Chapter 3 Clarification of rights and responsibilities
The ANAO submits that the Auditor-General Act 1997 has ‘served
the Parliament and the Office well’. The Committee is also of
the view that the fact that the inquiry received so few submissions from public
sector agencies could also be taken to imply support for this idea.
That said, the regular revision of Acts of Parliament is important. As
Professor Wanna states:
I think we need to revise acts regularly, because if you look
back at the audit acts from 1901 up to this act, you find that audit
effectiveness was impeded by the acts not being regularly reviewed and revised
and governments being reluctant to initiate changes to the act, through the
It became clear over the course of the inquiry that there are a number
of areas in the Act which remain somewhat ambiguous and in need of
clarification. Some main areas of concern include: auditing Government
Business Enterprises (GBEs); auditing performance indicators; and clarifying
issues around legal professional privilege.
Some further areas of the Act that submitters suggested need
- fees for financial
- acting as auditor
under the Corporations Act 2001;
- clarifying the
Auditor-General’s responsibilities around the provision of advice and
- auditing standards;
- exemptions from the Freedom
of Information Act 1982 and the Privacy Act 1998;
- defining ‘persons’
- access to Cabinet
- a role for the
Auditor-General with regard to whistleblowers;
- dealing with comments
on extract reports; and
- the possibility of a
blanket reporting embargo during caretaker periods.
A question was raised about the provision of information and documents
to the Committee and other parliamentary committees. This issue is also
addressed in this chapter.
Government Business Enterprises
In its inquiry into reform of the Australian Audit Office and subsequent
report (i.e., Report 296, The Auditor-General: Ally of the People and
Parliament) tabled in March 1989, the Joint Committee of Public Accounts
recommended that the Auditor-General be reinstated as the external auditor of
Government Business Enterprises.
However, in its response to that report, the Government considered that
there was little to be gained by subjecting GBEs to efficiency audits as they
are subject to the commercial discipline imposed through the focus on targets
and related performance measurement.
In its 1996 consideration of appropriate measures to be incorporated
into the Auditor-General Bill, the Joint Committee of Public Accounts again
recommended that the Auditor-General be appointed as the auditor of all
Commonwealth entities, and he/she have a mandate to initiate the full range of
audits of Commonwealth entities including performance audits of Government
Again, the Government of the day decided against subjecting GBEs to
performance audits by the Auditor-General given that ‘they are subject to the
overlaying accountability framework that requires them to pursue optimal market
performance and to improve the return to the Commonwealth as shareholder’.
Consequently, subsections 16(2) and 17(2) of the Auditor-General Act
1997 provide that the Auditor-General may only conduct audits of
Commonwealth authorities that are GBEs, and wholly owned Commonwealth companies
that are GBEs, if the responsible Minister, the Finance Minister or the Joint
Committee of Public Accounts and Audit requests the audit. Subsections 16(3) and
17(3) of the Act also state:
Nothing prevents the Auditor-General from asking a
responsible Minister, the Finance Minister or the Joint Committee of Public
Accounts and Audit to make a particular request under subsection (2).
The ANAO has no record of such a request to undertake a performance
audit of a GBE since the Act came into effect.
In the years since the Act was established in 1998 there have been
changes to the number and character of GBEs. As the Auditor-General states:
…we probably had companies like Qantas, the Commonwealth Bank
and even Telstra back then…with the passage of time our stable of GBEs is not
what it used to be.
As at May 2010, there were six GBEs falling under the Commonwealth
Authorities and Companies Act 1997 (CAC Act): ASC Pty Ltd; Australian
Government Solicitor; Australian Postal Corporation; Australian Rail Track
Corporation Limited; Defence Housing Australia; and Medibank Private Limited.
It is this reduction in market significance of the current GBEs as well
as the centrality of the principle to the Auditor-General’s mandate that he/she
should have the authority to conduct performance audits in all Commonwealth
entities that underpins the ANAO’s argument that GBEs should be subject to
performance audits conducted by the Commonwealth Auditor-General.
Extending the Auditor-General’s mandate to Commonwealth controlled GBEs
received support from a number of submitters. For example, the
Hon Dr Bob Such MP, Member for Fisher in the South Australian
State Parliament states:
There should be an amendment to the Act to permit the Auditor‑General
to have oversight of, and audit, the finances of all Government Business
Enterprises, with the intention of greater openness and clarity.
Similarly, from the Chief Executive Officer of the DMO,
Dr Stephen Gumley AO:
…I suggest expanding section 16 of the Act to include all
Government Agencies, including Government Business Enterprises…
ACAG also submit that, like other jurisdictions, the Commonwealth
Auditor-General should have the authority to conduct performance audits in
..the [Auditor-General] should automatically be the auditor
of all GBEs and their subsidiaries. All other Australian jurisdictions and New Zealand are the auditors of their GBEs, or equivalent entities, and of their
Having received no evidence to the contrary, the Committee believes it
is appropriate that the Auditor-General be provided with the authority to
conduct performance audits of Commonwealth wholly-owned GBEs.
Commonwealth controlled GBEs
On 7 April 2009, the Government announced a significant investment in
delivering broadband to Australian homes and workplaces and a new company NBN
Co Limited was established to build and operate the network.
In its primary submission (no 3) and a supplementary submission (no
3.1), the ANAO uses the example of NBN Co Limited to propose that the
Auditor-General should be able to conduct performance audits of GBEs in which
the Commonwealth holds a majority interest. Although currently a wholly-owned
Government Business Enterprise, a partial sale of NBN Co Limited
remains a possibility. As the Auditor-General states:
We are the auditor of NBN Co. Ltd and we have done the
financial statement audit for the financial year just ended. We expect,
obviously, that company to grow over time. But when we raised it in our
submission, you may recall that the government was at least raising the
possibility of partly selling down that company at some future stage.
The Government investment in the National Broadband Network is
considerable. The Committee agrees with the views expressed by the
Auditor-General at the hearing on 19 October 2009 that this investment should
be subject to performance audits by the Auditor-General:
It raised for us the issue of knowing the public interest, if
you like, in the broadband network, the significant investment of taxpayers’
funds, and whether the act should allow the Auditor-General, at their
discretion, to undertake a performance audit either of NBN Co. as a wholly
owned government business enterprise or as a partially owned GBE.
The Committee notes from the ANAO’s supplementary submission 3.1 that
there is no legal impediment to the Auditor-General’s performance audit mandate
being extended to Government Business Enterprises in which the Commonwealth
holds a majority interest.
The Committee also notes that any recommendation to extend the
Auditor-General’s mandate in such a way would not result in the requirement for
additional resources as per the following advice contained in supplementary
A decision to provide the Auditor-General with the authority
to conduct performance audits of Government Business Enterprises would, in
practice, not have a significant impact on the ANAO’s performance audit work
program and therefore would not require budget supplementation.
That the Act be amended to provide the Auditor-General with
the authority to initiate performance audits of Commonwealth controlled
Government Business Enterprises.
Auditing performance indicators
Measuring key aspects of an agency’s performance is a critical part of
the Government’s Outcomes Framework and recently, the
Department of Finance and Deregulation has increased its focus on agency
performance and results. This renewed emphasis is reflected in the revised
format of the Portfolio Budget Statements (PBS), which now necessitates
increasingly detailed key performance indicators which should clearly identify
how they will contribute to achieving outcomes.
According to the ANAO, performance indicators should be a mix of
quantitative and qualitative measures, incorporate a range of better practice
characteristics, and be cost-effective to collect, analyse and report against.
Currently, the ANAO reviews performance indicators only in the context
of individual programs or activities. Mr McPhee described the
current coverage of performance indicators as ‘by exception...if it is
important to the objectives [of the audit]’.
ANAO performance audits of public sector agencies frequently refer to
performance indicators as an ‘area that warrants improvement’.
For example, in its report No 23 2006-07 Application of the Outcomes and
Outputs Framework, the ANAO states:
...over a third of the surveyed agencies with administered
items indicated that none of their indicators addressed the effectiveness, quality
or cost of their administered items.
...many indicators did not incorporate targets or benchmarks
and other better practice characteristics...[in] particular, the majority of
surveyed agencies considered that not all their [indicators] were measurable.
On the basis of its work, the ANAO argues that auditing performance
indicators will contribute to an increase in the quality of the information
that would become available:
...it is evident that the systematic or periodic review of
the appropriateness of performance indicators, as well as the accuracy and
timeliness of an agency’s reporting against them, contributes to an overall
increase in the quality and credibility of the indicators themselves and the
reliance that can be placed on agencies’ reporting against them.
The Committee notes the view expressed by ACAG below and also believes
it is appropriate that the Auditor-General play a role in auditing performance
In the event that Commonwealth entities are required to include
in annual reports performance information, then ACAG believes it should be a
requirement that such information is audited. This would enable users of such
annual reports to be assured that the performance information reported is
relevant to stated objectives, appropriate for assessing performance and
whether or not information reported fairly represents actual performance.
Additionally, the Committee notes the following evidence from
Mr McPhee that in jurisdictions that provide for the auditing of performance
indicators, this has led to positive outcomes more generally:
...in talking to state auditors generally...and the
Auditor-General in New Zealand, they do believe that providing an audit focus
to performance information does result in an increase in the quality and the
integrity of the information presented.
The Committee is aware of the utility of being able to develop
performance information that would provide benchmarks and comparative
information across jurisdictions.
At the hearing on 8 February 2010, Dr Andrew Pope referred to the
difficulties in assessing programs when performance measures are lacking:
One of the issues that is
reasonably common across a lot of things is a lack of a baseline set of data.
Particularly the further back you go into programs you are not sure what the
situation was at the time, and so it is very hard now to look at current
performance information and then determine what the impact has been.
As a result of its own practical experience monitoring accountability
across public sector agencies through the work of the ANAO, the Committee is
fully supportive of these views expressed by Dr Pope.
The ANAO put forward three options to enhance audit coverage of
performance indicators. These options are as follows:
- the conduct
of a periodic review of indicators as part of the ANAO’s performance audit
review of an agency’s compliance with its performance indicator
responsibilities as an adjunct to the audit of an agency’s financial statements
in a similar way to that undertaken by the Western Australian Auditor-General;
(further details are included in paragraph 4 of the Appendix); or
review of an agency’s compliance with its responsibilities for a sub-set of
indicators which the Parliament and/or the Government considers relate to
critical programs or areas of public administration including, for example,
environmental sustainability. This review would be undertaken as an adjunct to
the audit of an agency’s financial statements.
At the public hearing on 16 September 2009, the Committee canvassed
these options with the Auditor-General.
Option (a) is the most similar to current arrangements. If this option
was to be adopted, where currently performance indicators are audited by
exception they would become a ‘specific focus of an audit’.
As Mr McPhee states:
…At the moment it tends to [be] by exception if it is
significant, if it is important to the objectives whereas under proposal (a) we
would make it a mandatory part of the objective and make sure we did cover it
as a part of the performance audit.
Although there may be some refocussing of some performance audit
resources, there would be no need for budget supplementation should option (a)
If option (b) were to be incorporated into the Act it seems clear that
this would provide a high level of assurance to the Parliament as is the case
in Western Australia. As the Auditor-General
…at the same time as you do your financial statement audit
you could look at all of the performance indicators and provide an opinion in
relation to the completeness, accuracy, et cetera, of indicators.
However, while the Committee agrees that option (b) might provide ‘more
focused assurance to the Parliament’ it is resource intensive,
particularly in light of the ANAO’s indicative budget supplementation in the
vicinity of $2.8 and $4.05 million per annum. The Committee also notes
the Auditor-General’s comment that this option may not be ‘entirely necessary’.
In the Committee’s view, the third option proposed in the Auditor‑General’s
submission would provide adequate assurance around the integrity of performance
information attached to programs or areas the Parliament sees as a priority.
As the Auditor-General states, this option means that should the
Parliament and its committees have a particular interest in any particular
areas of public administration, programs or portfolios, the ANAO could focus on
those interests. For example, examining
performance information related to environmental sustainability across all
performance audits in any given year.
To that end, the Auditor-General should identify possible agency
performance indicators to be audited and consult with the Parliament, through
the JCPAA. This process should be conducted in the same way the
Auditor-General currently consults with the Parliament about his performance
The Committee notes that by increasing audit coverage in this way
additional budget supplementation would be required. The Committee also notes
that while the actual level of resourcing required would be dependent upon the number
and nature of the performance indicators involved, the ANAO has provided an
indicative figure of up to $2 million per annum.
That the Act be amended as necessary to enable the
Auditor-General to review an agency’s compliance with its responsibilities
for a sub-set of performance indicators. Proposed performance indicators to
be audited should be identified annually by the Auditor-General and forwarded
to the Parliament, via the JCPAA for comment, in a manner similar to the
annual performance audit work program for the ANAO.
Legal professional privilege
Legal professional privilege is a rule of law that preserves the
confidentiality of communications between a lawyer and a client. In ordinary
circumstances, parties to legal proceedings must disclose to other parties and
the court any documents which are relevant to the matter in issue in the
proceedings. However, if ‘legal professional privilege’ is attached to a
document, the document need not be produced in connection with legal
proceedings, or in other circumstances, such as on receipt of a search warrant
from the police or a mandatory notice for production from a regulator.
Confidential communications between lawyers and their clients which are
made for the dominant purpose of giving or obtaining legal advice or in
connection with existing or anticipated legal proceedings generally attract
legal professional privilege.
Through section 32 of the Act, the Auditor-General has broad access
powers to information and documents. Documents protected by legal professional
privilege do not limit that access.
Despite possessing that authority, the ANAO submits that there are
occasions when agencies claim that documents protected by legal professional
privilege should not be accessible by the Auditor-General. This can lead to
protracted negotiations and subsequent delays in the audit process and, at
times, can require legal intervention to reach a resolution.
The ANAO argues that were the Act to be amended or an appropriate
reference made in the Explanatory Memorandum to make explicit reference to
legal professional privilege in the context of the Auditor‑General’s
information gathering powers (as is the case in other Acts such as the Ombudsman
Act 1996), this would enhance clarity around the issue.
It is clear from the evidence that the issue of legal professional
privilege is not straightforward. As Mr Russell Coleman, Principal Auditor
with the ANAO states:
...there has been a lot of case history in relation to legal
professional privilege. There are a lot of court cases in relation to various
aspects of it. Therefore, not surprisingly, there are a variety of
interpretations placed on those court cases.
Mr Coleman further describes how the ANAO has received conflicting
advice about access to documents protected by legal professional privilege and
disagreements about whether legal professional privilege will be waived as a
result of providing the Auditor-General with such access. The question of
whether Commonwealth agencies can indeed claim legal professional privilege
against another arm of the Commonwealth has also resulted in some differing
Despite these difficulties, Mr McPhee reported that his office had never
been refused access to information.
A number of issues were brought to light during the discussion around
amending the Act to contain an explicit reference to the Auditor-General’s
power to access documents protected by legal professional privilege.
First, as mentioned above, is the issue of whether such an amendment
would result in a waiver of legal professional privilege over those documents.
Second, questions were raised about ANAO publication of material protected by
legal professional privilege.
With regard to the first question, the Committee notes that in the
context of disclosure within the Commonwealth, disclosure of legal advice to
another Financial Management and Accountability Act agency, such as the
ANAO, does not amount to a waiver of legal professional privilege. However,
there appears to be less certainty where disclosure involves a Commonwealth
body that is a separate entity.
The ANAO sought legal advice on this issue, and provided the following
information to the Committee:
We were...asked to consider an amendment of the Auditor‑General
Act that, while putting beyond doubt that legal professional privilege does not
prevent access by the Auditor‑General to documents and records, it would
ensure the provision of documents or records to the Auditor-General would not
result in the waiver of legal professional privilege by persons providing them
to the Auditor-General.
Based on the legal advice we have received, the ANAO suggests
that this could be achieved through the inclusion in the Act of a specific
power that allows the Auditor-General to access material over which entities
claim legal professional privilege but this access does not amount to a waiver
of this privilege by the entities concerned.
The ANAO further advised that a provision along the lines of that
included in the Inspector-General of Taxation Act 2003 would satisfy
As referred to above, questions were also raised about the publication
of material protected by legal professional privilege in public reports. The
Committee notes that under the current legislation, the Auditor-General has discretion,
subject to section 37 of the Act (see paragraph 3.64 below), to include
information subject to legal professional privilege in public reports.
On the face of it, this legislative provision appears to warrant some
concern. In particular, that decisions which may affect the legal professional
privilege attached to certain documents are ultimately the responsibility of
the Auditor-General thereby exposing the Government to risk associated with
However, the Auditor-General outlined to the Committee not only the high
degree of caution that is applied to the publication of sensitive information
but additionally, the authority the Attorney-General already has to override
Specifically, in response to a question about whether he would publish
documents that are the subject of legal professional privilege the Auditor‑General
The answer is: we have not. The reason is because I am very
mindful of the legal advice provided to the Commonwealth. In many cases, as important
as it is, it is not central to the individual issue. We would normally try to
draft around sensitive legal positions. However, if it happened to be an issue
which was front and centre in an audit, we may take a different attitude. But...I
am very sensitive to legal advice, the Commonwealth’s position, and very
careful not to explicitly bring harm to the Commonwealth unless I thought it
was significant in terms of the audit that we were doing.
More significantly, built into the legislation (section 37 of the Act)
is a mechanism which overrides that power in certain circumstances. Section 37
of the Act states, in part:
Auditor-General must not include particular information in a public report if:
- the Auditor-General is of the
opinion that disclosure of the information would be contrary to the public
interest for any of the reasons set out in subsection (2); or
- the Attorney-General has
issued a certificate to the Auditor-General stating that, in the opinion of the
Attorney-General, disclosure of the information would be contrary to the public
interest for any of the reasons set out in subsection (2).
- The reasons are:
- it would prejudice the
security, defence or international relations of the Commonwealth;
- it would involve the
disclosure of deliberations or decisions of the Cabinet or of a Committee of
- it would prejudice relations
between the Commonwealth and a State;
- it would divulge any
information or matter that was communicated in confidence by the Commonwealth
to a State, or by a State to the Commonwealth;
- it would unfairly prejudice
the commercial interests of any body or persons;
- any other reason that could
form the basis for a claim by the Crown in right of the Commonwealth in a
judicial proceeding that the information should not be disclosed.
The ANAO submits that claims of legal professional privilege are covered
in subsection 37(2)(f) set out above. The ANAO suggests, therefore, that the
existing provisions are adequate for addressing the issue of whether
information that is subject to a claim of legal professional privilege can be
included in a public report.
In practice, section 37 provides ‘a body of protection dealing with this
public interest consideration’. By way of example, if a
Department relinquished documents protected by legal professional privilege to
the Auditor-General and the Auditor-General was of a mind to publish that
material in his/her report, the Department, having become aware of that report
in the statutory process of providing comments on the draft, would then be in a
position to petition the Attorney-General to intervene.
The Committee notes that while there have been three situations recently
where agencies have raised concerns about both providing to the ANAO and the
ANAO publishing documents protected by legal professional privilege,
there has been no occasion, under the current legislation, where the
Attorney-General has intervened.
The Committee also notes that Mr Pat Barrett AO, a former Auditor‑General,
supports the idea that there should not be a detailed prescription of what the
Auditor-General can or cannot do and that he/she is guided by ‘public interest’
The Committee believes that as an independent officer of the Parliament the
Auditor-General should not be constrained in the conduct of his or her work on
behalf of the Parliament.
Additionally, the Committee notes that by including a specific provision
in the Act that makes explicit that the Auditor-General has access to material
over which legal professional privilege is claimed, and clarifying that such
access does not amount to a waiver of such privilege, no additional powers are
being conferred on the Auditor-General.
The Committee accepts that efficiency is diminished when the Auditor‑General
and his officers are engaged in time-consuming invalid negotiations about the
provision of privileged documents.
That the Act be amended to make clear that claims of legal
professional privilege do not override the Auditor-General’s information
gathering powers. The Act should also be amended to make clear that access
to documents upon which legal professional privilege is claimed does not
amount to a waiver of such privilege.
Fees for financial statement audits
Agencies that fall under the Financial Management and Accountability
Act 1997 do not pay fees for financial statement audits. Agencies are
advised of the cost of the audit and it is reported in their financial
statements but this is a notional figure which is not actually paid.
On the other hand, under section 14 of the Act, Commonwealth authorities
and subsidiaries and Commonwealth companies and subsidiaries are required to
pay audit fees for financial statements.
In 2008-09, a total of $8.141 million was received in audit fees from
bodies that fall under the Commonwealth Authorities and Companies Act 1997 (CAC
Act). It is important to note
that this revenue is returned to the budget and not made available to the ANAO.
The ANAO advises that the under the existing Act, the payment of audit
fees only applies to Commonwealth authorities and companies that fall under the
ambit of the CAC Act. There are a small number of bodies (including the High
Court of Australia, the Commonwealth Superannuation Scheme, and the Public
Sector Superannuation Scheme) where ‘their enabling legislation is silent on
the issue of audit fees’ and accordingly they pay
The ANAO submits that it would be appropriate to clarify whether the
Auditor-General should charge statutory authorities and other bodies that fall
outside the ambit of the CAC Act fees for financial statement audits.
The Committee was in receipt of no evidence to suggest that the Act
should not be amended to provide some consistency in relation to the collection
of audit fees.
That subject to consultation with affected bodies,
consideration be given to amending the Act so that all statutory authorities
or other bodies that fall outside the ambit of the CAC Act are liable to pay
audit fees for financial statements.
Acting as auditor under the Corporations Act
The Auditor-General seeks a technical amendment relating to section 21
of the Act.
Section 21 of the Act provides for the Auditor-General to accept
appointment under the Corporations Act 2001 as the auditor of:
(a) a subsidiary of a
(b) a Commonwealth company; or
(c) any other company in which
the Commonwealth has a controlling interest.
The intent of this section is to allow the Auditor-General to accept
appointment under the Corporations Act as auditor of all Commonwealth
entities that are subject to the Corporations Act.
The ANAO submits that when the Auditor-General Act was drafted,
the CAC Act defined a Commonwealth company as ‘a Corporations Act company in
which the Commonwealth has a controlling interest’. However, as a result of
recent amendments to the CAC Act related to the definition of ‘control’, subsection
21(1)(c) of the Act should be amended to read ‘any subsidiary of a Commonwealth
The purpose of this amendment is simply to make clear that the Auditor‑General
should audit any Commonwealth controlled companies and their subsidiaries.
The Committee notes that the proposed amendment simply provides
legislative certainty to existing arrangements. As such, there are no
resourcing implications associated with making this amendment.
That section 21 of the Act be amended to reflect that the
Auditor‑General is able to audit any Commonwealth-controlled entity
including Commonwealth-controlled companies and their subsidiaries.
Providing advice and information
Evidence from the ANAO suggests that section 23 of the Act (set out
below) which deals with the provision of advice or information is somewhat
23 Provision of advice or information
Auditor-General may provide advice or information to a person or body relating
to the Auditor-General’s responsibilities if, in the Auditor-General’s opinion,
it is in the Commonwealth’s interests to provide the information or advice.
- In this section:
- the Auditor-General’s functions
and powers; and
- any matter which the Auditor-General could consider when exercising those functions and powers.
The Auditor-General’s preference would be for the Act to expressly
recognise that the functions of the Auditor-General include the promotion of
public accountability in the public sector and the authority to do anything
incidental or conducive to any of the Auditor-General’s audit responsibilities.
The relevant Australian Capital Territory legislation (i.e., Auditor-General
Act 1996) is cited as an example which provides greater clarity around
The Committee acknowledges and appreciates the wide range of activities (e.g.,
seminars, better practice guides, capacity building) that are undertaken by the
Auditor-General and his office to improve public accountability and
administration both nationally and internationally.
However, it is the Committee’s view is that rather than being
restrictive, section 23 as it stands is broad in scope. Additionally, it is
not clear what practical difference this amendment would make to the
Auditor-General’s functions. The Committee does not recommend
any amendment to this section of the Act.
The Australian Auditing and Assurance Standards Board develops standards
for both audits and other assurance engagements
yet section 24 of the Act requires the Auditor-General to set auditing
The Auditor-General submits, and the Committee concurs, that it is
proper for the Act to use the same terminology that the profession uses both
nationally and globally.
Additionally, given the Committee’s first recommendation outlined in
chapter 2 above, (i.e., that the Auditor-General be provided with the express
authority to conduct assurance activities) it is appropriate to update the Act.
That the Act be amended to require the Auditor-General to
set auditing and assurance standards.
Parliamentary privilege refers to the special rights and immunities that
belong to both Houses of Parliament, their committees and their Members. These
rights are considered essential for the proper operation of the Parliament.
These rights and immunities allow the Houses, their committees and Members to
carry out their proper roles without obstruction or fear of prosecution.
In its 2001 review of the Act, the JCPAA reported:
The tabling of a performance audit report or financial
statements audit report in Parliament becomes part of ‘proceedings in
Parliament’ and attracts the protection of Parliamentary privilege. The
Auditor-General and ANAO officers cannot be found liable in respect of
statement contained in a tabled report.
However, there was a lack of clarity around whether ANAO draft reports,
extracts of draft reports and working papers attract parliamentary privilege
given these documents are not tabled and hence may not be considered
‘proceedings in Parliament’.
The JCPAA recommended, therefore, that the Privileges Committee of both
the Senate and the House of Representatives examine this question.
To date, this recommendation has not been taken up by either committee.
This issue was raised at the hearing on 19 October 2009. At that
hearing, Mr Russell Coleman indicated that this is an issue that does ‘come
up...from time to time’, legal advice having been
sought in the past by the ANAO:
There are often issues in relation to that as to whether that
information subject to a discovery motion could be subject to parliamentary
privilege. Some years ago, we did get advice from the then Solicitor-General.
He at the time concluded that the relevant provisions of the relevant act...should
be read widely. Therefore, not only our reports but also effectively our
working papers were subject to parliamentary privilege. I think he also
concluded that it was not beyond doubt. The courts generally do not rule on
The point was also made at that hearing that while it is unclear whether
privilege is attached to draft reports and extracts of draft report there are
penalties for not adhering to the relevant confidentiality requirements.
While there is no urgency attached to addressing this issue, the
Committee reiterates the relevant comments its predecessor made in Report
The audit process relies on a free flow of information on a
continuous basis...the provision of Parliamentary privilege is an essential
element in protecting the office of the Auditor-General from legal action so
that it may provide a fearless account of the activities of executive
The Committee again recommends that this issue be taken up by the Privileges
The Committee suggests that the Privileges Committee of both
the Senate and the House of Representatives examine in more detail the
application of parliamentary privilege to ANAO draft reports, extracts of
draft reports and working papers, noting the Auditor-General’s status as an
‘independent officer of the Parliament’.
Exemptions from FOI and the Privacy Act
Although not a matter requiring amendment to the Auditor-General Act,
the issue of the Auditor-General being exempt from the Freedom of
Information Act 1982 (FOI Act) (Schedule 2 exemption) and largely exempt
from the Privacy Act 1998 was raised over the course of the inquiry.
Exemption from the FOI Act
The FOI Act gives individuals the right to:
- see documents held by
federal government Ministers, their departments and most statutory authorities;
- ask for information
concerning them to be changed, if it is incomplete, out of date, incorrect or
- appeal against a decision
not to grant access to a document or amend or annotate a personal record.
Federal government agencies are also required to make available detailed
information about the way they are organised, their functions and
decision-making processes and the documents they hold under the FOI Act.
As referred to above, the ANAO is exempt from all provisions of the FOI
Act and in response to a Committee request for the rationale behind this
exemption, the Auditor-General provided a summary of the reasons (see supplementary
submission 3.2 for more detail):
- The Auditor-General,
through the conduct of audits and related activities, is responsible for
providing to the Parliament an independent assessment of the operations of
public sector entities. The Auditor-General is an independent Officer of the
Parliament, performs no executive functions, and makes no decisions or
recommendations that directly affect members of the public. The outcome of all
audit and related functions are publicly available, thereby achieving the
objective of public accountability that is also an objective of the FOI Act.
- The majority of
documents in the possession of the ANAO are obtained from agencies, or are
generated by the ANAO for the purposes of producing an audit report or forming
an audit opinion that is tabled in the Parliament. Requests to access agency
documents are able to be made directly to the agency concerned. Where
documents are provided to the ANAO in confidence, it is important that their
confidentiality is maintained.
- The general principle
of confidentiality of information obtained during the course of an audit is
reinforced by the Code of Ethics for Professional Accountants
and by sub-section 36(1) of the Auditor-General Act 1997.
- The FOI exemption for
the Auditor-General at the federal level is consistent with the position for
Auditors-General in the majority of States and Territories.
The ANAO’s exemption from the provisions of the FOI Act raised concerns
amongst some Committee members who believed the Auditor‑General should be
subject to the provisions of the FOI Act in the same way that other agencies,
also holding sensitive information, are.
One of the Auditor-General’s primary concerns about releasing
information is related to the protection of confidentiality (as set out in the
second bullet point above). This point was reiterated by the Auditor‑General
at the public hearing on 22 June 2009 as follows:
If the protections can go to maintaining the confidences of
individuals who have talked to us in a confidential manner for the purposes of
furthering the audit then I think the proposal is worthy of looking at. But I
would just say to you that it is important not to underestimate the importance
of retaining some confidentiality.
The Committee notes the Auditor-General put forward an option for
consideration by the Committee that the ANAO, in the context of its
administrative functions only, be subject to the provisions of the FOI Act. The
Committee can see no real benefit to be gained by adopting such an approach.
The Committee has little evidence on which to suggest that any changes
to the ANAO’s exemption from the FOI Act are warranted. However, the Committee
notes that the current Government conducted a review of Australia’s Freedom of
Information laws. As a result of that review two bills, the Australian
Information Commissioner Bill 2010 and the Freedom of Information
Amendment (Reform) Bill 2010, passed through the Parliament on 13 May 2010.
These bills provide for the establishment of the Office of the Australian
Information Commissioner and two new independent office holders, the Australian
Information Commissioner and the FOI Commissioner. The Commissioners are
described by the Government as having ‘wide ranging FOI functions to promote
openness and transparency as intended by the Government reforms’.
The Committee believes that the appropriateness of the current
exemptions from FOI could be examined in the context of that ongoing reform
Exemption from the Privacy Act 1998
The Privacy Act 1998 regulates information privacy. More
specifically, it regulates how the personal information of individuals
(including sensitive information) is collected, used and disclosed, and the
accuracy of that information. It also regulates the manner in which the personal
information of individuals is kept and their access to that information. The Privacy
Act also covers the use of tax file numbers and credit worthiness
The Privacy Act sets out principles about the way in which
personal information should be handled rather than being prescriptive. Each
agency applies the principles to its own situation.
The Committee was interested in the application of the Privacy Act
1998 to the ANAO. In response the ANAO informed the Committee that on the
basis of advice it had received, the Auditor-General is largely exempt from the
provisions of the Privacy Act 1998. This is as a consequence of its
exemption from the FOI Act. However, the advice also notes:
...that the application of the Privacy Act to the
Auditor-General and the ANAO is in some respects uncertain, and legislative
clarification would be warranted.
Based on advice from the Australian Government Solicitor, the ANAO also
submitted that in broad terms the access and confidentiality provisions of the Auditor-General
Act would take precedence over the majority of the provisions of the Privacy
Act that relate to the activities of agencies that collect or receive
In summary, the ANAO suggest that while, again, ANAO administrative
functions could be subject to the Privacy Act there would be little or
no public benefit in amending the current arrangements.
Like the question of the ANAO exemption from the FOI Act, the Committee
has little evidence on which to suggest that any changes to the ANAO’s
exemption from the Privacy Act are warranted.
Definitions of ‘persons’ giving evidence
In its submission to the inquiry, the Institute of Public Administration
Australia raise the definition of the term ‘person’ in section 32 of the Act
which sets out the power of the Auditor-General to obtain information. Section
32 states (in part):
Auditor-General may, by written notice, direct a person to do all or any of the
- to provide
the Auditor-General with any information that the Auditor-General requires;
- to attend
and give evidence before the Auditor-General or an authorised official;
- to produce to the
Auditor-General any documents in the custody or under the control of the
The IPAA raise this issue because Ministers and their staff could prove
to be valuable witnesses in the context of audits yet the operation of section
32 is limited by section 30 of the Act, which states that the power of the
Auditor-General to obtain information is limited by the laws of the
Commonwealth relating to the powers, privileges and immunities of the Parliament
Evidence from the Auditor-General and Mr Russell Coleman taken at the
hearing on 19 October 2009 suggests that the IPAA is mistaken in its
assumption that Ministers and/or their staff are not subject to section 32 of
The Acts Interpretation Act  clarifies the definition
of persons. From memory, it is very broad. Generally, again, my understanding
is that the Acts Interpretation Act is the relevant act you go to, which
expands on things like the wording of persons and bodies and those sorts of
things. It is not usually put into specific individual pieces of legislation.
The master legislation is the Acts Interpretation Act. We believe it is covered
sufficiently in that act.
My understanding is that we are quite clear about the powers
already under the act...It applies to everyone.
Supplementary submission 3.6 provided to the Committee contains legal
advice on the question of the Auditor-General’s access powers in section 32 of
the Act. On the basis of this legal advice the ANAO submits the following:
The advice does not suggest that any amendments to the
existing access powers contained in the Auditor-General Act 1997 are
The Committee agrees that it is not necessary to amend the Act in this
Explicit access to Cabinet documents
The Australasian Council of Auditors-General submit that the Act could
be clarified with regard to the Auditor-General’s right to access cabinet
documents. However, very
straightforward evidence was received from Mr McPhee that there is no
requirement for an amendment in this respect:
It is understood. The cabinet issue is understood...[O]n
cabinet papers, everyone within the system understands we do have access to
The Committee believes that there is no need for amendment to clarify
this aspect of the Act.
In her submission to the inquiry, the Acting Commonwealth Ombudsman, Dr
Vivienne Thom, considered there is a case for ‘providing the Auditor‑General
with an express role in relation to any new whistleblowing scheme’.
Currently, the Public Service Act 1999 and supporting legislation
provide a framework for the reporting of breaches or suspected breaches of the
Code of Conduct so as to protect the ‘whistleblower’ from victimisation or
The Auditor-General, having been invited to provide his views on this
matter, provided a sensible rationale for his exclusion from any participation
in a whistleblowing scheme as follows:
To preserve the Auditor-General’s independence, it is
generally accepted that it is not appropriate for the Auditor-General to
perform executive functions. In the past, the Auditor-General has been
involved from time to time in performing executive functions such as in
relation to electoral redistribution committees and tax agents’ registration
boards. Previous governments, with the strong support of the ANAO, have
removed these executive responsibilities from the Auditor-General.
Moreover, the ANAO suggests that any specific role in a government
scheme might be incompatible with its central auditing responsibilities.
The Committee concurs with this view and notes the following comment
made by Professor John Wanna when asked for IPAA views on the potential for
the Auditor-General to be involved in any whistleblowing scheme:
I think there is a danger in too many people being
responsible for whistleblowing. The next generation in the whistleblowing area
will be better supported with places to which they can go to receive that
support and where they can be protected. Bringing the Auditor-General into that
just muddies that water rather than helps clarify.
The Committee also notes that no role was identified for the Auditor‑General
in the House of Representatives Standing Committee on Legal and Constitutional
Affairs report entitled Whistleblower Protection: A Comprehensive Scheme
for the Commonwealth Public Sector.
The Committee does not believe it would be appropriate for the Auditor‑General
to be involved in any public sector whistleblower scheme.
Comments on reports and extracts of reports
Section 19 of the Act provides that all written comments received from
recipients of either a full proposed audit report or an extract of a proposed
audit report are required to be included in the final report.
The requirement to include these comments came about as a result of a
recommendation made by the Committee in its 2001 review of the Auditor‑General
The intention of the JCPAA in 2001 was, in the interests of natural
justice, to include comments in full to ‘avoid disputes about the
representation of agency views’. The ANAO submits that
this intention has been realised with the amendments that were made to the
legislation as a result of that recommendation.
However, the ANAO also submits that there are now practical issues
around the inclusion of comments received on extracts of reports which could be
addressed in the context of this inquiry.
In particular, the ANAO has expressed concern that on occasion comments
received from non-auditees such as contractors, sub-contractors and former
Australian Public Service personnel may not be directly relevant to the audit
findings or the extract of the report provided to them. This sometimes results
in extended consultations with the parties concerned and the need for the ANAO
to provide further comment on comments received. Delays become inevitable and
additional resources required. Moreover, the ANAO states:
The inclusion of such comments, particularly lengthy
comments, can also have the unintended effect of distracting from the central
focus of the audit, which is administration by the responsible agency or
agencies of the program or activity subject to audit.
The ANAO argues that while the Act should still require that the Auditor‑General
include in the final report any comments received from Australian Government
entities that are the subject of the audit, other comments should be included
at the discretion of the Auditor-General.
We would like discretion so that
for non-auditees the Auditor‑General has discretion to identify relevance
in including the extract in the report. Certainly we would be taking account of
The Committee is of the view that non-auditees are entitled to natural
justice and as such should continue to be provided with extracts of the
proposed reports where necessary and permitted to comment on those extracts.
The Committee is sympathetic to the argument made by the Auditor‑General
in supplementary submission 3.1 and at the hearing on 19 October 2009;
however, in the interests of transparency the Committee believes that all
comments received from recipients of extracts of proposed audit reports should
continue to be published in full in the audit report.
That said, it is important that recipients of extracts of proposed audit
reports be formally made aware of the expectations around, and implications of,
The ANAO currently provides guidance that asks:
...any comments you have on the report extract be directly
relevant to the matters referred to in the extract and be reasonably succinct.
The Committee recommends that the Auditor-General should also inform
recipients of report extracts of the potential implications and/or
complications of naming others in those comments.
That the Auditor-General continue to provide the recipients
of extracts of proposed audit reports with clear guidelines to clarify
expectations around the submission of comments (e.g., the importance of
brevity and clarity) and also the implications for naming other
persons/entities /organisations in those comments which are published in
Tabling embargo during the caretaker period
The timing of the conduct of performance audits is at the discretion of
the Auditor-General. However, subsection 18(2) of the Act requires that as
soon as practicable after completing the report on an audit the Auditor‑General
must cause a copy of the report to be tabled in each House of Parliament.
There has been some controversy in the past regarding the tabling of
audit reports during the caretaker period. The question of
whether it would be appropriate to incorporate a blackout on tabling during this
time was raised both at an Estimates hearing in February 2008
and during this inquiry.
At the public hearing on 22 June 2009, the Auditor-General indicated that
while he did not see any problem with the imposition of a tabling blackout
during the caretaker period should the Committee recommend one, he is
comfortable with the current arrangements:
Let us face it, the caretaker period is primarily focused on
the current government not really locking in a possible change in government in
terms of policy positions or major contracts, so it is a forward-looking
consideration. My role and my reporting is very much about accountability for
performance of the current government’s programs so I am comfortable with
making the judgement about whether to table or not in the caretaker period.
...if you have a long caretaker period and you had a
blackout, it would mean that the Auditor-General would be required to sit on
that report and potentially table it a week after an election. If it were a
contentious report, I am not sure that that is in the best interests of the
community or the public.
The Committee is
of the view that the disclosure of information regarding government performance
is always in the public interest. It does not, therefore, propose to make any
recommendation in this respect.
Provision of information to committees
Section 49 of the Australian Constitution confers on both Houses of
Parliament the powers, privileges and immunities possessed by the United
Kingdom House of Commons in 1901. Under Section 50 each House has the right to
make rules or orders concerning its powers and conduct of business. This power
is delegated to a committee by the Standing Orders, by the Resolution of Appointment,
or by the relevant statute.
One significant power delegated to parliamentary committees is the power
to compel the attendance of witnesses, the giving of evidence and the
production of documents. In the case of this
Committee, section 13(1) of the Public Accounts and Audit Committee Act 1951
explicitly provides it with the power to summon a person to appear before it to
give evidence and produce documents.
This authority reflects the significant role committees play in, amongst
other things, oversight and scrutiny of the Executive on behalf of the
Parliament. The power to access information in order to perform its role is something
taken very seriously by this Committee.
On occasion, claims that information should be withheld from disclosure to
a parliamentary committee are made by the Executive on the grounds of public
interest (i.e., claims of public interest immunity). Grounds for making a
claim of public interest immunity may relate to national security, or the harm
that may result from the disclosure of commercially sensitive information. Such
claims are normally made by the responsible Minister in consultation with the
Attorney-General and the Prime Minister. However, it is accepted
practice that an alternative means for providing the information in question to
the Committee (such as on a confidential basis or in camera) should be
explored prior to making a claim of public interest immunity.
Section 36 of the Auditor-General Act 1997 relates to protection
of the confidentiality of information. It provides that information obtained
in the course of the performing an Auditor-General function can only be
disclosed in particular circumstances. Section 36 states, in part:
(1) If a
person has obtained information in the course of performing an Auditor-General
function, the person must not disclose the information except in the course of
performing an Auditor-General function or for the purpose of any Act that gives
functions to the Auditor-General.
Subsection (1) does not prevent the Auditor-General from disclosing particular
information to the Commissioner of the Australian Federal Police if the
Auditor-General is of the opinion that the disclosure is in the public
At the same time as this inquiry was being conducted, the Committee was
also conducting an inquiry into the role of the Auditor-General in scrutinising
government advertising campaigns. During that inquiry there was a great deal
of discussion about the degree to which the Auditor-General should be required
to provide internal documents to the Parliament via the Committee.
Committee members were interested, first, in the extent to which the
confidentiality requirements set out in Section 36 of the Auditor-General Act
limit the Auditor-General’s ability to disclose material it has in its
possession to the Committee and second, whether
this potential ‘grey area’ is an one that might be clarified by amending the
With regard to the first question, it is important to note that the
ANAO’s interaction with the Committee is reasonably considered ‘as being part
of performing [an Auditor-General function]’.
More significantly, it is also important to note that statutory secrecy
provisions such as those provided in section 36 of the Act are not considered binding
on parliamentary committees. The law of parliamentary privilege provides
absolute immunity to the giving of evidence and the disclosure of information
to parliamentary committees cannot therefore be prevented unless the
legislation expressly states as such.
In a supplementary submission to the inquiry the Auditor-General acknowledged
the degree of uncertainty between relevant legislation and parliamentary
Standing Orders and advised that, to date, the ANAO’s approach to providing
information to parliamentary committees has been guided by ‘custom and
At the hearing on 8 February 2010, the Auditor-General outlined the matters
he takes into consideration when disclosing documents to the Committee as
I guess broadly it is under the
public interest umbrella that drives [considerations about disclosing information
to the Committee]... I have always worked to provide the committee with
whatever information it wanted, but I do have to keep an eye on the integrity
of the audit process itself. We have people who communicate with us openly,
directly and in confidence. It is always a judgment as to how...much we provide
to committees of the parliament, because I am concerned that if we go too far
in that people will not be as open with us about their views on particular
aspects, and that will impair the audit process. I believe as Auditor-General
that I have an obligation to weigh that consideration as well.
In order to provide some clarity around this issue, the Auditor-General proposes
that an appropriate amendment to the Act would be one that explicitly requires
him/her to consider the public interest in providing information or documents
to parliamentary committees. According to the Auditor-General:
Such an amendment would not diminish the Auditor-General’s
accountability for the audit conclusions and opinions that are issued and are
publicly available. Further, it is the ANAO’s understanding that responding to
requests for information and documents, where appropriate, is an integral part
of performing an Auditor-General function.
The Committee acknowledges that differing claims of public interest by
the Parliament and the Executive (or the Auditor-General in this case) may, on occasions,
come into conflict. The Committee also acknowledges that there may be
occasions when it is in the public interest that certain information not be
disclosed. However, it is the Committee’s view that any legislative change
would inevitably result in the Parliament being seen to diminish in its
capacity to scrutinize the performance of the ANAO and other agencies. This is
a situation which is not acceptable to the Committee nor indeed in the public
A key question of interest to the Committee is whether the decision not
to disclose certain information to committees in the public interest should be
one that is left to the Auditor-General.
Upon consideration of this issue, the Committee believes that were the
legislation amended so as to constrain the Auditor-General from making
decisions about disclosing information in the public interest, or to stipulate
that such claims may only be made by a Minister, this would not only result in
the potential for interference in the audit process by parliamentary committees
but ultimately have a detrimental impact on the independence of the office of
It is the Committee’s view, therefore, that the most appropriate course
of action would be to retain the current arrangements. In this way, individual
issues would be resolved on a case by case basis by negotiation or ultimately
by the Houses of Parliament, as is currently the case.