Bills Digest no. 91 2008–09
Auditor-General Amendment Bill 2008
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
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Date
introduced: 3 December
2008
House: Senate
Portfolio: Department of Prime Minister and
Cabinet
Commencement:
The Act commences on Royal
Assent
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To amend the Auditor-General
Act 1997 (the 1997 Act) to allow for the distribution of
reports or extracts of reports to any person who the
Auditor-General considers has a special interest in the report and
incorporate certain amendments recommended by the Joint Committee
on Public Accounts and Audit in relation to the disclosure of
confidential information in public reports.
Reports 331 and 346 of the Joint Committee on Public Accounts
formed the basis of the 1997 Act. The Committee conducted a
comprehensive inquiry in 1988 into the operations of the
Auditor-General and produced a report entitled The
Auditor-General: Ally of the People and Parliament. According
to the second reading speech of the Minister of Finance at the
time, Mr Fahey, the Committee recommended profound changes to the
Auditor-General s operations, including that the Audit Act
1901 be replaced with more modern legislation.[1]
The Auditor-General Bill 1996 was one of a package of
Bills to replace the Audit Act 1901. The other Bills
comprising the package of reforms were the Financial Management and
Accountability Bill 1996, Commonwealth Authorities and Companies
Bill 1996 and the Audit (Transitional and Miscellaneous) Amendment
Bill 1996. The Auditor-General Act 1997 was the central
plank of these reforms. The Minister for Finance, Mr Fahey stated
the objectives of the legislation at the time:
The Auditor-General Bill 1996 is designed to
achieve a number of related purposes: foremost the re-establishment
of the Office of the Auditor-General of the Commonwealth of
Australia, but in a way that both symbolically and practically
strengthens the functional independence of the office beyond that
available under current laws. The bill declares the Auditor-General
to be an independent officer of the parliament , as an expression
of the primary and unique relationship which the office has with
the parliament. In keeping with the government s publicly stated
commitment to confer genuine functional independence on the
Auditor-General, a range of statutory safeguards are included in
the bill to prevent inappropriate influence being exerted on the
Auditor-General by either the executive or the parliament.[2]
In 2001, the Joint Committee on Public Accounts and
Audit reviewed the Auditor-General Act and the Committee s
report 386 made five recommendations. The Government
responded to Recommendations 2, 3, 4 and 5 on 19 September
2002. The Government response agreed to Recommendations 2, 4 and 5
and in part to Recommendation 3 which is discussed later. This Bill
incorporates the Government response in relation to Recommendations
2-5.
According to the Explanatory Memorandum, the Bill has no
financial impact.
Schedule 1 Amendments relating to reporting
requirements
Item 5 inserts paragraph 15(2)(c) and provides
that the Auditor-General must give the Chief Executive of an agency
which is subject to an audit a copy of the performance audit
report. Section 15 relates to agencies established under the
Financial Management and Accountability Act
1997[3].
Item 6 proposed subsection 15(2A) provides that
the Auditor-General may give a copy of the report or an extract of
it to any person or body, including a Minister, who the
Auditor-General considers has a special interest in its content. A
provision in relation to Commonwealth authorities is found in
item 9, proposed subsection 16(5)
and to Commonwealth companies in item 12,
proposed subsection 17(4A).
Item 8 proposed paragraph 16(4)(c) provides
that the Auditor-General must give a copy of a performance audit
report to a Commonwealth
authority[4] or a
subsidiary of the authority for which the audit was conducted.
Item 11, proposed paragraph 17(4)(c) provides for
a similar provision in relation to a company or a subsidiary of a
company for which an audit has been conducted.
Item 14 proposed paragraphs 18(2)(c) to
(g) expands the list of agencies and persons to whom
copies of performance audit reports must be given provided that
they comply with certain conditions and that the report relates to
the operations of that agency. Currently the section requires that
the Auditor-General to table copies of the audit report in each
House and to give a copy to the Finance Minister. The Bill proposes
that copies be given to each responsible Minister, the chief
executive of an agency, Commonwealth authority or Commonwealth
company, or if it relates to the operations of a person, a copy to
that person.
Item 15 proposed subsection 18(3) repeals and
substitutes the existing provision to broaden the Auditor-General s
discretion in relation to whom he/she may give a copy of the
report. Currently the Auditor-General may give a copy of a general
performance audit report to any other Minister whom the
Auditor-General considers has a special interest in the report. It
is proposed to broaden that discretion to include any other person
or body who the Auditor-General considers has a special interest in
the report or the content of an extract of it.
Section 19 deals with the obligation of the Auditor-General to
provide proposed (that is, draft) audit reports to the organisation
that is the subject of them to enable the relevant organisation to
respond in writing to the proposed report within 28 days. Those
written comments must be considered before the preparation of the
final report.
Item 16 proposed subsection 19(2) repeals and
substitutes the existing provisions. In the case of a Commonwealth
Authority or its subsidiary, the proposed report must be given to
an officer of that Authority: in the case of a Commonwealth
company, it must be given to a director or senior manager of that
company. Item 17 proposed subsection 19(3) amends
the existing provision to provide that the Auditor-General may
provide a copy of a proposed report or an extract of it to any
person who the Auditor-General considers to have a special interest
in the report. The Committee suggested that the Auditor-General
must give a copy or copy of an extract to a person
with a special interest in the report.[5] However the Bill has retained the
discretion in the Auditor-General to may give a copy to any person
whom he considers has a special interest in the report. This is
consistent with items 6, 9, 12 and 15. Item 20 proposed
subsection 19(5) provides that the Auditor-General must
include all written comments in the final written report. This
accords with the Government response in relation to the Committee s
Recommendation 3 that agency comments provided to the
Auditor-General should be included in full in the final report but
not in summary documents as the Committee recommended.
The question whether working papers and draft reports attract
parliamentary privilege also arose in the Committee s
deliberations. The summary of the issue, including the view of the
Australian Government Solicitor at that time, is attached in
Appendix A. In recommendation 1 of its report, the committee
suggested that:
the Privileges Committees of both the Senate
and the House of Representatives examine whether Australian
National Audit Office draft reports and extracts of draft reports
attract Parliamentary privilege, and if they do not, should they
attract Parliamentary privilege.
It is unclear what, if any, action has occurred in relation to
this issue. The government did not respond to this recommendation
when it issued its response to the other 4 recommendations of the
Committee.
Section 36(3) of the Auditor-General Act 1997 protects
information contained in proposed reports by stating that anyone
receiving a copy of a proposed report must not disclose any of the
information in the report except with the consent of the
Auditor-General. This offence attracts a maximum penalty of 2 years
imprisonment.
Item 21 proposed section 23A provides a
legislative basis for a current practice of the ANAO, according to
the Explanatory Memorandum, of providing information to third
parties for comment in assisting the auditor to resolve
inaccuracies or misunderstandings prior to the final report being
prepared.[6]
Item 22 proposed subsection 36(2A) provides
that subsection 36(1) of the Auditor-General Act 1997 does
not prevent the disclosure of information under section 23A
provided it is in accordance with that section. Subsection 36(1)
provides that a person must not disclose information obtained
during the course of performing an Auditor-General function except
when performing those functions or for the purpose of any Act that
gives functions to the Auditor-General. Proposed subsection
36(2B) provides that a person commits an offence if the
information is disclosed in accordance with section 23A but the
person to whom it is disclosed was not performing an
Auditor-General function and that person subsequently discloses the
information. The penalty is imprisonment for 2 years.
Proposed subsection 36(2C) provides that
subsection 36(2B) does not apply if the Auditor-General has
consented to the use or disclosure. A defendant bears an evidential
burden under section 13.3(3) of the Criminal Code. Evidential
burden is defined in section 13.3(6) of the Criminal Code as
meaning the burden of adducing or pointing to evidence that
suggests a reasonable possibility that the matter exists or does
not exist. The question of whether an evidential burden has been
discharged or not is one of law (section 13.3(5) of the Criminal
Code).
Item 25 proposed 37(4) amends the existing
provision in line with the Committee s recommendation that the
words If the Auditor-General decides to omit suggests that the
final determination whether to include sensitive information in a
report rests with the Auditor-General. [7] During the 2001 inquiry, the ANAO
raised concerns about the inconsistency between subparagraph
37(1)(b) and subsection 37(4). Subparagraph 37(1)(b) of the
Auditor-General Act 1997 provides that the Auditor-General
must not include information in a public report if the
Attorney-General has issued a certificate stating that disclosure
of the information would be contrary to the public interest for any
of the reasons set out in subsection 37(2).[8] The Committee agreed with the
suggestion of the Auditor-General that subsection 37(4) be amended
to reflect the intentions expressed in the Explanatory
Memorandum[9] to the
1996 Bill and the Committee agreed with that proposition.
The Committee considers that the original
intention of section 37(1)(b), as expressed in the EM should be
confirmed through amendment to section 37(4). The Auditor-General
supports this amendment.[10]
The Committee recognised that as the Attorney-General is part of
the executive government and one of the roles of the
Auditor-General is review the activities of executive government,
the Attorney-General may have a conflict of interest when he/she
determines that certain information should be restricted from
public access under subparagraph 37(1)(b).
In view of this, the Committee examined the
constraints that apply to the Attorney-General.
4.16 The Committee received advice from the
Australian Government Solicitor which indicated that the
Attorney-General s Certificate was subject to review under the
Administrative Decisions (Judicial Review) Act
1977. However, the Auditor-General stated that this processes
would be unduly bureaucratic . The Auditor-General concluded:
it would be a very brave Attorney-General and
government if an Auditor-General put a fairly persuasive case in
the public interest and we could not get satisfactory resolution.
9
4.17 The Auditor-General and DoFA noted that
there are other mechanisms to question the appropriateness of the
Attorney-General in issuing a certificate to prevent the
Auditor-General from reporting. The Auditor-General stated:
What the Auditor-General would do would be to
simply say in the report that this element had been excised on the
basis of a decision made by the Attorney-General. Then the
Attorney-General would be subject to questioning in the House.
4.18 Similarly, DoFA stated:
the Auditor-General still has the right to
advise parliament that in fact parts of his report or parts of the
information have actually been deleted for reasons that by the
Attorney-General has. The Attorney-General is then accountable to
parliament directly for that decision making process.
However, the Committee ultimately noted and
recommended:
4.19 The Auditor-General proposed that section
37(4) of the Act be amended to reflect the intentions expressed in
the Explanatory Memorandum. The Committee agrees with this
position.
4.21 The Committee notes that there are several
accountability mechanisms to ensure that the Attorney-General s
certificate is subject to scrutiny. These include the:
- Attorney-General s certificate being subject to the
Administrative Decisions (Judicial Review) Act 1977;
- Attorney-General being subject to questions in Parliament;
and
- the risk of public dissent if the Auditor-General put forth a
strong case for reporting certain information, and the
Attorney-General restricted publication.
4.22 In view of this, the Committee considers
that the original intention of section 37(1)(b), as expressed in
the EM, should be confirmed through amendment to section 37(4). The
Auditor-General supports this amendment.
Item 26 proposed subsection 37(5) repeals and
substitutes the existing provision to remove the word decides so as
to make clear the Auditor-General has no discretion to omit
information when the Attorney-General has issued a certificate. It
also tidies up the drafting of the provision.
Item 28 proposed subsection 45(4) provides that
the Independent Auditor may give a copy or an extract from the
report to any other Minister who in his/her opinion has a special
interest in the report. The role of the Independent Auditor under
the Auditor-General Act is to carry out auditing of the financial
statements and carry out performance audits of the ANAO.
Item 29 provides for the general application of
Schedule 1 amendments, other than items 21 and 22, to apply to
reports and proposed reports completed on or after the commencement
of this Schedule regardless of when the work started. Item
30 provides items 21 and 22, which relate
to the use or disclosure of information, apply on or after
commencement.
The Committee commented as follows:
This inquiry revealed that there is some
uncertainty as to whether Parliamentary privilege applies to
Auditor-General working papers and draft reports. Recent advice
from the Solicitor-General and the AGS suggested that it would be
proper to proceed on the basis that Parliamentary privilege applies
to draft reports and working papers for the purpose of preparing
audit reports. The AGS stated that unless and until a court decides
to the contrary, the Auditor-General could properly argue that the
creation of working papers and the preparation of draft reports are
part of proceedings in Parliament.[11]
The AGS commented in its advice that:
- the actual tabling of a performance audit report or financial
statements audit report in Parliament is part of proceedings in
Parliament and attracts the protection of Parliamentary privilege.
The Auditor-General and ANAO officers would not be found liable in
respect of statements contained in the tabled report;
- the extent to which the protection of Parliamentary privilege
extends, and how it extends, to earlier steps in the performance
audit or financial statements audit process is less certain. Where
a step in the audit process is not protected by Parliamentary
privilege, there is scope for that step to be challenged in court
and to give rise to legal liability;
- although the position is not clear, unless and until a court
decides to the contrary, the Auditor-General could properly argue
that the creation of working papers and the preparation of draft
reports are part of proceedings in Parliament , thereby attracting
the protection of Parliamentary privilege, with the result that the
Auditor-General and ANAO officers could not be found liable in
respect of statements contained in those draft reports and
statements;
- however, because the extent to which the protection afforded by
Parliamentary privilege applies to steps earlier than the tabling
of reports is unclear, and how that protection extends to those
steps is also unclear, it would be prudent for the Auditor-General
and ANAO officers to proceed on the basis that their conduct of a
performance or financial statements audit is capable of being
challenged and of giving rise to legal liability .
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277
2784.
Moira Coombs
4 February 2009
Bills Digest Service
Parliamentary Library
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