Introduction

1.1 This report provides the reader with an overview of the Committee's examination of annual reports for the 2005-06 financial year. It is the first of the Committee's two reports for 2007. Copies of this and other Committee reports can be obtained from the Senate Table Office, Committee Secretariat or online at the following address: https://www.aph.gov.au/Senate/committee/fapa_ctte/index.htm

Terms of Reference

1.2 Under Senate Standing Order 25(20) the annual reports of departments and agencies stand referred to committees in accordance with the allocation of departments and agencies in a resolution of the Senate. Each committee is required to:

examine each annual report referred to it and report to the Senate whether the report is apparently satisfactory;
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;
investigate and report to the Senate on any lateness in the presentation of annual reports;
in considering an annual report take into account any relevant remarks about the report made in debate in the Senate;
if the committee so determines, consider annual reports of departments and budget-related agencies in conjunction with examination of estimates;
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;
draw to the attention of the Senate any significant matters relating to the operations and performance of the bodies furnishing the annual reports; and
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 last amended the continuing order relating to the allocation of departments and agencies to committees on 8 February 2007.[1] In accordance with that resolution, the Finance and Public Administration Committee has responsibility for the oversight of the following portfolios:

Parliament;
Prime Minister and Cabinet;
Finance and Administration; and
Human Services.

Annual reports referred

1.4 In accordance with Senate Standing Order 25(20)(f) this report must examine those annual reports presented in the period 1 May 2006 to 31 October 2006 from the portfolio areas listed above. During that period two annual reports of Parliamentary departments, one report of a department of State, nine reports of statutory agencies and/or authorities, two reports of Commonwealth companies, and four other miscellaneous reports were received.

Method of Assessment

1.5 Annual reports, together with the estimates process, provide a mechanism for parliamentary (and public) scrutiny of the operations of government. Annual reports should 'provide sufficient information and analysis for the parliament to make a fully informed judgement on departmental performance'.[2] To this end, there are guidelines mandating what information must be included in the report and how the information should be presented.

1.6 The Senate Standing Order referred to above requires that the Committee examine reports referred to it to determine whether they are timely and 'apparently satisfactory'. In forming its assessment, the Committee has considered whether the reports comply with the relevant legislation and guidelines for the preparation of annual reports. The principal Acts 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 report under their respective Acts, for example, the Australian Electoral Commission reports under section 17 of the Commonwealth Electoral Act 1918.

1.8 The Committee has also assessed whether reports comply with the Requirements for Annual Reports (the 'guidelines'), June 2006, issued by the Department of the Prime Minister and Cabinet (PM&C) with the approval of the Joint Committee of Public Accounts and Audit. This is the authoritative source outlining the requirements for preparing and presenting annual reports. These guidelines may be found on the Internet at http://www.pmc.gov.au/guidelines/index.cfm

1.9 For bodies reporting under the CAC Act, compliance with the CAC Act and also the Commonwealth Authorities and Companies (Report of Operations) Orders 2005 was considered. This legislative instrument may be found on the internet at http://www.comlaw.gov.au/comlaw/management.nsf/lookupindexpagesbyid/IP200509122?OpenDocument

Reports Examined

1.10 The following 17 reports for the financial year 2005-06 were tabled or presented 'out of session' to the President of the Senate by 31 October 2006 and referred to the committee:

Parliamentary Departments

Department of the Senate—Report for 2005-06 pursuant to section 65 of the Parliamentary Service Act 1999; and
Department of Parliamentary Services—Report for 2005-06—pursuant to section 65 of the Parliamentary Service Act 1999.

Executive Departments

Department of the Prime Minister and Cabinet—Report for 2005-06—pursuant to subsection 63 of the Public Service Act 1999.

Statutory Agencies or Authorities

Australian Electoral Commission—Report for 2005-06—pursuant to section 17 of the Commonwealth Electoral Act 1918;
Australian Hearing—Report for 2005-06—pursuant to the Commonwealth Authorities and Companies Act 1997;
Australian National Audit Office—Report for 2005-06—pursuant to section 28 of the Auditor-General Act 1997;
Australian Public Service Commissioner—Report for 2005-06—pursuant to sections 44 and 51 of the Public Service Act 1999;
Commonwealth Grants Commission—Report for 2005-06—pursuant to section 63 of the Public Service Act 1999;
Commissioner for Superannuation (ComSuper)—Report for 2005-06—pursuant to section 5 of the Financial Management and Accountability Act 1997;
Inspector-General of Intelligence and Security—Report for 2005-06—pursuant to section 35 of the Inspector-General of Intelligence and Security Act 1986;
Medicare Australia—Report for 2005-06—pursuant to section 70(1) of the Public Service Act 1995 of the Financial Management and Accountability Act 1997; and
National Water Commission—Report for 2005-06–pursuant to section 45 of the National Water Commission Act 2004.

Commonwealth Companies, including Government Business Enterprises

ASC Pty Ltd—Report for 2005-06—pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997; and
National Australia Day Council—Report for 2005-06—pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997.

Other

Albury-Wodonga Development Corporation–Report for 2005-06–pursuant to section 32 of the Albury-Wodonga Development Act 1973;
ASC Pty Ltd—Statement of corporate intent 2006 to 2009;
Members of Parliament (Staff) Act 1984—Consultancies engaged under section 4 of the Act—Report for 2005-06; and
Parliamentary Service Commissioner—Report for 2005-06—Pursuant to subsection 42(1) of the Parliamentary Service Act 1999.

1.11 The Committee is not obliged to report on Acts, statements of corporate intent, surveys, corporate plans or errata, but it may do so if it considers it necessary to report a matter to the Senate. On this occasion the Committee did not examine any of these types of reports.

1.12 The following reports were tabled in the Senate after 31 October 2006. These reports will be reviewed in the committee's second report on annual reports due to be presented to the Senate in September 2007.

Australian Public Service Commission—State of the Service—Report for 2005-06—pursuant to sections 44 and 51 of the Public Service Act 1999;
Australian Industry Development Corporation—Report for 2005-06—pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997;
Centrelink—Report for 2005-06—pursuant to section 40 of the Commonwealth Services Delivery Agency Act 1997;
Commonwealth Ombudsman—Report for 2005-06—pursuant to section 19 of the Ombudsman Act 1976 and section 38 of the Complaints (Australian Federal Police) Act 1981;
Commonwealth Superannuation Scheme Board—Report for 2005-06—pursuant to section 161 of the Superannuation Act 1976;
Department of Finance and Administration—Report for 2005-06—pursuant to subsection 63 of the Public Service Act 1999;
Department of Human Services—Report for 2005-06—pursuant to subsection 63(2) of the Public Service Act 1999;
Future Fund Management Agency and Future Fund Board of Guardians—Report for the period 3 April to 30 June 2006—pursuant to section 81 of the Future Fund Act 2006;
Health Services Australia—Report for 2005-06—pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997;
Office of the Official Secretary to the Governor-General—Report for 2005-06—pursuant to section 19 of the Governor-General Act 1974;
Public Sector Superannuation Scheme Board—Report for 2005-06—pursuant to section 28 of the Superannuation Act 1990; and
Telstra Instalment Receipt Trustee Ltd—Report for 2005-06—pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997.

1.13 The Committee notes that a number of reports met their required deadlines and were tabled in the Parliament by the 31 October 2006 deadline. However, they were tabled in the House of Representatives, not in the Senate. Three reports were tabled on 31 October 2006 and another report on 19 October 2006. As they were subsequently tabled in the Senate after 31 October 2006, they will be examined in the Committee's second report of 2007 in September.

1.14 The Committee also notes that a number of these agencies are required to table a report 'as soon as practicable after 30 June'. However, five reports did not meet their prescribed deadlines. The Committee discusses the apparent reasons for, and effects of, the post 31 October tabling of reports below, under "Timeliness".

Non-Reporting Bodies

1.15 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.

1.16 The Committee continues to approach this in two ways. First, the Committee checked the Administrative Arrangements Orders (dated 21 September 2006) for the list of legislation administered by portfolio ministers and consequently, departments and agencies.

1.17 Second, the Committee consulted the Department of Finance and Administration's List of Australian Government Bodies. The list identifies the agencies that are required to report and the Acts under which they report. This list may be found at the following internet addresses: http://www.finance.gov.au/finframework/fma_agencies.html and http://www.finance.gov.au/finframework/cac_bodies.html

1.18 Based on the above checks, the Committee is not aware of any bodies that have neglected to furnish a report for presentation to the parliament.

Senate Debate

1.19 Few annual reports are debated in the Senate, but many remain on the Senate Notice Paper for future consideration. The Committee notes procedural changes adopted by the Senate on 11 May 2004 on the recommendation of the Procedure Committee: namely, that 'government documents tabled on any day of the week are to be carried over for consideration each day until they appear on the list for consideration under General Business on Thursday (Standing Order 61)'.[3] Annual reports fall into this category of government documents.

1.20 The Committee is not aware of any Senate debate relating to the reports examined.

1.21 Annual reports are also often used by senators during estimates hearings. It is common practice for senators to use the reports to assist the examination of ministers and their officials in relation to the financial position and operations of departments and agencies. This is a key reason why departments and agencies should take care to ensure that annual reports are available in time for use during estimates.

Timeliness

1.22 Most reports are required to be tabled in parliament by 31 October each year unless another date is specified, for example, in an agency's legislation, charter and/or terms of reference. Organisations reporting under the CAC Act are required to provide an annual report to the responsible minister by the 15^th day of the 4^th month after the authority's financial year. Where the authority's financial year ends on 30 June, the report must be furnished to the minister by 15 October.

1.23 Reports from the Department of Human Services, the Department of Finance and Administration, and Centrelink were tabled on 31 October 2006 in the House of Representatives. As mentioned in above, departments and agencies are encouraged to table annual reports prior to the supplementary estimates hearings to allow adequate time to review them before the hearings take place. In the case where an annual report is tabled in the House of Representatives, every effort should be made to ensure the report is available to senators through the Senate Table Office.

1.24 Where a department or agency cannot meet its deadline for reporting, it must apply to the minister for an extension. Where an extension is granted, the minister must table in the Parliament a copy of the application together with a statement specifying the length of the extension and the reasons for granting the extension. The Committee is aware of two extensions during this reporting period:

Commonwealth Superannuation Scheme Board (Received 6 November 2006); and
Public Sector Superannuation Scheme Board (Received 6 November 2006).

1.25 The application from both agencies stated the reason for the extension was due to delays in the preparation of financial statements. The Minister for Finance and Administration tabled the applications and a statement granting an extension until 31 December 2006. Both reports were subsequently tabled on 12 December 2006 and will be examined in the Committee's second report in September 2007.

1.26 All reports examined in this report were tabled on time. For each report referred to it the Committee recorded the following dates:

date report submitted to minister;
date report received by the minister; and
date report is tabled or presented to the President or a temporary chair of committees.

1.27 Appendix 1 shows these key dates (where available).

Assessment of Reports

1.28 In determining whether a report was satisfactory, the Committee applied the PM&C guidelines. In particular, to assess whether the reports adequately met reporting requirements, they were assessed against the checklist at Attachment F in the guidelines. In the case of companies and authorities under the CAC Act, the committee also took account of the Commonwealth Authorities and Companies (Report of Operations) Orders 2005.

1.29 Where applicable, the Committee paid particular attention to agencies reporting against outcomes as set down in their respective portfolio budget statements (PBS) and portfolio additional estimates statements (PAES). The Committee notes that the majority of agencies report performance against outcome structures as set out in these documents.

1.30 The Committee has found that all the reports are 'apparently satisfactory'. It notes also that all financial statements included in the reports received an unqualified report from the Auditor-General.

Selected agencies and reports

Department of the Senate

1.31 The department's annual report was of a high standard, and provided a clear review of the department's performance. The department's output and outcome structure was provided in tabular form, which enhanced the reporting on performance.

1.32 The report on performance addressed the department as a whole, as well as each individual output. The structure used to report against each output is to be commended. A concise analysis of 'performance indicators' and 'performance results' is provided in a table with columns on quality, timeliness, quantity and price. Through the inclusion of values, this format conveys a variety of aspects of the department's performance in a succinct form. The table acts as an introduction to further analysis of the performance in each output.

1.33 Further, the Committee appreciates the department's self-assessment and ability to evaluate areas in need of improvement such as asset management and service level agreements with DPS.

Department of Parliamentary Services (DPS)

1.34 The department's annual report had no major shortcomings. All mandatory requirements of the guidelines were addressed. The department reported effectively against each output, a difficult task for a department which provides a diverse range of services. Due to the variety of services it was difficult to grasp a clear understanding of the performance of the department as a whole. The Committee suggests a more comprehensive introduction to Part 4, 'Report on Performance' be included in future to address the performance of the department across all service areas.

1.35 The review by the secretary was comprehensive. However, some major issues of the financial year were addressed only in the secretary's review. Items such as the departmental restructure and improving DPS operations could have been elaborated on in the report. As this time of transition for the department is expected to continue, DPS should consider the inclusion of a summary of significant issues and developments in its annual reports.

Australian Public Service Commission

1.36 The commission provided an informative and thorough report. It included a useful guide to the report and compliance index to assist in examination of the commission's performance. The commission's inclusion of a performance review in tabular form across all outputs is useful. The Committee did not find the commission's use of full and half stars to grade performance particularly helpful. Perhaps an alternate form of summary performance rating could be considered in future.

1.37 However, the commission reported clearly against each output using a standard format:

a description of the output;
achievements against the output;
slippages for the output;
a narrative, tables and statistics describing the work undertaken in the output; and
a highlight of the year for the output.

1.38 The Committee welcomed the inclusion of 'highlights' as well as reports of 'slippages'. Inclusion of these factors results in a balanced and accountable form of performance reporting, and the Committee commends it to all departments and agencies.

1.39 The Committee notes that the commission addressed concerns relating to unscheduled absences in the APS; an issue that was raised at Senate estimates hearings in May 2005. The commission responded to these concerns with the release of two better practice guides in June 2006 and 12 information sessions delivered to various agencies throughout the year.

Medicare Australia

1.40 The former Health Insurance Commission (HIC), which had operated as a statutory authority under the CAC Act, on 1 October 2005 became Medicare Australia (Medicare), a prescribed agency under the FMA Act and a statutory agency under the Public Service Act 1999.

1.41 That change had implications for the authority's annual report, especially with regard to the financial statements, which were presented for the HIC for the period 1 July 2005 to 30 September 2005 and for Medicare from 1 October 2005 to 30 June 2006. Both financial statements received unqualified audit reports.

1.42 Despite the change in governance, the agency's programs continued throughout the reporting period, apparently without pause. Medicare Australia was thus able to provide one set of performance information on each program for the year.

1.43 The performance information that was provided suggests that Medicare is an efficient service provider that rightly prides itself on its high levels of service.

1.44 As mentioned above, performance information was presented for programs rather than for outcomes/outputs. The Committee is not critical of that approach which may have been inevitable given that Medicare operates with only one outcome and one output. The Committee questions whether Medicare's outcomes/outputs structure remains appropriate, especially in view of the activities it undertakes on behalf of other agencies.

1.45 One of the claimed benefits of the outcomes/output structure is that it enables a 'clear read' between the budget documents (PBS and PAES) and annual reports.

1.46 The PM&C guidelines state:

The 'clear read' between PBSs and annual reports is an essential part of the accountability system that compares budgeted targets and figures to those actually achieved, and places a strong emphasis on compatibility between the two documents regarding budget and performance information.[4]

1.47 The agency's PBS for 2005-2006 set down key performance indicators against 'strategic themes'. With some variations, that information was repeated in the PBS for 2006-2007. Medicare's annual report includes sufficient information for an assiduous reader to assess the agency's performance against those indicators, but with difficulty. In that regard, the Committee draws attention to paragraph 11(1) of the Requirements for Annual Reports that states that an agency's review of performance must include reporting of actual results against the specific performance standards for the outcomes and outputs set out in the PBS/PAES. The document suggests that a tabular presentation in landscape format might be helpful.

Selected issues

Compliance indexes

1.48 Compliance indexes should list all the matters which must be reported against and serve to help the reader to locate this information in the report. The index is a useful device for the Parliament when examining annual reports and the performance of departments. The Committee commends those agencies that included a compliance index in their annual report. However, some annual reports did not include a compliance index.

1.49 For example, many of the bodies reporting under the CAC Act did not include compliance indexes. The Committee encourages these bodies to review the requirements listed in the Commonwealth Authorities and Companies (Report of Operations) Orders 2005 and devise a compliance index for use in future reports. Further, whilst the inclusion of a general index is helpful, it cannot substitute for the information a compliance index provides. The Commonwealth Grants Commission and the Inspector General of Intelligence and Security's reports included indexes, but they should consider the addition of a compliance index in future.

1.50 The Auditor-General's report included a comprehensive compliance index. It also included items not reported on as 'N/A'. This is useful to the reader as it clarifies the item was not applicable to the agency. Without addressing inapplicable requirements as 'N/A' in a compliance index, the reader is left wondering if the requirement has been reported on but not listed in the index, or has been ignored or overlooked.

1.51 Some indexes did not list variation to the outcomes and outputs structure from that set out in the PBS, or where performance targets differed from the PBS. This could be an indication that there was no variation. However, if this is the case, the committee encourages agencies that have no variations from the PBS in future to make note of both types of variations as 'nil' or 'N/A'.

Senator Mitch Fifield

Chair

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