House of Representatives Committees

Standing Committee on Economics, Finance and Public Administration

Review of ANAO Audit Report No.6 1996/97: Commonwealth guarantees, indemnities and letters of comfort

Media release, 27 February 1997

COMMONWEALTH GUARANTEES AND INDEMNITIES

The adequacy of public sector financial management will be examined by the Financial Institutions and Public Administration Committee at a public hearing this week.

According to Committee Chairman, Mr David Hawker, the Department of Finance will be giving evidence on a significant report by the Australian National Audit Office (ANAO) into Commonwealth guarantees, indemnities and letters of comfort.

"Guarantees, indemnities and letters of comfort result in financial exposures for the Commonwealth, and therefore carry an implicit cost to every Australian taxpayer," said Mr Hawker.

"The audit found that the Commonwealth's gross exposure to these instruments amounts to at least $222 billion at 30 June 1995, or around $28,000 per taxpayer."

"The Committee is very concerned that most departments are not managing this risk adequately."

"Such inadequacies could prove to be very costly to taxpayers."

"A number of claims have been made against the Commonwealth in respect of such instruments in recent years."

"For example, payments of some $563 million were made between 1990 and 1994 to the Export Finance and Insurance Corporation in respect of national interest loans and insurance contracts."

"Of course, the risk of having to make a payment for guarantees, indemnities and letters of comfort in most cases is remote in any one year."

"However, there is a need to improve the level of awareness across departments of the financial risk involved."

"The Department of Finance has a central role in ensuring that departmental management of these instruments is of a high standard and the Committee will be very interested in what the Department has to say about improving management of these instruments."

"The Committee will also canvass the financial framework for government business enterprises and statutory authorities," Mr Hawker concluded.

Ends
26 February 1997
Further information: David Hawker MP (Chairman) (06 277 4100)
Christopher Paterson (Secretary) (06 277 4587)

Public Hearing Program

Thursday 27 February 1997 10.30 - 11.30am
House of Representatives Committee Room 2R2

10.30am Department of Finance

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