Senator CARR —Professor Sara, could you assist me with a few queries I have regarding your annual report? Could you tell me why your departmental expenses have increased 2[half ] times since 1999?

Mr Harper —Would you be able to indicate which part of the annual report?

Senator CARR —The annual report for 2000, page 74, said your operating expenses were $4,079,000; the annual report for 2001, page 78, said they had gone up to $4,379,000; the annual report for 2001 said they had gone up to $6 million; and the last annual report, 2001-02, page 94, said they had gone up to $10.2 million. Could you tell me why that is? It is a fairly steep increase from $4 to $10 million.

Prof. Sara —Over those years, of course, as you know, the status of the ARC has changed from being part of the department to being an independent statutory authority, and along with that there are all the responsibilities and accountabilities. Therefore, there has been a transfer of funds from the department to the ARC.

Senator CARR —I see. How much has the department transferred to you for operating expenses?

Prof. Sara —That transfer involves staff as well. It was a transfer of operating resources as well as staff.

Senator CARR —Yes, but what has it meant money-wise, for a start? Why don't we have a look at that? How much did the department hand over to you? It is a remarkable achievement to get money out of the department like this. How much was it?

Mr Harper —I am not sure how much was transferred by way of recurrent expenditure. There was an amount, which I can check for you shortly, of the order of $4.7 million which was transferred as equity on establishment of the ARC as a separate body.

Senator CARR —What sort of equity? What was that money for?

Mr Harper —It was largely cash.

Senator CARR —That shows up in your accounts as operating expenses, does it?

Mr Harper —No, that would not show up as operating expenses.

Senator CARR —How do I account for the change in your operating expenses?

Mr Harper —I note that on page 94 of this year's annual report the statement is made about one-third of the way down the page that 2001-02 is the ARC's first year of operations. Consequently, comparative data from previous years is not available. This is the first year that the ARC's accounts have been prepared and audited to Australian accounting standards as a free-standing institution.

Senator CARR —The annual reports from previous years were not audited to the Australian accounting standards. Is that what you are saying?

Mr Harper —I am unsure, not having been here, but I suspect that may be the case. There was no requirement for them to be so audited because the ARC was not a reporting entity.

Senator CARR —But it produced annual reports.

Mr Harper —It did.

Prof. Sara —Yes, it did, but it was not responsible for the financial systems that were used.

Senator CARR —No, but it was responsible for the statements in its own annual reports, was it not?

Prof. Sara —Yes.

Senator CARR —And those annual reports indicated a movement from $4 million to $10 million over the series I have looked at.

Prof. Sara —Yes, Senator, but as I have explained, that is due to the transfer of resources and staff from the department.

Senator CARR —I am just trying to identify where the resources have come from.

Prof. Sara —Certainly.

Senator CARR —You have said to me that there was $4.7 million in equity, and I am wondering whether that would show up in the departmental operating costs, and it does not. So where does it show up?

Mr Harper —On page 117, there is note 8 equity. You will see there is a little table there that indicates that, on establishment we received $5.6 million, assets recognised, offset by about $900,000 in liabilities.

Senator CARR —Yes, I see that.

Mr Harper —That is the $4.7 million to which I was referring earlier.

Senator CARR —Yes, I can see that. How does that relate to the table on page 94?

Mr Harper —It does not directly.

Senator CARR —What is the point in showing me that?

Mr Harper —I was responding to your question as to where you would find the statement about equity.

Senator CARR —I am interested to know how it is that your operating expenses have gone up by 2[half ] times. Can you please explain that to me.

Mr Harper —I do not think we are able to do so here. I am happy to take that on notice. It may be that, given that there is no comparative data available, we may struggle to do it.

Senator CARR —Mr Harper, looking at your annual reports from previous years, they seem to imply that there is data available, and unless you are saying that I should not take any notice of your annual reports, which is a pretty serious claim to make, then I would like you to explain to me—

Senator Alston —Can I interrupt?

Senator CARR —Yes.

Senator Alston —You are proceeding on the basis that the operating expenses have gone up 2[half ] times.

Senator CARR —Yes.

Senator Alston —I do not know that that is accepted. In the first instance, you should seek to ascertain whether that is correct.

Senator CARR —How would you explain these figures then? You say these figures are not right?

Senator Alston —Perhaps if you explain the basis on which you say—

Senator CARR —I am saying to you that I read the annual reports. I got the tables out, and I saw how much was being spent from successive annual reports on the operational costs—relevant reports on total departmental expenses. It is the same categorisation in each report.

Senator Alston —Can I suggest that you provide to the ARC the basis for your assertion. No-one can grasp it at the moment.

Senator CARR —Senator Alston, I appreciate that you are coming late to the scene—

Senator Alston —Don't resort to abuse at this stage.

Senator CARR —I am not.

CHAIR —Order, Senator Carr! The minister is speaking.

Senator Alston —Until you can identify the basis for your assertion, it is impossible to expect a sensible response. If you will put that down on paper, they can get back to you on paper.

Senator CARR —Senator Alston, I have said this already. If you were listening, I gave the dates and the pages of the annual reports, did I not?

Mr Harper —I believe you did, Senator.

Senator CARR —Will you be able to determine from what I have said to you the dates and the pages on which these tables appeared?

Mr Harper —Certainly the annual reports and—from memory, yes; we can take your question on notice.

Senator CARR —Thank you. I appreciate that. What was the increase in the proportion for staffing costs?

Mr Harper —Given that we do not know the increase in aggregate, I will have to take that on notice as well.

Senator CARR —Thank you. I would expect there will be a series of questions you will now wish to take on notice, given that response.

Mr Harper —I could observe that the staffing level of the ARC has increased significantly so that it is now of the order of 60, having been 20 in the period in which you are showing interest.

Senator CARR —How many staff at the SES level were there in the ARC in 1999, Professor Sara?

Prof. Sara —In 1999 there were no staff at the SES level.

Senator CARR —How many are there in 2002?

Prof. Sara —Nine, I believe.

Senator CARR —Does that include yourself?

Prof. Sara —No, it does not include myself.

Senator CARR —I take it the 1999 figure would not include you either?

Prof. Sara —No. I was the chair of the ARC at that time, and a statutory officer. There were no SES staff; there were no staff of the ARC.

Senator CARR —The annual reports seem to indicate that there are classifications of staffing profile.

Prof. Sara —The ARC did not exist until July 2001.

Senator CARR —The staffing profiles referred to in the annual reports are not—

Prof. Sara —They were staff who belonged to DETYA.

Senator CARR —Who happened to work for the ARC?

Prof. Sara —Yes.

Senator CARR —I see. There is a subtle difference, is there?

Prof. Sara —There is a major difference.

CHAIR —Order! Senator, perhaps Professor Sara could explain the major difference.

Senator CARR —Yes. Tell me what that major difference is.

Prof. Sara —The ARC was not an authority that could employ staff in its own right.

Senator CARR —Before it was an authority, how many people worked on ARC business?

Prof. Sara —From memory, probably around 20 to 30 staff in the late 1990s. We can certainly give you that information.

Senator CARR —Yes, I know. I can read it in the annual reports as well. I am saying that there appears to be a significant growth, particularly at the SES level, in your organisation from that period.

Prof. Sara —Yes.

Senator CARR —You have indicated that it has gone from none to nine at the moment.

Prof. Sara —That is right.

CHAIR —I chaired an inquiry into research in universities in 1995 and, from memory, it was fairly much a shoestring sort of operation back then. We brought down a new act for the ARC in the last two years. Perhaps part of the answer to Senator Carr's question is that we have put the ARC on a proper footing, which it was not on before.

Prof. Sara —Yes.

Senator CARR —It has put it on a $10 million footing, that is certainly true.

Prof. Sara —The ARC currently has approximately 60 staff. Eight of those staff are at the SES level, because the organisation of the ARC has changed quite significantly from 1999. We are organised in six discipline clusters, each headed by an SES officer. We have a corporate section, headed by an SES officer, a policy and planning section, headed by an SES officer, and a deputy chief executive, who is at the SES level.

CHAIR —I assume some of those functions would previously have been undertaken by the department—

Prof. Sara —Precisely.

CHAIR —and have now been transferred into the ARC.

Prof. Sara —Yes.

Senator CARR —When those functions were performed by the department, as you put it—despite the fact that the functions were carried out before the establishment of the ARC as an independent body—what was the level of classification for each of the relevant officers?

Prof. Sara —In the department, which assisted the ARC; is that your question?

Senator CARR —Yes. From the question Senator Tierney asked you, I presume that the SES officers you have now employed were replacing people who were doing the function under the department.

CHAIR —That was not the exact question. I just said functions were transferred.

Senator CARR —Is that right?

Prof. Sara —Program, policy and corporate functions were transferred. All those functions were transferred to the ARC.

Senator CARR —Were those functions performed by staff at SES rank?

Prof. Sara —I have always assumed that the head of DETYA's corporate section was at the SES level.

Senator CARR —Yes, but were those responsible for the ARC at SES rank?

Prof. Sara —There was not necessarily a single officer responsible for the ARC.

CHAIR —Perhaps, Senator, under your government this was all grossly under-resourced. I think that was the finding of our Senate inquiry in 1995, if you care to look that up.

Senator CARR —I would like, if you could, please, a description of each of the SES officers you have employed. Not individuals—I think we can work that out from the annual report—but by function.

Prof. Sara —The description of their function is outlined in the white paper, Knowledge and Innovation, released by Minister Kemp in December 1999.

Senator CARR —I would now ask you to give this committee an answer to the question I just asked you. In terms of the current SES personnel, what is the nature of their functions? Can you indicate that to me?

Prof. Sara —I certainly can, Senator.

Senator CARR —Can you also indicate to me the personnel who performed the equivalent function in the immediate period just prior to the establishment of the ARC as an independent statutory authority—is that how you describe it?

Prof. Sara —Yes.

Senator CARR —and what their classification was?

Prof. Sara —Would you like me to do that now or take it on notice?

Senator CARR —Can you tell me whether or not—

Prof. Sara —I can tell you right now, if you wish.

Senator CARR —Thank you.

Prof. Sara —Firstly, if we go the discipline and program area, there was no equivalent position prior to 2001. The six SES officers each head a discipline cluster. Their responsibilities are communication with the research community in that area, operation of the programs supporting research in that area, research training in that area and providing strategic advice for policy development within that area. There are six SES officers. They are new positions created with the reorganisation of the ARC as outlined in both the white paper Knowledge and Innovation, and of course coming through into the legislation, the ARC Act, in July 2001.

There are additional SES officers. One is responsible for the corporate section, which is the human resources, finance and IT systems. The second of those is responsible for policy and planning within the ARC. She is responsible for any strategic policy advice from the ARC, as well as the annual reporting and performance indicator work—and outcome reporting—from the government's investment through the ARC. The final SES level is the Deputy Chief Executive Officer, who is sitting next to me—Greg Harper—who is my deputy across all functions of the ARC, but has particular responsibility for the operations of the ARC.

Senator CARR —You have not indicated in that latter group what the equivalent officer was effectively paid—their Public Service classification in the period prior to the establishment of the authority.

Prof. Sara —I suggest that the equivalent head of corporate section in that department at that time was paid more than the head of corporate within the ARC.

Senator CARR —Would you take that on notice, because I will ask the department the same question and perhaps they will tell me which officers were responsible for administering the ARC. Frankly, I do not think that you will find that it is the head of the corporate division of the department of education.

Prof. Sara —All I can say is that I always dealt with the head of corporate or whatever section it was.

Senator CARR —On a final matter on this particular issue, can you look at page 94 of your annual report. Do you see the total departmental expenses? Look at the budget 2002-03, in that final column. What do you make of that figure?

Mr Harper —On first inspection, it appears very nice, but it is probably an overstatement.

Senator CARR —By about 10. It is $125 million. You do not think that that is right?

Mr Harper —It might just be overstated.

Senator CARR —Do you proofread these reports?

Mr Harper —It would have been proofread, but occasionally gremlins creep in and that would appear to be one.

Senator CARR —Fair enough.

Mr Harper —Given that there is a repeated four there, I suspect that that may be the problem.

Senator CARR —That could account for it. I thought that you had been spending a fair bit a day, but not $125 million.

Prof. Sara —Let me assure you that we have not spent $125 million. The extra four there is a mistake. I apologise.

Senator CARR —No worries. Appendix 7 of the annual report 2000-01 gives a staffing profile, which I have drawn my statistics from, and page 70 of the annual report 1999-2000 gives you the number of staff in proportions of male and female staff by actual classification as at 30 June. I presume that those reports are accurate. Would you be able to tell me that?

Prof. Sara —I presume they are, but I do not have a copy in front of me I am afraid.

Senator CARR —When you are answering that last question, I would ask you to refer to those and indicate why it is that the evidence that you have put to me tonight about the department's administration costs is different from what you proposed in this report in 1999. I have a few other questions about staffing. How many staff separations have there been in program areas in 2001-02?

Mr Harper —We will take that on notice.

Senator CARR —How many staff have occupied the position of communications officer in the last two years?

Prof. Sara —There have been one or possibly two.

Senator CARR —How many persons have occupied the position of personnel manager in the last two years?

Prof. Sara —I do not believe that we have had a personnel manager.

Senator CARR —You do not have one at all?

Prof. Sara —I said that we have not had a personnel manager. We now have a head of corporate and someone who is acting as personnel manager.

Senator CARR —Does this account for why there has been such a growth in SES staff?

Prof. Sara —The growth in SES staff is, as I thought I explained, really due to the functions required of a person at that level. These individuals are responsible for a broad discipline cluster of research.

Senator CARR —What is the total staffing at the moment at the ARC?

Prof. Sara —It is approximately 60.

Mr Harper —At the end of October, Senator, it was 57.

Senator CARR —Okay. Since the ARC Act was actually enforced two years ago, how many staff separations have there been in the ARC?

Mr Harper —We will have to take that on notice, Senator.

Senator CARR —I tell you what, can you confirm that approximately 53 staff have left?

Prof. Sara —That sounds quite large. It sounds like the $125 million spend to me. So I would need to take that on notice.

Senator CARR —What is the number, are you able to tell me that?

Prof. Sara —We have to take it on notice, Senator. We do not have the number.

Senator CARR —Is it high? Would you say it is high?

Mr Harper —Without knowing the number, I would rather not comment.

Senator CARR —You think 53 is far too high.

Mr Harper —Fifty-three on a base which would have been less than 53 at the start of the year sounds high.

Senator CARR —Absolutely. That is my point. And in the project area, would you be able to confirm that something like 24 positions have turned over?

Mr Harper —We will take the answer on notice.

Prof. Sara —We have to take it on notice, but let me explain something about the organisation and the staffing of the organisation which may in fact underpin your 53. The ARC is a small organisation for its administered budget. In fact, we have the smallest percentage of any international comparison that I know of—something like three per cent of our administered budget is our departmental cost. This is half of anything I know around the world. Regardless of that, we have a small core of staff and we bring in contract staff during the peak periods of activity, and I do wonder if your 53 does not reflect the fact that we have contract staff for short periods of time.

Senator CARR —Perhaps you can clarify that.

Prof. Sara —We certainly can clarify that if we can take it on notice.

Senator CARR —If you wouldn't mind doing that. I would like to know the total turnover of staff in the ARC in the last two years and the total number of project staff. I am told that the use of contract staff is actually becoming more common in the ARC. Is that true?

Prof. Sara —The ARC has peaks and troughs of activity and we often require a lot of staff for data work, data entry work, analysis and handling of the large number of grants we get in at peak periods during the year.

Senator CARR —Yes. So it is becoming more common?

Prof. Sara —It has always been a common feature of the ARC.

Senator CARR —So you cannot tell me whether or not there are more contract staff at the moment than there have been in the past.

Prof. Sara —We can certainly provide that information.

Senator CARR —Can you tell me if the number of permanent positions has increased or decreased?

Prof. Sara —The number of permanent positions has certainly increased because we now have 57 staff employed by the ARC.

Senator CARR —What percentage of your staff is permanent and what percentage is on contract? How has that changed over the last three years?

Prof. Sara —I cannot tell you over the last three years off the top of my head. I will take it on notice.

Senator CARR —No, I expect that. But given the annual reports go to the detail of these matters, I am wondering if you can confirm for me what the percentages are over that period.

Prof. Sara —Certainly, Senator.

Senator CARR —I would appreciate that very much. Have the qualifications of your senior management changed?

Prof. Sara —As I explained to you, the senior management has changed quite radically from what it used to be because of the SES staff who are responsible for the discipline clusters. They are outstanding researchers who have come in from the research community on a contract up to three years.

Senator CARR —Okay. So could you tell me what the difference is in pay, for instance? I notice in the previous salaries that an APS officer would be paid around $50,000 and an executive officer, SES officer, starts at about $67,000 now or thereabouts in that field; would that be right? The difference between an APS level officer, a DL3 or whatever they call them—that is the top of the range, isn't it?

Mr Harper —EL2 we call them.

Senator CARR —Right. They get paid about $50,000 to $55,000?

Prof. Sara —No, they get paid more than that.

Senator CARR —How much do they get paid?

Prof. Sara —About $70,000, I think.

Senator CARR —$70,000? I am relying again on your annual report—obviously a foolish thing to do. It actually says here on page 178: `APS level 6 DL3, $49,000—

Senator Alston —It might be best if you wait because they are getting instructions. They are not able to hear you and get instructions at the same time.

Senator CARR —Okay. What is the figure?

Prof. Sara —You are talking about what we could call an APS6, I presume, and the figure for that is—

Mr Harper —I understand the figure for an APS6 would be in the $50,000 to $60,000 range.

Senator CARR —So on page 78 in the annual report for 2001-02—do you have that there? Just guide me through that.

Mr Harper —Page 78.

Senator CARR —Page 178, I am sorry.

Mr Harper —That gives the precise answer to the figures.

Senator CARR —Yes, it does—and it is somewhat different from the one you just gave me, isn't it?

Mr Harper —I said somewhere between $50,000 and $60,000, and I was slightly wrong.

Senator CARR —The point is this: we can take it from this that they get paid between $49,000 and $54,000. An SES level 1 officer gets paid between $62,000 and $67,000 and an SES2, $73,000 to $84,000. Would you agree?

Mr Harper —No, Senator. These are staff below the SES, as the table is headed.

Senator CARR —What does the SES officer get paid?

Mr Harper —It would vary, but more than the figure for the EL2—executive level 2—that is shown there.

Senator CARR —I see. So what is the difference in pay rates? Would it be 10 per cent, 20 per cent?

Prof. Sara —It could be as much as a difference between $50,000 and $100,000.

Senator CARR —That is right: it could be substantially increased.

Prof. Sara —It depends on the level.

Senator CARR —I am just wondering why you think you need to have persons who are eminent researchers in an administrative role.

Prof. Sara —Because they have responsibility for research in those areas, they have responsibility for the administration of research programs in those areas, they have responsibility for the development of programs and the development of strategies in those areas and they have responsibility to work with the research community, the business community and government in increasing interest and developing new directions in those areas.

Senator CARR —That is clearly the straight strength of employing researchers in administrative roles. What are the disadvantages in employing researchers in administrative roles? For instance, do you think there is sufficient administrative background for people undertaking these roles.

Prof. Sara —I do indeed. They are also supported by a team of staff at an EL1 level or an APS6 or 5 level as well. Let me explain to you that in the old structure of the ARC these SES positions were filled by part-time people from the university sectors who were chairs of committees. That was an enormous stress on the organisation and those individuals.

Senator CARR —So now you pay them a hundred grand to do the same job. Is that the point you are making?

Prof. Sara —No, we pay them a hundred grand, as you put it, to do a far better job than was ever done before.

Senator CARR —Okay, they are doing a better job. Fair enough. And then they have got these other administratives to support them to actually do the work. Is that what you are saying?

Prof. Sara —These people work as teams.

Senator CARR —Okay. What is the performance review procedure? How well is this working?

Prof. Sara —The performance review is working well. We have a policy for performance review throughout the organisation.

Senator CARR —Has there been a performance evaluation of why your administrative costs have increased 250 per cent?

Prof. Sara —The ARC has only been in operation for 18 months. I do feel that is a little early to have a review.

Senator CARR —Fair enough. So when will you have that review?

Prof. Sara —I would assume we would have that review in about three years, but that is for the minister to decide.

Senator CARR —Right. He may, after listening to this, have it maybe a little earlier than that, I trust. You are satisfied that the appointment of executive directorships has been successful: is that the evidence you put to the committee?

Prof. Sara —I personally am delighted with it, but that is irrelevant to information to this committee.

Senator CARR —That is not relevant to this committee: is that what you said?

Prof. Sara —My personal views probably are irrelevant to this committee, but I can tell you that the feedback from the research community has been tremendous over their role and their connectivity with the research community.

Senator CARR —The former chair of the ARC, Mr Wills, resigned in September.

Prof. Sara —Yes.

Senator CARR —He was in the job for 15 months, was he?

Prof. Sara —Yes.

Senator CARR —Why did he resign?

Prof. Sara —His commitments to his business were overpowering.

Senator CARR —Did he spend a lot of time in the ARC office?

Prof. Sara —In the office, or talking to me or to the board or doing other business for the ARC out of the office. He certainly did not spend a lot of time physically in the ARC office; that was not his role.

Senator CARR —Did his role require him to spend a lot of time, apart from board meetings, at the ARC office?

Prof. Sara —The role of the board is one of setting strategic directions, not to delve into the management and operations of the ARC. The management of the ARC reported on a regular basis to the board.

Senator CARR —Mr Wills was the former chair of the Garvan Institute of Medical Research in Sydney, wasn't he? When did he cease being the chair of that institute?

Prof. Sara —I cannot tell you exactly, but it was perhaps six or 12 months before he became the chair of the ARC.

Senator CARR —How did you respond to the reports in the press at the time of his appointment and the comment on the payment of the $75,000 grant to the Garvan institute?

Prof. Sara —It was $750,000.

Senator CARR —$750,000—my apologies; you are quite right.

Prof. Sara —I made no response. The money was not from the ARC, that money was from Biotechnology Australia.

Senator CARR —Was that money granted on the basis of a competitive application?

Prof. Sara —You will have to ask the industry portfolio, as Biotechnology Australia was responsible. There was no connection to the ARC.

Senator CARR —You made no connection at all with that?

Prof. Sara —None at all.

Senator CARR —While he was the chair, what sort of expenses did Mr Wills have?

Prof. Sara —What do you mean?

Senator CARR —What sort of expenses did he have for his role as chair?

Prof. Sara —He received remuneration from the Remuneration Tribunal.

Senator CARR —Did he have any particular tastes in accommodation, for instance, that had to be met by the ARC?

Prof. Sara —The Remuneration Tribunal stipulates the type of accommodation and travel which the chair of particular boards take, and one of those boards is the ARC.

Senator CARR —And his remuneration in that regard was all within the Remuneration Tribunal's guidelines.

Prof. Sara —Absolutely.

Senator CARR —And the transport arrangements, were they within the Remuneration Tribunal decisions as well?

Prof. Sara —I presume so, yes.

Senator CARR —Did he have a view about motor transport in particular?

Prof. Sara —I beg your pardon?

Senator CARR —Were you aware of his view about motor transport at all?

Prof. Sara —No, I have never discussed motor transport with Mr Wills.

Mr CADMAN —So he left no specific instructions with the ARC as to his mode of transport?

Prof. Sara —Not that I am aware of; I have never had that discussion.

Senator CARR —Right. So there is no truth to the suggestion that he required limousine service at all times—is that right?

Prof. Sara —Not that I am aware of.

Senator CARR —He refused to be picked up by ARC staff. Is that true?

Prof. Sara —I cannot imagine that. I have picked him up myself.

Senator CARR —I see. But you are not really ARC staff, though, are you?

Prof. Sara —I consider myself to be ARC staff.

Senator CARR —How many times has the ARC engaged SplashMedia?

Prof. Sara —Three times in 2001-02.

Senator CARR —Why did you engage them? What was the purpose of engaging SplashMedia?

Prof. Sara —SplashMedia were involved in several activities that ranged from the announcement of federation fellows to the announcement of grant outcomes. They were also engaged for the production of stories of each of the federation fellows. They were engaged for communication activities.

Senator CARR —Do you have a communications officer?

Prof. Sara —At the moment, we do not.

Senator CARR —Did you have one at the time you engaged SplashMedia?

Prof. Sara —We had a communications officer from DEST in a temporary position for perhaps six months. I believe he completed that term in the middle of October, so there would have been some overlap. He worked with SplashMedia.

Senator CARR —I am sure he would have. What else would a communications officer do?

Prof. Sara —Most of that activity occurred prior to having a communications officer there.

Senator CARR —Has there been only one communications officer?

Prof. Sara —That I can think of.

Senator CARR —I am interested in why you would employ a communications officer and then outsource the work as well.

Prof. Sara —The communications officer's role was also to communicate with the institutions that we fund and included the production of a newsletter and contact with the publicity officers at the various universities. It was a very broad task.

Senator CARR —Indeed. How much did you pay SplashMedia?

Prof. Sara —Approximately $22,000, as I add it up very quickly.

Senator CARR —Were all of those contracts let by way of open tender?

Prof. Sara —No, they were not.

Senator CARR —Why is that?

Prof. Sara —We can provide you with the precise details.

Senator CARR —Thank you. Who runs SplashMedia?

Prof. Sara —Michael Smith is the fellow's name.

Senator CARR —What was his expertise in communications?

Prof. Sara —His expertise was his great experience with the media. You possibly knew him as David Kemp's press secretary.

Senator CARR —I knew I had heard of him somewhere!

Prof. Sara —I thought you might have.

Senator CARR —Is his expertise as a ministerial press officer?

Prof. Sara —His expertise was shown through that. He also acted as a communications manager—

Senator CARR —Dr Kemp thanks him all the time! He got three contracts on a selected tender basis. That was presumably because of his pre-eminent expertise. Is that what you are going to tell me?

Prof. Sara —Precisely. It is written in the annual report, which I am sure you have read, that it was:

... not advertised—obtained exemption based on: sole supplier, pre-eminent expertise or urgency and practicality ...

Senator CARR —Was Dr Kemp minister at the time?

Prof. Sara —I do not think Michael Smith has worked for Dr Kemp for a very long time—for several years.

Senator CARR —I know that, but Dr Kemp was the minister at the time, wasn't he?

Prof. Sara —No. I believe it was after Dr Nelson became minister.

Senator CARR —Can you remind me of the dates of those contracts?

Prof. Sara —They are not shown here, and I really do not have them in my head.

Senator CARR —You do not recall whether or not it was before the election?

Prof. Sara —No, I honestly cannot recall that.

Senator CARR —Are you telling me these selected tenders all occurred in the last year?

Mr Harper —They occurred during the period covered by this annual report, which is from July 2001 to June 2002. I think at least the second two did, as listed in the annual report on page 181, relating to the launch of Federation Fellowships and the grant round for—

Prof. Sara —2002. It would have been December.

Mr Harper —It would have postdated the election.

Senator CARR —Professor Sara, I have a few other issues here. Does your travel contract include going back to Brisbane every weekend?

Prof. Sara —No, not at all; that is personal travel. I pay for that, Senator.

Senator CARR —So it is an entirely private matter?

Prof. Sara —Absolutely.

Senator CARR —Could you tell me about the report into commercialisation. How well do you think the commercialisation program is going?

Prof. Sara —Could you explain what you mean by `commercialisation program'?

Senator CARR —I will come back to that while you are answering the next question; I will go on with something else in the meantime. Can you indicate to me what the trends and the funding under the IREX Program are?

Prof. Sara —I believe the IREX Program has stayed fairly constant over the years.

Senator CARR —Constant? Page 150 in the annual report does not seem to suggest that to me. The overall success rate for the IREX Program 2000 was 59 per cent, and it dropped in 2001 to 45 per cent. Is that the case?

Prof. Sara —I am sorry, Senator. I do not understand which program you are talking about.

Senator CARR —It is the Linkage-International program. Has funding fallen in 2002 from 2001 levels?

Prof. Sara —No, Senator. What has happened is that we have removed a closing date from that program so that it is batched up several times through the year.

Senator CARR —I see. Who removed the closing date for the program?

Prof. Sara —The board decided to do that.

Senator CARR —On your recommendation?

Prof. Sara —Recommendations such as that come from the management of the ARC, yes.

Senator CARR —And you are the chief executive officer, aren't you?

Prof. Sara —That is right.

Senator CARR —So was it your recommendation?

Prof. Sara —I presume so.

Senator CARR —Can you indicate to me whether or not funding levels have declined?

Prof. Sara —No, they have not declined. Of the 2002 figure, which is reported here as being $1.5 million, the money is still being spent this year. The closing date has been removed, so we have several rounds per year.

Senator CARR —Why was the closing date removed?

Prof. Sara —Because of input from the research community, who found that it was very inconvenient to have a single closing date for an international program which was to build networks.

Senator CARR —So how do people know when to apply for funding?

Prof. Sara —Their preference was to have no closing date so that when the need arose they could apply to the ARC for support.

Senator CARR —I see. So it is an ad hoc program now, is it?

Prof. Sara —I do not call it ad hoc; it simply does not have a closing date.

Senator CARR —So you can apply at any time, is that right?

Prof. Sara —Precisely.

Senator CARR —Has there been a drop in applications?

Prof. Sara —Initially there was when the closing date was removed, but I think that is a response of the research community. It has now picked up again.

Senator CARR —How many applications were there last year?

Prof. Sara —In 2001 there were 230.

Senator CARR —How many were there this year?

Prof. Sara —Eighty-one are reported here, Senator.

Senator CARR —That is a significant drop, would you agree?

Prof. Sara —Yes, it is. But, as I said to you, it is because they have been batched up. The year 2002 is not yet over. It is coming close, but it is not yet over.

Senator CARR —So you anticipate a significant application rate, do you, from 81 to 230?

Prof. Sara —No. I expect there will not be quite the number for previous years, but it has picked up enormously in the latter part of this year.

Senator CARR —I will put on notice some questions on that matter and you can pick them up through that means; I would appreciate that. Are you able to comment on the research commercialisation report, which was jointly sponsored by you, CSIRO and NHMRC and was published in September of this year?

Prof. Sara —I think it is an excellent report. It is the first time that a national survey has been conducted to determine the commercial outcomes for publicly funded research.

Senator CARR —I take it you are intending to report on an annual basis from now on, are you?

Prof. Sara —I believe that it will be done on a biennial basis, every two years.

Senator CARR —It will be very good to see. On page 8 of the report, you say that 491 licences yielded for respondent institutions a gross income of $99 million in the year 2000. Is that correct?

Prof. Sara —Yes, Senator.

Senator CARR —You identify five licences producing nearly $3 million annually. Can you produce a table for us showing a breakdown of all licences and their revenues and returns? Is that possible?

Prof. Sara —For each individual licence?

Senator CARR —Yes.

Prof. Sara —No.

Senator CARR —What can you do? You have five licences producing $3 million annually.

Prof. Sara —We can do it by institution but not by individual licence.

Senator CARR —Well, can you do that for me?

Prof. Sara —Certainly, Senator.

Senator CARR —Thank you. Does the $99 million include in it the $52 million reported from the University of Melbourne for the sale of Melbourne IT? Is that correct?

Prof. Sara —Yes, it is correct.

Senator CARR —So it represents about 50 per cent of the total. Would that be right?

Prof. Sara —Approximately, yes.

Senator CARR —What adjustments have been made in terms of the report to prevent this one-off windfall skewing the results for your survey?

Prof. Sara —The adjustments have been to do it on a regular basis. There are swings and roundabouts in any report such as this. Provided that you identify the source of these large changes, it is a very objective way of dealing with the data.

Senator CARR —You say that it is objective. The report identifies a return of 3.16 per cent for Australian research institutions for research expenditure. That is the equivalent, in US dollar terms, of $31.6 million adjusted gross income for every $1 billion. So it is a return of 3.16. Would you agree?

Prof. Sara —I think it is approximately that. I would need to check the figures myself, but I think you are right.

Senator CARR —Have you undertaken an equivalent exercise without the $52 million from Melbourne IT within it?

Prof. Sara —Yes, we have. The information is available within the report, because it is presented on an institutional basis. We have looked on an institutional basis. Do recall, when the universities are grouped together, that there is a wide variation in the individual institutions. Many of the institutions have very little or no activity in that area, and some have very high activity.

Senator CARR —That expenditure for a 3.1 per cent return is gross expenditure; it is not a net expenditure, is it?

Prof. Sara —I will have to check. We will take that on notice, Senator.

Senator CARR —I appreciate that, because I will get to see a figure that gives me a net return on investment for commercialisation in Australian institutions. This is the first time that I have seen a figure such as the 3.1 per cent, but I take it that it is a gross figure and not a net figure.

Prof. Sara —I would like the opportunity to check that.

Senator CARR —It is a long way short of the American return rate of 4.5 per cent, is it not?

Prof. Sara —Yes. It is short of it; I do not know about it being a long way short of it.

Senator CARR —If it is the net figure, it is considerably short. It might even be half. Would you agree?

Prof. Sara —I really do need to take this on notice to check the figure.

Senator CARR —You identify—and I find this extraordinary—that there are only 287 persons employed on commercialisation activities in respondent institutions. Is that right?

Prof. Sara —That is the result of the survey, Senator.

Senator CARR —Included in the figure is the estimated cost of employing those 287 persons for the return of the 3.1 per cent?

Prof. Sara —No, Senator.

Senator CARR —So the return on an investment of $1 billion is considerably less than 3.1 per cent?

Prof. Sara —It could well be, yes.

Senator CARR —Have you calculated the cost of patent rights and other expenses associated with commercialisation in the figure of 3.1 per cent?

Prof. Sara —No, we have not. This is a survey, and you will note that the survey is in the latter part of this report. We have simply presented the data collected.

Senator CARR —I appreciate what you have done—I say to you that this is a service you have performed—however, it would suggest to me that there is a considerable amount of work to be done. More especially, given the importance of commercialisation in terms of the public policy debate in this country, returns that would appear to be around the two per cent mark are considerably less than world's best practice and, you would have to suggest are not a great measure of success.

Prof. Sara —No-one is saying that Australia is a leading nation in commercialisation of research. The idea of this report was to see where we are today and to set targets for where we want to be tomorrow.

Senator CARR —Would you agree that we have considerable distance to travel to world's best practice in commercialisation?

Prof. Sara —Yes, I do.

Senator CARR —I will put the rest of the questions on notice.

CHAIR —The committee stands adjourned while we try to resort the program to accelerate it a little. We will see what we can do during the break.

CHAIR —We are now considering the higher education group output 2.1, funding for the post school education system and students' questions.

Senator CARR —Our intention here tonight is to try to conclude as much of the program as possible. That will probably leave us with international education and VET tomorrow. We will use our best endeavours and I appreciate the manner in which the questions have been answered tonight.

CHAIR —And ANTA.

Senator CARR —That is what I am talking about. The whole VET program includes ANTA. I want to acknowledge the way the answers have gone tonight, which helps us get through our work. I take it we can get the schools in tonight at about 10 o'clock or so.

Dr Shergold —People are ringing up now.

Senator CARR —If it cannot be done, it cannot be done.

Dr Shergold —I think we will be able to.

Senator CARR —Dr Shergold, in a speech that you gave at a recent conference on financing the university system, during the closing session on the Crossroads review, you indicated that you thought there were five institutions that were running deficits in 2001.

Dr Shergold —That is correct. Five institutions were running deficits in 2001 compared with 10 the year before.

Senator CARR —That is right. Quite clearly you have that data. Can we now know which universities they were?

Mr Watson —The five institutions were the University of Newcastle, La Trobe University, the University of Adelaide, the Australian Maritime College and the University of Tasmania.

Senator CARR —Dr Shergold, you have said:

For a university to run a deficit is not necessarily a sign of financial weakness. It may equally be strategic: running a deficit in order to invest in infrastructure that will provide increased future revenues may well be good financial management.

Would this diagnosis apply to those universities that were running a deficit in 2001?

Dr Shergold —It may well do. I was commenting on the fact that over the last decade we have varied between about five and ten university institutions in any year running an operating deficit. But as you know, the institutions that run operating deficits are not the same—they vary from year to year. What that suggests to me is that there is a significant amount of strategic decision making going on. The other point I was making is that overall our university system, rather than being in financial crisis, is in a very solid state. Whether you look at revenue, operating surplus, net assets, operating deficits or debt—on all of those we are looking pretty strong.

Senator CARR —Dr Shergold, which of these five are you saying are losing money to make money?

Dr Shergold —I am not going to go into the details of that. You have had identified for you the five institutions which this year ran an operating deficit.

Senator CARR —I am just wondering, can you—

Dr Shergold —I cannot analyse at the moment which of those would be doing it on the basis of a strategic approach.

Senator CARR —The audited financial statements of La Trobe indicate a deficit of $7.5 million. The annual report tells you that this is largely due to a `paper write down'. Mr Watson, were you on the profiles team that went to Victoria?

Mr Watson —Certainly I was on the profiles team that went to Victoria.

Senator CARR —Which universities did you visit?

Mr Watson —We visited RMIT.

Mr Burmester —La Trobe and VUT.

Senator CARR —Which universities did you visit in other states?

Mr Burmester —We visited 18 in total. I have the list in my folder.

Senator CARR —Would you be able to give me a copy of that because it will save me a lot of time.

Mr Burmester —Yes, I have it.

Senator CARR —Thank you, I appreciate that. Did you choose those universities with any particular criteria?

Mr Burmester —We informed the sector that we would not be visiting all universities this year. We invited all universities, if they wanted us to visit, to indicate that that was their preference. We also looked at a range of issues from the profiles documentation and chose a number of other institutions that we thought would be worth visiting to check on aspects of their documentation and their progress on a number of the issues that were evident from their profiles documentation.

Senator CARR —So it would be fair to say that you actually chose these institutions; they did not choose you?

Mr Burmester —It was a mixture. I think there were five or six who invited us that we probably would not have otherwise visited.

Senator CARR —Which five?

Mr Burmester —I cannot recall that detail off the top of my head.

Senator CARR —Would you take that on notice then?

Mr Burmester —I could take that on notice.

Senator CARR —Would it be true to say that you chose the other 13?

Mr Burmester —I think it was about 13.

Senator CARR —There is 18 here and five chose you, so you chose 13?

Mr Burmester —Five or six chose us.

Senator CARR —Would it be true to say that in all the ones that you selected to attend it was because you felt some concern about financial issues?

Mr Burmester —That was certainly an issue in a number of the ones we visited. Some of the ones that you identified in your opening question about those in deficit were—

Senator CARR —They are all on this list.

Mr Burmester —Yes—but that was not the only criteria. We went to a number of universities for a range of reasons. The ANU, for example, was not one that we went to on the basis of their financial situation.

Senator CARR —Because you were worried about the money. I am pleased to see that because that has not come to the council yet. So clearly the ANU is not one that you are worried about?

Mr Burmester —Not with regard to their financial situation.

Senator CARR —Were there any others that you would put into that category—the Australian National University category?

Mr Burmester —We were not too concerned about the Central Queensland University's financial situation but we were concerned about some matters that have been raised in various Queensland audit reports, concerning their financial management but not their financial situation. I do not think we had a particular issue with the University of Western Sydney's financial situation. Again, if there were several matters then financial matters were raised in those discussions obviously.

Senator CARR —So there may well be 11 institutions on this list that you are a bit worried about.

Dr Shergold —I would not say that was what Mr Burmester said. There are 11 institutions here. In amongst the range of issues that we wish to talk to them about were financial matters. But the fact that we visit them for profile visits is not to suggest that we have concerns that they are in financial difficulty; it is to discuss their finances and financial management and a range of other issues.

Senator CARR —I accept that, but the bulk of these institutions are institutions that have had serious questions raised about their financial standing—not all of them, I agree. But of this 18 well over half have either appeared on the deficit list in the last year or are institutions that you think will have some financial difficulties in the near future.

Dr Shergold —Usually if they are running a deficit, it would be very important for us to talk to the university and find out the reasons for that operating deficit. It would be a matter of course.

Senator CARR —The Victorian institutions were VUT, La Trobe and RMIT. They are the three you are worried about, aren't they?

Mr Burmester —They were the three we visited, yes.

Senator CARR —Is it the case with regard to La Trobe—$7.5 million— that an investment of just over $8 million in the La Trobe University Medical Centre has been written down? Is that the reason they are in trouble?

Mr Burmester —They constructed a medical centre. The way that the state auditor required them to enter that capital investment into their books resulted in, I think, the whole amount of the capital being written into two years and a financial deficit in the current year. I am not sure what the impact is in the following year, but it was a technical variation to their bottom line in that it was explainable by a single treatment of a capital expense.

Senator CARR —Finances must be pretty tight though, Mr Burmester, if in an event such as this—technically it is not a cash loss, given that the university lease grounds to the health centre in return for shares and the loss is revenue foregone—their financial position could be so tenuous that the deficit occurs in these circumstances.

Mr Burmester —I cannot recall the precise details. It had a significant impact on their financial statements from that single aspect. We visited them and we raised with them their financial strategies and their ability to manage their cash flow in future years. We were satisfied with their explanation.

Senator CARR —I also note on page 18 in their annual report it says that round 2 funding—that is, funding for round 2 wage rises worth $2.5 million; they are looking for support from you to the extent of $2.5 million—will help mitigate against downsizing action, which would otherwise be necessary if the one-off grant were not to be included in the normal operating grant. Is that right?

Mr Burmester —From recollection of our discussion with them, they made a similar point, that they would need to fund their pay rises obviously from their revenue sources. The inclusion of funds from the workplace program was obviously part of their planning and therefore they factored it into their figuring.

Senator CARR —Is it fair for me to conclude from that their salary increases, which have already been agreed to, will only come about at the expense of staff cuts, unless there is supplementation forthcoming?

Mr Burmester —I cannot recall whether it was about their current agreement or they were looking forward.

Senator CARR —No, I am afraid this is their published annual report, so surely it is not looking forward.

Mr Burmester —I have not got a copy of the annual report.

Senator CARR —Can you take that on notice for me please, Mr Burmester?

Mr Burmester —Yes.

Senator CARR —My reading of it is that it refers to the salary increases already agreed to, not the current EB round. Take the further example of Newcastle, which is running a deficit in 2001: its operating result consolidated was $4.8 million, the deficit was $5.6 million; in 2002, the consolidated deficit was $8.7 million and the university's deficit overall was $8.3 million. Dr Shergold, would you regard that as an example of strategic deficit?

Dr Shergold —I am not going to comment on individual cases when I do not know the details. Nor will it be appropriate for any of us to talk about the details of the confidential profile discussions that we have had with universities.

Senator CARR —I am talking about published reports, documents that are in the public arena which—

Dr Shergold —I understand that. We will not comment on those reports when we have not analysed them. Nor will we go into the details of what we discussed with the individual universities.

Senator CARR —No. But you are obliged to respond to questions on annual reports, on your triennium reports and speeches that you make, Dr Shergold, which is what I am asking you about. If I look sector wide across 2001, I see there is an operating surplus in the order of $123 million. You described that as healthy. In regard to the operating margin in the universities, in the annual report, you say that the average figure is about 4.6 per cent. Is that right?

Dr Shergold —Which figure is 4.6 per cent?

Senator CARR —The 2001-02 annual report, on pages 51 and 52, gives the operating margin of Australian universities as having reached a 4.6 per cent figure for 2001. That is the annual report, Mr Burmester.

Mr Burmester —Our annual report?

Senator CARR —Yes, the department's annual report. Pages 51 and 52.

Mr Watson —I will just clarify one point.

Senator CARR —Stop at page 52 if you want to have a look at it.

Mr Watson —You indicated that the consolidated operating result across the sector for 2001 was $120-something million.

Senator CARR —$123 million. What is it?

Mr Watson —I have here a figure of $463 million.

Senator CARR —I will have to check the figures on that, but I take it that the 4.6 per cent figure is right?

Mr Watson —I would say so.

Senator CARR —I will have to assume that. How evenly spread is that 4.6 per cent figure? Can you give me a figure for each of the 40 institutions on the HEFA list?

Mr Burmester —We could provide a summary table from their published financial statements.

Senator CARR —Could you do this with regard to Victorian operating results for the Victorian universities for 2001? Do you have that with you?

Mr Burmester —Not with us.

Dr Shergold —So you would like the operating surpluses as a proportion of revenue for the Victorian universities?

Senator CARR —Yes, and I want the rest of the sector as well, but I was interested in the Victorian ones. The 4.6 figure is the average figure, isn't it?

Mr Watson —It is. You are after the operating margin for Victoria in 2001? Deakin 5.06—

Senator CARR —Have you got that in a nice table for me? Can you give that to me?

Mr Watson —I have a nice table. Whether or not I can provide it, I would have to check what other data is on here that may be particular to the universities.

Senator CARR —Could you just run through them? I will not write them down now. You can give me the table when you have doctored it into a state that is fit for me to look at.

Mr Watson —Never! Deakin 5.06; La Trobe -2.67; Monash 3.2; RMIT 1.3; Swinburne 10.6; Ballarat 15.1; Melbourne 9.2; VUT 5.38.

Senator CARR —What was RMIT?

Mr Watson —RMIT was 1.3.

Senator CARR —What is the safe operating margin?

Mr Watson —I do not have that figure. I can check on that.

Senator CARR —It is not 4.6, is it?

Mr Watson —That is the average across the sector.

Senator CARR —That is right. It is not the safe operating margin that you have normally given us. Have you got a triennium report in there?

Mr Watson —No.

Senator CARR —Yes, it is in there. How many Victorian universities are under the safe operating margin at the moment?

Mr Watson —Whether or not they are under a safe operating margin from year to year is not necessarily a good indicator of the financial health of institutions. Any institution, including Commonwealth agencies, can run an operating surplus or deficit from year to year. A better measure is to look at the underlying financial health of organisations, including their total assets, cash and investments, debt borrowings and so forth. Any number of factors can influence an outcome for a particular year, including debt write-downs and so forth.

Senator CARR —But it is an indicator that we use from year to year, isn't it?

Dr Shergold —It is, and I think the trend over time is a crucial benchmark. The fact that the operating surplus as a proportion of revenue has risen—from 3.2 per cent in 1999 to 3.4 per cent in 2000 and then to 4.6 per cent in 2001—is a significant trend line.

Senator CARR —Can you give me that table?

Mr Watson —Sure. I think the other thing to note is that over the past nine years, 17 of the 40 universities have never reported an operating deficit and 11 have reported deficits only once. So 70 per cent have reported one or fewer operating losses over the past nine years. Only four institutions have reported deficits three or more times in nine years.

Senator CARR —Yes.

Mr Watson —It is not exactly an unusual incidence. In terms of the number in deficit in 2001, again that is not unusual because in 1993 there were five; in 1994, two; in 1995, seven; in 1996, three; and in 1997, one. It goes on.

Senator CARR —What I would like to know, though, is whether or not the growth in the sector has actually been uniform or whether the growth in operating surpluses at a couple of key institutions has actually been much more rapid than in the sector as a whole. Can you tell me what the growth in operating surpluses is at the University of Melbourne, the University of New South Wales, the University of Sydney and the University of Queensland? How does that compare with the average?

Mr Watson —I would have to take that on notice.

Senator CARR —Thank you. I also note that the MacKinnon financial benchmarks which were published by DEST indicate that the surplus or deficit percentage of total revenue is an important indicator—they say—of financial health. They indicated a desirable rating of between three per cent and five per cent. What weight do you give to the MacKinnon financial benchmarks?

Dr Shergold —When I look at the financial health of our universities, I look at a range of indicators and I look at those indicators over time. Of course, across 40 institutions there are significant variations between them and, as has been pointed out, the differences between those institutions vary from year to year. It seems to me that when I want to measure the financial health of universities I would like to know about their operating debt, and, as you would be aware from the recent Productivity Commission report, our universities have a lower than average operating debt compared with overseas. I look at net investments over time. You look at net investments in universities over the last five years. You have net investments of $4.6 billion, and yet that has been achieved at a period in which the reserves have actually increased. That seems to me a significant indicator of underlying health.

Senator CARR —That is true. But can you confirm your previous answers to me: that about 23 of the 39 listed universities in the DEST financial statistics had operating deficits below the MacKinnon benchmarks?

Dr Shergold —I would have to take on notice what the MacKinnon benchmark is.

Senator CARR —Would you do that? Can you confirm for me, based on the financial statistics published in 2000, whether or not that is the case?

Dr Shergold —Can you give me the reference to the MacKinnon benchmarks so I know we are using the right thing?

Senator SHERRY —Don't you actually refer to them in your own speech, from memory?

Dr Shergold —I do not think I referred to the MacKinnon benchmarks.

Senator CARR —Didn't you? Are you sure?

Dr Shergold —I am not sure but I do not think so. It may have been in one of the tables.

Senator CARR —Was it one of the papers? That is the context in which it has come to me.

Dr Shergold —Okay. We will have a look and compare ourselves against that benchmark.

Senator CARR —If you could. How are we going, Mr Watson, with that table?

Dr Shergold —We will take it on notice and we will look at it overnight.

Senator CARR —In regard to the reliance on international fee income, I notice that some of the institutions are up to 20 per cent or 25 per cent. Do you think that is a healthy situation?

Dr Shergold —I think one of the remarkable success stories of Australia in the last five to 10 years is the extraordinary growth in the number of international students who want to come and study at Australian universities.

Senator CARR —You said in your speech that you thought the Productivity Commission's perception that dependence on overseas student income is a weakness was amusing or bemusing.

Dr Shergold —Bemusing, not amusing.

Senator CARR —Why did you say that?

Dr Shergold —Because, as I just indicated, I think it is a remarkable success story—the growth in the importance of international education and the number of overseas students who are paying fees to come and study at Australian institutions. I think it speaks very well of the quality of Australian universities and I think it has made a significant positive contribution to the education of Australians to the extent that it has significantly improved the operating revenue of our universities.

Senator CARR —In your speech, Dr Shergold, you indicated—if I recall correctly—that you saw buildings as the chief driver for capital expenditure. How significant do you think IT infrastructure costs are—the capital expenditure for Australian universities at the moment?

Dr Shergold —I would say that they are significant, but I do not have a figure on it.

Senator CARR —Is DEST monitoring IT infrastructure across the sector?

Mr Watson —It is early days in my exposure to the sector, Senator, as you would appreciate, but I have not seen anything that suggests we are monitoring that.

Senator CARR —I do not recall anything either. I am just wondering if I have missed something.

Mr Watson —But I do know from the visits that we have undertaken and from correspondence we have had with the institutions that a number of them are implementing various IT systems associated with student enrolments and data, and so forth, so they are certainly investing in that sort of—

Senator CARR —Certainly investing—those are big words in this context. Have you had any assessment of the Peoplesoft system?

Mr Watson —The Commonwealth, as far as I know, has not done an investigation. I am not sure that it is appropriate for us.

Senator CARR —What about Calysto? Have you any had assessment so far on the effect of the introduction of the profile systems? We have heard a fair bit about the RMIT's problem, but what about Adelaide University's problem?

Mr Burmester —The experience of individual universities with the implementation of new student systems or financial systems has varied quite considerably. There seem to be some trends emerging. Some systems have obviously been major causes of concern in the way that they have been implemented. Overall, the trend is showing that universities that have tried to stick closely to the basic, vanilla model of the system that they have chosen have been quite successful in implementing new systems. Those that have chosen to do significant customisation of a system to get their own product have had more trouble than the others.

Senator CARR —How many universities have had trouble with their computer systems?

Mr Burmester —As I said, it varies across the system.

Senator CARR —Could you take that on notice?

Dr Shergold —I will take that on notice, but I think it is actually quite a doubtful question in the way that you have articulated it. I would like to know an organisation that, at one level or another, over a the course of a year does not have problems with its IT.

Senator CARR —To rephrase that: of which there has been significant expenditure as a result of the failure of the introduction of their—

Dr Shergold —We will see if we have such a figure.

Senator CARR —How many universities have made an application for special assistance, for an advance, on operating grants this year?

Mr Burmester —I am not sure that any have formally sought an advance, although one has raised it as a possibility.

Senator CARR —Is that VUT?

Mr Burmester —No.

Senator CARR —So apart from VUT, there are others?

Mr Burmester —There is one other that has raised it with us as a possibility.

Senator CARR —How long does it take for that process to kick in?

Mr Burmester —The minister would be making decisions on that matter, along with a number of others in time for the preparation for the triennial report by the end of the year.

Senator CARR —Will we know who they are by February or with the early release of that in December?

Mr Burmester —Yes, when the triennial report—

Senator CARR —You are obliged to report them now, aren't you?

Mr Burmester —Yes.

Senator CARR —How many were there last year?

Mr Burmester —I am not sure whether there was one provided last year or the year before that.

Senator CARR —Was that Adelaide University?

Mr Burmester —Yes.

Senator CARR —For Adelaide it was $10 million, wasn't it?

Mr Burmester —Yes, but I am not sure in which year that was provided.

Senator CARR —It is not uncommon these days, is it?

Dr Shergold —For one out of 40?

Senator CARR —How many were there in the previous year?

Mr Burmester —I would have to take that on notice.

Senator CARR —It is not uncommon for at least one a year—perhaps two or three.

Mr Burmester —I would say that is grossly overstating the situation. I would say that it is a rarity that a university seeks an advance.

Senator CARR —If you do get two applications this year, that would be an unusual number.

Mr Burmester —It would be an unusual year.

Senator CARR —I have some issues that I would like to talk to you about in more detail, but I will ask you about some of the smaller issues. Regarding the Crossroads submissions—you read all the submissions thoroughly, did you?

Dr Shergold —I certainly read many of them and I read the summaries of the other submissions.

Senator CARR —Perhaps it is unfair to ask you, personally, but have officers read them?

Dr Shergold —It is no more unfair than many of the questions.

Senator CARR —Then perhaps, Dr Shergold, you can tell me this: what action have you taken in regard to the submission from the Australian National University that has said that the system of research performance indicators in Australia `can be manipulated, is rortable and is rorted'?

Dr Shergold —You will understand that I am not going to answer that question. In the order of 730 submissions were received in response to the Crossroads document and to the six discussion papers. Those submissions are being taken into account in the development of a higher education reform package which, as you will know from the Prime Minister's statement last night, will be considered in the budget context. As well as that, there were a total of 50 focus groups around the country, involving between 700 and 800 participants. All of that contributes to the process of developing policy options. I am not going to respond on any particular comment made by any particular university.

Senator CARR —But if you get one of the great eight universities writing to the government— writing to the minister, effectively—and saying that the `system can be manipulated, is rortable and is rorted', it would be reasonable to expect the department to read the submission and take some action. What action has been taken?

Dr Shergold —It is absolutely reasonable that we would read it. We have. It is absolutely reasonable that we would take account of those views in the preparation of policy advice to the minister, and we have. I am not going to discuss the nature of that advice.

Senator CARR —If I make an allegation that the system—presumably a reputable institution like the Australian National University has—

Dr Shergold —I do not know. I am interested in the conflict of interest situation you must be in in this situation.

Senator CARR —I will tell you what I am doing: I am raising it with you right now.

Dr Shergold —My conflict of interest, or your conflict of interest?

Senator CARR —No. I am raising this matter with you right now. You asked me what I am doing—that is quite clearly the inference in what you have just said to me. I am asking you, Dr Shergold: what action has the department taken with regard to this submission?

Dr Shergold —The action taken on that submission is to take it into account in the preparation of policy advice for the minister.

Senator CARR —So you are just ignoring the claims that—

Dr Shergold —I am absolutely not ignoring the claims. I am not going to talk to you about the way that that submission has been used in the preparation of policy advice, nor would any public servant.

Senator CARR —No. Presumably, if you make it advice to the minister, you do not have to respond at all.

Dr Shergold —The response will be seen in the package that the government develops.

Senator CARR —Do we ask the minister what action he has taken?

Dr Shergold —No. You will see the response to the 730 submissions and the participation of 700 individuals in the government's response in the budget context.

Senator CARR —I note the claim by the minister in the media release of 23 September:

... it is cheaper to study in Australia ... than the United States, the United Kingdom and about the same as in Canada.

What was the basis for that claim?

Dr Shergold —If we cannot answer that now, we will probably be able to answer it tomorrow. I feel confident that we will be able to answer it when we have the international group here tomorrow.

Senator CARR —Would you prefer me to wait for the international group for all of these questions that relate to the cost of study in Australia?

Dr Shergold —No. We may be able to deal with many of them now, but I will take that one on notice. If I can answer it tomorrow, I will.

Senator CARR —Will you want to discuss the IDP study in the same environment?

Dr Shergold —Which IDP study are you referring to?

Senator CARR —The IDP study that goes to the issue of the cost of international students.

Dr Shergold —That is correct.

Senator CARR —We will leave that until tomorrow and deal with it when the officers are here. I can put the rest on notice. Thank you very much.

CHAIR —There being no other questions relating to the higher education group, I thank the officers. We now move to issues relevant to the schools group output 1.1 funding for schools.

Senator CARR —I hope I did not disturb you too much tonight, Messrs Greer, Evans and Thorn. Tell me this, Mr Greer: why have the private school fees gone up so much?

Mr Greer —By how much have they gone up, Senator?

Senator CARR —They have gone up by six to eight per cent. Let me just fill you in on a little background while you are finding your notes. I recall that Dr Kemp, when he was introducing his $24 billion bill, kept telling us how the fees would go down. This was going to be a great boon to parents who send their kiddies to private schools, because they would get cheap private schooling.

CHAIR —Do have a question out of any of this, Senator?

Senator CARR —I am just letting Mr Greer get his notes and helping him out with a bit of background. Dr Kemp kept telling us over and over again how this was going to happen.

CHAIR —I am sure you have a question relating to this.

Senator CARR —I recall asking you a similar question in previous years.

Mr Greer —I noticed in the press in the last couple of days—I think that it was in the Sun Herald and the Melbourne Age—that increases in fees have been reported. As I mentioned last year, fees have actually increased along a continuum. If I can find the article that I remember seeing in the last day or so, I think that the continuum of fee increases that was published was from about 2.6 per cent through to about eight per cent. About 60 percent of the fee increases that were reported were six per cent or lower. This is not inconsistent with the Average Government School Recurrent Costs—supplementation has risen for government schools this year.

Senator CARR —I see. What is the AGSRC—5.7 per cent?

CHAIR —Before you go on, Senator, I think that Mr Evans has a comment to make.

Mr Evans —The AGSRC announced recently was 5.2 per cent.

Senator CARR —5.2 per cent, I am sorry.

Mr Evans —Wesley College, by contrast, has announced fees increases for next year of 2.6 per cent.

Senator CARR —That is right.

Mr Evans —The acting principal, Robert Renton, said that the schools three per cent fee increase—or actually 2.6 per cent—was due to salary increases and equipment costs. He said that the school would also be offering a few more scholarships and bursaries to families.

Senator CARR —That is very generous of them.

Mr Evans —So, at a point where the actual costs of education are identified as having increased by some 5.2 per cent, the fact is that there are schools offering fee increases that are below that. I think that this is an indication of what Dr Kemp was saying a few years ago.

Senator CARR —That is right. But has Halbury gone up by 8.6 per cent? How do you account for that?

Mr Evans —That is an issue that the parents at Halbury can take up with the school. We do not regulate school fees. It is an opportunity for the parents to talk to the school council and talk with the school. This is really an investment in the education of the students at that school.

Senator CARR —Yes, indeed it is. It is a huge public investment, isn't it?

Mr Evans —It is a huge private investment.

Senator CARR —Yes, it is a huge public investment. How much are we spending now? Did you say $18 billion?

Mr Greer —I am sorry—

Senator CARR —In four years, how much is the public contribution from the Commonwealth budget to these schools?

Mr Greer —To what schools?

Senator CARR —To the non-government schools.

Mr Greer —For educating Australian children.

Senator CARR —Yes. What is it? Is it $16 billion or $18 billion that we are talking about? I get my millions and billions mixed up.

Mr Evans —It is just under $16 billion.

Senator CARR —That is a fairly substantial public investment.

CHAIR —Mr Evans, could you tell us how much taxpayers save by people paying fees to these schools as well?

Mr Evans —Of the order of $2 billion to $3 billion a year.

CHAIR —Which we can then plough back into other programs.

Senator CARR —They do. This is great—there are paths of gold there as the result of the generosity of the Commonwealth government!

CHAIR —Do you have any questions, Senator?

Senator CARR —If you talk to any of these schools: Eltham 7.2; Scots 7; Caulfield 6.5; Carey Baptist 6; Morison 6; Ivanhoe Grammar 6—

Mr Greer —I think I have the same list. It then goes Toorak 4; Trinity 4; St Leonards College 4 and Wesley 2.6.

Senator CARR —What do you do? Do you actually talk to them about the fees they are changing or not?

Mr Evans —No. As we indicated, individual schools make individual decisions about the budgets they need for the forthcoming year and the services that they wish to provide at those schools. In the context that, as we have already agreed, the costs of government school education have risen by the order of 5.2 per cent, a fee increase to parents of about six per cent seems to me to be pretty much in line with the cost increases that have occurred.

Senator CARR —Yes, certainly six per cent is above 5.2 per cent. I agree with that.

Mr Evans —In line.

Senator CARR —It is above 5.2 per cent.

Mr Evans —There is a lag effect for the AGSRC. We have discussed that before.

Senator CARR —There is certainly a very big lag effect. As far as you are concerned, it is none of the Commonwealth's business what the fees are.

Mr Evans —This is an announced fee increase. It is up to individual parents to talk with the school council. If they have difficulties, a number of the schools have indicated that parents can talk to the school.

Senator CARR —Fair enough. The Commonwealth is not really a matter that you take up with anybody. It is none of your business really, is it?

Dr Shergold —No, it is not. It is a matter for parents. It is the parents' choice. They will decide whether that is the school to which they wish to send their child.

Senator CARR —Dr Shergold, since you have an interest in this matter, and we mentioned the AGSRC, can you tell us whether or not there is a review under way of the AGSRC as an indexation arrangement?

Mr Evans —We cannot say that there is a review under way. It is a policy issue.

Senator CARR —I see—it is a policy issue. Dr Shergold, I ask you directly: have you indicated to any groups outside government that there is a review under way on the continued use of the AGSRC for indexation for government grants and non-government schools?

Dr Shergold —No, I have not. I have almost certainly, in a number of the speeches which I have given to outside organisations, indicated that one issue that a government would wish to consider is that index.

Senator CARR —I ask you this, Dr Shergold, because obviously I am capably misinformed, and no doubt you can correct me now: did you give an address to the Queensland branch of the Australian College of Educators earlier this year?

Dr Shergold —Yes, I did.

Senator CARR —Was there a request from the chair on this particular matter?

Dr Shergold —What request? Was it a question about the index?

Senator CARR —No, a request for information on the development of the quadrennium funding agreements over the next four years.

Dr Shergold —Was I asked a question on that? I may well have been asked, but I cannot remember whether I was asked a question by the chair. I may well have been. I feel confident that I would have said that that was a matter which, of course, the government would be considering.

Senator CARR —Considering? Is that all you said to them?

Dr Shergold —Yes; that it would be a matter for consideration by government. As you will know, in that speech I mostly looked at the impact on the index on both government and nongovernment school funding and, as the Chair has indicated, explained to that audience—from the government's position—the amount of savings that were made from the expenditure on nongovernment schools.

Senator CARR —At that conference—

Dr Shergold —It was an evening meeting; I do not think it was a conference.

Senator CARR —You did give a speech though, did you not?

Dr Shergold —Yes. I think they have a regular meeting each month, and I was the guest speaker for that month.

Senator CARR —Do you recall being asked a question on this matter?

Dr Shergold —I think I may well have been. In fact, I cannot remember giving a speech to any group where a question was not raised about the index.

Senator CARR —Your evidence to this committee is that you said, `The government is just considering it.'

Dr Shergold —My evidence to this committee is yes, it is a matter for government consideration. I am sure that at that meeting I noted the relative generosity of the index, because I am almost certain that was the meeting in Queensland and I was comparing the Commonwealth's contribution to the state budget with the state government's contribution to the state budget.

Senator CARR —Thank you. I appreciate the point you have made, the way in which you have put it and the generosity that you referred to. Do you think the AGSRC is perhaps too generous?

Dr Shergold —No, I did not say that it was too generous; I said that, relative to the amount of increased funding in the state budgets this year, it was a more generous rate of indexation.

Senator CARR —You are saying that this matter is being considered by government?

Dr Shergold —That is right; it is an ongoing matter for consideration.

Senator CARR —How would you describe that consideration? Would it be fair to describe it as a matter under review?

Dr Shergold —I would describe it as a matter of policy advice to the government.

Senator CARR —Another policy advice to government.

Dr Shergold —Clearly. To the extent that there is or is not discussion within government on any issue, it relates to policy. I am sure you would see that.

Senator CARR —Is the department undertaking any review?

Dr Shergold —What sort of review?

Senator CARR —Of the index.

Dr Shergold —There is constant departmental work on reviewing the index.

Mr Evans —As a matter of course, we have to update the index each year. I know that you have also been a defender of the index, Senator. I think at the last Senate estimates you actually stepped in when there was—

Senator CARR —A `defender of the index': that is an extraordinary description. What I have asked you, I think you have answered very well. I appreciate the way you have pointed out the differences in the parameters within the various programs administered by the department in the indexation arrangements across the portfolio. I think I have also indicated to you that I was interested to see why there was such a discrepancy between them. Has there been any action on that? Has there been any consideration of trying to get any consistency in the department's indexation arrangements?

Mr Evans —The supplementation indexation arrangements vary across all portfolios. There is a feature here that I should mention to you: that is, with the legislation that was passed in the year 2000, it is actually the architecture of the legislation that has changed. For the large amount of general recurrent grants, it is really contingent on the average government school recurrent cost. So there is not necessarily that same or traditional form of indexation that we have had. We are talking about a different method—

Senator CARR —We are. But we are able to say now, aren't we, that there is an automatic level of increase in the basic grant applications?

Mr Evans —For government and for nongovernment schools that reflects the actual costs and expenditure on a per student basis.

Senator CARR —That is right. We could also say now that by 2007[hyphen]08 the Commonwealth will be spending more money on the Catholic education system than it will be on the university system. Is that right?

Mr Evans —I do not have a figure like that in front of me.

Senator CARR —Could you take that on notice for me? I do not think I have that formally.

Dr Shergold —I do not see how we can. I cannot hypothesise what the government will be spending on the higher education system in 2007[hyphen]08.

Senator CARR —But you can on the basis of the current application of the—

Mr Evans —The forward estimates do not go out that far for higher education.

Senator CARR —No, they do not, but you can calculate the figure, based on the current indexation arrangements.

Mr Evans —As Dr Shergold says, the higher education figures do not go out that far.

Dr Shergold —I am happy to do it to the point at which forward estimates conclude.

Senator CARR —You do what you can, Dr Shergold. I think I have made my point about that. With the university system as a whole, at what point is there a crossover with expenditure on the nongovernment school sector and expenditure on universities?

Mr Evans —I do not know have that figure or calculation in front of me. There is another issue there, though. I am not as familiar with the higher education sector and I would have to know what is happening with enrolments. As you know, in the nongovernment sector and the Catholic sector, there are enrolment increases and that influences expenditure.

Senator CARR —Indeed. But on the current settings you can give me a figure, can't you?

Mr Evans —I could attempt to do that.

Senator CARR —Thank you very much. I would appreciate it if you could. With the department's retabulation of these indexation arrangements, are you able to tell me whether any policy options are being considered?

Mr Evans —No.

Senator CARR —So are you saying to me that the only thing you are doing at the moment is examining the operation of the current index?

Mr Evans —No, I did not say that we were examining the current index. We are saying that—I think Dr Shergold said it—at any time these issues are a matter that we advise ministers on. The index has been around on an annual basis for a number of years.

Senator CARR —It does not matter how long it has been around. Are you examining any other alternative indexation arrangements?

Dr Shergold —By answering that question, it goes to the nature of policy advice. If we say yes or no, it is giving you an indication of the policy advice that is being developed.

Mr Evans —I can say that—this is a calculation that I have done for you in the past—if you compare AGSRC between 1996 and 2001, we are talking about a 36.86 per cent increase compared to, say, 14.24 under CPI. So we do make comparisons and that is the nature of how we advise ministers.

Senator CARR —One thing that does interest me though is the way in which recent media releases have been presented by the government. I understand that up until recently you were claiming 5.7 per cent as the AGSRC figure, were you not?

Mr Evans —We were. That is the best projection that we have. On the basis of the final MCEETYA figures that came through, the actual supplementation that was paid for this year was 5.2 per cent. So, as a matter of course, we have had to revise our estimates—which we do at this time of the year, anyway—in terms of supplementation effects and also enrolment effects.

Senator CARR —Has that changed the appropriations at all?

Mr Evans —It is a standing appropriation, and so it is open-ended. It is based on an entitlement on a per capita basis and the numbers of students that are in each of the sectors.

Senator CARR —But the minister's media release—I do not seem to have a date for it—claimed that there was a 5.7 per cent increase, which was higher than the states and territories. Do you know the document I am referring to?

Mr Evans —I know the document. That first came out very close to May, as and when each of the state budgets came down. I think it was portrayed in the form of a blackboard.

Senator CARR —How did you reach your conclusion that the Commonwealth was funding schools at higher than state and territory increases?

Mr Evans —Through analysis of state budget papers.

Senator CARR —I must say that, when we have asked you questions about this, you have always told us that you could not do this sort of analysis.

Mr Evans —I think I have done it for the last couple of years.

Senator CARR —This is a new found skill you have developed, is it, Mr Evans? How do you reconcile the department's answer on question No. Q198 that $120 million of the $127 million increase in government funding is the effect of indexation and supplementation to Commonwealth general recurrent grants?

Mr Evans —Did you say 198?

Senator CARR —Yes, 198. On page 4 there is a table. At the top it says that parameter adjustment supplementation was $120 million. Am I right about that or not?

Mr Greer —Yes, that is correct, for government schools.

Senator CARR —Is that right?

Mr Evans —Actually, there are some ups and there are some downs in this.

Senator CARR —Are there some lumpy bits that we need to flatten out?

Mr Evans —As I indicated to you, the supplementation is 5.2 per cent. The amount of increase of supplementation this year will be in aggregate $275 million. The supplementation for government schools will be $86 million. The supplementation for non-government schools will be $243 million. Could I just correct those figures: the actual supplementation will be $88 million for government, $187 million for non-government, and there are some enrolment changes as well, with an extra $54 million on enrolment increases.

Senator CARR —This is all a bit difficult for me to follow at this time of night. Would you mind revising the answer for me, as you obviously need to?

Mr Greer —We can update that answer.

Senator CARR —I appreciate the point you are making, but I would like to talk to you about the document you have actually given me.

Mr Evans —The document we have given you is a document that was produced when the projection—

Senator CARR —Yes, but I am not going to argue the toss about 5.7 per cent or 5.2 per cent. That is not the point I am trying to make. My point goes to the issue of you issuing a press release making claims which do not appear to add up with the figures that you had given me to that point.

Mr Evans —At the time that the media release came out they were the best projections and estimates that we had.

Senator CARR —Mr Evans, you are confusing—

Mr Evans —No, I am not confusing things. If I could be allowed to elaborate: in the context of changes with supplementation and changes with enrolments, the overall change in the bottom line across some $6 billion worth of programs was $19 million. That $19 million, in the context of $6[half ] billion, is relatively minor. I am saying that overall there has not been a significant change.

Senator CARR —Good, so you will not have any trouble following my questions.

Mr Evans —No.

Senator CARR —You are saying that the figure was $120 million of the $127 million increase in government funding based on the data you gave me at the time. Is that right?

Mr Evans —I will update that table for you.

Senator CARR —But on the basis of the press release you put out, the figure was $120 million of $127 million.

Mr Evans —That is right.

Senator CARR —Is it not the case that indexation is based on state and territory expenditure as part of that calculation to reach the AGSRC?

Mr Evans —It is, and there is a lag effect and then, in addition to that, the Commonwealth provides, on an annual basis, grants over and above the supplementation that occurs.

Senator CARR —What is the impact of the lag effect?

Mr Evans —The effect of the lag effect is that we are actually supplementing this year, based on the difference between 1999-2000 and 2000-01. In addition to that, in this year's budget we provide budget decisions that are added on top of the supplementation.

Senator CARR —What is the effect of this lag? How much is it?

Mr Evans —It is not a question of how much. It is basically the movement in a state budget going back two years ago.

Senator CARR —The point I am trying to make is that, while you are claiming these things about the level of Commonwealth funding versus state funding based on state government budgetary figures, I am having a bit of trouble following how it is that you can claim that the Commonwealth funding has actually increased at a higher rate than that of the states and territories when they are essentially tied together.

Mr Evans —As I am trying to explain, we use the states' expenditure as a basis of supplementation. In addition, any Commonwealth budget decisions add over and above that. So, of its nature, it has to be of a higher level order.

Senator CARR —Thank you. I turn to the detail of 198. I am seeking a bit of clarification on some of these answers. You are saying that 198 is an increase of $16.7 million for the Quality Teacher Program. What was the quality teacher program expenditure in the previous year?

Mr Greer —I will check. We do not seem to have the specific figure. I thought we may have provided that for you last time around, but I have just looked at the questions and it did not go to that level of detail. We can certainly get that for you.

Senator CARR —Was that program a rollover from the previous year?

Mr Greer —No, it was not a rollover as such. It was a lapsing program in respect of which the government took a conscious decision to continue that program, so it is not right to characterise it as a rollover.

Senator CARR —I appreciate that. Was the figure an increase? Was there indexation in there at all? Was the figure for the previous year $16.7 million?

Mr Greer —I will find the detail in a minute, but my understanding is that the budget decision was an increase of something like $82.3 million or $82.4 million between 2002-03 out to 2005, recognising that there is a tail in the current program of about $14 million or $15 million which runs through to the end of June 2003 and the $16 million which was coming on in this fiscal year flattened out—

Senator CARR —I get the point. Was there any increase between 2001 and 2002? You have just indicated to me that the tail went through to 2003, so I can presume from that answer that the answer is no.

Mr Greer —I think the original allocation—I will get this checked—of the QTP was about $74 million.

Senator CARR —Yes, that is right, but in 2001 was the figure $16.7 million?

Mr Greer —I do not think we have that figure here, but we can quickly check that for you.

Senator CARR —From what you told me, it seems to be logical that it was.

Mr Greer —From memory, the program got off to a slower than expected start and we did in fact carry forward six months funding from the end of 2002 into 2003.

Senator CARR —I appreciate that. You keep talking about 2003. I am asking about 2001 and 2002. My proposition to you is that the figure of $16.7 million is consistent for both years. Therefore, Mr Evans, I ask why it is that you put into your answer the word `new' when in fact it was not new.

Mr Evans —It was new in the sense that it was a lapsing program.

Senator CARR —It was a lapsing program, but there was no new money involved. Would you agree?

Mr Evans —It is new money. There was an election commitment to the program up to a particular point. The government made a budget decision to provide an additional $82 million that Mr Greer talked about. So that $16.7 million is new money.

Senator CARR —It happens to be the same amount of money as the previous year.

Mr Evans —But it was a conscious decision the government took in the budget to actually continue a lapsing program.

Senator CARR —Okay. This is going to get us a long way. What troubles me about that—

Mr Greer —I have found those figures for you. In 2000-01 there was $30.6 million and in 2001-02 it was $31.1 million. In 2002-03 the tail of the original program was $15.1 million. With the government's decision to not lapse the program, there was $82.4 million compared to the previous $76.8 million. That will flow on the basis of $16.8 million in 2002-03, $32.5 million in 2003-04 and $33.1 million in 2004-05.

Senator CARR —Thank you very much, Mr Greer. I will turn now to the $2.8 million for the humanitarian elements of the ESL program which is referred to in the same set of tables. That is for intensive English language courses and for increases in new arrivals; is that right?

Mr Evans —That is right.

Senator CARR —It is actually not for existing students, is it?

Mr Evans —No, Senator.

Senator CARR —It is for students coming in from overseas. I am trying to identify where all this new money is coming from for the school system. We will go on to look at the breakdown of the $5 million in the `other' category which is listed on that table. Do you see that figure of $5 million for `other'?

Mr Evans —Yes, I see that.

Senator CARR —Can you tell me how much of that is for government schools?

Mr Evans —I think, because of the heading at the top of the page, it is all for government schools.

Senator CARR —So there is no money there for any non-government schools at all?

Mr Greer —That is on page 6 of 198.

Senator CARR —Is that a separate category again?

Mr Greer —No. I thought your question—

Senator CARR —I am just asking you if the $5 million is only for government schools. Is that the point you are trying to make?

Mr Greer —Yes. The same presentation for government schools is reflected on page 6.

Senator CARR —To make a similar point, how much of the money is for assistance to isolated students?

Mr Evans —There was nothing in that budget in that year to increase it. Decisions were taken in earlier years for isolated students.

Senator CARR —I agree, but how much of the `other' $5 million goes to assistance for isolated students?

Mr Evans —I would have to take that on notice.

Senator CARR —How much of that would be spent on non-government boarding school expenses?

Mr Evans —We do not spend money on non-government boarding expenses.

Senator CARR —What about assistance to isolated children? Do you provide assistance to isolated children?

Mr Greer —Yes, we do.

Senator CARR —Do you tell them where they have to spend their money? Can they spend their money in non-government boarding schools?

Mr Thorn —One of the allowances under the Assistance for Isolated Children Scheme is a boarding allowance. An amount of money is paid to the families of children who meet the distance criteria for the receipt of the allowance. They get some funding if their kids attend boarding schools.

Senator CARR —So part of that $5 million could be used for that purpose?

Mr Evans —That $5 million is for government schools.

Senator CARR —Only government schools?

Mr Evans —Correct.

Senator CARR —No money goes to assistance for isolated children in that category?

Mr Greer —If you look at the mirror table in respect of non-government schools, the `other' decreased by 8.2.

Senator CARR —I will ask again: none of that money would go to isolated students?

Mr Greer —I think Mr Evans has indicated that he will take that on notice and will confirm the figure for you.

Mr Evans —We will unpack the $5 million for you.

Senator CARR —Thank you very much. I appreciate that. I want to go through all of these figures. I am a bit concerned about the $16.7 million. I am wondering what the real impact is of these percentage increases that you have referred to. The $120 million, on the figures you have given me, is for indexation. The net change for indexation is about $10 million overall. There is $5 million for `other' and we are not quite certain how that breaks down. Is there any money there for student assistance? Is there any money at all?

Mr Greer —Student assistance in what sense?

Senator CARR —Is any of that calculation for students in the `other' category, for instance, for funding for Abstudy?

Mr Greer —I do not think there would be any funding there for Abstudy.

Mr Evans —I do not believe so.

Senator CARR —You will establish that.

Mr Evans —I think we have agreed to update that table for you, so we will cover that in a footnote to the updated table.

Senator CARR —I am a bit concerned about the accuracy of the table, as you might have gathered. If you actually look at the table, `Increase the Quality Teacher Program' is an extension of the program and not necessarily an increase—

Mr Evans —It is an increase, because it was a decision to extend a lapsing program.

Senator CARR —Does the table include the effect of the government's decision to terminate the NALSAS program? Shouldn't that be part of it as well?

Mr Greer —That is there. I thought it was quite explicit on page 4—`Cessation of NALSAS', minus 21.2.

Senator CARR —Show me that.

Mr Evans —Just beneath the 16.7 in the government schools one you will see, for example, the total shows `Cessation of NALSAS'—in the answer to B.

Senator CARR —I see, minus 21, right. Should that also be for non-government schools? Where do I find that in the non-government school table?

Mr Greer —That was on page 6 of the answer to question No. 198.

Senator CARR —Show me where I can see the NALSAS figure in there?

Mr Greer —It may be in the unpacking of the `other'.

Senator CARR —If these figures are included, does it not change the total increase for the non-government school sector? I understand the non-government school sector received about $9 million from the NALSAS program; was that right?

Mr Evans —The reason we have an `other' is that there are ups and downs. We will unpack it and provide you with the details.

Senator CARR —It is just that the `other' division here is only $8 million. I am just wondering where the NALSAS stuff has gone; it is not there. I ask you again: if we look at that `other' figure, does that include student assistance in regard to isolated children, Abstudy, Austudy, reduction in estimates for establishment grants? Are any of those figures included in the table?

Mr Greer —I am not sure if we can add much more to what we have undertaken to do for you, and that was to relook at the table in the context of current supplementation.

Senator CARR —Okay, you will update the figures. Can you also tell me, while you are doing that, Mr Evans, why there is not a consistent footnote on IESIP in the non-government school sector as well as the government school sector? After you have recalculated these things, come back to us with an answer that will give us the impact on the net effect per student if we were to examine the issue of enrolment change—that is existing students; we need to actually look at the existing students—and the increase in ESL for new arrivals, because I presume that is money in advance before they get here. Is that right?

Mr Evans —No, that is money that is spent on them when they are here.

Senator CARR —Also the Quality Teacher Program and NALSAS. I am wondering whether these affect your calculations at all.

Mr Evans —I am struggling to understand the calculation you would like me to make.

Senator CARR —I am trying to get an accurate table. I do not think I have got one.

Mr Evans —I am happy to update the table.

Senator CARR —While you are doing it, you can update it based on the comments I have made as well. Also, see if you can find out the net change per student after indexation for government schools. Could you do that?

Mr Greer —Sure.

Senator CARR —Would you also include in that the net change for non-government schools after indexation and the net change per student?

Mr Greer —Certainly.

Senator CARR —Thank you very much. I turn now to the issue of the NALSAS—National Asian Languages and Studies in Australian Schools—Strategy. What was the basis for the decision to cease this program?

Mr Greer —You may recall that in the 1999 budget the government announced the extension of Commonwealth funding for NALSAS for a further three years, and that brought the total number of funded years to eight. On page 62 of the 1999-2000 Budget Paper No. 2, it clearly shows that the commitment was for $30 million annually until the end of 2002. The 1999-2000 portfolio budget statement—PBS—also reflects that the Commonwealth commitment was for three years, 1999 until 2002, and that stated, also quite clearly, by which time it should have become self-sustaining. The former minister's budget press release on 11 May 1999 clearly gave a commitment of funds for three years.

Senator CARR —Thank you, Mr Greer. That is the position that has been put in recent times by government spokespersons, but I wonder if we could go back to the original report prepared for the Council of Australian Governments Working Group on Asian Languages and Cultures. How long did that report specify that the program would run for?

Mr Greer —My understanding is that at that time there was some expectation that it may run for 12 years.

Senator CARR —Can you remind me of the date from which the 12 years would run?

Mr Greer —I think it was from 1994 to 2006.

Senator CARR —Yes, that is what it said. On page 9 the report, and I have an extract of it in front of me, did specify 2006 and the communique, which you agreed also said that, said that the implementation of the comprehensive Asian language and cultures program was contained in the report, which was actually based on that date. Would you agree with that?

Mr Greer —I do not have the communique here. What I have indicated is that the government made a decision, in the context of the 1999 budget, that the program, from the Commonwealth's perspective, would run for a further three years from 1999, bringing the total number of years funded by the Commonwealth to eight.

Senator CARR —I understand the point of view you put. I am just putting to you now, though, that the original communique on which the program was based, which the Commonwealth signed up to, was that the program should run to 2006. I would ask you, if you cannot at this point recall, to take these questions on notice. Can you produce a copy of the COAG communique which established the program? Can you confirm that that communique was an endorsement of the implementation of the program based on the Asian languages and Australia's economic future report prepared for the Council of Australian Governments on the proposed National Asian Languages and Studies in Australian Schools strategy of February 1994? Did that report clearly specify that the program should run till 2006?

Mr Greer —I will take those on notice.

Senator CARR —Has the department or the minister been advised that the Chief of the Australian Defence Force, Peter Cosgrove, has said that Asian language studies are vital to Australia's future security and that an Asian language skill is vital for on the ground activities in East Timor?

Mr Greer —I understand that General Cosgrove did address a conference on languages for principals who were assembled to consider the issue of languages other than English. I do not recall whether he was specifically talking about NALSAS or all languages other than English, but the conference that he addressed earlier this year was a conference on LOTE.

Senator CARR —Can you confirm for me whether or not those statements were true and whether or not the minister has been made aware of them?

Mr Greer —Certainly.

Senator CARR —There have been two separate evaluation reports that have confirmed the success of the program and have argued for its continuation. The most recent of those reports was completed in January this year and it argued that, if funding for the program were to be stopped now, previous investment by the government would be wasted. Is that true?

Mr Greer —There was a mid-term evaluation or a program evaluation undertaken earlier this year. That was undertaken on the recommendation, I understand, of the NALSAS steering committee and was agreed to by the then minister.

Senator CARR —Was it the case that the 2002 report found that if investment was stopped the previous investment by government would be wasted? Was that agreed to by the minister as well?

Mr Greer —I am not sure whether that form of words was expressly in there.

Senator CARR —Could you take that on notice and confirm it for me?

Mr Greer —I understand that the report did say that it is also reasonable to ask whether after nearly eight years of funding there are compelling reasons why further funding should be contemplated or, indeed, should be necessary. But I will check and see if that other quote was in there.

Senator CARR —Thank you. Did the 1998 evaluation of NALSAS find that Asian language studies was a national priority and recommend the strategy continue until 2006, which was accepted by the minister at the time?

Mr Greer —My expectation is that the 1998 evaluation was probably used to inform the decision of the government in 1999 to continue NALSAS funding for a further three years.

Senator CARR —But didn't that study actually recommend that it be funded to 2006?

Mr Greer —Studies may recommend, Senator, but—

Senator CARR —I thought you said the minister had accepted that report.

Mr Greer —No, I thought I said the minister accepted the recommendation of the NALSAS steering committee to commission a review—the review that was completed earlier this year.

Senator CARR —Is the government seeking to actually transfer responsibility for the teaching of Asian languages to the states?

Mr Greer —As I mentioned, in the 1999-2000 portfolio budget papers there was a clear statement that the Commonwealth's commitment for NALSAS was for three years from 1999 until 2001, and there was a statement in that that by that time it should have become self-sustaining.

Senator CARR —Is it the intention of the Commonwealth that this responsibility be transferred to the states?

Mr Greer —It should be a self-sustaining program. There is an opportunity for states to continue to fund if—

Mr Evans —Senator, you referred to the communique. The communique about NALSAS was taken well before the new tax system came into place, well before the states had access to new sources of growth funds. There are some issues there about new federalism, and issues about who should fund what.

Senator CARR —I suppose that is an approach that, Mr Evans, you will take in all Commonwealth programs in your responsibility?

Mr Evans —No. I just take it in the context of looking at how much the Commonwealth is putting into government schools compared to the states.

Senator CARR —Yes, sure. When do the states actually get this money from the GST?

Mr Evans —Queensland has actually announced that it is going to be expanding its expenditure on schools because of that money. I know that Premier Beattie—

Senator CARR —When do they get the money?

Mr Evans —I think they have already got it.

Senator CARR —They have actually got money already?

Mr Evans —Correct.

Senator CARR —Okay. Tell me this: when was the announcement of the review of foreign languages? Is there not a ministerial review announced in that area?

Mr Greer —Yes. I think that announcement was earlier this year or the middle of this year. I think it was around May, but I can confirm that for you.

Senator CARR —That was after the decision was taken to axe the NALSAS program, wasn't it?

Mr Greer —The decision not to continue the NALSAS program beyond 2002 was a decision taken in 1999, in the 1999 budget context. So, yes, it was.

Senator CARR —It is just unusual, is it not, to stop a program and announce a review into it?

Mr Greer —No, the review is into the Languages Other than English program, the LOTE program, which in addition to the NALSAS program is an additional $20 million a year provided to education authorities to support languages generally, and that includes Asian languages.

Senator CARR —When will the review report?

Mr Greer —My understanding is the report should be available by the end of this year.

Senator CARR —Will that be available to the committee?

Mr Greer —That will be a report to the minister. An expectation is that the report would be available.

Senator CARR —The end of the year; that is a long time away. You can take it as read that I have asked for a copy of the report.

Mr Greer —When it becomes available.

Senator CARR —Of course. I would not expect you to give me a pre-publication release, although I would be only too grateful to receive one. Can I ask you about the Kooralbyn International School in Queensland. Do you know about that school—the one that went belly-up?

Mr Greer —Yes, I do. I do not think I have a briefing on it. I had a briefing on it last time. Mr Evans might have a briefing on it. From memory, it was a school that took both international students and—

Senator CARR —That is right. It was outside the ESOS provisions. They were in receipt of recurrent funding, were they not?

Mr Greer —For domestic students.

Senator CARR —How much were they getting?

Mr Evans —As Mr Greer said, we had a briefing on that for the previous estimates. If you would like—

Senator CARR —Do you want to ensure that the officers who will be here tomorrow are briefed? Perhaps I will come back to it.

Mr Greer —Certainly.

Senator CARR —I am particularly interested to know whether any money was paid to the Queensland government to facilitate transfer of students.

Mr Evans —No, I do not believe so.

Senator CARR —Do you have any indication of the cost to the Queensland government of transferring those international students? There were 116, if I recall rightly.

Mr Evans —I would have to come back to you on that aspect. I have not heard of a cost—

Mr Greer —Our International Division colleagues may know.

Senator CARR —Sure. Given that there is clearly a weakness in the ESOS Act in regard to schools in receipt of recurrent funding being outside the tuition assurance arrangements, have you undertaken any discussions about filling that gap?

Mr Evans —I would need to take that on notice, Senator. I am not familiar with the detail of that distribution.

Senator CARR —Is that a matter for the International Division as well?

Mr Evans —It might be, although they would need to talk to us about it as well.

Senator CARR —Exactly. That is why I am asking you, because I will ask them as well. I would like to know what options you think are available to fill that gap.

Mr Greer —Certainly.

Senator CARR —This is advice to the committee, not to the minister, so you will not have any trouble answering the question.

I am a bit confused about your updates for that table, Mr Evans. There were two figures being used—$120 million and $88 million—in terms of your adjustments for the AGSRC. That is a remarkable gap. Can you explain to me how it is that there was such a gap in those figures?

Mr Evans —It is impacted on by changes in enrolments, compounding with changes in supplementation. So if you have slightly fewer students there, the supplementation impact is on a smaller base. I will come back to you with a sufficient explanation.

Senator CARR —I think it is a big gap—$88 million to $120 million. Thank you very much. I will put the rest of the questions on notice.

CHAIR —Thank you, Senator. The committee stands adjourned until 9 o'clock tomorrow morning.