Chapter overview
3.1
The Auditor-General Act 1997 (AG Act) interacts with other legislation, including (but not limited to):
the Public Governance, Performance and Accountability Act 2013 (PGPA Act);
the Public Accounts and Audit Committee Act 1951 (PAAC Act);
the Freedom of Information Act 1982 (FOI Act); and
the Parliamentary Privileges Act 1987 (Privileges Act).
3.2
These interactions can occasionally create ambiguities or contradictions in the Auditor-General’s role and mandate. This chapter considers those in relation to three of the above Acts. The following chapter discusses the relationship between the AG Act and the JCPAA’s own legislation, the PAAC Act.
Public Governance, Performance and Accountability Act 2013
3.3
The PGPA Act establishes the rules for ‘establishes a coherent system of governance and accountability for public resources, with an emphasis on planning, performance and reporting’. The ANAO recommended improvements to both pieces of legislation ‘to ensure these acts interact in a manner that supports the Auditor-General’s mandate, information access and ability to report on audit work.’
Section 19 of the Public Governance, Performance and Accountability Act 2013 and independence risk
3.4
There is ambiguity around the interaction of:
Section 19, PGPA Act, regarding the duty to inform/right to access information;
Section 54, AG Act, regarding information to be provided in writing and reported; and
Section 36, AG Act, regarding confidentiality obligations.
3.5
Section 19 of the PGPA Act creates a duty for accountable authorities (in the ANAO’s case, the Auditor-General) to ‘keep the responsible Minister and Finance Minister informed’, including:
(a) keep the responsible Minister informed of the activities of the entity and any subsidiaries of the entity;
(b) give the responsible Minister or the Finance Minister any reports, documents and information in relation to those activities as that Minister requires;
(c) notify the responsible Minister as soon as practicable after the accountable authority makes a significant decision in relation to the entity or any of its subsidiaries;
(d) give the responsible Minister reasonable notice if the accountable authority becomes aware of any significant issue that may affect the entity or any of its subsidiaries;
(e) notify the responsible Minister as soon as practicable after the accountable authority becomes aware of any significant issue that has affected the entity or any of its subsidiaries.
3.6
Therefore, the Auditor-General may be required to provide reports, documents and information to the Prime Minister and the Finance Minister if requested. Section 54 of the AG Act limits this information to be provided in writing, reported by the Minister to the JCPAA and publicly reported through the ANAO’s annual report.
3.7
There is ambiguity around section 19 of the PGPA Act and section 54 of the AG Act. As the role of the ANAO is to scrutinise the Executive, there is a potential conflict of interest:
Although the ANAO has no records of this power being used since the introduction of the PGPA Act, there is an inherent risk of conflict of interest and dilution of audit independence because the ANAO’s primary activity is to scrutinise the executive.
3.8
A possible solution to this problem is introducing provisions similar to subsection 19(2) of the PGPA Act, which provides that information requested under section 19 of the PGPA Act from courts or tribunals be of an administrative nature only.
3.9
The Committee recommends that section 19 (1) (a) and (b) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) be amended to clarify that requests made of the Auditor-General related to audits in progress be limited to information of an administrative nature only, like the provisions for courts and tribunals under section 19(2) of the PGPA Act.
Section 105D of the Public Governance, Performance and Accountability Act 2013 and withholding or removing information
3.10
Section 105D of the PGPA Act allows for the Finance Minister to determine, by written instrument, the removal of information from public audit reports relating to intelligence, security, and law enforcement agencies. Such determinations are not legislative instruments, and do not attract parliamentary scrutiny.
3.11
The result of this, the ANAO noted, would be that changes made to a public audit report would not be signalled to the parliament:
While it has not yet occurred, the independence risk of s105D is that a s105D instrument could be used to require the removal of information from a public audit report without redactions to show that it was removed. The Parliament and any other reader of a public report which has had information removed under section 105D would not be aware that information has been removed. This contrasts with the operation of section 37 of the Auditor-General Act which does not preclude redactions being shown in a public audit report.
3.12
At the time of writing this report, no such instruments have been issued. However, the ANAO highlighted the risk of ‘restriction without a legislative instrument or Parliamentary oversight’.
The most serious risks that the ANAO can foresee are that an instrument could specify that a Commonwealth entity or company is not required to prepare financial statements or be audited, or an instrument could require the Auditor-General to remove information from a public audit report without redactions to make it clear that information has been removed. A section 105D instrument could require the Auditor-General to remove qualifications to the audit opinion from an audit report and therefore the Parliament would not have visibility of the basis for the qualification.
3.14
Whilst agreeing that ‘there are situations where information should not be included in public audit reports’, the ANAO said in these instances section 37 of the Auditor-General Act 1997 (AG Act) should be used.
Committee comment
3.15
The Committee notes that there is overlap between section 37 of the Act and section 105D of the PGPA Act. Both can be used to limit the information that can be included in public audit reports for legitimate and appropriate reasons. However, section 105D of the PGPA Act can be used without the knowledge of the Parliament, including the JCPAA, and this should be addressed to improve transparency.
3.16
Although section 105D only applies to certain agencies (intelligence, security and law enforcement), it has a broad remit. It has the potential to exempt a Commonwealth entity or company from the requirement to prepare annual financial statements or limiting the information that could be included in an audit report. This would limit the capacity of the JCPAA to appropriately review the ANAO’s reports.
3.17
There are circumstances where it is inappropriate for certain information to be included in a public audit report. However, ordinarily (almost always) these issues are resolved between agencies and the Auditor-General. In the exceptionally rare instances where an issue is not resolved, section 37 of the AG Act provides a mechanism to remove certain material. Whilst the Auditor-General notes that ‘any use of section 37 will limit the assistance that the Auditor-General can provide to the JCPAA and the Parliament’, the Committee notes that information removal where it is clear that the content has been changed remains preferable to cases where it is not clear to the Parliament that information has been removed.
3.18
In order to mitigate the confusion of overlap between section 37 of the AG Act and section 105D of the PGPA Act, and so the Committee can maintain access to information it needs to perform its duties, the Committee recommends that a future inquiry consider whether section 105D of the PGPA Act should be amended so that, when this section is used in relation to the Auditor-General, the JCPAA is notified.
3.19
The Committee recommends that a future inquiry consider, with input from the national intelligence agencies, amending section 105D of the Public Governance, Performance and Accountability Act 2013 so that the Joint Committee of Public Accounts is notified when this section is used in relation to the Auditor-General’s draft audit reports.
Freedom of Information Act 1982
3.20
Under the Freedom of Information (FOI) legislative framework, ANAO documents cannot be subject to FOI requests directed to the ANAO. However, it is unclear whether requests can be granted to entities that hold ANAO documents.
3.21
Examples of ANAO documents held by audited entities include ‘report preparation papers and proposed audit reports issued under section 19 of the Act and protected by the confidentiality obligations in section 36.’
3.22
The Australasian Council of Auditors General ‘continues to support the ANAO’s current exemption from the Freedom of Information Act 1982 [FOI Act] to prevent the audit office being used as a “backdoor” for the release of documents belonging to an audited entity’.
3.23
There have been multiple instances where audited entities have been subject to FOI requests related to the ANAO:
To date, most Departments that have consulted the ANAO about FOI requests have released ANAO communications of an administrative nature but have relied on the existing Freedom of Information Act 1982 (FOI Act) exemptions to protect ANAO documents that the ANAO does not consider should be released, such as documents protected by the statutory confidentiality obligation in section 36 of the Act.
3.24
The ANAO identified that ‘application of FOI to ANAO documents is a risk, albeit not a high risk’.
3.25
The ANAO suggested possible legislative amendments to clarify whether ANAO documents held by audited entities are subject to FOI requests, and suggested that there were two possible options to approach this situation:
1
Applying section 38 of the FOI Act to section 36 of the AG Act by either:
a.
Listing section 36 of the AG Act in Schedule 3 of the FOI Act, or
b.
Redrafting section 36 of the AG Act to make section 38 of the FOI Act expressly apply.
2
List the Auditor-General and ANAO in subsection 7(2A) of the FOI Act.
3.26
The changes under option one achieve the same outcome but provide a choice of drafting preference. The ANAO noted that the advantage of 1.a. is that an audited entity is less likely to overlook the exemption as it would be included in the FOI Act; whereas the advantage of option 1.b. is simplicity, as it only requires an amendment to the AG Act.
3.27
The second option would have a broader reach. The ANAO cautioned the Committee about this option:
The JCPAA would have to be mindful that this option would place a complete ban on all ANAO documents being subject to the FOI Act and not just documents protected by s36 of the [AG] Act. Therefore it would include the ANAO’s administrative correspondence that to date the ANAO has not objected to being released by audited entities under the FOI Act and non-public audit reports issued under s37 of the [AG] Act.
Committee comment
3.28
When considering the interaction of the FOI Act and the AG Act, the Committee notes that although there is not a high risk of ANAO documents held by audited agencies being subject to FOI requests, it would be prudent to mitigate this risk.
3.29
The Committee notes there are multiple options to address this but prefers redrafting section 36 of the AG Act to make section 38 of the FOI Act expressly apply.
3.30
The Committee recommends that to clarify where ANAO documents held by audited entities are subject to Freedom of Information requests, section 36 of the Auditor-General Act 1997 is redrafted to make section 38 of the Freedom of Information Act 1982 expressly apply.
Parliamentary Privileges Act 1987
3.31
Another Act which interacts with the AG Act is the Privileges Act, including in relation to the application of parliamentary privilege to:
the Auditor-General’s information gathering powers; and
draft audit reports and working papers.
3.32
For the most part, the interaction between the two pieces of legislation is working well. However, the ANAO suggested clarification to the notes of the AG Act to make it more explicit that parliamentary privilege applies to the work of the ANAO.
The application of parliamentary privilege to the ANAO’s work and the Auditor-General’s information gathering powers
3.33
The application of parliamentary privilege to ANAO working papers and draft reports was considered in the last two reviews of the AG Act. It was further considered by the Senate Privileges Committee, which sought the view of the then-Clerk of the Senate, Dr Rosemary Laing. The Solicitor-General also ‘advised that parliamentary privilege applied to ANAO working papers prepared for an audit but did not extend to general correspondence between the ANAO and audited entities’.
3.34
Despite being considered by the Senate Privileges Committee, the Clerk of the Senate and the Solicitor-General, no changes were made to the Privileges Act.
3.35
The application of parliamentary privilege to draft ANAO reports was set to be considered by the Federal Court of Australia in 2018. However, the issuance of a section 37 certificate resulted in the case being dismissed:
On 29 January 2018, Thales Australia Limited applied to the Federal Court of Australia seeking orders to restrain the publication of particular information in the proposed performance audit report on the Army’s Protected Mobility Vehicle – Light. The key issue in the matter was parliamentary privilege, as Thales Australia was effectively seeking to restrain the tabling of an audit report in the Parliament. The Federal Court action was dismissed by consent on 9 July 2018, shortly after the issuance of the Attorney-General’s certificate (under s37 of the Act) on 28 June 2018. As the Federal Court was dismissed there is no court decision that has definitively determined the application of parliamentary privilege to ANAO draft reports, extracts of draft reports or working papers.
3.36
The combination of the court action and Thales Australia’s application for a section 37 certificate delayed the tabling of the audit report into the Army’s Protected Mobility –Light by around 9 months.
3.37
According to Principle 4 of the Mexico Declaration, SAIs should have ‘unrestricted access to information’. The Auditor-General’s information gathering powers are set out in Part 5, Division 1 of the AG Act. This includes the right to direct a person to provide the Auditor-General with any information they require, to attend and give evidence to the Auditor-General of any authorised official and produce any documents. The Auditor-General also has the power to enter premises.
3.38
The ANAO ‘considers that the Act currently strikes an appropriate balance in relation to the application of parliamentary privilege and the Auditor-General’s information gathering powers’. It explained that the balance of powers and obligations conferred on the ANAO:
…allows the Parliament to have a high level of trust in ANAO audit conclusions, even if the Parliament never sees information that leads to those conclusions (as it may not be included, or may only be referred to in an audit report.
3.39
The ANAO stated that it ‘had not encountered any major practical issues and does not consider that any changes are required’.
3.40
Concerns have been raised that the extent to which parliamentary privilege applies to the work of parliamentarians and their offices remains unclear. Senator James Paterson, Chair of the Senate Finance and Public Administration Legislation Committee, expressed the view that the actions of the ANAO in conducting investigations could potentially breach parliamentary privilege:
As you know, in our system of government you can only be a minister if you are a member of parliament, and staff who work for members of parliament can, potentially, be covered by parliamentary privilege. I think there is potential for interaction between parliamentary privilege and your work in the same way that there is for the AFP, maybe not as often as it is for the AFP.
3.41
Senator Paterson suggested that a possible solution to this issue is a memorandum of understanding (MOU) between the Parliament and the ANAO, similar to the one between the Parliament and the Australian Federal Police. In response, the ANAO suggested that it had sought legal advice on the intersection between parliamentary privilege and the ANAO’s work, which had informed its policy of only dealing with matters within its framework.
3.42
In Report 419 tabled in December 2010, the Committee examined the issue of whether the AG Act could potentially come into conflict with parliamentary privilege in this manner, particularly in relation to ministers and their staff. It found that, under advice from the then-Auditor-General and other witnesses, that the AG Act did not require any amendment to clarify the issue.
Committee comment
3.43
The Committee is strongly of the view that parliamentary privilege should apply to all working documents and draft reports of the ANAO as this is an important protection for the Auditor-General’s work.
3.44
However, the Committee also notes the importance of ensuring confidentiality of documents held by the ANAO and that public release of audit conclusions and related documentation suitable for publication should be through the tabling of reports in the Parliament.
3.45
The intersection between the Auditor-General’s information-gathering powers and parliamentary privileges has yet to be significantly tested. Having said that, the working practices of parliamentary offices, particularly in relation to Ministers and ministerial staff, could potentially lead to a situation where these two frameworks could conflict.
3.46
The situation in 2018 when Thales took legal action in the Federal Court resulted in a delay of around nine months to the tabling of an audit report, but ultimately did not settle the question of whether parliamentary privilege applies to ANAO draft reports or working papers.
3.47
The Committee notes that the Auditor-General has received legal advice regarding parliamentary privilege and the ANAO’s work, which was accepted at that time in Report 419 by the Committee. Nonetheless, the Committee notes that the extent to which the powers of the ANAO could intersect with parliamentary privilege are not entirely clear in this respect. Further clarification of these powers would be of benefit to both the ANAO and to the Parliament in identifying the scope of parliamentary privilege and the extent to which the ANAO can access information.
3.48
The application of parliamentary privilege to the Auditor-General’s work has been considered in previous reviews; however, there could be more clarification in this area. It would be useful to explore a Memorandum of Understanding between the ANAO and the Parliament (similar to the arrangements used by the Australian Federal Police).
3.49
The Committee recommends that the Auditor-General Act 1997 be amended to clarify that working papers and draft reports prepared by the Australian National Audit Office (ANAO) are protected by parliamentary privilege, and also that documents held by the ANAO remain confidential unless they are tabled in the Parliament or released pursuant to other relevant legislation.
3.50
The Committee recommends that the Privileges Committees of both the House of Representatives and the Senate clarifies the extent to which parliamentary privilege intersects with the powers under the Auditor-General Act 1997, particularly in relation to parliamentarians and their offices, Presiding Officers, and Ministers and ministerial staff.
3.51
The Committee recommends that consideration be given to the development of a Memorandum of Understanding between the Australian National Audit Office and the Parliament is developed that clarifies the application of parliamentary privilege to the Auditor-General’s work.