Bills Digest 104 1996-97 Auditor-General Bill 1996

Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

• Passage History
• Purpose
• Background
• Main Provisions
• Concluding Comments
• Endnotes
• Contact Officer and Copyright Details

Passage History

Auditor-General Bill 1996

Date Introduced: 12 December 1996
House: House of Representatives
Portfolio: Finance
Commencement: On the same day as the Financial Management and Accountability Act 1996 which is to commence on a date set by Proclamation.

Purpose

The Auditor-General Bill 1996 (the Auditor-General Bill) forms part of a package of four Bills and associated measures designed to modernise controls on Commonwealth finances and over businesses owned or operated by the Commonwealth.

The other Bills in the package are:

• the Audit (Transitional and Miscellaneous) Amendment Bill 1996 (the Transitional Provisions Bill);
• the Commonwealth Authorities and Companies Bill 1996 (the CAC Bill); and
• the Financial Management and Accountability Bill 1996 (the FMA Bill).

The Transitional Provisions Bill formally repeals the Audit Act 1901, proposes consequential changes to enabling legislation affecting Commonwealth Authorities so as to link those bodies to the CAC Bill, and provides for the Auditor-General in office at 30 June 1997 to see out the remainder of their 10 year term. The Public Accounts Committee Act 1951 is to be amended to enlarge the powers and functions of the Parliamentary Joint Committee of Public Accounts (JCPA).

The CAC Bill contains financial reporting, ethical and auditing provisions relating to corporate public authorities whose enabling legislation gives them 'ownership' of their operating funds and assets. It also extends to companies where the Commonwealth has a direct controlling interest and makes special provision for 100 percent Commonwealth owned companies. The CAC Bill replaces Part XI of the Audit Act 1901 which currently provides standard financial, reporting and auditing provisions for about two–thirds of Commonwealth authorities.

The FMA Bill seeks to establish a regulatory framework for Commonwealth instrumentalities which financially are agents of the Commonwealth, that is, those bodies which do not 'own' their funds but operate squarely within the provisions of sections 81 and 83 of the Commonwealth Constitution. Such bodies include the Departments of State, the Parliamentary Departments and many Statutory Authorities and government agencies which manage public money or property on behalf of the Commonwealth. The Bill also specifies the powers and responsibilities of the Minister for Finance with regard to their duties as custodian of the Treasury of the Commonwealth under the Constitution.

The Auditor-General Bill:

• provides for the re-establishment of the Office of Auditor-General under the proposed new financial accountability regime replacing the Audit Act 1901;
• styles the Auditor-General as an 'independent officer of the Parliament' with a more clearly defined role and powers;
• provides for a range of statutory safeguards insulating the Office from inappropriate interference by either the Executive or the Parliament;
• re-creates the Australian National Audit Office (ANAO) as an independent statutory body employing staff under the Public Service Act 1922 but with a capacity to contract out work where considered appropriate by the Auditor-General;
• together with the Transitional Provisions Bill, makes provision for a wider role for Parliament (through what will be the Joint Committee of Public Accounts and Audit) in selecting the Auditor-General and in monitoring the performance of that Office and the ANAO; and
• re-establishes the Office of Independent Auditor who is the Parliament's auditor of the ANAO.

Background

Previous Bills

The present Bill and the associated measures are similar but not identical to a package of Bills introduced by the previous Government in June and December 1994.(1) The earlier Bills were debated in both Chambers but were not passed before the Parliament was prorogued on 29 January 1996 for the General Election of 2 March 1996.

Consideration of the 1994 Bills was extensive with the Auditor-General, FMA and CAC Bills being the subject of a JCPA Report.(2)

The Keating Government accepted the majority of the recommendations made by the JCPA but rejected others. This attracted further criticism from, amongst others, the former Auditor-General, John Taylor.(3) During the debate on the 1994 Bills, the then Opposition argued for further amendments to the Bills in line with recommendations made in JCPA Report No. 331, including that:

• the Auditor-General should have unilateral power to conduct a performance audit of any government business enterprise (GBE) at any time (initially the Keating Government was prepared to allow such audits only where requested by either the responsible Minister or by both Houses of Parliament);
• the Auditor-General's staff not be engaged under the Public Service Act but that the Auditor-General have the power to negotiate the terms and conditions under which staff are hired;(4)
• the approval of both the Leader of the Opposition and the JCPA and the Audit Committee must be secured in relation to the appointment of the Auditor-General; and
• the JCPA be given an expanded role in relation to the auditing of Commonwealth accounts (the Keating Government had supported the creation of a separate Audit Committee of the Parliament).

Subsequently the majority of the Opposition's amendments (principally to the Auditor-General Bill) were passed by the Senate(5) but rejected by the House of Representatives.

The main Senate amendments would have:

• allowed Parliament a greater say in the appointment of future Auditors-General;(6)
• allowed the Auditor-General to conduct performance audits of GBEs;(7) and
• allowed the Joint Committee of Public Accounts to act also as an audit committee of Parliament.(8)

The present proposals and the 1994 package have been shaped by two forces. First, a general desire to streamline and modernise the financial control and reporting arrangements within the Commonwealth public sector. Hence, the majority of the proposed measures are seen as both a timely and appropriate means for improving government operations and enhancing accountability. In the broad, they have enjoyed cross-party support. Secondly, however, there have been other concerns centring principally on the role and status the Auditor-General and on the level of resources available to the ANAO. These specific concerns dominated debate on the previous Bills and are reflected in three substantial JPCA reports issued between 1989 and 1996. Concerns over the independence of the Office of Auditor-General were also evident in, but not confined to, some vigorous public exchanges involving the former Auditor-General, John Taylor, and Ministers of the previous Government.

The three JCPA Reports in question are The Auditor General: Ally of the People and The Parliament (1989)(9), An Advisory Report on the Financial Management and Accountability Bill 1994, the Commonwealth Authorities and Companies Bill 1994 and the Auditor-General Bill 1994 (1994),(10) and Guarding the Independence of the Auditor-General (1996).(11) Taken together they are excellent source documents for testing the basis of the present Bills in greater depth than is possible here.

Regarding the public controversy involving Auditor-General Taylor and the previous Government, the friction appears to be an amalgam of agency specific and service–wide factors.(12) As a key accountability mechanism, the ANAO was not unnaturally a major pressure point for tensions in the the APS as managers attempted to marry the new 'results' orientated management style of the 1980s and 1990s with a more traditional emphasis on process and proper procedures. At the same time, the level of resources provided to the ANAO was an underlying source of friction. What had been a fairly long-standing concern over the provision of resources to the ANAO, (13) probably inflamed several unrelated differences between the Government and the ANAO including over:

• the leasing arrangements for the ANAO's accommodation in Centenary House;(14)
• the ANAO's powers to conduct an efficiency audit of the then National Media Liaison Service (aNiMaLS);(15) and
• the role played by the ANAO in bringing undone Minister Ros Kelly in the so-called 'Sports Rorts Affair'.(16)

Perhaps reflecting the politicisation of some of the ANAOs role, in 1995 the then Opposition committed itself to establishing a 'completely independent Auditor-General' who '[u]nder the Coalition [would] be an officer of the Parliament'.(17)

Status of the Auditor-General and the ANAO

Presently the ANAO has the equivalent of 377 full-time staff and a budget in excess of $38.6 million.(18)

The Auditor-General is responsible for the audit of financial statements prepared by Commonwealth departments, departmental commercial activities, statutory authorities, and most Commonwealth–owned or Commonwealth–controlled companies.(19) The Auditor-General, in the words of the JCPA, may also be viewed as 'the external auditor of the Executive Government and has a duty to report to the Parliament on the integrity, economy and efficiency of the financial operations of government.'(20)

Under the present Administrative Arrangements, the Auditor-General and the ANAO are located within the Executive arm of Government and report to Ministers of State:

• the Auditor-General is appointed by the Governor-General on the advice of the Prime Minister;
• the staff of the ANAO are employed under the Public Service Act as part of the Department of Prime Minister and Cabinet (although the Auditor-General exercises the powers of Secretary in relation to the ANAO); and
• funds for the ANAO are included in appropriations for the Department of Finance.(21)

The constitutional status of the Auditor-General, and the degree of independence to be afforded that office, has become a vexed matter with the present proposal to designate the office an 'officer of the Parliament' the product of considerable soul-searching.(22)

The JCPA has concluded that on the balance of evidence presented to it that 'the Auditor-General works first and foremost for the Parliament' and that '(the Auditor-General's ultimate client is the Parliament.'(23) Other commentators and interested parties have different views. For example, and as noted by the JCPA:

• Mr Tony Harris, representing the Australasian Council of Auditors-General, recalled that the WA Royal Commission into the Commercial Activities of Government and Other Matters had concluded that the Auditor-General was a 'constitutional orphan';(24)
• Dr Warwick Funnell, of the Department of Accounting and Finance of Wollongong University, argued to the JCPA that, 'since the threat of exposure to public criticism is the final discipline on the actions of the Executive, then, in reality, the Auditor-General works for the wider community, not just its representatives who sit in Parliament';(25) and
• In its submission to the JCPA, the Attorney-General's Department best summarised the legal and constitutional position as follows:

  The Constitution provides for three arms of government - the Parliament, the Executive and the Judicature. In very basic terms, the role of the Auditor-General is to report to one arm of government, the Parliament, in relation to specified activities of another arm of government, the Executive (

  Having regard to the Constitution, the ANAO's functions do not sit directly with either the Parliament or the Executive. Under the Constitution, Parliament's primary function is to make the laws of the Commonwealth (s.1). On the other hand, the executive power of the Commonwealth 'extends to the execution and maintenance of [the] Constitution and the laws of the Commonwealth' (s.61). It could be argued that the Auditor-General's functions are incidental to Parliament's functions, especially those functions of Parliament which relate to the Commonwealth's finances. Alternatively, it could be argued that the functions are part of the Executive Government's functions because they amount to the maintenance of the laws of the Commonwealth. There does not appear to be convincing argument either way.(26)

The Attorney-General's Department also provided useful advice in relation as to the limitations on legislating to protect the independence of the Auditor-General vis-a-vis the Executive. The thrust of that advice, largely accepted by the JCPA, was that designating the Auditor-General an 'Officer of the Parliament' would of itself be largely a symbolic gesture. Moreover, it would open further questions as to how the ANAO would be staffed and who, within the Parliament, would be responsible for the administration of the ANAO.

As the Attorney-General's Department and the JCPA noted, the major impediment to securing absolute independence for the Auditor-General is the requirement embodied in section 56 of the Constitution to the effect that the funding for the Office must be proposed to the Parliament by the Executive Government. Hence, short of establishing the ANAO as a self-funded government business enterprise,(27) the Office will always have its level of resources determined by the Executive, i.e. the Government of the day formed by the majority party(ies) in the House of Representatives.(28)

Main Provisions

JCPA Concerns

The following summary of 'main provisions' quite deliberately departs from the usual approach taken in Bills Digests. Instead of proceeding in numerical sequence through the more significant clauses, the Digest is organised around the recommendations made in JCPA Report No.346(29) insofar as they relate to the Auditor-General Bill. This gives due prominence to the work of the JCPA and its unanimous Report and recognises the interest that some readers may have in any divergence between the Report's recommendations and the legislation. In this regard, it may be noted that the JCPA was not given access to the draft Bill and accordingly was 'not in a position to suggest specific amendments or additions' to it.(30)

Recommendation No. 1

The Auditor-General Bill should state that:

1. there is to be an Auditor-General for Australia, exercising the audit functions described in this Act;
2. the Auditor-General is an 'Independent Officer of the Parliament';
3. the title 'Independent Officer of the Parliament' has the meaning given to it in this Act and no other and, further, has the legal consequences expressly provided for in this Act and no other; and
4. the Parliament has no power to act in relation to the Auditor-General except expressly provided in this Act.

The Bill provides for there to be an Auditor-General and the Auditor-General is to be styled an 'independent officer of the Parliament'[clauses 7 and 8]. Subclause 8(3) states that the powers of the Parliament to act in relation to the Auditor-General are contained in this Act and in other laws of the Commonwealth. Subclause 8(3) also states that 'there are no implied powers of the Parliament arising from the Auditor-General being an independent officer of the Parliament'. The Explanatory Memorandum provides no further assistance in discovering the precise purpose or intended effect of these provisions. It may be that it is intended that subclause 8(3) serve a number of purposes. First, it may reinforce the effect of subclause 8(2) so as to make it plain that the change of style to the Office of Auditor-General is largely symbolic. Secondly, the Auditor-General is to be a creature of statute and does not acquire any special role or powers by virtue of formally being restyled an 'Officer of the Parliament', i.e. the office does not become part of the legislative arm of government. Similarly, the Parliament does not acquire any executive authority by virtue of having additional legislated powers in relations to the Auditor-General. These proposals are largely in sympathy with JCPA Report No.346 which recognised constitutional concerns that might arise if the expression 'Officer of the Parliament' was not defined and its meaning confined. The thrust of these and other related provisions [see subclause 8(4)] is to give effect to the JCPA's broadly expressed view that '(the Auditor-General needs not only to be functionally independent of the Executive but also functionally independent of the Parliament.'(31)

It should be noted, however, that the Bill does not give effect to the recommendation that the Parliament have no power to act in relation to the Auditor-General except as expressly provided in the Auditor-General Act. Such a broad provision might have the appearance of circumscribing Parliament's own legislative powers and would therefore risk being held unconstitutional. This is because no Commonwealth Parliament, short of securing a constitutional amendment, can limit the substantive legislative powers of its successors. Moreover, there would seem little sense in relation to the Auditor-General in seeking to exclude the operation of all other Commonwealth laws of general application (for example, the Acts Interpretation Act 1901). Such an open-ended exclusory provision as (apparently) was recommended by the JCPA would probably have had just such an unintended effect.

Recommendation No. 2

The Auditor-General Bill should state that:

The Auditor-General shall have complete discretion in the discharge of the audit functions set down in this Act, subject only to any duties imposed by statute. In particular, the Auditor-General is not subject to direction in relation to:

1. whether or not an audit is to be conducted;
2. the priority to be accorded to any particular matter; and
3. the manner in which an audit is to be conducted.

The terms of the recommendation are replicated in subclause 8(4).

Recommendation No. 3

The Auditor-General Bill should also state that:

The staff of the Australian National Audit Office (ANAO):

1. have a duty to assist the Auditor-General in the performance of the Auditor-General's functions; and
2. may be directed only by the Auditor-General in the performance of audit duties.

Clause 29 provides that the Auditor-General may, by written instrument, delegate any of their powers or functions under any Act to a person who is an official within the meaning of the FMA Act, i.e. an official who constitutes an agency or part of an agency.(32) Schedule 2, item 1043 of the Transitional Provisions Bill inserts a new subsection 8(1A) into the Public Accounts Committee Act 1951. This new provision states that none of the powers conferred on the proposed Joint Committee of Public Accounts and Audit (JCPAA) authorise it to direct the activities of the Auditor-General.

Recommendation No. 4

The Auditor-General and the Australian National Audit Office should be the portfolio responsibility of the Prime Minister.

This is not a matter for legislation. The Minister's Second Reading Speech, however, indicates that the Prime Minister will continue to be the responsible Minister.(33)

Recommendation No. 5

The Audit Committee should be empowered to:

1. approve by a majority of no less than three-quarters of the Committee membership the Government's nomination for appointment to the position of Auditor-General; and
2. conduct a public confirmation hearing to take evidence from the person nominated to the position of Auditor-General prior to giving approval to the appointment.

Clause 2 of Schedule 1 provides that the nomination must be agreed by the JCPAA. By what method the JCPAA chooses to indicate its view of proposed appointments has been left to the Committee and the Parliament. Similarly, the Bill makes no reference to the JCPA's proposal for public confirmation hearings.

Recommendation No. 6

The Audit Committee should be empowered to:

1. examine the budget estimates of the Australian National Audit Office (ANAO);
2. examine the levels of audit fees set by the Auditor-General under the Auditor-General Act;
3. seek evidence and advice on the estimates of the ANAO, including at public hearings;
4. make recommendations to Parliament and to the Prime Minister about the appropriation for the ANAO; and
5. monitor, over time, the adequacy of funding for the ANAO, with particular attention to the ability of the office to attract staff and to maintain and upgrade information technology as necessary.

Under clause 53, the JCPAA may ask the Auditor-General to submit to it draft budget estimates for the ANAO. The Auditor-General must comply with such a request in time for the JCPAA to consider the draft estimates and make recommendations to be included in the Commonwealth Budget. Other relevant amendments form part of the Transitional Provisions Bill. Schedule 2, item 1043 of that Bill amends the Public Accounts Committee Act 1951 to provide for the creation of the Joint Committee of Public Accounts and Audit:

• to consider the operations of the Audit Office, its resources and funding, and the reports of the Independent Auditor on operations of the Audit Office;
• to report to both Houses of the Parliament on any matter arising out of the Committee's consideration of the above matters;
• to report to both Houses of the Parliament on the performance of the Audit Office at any time;
• to consider draft estimates for the Audit Office;
• to consider the level of fees determined by the Auditor-General;
• to make recommendations to both Houses, and to the Minister who administers the Auditor-General Act 1996, regarding the draft estimates of the Audit Office;
• to determine the audit priorities of the Parliament and to advise the Auditor-General of those priorities;
• to determine the audit priorities of the Parliament for audits of the Audit Office and to advise the Independent Auditor of those priorities; and
• to undertake any other duties given to the Committee under the legislation or by Joint Standing Orders approved by both Houses of Parliament.

Recommendation No. 7

The appropriation for the Australian National Audit Office should appear as a separate schedule in the Budget Papers.

This recommendation does not require enabling legislation.

Recommendation No. 8

The Auditor-General Bill should provide:

1. that the Minister for Finance must issue drawing rights under the relevant provision of the Financial Management and Accountability Act to cover the full amounts that the Parliament appropriates for the purposes of the Australian National Audit Office; and
2. that the Auditor-General has authority to approve a proposal to spend money under an appropriation for the ANAO.

The issuing of drawing rights is guaranteed under clause 50. Clause 51 provides that the Auditor-General has authority to approve a proposal to spend money under an appropriation for the Audit Office.

Recommendation No. 9

The Auditor-General Bill should provide that:

1. the Executive may only direct the Auditor-General to exclude sensitive audit information from a report to the Parliament where disclosure of the information would be likely to prejudice national security;
2. where the Executive orders the Auditor-General to suppress sensitive audit information on the grounds of national security, the Audit Committee should receive an unabridged copy of the audit report and/or a copy of the suppressed information; and
3. where sensitive information is excluded from an audit report, the fact of the exclusion should be reported to the Parliament in the audit report.

Clause 36 restricts the use and republication of information obtained by persons exercising powers under the Act.

Contrary to recommendation 9, clause 37 places wide restrictions on the capacity of the Auditor-General to include information in public reports. Paragraph 37(1)(b) provides that where the Attorney-General has issued a relevant certificate, the Auditor-General may not disclose information which the Attorney believes would prejudice the public interest. The Attorney-General may also issue a restrictive certificate for any of the reasons stated in subclause 37(2). These reasons extend beyond the ground of protecting national security. The capacity of Parliament to seek from the Auditor-General access to such material is restricted under subclause 37(3) and is commented on below.

Clause 56 provides for regulations to be made which exclude the operation of the Act in relation to intelligence and security agencies

Recommendation No. 10

The Auditor-General Bill should require that:

If the Executive gives any direction to the Auditor-General, then:

1. such direction should be in writing and should be reported to Parliament by inclusion in a schedule in the Annual Report of the Auditor-General; and
2. the Executive should immediately report the substance of the direction, and the reasons for the direction, to the Audit Committee of Parliament.

Clause 54 deals with directions to the Auditor-General given by the Finance Minister under section 50 of the FMA Act. Such directions must be in writing, communicated to the JCPAA and recorded in the Annual Report of the of the ANAO. Otherwise, the Auditor-General Bill makes no reference to ministerial directions save for subclause 8(4) which gives the Auditor-General complete discretion in relation to the conduct of particular audits.

Recommendation No. 11

The Audit Committee should be empowered to:

1. approve the appointment of the Independent Auditor and advise the Independent Auditor of the Parliament's audit priorities;
2. seek advice from the Independent Auditor on the performance of the Australian National Audit Office (ANAO) in the course of examining the annual estimates of the ANAO (Recommendation 6 refers); and
3. report to Parliament on the performance of the ANAO at any time as appropriate.

Schedule 2, clause 2 provides that the appointment of the Independent Auditor must be approved by the JCPAA. Clause 43 of the Bill provides that the Independent Auditor must have regard to the audit priorities of the Parliament as determined by the JCPAA. Further details on the relationship between the JCPAA, the Parliament and the Auditor-General are detailed in the Transitional Provisions Bill at Schedule 2, items 1043 and 1044. These also include a power to report to both Houses on the performance of the ANAO at any time.

Recommendation No. 12

The Public Accounts Committee Act 1951 should be amended to provide for the Joint Committee of Public Accounts (JCPA) to assume the role and functions set out in Recommendations 5, 6, 9, 10 and 11 above.

The relevant amendments are contained in the present Bill and in the Transitional Provisions Bill.

Recommendation No. 13

The Auditor-General Bill should include specific provisions to the effect that:

1. the Auditor-General is to be appointed for a term of 10 years;
2. the Auditor-General is to be ineligible for reappointment to the office or appointment to any other Commonwealth public office within 3 years of stepping down as Auditor-General;
3. the Auditor-General may be removed from office only by the Governor-General acting on resolutions from both Houses of the Parliament in the same session; and
4. the remuneration of the Auditor-General is to be at the level of remuneration for the first tier of Departmental Heads in the Australian Public Service.

The appointment conditions of the Auditor-General are set out in Schedule 1 to the Bill.

Clause 1 of Schedule 1 provides that the Auditor-General is to be appointed for a non- renewable term of 10 years. There is, however, no further restriction on subsequent employment by the Commonwealth.

Subclause 6(1) of Schedule 1 provides for the removal from office of the Auditor-General by the Governor-General where in the same session of Parliament both Houses present an address to the Governor-General praying for the removal of the Auditor-General on the ground of misbehaviour or physical or mental incapacity. Subclause 6(2) of Schedule 1 provides that the Governor-General must remove the Auditor-General from office if the Auditor-General has become bankrupt.

Schedule 1, clause 3 provides that the remuneration of the Auditor-General is to be determined by the Remuneration Tribunal. The legislation does not link the salary and entitlements of the Auditor-General to that of any other office.

Government Business Enterprises and Performance Audits

Recommendation No. 14

The Auditor-General Bill should provide that:

1. the Auditor-General is to be appointed as the auditor of all Commonwealth entities; and
2. the Auditor-General has a general mandate to initiate the full range of audits in relation to all Commonwealth entities (including performance audits of Government Business Enterprises).

This recommendation relates to what has been one of the more controversial aspects of the reform package, the capacity of the Auditor-General to conduct performance audits of GBEs.

The Auditor-General has power to audit the financial statements of all Commonwealth bodies. However, under the proposed legislation the conduct of 'performance audits', which focus on cost effectiveness as well as matters financial probity, is circumscribed. The principal restrictions are to apply in relation to performance audits of GBEs.

One view is that as a long as any public money is tied up in any such enterprise, the full range of accountability measures must apply. On this view, the Auditor-General should have complete discretion to conduct performance audits of all GBEs. An opposing view is that GBEs which face competitive market pressures need only submit to financial audits, and not performance audits. Supporters of this approach argue that market discipline provides a sufficient check on the performance of GBEs which do not enjoy a monopoly or near monopoly power. They also point to the added regulatory burden and associated costs imposed on GBEs by performance audits and similar administrative controls.

In many cases the argument will be more complicated. Some GBEs perform mixed functions and have differing degrees of power in different markets. Variations in the relative size of public and private holdings, legal obligations to any minority (private) shareholders and the quasi-regulatory role of some GBEs, however, serve to further complicate the debate.

Clauses 15–18 deal principally with the question of performance audits.

Clause 15 provides for the Auditor-General to initiate and conduct performance audits of any government 'agency', for example, Executive Departments. Special rules are to apply, however, in relation to Commonwealth authorities and their subsidiaries [clause 16] and Commonwealth companies and their subsidiaries [clause 17]. In the case of both clauses 16 and 17, the Auditor-General may conduct a performance audit at any time of a Commonwealth authority or company which is not a GBE. For GBEs (both authorities and companies), the Auditor-General may only conduct a performance audit where:

• the Finance Minister; or
• the responsible Minister; or
• the JCPAA.

requests such an audit.

The following lists by portfolio the GBEs which appear likely to be subject to the above controls:

Commonwealth Government Business Enterprises

To bring together the legislative history of these provisions:

• the 1994 legislation as first presented provided the Auditor-General with an unfettered mandate in relation to financial audits of GBEs but confined performance audits to instances where ministerial approval was obtained;
• the JCPA in Report No. 331 recommended that a GBE performance audit could be initiated at the request of the Audit Committee of the Parliament;
• the Keating Government initially rejected the JCPA recommendation;
• the Senate amended the 1994 legislation to permit the Auditor-General to conduct a performance audit of any GBE at his or her discretion;
• in Report No. 346, the JCPA recommended (see above) that the matter be left to the discretion of the Auditor-General; and
• the present Bill provides that such an audit may be requested by the Executive or by the Parliament acting through the JCPAA [clauses 16 and 17].

Recommendation No. 15

The Auditor-General Bill should provide that:

1. the Auditor-General is to be given wide powers of access to information and premises in performance of audit functions; and
2. the Auditor-General is to have the ability to engage professional services on contract to assist in the performance of audit functions.

Part 5 of the Auditor-General Bill gives the Auditor-General and the ANAO extensive powers in relation to the gathering of information. Clause 33 deals specifically with access to premises.

Clause 27 specifically allows the Auditor-General to engage contract staff.

Recommendation No. 16

The Auditor-General Bill should provide that:

The Auditor-General has the right to report to Parliament on any matter at any time as the Auditor-General sees fit.

Clause 25 of the Auditor-General Bill provides that the Auditor-General may report to either House at any time on any matter. Clause 26 similarly states that the Auditor-General may at any time report to any Minister on any matter. There are, however, limitations on the types of information that may be routinely released to the Parliament [clause 37]. This restriction on Parliament's powers is commented on below.

Other Provisions

The Senate Standing Committee for the Scrutiny of Bills (the Standing Committee) has drawn attention(35) to several features of the Auditor-General Bill which, in its opinion, give some cause for concern.

Clause 35 removes the right of a person to remain silent when asked a question or ordered to produce a document by the Auditor-General. The Committee concluded that this provision will not unduly trespass on individual rights or freedoms as the information supplied may not be used directly or indirectly in criminal proceedings - other than certain proceedings under the Auditor-General Act [clauses 32 and 34].

Clause 37 seeks to restrict the Parliament's access to information and documentation held by the Auditor-General where the Attorney-General has issued a certificate stating that it would not be in the public interest for the information to be disclosed to Parliament. In effect, the powers, privileges and immunities of the Parliament, guaranteed by section 49 of the Constitution, are to be watered down in relation to this Bill. The Standing Committee has concluded that this proposal 'impinges on the rights of Australians to have the administration of the country by the executive properly scrutinised by Parliament.'(36) The Standing Committee also criticised the Government for proposing such a limitation on Parliament in the very piece of legislation that provides for the Auditor-General to be styled an 'independent officer of the Parliament'.(37) The Standing Committee has therefore sought the Minister's 'advice' as to:

• whether subclause 37(4) ought to require the Auditor-General to publish reasons where he or she decides not to include sensitive information under subclause 37(1); and
• why if members of the executive, under subclause 37(5), may be given the sensitive information, Parliament and its committees might not be entrusted with access (suitably safeguarded) to the same information?(38)

Given the Bill's symbolic importance, both these questions should be addressed.

Clause 37 could, of course, be subsequently overridden by both Houses agreeing on amendments to the Auditor-General Act in respect of particular matters or classes of matter. The difficulty is that the House of Representatives' support for the waiving of clause 37 would be seen as calling into question its confidence in a particular minister or the government as a whole. The Senate may not be subject to Government control and may want the embargo imposed by clause 37 waived in particular cases. Hence one way of viewing clause 37 is as an effective bar on the Senate gaining access to material held by the Auditor-General and the Executive.

On the other hand, there may indeed be valid reasons for not entrusting (in effect) potentially every Member and Senator with information of the kind dealt with under clause 37. Moreover, the analogy drawn by the Standing Committee comparing access rights enjoyed by the Executive and the Parliament invites wider comparisons about the respective roles of these two branches of government. It may be recalled that the Executive and legislative arms of government operate under differing political and legal constraints. For example, not all members of the Executive will have access to sensitive information, nor will those that have such access be free to do with it as they please. Public servants are not free to use sensitive information in ways open to Members and Senators under Parliamentary privilege. Moreover, the privilege enjoyed by Members and Senators is absolute and their capacity to disseminate potentially harmful information far greater than that of public servants bound by the provisions of the Public Service Act and the Crimes Act and the dictates of responsible government.

Concluding Comments

The Bill and its predecessor are of more than symbolic significance. They provide an improved basis for safeguarding role of the Auditor-General and create a range of formal mechanisms for insulating the ANAO from any inappropriate influence exerted by the Executive. However, the proposed reforms are not, nor could they be, a substitute for continuing Parliamentary vigilance. Similarly, limitations imposed by the Constitution leave the resource base of the ANAO very much in the hands of the Government. Accordingly, the effectiveness of the Auditor-General will continue to depend on the diligence of individual Members and Senators and their capacity to familiarise themselves with the voluminous material which will come their way via the processes established or refined under this Bill. On the other hand, the objections implicit in the response of both the current and the previous Government to some of the recommendations put forward by the JCPA and those of like mind cannot be simply dismissed as Executive hubris. The Bill gives Auditor-General both functional independence and considerable power. It is one thing to style the Auditor-General as an 'Ally of the People'; it is entirely another to create the circumstances where he or she can style themselves as the permanent ally of the Opposition or as a law unto themself. If the integrity of the office is to be maintained then there will need to be some care and restraint on all sides and from the Auditor-General and the staff of the ANAO. Extended tenure, a high degree of operational independence and access to substantial investigative powers are potentially a twin edged sword. They give the Auditor-General the capacity to assist the Parliament in keeping a rein on Government excess. If inappropriately applied, these powers could intrude on individual rights and raise the same sorts of concern that are sometimes voiced about alleged and actual abuses of Parliamentary privilege.

Endnotes

1. The Auditor-General Bill 1994, the Commonwealth Authorities and Companies Bill 1994, the Financial Management and Accountability Bill 1994 (introduced June 1994) and the Audit (Transitional and Miscellaneous) Amendment Bill 1994 (introduced December 1994).
2. The Bills were referred to the JCPA by then Finance Minister, Kim Beazley, on 29 June 1994.
3. 'Five victims of the arrogant junta', Canberra Times, 2 April 1995.
4. This proposal was also rejected by the Senate. Senate Hansard, 27 March 1995: 2182–3.
5. Refer in particular Senate Hansard, 27 March 1995: 2157–2197.
6. The Senate added the requirement that a nomination for the Office of Auditor-General must be supported by a two thirds majority of the audit committee.
7. The JCPA's preference was for the Auditor-General to be able to conduct a performance audit in a GBE at the request of the audit committee of Parliament. The Senate's preference, at the time, was for allowing the Auditor-General to exercise his or her discretion in relation to such audits.
8. Refer Media Release issued on behalf of the JCPA by its Chairman Les Scott MP (ALP, Oxley) on 18 April 1995.
9. JCPA Report No. 296.
10. JCPA Report No. 331.
11. JCPA Report No. 346.
12. Refer Tom Burton, 'Hard Times visit the Auditor-General', Australian Financial Review, 18 February 1994.
13. These had also been highlighted by previous Auditors-General, indeed, the first Commonwealth Auditor-General, Mr J W Israel, had reported to Parliament in 1902 in his first annual report that the audit office was not adequately resourced. (Refer JCPA Report No. 346: 5.).
14. Report of Commissioner Morling, Royal Commission into the Leasing by the Commonwealth of Accommodation in Centenary House (1994).
15. The Auditor-General, Audit Report No. 17, 1994–95, 'National Media Liaison Service: A Loophole in Accountability?'
16. See The Auditor-General, Audit Report No. 9, 1993–94, Efficiency Audit, 'Community Cultural, Recreational and Sporting Facilities Program.'
17. Hon John Howard MP, The Role of Government: A Modern Liberal Approach, 1995 National Lecture Series, June 1995: 22–3.
18. Department of Finance, Portfolio Budget Statements 1996–7: 44–5.
19. The Auditor-General, ANAO Annual Report 1995–96: 19.
20. JCPA Report No. 346: 11.
21. ibid:41.
22. Similar issues have been raised in the past in relation to the role and status of the Commonwealth Ombudsman.
23. JCPA Report No. 346: 35 and 37.
24. ibid: 38.
25. ibid: 37.
26. Attorney-General's Department, Submission to Joint Committee on Public Accounts, Inquiry into Guarding the Independence of the Auditor-General, September 1996: 2–3.
27. The very sort of entity which will be subject to the CAC Act 1996.
28. Attorney-General's Department , op.cit.6–7.
29. The Government has not formally responded to the Reportl.
30. JCPA Report No. 346: xii; see also page 2.
31. ibid: 51.
32. See section 5 of the FMA Bill for an extended definition of 'agency'. Basically the expression covers Departments and those bodies which, although legally separate entities, are closely connected with particular Departments.
33. House of Reps Hansard, 12 December 1996: 7913.
34. Information supplied by the Department of Finance.
35. Alert Digest, No. 1 1997: 6–10.
36. ibid: 9.
37. ibid: 10.
38. loc. cit.

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17 February 1997
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ISSN 1323-9031
Commonwealth of Australia 1996

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Published by the Department of the Parliamentary Library, 1997.

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