Chapter 1


Chapter 1

Introduction

1.1        This is the Senate Finance and Public Administration Legislation Committee's (the committee) first report on annual reports for 2013. It provides an overview of the committee's examination of annual reports for the 2011–12 financial year presented to the Parliament between 1 May and 31 October 2012. Copies of this and other committee reports can be obtained from the Senate Table Office, the committee secretariat or online at: www.aph.gov.au/senate_fpa.

Terms of reference

1.2        Under Senate Standing Order 25(20) the annual reports of certain departments and agencies stand referred to committees for examination and assessment. Each committee is required to:

(a)  examine each annual report referred to it and report to the Senate whether the report is apparently satisfactory;

(b)  consider in more detail, and report to the Senate on each annual report which is not apparently satisfactory, and on the other annual reports which it selects for more detailed consideration;

(c)  investigate and report to the Senate on any lateness in the presentation of annual reports;

(d)  in considering an annual report take into account any relevant remarks about the report made in debate in the Senate;

(e)  if the committee so determines, consider annual reports of departments and budget–related agencies in conjunction with examination of estimates;

(f)   report on annual reports tabled by 31 October each year by the tenth sitting day of the following year, and on annual reports tabled by 30 April each year by the tenth sitting day after 30 June of that year;

(g)  draw to the attention of the Senate any significant matters relating to the operations and performance of the bodies furnishing the annual reports; and

(h)  report to the Senate each year whether there are any bodies which do not present annual reports to the Senate and which should present such reports.

Allocated portfolios

1.3        The Senate allocated departments and agencies to committees on 8 February 2012. In accordance with that resolution, the committee has responsibility for the oversight of the following:

  • Parliament;
  • Prime Minister and Cabinet portfolio; and
  • Finance and Deregulation portfolio.

1.4        The committee notes that the first Parliamentary Budget Officer, Mr Phil Bowen PSM FCPA, was appointed on 23 July 2012 in accordance with the Parliamentary Service Act 1999. The Parliamentary Budget Office is one of four Parliamentary Departments which support the Parliament. As the date of the office's establishment is after the end of the 2011–12 financial year, an annual report was not prepared. The committee looks forward to receiving the Parliamentary Budget Office's first annual report for the 2012–13 financial year later this year.

Method of assessment

1.5        Annual reports provide one of the key mechanisms, together with the Estimates process, for scrutiny of the operations of Government. As stated in the Requirements for Annual Reports for Departments, Executive Agencies and FMA Act Bodies 'the primary purpose of annual reports of departments is accountability, in particular to the parliament'.

1.6        Senate Standing Order 25(20) requires that the committee examine reports referred to it to determine whether they are timely and 'apparently satisfactory'. The committee must consider whether the reports comply with the relevant legislation and guidelines for the preparation of annual reports in forming its assessment. The principal legislation which applies to departments, statutory agencies and authorities, and Commonwealth companies are:

  • Public Service Act 1999;
  • Parliamentary Service Act 1999;
  • Financial Management and Accountability Act 1997 (FMA Act); and
  • Commonwealth Authorities and Companies Act 1997 (CAC Act).

1.7        Statutory authorities also report under their respective enabling legislation.

1.8        The committee also assesses whether reports comply with the Requirements for Annual Reports for Departments, Executive Agencies and FMA Act Bodies (the PM&C Requirements), issued by the Department of the Prime Minister and Cabinet with the approval of the Joint Committee of Public Accounts and Audit under subsections 63(2) and 70(2) of the Public Service Act 1999. This is the authoritative source outlining the requirements for preparing and presenting annual reports for bodies prescribed under the FMA Act. The PM&C Requirements are reviewed annually and the latest version was issued on 28 June 2012 and will apply to annual reports for the financial year 2011–12.

1.9        Significant amendments to the most recent PM&C Requirements relate to:

  • Consultancy reporting – recognising the functionality provided by the AusTender database, the requirement to provide details of consultancy contracts let in the reporting year has been omitted;
  • Carer recognition – a new requirement has been added for public service care agencies to report on compliance with the Carer Recognition Act 2010;
  • Work health and safety – minor revisions to the existing requirement reflecting the provisions of the Work Health and Safety Act 2011; and
  • Freedom of information – simplification of reporting following accommodation of major reforms to freedom of information reporting in the 2010–11 Requirements.[1]

1.10      Commonwealth authorities and companies reporting under the CAC Act are required to comply with the Commonwealth Authorities (Annual Reporting) Orders 2011 and the Commonwealth Companies (Annual Reporting) Orders 2011, respectively. The annual reports for the 2011–12 financial year will be the first annual reports prepared under the new orders (with the exception to clauses dealing with related entity transactions, which will apply to annual reports for each financial year ending on or after 30 June 2013.)

1.11      The Finance Minister has a role in the oversight of Commonwealth authorities that are also classified as a government business enterprise (GBE) as set out in the CAC Act. The annual reports of GBEs must provide an assessment of the entity's financial condition, dividends and community service obligations over the financial year.

1.12      Annual reports of non–statutory bodies are prepared in accordance with the guidelines set out in the Government Response to recommendations of the then Senate Standing Committee on Finance and Government Operations, in its report entitled Reporting Requirements for the Annual Reports of Non–Statutory Bodies. The Government response was incorporated into the Senate Hansard of 8 December 1987.[2]

1.13      The committee determines whether the report of an agency satisfactorily meets reporting requirements by assessing it against the PM&C Requirements, in particular, the checklist at Attachment F in the requirements; its respective enabling legislation; and where necessary, the Corporations Act 2001.

Reports examined

1.14      During the period of 1 May to 31 October 2012, 28 reports were tabled in the Senate or presented 'out of session' to the President of the Senate, and referred to the committee for examination. The reports are categorised as follows:

Departments of the Parliament

  • Department of Parliamentary Services—Report for 2011–12; and
  • Department of the Senate—Report for 2011–12.

Departments of State

  • Department of Finance and Deregulation—Report for 2011–12; and
  • Department of the Prime Minister and Cabinet—Report for 2011–12.

Statutory agencies/authorities

  • Albury–Wodonga Development Corporation—Report 2011–12;
  • ASC Pty Ltd—Report for 2011–12;
  • Australian Electoral Commission—Report for 2011–12;
  • Australian National Audit Office—Report for 2011–12;
  • Australian Public Service Commission—Report of the Australian Public Service Commissioner for 2011–12;
  • Australian River Co. Limited—Report for the period 1 December 2010 to 30 November 2011;
  • Commonwealth Ombudsman—Report for 2011–12;
  • Commonwealth Superannuation Corporation (CSC)—Reports for 2011–12 including financial statements for the CSS, PSS and PSSap;
  • ComSuper – Report for 2011–12;
  • Future Fund Board of Guardians and Future Fund Management Agency—Report for 2011–12;
  • Inspector–General of Intelligence and Security—Report for 2011–12;
  • Medibank Private Limited—Report for 2011–12;
  • National Australia Day Council—Report for 2011–12;
  • National Mental Health Commission—Report for the period 1 January to 30 June 2012;
  • NBN Co. Limited—Report for 2011–12;
  • Office of the Official Secretary to the Governor–General—Report for 2011–12; and
  • Parliamentary Service Commissioner—Report for 2011–12.

Reports not examined

1.15      The committee is not obliged to report on Acts, statements of corporate intent, surveys, policy papers, budget documents, corporate plans or errata. The following documents were referred to the committee but not examined in this report:

  • Department of the Prime Minister and Cabinet—Australia in the Asian Century – White Paper, dated October 2012;
  • Department of Finance and Deregulation—Campaign advertising by Australian government departments and agencies – Report for 2011–12;
  • Final Budget Outcome 2011–12—Report by the Treasurer and the Minister for Finance and Deregulation;
  • Medibank Private Limited—Statement of Corporate Intent 2012–2013;
  • Medibank Private Limited—Statement of Corporate Intent 2011–2014;
  • Mid–year economic and fiscal outlook—2012–13 Statement by the Treasurer and the Minister for Finance and Deregulation; and
  • NBN Co. Limited—Statement of corporate intent 2012–2015.

'Apparently satisfactory'

1.16      Under Standing Order 25(20)(a), the committee is required to examine the annual reports of departments and agencies and report to the Senate on whether they are apparently satisfactory. In its examination of the annual reports referred, the committee found them to be generally of a high standard and largely adhering to the relevant guidelines. The committee considers all reports examined to be 'apparently satisfactory'.

1.17      Chapter 2 of this report presents a discussion of four agencies' reports which the committee has selected for detailed examination. The committee has not examined the 2011–12 annual report of the Department of Parliamentary Services (DPS) in this report. During the committee's inquiry into the performance of DPS conducted during 2011 and 2012, DPS annual reports were examined in detail. The committee pointed to major deficiencies in the reports, including non-compliance with the guidelines and lack of transparent performance information.[3] The committee noted that the new secretary of DPS, Ms Carol Mills, has recognised that improvements in DPS annual reporting are required. The committee will undertake a detailed examination of the 2012–13 DPS Annual Report when it is received.

Non–reporting bodies

1.18      Standing Order 25(20)(h) requires that the committee inquire into, and report on, any bodies which do not present annual reports to the Senate but should present such reports.

1.19      On this occasion, the committee makes no recommendation for any organisations not presenting an annual report to do so.

Timeliness

1.20      All annual reports are required to be tabled in Parliament by 31 October each year unless another date is specified in an agency's legislation, charter and/or terms of reference. The PM&C Requirements state that 'it remains the Government's policy that all annual reports should be tabled by 31 October'. The committee considers timeliness in annual reporting an important element in accountability and continues to encourage FMA Act bodies to follow this policy.

1.21      Organisations reporting under the CAC Act are required to provide an annual report to the responsible minister by the fifteenth day of the fourth month after the end of the financial year. For the standard financial year, this is 15 October.

1.22      Appendix 1 lists the annual reports tabled (or presented) in the Senate and the House of Representatives between 1 May to 31 October 2012, and referred to the committee, with relevant tabling dates.

1.23      All annual reports of departments and agencies considered in this report met the tabling deadline of 31 October 2012. The committee particularly commends those agencies which presented their report before the supplementary budget estimates hearings on 15 and 16 October 2012. Agencies are reminded that the PM&C Requirements advise that:

If Senate Supplementary Budget Estimates hearings are scheduled to occur prior to 31 October, it is best practice for annual report to be tabled prior to those hearings.[4]

1.24      The committee further notes that the new Secretary of the Department of Parliamentary Services, Ms Carol Mills, made an explanation to the committee for the failure to table the report prior to the supplementary budget estimates hearing at the hearing on 15 October 2012:

...I would also like to make two comments about our reporting. I want to apologise that I have not been in a position to table our annual report in advance of this meeting. I know it has been practice and it was certainly something that I was cognisant of. I feel as part of the changes that I am trying to make to the organisation that the annual report as drafted did not meet some of the expectations that I think are important for us in providing you with as much information and clarity as possible about the organisation's delivery of services. As a consequence, we were not able to make that deadline, but we will certainly make the tabling deadline of the end of October.[5]

Senate debate

1.25      In accordance with Standing Order 25(20)(d) the committee is required to take into account any relevant remarks about the reports made in debate in the Senate. The committee noted two speeches in the Senate which referred to 2011–12 annual reports referred to the committee.

1.26      Senator Faulkner noted statistics presented in the Commonwealth Ombudsman's Annual Report for 2011–12. In particular, it was noted that complaints had increased from 38,919 to 40,009, while the number of complaints that related to correctness, propriety or timeliness of agency decisions or actions was down from 72 per cent to 70 per cent. After recent declines, it was also highlighted that complaints about Centrelink had increased in 2011–12. Senator Faulkner commended the agency for the critical work it performs:

There is much work that the Commonwealth Ombudsman does. It is not just a complaints hotline. The Ombudsman serves as an important purpose of following up on individual citizen's cases as well as, conducting investigations, producing reports to assist agencies ensure transparency and making submissions to parliamentary inquiries. I think the work of the Commonwealth Ombudsman is critically important. I commend its work and I commend the annual report of the Commonwealth Ombudsman to the Senate.[6]

1.27      Senator Mason raised concerns with the clarity of information provided in the Australian Public Service Commissioner's annual reports in regard to public service absenteeism as a matter of public interest in the Senate:

I even had difficulty in assessing the performance of public sector agencies and the public sector as a whole because of the opacity of the information provided in the commission's annual report and, more importantly, the State of the service reports. I will be watching to ensure that there is sufficient clarity in future information provided in annual reports and the State of the service reports so that parliament and the public can hold agencies and the commission accountable for their performance.[7]

Presentation of annual reports

1.28      Annual reports are a significant mechanism for informing the Parliament about the operation of departments and agencies and assisting with the examination of the performance of those entities. The PM&C Requirements emphasise annual reporting in the accountability of the public sector to the Parliament and state that annual reports should 'provide sufficient information and analysis for the Parliament to make a fully informed judgement on departmental performance'.

1.29      The committee notes that there has been some recent comments on annual reports with Dr Ian Watt AO, Secretary, Department of Prime Minister and Cabinet, stating that annual reports are 'an important way in which we, the APS, are accountable, through Ministers, to Parliament and to the public'. Dr Watt went on to state that he was committed to shorter annual reports and noted that the PM&C Annual Report 2011–12 has been considerably reduced in length, discounting the accountability reporting and financial statements, compared to the Annual Report for 2010–11.[8]

1.30      In an earlier speech, Dr Watt also indicated that there were some common 'gripes' across the Australian Public Service about annual reports, including that they were rather long, reflecting the prescriptions laid down for reports, and over which the Departmental Secretary or the CEO has no control. He added, 'in fact, to the extent that some material is inserted at the behest of the Senate, the Government itself has no control over what needs to be included in annual reports'. While some material has been culled from annual reports, Dr Watt commented that 'they never seem to get any shorter'. Dr Watt concluded his speech by stating:

So those of you who work on annual reports should remember that you have an important role in informing the Parliament and informing the public: not just in October each year, but as a historical record.[9]

1.31      At the October 2012 supplementary estimates the committee also discussed the length and number of government publications, including annual reports, with Mr David Tune PSM, Secretary, Department of Finance and Deregulation (Finance). Mr Tune commented that consultations had been undertaken with the Joint Committee of Public Accounts and Audit (JCPAA) 'to take out some issues that are reported to parliament that are also reported in this document [the annual report] and are also online around procurement, in particular, through AusTender'. Mr Tune went on to comment that if information on all contracts were removed, for example 'you are probably saving 60 or 70 pages per agency'. The aim would be 'less publications, shorter publications and more publications online.'[10]

1.32      The committee has noted these comments. In relation to the length of annual reports and what is required to be included, the guidelines are formulated by the Department of the Prime Minister and Cabinet and approved by the JCPAA. As noted by Mr Tune, regular consultations take place with the JCPAA and changes are made to the material required to be included in annual reports. For example, from 2011–12, listing of individual consultancy contracts over $10,000 are no longer required: agencies are now only required to provide a summary of consultancy contracts and to refer readers to AusTender. The list of consultancies covered 12 pages in Finance's 2010–11 Annual Report.

1.33      Other than the matters required under the guidelines, agencies are open to include any other matter they choose. The committee notes that there are a range of agencies which now include significant amounts of information in annual reports which are of only slight use to the Parliament or the public when assessing performance. Of note is the frequent inclusion of staff profiles, the use of case studies or vignettes and photographs.

1.34      While photographs add interest to, or enhance design and layout they should only be used to aid in the presentation of significant information. However, the committee has found that some annual reports contain photographs which are less than relevant and add to the length of annual reports, for example, what could be classified as social snapshots. The committee points to the reports of Finance and ComSuper where photographs and 'interest pieces' are used in moderation or not at all. In addition, the committee notes that the PM&C Annual Report 2011–12 is more restrained in its use of photographs than the 2010–11 Annual Report which included photographs of PM&C staff social events and staff participating in a classified waste bag race for the 'Caretaker Cup'.

1.35      The committee also notes the recent trend to include case studies, feature articles and staff profiles in annual reports. While the inclusion of these pieces adds interest, and often personalises the report, they can take up considerable space. For example, PM&C's report included 17 'feature' articles, many a full page in length and some of which do not go to performance matters. The committee acknowledges that annual reports serve a range of functions and the inclusion of case studies may be appropriate. For example, the case studies included in the Annual Report of the Commonwealth Ombudsman provide an effective mechanism to explain the work of the office and the reasons for the Ombudsman's decisions. However, the primary purpose of annual reports is accountability to the Parliament.

1.36      The committee also notes the trend to highly designed annual reports. Although this may contribute to readability, there needs to be balance so that there is no risk of reports becoming overly lengthy because of overgenerous layout and design. There are a number of reports with formatting which results in minimal information being provided per page and very elaborate chapter introductions which take up considerable space, for example the annual report of the Commonwealth Ombudsman.

1.37      The committee notes that agency annual reports should comply with guidelines devised by the Joint Publications Committee Printing standards for documents presented to Parliament. The Printing Standards state that any document presented to the Parliament may be included in the Parliamentary Paper Series and adherence to the standards ensures that a tabled document conforms to the series' standards, with minimal additional cost to the agency. The Standards address production quality and value for money, colour and illustration, format, paper, covers and binding, tip-ins and inserts, and corrections. In particular, advice on the use of colour and illustrations encourages restraint. The Printing Standards also differentiate between classes of documents and the acceptable corresponding presentation quality for those classes.[11]

1.38      With most annual reports running close to 200 pages, and some well over 300 pages, the committee's preferred approach to the content of annual reports is for minimal use of extraneous information such as photographs and staff profiles. If agency reports are aimed at other audiences or serve another purpose, it may be appropriate to provide a separate publication or provide information on agency websites. This would ensure that excessive space is not used for these matters in annual reports and the focus of annual reports remains on accountability to senators, members of the House of Representatives and the public.

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