Introduction
Paragraph 55(1)(c) of the National Crime Authority Act 1984 requires
the Committee to examine each annual report of the National Crime Authority
(NCA) and to report to the Parliament on any matter appearing in, or arising
out of, any such annual report.The NCA's 1994-95 Annual Report was tabled
in both Houses on 25 October 1995 but was not examined by the Committee
before the dissolution of the 37th Parliament.The Annual Report is required
to be presented to the Inter-Governmental Committee before being transmitted
to the Attorney-General for tabling. The Attorney must also table any
comments made on the report by the Inter-Governmental Committee. South
Australian Minister for Emergency Services, the Hon. Wayne Matthew MP,
made brief comment on the operations of the NCA during the year from his
perspective. His comments were also tabled on 25 October 1995.
Background
The attention of the Parliament was drawn on 19 September 1996 to the
possibility of an error in the NCA's 1994-95 Annual Report. The entry
in question states:
In Matter 10 in Victoria, Income Tax Assessments involving the
target group of companies were amended by approximately $26 million.
[1]
The target group of companies was identified as the Foster's Brewing
Group Limited, which had denied the 'accuracy of the NCA's assertion'.
[2] On 9 October 1996 the House was informed that
the Attorney-General had confirmed that the statement in the NCA's Annual
Report was 'not accurate'. [3] The problem
of the inaccuracy was compounded by the claim in the Annual Report that:
... net benefits to the revenue by way of taxation assessments
was of the order of $35 million in 1994-95. This means that in 1994-95,
the NCA recovered almost the equivalent of its budget appropriation
[4]
the NCA thus inferring that the $26 million tax receipt, when added to
other taxation receipts in 1994-95, had led to a near break-even situation
on its operations over the year.
The Speaker later informed the House that it was customary, where an
error of substance was subsequently detected by a Commonwealth agency
in its annual report, for a corrigendum, or erratum, to be issued, or
a corrected version of the report to be tabled in substitution. At the
time of providing this information, no corrigendum or substitute copy
of the NCA's Annual Report for 1994-95 had been presented to the House.
[5]
The Committee's examination of the issue
Mr Broome wrote to the Committee on 25 September, shortly after the matter
was first raised in the House. Mr Broome informed the Committee in relation
to the relevant entry in the Annual Report that:
This was incorrect because the Australian Taxation Office had
not, in fact, issued a revised assessment and there was no revenue implications
during last financial year. What in fact occurred was that the Australian
Taxation Office disallowed a claim, the result of which will be to have
revenue implications at some stage in the future.
Mr Broome's correspondence made it clear that the Authority and the company
concerned had had an exchange of correspondence shortly after the publication
of the Annual Report and discussions had subsequently taken place. These
exchanges had led the NCA to believe the company did not wish to take
the matter further. Another exchange of correspondence early in September
1996 between Mr Broome and the company confirmed this position.The Committee
also took the opportunity at the public briefing it received from the
NCA in Melbourne on 21 October 1996 to raise this issue. In response to
a question from the Committee about the relationship between the NCA and
the ATO, Mr Broome stated:
They tell us, as a general rule, when they have issued a revised
assessment as a result of information provided by the authority. What
they do not tell us is individual collection. So they tell us that they
have issued a revised assessment; they do not tell us about recoveries.
The particular paragraph to which you refer in last year's report was
not accurate because it talked about an assessment. In that particular
case it was not an assessment that was involved. It was the tax office
making a decision to disallow a claimed loss.
Without getting too much into the detail, the end result may be very
similar in terms of determining the taxation liability, but it was inaccurate.
I have admitted this to the people concerned. I have admitted it to the
committee and written to the committee and explained what we have done.
It was wrong to say that there had been an assessment; there had not been
an assessment. It is correct, however, to say that at some stage - and
I do not know enough about the taxation affairs, and I do not want to
know about the taxation affairs, of the company concerned - because of
the actions taken, their tax position will be such that they will have
to pay a substantially greater amount of tax than they would have paid
if that loss had been allowed to be claimed.
The real problem was that we were wrong to say the assessment had been
issued last year and to imply that perhaps the funds had been recovered
last year. The amount of money involved will be, as I understand it, recovered
at some stage. I do not know when and without a detailed analysis of the
company's affairs you would not know. When we became aware of the error
we discussed it with the company, as I have said to the committee in correspondence.
We thought the matter had been resolved.
I became aware that the company still had some concerns. I took it up
with the company direct. They were concerned that the matter not be given
additional publicity. I explained that to you in a letter that I wrote
to the chairman on behalf of the committee. I explained what we had done
and that we had, in fact, offered to correct it. So I think we have very
much sought to account to your committee because we believe that is the
appropriate mechanism to deal with this and to explain that there was
an error and we have sought to correct it. [6]
In a subsequent estimates committee hearing on 23 October 1996, Mr Dene
Hawke, NCA General Manager, Corporate, clarified the matter further. He
again confirmed that the information in the annual report was inaccurate
but only because of the terminology used. He added:
However, the fact that an amount of revenue would ultimately come to
the Commonwealth was correct....[it was not a tax assessment] it was a
carry-forward of losses, which can be offset. [7]
Summary
It is obviously a matter of concern to the Committee that the NCA Annual
Report contained a statement which was incorrect. The fact that the error
was one of terminological inexactitude rather than a false representation
does not alter the fact that the Parliament expects and is, in fact, reliant
on the accuracy of such documents as annual reports to hold the Executive
accountable.
The NCA claims to have acted promptly to seek to address the issue once
it was drawn to its attention. Its decision not to table an erratum in
the Parliament was taken only after it had consulted with, and was taken
at the request of, the company involved. The Committee's major concern
is that it was not until September 1996 that the NCA drew this problem
to the Committee's attention. This was despite the matter receiving media
publicity in October 1995 in which an NCA spokeswoman asserted the accuracy
of the claimed net benefit of the tax revenue to the Federal Government,
which no doubt convinced the Committee at the time that there was no issue
requiring its closer examination. Had it been so advised, the Committee
could have indicated to the Authority whether it saw it as, in the Speaker's
terminology, "an error of substance" which warranted an erratum
to be tabled.
The Committee can also sympathise with the NCA in its attempts to show
in its Annual Report a relationship between its budget appropriation and
any revenue gained as a result of its activities. The "bottom line"
is an easily understandable concept. However, law enforcement agencies
should not be expected to perform on a quasi-commercial basis. If revenue
was the purpose of law enforcement, NCA operatives would be better employed
along Australia's highways with radar guns.
The Committee notes that, in general terms, there is a problem in translating
the performance information contained in the annual report to performance
measurement. The raw statistics tell the community what has transpired
during the period in question. That does not help the community to make
informed judgements about how efficiently and effectively the NCA has
performed its role.
This is the challenge for the future and one that the Committee intends
to examine in detail in its comprehensive evaluation of the operations
of the NCA which it will be undertaking next year.Finally the Committee
notes that, at the time of completing this report, the tabling of the
NCA's 1995-96 Annual Report is imminent. As required by its statutory
charter, the Committee will also examine this report with a view to reporting
to the Parliament its findings in this respect.
John Bradford MP
Chairman
Footnotes
[1] NCA Annual Report 1994-95, p.34
[2] House of Representatives Hansard,
19 September 1996, p.4782
[3] House of Representatives Hansard,
9 October 1996, p.5103
[4] NCA Annual Report 1994-95, p.8
[5] House of Representatives Hansard,
16 October 1996, p.5461
[6] Proof Transcript of Evidence, 22 October
1996, pp.21-22
[7] Estimates Committee Hansard, 23 October
1996, p.L&C267
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