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

Recommendations

1 That the power of Commonwealth statutory authorities to accept liabilities, including contingent liabilities, be regularly reviewed by portfolio departments, in consultation with the ANAO and Finance, to ensure that the Commonwealth's interests are protected. (paragraph 2.15)

2 That agencies be required to follow the recommendations of the ANAO and Finance concerning the formal authorisation of officers to issue indemnities on behalf of a Minister. Each agency should also be required to provide a copy of its register of authorised officers to Finance on a regular basis. (paragraph 2.19)

3 That agency heads be required to take account of their responsibility with regard to management of the Commonwealth's contingent liabilities. Subject to ultimate Ministerial responsibility and accountability to the Parliament, it is the responsibility of agency heads to ensure the agency complies with guidelines and other instructions concerning contingent liabilities. (paragraph 3.12)

4 That agencies take account of the direction to include a limit where possible. Agencies should always attempt to measure the potential financial cost as part of risk assessment, either internally or with external assistance, and should keep a record of that assessment. Where a limit is not included, agencies should record the reason for that arrangement as part of the risk assessment. (paragraph 3.22)

5 That the Department of Finance in consultation with the ANAO issue a 'better administrative practice' document to provide agencies with more direct assistance on how to introduce and maintain a central register of contingent liabilities. (paragraph 3.29)

6 That agencies consider introducing contract registers, in particular with a view to addressing concerns about the increased emphasis on outsourcing Commonwealth functions. In the absence of a register, agencies should ensure that contingent liabilities in contracts, if any, are recorded separately on a Register of Guarantees, Indemnities and Letters of Comfort. (paragraph 3.40)

7 That Defence review its existing contracts and its contract management practices to ensure that its central record keeping and finance areas are fully informed of all contingent liabilities contained in contracts. (paragraph 3.41)

8 That agencies which report contingent liabilities to the public or to Ministers, review those values, in consultation with the ANAO where relevant, to ensure that they calculate the values accurately. (paragraph 3.60)

9 That the Department of Finance, in consultation with the ANAO, takes all steps necessary to ensure that whole of government risk reporting in the Statement of Risks provides an accurate description of the Commonwealth's exposure. (paragraph 3.61)

10 That Finance, in its review of the Commonwealth policy of self insurance, take account of the need for expertise in managing risk and the cost to departments of providing such expertise in-house or externally. (paragraph 3.88)

11 That the review of the governing legislation for EFIC under the Commonwealth's Legislation Review Schedule include consideration of the appropriate prudential regulation arrangements for EFIC where commercial risks are covered. (paragraph 3.97)

12 That the ANAO review the management of the Commonwealth's contingent liabilities, and agency compliance with the guidelines on issuing indemnities, guarantees and letters of comfort, in two years time. (paragraph 3.108).

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