Chapter 2
Review of selected reports
2.1
The committee has selected the annual reports of the following bodies
for closer examination:
- Department of Industry, Innovation and Science;
- National Offshore Petroleum Safety and Environmental Management
Authority;
- Department of the Treasury;
- Australian Taxation Office (Commissioner of Taxation).
Department of Industry, Innovation and Science
Secretary's review
2.2
The 2017–18 annual report of the Department of Industry, Innovation and
Science (the department) is the first annual report of the new departmental
secretary
Dr Heather Smith PSM. Dr Smith was previously Secretary of the Department of
Communications and the Arts.
2.3
As in previous years, this document includes the annual reports of
Geoscience Australia and IP Australia—non-corporate Commonwealth entities
within the Industry, Innovation and Science portfolio.
2.4
In her review, the Secretary highlighted a number of the department's
achievements in 2017–18, including the introduction of the Advanced
Manufacturing Growth Fund, the establishment of five new Cooperative Research
Centres (CRCs), the launch of an Australian quantum computing company, and
progress in implementing the National Business Simplification initiative.[1]
2.5
The five new CRCs support industry-led collaborations in five distinct
fields: cyber security; reducing food waste; addressing declining mineral
exploration; adoption of future fuels; and the development of digital health
solutions.[2]
2.6
In relation to the implementation of the National Business Simplification
initiative, the Secretary highlighted that the new Business Registration
Service has seen the time required for a sole trader to register a business
drop from 65 minutes to under 15 minutes.[3] Further, the Business Grants Hub 'is making it easier for business to access
grant programs and is providing a streamlined and standardised approach for
government's design and delivery of these programs'.[4]
2.7
The Secretary also noted the work that the department has done to
provide a more inclusive and flexible workplace, through the creation of an
inclusion strategy. This strategy encompasses multiple initiatives including
the DIISability Internship Program, Inclusion Scholarship Program and a
departmental Inclusion Expo.[5]
Portfolio overview
2.8
The annual report notes that between 20 December 2017 and 28 August
2018, the Department of Industry, Innovation and Science was one of two
departments that made up the Jobs and Innovation portfolio.[6]
2.9
The administrative arrangements order of 28 August 2018 removed the
department from that portfolio and re-recreated the Industry, Innovation and
Science Portfolio
Annual performance statements
2.10
The department continues to deliver its one outcome through the
following three programs:
- Program 1—Supporting Science and Commercialisation; and
- Program 2—Growing Business Investment and Improving Business
Capability; and
- Program 3—Program Support.
2.11
The department continues to present its annual performance statements in
a manner which is easy to read and provides a detailed yet not cumbersome
assessment of its progress against each of its three Purposes. The committee
notes the clarity of the brief 'Summary of the department's performance'
against each Purpose. For example, for Purpose 1, the annual report summarises:
Measured by the performance criteria set out against the
intended results, appreciable progress has been made in recent years towards
the achievement of Purpose 1, particularly in enhancing performance in
scientific research; sustaining growth in knowledge-intensive industries;
sustaining Australia’s performance in innovation above the Organisation for
Economic Co-operation and Development average; and increasing the number of
collaborations entered into by research institutions. The fall in [Business
Expenditure on Research and Development] as a proportion of GDP has been driven
by broader structural shifts in the Australian economy. This has also impacted
the growth of investment in intangible capital as a share of total GDP by the
private sector.[7]
2.12
The committee notes that the department has made progress in
implementing each of its three Purposes in recent years; however, also notes
that the assessments made in the summary of the department's performance
against each Purpose does not specifically indicate what progress has been made
during the particular reporting period, in this case, during 2017–18.
Financial performance
2.13
The annual report clearly sets out the department's expenditure and
revenue. Excluding depreciation, amortisation and adjustments through other
comprehensive income, the department recorded a loss of $37.1 million for the
2017–18 reporting period. The report offered the following explanation:
This loss is largely due to the transfer of the Australian
Astronomical Observatory functions from the department to the research sector
as part of the 'Maintaining Australia's Optical Astronomy Capability' measure
announced in the 2017–18 budget.[8]
2.14
After taking into account depreciation and amortisation of $37.7 million
and the change in the asset revaluation reserve of $1.4 million, the department
recorded a loss of $73.4 million for 2017–18. The department noted that:
...this reflects the introduction of the net cash appropriation
arrangements where appropriation for depreciation and amortisation expenses
ceased. Entities now receive a separate capital budget provided through equity appropriations.[9]
2.15
The committee notes that department's revenue is largely generated
through three sources: royalty revenue ($1072.7 million); levy receipts
generated by the National Offshore Petroleum Safety and Environmental
Management Authority (NOPSEMA) ($36.5 million); and registration fees generated
by National Offshore Petroleum Titles Administrator ($15.4 million)––totalling just
over $1 billion in revenue for the reporting period 2017–18.[10] The committee also notes that each of these figures shows a small increase on
those from the previous financial year.
Conclusions
2.16
The committee considers that the department's annual report for the 2017–18
reporting period is apparently satisfactory.
National Offshore Petroleum Safety and Environmental Management Authority
2.17
NOPSEMA is a corporate Commonwealth entity within the Industry,
Innovation and Science portfolio.
2.18
NOPSEMA has one outcome:
Promote and enforce the effective management of risks to the
workforce, the environment and the structural integrity of facilities, well and
well-related equipment of the Australian offshore petroleum and greenhouse
storage industries through regulatory oversight.[11]
2.19
NOSPEMA's jurisdiction extends to all offshore areas in Commonwealth
waters—comprising the first three nautical miles of the territorial sea—and in
coastal waters where regulatory powers and functions have been conferred.
2.20
Mr Stuart Smith is the Chief Executive Officer (CEO), and the accountable
authority of NOPSEMA. Mr Smith was appointed CEO of NOPSEMA in September 2014,
prior to which he was the Director General of the Department of Fisheries in
Western Australia.[12]
2.21
Mr Smith's review of the 2017–18 reporting period provided an overview
of NOPSEMA's regulatory activities. In particular, Mr Smith highlighted the
significant increase in the number of hours worked in NOPSEMA regulated waters.
Mr Smith explained that this was due to 'an unprecedented level of
commissioning activity that fundamentally changed the risk profile of the
industry and as a result the level of NOPSEMA's regulatory oversight'.[13]
2.22
Mr Smith also noted that 2017–18 saw an increase in enforcement actions,
with 19 breaches of the legislation leading to action. Mr Smith considered that
this enforcement activity will serve to 'deter similar non-compliance from the
wider industry'.[14]
Annual performance statements
2.23
NOPSEMA's outcome is implemented through one programme:
Programme 1.1 (as per PBS)
Regulatory oversight of safety cases, well operations
management plans and environment plans coupled with effective monitoring,
investigation and enforcement.[15]
2.24
The annual performance statements noted that NOPSEMA has 'fully met the
targets for all 23 key performance indicators (KPIs) identified in its
corporate plan'.[16]
2.25
NOPSEMA's assessment of its performance against each KPI is clear and
provides the reader with a good picture of the organisation's activities over
time through the inclusion of the two previous years' results.[17]
2.26
As a Commonwealth regulator, NOPSEMA is also required to implement the
Regulator Performance Framework (RPF):
The framework consists of six outcomes-based KPIs covering
reducing regulatory burden, communications, risk-based and proportionate
approaches, efficient and coordinate monitoring, transparency, and continuous
improvement.[18]
2.27
The RPF shows that NOPSEMA has met all targets for the 2017–18 reporting
period.[19] However, the performance statement for this section indicates that 'NOPSEMA has
met five and substantially met one' of the six RPF KPAs.[20]
Financial performance
2.28
In 2017–18, NOPSEMA returned a surplus of $0.2 million. The annual
report noted that the forecast for this financial year was to be in deficit by
more than
$2 million. NOPSEMA's report explained that '[t]he actual result shows revenue
was on budget whereas expenditure, specifically employee expense, was
significantly under budget'.[21]
2.29
NOPSEMA recorded total revenue of $31.9 million for the reporting
period. NOPSEMA's revenue is sourced from levies collected from stakeholders
that are planning or undertaking offshore petroleum activities in Commonwealth
waters. Levy revenue has contributed to more than 99 per cent of total revenue
since NOPSEMA's inception in 2012, after the cost of transitioning from NOPSA
to NOPSEMA was removed.[22]
Conclusions
2.30
NOPSEMA's annual performance statements (including against KPIs and
RPFs) are well presented and easy to understand.
2.31
The committee considers that NOPSEMA's 2017–18 annual report is apparently
satisfactory.
Department of the Treasury
Secretary's review
2.32
This is the first annual report of Treasury Secretary Mr Philip
Gaetjens, who commenced the role in August 2018. Mr Gaetjens acknowledged the
contributions of his predecessor, Mr John Fraser, noting his 'lasting legacy' which
included 'improving budget outcomes and increased outreach and accessibility to
Treasury through our state offices'.[23]
2.33
Mr Gaetjens' review of the 2017–18 reporting period was succinct and
gave a brief overview of Treasury's activities:
In the past year, we provided advice on a series of tax
reforms. This included significant changes to the personal income tax
framework, better targeting the research and development tax incentive and
proposed changes to the way the GST is distributed between the states and
territories. We are also coordinating a whole-of-government strategy to tackle
problems associated with the black economy.[24]
2.34
Mr Gaetjens also noted Treasury's contribution to the Royal Commission
into Misconduct in the Banking, Superannuation and Financial Services Industry
(Royal Commission). He also highlighted Treasury's role in aiding public debate
across a range of topics, including 'population growth and immigration, best
practice modelling and the implications of US corporate tax reforms for the
Australian and global economy'.[25]
Annual performance statements
2.35
In the 2017–18 reporting period, Treasury had six Groups which
contributed to the delivery of its main outcome:
Informed decisions on the development and implementation of
policies to improve the wellbeing of the Australian people, including by
achieving strong, sustainable economic growth, through the provision of advice
to government and the efficient administration of federal financial relations.[26]
2.36
The six Groups are the following: Macroeconomic, Markets, Fiscal,
Revenue, Structural Reform, and Corporate Services and Business Strategy.[27]
2.37
As set out in its corporate plan for 2017–18, Treasury measures its
performance against three purposes: promoting fiscal sustainability; increasing
productivity and workforce participation; and securing the benefits of global
economic integration. The corporate plan and performance assessment also
includes a section called 'organisational capability', which provides a broader
view of Treasury's activities.[28]
2.38
The analysis of Treasury's performance is followed by its results
against each purpose. This is clearly set out and provides specific details as
to how each criteria has been met.
Financial performance
2.39
Treasury's annual report provided the following summary of its financial
performance for 2017–18:
The Treasury has a sound financial position, with sufficient
cash reserves to fund its debts as and when they fall due. After adjusting for
depreciation, amortisation and changes in asset revaluation reserves, the
Treasury reported an operating surplus of $3.2 million in 2017–18, which was
driven by underspends in sustained functions, overheads, reserves and one-off
activities, rather than the base functions of the Treasury. This compares with
an operating surplus of $3.3 million in 2016–17 after adjusting for
depreciation, amortisation and changes in asset revaluation reserves. The
Treasury's administered expenses in 2017–18 were $133.9 billion, compared with $94.5
billion in 2016–17. The first Medicare Guarantee Fund payment was processed in
2017–18 for the amount of $34.8 billion.[29]
Conclusions
2.40
The committee considers that Treasury's annual report for the 2017–18
reporting period is apparently satisfactory.
Commissioner of Taxation
2.41
The Commissioner of Taxation, Mr Chris Jordan AO, is the accountable
authority of the Australian Taxation Office (ATO). The ATO is a non-corporate
Commonwealth entity under the Treasury portfolio.
2.42
The ATO has one outcome:
Confidence in the administration of aspects of Australia's
taxation and superannuation systems through helping people understand their
rights and obligations, improving ease of compliance and access to benefits,
and managing non-compliance with the law.[30]
2.43
This outcome is delivered through four agency programs and 14
administered programs. The agency programs are run through the ATO, the Tax
Practitioners Board, the Australian Business Register, and the Australian
Charities and Not-for-profits Commission.[31]
Commissioner's review
2.44
In his review of the 2017–18 reporting period, Mr Jordan stated that he
was proud of the ATO and its performance.[32] Mr Jordan commented:
In 2017–18, the people in the ATO delivered on a multitude of
commitments to government and to the community through our business lines,
taskforces and projects. We also continued our transformation to improve the
client and staff experiences; focusing on delivering contemporary services to
make it easier to do the right thing, and targeting and bringing to account
those who do not meet their obligations.[33]
2.45
Mr Jordan also highlighted a number of the ATO's achievements including:
- Increase in collection of company tax (up $16 billion on the
previous financial year);
- Increased take up of myTax and faster refunds;
- Implementation of the first phase of the Single Touch Payroll;
and
- Earlier resolution of objection disputes, with approximately
two-thirds of all objections being resolved within three weeks.[34]
2.46
Mr Jordan also put forward that, although pleased with the ATO's results
in this reporting period, 'they can be better'.[35] Mr Jordan stated:
I am committed to listening, empathising and understanding
what and how we can improve our performance—particularly in terms of how the
community and stakeholders perceive us; our services efficiency, effectiveness
and integrity.[36]
Annual performance statements
2.47
In accordance with its 2017–18 corporate plan, the ATO's annual
performance statements set out its purpose:
The ATO purpose is to contribute to the economic and social
wellbeing of Australians by fostering willing participation in the tax and
superannuation systems. We achieve this through the delivery of our goals:
- Making it easier for people to participate
- Providing contemporary and tailored services
- Maintaining purposeful and respectful relationships
- Being a professional and productive organisation[37]
2.48
The ATO has in place nine strategic objectives that guide it towards
achieving this purpose, which are grouped into five perspectives: Government,
Client, Workforce, Operational, and Financial.[38]
2.49
The statements provide a general overview of the ATO's performance as
well as a detailed assessment of performance and analysis of results against
each of the nine strategic objectives.
2.50
The overview stated:
The ATO performance results for 2017–18 indicate a year of
solid performance in achieving our purpose, with some specific areas for
improvement. The ATO has 23 measures for Program 1.1 to demonstrate how well we
are achieving our purpose. These are set out in the Australian Taxation Office
Budget Statements in the Treasury Portfolio Budget Statements (PBS), and in the
ATO corporate plan 2017–18. Fifteen of these measures had a 2017–18 performance
target, with the target fully achieved for nine and substantially achieved for
the remaining six. In 2018–19 we will be looking at what we need to do
differently to fully meet our own and the community’s expectations.[39]
2.51
The detailed information on ATO's performance is set out in tables for
each strategic objective. The tables are clear and also provide data on the
ATO's results against each objective in the preceding two financial years. This
is valuable as it shows trends in performance.
Financial performance
2.52
The ATO provided a summary of its financial performance for 2017–18 in
three parts: operating expense budget, capital budget, and administering the
GST.[40]
2.53
The summary noted that the ATO's financial result was an operating
deficit of $36.1 million, or 1 per cent of budget (excluding
depreciation).[41] In relation to the capital budget, the annual report noted that the capital
budget increased by $28.9 million 'as a result of carrying forward funding
from the previous year and the ATO's decision to reallocate operating funding
to ensure the ongoing stability of our services to the community'.[42]
2.54
The ATO met the agreed outcomes, including expenditure for administering
the GST. In 2017–18, this was capped at the agreed estimate of
$631.1 million.[43]
Conclusions
2.55
The committee considers that the Commissioner of Taxation's annual
report on the ATO for the 2017–18 reporting period is apparently satisfactory.
General comments
Compliance index
2.56
The committee notes that in the annual reports of a number of agencies,
the compliance indexes continued to indicate large page ranges and, in some
cases, whole chapters in which to locate specific information. The committee
suggests that providing a more precise page range for each requirement will
improve the overall accessibility of annual reports.
2.57
The committee also notes that two agencies, the Australian Reinsurance
Pool Corporation and the Financial Adviser Standards and Ethics Authority, did
not include a compliance index identifying where the PGPA requirements can be
located in the reports.
2.58
The committee suggests that all agencies of the Industry, Innovation and
Science and Treasury portfolios ensure that their compliance indexes are in
line with PGPA Act and Rule requirements.
Pro forma phrases
2.59
The committee also notes that where the PGPA requirements prescribe a
pro forma phrase to respond to certain compliance requirements, a number of
annual reports failed to use the exact wording provided. The committee
encourages all departments and agencies to use the wording as set out in the
requirement.
Apparently satisfactory
2.60
As noted in chapter 1, the committee finds that all reports of the
Industry, Innovation and Science and Treasury portfolios for 2017–18 are
apparently satisfactory.
Senator Jane Hume
Chair
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