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EMPLOYMENT, WORKPLACE RELATIONS, SMALL BUSINESS AND EDUCATION LEGISLATION COMMITTEE
EDUCATION, TRAINING AND YOUTH AFFAIRS PORTFOLIO
- Committee Name
EMPLOYMENT, WORKPLACE RELATIONS, SMALL BUSINESS AND EDUCATION LEGISLATION COMMITTEE
EDUCATION, TRAINING AND YOUTH AFFAIRS PORTFOLIO
CHAIR (Senator Ferris)
CHAIR (Senator Tierney)
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EMPLOYMENT, WORKPLACE RELATIONS, SMALL BUSINESS AND EDUCATION LEGISLATION COMMITTEE
(SENATE-Wednesday, 31 May 2000)
- Start of Business
EDUCATION, TRAINING AND YOUTH AFFAIRS PORTFOLIO
CHAIR (Senator Tierney)
CHAIR (Senator Ferris)
Outcome 2—Training Youth Division and ANTA outputs
- Output 2.1—Infrastructure funding for the post-compulsory education system
- Output Group 2.2—New Apprenticeships
- Output Group 2.4—Opportunities for the active engagement of young people with community activities
- Output Group 1.2—Assistance for school students with special needs
- Output Group 1.2--Assistance for school students with special needs
Content WindowEMPLOYMENT, WORKPLACE RELATIONS, SMALL BUSINESS AND EDUCATION LEGISLATION COMMITTEE - 31/05/2000 - EDUCATION, TRAINING AND YOUTH AFFAIRS PORTFOLIO
CHAIR (Senator Ferris)
—Good morning. Today we continue the consideration of budget estimates. We will commence the Education, Training and Youth Affairs portfolio. The committee will be working directly from the portfolio budget statements 2000-01. The committee has agreed to meet from 9 a.m. until completion, or 11 p.m, whichever is the earlier. I remind colleagues that the Finance and Public Administration Legislation Committee is continuing to monitor the format and contents of the portfolio budget statements. As we go through the documents, if you have any comments you wish to make about these documents, please place them on the public record during these estimates hearings, or direct them at a later stage to the committee.
We are required to report to the Senate by 22 June 2000. The committee has fixed 24 July 2000 as the date for the submission by the department and agencies of written answers to questions on notice. I remind participants that all oral evidence and documents in estimates proceedings are part of the public record. The committee requests that all mobile phones be turned off or left in the waiting room during the hearing. I thank you for your cooperation in that.
I now welcome the Hon. Senator Chris Ellison, the Minister representing the Minister for Education, Training and Youth Affairs. I also welcome the Secretary of the department, Mr Steve Sedgwick, and officers from the Department of Education, Training and Youth Affairs and the related agencies. Minister, did you want to make an opening statement?
Senator Ellison —Thank you, Madam Chair. I want to confirm that the officers concerned with the schools section will not be needed before the dinner break. However, if we do make progress we can get them back over here. They are now free to be released. I thank the committee for that cooperation. Apart from that, I have no opening statement.
Senator CARR —Thank you to the officers for appearing today. The first question I would like to turn to, Mr Sedgwick, concerns the issue of the 12 interim answers awaiting further developments from you. Can you indicate to the committee at this point if there has been any progress on the 12 outstanding answers to questions that have been lodged with us on the basis of interim answers?
Mr Sedgwick —Our practice is that we will provide you answers as soon as they are available. There are 12 interims—I have just had that confirmed—that are in here at the moment. Some of them are awaiting data that will take some time to get. Others we expect to be able to progress reasonably easily. There is no consistent pattern to them.
Senator CARR —Are there any further questions that you could respond to at this point?
Mr Sedgwick —We have answered every question that we can. There was one set that went through last evening. So there is one set of answers that is in train. Apart from that we have given you every answer we have got.
Senator CARR —So there is one that has been lodged with the secretariat, is there?
Mr Sedgwick —It is on its way.
Senator CARR —I look forward to that, and I am sure the secretariat will let me know as soon as that arrives. My second question goes to the answer to E497, which was listed for 4 May. That was an answer to a question concerning the listing of programs and projects for which funding will be discontinued in the forthcoming budget. You have indicated a number here that have no ongoing funding arrangement as far as I can see: Full Service Schools; Women in Small Business; the Advanced English for Migrants Program and Literacy and Numeracy Program; endowments for the Sir Robert Menzies Centre for Australian Studies; the Centre for Australian Studies and New Zealand Studies at Washington. You go on to say that it is not possible to provide a list of projects for which funding will be discontinued in the 2000-01 year. Can I ask why?
—This is in respect of specific projects under particular programs and such a list would not be easy to compile at this stage. Whether some projects would be continued or not will be dependent on their progress, and all those kinds of matters. Frankly, the spirit of the question that you asked was about programs. We have been more than unusually forthcoming in alluding to particular projects that may or may not continue to be funded. It would be a large amount of work to answer that question.
Senator CARR —Is it the case that you have suggested to me some of these projects—why not the whole lot?
Mr Sedgwick —It is a bit like asking how long is a piece of string. To look at the number of projects under every program the department runs and provide an individualised assessment of whether or not that project is terminating or may be continuing subject to a decision that is yet to be taken is a large amount of work. And it is not an amount of work that was justified in answering your question.
Senator CARR —The department feels that it does not have to answer the question so it is not going to. Is that what it boils down to, Mr Sedgwick?
Mr Sedgwick —You asked us a question about programs and we answered your question in respect of programs. If you ask us a question in respect of projects, I suspect that we would find it difficult to be able to answer your question because the volume of material that would be required is so large. You did ask for this answer in 10 days.
Senator CARR —I appreciate that. So I will ask you again: is it possible now to provide advice on the discontinuation of projects, given the fact that you have raised the issue of projects in the answer to me.
Mr Sedgwick —I will look at that question for you and take it on notice.
Senator CARR —Thank you.
Mr Sedgwick —My instinct, just to be honest with you, is that the amount of work involved is larger than we would feel comfortable with devoting the resources to supplying you the answer. But I will look at that for you.
Senator CARR —I look forward to your answer, Mr Sedgwick.
Mr Sedgwick —Is there a particular program that you would be interested in?
Senator CARR —No, I am interested to know. I read the budget papers and I, for one, find them particularly opaque. I do not believe they reflect clearly and precisely the activities of the department. Therefore, I require additional information to ascertain what activities the department is planning with what appear to be with considerable sums of money.
Mr Sedgwick —A project can be something as simple as a small-scale research project that is being undertaken.
CHAIR —Mr Sedgwick has indicated he will try to answer your question.
Senator CARR —I am sure he will. Perhaps I can clarify it then: major projects. There is a reasonable point to be made that every minor project, every research project that is being funded at the moment that will not be funded next year, may not necessarily be of great public moment, but for the major projects I do think it is important for us to establish what funding expectations there are. We will go through the proceedings over the next couple of days and I think it will become clear that there are a number of major projects that do not have an allocation in the forward estimates.
Mr Sedgwick —We can work that through.
—That is why I ask the question and I would like to establish what the departmental view is. In the minister's press release of 9 May which concerns a range of budgetary issues, there was a statement that the budget provides $1.7 billion for vocational education and training. Presumably someone in the department has worked out this figure by adding up all the components. Would that be correct, Mr Sedgwick?
Mr Sedgwick —If you want to go through the detail of a particular number you might be better advised to do it when the subject matter experts are here, unless my colleague Mr Watson has something that he wishes to say.
Mr Watson —The $1.7 billion represents the addition of the ETYA—education, training and youth affairs—components of the vocational and other education function from Budget Paper No. 1. Specifically, table A4, page 6 to 81, `Estimates of the Commonwealth general government expenses by function and sub-function,' of $1,061 million; the vocational and industry training from page 6 to 83, of the same table, of $436 million; and the elements of the labour market assistance to job seekers and industry function, also from the same table, that relate to the Education, Training and Youth Affairs portfolio, of $207 million.
Senator CARR —Thank you, Mr Watson. I presume you have that in a table format with you now?
Mr Watson —No, it is not in table format.
Senator CARR —If you have it in a format so I could follow it here it would expedite the work of the committee. Is there any reason why I cannot have a copy of that particular brief you have read out now?
Mr Watson —I would have to look at what else is on the particular page, but there is no reason why I cannot give you what I have just read out.
Senator CARR —As soon as possible would be appreciated.
Mr Watson —Sure.
Senator CARR —If the information did exist in that way, why couldn't the minister have announced that detail in total?
Mr Sedgwick —I am not sure that I follow.
Senator CARR —It is not confidential. The information clearly exists. It is a figure that is used year in, year out by the minister—$1.6 billion, $1.7 billion—but it does not appear in a consolidated form in the PBSs. I am wondering why it could not be the case that that information is released in a more coherent way when the minister announces these grand totals.
Mr Sedgwick —There are a number of different ways to present the budget figures. We have presented in the portfolio budget statements the figures in the context of the government's outcomes and outputs framework. In that context the numbers are presented in a particular format in a particular way. In other parts of the budget statements the figures are presented on a functional basis. This is simply the minister identifying some numbers that he wishes to highlight out of that broad range of estimates. It is just different ways of looking at the numbers.
—I raise these issues with you because I want to indicate to the committee that I am totally dissatisfied with the presentation of the budget estimates in this PBS. I will go through and demonstrate that again and again. I read, for instance, on page 7 of the PBS about this convention adopted to account for the GST in these estimates. For the benefit of the committee, can you take us through what effect this has on the useful comparisons between the 1999-2000 expenditure and the estimates for the outlying years?
Mr Sedgwick —I cannot, but I am sure one of my experts will.
Mr Watson —I was trying to get my PBS at the time and I missed the question. It relates to page 7. I got that much.
Senator CARR —Page 7 of the PBS refers to the conventions adopted to account for the GST in these estimates. For the benefit of the committee can you take us through, in a useful way, the comparisons between the 1999-2000 expenditure and the estimates for the outlying years?
Mr Sedgwick —They should have been done on the same basis.
Mr Watson —All the figures are done on a net GST basis within the budget documentation.
Senator CARR —So you are saying they are all comparable?
Mr Watson —They are all comparable in that they are net GST. The only impact that you would find is in the financial statements and cashflows. Because of the way the agencies can claim back the GST and the input tax credits from the tax office, there is a cashflow implication because we have to outlay cash which is inclusive of the GST, but then we claim that back through the tax office. So there could be a month or two cashflow issue for the department, which is being attended to by the Department of Finance and Administration at the moment in terms of having annotated appropriations for the appropriations for 2000-01.
Senator CARR —Have the department's clients been made aware of the impact of the GST on Commonwealth grants?
Mr Sedgwick —We are writing progressively to the department's clients in respect of the GST. The impact of the GST on grants depends on the nature of the business that you are in.
Senator CARR —In terms of TAFE institutes, have they been advised of the impact of the GST in terms of their grants?
Mr Sedgwick —We do not have a direct relationship with TAFE institutes that I am aware of, so I do not think we have written to individual TAFE institutes.
Senator CARR —Are you aware of any correspondence from any other agency of the Commonwealth in regard to the impact of Commonwealth decisions in regard to the GST and TAFE institutes?
Mr Sedgwick —No, but then again I would not expect to be either.
Senator CARR —Has there been any agreement between the states and territories about the treatment of GST in relation to VET funding generally?
Mr Sedgwick —I cannot speak about agreements between the Commonwealth and the states. Agreements between the Commonwealth and the states in respect of financial matters are managed by the Treasury portfolio.
Senator CARR —So you are not aware of any agreements that have an impact on the funding decisions of this department?
Mr Sedgwick —The funding decisions of this department in respect of the TAFEs are trivial because our funds under the VET funding act are provided to ANTA.
Senator CARR —What about the general VET funding to the clients of this department?
—I am not aware of the issue that you are raising
Senator CARR —Are there any windfall gains or windfall losses to state governments in regard to the payments to the states through appropriations made nominally by this department?
Mr Sedgwick —Education payments from the Commonwealth to the states have not been adjusted for the wholesale sales tax gain that education institutions should be able to make when embedded wholesale sales tax is removed.
Senator CARR —In terms of vocational education payments, as distinct from education payments, have there been any windfall gains or windfall losses to state governments as a result of the GST?
Mr Sedgwick —The only one I can remember would be the windfall gain that education institutions would be capable of making because of the fact that the Commonwealth has not withdrawn the impact of embedded wholesale sales taxes from the appropriations that are made in respect of education. I do not know whether there are any timing issues involved with the TAFE sector.
Mr Burmester —Not in regard to the TAFE sector.
Mr Sedgwick —We are dealing with the TAFE sector.
Mr Burmester —The treatment of payments under GST depend on the nature of those payments, so across the broader appropriations of the department, its treatment will depend on the nature of its own circumstances. The payments to ANTA are a payment to another government agency and, therefore, there is no GST paid from the department to ANTA.
Senator CARR —What about training providers—employer incentive payments as an example?
Mr Burmester —We would have to check on the treatment of those payments under GST with the people from the program area.
Senator CARR —What about New Apprenticeship centres?
Mr Watson —I think the thing here is that there has been no reduction in the appropriations provided by government for any of the appropriations handled by this portfolio. On occasions, some of the grants provided are grossed up for GST and for others, where the funding is between designated government agencies, then there is no grossing up. So the worst that could happen is that some agencies would get a benefit from the cash flow from having their grants grossed up. But there is no reduction in the grants.
Senator CARR —Thank you, Mr Watson. It is just that if I look at appendix 4 in the PBS on output 2.1 on page 144, as an example—I say these instances go across a range of portfolios, but I am using this just as an example of a lack of clarity in these papers—I notice that there appears to be a fall in VET funding between the periods 1999-2000 and 2000-01, would you agree with me?
Mr Watson —There is a fall in funding apparent in appendix 4, but there are good reasons for that.
Senator CARR —Obviously, I would like to know what these good reasons are and why they are not explained in these papers.
Mr Sedgwick —We could deal with this here, or we could deal with it with the relevant outcome.
—We can deal with it where you like, because there is going to be a whole series of ways of dealing with it, but I just think it is important to get what those good reasons are now because we are dealing with the presentation of the budget papers, which I say are grossly inadequate.
Mr Sedgwick —If you want to deal with the funding in respect of a particular program, then we will need to have the particular people here to answer your questions. It is as simple as that.
Senator CARR —That is fine. I take your point, Mr Sedgwick, that is a reasonable point. What I want to ask Mr Watson is: could you advise me what the impact of the GST is on that particular item in regard to the apparent reduction?
Mr Watson —No impact of the GST. As I indicated earlier, all the appropriations are net of GST. In relation to the VET Funding Act, I can indicate that the apparent reduction between 1999-2000 and 2000-01 is due to supplementary legislation for 1998 of $13.6 million and for 1999 of $27.8 million, and to the legislation for the 1999 off-the-job component of VET funding of $21.5 million not being passed until late in 1999 so it artificially increased the appropriations for 1999-2000. So it is not so much that there has been a reduction in 2000-01 as that 1999-2000 was artificially inflated because of the delay in legislation.
Senator CARR —Thank you. The point I am making is: is that explained in this PBS?
Mr Watson —The PBS that we have follows the guidelines which we are required to follow.
Mr Sedgwick —The timing effect that Mr Watson refers to is a function of accrual accounting. The point at which the expense is recognised is different under accruals than it is under cash. That is why you can have effects of this kind even though the cash flows will be a lot smoother.
Senator CARR —Right. Thank you, Mr Sedgwick. I just wonder about the appropriateness of these guidelines, then, if information such as this is not readily available to the reader of this document. Could I get a reconciliation of all the ons and offs getting from one financial year to the other in all the programs, all the various outcomes, of the budget statement, just so I can be clear about what is in and what is out and why it is that these discrepancies appear across the PBS?
Mr Watson —All the ons and offs where there is a reduction in the appropriation or where there is an increase as well?
Senator CARR —Both ons and offs, and if you can explain to me why that has occurred for each of the programs that are listed here. That would give us a more complete picture of what one can expect in terms of this appropriation.
Mr Watson —That is for the budget year?
Senator CARR —In terms of this PBS. I think the document needs to be completed.
Mr Sedgwick —The document is complete, Senator. It is complete in terms of the guidelines within which we work and the accrual accounting rules. I am a little upset at the imputation that you have just made there. We can have a look at the material that is in appendix 4 and attempt to give you a better reconciliation of that data.
—I would appreciate that. I do not want to overburden the department. Appendix 4 will do in that circumstance—I do think it covers the bulk of the portfolio's activities. What concerns me is that these guidelines are so grossly inadequate. Frankly, I think the presentation is disgraceful because it fails to actually inform the reader. I know, Mr Sedgwick, that you would not be involved in trying to obscure the work of the department; I appreciate that that is not your intention. But, to me, that is the outcome of you following these guidelines.
Take, for instance, the case of page 53, which deals with infrastructure funding for the post compulsory education system. As I read the figures there, it suggests to me that there is a single figure provided covering what are two quite distinct sectors, or what have traditionally been regarded as two distinct sectors, within the department—that is, it manages to run higher education programs and VET together. I am just wondering why the casual observer, or perhaps someone not quite so casually observing these situations, couldn't consider this an attempt to withhold information? How can you possibly justify not showing separate figures for each of the sectors?
Mr Sedgwick —The outcome that we are dealing with here is the post compulsory education and training sector. There are two components of that sector, the boundaries between which are becoming increasingly blurred. The construction of this set of numbers reflects the fact that the outputs that we are dealing with here, with post-school education and training, are focused on basically the same set of objectives. That is the rationale, the underlying philosophy, of an outcomes basis to presenting the budget. If it would assist you to have a separate break-up of the VET and the higher education numbers, that is fine. We are perfectly happy to do that. But we are dealing with a single outcome.
Senator CARR —I would like a separate breakdown of those two components. On page 52 some seven separate programs are mentioned.
Mr Sedgwick —Senator, I can direct you to the same appendix that you were just referring to. That appendix on page 144 specifies in quite some detail the allocation of funds between various elements of the system. The Higher Education Funding Act money, for example, is identified in the first row; the HECS funds are in the second row; the Vocational Education and Training Funding Act is in the third row, and so forth. It is just not true that these statements do not give you data that allows you to form an impression of what is happening with the various sectors. Similarly in outcome 3, the first line says `Higher Education Funding Act 1988' and the second line says `Grants for research'.
Senator CARR —What you can do to assist me is to show me where in the PBS the seven programs listed on page 52 are described in the text in terms of what the programs actually seek to achieve, or do.
Mr Sedgwick —Again these statements follow the guidelines in an outcomes and outputs framework. The material on page 52 describes the measures that were taken in the budget.
Senator CARR —You obviously have a much clearer understanding of this work than I do, and I expect that to be the case. Can you show me where I might find the expenditure for each program in the current year?
Mr Sedgwick —For which program?
Senator CARR —For each of the seven programs listed.
Mr Sedgwick —For the Job Pathways Program?
Senator CARR —For the seven programs listed.
—If I can go to page 144, output 2.3, the third line down provides all the funding for the Job Pathways Program. The Literacy and Numeracy program, subject to correction by my colleagues, is in output 2.3. The last line of that table refers to `Literacy and Numeracy Training for the unemployed'. I think that is the same program.
Mr Watson —Could I also add that this is the first time we have actually had appendix 4. This information has not been provided in previous papers.
Senator CARR —This is an improvement?
Mr Watson —It is an improvement. We were not necessarily required to provide this. It was done to provide a better breakdown so that there could be a disaggregation of these numbers.
Senator CARR —Where is the detailed achievements of these programs? Where would I find that in the PBS?
Mr Watson —You will not find the achievements because the achievements relate to the reporting we do as part of the annual report. What is in here is about the estimates and the performance detail related to the estimates and the estimate activity of these programs for the next financial year.
Mr Sedgwick —The portfolio budget statements are forward looking. The annual report is backward looking. It provides a report against the performance indicators that were identified in the PBS the previous year.
Senator CARR —The general outlooks are provided to the committee on the basis of performance indicators and performance over the period 2000-01. I noticed, for instance, the New Apprenticeships system is listed here on pages 68 and 69. Why isn't the detail for each of these programs listed?
Mr Sedgwick —The material on pages 68 and 69 provide a performance indicator in respect of performance in 2000-01, which we will be reporting on in the annual report in respect of 2000-01. For example, on page 68, where it deals with the first of those lines, `Employer satisfaction with New Apprenticeship Centres,' that is our indicator. Our performance target is in the third column where it says:
At least 80 per cent employer satisfaction with services provided by New Apprenticeships Centres
In a subsequent document, the annual report, we will be able to tell you how well we went against that indicator, just as the annual report in respect of 1999-2000 will provide you with a similar indication of how we went against the same indicator in last year's PBS.
Senator CARR —Mr Sedgwick, do you think that the guidelines need to be amended so that a person interested in your department might be able to follow it through? Take a program like the strategic interventions program, could a reader turn to the Portfolio Budget Statement and find an entry on that program which would tell such a reader what you are seeking to achieve and what expenditure you are proposing to devote to that program?
Mr Sedgwick —The government moved away from a programatic presentation of the budget towards one that was based on outputs and outcomes. We are reporting against an outputs and outcomes framework. We are reporting against what the ultimate objectives of the collection of programs is. That is the way these documents have been framed now for a couple of years.
Senator CARR —Yes, indeed, that is what has occurred for a couple of years. I put it to you that as a consequence, and as the committee has been asked to report upon, there is less information available to the reader trying to seek an understanding of what this department is doing.
—The information that has been put before you is in the framework that the government had agreed, and I believe it had worked it through the JCPAA. The Senate, of course, is invited to express its view about the particular framework that is being used. I am aware of the fact that in this context and in others there are opportunities for senators to make points of the kind that you are making. But we are dealing with the framework that has been adopted, and it is now in its second year.
Mr Watson —In fact, the Senate Finance and Public Administration Legislation Committee produced a report in October 1999 on the adequacy of the PBS and the format. They made a number of recommendations which were actually picked up by the Department of Finance and Administration. So there is a continuing evolution of the document in accordance with the recommendations of the committee.
Senator CARR —I put it to you, Mr Watson, that there is a need for a substantial degree of evolution to make these documents clearer and it may perhaps, heaven forbid, get us to the point where we might actually know what the department is seeking to do.
CHAIR —Senator Carr, we have had three-quarters of an hour on this. I think that Mr Sedgwick has got a pretty clear indication of the feeling you have about the presentation of the documents. Do you have any questions that we could move to?
Senator CARR —Yes, I have many questions.
CHAIR —I am looking forward to them.
Senator CARR —On page 52 you say, when referring to the amalgamated migrant English programs:
Savings will be released through increased efficiency in program delivery
Who is the officer I should direct this to?
Mr Sedgwick —This is a training and youth matter.
Senator CARR —Again, do you think it would be appropriate if we could get some value of the savings, and that that should be listed?
Mr Sedgwick —The savings are identified in the papers.
Mr Watson —The savings are identified in table 1.2, which is on page 20 of the document. At the bottom of that table it talks about the `Amalgamation of Advanced English for Migrants Programme with the Literacy and Numeracy Programme'. If you read across the page you can see the savings identified there for each of the financial years.
Senator CROSSIN —On page 144, down under output 2.3 `Advance English for Migrants Program', just for my own information, if it is being renamed `Language, Literacy and Numeracy Training', why is that new name not used in that table?
Mr Sedgwick —The numbers should be under the last line of that table `Literacy and Numeracy Training for the unemployed'. Why have we used that title rather than another? We will need an expert to answer that in a minute.
Senator CROSSIN —And perhaps you might assist me as to why there is no—
Mr Watson —I can answer that question. The full integration of the two programs is not due until January 2002, so it will not change its name until that time.
Senator CROSSIN —I am assuming that is why there is a zero entry for the last three years in that column?
—That is right.
Senator CROSSIN —Where does the money for that program go?
Mr Sedgwick —It should be in that bottom line, `Literacy—
Senator CROSSIN —Has it been integrated into `Literacy and Numeracy Training for the unemployed'?
Mr Watson —The client group is integrated within that bottom line. As we just pointed out to Senator Carr, the actual savings from the program are identified on page 20, on the bottom line of that table.
Mr Sedgwick —So the funding of the client group will be included in that bottom line of that table under output 2.3 `Literacy and Numeracy Training for the unemployed'.
Senator CARR —I make the point again: shouldn't there be a component within this budget paper somewhere that explains what you are doing there and why it is that you are doing it?
Mr Watson —That is explained on page 52 under the heading `Amalgamation of Advanced English for Migrants Programme with the Literacy and Numeracy Programme'.
Senator CARR —And why you are making the savings—where do I find that? I get a line here; I appreciate that at least there is line.
Mr Sedgwick —It says:
The Government will amalgamate two programmes ...
Senator CARR —Fair enough, okay. I think the chair has made the point. I believe we do have a serious problem with the way in which the guidelines operate, and we will have to deal with that in our report. Can I turn to a series of questions, unless Senator Crossin has further ones on the presentation of the papers themselves?
Senator CROSSIN —I have some questions on the PBS.
CHAIR —Are they general questions along the lines of Senator Carr's questions?
Senator CROSSIN —No, mine will be different, I am sure.
CHAIR —I have no doubt they will be different, Senator Crossin, I am just trying to establish whether they are across-portfolio comments?
Senator CROSSIN —I am assuming they are across the portfolio if I want verification of the PBS.
Senator CARR —Yes, we have a lot more across the portfolio.
Senator CROSSIN —On page 7 there is a statement under `GST accounting treatment' that expenses do not include any GST amounts. As I have had a look through most of these columns, and just recapping on what I think you answered to Senator Carr, there is no indication in this PBS of what costs the department will incur under the GST. Is that correct?
Mr Watson —I am not sure what you mean by `the department will incur'. The funding for the portfolio is split between administered funds and departmental funds. Is your question about administered funds or departmental funds?
Senator CROSSIN —Let us go to administered funds. I am assuming you have a cost and you have a figure as to what outlay you will need to commit to move to a GST tax regime and what those ongoing commitments will be?
—For administered funds there was a decision taken by government that all of the figures within the budget papers would be net of GST, so there is no impact in here. As I was explaining earlier to Senator Carr, the only impact on the appropriations or the portfolio is through cashflow, which means that where we gross up an appropriation for GST, obviously in terms of cash, there is more cash going out the door, but then when we have the capacity to claim input tax credits through the ATO we get the cash back through that mechanism and it goes back into the appropriation. So there is a timing issue, a cash flow issue, but there is no impact on the appropriations as such.
Senator CROSSIN —So you are saying there is almost a nil return.
Mr Watson —That is right in terms of administered appropriations.
Senator CROSSIN —In your performance indicators for each of the groups, on page 39 under output group 1.2 on assistance for school students with special needs, can you explain to me why the number of ESL indigenous language speaking students assisted is as low as 2,000?
Mr Sedgwick —We could better deal with that when we have the subject matter experts here. We can explain that.
Senator CROSSIN —On page 41, under output group 1.3 on the number of school age students or their parents or guardians receiving an educational textbook subsidy, you have 100 per cent. Is that 100 per cent of those who apply or 100 per cent of those you deem would be eligible for the subsidy? What is the 100 per cent struck on?
Mr Sedgwick —My answer is yes to all of the above, and it is certainly 100 per cent of those who apply.
Senator CROSSIN —I am assuming that process is yet to occur. I have to ask you the same question I asked people in DEWRSBE yesterday, although I have to say that your performance indicators are somewhat more specific than those of DEWRSBE. How do you assess the level at which the minister is satisfied?
Mr Sedgwick —I have a conversation with him roughly every quarter. It is not precisely every quarter, but roughly every quarter the minister and I have a conversation that addresses exactly that question.
Senator CROSSIN —DEWRSBE indicated to me that, in any brief or advice they provide to the minister, there is a little box on the bottom of the brief. Do you have the same system?
Mr Sedgwick —No, neither the minister nor I were enamoured of that scheme simply because the processing burden was so large. We do have a conversation. I usually have a pile of the major briefs with me and we discuss how we went.
Senator CROSSIN —So on a good day you get chocolate biscuits and on a bad day you get nothing? Is that the way it goes?
Mr Sedgwick —I should be so lucky—chocolate biscuits!
Senator CROSSIN —He doesn't throw coffee cups at you or anything does he?
Mr Sedgwick —No.
CHAIR —None of the Senate estimates run to chocolate biscuits.
Senator CROSSIN —I was at the legal and constitutional estimates yesterday and they had scones, jam and cream.
—Leaving the jokes aside, it is an exercise that is taken seriously by us both. We feed back to the department the feedback that we receive through that process.
Senator CROSSIN —On page 55, at the fifth paragraph, you say:
In total, 35 organisations have been contracted to provide New Apprenticeship services ...
I want a list of those 35 organisations. Is that better asked of the portfolio group?
Mr Sedgwick —I believe there would have been a press statement at the time so we can get that for you. That is not hard to get.
Senator CROSSIN —It says there are some 300 sites. I do not want the list of 300 sites, but a list by state or territory might be useful.
Mr Sedgwick —I think that material was in the original press release. If I can give my colleagues some notice maybe we can bring them that when we come to deal with training and youth a little later on today.
Senator CROSSIN —On page 144, can you explain to me why there is no entry for women in small business in the forward estimates or for the budget of this year?
Mr Sedgwick —My memory says that that was a program that terminated in the budget, so there was no funding in regard to that.
Senator CROSSIN —Similarly then, with the Federation Fund? Is that terminated?
Mr Watson —Yes.
Mr Sedgwick —Yes, that is a specific project, as I recall.
Senator CROSSIN —Is the New Apprenticeship Implementation Program terminated or has that been amalgamated?
Mr Sedgwick —The New Apprenticeship Implementation Program as it then existed has terminated. But that set of issues is addressed by—
Senator CROSSIN —The New Apprenticeship Work Force Development?
Mr Sedgwick —Yes.
Senator CROSSIN —Again, this may well be best directed to those people from the higher education sector. Has there been any analysis of the impact of the GST on universities?
Mr Sedgwick —Not that I am aware. I suppose there are two questions there. One is the cost of compliance and, to my knowledge, there has been no work done on that, although my colleagues may correct me. The other is the impact of the GST on funds that are made available to universities and the answer is none, although universities will benefit from the fact that embedded wholesale sales tax will be removed, but the grants have not been adjusted accordingly.
Senator CROSSIN —I have in front of me an article that was in the Campus Review that talks about the cost to Australia's universities being estimated to be up to $40 million. Do you know what each university is spending on initial start-up costs and then what the ongoing cost will be to them?
Mr Sedgwick —Not personally. That is the compliance issue that I referred to earlier. I do not know whether we have got estimates of those numbers. Again, we can deal with that when we deal with higher education later, if you like. I would be amazed though if the net cost was anything like that given the benefit that the sector will achieve through avoiding paying wholesale sales tax that they presently pay.
—This article goes on to say that the University of Sydney calculates that additional administrative costs to prepare for the GST will be at least $2 million.
Mr Sedgwick —I cannot comment on that.
Senator CROSSIN —So the department has done nothing to ascertain what each university's costs are going to be?
Mr Sedgwick —I am informed that we have had discussions from time to time with individual institutions, but the degree of science that lies behind some of those conversations is a little unclear. Our approach to the universities in this issue is the same as for any taxpayer that the compliance issues are ones that we would expect them to address.
Senator CROSSIN —So they are not being provided with any assistance from your department to meet those compliance costs?
Mr Burmester —The AVCC was provided with some start-up assistance through the Treasury department to assist the sector prepare for GST implementation. I am not sure of the size of that assistance. It certainly was not directed at every university. It was directed at the peak council to assist the sector as a whole to get ready for GST.
Senator CROSSIN —My knowledge of start-up assistance packages, particularly in the social services industry, is just to conduct training and information sessions for recipients. Was it similar?
Mr Burmester —In the education sector, the start-up assistance was directed at peak councils that covered the entire sector. The intention was that those councils could prepare information, training and material that would assist their members prepare for the GST. So some of the material that was prepared was a standard approach, a standard software package that could be applied. I do not know first hand how the AVCC used the allocation for the university sector, but the total assistance for the education sector was approximately $15 million.
Senator CARR —What was the $15 million spent on. How do you derive that figure?
Mr Burmester —We do not administer the start-up assistance program. Treasury does that.
Senator CARR —So you have no reconciliation of how that $15 million is derived?
Mr Burmester —I do not; I am not administering the program. The way it was approached for the education sector was that, rather than funding each institution in the same way that, for example, operated in small business, the sector was approached as a whole through the funding of key peak bodies to assist their members to prepare for the GST. The total allocation that eventuated through that process of contracts with peak bodies was approximately $15 million for the education sector.
Senator CARR —Can we get a list of the amounts of money that are allocated to each of the peak bodies?
Mr Burmester —We would have to ask Treasury for that.
Senator CROSSIN —So there has been no additional allocation in this budget to assist universities with start-up costs in this year for the GST?
Mr Sedgwick —They do have available to the sector the money that the government appropriated through the GST Startup Office arrangements. They will also progressively have the benefit of not having to pay embedded wholesale sales tax.
—I understand the system and I know that you have said that twice now. The fact I am getting to is, if the University of Sydney can anticipate that an additional administrative cost will be $2 million—and that is just one university out of our sector—are you telling me you are not aware of what the cost is going to be to each and every other university? They are being provided with no assistance from your department to implement the GST; is that correct?
Mr Sedgwick —The position of the university is the same as that of any other taxpayer but in circumstances in which they have received and will receive both of the benefits that we have spoken about earlier.
Senator CROSSIN —If the universities are not successful in getting any of this start-up money or the start-up money is in fact not enough, are they then expected to find the start-up and ongoing costs within existing funds?
Mr Sedgwick —They will need to comply with the legislation, like everybody else, and yes, they will need to meet any of those network costs from within their appropriation.
Senator CROSSIN —Have you had any discussions with universities as to how they are going to achieve that?
Dr Karmel —During the profiles discussions, which we have on an annual basis, we discuss a range of matters. GST was certainly one of the issues that was discussed at the meetings last year.
Senator CROSSIN —With the universities?
Dr Karmel —With individual universities.
Senator CROSSIN —When you say `was discussed', to what extent was that discussed, with the universities requesting assistance for funds?
Dr Karmel —These discussions cover a wide range of matters. Clearly GST was one of the issues that was of interest to the universities. They were interested in exactly how the system was going to work and we provided the answers that we could at that stage. Usually they are not backward in talking about the pressures they are under.
Senator CROSSIN —Did you get an indication from the universities that, in order to comply with the GST, they would need to make cuts in particular areas?
Dr Karmel —It is quite clear that the universities at the moment are spending considerable funds in revamping their administrative systems for a whole range of reasons. They are investing a lot of money in new technology and they expect to obtain efficiencies. The GST implementation is wound up in that process. It is not really possible, from what I can see, to actually put out what the cost of the implementation of the GST is for universities because they are revamping many of their systems.
Senator CARR —I would like to indicate that there are a series of issues that I need to come back to which are standard at this time of the budget cycle in terms of the department's staffing, consultancies and other matters. On page 19 of the PBS, there is a table that shows budget measures disclosed for 2000-01. I wonder if you could point me to where it indicates the department's activities in regard to GST awareness campaigns?
Mr Sedgwick —I do not think there is a specific reference in these documents to GST awareness campaigns. We are happy to take you through that, though. It is not a major issue for us.
—I appreciate that. In terms of awareness campaigns and related activities, including research into GST related matters, how much money will the department be spending?
Mr Sedgwick —GST publicity campaigns are focused on the textbook subsidy components. Do you want the amounts involved?
Senator CARR —I would like the whole kit and caboodle.
Mr Sedgwick —Our publicity campaigns in respect of GST focus wholly on the textbook subsidy components because that is the only element of this process that will involve us in needing to have a wide program of information dissemination. There is a particular program in that context and the sums involved are $489,000.
Senator CARR —Are there any moneys associated with research into GST related matters?
Mr Sedgwick —I do not think so.
Senator CARR —So there is no other expenditure associated with GST awareness?
Mr Sedgwick —I do not think so.
Mr Burmester —That figure for the textbook subsidy includes the research for the campaign around the textbook subsidy. Your question may have been a bit broader than the research for the publicity.
Senator CARR —That is right. So $489,000 is the total amount the department is spending—
Mr Sedgwick —On public awareness campaigns and their associated market research.
Senator CARR —Are there any other research projects being undertaken by the department?
Mr Sedgwick —On GST matters, not that I am aware of. Apart from those publicity campaigns, we are writing to a number of stakeholders. I am not aware of the cost of doing that. It would be not of that order of magnitude, I would imagine.
Senator CARR —Which stakeholders are you writing to?
Mr Burmester —This goes to your earlier question, where I can inform you that we have written to 35 NACS and 359 training and youth program suppliers. So that communication that you asked about earlier has occurred. The range of business partners—stakeholders—that we are writing to is quite considerable. It covers each of the program areas, which were each responsible for identifying their stakeholders and informing them of the arrangements for GST by the department that will apply to them. We have estimated that that work in supplier relations, as we have called it in our budget, is five per cent of our budget. Our current budget for departmental expenses in organising implementation of GST for the department is about $1 million. Five per cent of that is expected to be in relation to communications with our stakeholders.
Senator CARR —That is in the form of letters, is it?
Mr Burmester —Yes, that is right—individually tailored to the circumstances of our relationship with the supplier.
Senator CARR —Is this a letter from Mr Sedgwick or is it a letter from the minister?
—It is typically a letter from me.
Senator CARR —Sorry?
Mr Sedgwick —It is usually a letter from me.
Senator CARR —Usually?
Mr Sedgwick —I am not aware of one that was not a letter from me.
Senator CARR —Are you able to indicate to me how many letters are being sent?
Mr Burmester —We could provide a list of those. There are 2,894 departmental suppliers, 359 training in youth program suppliers, 35 NACS, 808 clients of IEDA—
Senator CARR —What is that?
Mr Sedgwick —The Indigenous Education Development Assistance Program.
Mr Burmester —and 1,133 grant recipients from Schools Division and a further 217 non-grant recipients from Schools Division. There are 9,210 ATAS tutors, 4,952 ASSPA committees and 900 non-grant recipients from Schools Division for whom we will be creating recipient created tax invoices. Then it gets down to smaller numbers. There are 40 letters to universities and a 100 other ones to the higher education sector, and then a range of small programs.
Senator CARR —What is the total?
Mr Burmester —I have not got a total on that—20,000, we understand.
Senator CARR —Is there a standard format that the letters go out in? Obviously there would be variations to each of the particular suppliers or clients of the department.
Ms Lewin —They are to a format, a template. They vary, depending on the individual circumstances of the people we are writing to. They are to a large extent based on standard paragraphs that have been released by the finance department.
Senator CARR —Can we have a copy of those?
Ms Lewin —Of the standard paragraphs?
Senator CARR —No, the template letter that you are putting out.
Ms Lewin —Yes. We will give you a sample letter.
Senator CARR —So the total cost of the GST implementation is $1 million for the department, is it?
Mr Burmester —That is our budget, yes.
Senator CARR —Does that include training for the department?
Mr Burmester —Certainly there will be training of all staff involved in payments and account processing, and a general awareness campaign for all staff in the department. The first round of that training has already occurred. I am not sure whether we have counted in the staff time of people attending those training sessions, but the delivery of those sessions is in our budget. It covers changes to technology, our IT systems, the business and accounting advice we have needed and the customer relations that we have talked about.
—If I can be clear: you have got $1 million to spend on advertising, all forms—
Mr Sedgwick —No. There is $1 million to spend on our systems and work that we need to do within the department. There was $490,000, in round numbers, I think—
Senator CARR —So it is about $1[half ] million. Is that right?
Mr Sedgwick —That is the sum of those two numbers.
Senator CARR —It is $1[half ] million for the GST implementation if we include the awareness campaign?
Mr Sedgwick —Yes.
Senator CARR —That includes the training for the department, but it does not include staff time.
Mr Burmester —I am pretty sure our budget does not include the staff time of staff who attended the training sessions.
Senator CARR —So do you have a bit of a punt on that? How much would that be?
Mr Sedgwick —It is impossible to punt on that.
Mr Burmester —It would only be an estimate of saying several hours time for a large proportion of the department.
Senator CARR —Presumably everyone in the department will get some training on this, won't they?
Ms Lewin —The intention is that everybody in the department will get general GST awareness raising training and then there will be specific training for people using the systems or processing accounts.
Senator CARR —There are about 1,800 now in the department?
Mr Sedgwick —Fifteen hundred.
Senator CARR —It gets less every time I ask.
Mr Sedgwick —That number has actually gone up since the last time you asked the question.
Senator CARR —Has it? We will come to that in detail. So for 1,500 people a couple of hours—
Mr Burmester —It is 1,452, actually.
Senator CARR —Thank you. So you have no estimate of the cost of that?
Mr Burmester —We have not prepared an estimate, but we could do so if you wish.
Senator CARR —Thank you. I just wanted to get a feel for what the cost is.
Mr Sedgwick —It will not involve 1,452 people for a couple of hours. The number of people that need to be specifically trained on this is a lot less than 1,452, but everybody will be involved somehow or another in the awareness raising material, even if it is only some information that is available on the Intranet.
Senator CARR —We are looking at about $1[half ] million, without staff time, for GST implementation for this department.
—Without staff training time.
Senator CARR —Yes.
Mr Sedgwick —That does include staff—
Senator CARR —The postage for the 20,000 letters you are sending out is included in that figure?
Mr Burmester —Yes.
Senator CARR —Have you undertaken any consultancies in regard to this matter?
Mr Burmester —Yes, we have two consultancies. One is from Rengain to assist us with modifying our financial IT system and, in addition, we have KPMG advising us on accounting aspects for both departmental and program requirements.
Senator CARR —How much were those consultancies?
Ms Lewin —The Rengain contract is for half a million dollars—
Senator CARR —Half a million?
Ms Lewin —Yes. The KPMG contract is for $200,000.
Senator CARR —Is that part of the $1.5 million we have spoken of so far?
Ms Lewin —Yes, it is.
Mr Sedgwick —It is part of the $1 million.
Senator CARR —I am putting the advertising campaign in as part of the costs. So that is all part of the $1 million?
Mr Burmester —Yes.
Senator CARR —So of this $1 million you have allocated, three-quarters of it goes to consultants. Is that what you are saying?
Mr Sedgwick —That tends to happen when you want to build systems, which is what we are doing here.
Ms Lewin —In terms of the KPMG advice, much of that is being delivered as part of the training in groups to our staff. Those consultants are working with staff to determine the correct taxation treatment of various programs.
Mr Burmester —There are also some consultants associated with the information campaign for the textbook subsidy program that are included in the $489,000.
Senator CARR —How much are they?
Mr Burmester —I am not sure whether these have been let. At this stage there are estimates of $200,000 for both the creative products and the market research.
Senator CARR —This is on top of the $489,000?
Mr Burmester —No, it is part of the $489,000.
Senator CARR —They have not been let?
Mr Burmester —Not that I know of. The contracts are let through the same arrangements as apply to the other more general tax campaigns run through the tax office, so we will be using some of their contracts for these two aspects.
Senator CARR —You have not picked a tender yet?
—I think a proposal went to MCGC last night.
Senator CARR —You are not able to give me details on that?
Mr Burmester —I was not there.
Ms Lewin —It is to be reconsidered on Tuesday.
Senator CARR —Reconsidered, did you say?
Ms Lewin —Creative work is to be re-presented on Tuesday.
Senator CARR —Why was it necessary to re-present it?
Ms Lewin —Because there had been some testing of the creative work done, there were some minor revisions and the committee wished to see it again.
Mr Sedgwick —Mr Gall can provide you with some further information, Senator.
Senator CARR —Thank you.
Mr Gall —You will be aware of the existence of the ministerial committee on government communications. They gave us advice that a single select process was appropriate for these two contracts to be let from existing contractors working on the overarching tax campaign.
Senator CARR —Who are they?
Mr Gall —The research agency is Colmar Brunton and the creative agency is Whybins TBWA.
Senator CARR —What is the nature of the minor amendments? I am sorry I was not quite clear on that.
Senator Ellison —It is like a working document. It is a matter which is under consideration, and I think that is as far as we can take it.
Senator CARR —Will these advertisements be going to air? Is it TV?
Senator Ellison —I think that is another aspect which is under consideration, and it is an ongoing campaign.
Senator CARR —I think we are entitled to know how this department intends to spend half a million dollars on an advertising campaign.
Senator Ellison —You have that detail, and that does not necessarily affect the date when something will be lodged. That decision is not necessarily relevant to how the money is spent.
Senator CARR —I would have thought it would be very relevant. Is it going to be TV or is it going to be advertisements?
Senator Ellison —Your question was about the date.
Senator CARR —I am sorry. What was the nature of the advertisements? Are they TV advertisements?
Senator Ellison —I think the nature of the campaign has been described, hasn't it? It is a media—
Senator CARR —`Media' is a very broad term, Minister.
Senator Ellison —Print media.
Senator CARR —So it is a print media campaign. There is no TV involved with it?
—At this stage there is no TV plan although there is some limited radio proposed.
Senator CARR —Is it sort of like the chains ads?
Senator Ellison —Again, Senator Carr, I think that is a matter which is under consideration. This is a discreet campaign which deals with the textbook subsidy—
Senator CARR —The chains ads are not discreet. You would agree with that.
Senator Ellison —and the campaign has been described by the officials concerned and the matter is under consideration. It is being developed.
Senator CARR —But it is up for reconsideration on Tuesday?
Senator Ellison —Not reconsideration. It is being worked through. There is no magic. You do not pull out of the air a campaign of this sort—of any sort. No one of us here is the Archangel Gabriel and has the talent. It is being worked on. Like anything else in the department, it is under consideration. It is not customary. We cannot give details of things that are being worked on or under consideration.
Senator CARR —Perhaps we can be clear about this. It is being dealt with at a ministerial level. Is that the case?
Senator Ellison —Yes, it is.
Senator CARR —The $489,000 can be divided up in terms of $200,000—is it?—for market research. Is that how it works?
Mr Burmester —That is both the creative element and the market research.
Senator CARR —Who is doing the market research?
Mr Sedgwick —Colmar Brunton.
Senator CARR —What other work are they doing in regard to the general campaign for the GST?
Mr Sedgwick —I am not aware of that, Senator.
Senator CARR —Is this the only research that the department is undertaking on GST related matters?
Mr Sedgwick —I think I have answered that before. Yes, it is.
Senator CARR —I just wanted to be clear about that. Is that the only research?
Mr Sedgwick —As I told you before, yes, it is.
Senator CARR —And there are no other consultants planned, other than for these matters in regard to the advertising campaign for the textbook subsidy arrangements?
Mr Sedgwick —The consultants are the ones who are engaged that we talked about previously—Rengain and KPMG and the ones that are dealing with the publicity material.
Mr Burmester —As part of the textbook subsidy program, we will be using external service providers to undertake our audit processes. They are service providers rather than consultants.
Senator CARR —How much will that cost?
Mr Burmester —We have not been to tender for that as yet.
Senator CARR —Do you have a budget expectation of what the cost will be for the audit?
—We do not have any firm notion because the degree of audit requirements, the efficiency with which a national firm could provide audit services, has not been tested in the market.
Senator CARR —What is the total cost of the textbook subsidy campaign?
Mr Burmester —Of the campaign?
Senator CARR —Yes. It is $489,000, but what is the total cost of the subsidy program?
Mr Burmester —It is $117 million, I think, over four years.
Senator CARR —So what is the breakdown of that across the four years? Do you have those figures?
Mr Sedgwick —It must be fairly uniform across the four years. It might build up in the first one. It is on the famous page 144.
Mr Watson —It is also on PBS page 143 under 1.3—the last two items there. You see there `Book Subsidy - Schools' and `Book Industry - Grants to Schools Libraries'.
Senator CARR —Yes, I see that. The advertising is not in those figures, or is this an additional item?
Mr Sedgwick —No, that is just the subsidy, I think. It is similarly on page 144 under output 2.1, just above the total line, where it mentions `Book Subsidy'.
Senator CARR —Yes, I see that, but where do I find the advertising budgets in this PBS?
Mr Burmester —The lines that we have just referred to in appendix 4 are for administered items. The advertising campaign is part of the departmental expenses and it will be part of the total departmental budget.
Mr Sedgwick —The departmental vote is about $200 million.
Mr Burmester —It is $202 million. Table 1.1—`Appropriations'—gives the departmental price of outputs figure. The total is $220 million.
Senator CARR —This half million dollars for the advertising campaign is on top of the $410 million that the government's advertising promotion campaign has indicated to this point, is it not?
Senator Ellison —It is an advertising and information education campaign.
Senator CARR —I would call it propaganda, Minister, if you want to be precise.
CHAIR —Senator Carr, is that really necessary?
Senator CARR —He has intervened, so I am just making it clear. I would have thought—
Senator Ellison —You called it advertising promotion—
Senator CARR —The GST propaganda campaign is transparently—
CHAIR —That is your view.
Senator Ellison —Even the Leader of the Opposition has described it as an advertising and education campaign.
Mr Sedgwick —We do not know the make-up of the $410 million, so I cannot answer your question.
Senator CARR —You do not know if it is on top of that?
—I do not know.
CHAIR —It is 10.30 a.m., Senator Carr. We generally take a tea break at this time.
Proceedings suspended from 10.29 a.m. to 10.43 a.m.
Senator CARR —We were discussing this advertising campaign in terms of the GST. The department has $1 million, Mr Sedgwick, for implementation plus the other $1.5 million. Is that, in your judgment, the total cost of GST implementation?
Mr Sedgwick —It is the amount that we have specifically set aside for the implementation of GST within the department. The $1 million will address the specific things that we need to do to develop new systems and hire the specific consultancies. I think the people who are in the GST team are in that $1 million; is that right?
Ms Lewin —Yes, except in cases where we have drawn people in from the finance area.
Mr Sedgwick —The people who are directly involved with the small team that has been put together to do the implementation of GST within the department, their time is costed, but across the organisation at large the work that needs to be done in ordinary line areas to prepare letters, send out bills—all that kind of stuff—that is not costed in that $1 million, that is just part of our ordinary ongoing business now.
Senator CARR —And this of course is additional to the $15 million that is being allocated from the ATO to peak bodies within the education sector?
Mr Sedgwick —That is in addition to the $15 million for the GST start-off, allocated by the GST Startup Office, yes.
Senator CARR —So for the education sector, as far as the Commonwealth government is concerned we are now looking at a figure of $16.5 million?
Mr Sedgwick —There is GST assistance of $15 and there is $1.5 million that we are directly spending.
Senator CARR —That $1 million is not coming out of the ATO, that is moneys that the department has to find?
Mr Sedgwick —The $1 million, yes.
Senator CARR —That is departmental moneys?
Mr Sedgwick —It is departmental money.
Senator CARR —Is the $500,000 in the same category?
Mr Sedgwick —It is also departmental.
Senator CARR —The advertising campaign of $500,000 for the textbook subsidy project, that is in the current year, is it?
Mr Gall —It is over two years, Senator.
Senator CARR —It is a two-year allocation?
Mr Gall —Yes.
Senator CARR —Are there any further allocations anticipated within the forward estimates?
Mr Sedgwick —For this matter?
Senator CARR —Yes.
—No, I do not think so.
Senator CARR —Are there any other advertising campaigns proposed within the forward estimates?
Mr Sedgwick —For GST?
Senator CARR —For GST related matters.
Mr Sedgwick —No.
Senator CARR —The consultancies that you have already engaged, Rengain and KPMG, who are the principals of that?
Ms Lewin —Denys Edwards, I believe, is the principal of Rengain.
Senator CARR —What is the purpose of that consultancy?
Ms Lewin —It is primarily a systems consultancy to make changes—modifications—to our financial and human resource system which is an SAP system.
Senator CARR —The KPMG is a consultancy on accounting practices, I take it?
Ms Lewin —Taxation.
Senator CARR —The 20,000 letters you are sending out, what is the cost of that particular project?
Mr Burmester —We have only got indicative figures of the proportion of the budget that will be going forward for those activities. We have broken it down to client and customer relations and supplier relations. Together they make up about 10 per cent of the budget, but that would include more than just the—
Senator CARR —So $100,000?
Mr Sedgwick —Is an overestimate.
Senator CARR —I have got to be clear about this. It is client—
Mr Burmester —And customer relations and supplier relations. We think the estimate is closer to $20,000.
Ms Lewin —I think our estimate is about $20,000. In many cases we are providing access for people to lodge their responses with us via the Internet.
Senator CARR —So the total cost of that mail-out is about $20,000?
Ms Lewin —I would want to confirm that. That is my recollection.
Senator CARR —Bradmark is the company that you have been asked to engage for the advertising campaign, is it? Did I hear that correctly, Bradmark?
Mr Gall —Which one, creative or research?
Senator CARR —There were two consultancies.
Mr Gall —Yes. The research consultancy is Colmar Brunton.
Senator CARR —Who are the principals there?
Mr Gall —I do not know.
Senator CARR —Is that the company run by a Mr Mark Pearson?
Senator Ellison —It is not.
—And the other company?
Mr Gall —Whybins TBWA.
Senator CARR —Who are the principals there?
Mr Gall —I am not aware of that.
Senator CARR —Could you take both of those questions on notice, please, in regard to those companies? Can I get a disaggregation of the $1 million? How do you intend to spend it? You have indicated to me $720,000. What other costs are involved to get to that $1 million? Is that over one year or two?
Mr Burmester —That is for the current financial year. I will take that on notice and provide you with a final breakdown.
Senator CARR —Thank you very much. What are your intentions in the second financial year in regard to GST implementation costs? Do you believe there will be any other expenditure?
Mr Sedgwick —Within a very short time of the commencement of the new financial year, we should be over the hump in terms of the work that this dedicated unit is doing and, thereafter, the management of the implementation of GST would be a standard line function across the organisation as part of the way of doing business. The management of the payment functions and the claiming back of any GST that we might pay will be managed through our purchasing systems pretty much in the normal way. There is a bit of work that is involved with sorting out some contractual issues from time to time but, again, that should be over and done with pretty quickly.
Senator CARR —Before I deal with each of the sectors in terms of the clawback from the states, could I get a clear indication from you, in terms of the financial assistance grants to the states allocated for education purposes, what you estimate the percentage of that allocation to be in regard to GST clawback?
Mr Sedgwick —I do not have that figure in my head. What states do within their own jurisdictions, I have no idea. What I can say to you is that for education payments from the Commonwealth to the states there is no GST clawback.
Senator CARR —So you are saying there is no clawback in regard to the introduction of the GST on Commonwealth general assistance grants that relate to education?
Mr Sedgwick —No.
Senator CARR —No?
Mr Sedgwick —No. There is no clawback of the embedded wholesale sales tax in any of the arrangements that we have with the states in respect of education payments.
Senator CARR —I am not talking about specific purpose payments.
Mr Sedgwick —No, these are education payments that are made to the states.
Senator CARR —As a component of the general FAGs, do you believe there is any clawback there that can be attributed—
Mr Sedgwick —I have got no idea what states are doing in their own jurisdictions.
Senator CARR —In the jurisdictions, but in terms of the Commonwealth payments to the states?
Mr Sedgwick —We do not administer the financial assistance grants.
—I know that. Mr Evans and I have had discussions about the question of FAGs on many occasions. You have in the past sought to use the allocation of FAGs to give you a percentage of moneys paid to schools. I notice that the minister, in an article in the Australian on 10 May, believes that the new tax system will provide significant savings to the university sector. So it does seem that the government is prepared to use the general FAGs as an allocation to education when it suits it.
Mr Sedgwick —I think there are two different things here. I said to you previously that the universities and education institutions will have the benefit of the removal of embedded wholesale sales tax when the new tax system is introduced and that there has been no arrangement made to reflect that in Commonwealth payments to education institutions. To that extent, there is a gain to those institutions. In terms of FAGs, we are not responsible for the FAGs and would not want to speculate at this stage.
Senator CARR —No, but you are only too happy to use the FAGs when it suits the government in terms of its allocation of funding to government schools and various other things.
Mr Sedgwick —If there is some greater clarity about that point at some stage, then fine, but at the moment I am not prepared to speculate on what those numbers might be. We know what the FAGs payments are. They are in the budget papers.
Senator CARR —I have before me the intergovernment agreement, the former Commonwealth-state financial relations, and it specifically refers to reductions in expenditure for off-road diesel subsidies, reduction costs for the removal of embedded wholesale sales tax and excise on purchases by the state and territory governments. Presumably that affects education expenditures as well within the FAGs.
Mr Sedgwick —I have no idea of the composition of FAGs and I do not intend to be drawn on a matter that I have absolutely no responsibility for. What I can tell you about is those payments for which we are responsible, and they are the education payments. There has been no clawback of embedded wholesale sales tax in respect of those education payments. The relationships between state treasuries and education institutions I am not aware of and the make-up of FAGs I am not aware of. If you wish to pursue the FAGs issues I suggest you take them up with Treasury.
Senator CARR —Obviously we will pursue that further, both here and in other portfolio areas.
Senator CROSSIN —Mr Sedgwick, on the discontinuation of the Full Service Schools program, your answer to question E497 says that, in 1998-99, $24 million was allocated over three years. With that program being discontinued, has it only run two of its years and it had another year to run?
Mr Sedgwick —I stand to be corrected by my subject matter experts, but my understanding is that the Full Service Schools program terminates at the end of this calender year. I have just been advised that is correct. The timing of that, in an accruals sense, would be reflected in these statements by showing the appropriation in this financial year.
Senator CROSSIN —Then it has only been in operation for two years, not the three that was anticipated—is that correct?
—You will find, Senator, that it relates to a calendar year program and the portfolio budgets statements are done by financial year. The subject matter experts will be able to advise you better, but on my understanding it would have gone for three calendar years.
Senator CROSSIN —So how were programs established under Full Service Schools—were they all established in the first year or were some rolled out over different years?
Mr Sedgwick —All of the above. If you want to penetrate the detail of that scheme it might be more productive if we can take it up under schools when we have got the people here that can answer your question.
Senator CROSSIN —All right, because I wanted to also ask you some questions about the evaluation of that program. Can you give me the reason the program was wound up, given that it was to cater particularly for kids who were not succeeding at school? I know of programs in the Territory that were targeting Aboriginal children who were not succeeding at school. What was the basis behind winding the program up?
Mr Sedgwick —Again, that is a matter that we can address in the context of the schools people who have got all that detail for you, but my understanding of it was that it was intended to be a transitional program. It was announced in those terms and that is the way the government has managed the program, as a three-year program. It was always ever intended to be a three-year program.
Senator CROSSIN —Perhaps I will take up some of the detail about what it has been a transition to when the schools people get here. Also, in last year's agency statement there was the extension of the young offender pilot program, $1 million over 1999-2000 and 2000-2001. I cannot find any reference to that in your PBS to see where the second year of that program is.
Mr Sedgwick —Again, perhaps it would be better to progress that in the context of the Training and Youth Division, which is next.
Senator CROSSIN —All right. You do not have anyone there who can point to where the figure is allocated in the PBS?
Mr Watson —Senator, I am just consulting my colleague. We think it is probably departmental funds for that particular program, so it would not figure in the administered items within the PBS, in appendix 4, but we can check that for you.
Senator CARR —Can I ask you some questions in regard to the university sector? Budget statement 5 on page 14 on the website version indicates that the government is forecasting an increase in the revenue collected from former students via the HECS scheme. Is that the case?
Mr Sedgwick —There is an increase in the revenue. It is shown on page 111 of the PBS, which reflects the application of indexation arrangements to HECS debt, as I understand it. Our expert on this item is not here with us, he will be here with Higher Education if you want to pursue it, but my understanding of the bulk of the reason for the increase in the numbers that are showing there is indexation.
Senator CARR —This indexation, does that include GST?
Mr Sedgwick —Yes.
Senator CARR —What is the percentage of the indexation?
Mr Sedgwick —I am not aware of that. This estimate is indexed to the all group CPI, so it is the standard budget parameter which appears elsewhere in the budget papers.
Senator CARR —This is a very substantial increase, would you not agree?
—It is a significant number, yes. There may be some other factors at work there as well.
Senator CARR —It is increasing by three.
Mr Sedgwick —There may be some other factors there as well, but I understand that the major one is that.
Senator CARR —From about $100,000 to $324,000, what other factors might be involved?
Mr Sedgwick —If you wish to pursue that, I prefer you did it when we had the subject matter experts here.
Senator CARR —All right, but you do concede that there is going to be an increase in regard to HECS payments?
Mr Sedgwick —Yes.
Senator CARR —Do you have any indication of the order of that increase?
Mr Sedgwick —Yes, the act indexes HECS debt outstanding as at the beginning of June each year by the movement in the all group CPI, and that is what has produced the change.
Senator CARR —Are you able to give us an indication of what the average student would actually have to pay as an increase, given this what appears to be a 300 per cent increase in your revenues?
Mr Sedgwick —No, I do not have those numbers with me; we can pursue them later.
Mr Karmel —Senator, it is the HECS debt that is being indexed, the value of the debt. There is no interest rate on that debt. With the introduction of the GST, some price levels will change, but, of course, these repayments are income contingent, and there have been changes to the direct taxation regime to offset the increased price levels. So there will be a change in nominal dollars paid, but in terms of the real effect on students, there should be no effect.
Mr Sedgwick —My understanding, as I would recall it, of the repayments that a student makes in any year when they trigger those income thresholds is a function of their income. So the repayment schedule of an individual should not be affected by this.
Senator CARR —Could you assist me here, Mr Sedgwick. Is it the case that the CPI inflationary spike caused by the GST will increase the HECS and Austudy loan debts on current and past university students by $180 million?
Mr Sedgwick —I do not have that number with me. The level of HECS debt as at June next year will be indexed by the group CPI. I do no have that number with me.
Senator CARR —It would seem, on the basis of the figures on page 111, to be in that order.
Mr Sedgwick —I am not willing to speculate on that number without the subject matter expert who will have the figure for you.
Senator CARR —So your officers will be able to assist me later on in providing that figure?
Mr Sedgwick —We should have the figure for you.
Senator CARR —Thank you. It is not the only expense, obviously, that needs to be considered in regard to university education, given that I understood that the minister on numerous occasions has told us that education is supposed to be GST free. Would you agree?
—The minister has certainly said that education is GST free.
Senator CARR —However, would it be the case that there are a number of other expenses associated with your educational activities that are not GST free?
Mr Sedgwick —The government has never said that education requisites would be GST free.
Senator CARR —I have a memorandum here from the DVC, a Professor Darvall, who indicates to us that Monash University is increasing the costs for students who wish to graduate. The charge has been $80 and it is increasing now to $88 for participation in a graduation ceremony. Mr Sedgwick, are you aware of that?
Mr Sedgwick —No.
Senator CARR —However, if a graduate goes offshore, the cost remains at $80. Isn't graduation an important part—some might say an essential part—of attaining a degree?
Mr Sedgwick —A graduation is an end result of a degree. Whether a student graduates in person or in absentia is a matter that they choose. Indeed, whether they graduate at all is an issue that they decide for themselves. I would have thought that the delivery of the education service is the essential element that is being GST free.
Senator CARR —Would you have expected that the DVC at Monash would be writing to people advising them of a movement from $80 to $88 for a graduation?
Mr Sedgwick —I would expect that Monash University would comply with the law.
Senator CARR —Would that be consistent with the law in your judgment?
Mr Sedgwick —I do not have their advice.
Senator CARR —Do you know of any other universities that are making those sorts of charges as a result of the GST?
Mr Sedgwick —Not myself, but there may well be charges that universities are making that would, under the law, attract GST. I am not aware of all of that.
Senator CARR —Perhaps that is a matter I will take up with your officers later on.
Mr Sedgwick —Sure.
Dr Karmel —I am happy to pursue that one now if you wish, Senator. My understanding, as the secretary said, is that fees certainly do not attract GST, but certainly student union fees and other charges of that nature do attract GST and administrative fees associated with courses do not attract GST.
Senator CARR —But graduation—
Dr Karmel —I am not aware of the exact nature of that charge for the graduation. That is a point of detail that would need to be worked through. If, for example, that was to pay for a graduation dinner, then you would expect GST to be levied. So it depends on the precise nature of the charge, and that would be a matter for the university to take up with the tax office as to what is appropriate.
Senator CARR —Professor Darvall, on behalf of Lynnette Quin, Graduations Officer, Examinations and Graduations at Monash University, has indicated to students at Monash:
As of 1 July 2000 graduation ceremonies that take place in Australia will be subject to GST. `Offshore' graduation ceremonies will not be subject to GST. The Application to Graduate form has been modified to include the new fee of $88.00 for local ceremonies and $80.00 for `Offshore' ceremonies, and has been distributed to all faculties and Student Services on all campuses.
He goes on to explain that the old form should be dispensed with and the new ones imposed. Do you find that consistent with the application of this GST free education policy that the government is pursuing?
Dr Karmel —I do not know the precise details of that. On the face of it, it does seem to be consistent.
Senator CARR —It does seem to be consistent?
Dr Karmel —Yes.
Mr Burmester —Senator, if I could add to that: the focus of GST free education relates to course provision, the supply of education courses. A number of the administrative costs associated with the provision of courses may well also be GST free, but not necessarily all of them, and it will come down to the tax ruling on which of those are associated with a course and therefore retain their GST free status.
Senator CARR —Mr Burmester, when will we have this tax ruling? Is it available at the moment?
Mr Burmester —I understand it is due for release today and the industry representatives from the sector were given advanced copies of the draft ruling this week.
Senator CARR —Will that case that I have drawn to your attention be covered by the draft ruling? I presume that you have got a copy of the draft ruling.
Mr Burmester —Yes, we have.
Ms Lewin —It is unlikely to be covered specifically. My understanding is that the tax office plans to meet with the tertiary sector on 14 June to work through further details in relation to the tertiary sector as to where universities may differ from the schooling sector.
Senator CARR —So graduates can expect to pay the GST on their graduation ceremonies?
Mr Sedgwick —Senator, that is a matter that the institution will need to clarify with its legal advisers and with the ATO.
Senator CARR —I am sorry, Mr Sedgwick, I have just asked whether you think the ruling will cover it and I understood Mr Burmester said he did not think it would cover it.
Mr Burmester —The ruling that is eventually made by the tax office will determine which administrative services are considered to be a mandatory part of a course and therefore GST free, and those which are not.
Senator CARR —So you can advise me now, can you not?
Mr Burmester —No—
Senator CARR —You have got a copy of the GST ruling in regard to this matter?
Mr Burmester —I cannot advise you on the specific item that you have raised. First of all, I am not in the tax office making decisions on tax law—
Senator CARR —No.
—and the ruling that is due out today relates to school education. It points out that there are administrative fees that are GST free. There will be a similar range of fees in the tertiary sector, but I have not got advice on that.
Senator CARR —When will the tax office make a ruling on university specific matters?
Mr Burmester —I am not sure, Senator.
Senator CARR —You have no advice on that? Is one expected?
Ms Lewin —Not on when they will make a ruling. They are meeting with the tertiary sector in mid-June.
Senator CARR —All right, we will wait and see. In regard to the school sector, you obviously do have GST rulings now on this matter. There has been considerable discussion in the press. On what basis was the calculation made by the minister that $45 million worth of embedded savings would accrue to the higher education institution as a result of the changes to the taxation system?
Dr Karmel —My understanding of that calculation is that the original modelling work that the Treasury did on the tax system suggested that the long-term effect of removing the wholesale sales tax and the other reforms was to reduce costs in the education sector by 0.7 per cent. If you applied 0.7 per cent to the operating grants of universities, I think you will get something pretty close to that.
Senator CARR —So it is a simple calculation based on that?
Dr Karmel —It would be based on that sort of logic.
Senator CARR —What was the basis of the modelling, 0.7 per cent?
Dr Karmel —I think that was based on an econometric model that Chris Murphy had designed. It was basically an input/output type of model.
Senator CARR —Yes. I take it that you believe that the $45 million that the minister is claiming will be saved to the system: where will that money reside? Will it go back to the system? How do you expect that to—?
Mr Sedgwick —It is money that the institutions would have paid had the wholesale sales tax regime continued. They will no longer need to pay it, so the money will reside with the institutions.
Senator CARR —So this is a gift by the government to universities? Is this the way it has been presented?
Mr Sedgwick —As I have said to you a couple of times now, certainly there has been no attempt by the Commonwealth to recoup those embedded wholesale sales tax savings.
Senator CARR —We will obviously need to return to that when we talk to the university sector about how they see the modelling. There has been considerable debate about the impact of the GST on schools. What do you believe to be the current situation in regard to the GST?
Mr Burmester —As I said earlier, the tax ruling for preschools, primary schools and secondary schools is expected to be released today.
Senator CARR —Since you have a copy of this ruling, are you able to enlighten us as to the impact it will have on government schools?
Mr Burmester —That is a pretty broad question, Senator.
—Yes, it is. Will there be savings to government schools as a result of the GST?
Senator Ellison —The situation is that the ruling is to be handed down today. So we are really wasting time talking about anything now. It will be public later on. Schools are being called later on. There will be ample opportunity for Senator Carr to ask some questions. It is a fruitless exercise whilst the ruling is not public.
Senator CARR —So you think we should wait until tomorrow when we deal with the school sector? Is that what you are suggesting to me?
Senator Ellison —When it is out. It is not out now, so we will be going around in circles while it is not public.
Senator CARR —It is just that you have a copy of it.
Senator Ellison —I do not think you can expect Mr Burmester to be gazumping the Australian Tax Office on this. It is not the normal procedure and it is about to be released. Let us wait until it is released and then you can ask questions on it.
Senator CARR —Did I read the PBS correctly when it was suggested there had been an intention to change the GST legislation to exempt certain activities of government schools?
Mr Burmester —The government has announced that intention to amend some legislation to that effect.
Senator CARR —What is the nature of those amendments?
Mr Burmester —The intention is for the government to ensure that there is similar treatment between government and non-government schools for the purposes of GST.
Senator CARR —That is on fund raising activities, is it?
Mr Burmester —It relates to fund raising activities. Part of the amendment will also relate to the lease and hire of school equipment. The amendment will ensure that there is similar treatment between government and non-government schools in relation to hire of equipment.
Senator CARR —What about the sale of second-hand uniforms and books—will it be covered by it?
Mr Burmester —To the extent that the activities of either a government or non-government school in the sale of second-hand uniforms or books accords with the other charity requirements on the sale of second-hand books and materials, they will be equivalently treated.
Senator CARR —Will non-government schools be affected by these changes?
Mr Burmester —I think the intention is to ensure that both government and non-government schools are treated on an equivalent basis to the extent that they are put on that basis. I am not sure whether you say that one is affected or the other one is affected.
Senator CARR —So you are saying that government schools and non-government schools will be treated exactly the same with regard to their charity status?
Mr Burmester —That is the intention of the government.
Senator CARR —When will we see this legislation?
Mr Burmester —I am not sure about the timetable for the introduction of the bills to amend the tax legislation.
—Has it gone to the draftsman yet?
Mr Burmester —I am not sure, Senator.
Mr Sedgwick —We do not manage that legislation, Senator.
Senator CARR —Presumably you prepare the briefs for the draftsman. Has it been sent to the draftsman for drafting?
Mr Sedgwick —We do not manage that legislation, Senator.
Senator CARR —Minister, can you advise us of when you expect the legislation to be made available to the parliament?
Senator Ellison —It is a Treasury matter but I will make inquiries and see what I can find out for you, Senator Carr.
Senator CARR —Thank you very much. Perhaps we will deal with those general issues when we get the ruling. Mr Evans, when do you expect the ruling to be released?
Mr Evans —I think, as has been advised to you, that that is really an issue on which the Treasurer should make the announcement.
Mr Sedgwick —We expect it later today; we do not know when.
Senator CARR —Thank you for that. I have noticed that the Solicitor General has distributed advice under the heading of `Commercial notes' dated 10 May. He draws our attention to some `complex issues surrounding the leasing of premises for non-residential purposes and the application of the GST'. Has the department made any assessment of these issues with regard to educational institutions?
Mr Burmester —No, Senator.
Senator CARR —What about the department's own activities? Has there been any assessment of the costs that will be associated with the leasing of premises for non-residential purposes and the application of the GST?
Mr Burmester —Where the department faces an increased charge due to the GST applying to an invoice it receives, it is claimable as an input tax credit. So it relates to our earlier comments that there is no net impact on the department; there is a cash flow impact.
Senator CARR —Is it a short-term cash flow issue for the department? That is the only implication?
Mr Burmester —That is correct.
Senator CARR —Has the department looked at the issue of liability under the GST relating to procurement? I notice in the same notes on page 4 that, again, there are some quite serious or complex issues. Have you considered this issue?
Mr Burmester —Our legal area has reviewed our contracts to ensure that they are compliant with GST requirements, and they will be able to furnish us with the necessary invoices and so on. Our suppliers will be able to do that. Our changes to our financial IT system will ensure that we can process the payments and claim back our input tax credits.
—That is your input, but I notice in these notes that it says that the Commonwealth could make taxable supplies even where it is procuring and that where the Commonwealth has a GST liability in such unexpected circumstances it is not able to pass the liability on to another party. However, it says that the agreement could provide, for example, that all taxes under the agreement are to be borne by another party. Does that apply to you at all?
Mr Burmester —I am not sure of the full context of the statement you have read.
Senator CARR —I will ask you to take this on notice. What are the implications for the GST application for taxable supplies, even where you are procuring that supply? I refer specifically to page 4 of the commercial notes from the Australian Government Solicitor.
Mr Burmester —I will take that on notice.
Mr Sedgwick —Again, the general point is true: to the extent that we need to assume a liability to pay GST, we can claim it back under the input tax credit arrangements, so the net effect on the department is zero. There are issues to be worked through, in terms of our liability—or, indeed, that of others—in respect of individual transactions but, in terms of our budget, and subject to some timing issues, it just washes out.
Senator CARR —What is the impact of the GST on research grants and other research funds administered by DETYA and the ARC?
Dr Karmel —We are working through the effects at the moment but, under the appropriations ruling, it appears that there will not be any effect at all and the GST will not be charged specifically when these are made to government entities.
Senator CARR —Is it the case that the government has decided to cut funding for a large range of programs of the industry, science and resources portfolio? Are you aware of any cuts in other portfolios?
Mr Sedgwick —We cannot talk about the industry, science and resources portfolio.
Senator CARR —That is a question that I will need to direct to them on that matter. I have some questions that relate to the textbook subsidy scheme more generally, as distinct from the GST application to this matter.
Mr Sedgwick —I am sorry, are you finished with the higher education and schools people?
Senator CARR —I presume so.
Mr Sedgwick —Can I let them go?
Senator CARR —Yes, on GST matters, I believe so. Have you finished with the GST issues on that?
Senator CROSSIN —Yes.
Senator CARR —I have not finished with GST issues, as far as I know. I might just want to double-check those. I do not believe there are any others. Do you have any others?
Senator CROSSIN —I have some questions directed to the assistance for research students, but is that best directed to the higher education people?
Senator CARR —We are still on cross-portfolio issues. I just want to check my notes. On another GST issue, is—
Senator Ellison —Can I clarify if we have got to a stage where the higher education and schools officials are free to go in respect of GST?
Senator CARR —No. Is there going to be any mechanism by which the government will be compensating universities for salary and wage increases, in terms of GST related increases?
—No, not specifically. The government's policy position in respect of its own employees is that the compensation arrangements that exist in the overall package are self-defining and further compensation is unnecessary. The government would not be supplementing universities for any salary movement which they might agree to and justify in terms of GST. The indexation arrangements in respect of the operating grant are not calculated that way.
Senator CARR —I think that is all on GST. The textbook subsidy scheme—
CHAIR —You mean the book industry assistance plan?
Senator CARR —The textbook subsidy scheme is what I understand it was called here. Is that what it is called?
Mr Sedgwick —Yes, that is what we understand.
Senator CARR —You have given me one answer already on this matter on 4 May. I just want to follow up on some of these issues. Do you believe, Mr Sedgwick, that there is any room for rorting of this scheme?
Mr Sedgwick —There are always risks in any government program. The risks in this instance are relatively small in monetary terms. We have worked out our own risk assessment and then our risk management plan to cope with the various risks that might be involved in this case and we will pursue our risk management plan, as you would expect.
Senator CARR —So can I be clear: is it the requirement of the book retailers that they will need to maintain lists and checks on the credentials of students as a means of administering this scheme? Is the book retailer required to do those things?
Mr Sedgwick —Yes.
Mr McAuslan —What we are trying to achieve is a situation where to the extent possible booksellers record the details of textbook requirements from institutions that they service for those textbook requirements. In those cases what we are asking the booksellers to do is to satisfy themselves that they are actually dealing with a student or the parent of a student and offer a discount at the point of sale without any substantiation requirement on them.
As discussed previously, we will be coming up with a fairly substantial post-payment audit regime which will substantiate those arrangements we think satisfactorily. In situations where it does not occur that a book being purchased is on the textbook list for a bookseller by virtue of that fact that they have no direct relationship with an institution, then we are asking that they satisfy themselves that they are dealing with a student or the parent of a student, that the textbook they want to buy, the book they want to buy, is a textbook for them and that they maintain some substantiation to substantiate those particular sales.
Senator CARR —It is quite a task, isn't it?
Mr McAuslan —In many cases it is very little more than they do now; in some cases it is more than they do now.
Senator CARR —Can you explain that to me?
Mr McAuslan —In many cases now, particularly in some states where there are school suppliers who supply the needs of schools particularly, book lists are there; book list arrangements have been in place for a number of years. In most cases we think parents of the students will go to the bookseller that services their institution so that arrangement will be simple.
—So, dedicated books. I go down with my children in a large crowd of people to buy the books. Is that the sort of thing you have in mind?
Mr Sedgwick —If you are dealing with the University Co-op Bookshop or you are dealing with a supplier who is supplying through a school the issues are relatively clear cut. It is a little more difficult if you have got somebody out on the high street who wanders in to a general bookseller.
Senator CARR —That is right. So the Myers book department down in Bourke Street in Melbourne might have a bit of a problem with this, wouldn't they?
Mr Sedgwick —We consider that it is very unlikely that the Myers book department will want to take part in the scheme because they are not substantially involved in textbook sales—it is a voluntary scheme.
Mr Burmester —There is a number of retail models which involve offering discounts, usually fairly small value discounts such as Fly Buy cards, store discount cards and so on, where retailers have managed the requirement to establish that somebody is a member of a scheme by producing a card, showing it to them satisfying themselves, and providing a discount on that basis. The book scheme is based around that model.
Senator CARR —There are 1[half ] million TAFE students at the moment, there are five million school students in the country and there are 650,000 university students—a great many Australians. You are saying that this will be easily administered.
Mr Sedgwick —I do not think we have said that. We have said that there are risks that need to be managed in this context, as there are in other contexts. We have had quite extensive discussions with various representatives of the booksellers. We think we have an implementation model that draws the balance between excessive record keeping on the part of the bookseller and the kinds of evidentiary requirements that we need—evidence of payment. I am certain that we will learn through the next year or two as we manage these processes. They are certain to be refined. I would not pretend to you that it is easy. We can just say to you that we have done as professional a job as we can to make sure that the risks have been properly identified and reasonably managed, without a huge burden being placed on the bookseller.
Senator CARR —How many staff will be administering this program?
Mr Burmester —There will be a relatively small number of staff specifically administering this scheme. They will be handling the administration and policy aspects of this scheme. We would expect that to be, probably, one section. They would also be responsible for the tendering and management of the audit provider who will be required to audit booksellers at their place of work. The accounts processing for this scheme will be handled through the existing accounts processing modules in our financial system and will be largely electronic. We have not identified the extra separate costs for those, but the accounts payable function is the scalable function so that we can add capacity as we need it and as claims are made.
Senator CARR —So how many staff, Mr Burmester?
Mr Burmester —Probably six or so.
Senator CARR —Six people administering a scheme which involves payment and audit.
Mr Burmester —That is the dedicated team. There will be other members of the department who undertake some of the work. The payments, for example, will be put through the accounts processing area of the department.
—How many staff are involved with that?
Mr Sedgwick —It is electronic processing. There is an Internet based application being developed at the moment and it should be quite efficient for those institutions which can work with us that way.
Senator CARR —It would have to be, wouldn't it? You have a scheme which applies to seven million students in this country.
Mr Sedgwick —It applies to a rather smaller number of booksellers than seven million.
Senator CARR —I see, but seven million Australians are going to have access to this scheme, is that correct?
McAuslan —We are certainly hopeful that all of those Australians will have access to the scheme, but because it is a voluntary scheme—
Senator CARR —They will have access to it and you have half a dozen people dedicated to the administration of the scheme. That is efficiency that must surprise even DETYA.
Mr Sedgwick —It is simple if it is an Internet based system. A claim is lodged and it is paid basically electronically.
Mr Burmester —Individual students do not make claims against the department. Booksellers make claims monthly.
Senator CARR —How many booksellers are there in Australia?
Mr Burmester —The estimate we have is about 6,000 or 7,000 booksellers, but it is a voluntary scheme and the number who have predominantly textbook sales is obviously a smaller proportion of that number. We do not know how many will lodge claims or the frequency of the claims to which they submit. They do not have to submit a monthly claim. They can hold their business over and make less frequent claims as suits their purposes.
Senator CARR —You have got 6,000 to 7,000 booksellers. You do not know precisely how many of those will participate in the scheme. Is that the case?
Mr Burmester —That is correct, at this stage.
Mr McAuslan —That includes about 4,000 newsagents, and we would not expect a lot of those to participate in the scheme.
Senator CARR —And how many schools?
Mr Sedgwick —The schools do not matter. It is the bookseller that matters; it is the bookseller that makes the claim.
Senator CARR —Schools sell books directly to students, do they not?
Mr Burmester —In a number of cases, the schools just have an arrangement with a bookseller to provide that service.
Senator CARR —But if the school has a bookshop that sells textbooks to students, are they not able to access the scheme?
Mr McAuslan —Yes, they are.
Senator CARR —How many schools do you believe fit into that category?
Mr McAuslan —That is very hard to estimate because it varies between the states; it varies between the sectors. We do not think there will be a lot of schools in that boat.
Senator CARR —How many universities?
—Every university has its own bookshop or has—
Senator CARR —Has its own bookshop and there are variations within the university, presumably. What about TAFE colleges? Of the 84 institutes, how many of those have—
Mr McAuslan —Most of them are in the same boat as the universities in terms of having a bookshop on campus that is either owned by the institution or by the staff association, et cetera.
Senator CARR —I must say, I am impressed with your ambition to be able to administer this scheme effectively with six dedicated staff.
Mr Sedgwick —The process is basically electronic, subject to a post-program monitoring that we will contract. Therefore, we are covered by those six staff.
Senator CARR —Another consultant? You would get a consultant in to—
Mr Sedgwick —No, it would not be a consultant. It would be a contract of service. We would be looking for—
Senator CARR —I must bear that in mind when we come round to consultants.
Mr Sedgwick —We would be looking for somebody who, either alone or in concert with others, could provide national coverage to implement our audit and risk management framework to the extent that it bears on audit. The claims process is basically meant to be Internet based. It does not require a large amount of human intervention. If it turns out that we need more than six people to manage that processing function, we of course will find more than six people. Mr Burmester is simply telling you the way that we intend to begin.
Senator CARR —I am very impressed. It goes on in the PBS to say that you are going to have feedback from booksellers and students or their parents or guardians on the operations of the educational textbook subsidy scheme. Presumably, there is a lot more than seven million students involved with that. How is that going to be done?
Mr Burmester —In establishing the performance indicators for the program, we wanted to set a target that said that students could avail themselves of the subsidy program and, by that measure, we would determine the success of the program. To gauge their satisfaction and access to the program, we would have to conduct some sort of survey on that. But we certainly would not be going to seven million people to find out every instance in which they would use the scheme. That is not appropriate to the indicator we are trying to achieve.
Senator CARR —So the six people are not going to do that. Is there another consultant or perhaps another contract of service? Would that be right?
Mr Sedgwick —The evaluation strategy that we will employ is something that we will address down the track. But to conduct a survey of this kind, it would be perfectly appropriate to have somebody else go and do it for us.
Senator CARR —What is the expectation on the budgetary allocation for the survey that you are going to conduct?
Mr Sedgwick —I do not have a precise budget for that. I do not think anybody does.
Senator CARR —Do you have one?
Mr McAuslan —Not at this stage.
Senator CARR —So this is separate from audit.
—It is possible that we could include that under the banner of the audit work.
Senator CARR —These people are going to be very busy running around auditing these bookshops and surveying parents and students.
Mr Sedgwick —We will adopt a procedure that enables an appropriate risk managed approach to program monitoring to be put into place, and we will develop a surveying procedure that will give us valid results, but we will not ask seven million students for their opinion.
Senator CARR —Then you predict an 80 per cent satisfaction rate.
Mr Sedgwick —That is a target that we aspire to.
Senator CARR —How did you get an 80 per cent satisfaction rate as your target figure?
Mr Sedgwick —That is PBS—
Senator CARR —Page 42. Have I understood that correctly?
Mr Sedgwick —I will have a look for you.
Mr Burmester —That is a target obviously before the commencement of the scheme. It is difficult to gauge what the level of satisfaction will be but we believe that the scheme has design features that will ensure that most people are able to, firstly, have access to the scheme and, secondly, if the process is run as we have described them then they should be satisfied with getting an eight per cent discount on their textbook sales.
Senator CARR —That is terrific. But I want to know on what basis you calculated that four out of five people would be satisfied so, therefore, one out of five would be dissatisfied with the operation of the scheme?
Mr Burmester —We think it is a target that is a reasonable goal to set at the commencement of the scheme.
Senator CARR —Did you pluck the number out of the air? How did you calculate that four out of five people would be satisfied, but one out of five would not be satisfied?
Mr Sedgwick —It is not a prediction; it is a target that we would aspire to. We would be absolutely delighted if the number were higher.
Senator CARR —I am sure you would. Equally, I presume that you could say it was within the forward estimates that one out of five people are not going to be happy and therefore—
Mr Sedgwick —No, Senator, that is not a correct interpretation of that performance indicator.
Senator CARR —Eighty per cent satisfaction?
Mr Sedgwick —That is the level to which we would aspire in the first year of a new scheme as being a reasonable measure of success in terms of people's understanding of the scheme.
Senator CARR —Do you read these PBSs before they are sent out?
Mr Sedgwick —Do I read them?
Senator CARR —Yes.
Mr Sedgwick —I cannot say that I read every word of them but I read an awful lot of it.
—You were aware that it was an 80 per cent satisfaction rating before we—
Mr Sedgwick —I cannot say that that particular indicator had penetrated my consciousness, but I am not uncomfortable with it.
Senator CARR —It certainly has now though, I suspect.
Mr Sedgwick —I am not uncomfortable with an 80 per cent satisfaction rating in the first year of a new scheme.
Mr Burmester —I was the individual who took responsibility for setting those terms.
Senator CARR —That is very good. How did you do that?
Mr Burmester —As we have discussed, in terms of access—the first indicator—we wanted 100 per cent because that is a goal to which we believe any program such as this should aspire. In terms of satisfaction, we wanted to set a goal that was reasonable and that would indicate that the scheme had been overwhelmingly a success.
Senator CARR —I presume this relies on registration. When does the scheme come into operation?
Mr McAuslan —On 1 July.
Senator CARR —How many schools have registered?
Mr McAuslan —I do not have those figures at the moment. As at close of business Friday we had 100 businesses and schools registered in the scheme.
Senator CARR —The total was 100.
Mr McAuslan —Yes. I might point out that at that stage roughly one-third of the expected expenditure under the scheme had been reached already, based on estimates from those booksellers.
Senator CARR —The 100 that have registered are taking one-third of the money?
Mr McAuslan —Our estimate at the moment is that there are probably 300 booksellers in Australia who account for 90 per cent of textbook sales in Australia. I think we would be reasonably happy if, within the next few weeks, we certainly got those 300 booksellers registered.
Senator CARR —But they have not at the moment?
Mr McAuslan —No, but we are fairly encouraged by the breadth of registration. We have schools, general booksellers and booksellers who sell specifically to schools. We also have the Co-op Bookshop and we have campus based booksellers. We have a good spread and we know that, in the case of booksellers who service the universities, the association that they belong to has indicated that all their booksellers will participate in the scheme. Based on recent discussions with the Australian Booksellers Association, we think the bulk of members of that association will also be part of the scheme. One of the things that we are not sure of at the moment is whether booksellers who sell to schools and who have a focus on the start of each calendar year will actually register now or wait until a later stage in this calendar year.
Senator CARR —They will want to register pretty quickly because the money will be gone.
Mr Sedgwick —No, it does not work like that. It is basically a demand driven program.
Senator CARR —I see. The $115 million you spoke of before—
—It can be exceeded.
Mr McAuslan —We would need to get a different appropriation authority.
Senator CARR —Yes. Is that your minimum estimate?
Mr Sedgwick —No, it is a reasonable estimate, so the number could be lower.
Senator CARR —So these figures in the budget remain just an estimate, do they? They are just obviously estimates to your best guess to what it is going to be in the out years?
Mr Sedgwick —For any basically demand driven program that is the case.
Senator CARR —Could I have a list of the companies that have registered and the moneys and the payments that have been made to them.
Mr McAuslan —No money has been paid. No money will be paid until after 1 July.
Senator CARR —How can you get an allocation of one third—
Mr Sedgwick —No, I think what he—
Mr McAuslan —We have asked registrants is to estimate what they think they will claim in each year. That will give us a—
Senator CARR —So no moneys have been paid.
Mr McAuslan —No money will be paid until after 1 July. In fact, we do not expect any payments to be made until at least August.
Senator CARR —Obviously we need to come back to that then. Mr Sedgwick, you spoke of your fraud control mechanisms. Given that there are six people looking at this issue are you satisfied that you can effectively monitor fraud?
Mr Sedgwick —We said to you that, as part of our risk management approach, we will engage a contractor for service to do some post-payment monitoring and that will be the basis on which we should be able to get an indication as to whether there is an issue of fraud or clarity of guidelines or any matters of that kind that need to be addressed.
Senator CARR —Mr Sedgwick, how does this mechanism—
Mr Sedgwick —Senator, these are really small value claims for individual students.
Senator CARR —A small number of booksellers control 90 per cent of the market.
Mr Sedgwick —For an individual transaction, these are relatively small value claims.
Senator CARR —No. I am not worried about the second form student at Moonee Ponds Central School defrauding the Commonwealth of a dollar. I am talking about the situation where you say a very small number of booksellers control 90 per cent of the market in a program of $115 million.
Mr Sedgwick —That should give you some confidence that our post-program monitoring arrangements, where if we detect grounds for concern about the claims that are being made by an individual institution, either because of its history or because of its performance relative to others, then we have got the capacity to go and audit them rather more intensively.
Senator CARR —Mr Sedgwick, the Australian National Audit Office has had a look at the question of fraud control in the department—
Mr Sedgwick —Yes.
—and, as you know, it is an interest of mine and has been for a while. I would hate to have to see a situation develop where we had to have a whole series of issues explored in terms of this scheme, as we have had with the Vocational Education and Training Scheme.
Mr Sedgwick —I do not accept your characterisation, I must say. Again, experience will tell here one way or the other. We do acknowledge that this is not a riskless scheme but, to the extent that we can correctly anticipate those risks and attempt to manage them, we will certainly do so. I do have no doubt that as this scheme beds down there will be things that we learn and we will tighten systems or clarify systems or work on the evidentiary requirements, possibly both ways, in order to make it work more effectively.
Senator CARR —The Audit Office, when it had a look at the fraud control mechanisms within the department, said that you generally had a sound framework to prevent as well as manage fraud, however the quality assurance of that framework had not been established.
Mr Sedgwick —I am sorry. What report are you dealing with?
Senator CARR —I am dealing with the fraud control arrangements in Employment, Education Training and Youth Affairs, performance audit No. 4?
Mr Sedgwick —What year was that?
Senator CARR —It is dated 22 July last year.
Mr Sedgwick —It did relate to our earlier incarnation as DEETYA rather than DETYA. The thing that I hear from you, though—and it is my understanding—is that the ANAO was reasonably happy with our approach. Since then we have taken some steps to centralise some of our business assurance systems and processes under Mr Kriz's control.
Senator CARR —Can I be clear about this. I have got the right position. They said that the quality assurance components of that framework had not been established but, further, the number of cases reviewed did not use the systematic approach set out in the manual for the officers of the department of fraud prevention units. They went on to say that, as a result, the effectiveness could have been improved in terms of ensuring allegations in actual cases that fraud would be dealt with promptly and that records were both up to date and accurate. Consequently, there were risks that the delays in taking action would inhibit the achievement of successful investigations or prosecution of fraud cases.
Mr Grant —Could you read the first sentence of that paragraph as well?
Senator CARR —I did. I said that there was a sound framework to prevent as well as manage fraud, however—this is now the second, probably the third time I mentioned it. There were these `howevers' that I am always interested in when you talk to auditors.
Mr Kriz —As the secretary has said, that particular ANAO report related to the department in its previous incarnation as DEETYA. It related to a situation where, for example in the investigations area, we had investigators placed in state offices. As a result of the reorganisation of the department following the restructuring in late 1998, we took steps, in particular in part, to deal with some of those issues that were raised. Some of those steps involved bringing investigators into a central unit, which we have now. Those investigators were in my area under my direction. Some of those problems of control have disappeared entirely, because there is not the issue of trying to work out what somebody is doing in Darwin, in Perth or whatever.
We have quality assurance reviews undertaken in relation to our investigations unit by the Australian Federal Police. There is another one due within the next two months, I believe, where they actually go through our approach to investigations and assess whether our conduct of them measures up to the standards that are required of in-house investigators throughout the Commonwealth. We have addressed all of the issues that have been raised in that particular report. We have done major structural changes in the way that the department's investigation unit is done specifically to overcome some of those minor problems that they have identified.
Senator CARR —When it says here that it has not defined fraud control outcomes in a way which fully meets the requirements of the Department of Finance and Administration's definition, has that been satisfied?
Mr Kriz —That is a reference, basically, to having quantifiable performance indicators. That is an idea that could be applied across the whole Public Service, and I am not just referring to investigations and so on. That has required a shift over time of trying to particularise what you are trying to achieve. The example of the discussion that took place here earlier on about the 80 per cent and 100 per cent and so on is precisely what they are after. When we do put things like that in there, we are questioned about why we have put them in. But that is precisely what they are after. We have attempted over time to improve on those. For example, what we have in our current business plans are performance indicators which show that we have three days within which to enter into the IT management system that we have, new allegations that we receive. So we have attempted to improve the position, but it is a question of what sort of a balance you should have in place between quantitative indicators and qualitative indicators.
The National Audit Office and the Department of Finance and Administration are very keen on quantitative indicators and people on the ground are very keen to have a sense of reality injected into quantitative indicators and have some sort of a qualitative balance as well. That is what this department and every other department has attempted to do, I think.
Senator CARR —So when it comes to specifics in regard to this department, as distinct from the general problem in the Public Service, the observation that the Auditor has made that the fraud control performance indicators in the division and the branch do not provide the range of indicators necessary for balanced performance assessments—and he uses the term `balanced'—to price quantity and quality: can you say to this committee that that has now been satisfied?
Mr Kriz —Yes, for example, in relation to price, recently as part of the performance improvement cycle, some of the functions that have been undertaken in my unit have been judged against outside providers and have been found to be very cost effective.
Senator CARR —You just do not catch anyone? Is this how it is cost effective?
Mr Kriz —I think it is a different issue, but we will see in the next little while as cases proceed—they take time, as I have mentioned in previous instances—whether—
Senator CARR —So I can expect some results in terms of the overseas students?
Mr Kriz —I think so, yes.
Senator CARR —I will be very pleased to see that.
Mr Kriz —Yes, I can say to you that, as a result of that, we have changed our arrangements, changed our indicators and that that is not a static process. We review that on a yearly basis when we look at the business plans.
—Is it the case though in the issues that were raised here today regarding the textbook subsidy scheme that your attentions will be directed at the providers—the large booksellers—or will they be directed at the students, because that is what happened in the case of the overseas students issue: all the attention seemed to be directed at the individual visa holder or student rather than at the colleges that were clearly and substantively in breach of the law.
Mr Sedgwick —These guys get involved when there is an allegation of fraud which needs to be followed up. That is where the investigations unit comes in
Senator CARR —So you come in after the event?
Mr Sedgwick —Yes. The post-program monitoring processes intervene. They are our first line of defence in this context and the claim is made by the bookseller in this instance, so it is the behaviour of the bookseller—
Senator CARR —That you would be interested in. What do you feel, Mr Kriz, about the concept of getting in outside consultants or service providers to do the audits: shouldn't you be doing the audits?
Mr Kriz —It is a very modern thing to do.
Senator CARR —To subcontract out the investigations?
Mr Sedgwick —Mr Kriz does not run our audit function. The audit function within the department is in an audit branch. There is a decision to be made about how we do that post-program monitoring, post-payment monitoring, to use the jargon of this program, then we have chosen, given the dispersed nature of this task, to tender that process so that we can get it done across the country in a timely fashion.
Senator CARR —Will it be a front-end auditing arrangement, a paper-auditing arrangement, or will there be provision to actually have a look at the operations of these persons making claims on the Commonwealth for moneys?
Mr McAuslan —It is a fairly substantial systems based audit approach.
Senator CARR —Does that mean it is paper based?
Mr McAuslan —It will be paper based, but also looking at the IT systems that booksellers have in place and whether they can calculate the eight per cent discount accurately or whether they record the details of textbooks appropriately or—
Senator CARR —So it will not just be a desktop audit. Is that what you are saying?
Mr McAuslan —It will not be.
Senator CARR —If I could return, Mr Kriz, to the recommendations of the auditor's report, recommendation 1, says:
The ANAO recommends that comprehensive monitoring arrangements should be established in relation to the implementation of fraud control action plans to inform the Department's Executive of the effectiveness of fraud control arrangements for the Department as a whole.
Has that been completed?
Mr Kriz —Yes.
—Recommendation 2 says `to improve performance assessment, to develop a full range of fraud control indicators, to define terms such as quality and timeliness' and `to include all fraud control indicators from State and Territory agreements'. Has that recommendation been completed?
Mr Kriz —Yes, with one proviso that that is an ongoing function. I do not believe that it would be accurate to say that it is ever complete. That is something that needs to be examined on a yearly basis.
Senator CARR —The recommendation 3:
To facilitate the appropriate management of allegations and cases of fraud the ANAO recommends that the Departments should implement a system of quality assurance ...
Has that been undertaken?
Mr Kriz —Yes, as I have mentioned to you, Senator, we are quality assured by the Australian Federal Police in relation to the investigations that we carry out and there is another review coming up within the next couple of months.
Senator CARR —It continues in recommendation 4:
The ANAO recommends that the Departments assess training needs in relation to fraud control so that it is targeted to staff in areas with the highest potential for fraud ...
Has that been undertaken, Mr Sedgwick?
Mr Kriz —Yes, we do provide training to staff. We pay visits to all our state offices on a regular basis in each financial year to deal with raising awareness and, indeed, to get information from them directly about potential problems and so on.
Senator CARR —To your knowledge, because presumably you would be asked about these matters, has the Australian National Audit Office examined any of the allegations of fraud that have been initiated against the vocational education scheme or the student visa within the ESOS Act?
Mr Sedgwick —Not that I am aware of, but the allegations you are making there, Senator, involve state jurisdictions.
Senator CARR —No, the ESOS Act is a Commonwealth act.
Mr Sedgwick —Not that I am aware of in respect of ESOS but, again, a number of the things that you are dealing with relate to visa fraud, which is not part of our jurisdiction at all.
Senator CARR —Yes, but in regard to the operation of colleges that are organising these scams?
Mr Sedgwick —We will have that debate later.
Senator CARR —Yes, we will.
Mr Sedgwick —But no.
Senator CARR —Has the National Audit Office examined the effectiveness of the department's response to those issues?
Mr Sedgwick —Not that I am aware of.
Senator CARR —Is it the case that you are still operating on the basis of primarily looking at the contractual frauds against the department, rather than frauds within a service industry of the department?
—We are applying our legislation. When we are dealing with Commonwealth payments, then we need to have processes in place that will enable us to manage risks in respect of those payments. We do not have a general policing function though in respect of any of the sectors that we fund or regulate.
Senator CARR —So you are maintaining that pattern in the next year. Is that your intention? It is not to examine, for instance, in terms of risk management, the issue of fraudulent behaviour covering legislation that is administered by this department in regard to ESOS?
Mr Sedgwick —We will administer the act.
Senator CARR —It is not intended to change the fraud protection program of the department?
Mr Sedgwick —We will administer the act as it is in place at the time.
Senator CARR —So there is no intention to change the fraud protection strategy of the department?
Mr Kriz —In a very major way this government, this minister and this department are undertaking to deal with risks in the ESOS area by shortly putting forward legislation before parliament to actually improve our ability to deal with the problems such as might be in the sector. It is a major change.
Mr Sedgwick —And we will act in compliance with the act as it exists from time to time.
Senator CARR —Can I perhaps turn to some general issues as we normally do that this time of the year, Mr Sedgwick? Is there a consolidated list of staffing figures for the department within this PBS I may have missed?
Mr Sedgwick —No, the staffing numbers typically are in the annual report, as I recall.
Senator CARR —Can you advise me what is your establishment likely to be as of June 1999 and your expectation for June 2000?
Mr Sedgwick —I recall my colleague telling me that I have 1,452 members of staff—not ASL, as I recall. At present how those numbers will evolve over time is difficult to say. I am not forecasting large variations much one way or the other. A few people here or there does not matter for this purpose in a number of that size.
There are though, as you know, a number of issues that will need to be addressed over the year ahead. For example, IT outsourcing is an issue that we need to contend with this year. I think the plan would be that, if there were to be an outsourcing outcome of the market test that we will shortly engage in as a member of Group 11, the handover of those functions would occur in July 2001, I think. But, leaving aside things like that, I would not imagine big variations one way or the other—10 up, 10 down.
Senator CARR —Yes, fair enough. What do you anticipate to be the staffing implications of that IT outsourcing?
Mr Sedgwick —I would not prejudge the outcome of the IT market test. I think that we will take those implications as they occur at the time. We have been through the IT market testing process once before and the outcome in that case was that we did not outsource, but I would not prejudge the outcome of this process.
Senator CARR —I am wondering if I could get an update on the staffing figures provided on the question on notice I asked at the previous budget estimates, just to complete my files in that regard.
—Senator, in response to your first question, the budget papers show that the average staffing level for the department for this financial year would be in the order of 1,360 and for next financial 1,350.
Senator CARR —Of 1,360.
Mr Sedgwick —That is ASL.
Mr Watson —Average staffing level.
Mr Burmester —It is on page 677 of Budget Paper No. 1.
Senator CARR —Have you had any voluntary redundancies in the past years?
Mr Sedgwick —Small numbers, as I recall.
Mr Burmester —There were two aspects to redundancies in the department. First, as you will recall, last year there was a $10 million reduction in the departmental expenses for the department and that resulted in a round of voluntary redundancies. Some of those redundancies actually occurred in this financial year, but they were triggered by the events of the previous budget.
Senator CARR —Has there been a similar reduction in the department's—
Mr Burmester —There were 30 staff who accepted voluntary redundancies this financial year as a result of the previous budget round. Since that time, apart from those 30, there have been two others this financial year.
Senator CARR —What is the cost of those redundancies?
Mr Burmester —The payment for the 30 staff was $2,096,000.
Senator CARR —Is it expected that there will be any further redundancies in the out years as a result of the budget?
Mr Sedgwick —No, not as a result of the budget. We had a price review of output—not in this budget but the budget before—which gave us a relatively stable platform of our departmental expenses, what were formerly known as running costs, for the years ahead. This year's budget numbers reflect the fact that some programs end, for example, and others start up. Our numbers reflect, as I recall, some clawing back of wholesale sales tax and better wholesale sales tax in respect of our own expenditures, but—
Senator CARR —How much is that—that clawback?
Mr Watson —In the order of $2.7 million, I think.
Mr Sedgwick —As a consequence of the budget, there is no need for large redundancies within the department. We will always assess redundancy issues on a case by case basis as they come up through time. As they say, we do not know where the IT thing is going.
Senator CARR —DETYA really has moved a long way in the last four years, hasn't it? What was your staffing entitlement establishment figure five years ago—$18,000?
—There are two things, I think. One is DEETYA and the other is DETYA. If you are trying to get a time series of DETYA, then you need to exclude the employment functions of the department that are now managed out of DEWRSB. Without having the hard numbers, my sense of the DETYA numbers is that, apart from the slimming down of our back office that you and I spoke about on an earlier occasion and the change that we talked about last year when the price of our output was reduced following the price of output review that had occurred in that budget context, our numbers have just bubbled along. There has not been a big change in the DETYA baseline number apart from those things.
Senator CARR —And you are saying that education services have remained relatively static?
Mr Sedgwick —Relatively stable through that time. The numbers have gone up and down as we have taken on board short-term projects or whatever, and we have had to make a couple of step changes. One was to get our back office slimmed down a bit as we came down from being the bigger entity to the smaller one, and the other was in the context of last year's budget, but pretty well within small numbers—20 or something; it has been reasonably constant.
Senator CARR —We could probably argue the toss about that for some length. As you know, I am always interested to know what polling you are undertaking.
Mr Sedgwick —We do not do polling.
Senator CARR —You do not do any polling?
Mr Sedgwick —The only market research type activity that we do is in conjunction with particular advertising campaigns, but we do not do general polling.
Senator CARR —That includes new apprenticeships?
Mr Sedgwick —Again, we have done some work around the new apprenticeships marketing campaign, but I am not aware that we have done other polling.
Senator CARR —What I would like then is an indication of all polling—market research if you like—surveys and advertising conducted by the department as updated on the last published annual report. Can you provide that?
Mr Sedgwick —Okay, we can take that on notice. The next annual report will be available in September—not too far after the return date.
Senator CARR —Yes. I would like to know the form of tender and whether the tender was the lowest received or, if there was not a tender, whether a consultant arranged a service contract for such work. I would also like to know the date due for reporting on such projects, if they have been let, and whether or not there has been any involvement of the minister or his office in the commissioning of the work.
Mr Sedgwick —Again, typically if it is a marketing exercise and the government has well established arrangements about the involvement in the minister's—
Senator CARR —Yes, I know, but it is a standard question I ask on a regular basis, but I am interested to know—
Mr Sedgwick —We will take the rest of the question on notice.
Senator CARR —I would like to know if I could get an update on the information on the table of consultancies, including service contracts, or service contracts of service—whichever way you want to define it—as has been provided in the previous year. I would like to know, particularly, of any contracts let since June 1999 and the details of any ministerial involvement, the letting of any contracts, service agreements, media polling or advertising contracts.
Mr Sedgwick —That is a very broad question.
Senator CARR —And you answer it every year, Mr Sedgwick.
—I am just asking whether it is possible to put some limits on that question so that we do not need to engage in quite the same intensive resource costs as are required to meet that every year.
Senator CARR —You answered it last year; why can't you answer it this year?
Mr Sedgwick —We did answer it last year and it involved an enormous amount of effort.
Mr Burmester —Senator, in last year's answer, we provided the additional information in regard to consultancies, and we did not include all contracts for service because there are just so many of them in the department. There is a difference—
Senator CARR —Mr Burmester, how do you want to limit it? Let us have a look at that.
Mr Burmester —First of all, there is a difference between departmental contracts and funding contracts which would otherwise be payments of grants and so on, arrangements from program funds, and that can obviously be a great number, and they are appropriately provided with the information sought from program areas. In terms of departmental expenses, we could provide details of contracts for service that was sizeable, but if we went to every purchase of the department through a contract for service, it would be a large—
Senator CARR —What do you believe to be a reasonable cut-off figure? How do you distinguish between a major and minor contract?
Mr Burmester —For the purposes of the procurement guidelines we use a $50,000 cut-off which requires an open tender or an exemption from open tender on limited grounds. So a $50,000 limit to the size of the contract would substantially reduce the numbers of contracts we reported on and therefore save an awful lot of work. Again, I would say that these are collected across the agencies. We do not have a single contract unit in the department—it is across all divisions.
Senator CARR —I will take it at $50,000 if you think that is quite a reasonable way of dealing with it. We will have a look at it on that basis. We can always return to it. I would be interested to know the date the tender was let, the completion date, details of the reports to be published and the date of availability of the reports to this committee—standard procedure. I would like to know the expenditure of contract values throughout the last year. I would like to know if there have been any previous DETYA staff involved in any successful tender or project. Presumably there are guidelines operating in this area and I want to know whether or not they have been met.
Mr Sedgwick —The guidelines that operate in this area do not require us to keep track of former DETYA staff indefinitely. There are some issues about individuals who may have taken a VR. I think we will find it very difficult to answer that last part of the question.
Senator CARR —What are the guidelines at the moment? Was it three years—former staff cannot be re-employed as a contractor in three years?
Mr Burmester —The guidelines are that a former APS employee who takes a VR cannot be re-employed in the APS under 12 months, either as an ongoing employee or a non-ongoing employee. On our appointment forms we request that information from the individuals.
Mr Sedgwick —Whether there is somebody who is in a consultancy firm somewhere that fits that category.
Senator CARR —You would have no way of knowing.
—If it is somebody who is the principal part of the contract then we might know but, apart from that, God knows. Do we have a cleaner who used to work for the department? I do not know.
Senator CARR —Obviously I am not interested in cleaners in the sense that it strikes me that there is a significant amount of the business of this department now contracted out. I am interested to know whether or not officers are taking redundancy payments and then being contracted to undertake work by the department or any of its agencies.
Mr Burmester —The provisions on employment are quite strictly adhered to, as I have indicated, and we require a statement that individuals are not in those circumstances. When it comes to consultancies, we ask for the personnel who are going to operate the consultancy and it could be that that would bring to our attention that a former employee was now offering consultancy services. The only limitation on that are the guidelines that say that, if consultancy arrangements are established to overcome the employment prohibition, it should not proceed. From my recollection there have not been cases such as that in the department for those people who have taken VRs. There may have been some cases where people have resigned from the APS and established a consultancy firm and won tenders or been awarded contracts. We would not have knowledge of those unless they were personally known to the individual who was letting the contract that the person was a former APS employee.
Senator CARR —Fair enough.
Mr Sedgwick —In the earlier life of the department, when we did manage the employment function, of course there were large numbers of people who took a VR but ended up working for successful tenderers in the first round of Job Network. They were employed by their firms and we would not have had records of those at the time.
Senator CARR —I notice that 76 of the 113 consultancies listed in the annual report were let because the specialist skills were not available to the department. Would you agree with that figure?
Mr Sedgwick —I take it that you have correctly taken the numbers out.
Senator CARR —That is the information I have before me.
Mr Sedgwick —I will get one of my colleagues to check them for you.
Senator CARR —If you are happy to do that. What strikes me as odd about that is that this represents an increase in over 66 consultancies which were let for this reason in the previous year and obviously a significant increase in the total percentage. Mr Sedgwick, are you not concerned at the loss of specialist skills within the department where you have to use often more expensive means to attract those skills back to the department by way of consultancies?
Mr Sedgwick —It depends on what kind of skill we are talking about. I guess the area of specialist interest that the department needs to retain in-house changes over time. In, for example, a year when we have a lot of work being done on, say, the development of testing procedures for literacy, that is not a matter in which our department would hold specialist expertise and I do not think it is an area in which we would need to develop specialist expertise. There are others in the universities and other places who do hold that expertise and in support of an agenda that may be focused on literacy and numeracy, for example, we would have recourse to that kind of expertise.
When we are dealing with marketing issues or in some cases the organisation of significant events, it is often more effective in terms of our use of specialist expertise to have other people to perform market research or to organise a function of some kind rather than have people whom we principally employ for their policy advising skills to be diverted from that work in order to do something which is reasonably episodic.
Senator CARR —But is it value for money?
Mr Sedgwick —Yes. We would not let such a contract if it were not value for money.
Senator CARR —What evaluation have you done on that basis?
Mr Sedgwick —We make that assessment each time that we decide to let a consultancy or a contract for service.
Senator CARR —I have just noticed that, of the 113 major consultancies detailed in the report, only 30 were under public tender. Is that correct?
Mr Sedgwick —Again, you have the numbers and I am sure that my colleagues can address the numbers issue.
Senator CARR —You might well tell me that this is a slight improvement over the previous year but it still remains I think an extremely small number.
Mr Sedgwick —It is. The guidelines require that a judgment is made in each case and, when a tender that should, on its face, go to open tender in fact proceeds in another way, that is because a senior officer of the department has certified that the exemptions that are available under the guidelines have been complied with.
Senator CARR —Perhaps you can assist me in that regard. You say it is because a senior officer of the department has determine that an exemption applies?
Mr Sedgwick —Typically, yes. It depends on the situation.
Senator CARR —Where an exemption has been applied, is it possible to provide why the authorising officer did seek the exemption and what market intelligence was applied to the specific contract in determining why the exemption should apply?
Mr Burmester —The figures for the 1998-99 year are that, of the 46 contracts let in the period that required an open tender, 25 went to an open tender and 21 obtained an exemption. In each of those cases, the reason for the exemption is recorded and we could add that to the list of items that you previously asked for.
Senator CARR —If you would not mind. It is does seem an extraordinarily small number actually going to open tender in that regard. While I know we are due to finish at 12.30, I would just like to finish this. There are a couple of questions here that I will put on notice; I think they are small. I would like to know what percentage of consultancies, service contracts and media and advertising contracts that went to open tender were above the threshold for the period 1999-2000? I presume that is close to the figure you have already given me, Mr Burmester?
Mr Burmester —That is for the current year. I imagine it would be roughly the same proportions.
Senator CARR —Yes. Up to this point?
Mr Burmester —I can give you figures on that up until 31 March.
Senator CARR —Thank you; I would like to have those.
Mr Burmester —I am doing a quick addition here: 33 are requiring an open tender, or above the threshold for an open tender; 15 obtained an exemption; and 18 went to an open tender.
—What typically is the reason for the exemption being applied?
Mr Burmester —We would have to compile the list and extract the information to establish a trend. I am not sure, but in some cases the grounds are that it is inexpedient to go through a tender because of a reasonably urgent requirement on whatever the project is. On some occasions you do not go to an open tender because it is pretty certain that there is a limited number of people who can actually provide the service and you wish to avoid imposing the costs of tendering not only on the department but also on the suppliers if, realistically, the expertise is limited to a limited number of firms.
Senator CARR —Could I have a total advertising budget for the department per outcome as listed on pages 144 and 145 of the PBS?
Mr Sedgwick —We do not manage an advertising budget on that basis. We can certainly tell you the amounts that we currently know would be spent on advertising under those outcomes, but there is not an advertising budget per se.
Senator CARR —I would like to know the cost of advertising associated with each of those outcomes. I do not seem to see it anywhere within the PBS.
Mr Sedgwick —In the budget years or the forward years, or both?
Senator CARR —In the forward years, if you could, please, and in the current year, obviously.
Mr Sedgwick —Again, it is not a budget but there would be programs that have an allocation for advertising, and we can give you that.
Senator CARR —I understand we are breaking for lunch.
Senator CARR —We have not concluded cross-portfolio.
Mr Grant —I understand some of our ANTA colleagues are booked currently on a twenty to five flight.
Senator CARR —That is extremely optimistic.
Mr Grant —Could I check with the committee whether there is any likelihood that ANTA questioning will be complete, say, by 4 o'clock. If not, obviously they will need to rearrange flight schedules.
CHAIR —Thank you for that. I am sure my colleagues will bear that in mind during the questions this afternoon.
Senator CARR —We will have a better view of that around 4 o'clock.
CHAIR —The committee stands adjourned for lunch.
Proceedings suspended from 12.33 p.m. to 1.36 p.m.
CHAIR (Senator Tierney) —We continue the estimates hearing with cross portfolio questions.
Senator CARR —In this round of estimates last year, Mr Sedgwick, I asked you some questions about the ANAO scoping report on training. Has that been concluded?
Mr Sedgwick —The only thing that I can think of that would fit that bill was that the ANAO was doing some work with our training and youth division about the management of some of their programs.
—I will ask you to take that on notice. It was canvassed in the estimates last year at this time.
Mr Sedgwick —We have asked someone to have a look at the Hansard from last year to see what that might be.
Senator CARR —That is fine. You can take it on notice.
Mr Sedgwick —If it is the ANAO exercise that I have in mind, that exercise between ourselves and the ANAO is at a very advanced stage. It is up to the Auditor-General to decide when and in what form he will release his report. It is with him, basically.
Senator CARR —If that is the scoping report—
Mr Sedgwick —I think it is.
Senator CARR —could you take that on notice to confirm the particular—
Mr Sedgwick —The rules, unfortunately, prevent me from foreshadowing what might be in the ANAO report.
Senator CARR —I am not asking you that at this stage. I am just asking when you anticipate the report being available.
Mr Sedgwick —If it is that one, it is in the hands of the Auditor-General. The involvement between ourselves and them is well advanced, so it should not be a long way away.
Senator CARR —There has been considerable concern expressed to me about the abolition of the National Board of Employment, Education and Training, Mr Sedgwick, with the exception, of course, of councils such as the ARC. All the associate councils have now gone. My understanding is that New Zealand, in recent times, has moved to establish an equivalent structure of what used to be known as the NBEET. Its role will be to provide strategic long-term advice and bring together in partnership what is called key contributors in the sector.
In the information provided to me, I understand that the New Zealand government has sought to develop a more cooperative and collaborative tertiary education sector that will build and assist them to become a world leading knowledge in economy, learning and so on. So that is on the web site of the Tertiary Education Advisory Commission of the New Zealand government. Given the section you have here on strategic priorities for education, training and youth affairs in the portfolio, which is on page 10 of the PBS, have you at any point considered examining what the New Zealanders are doing in this regard? Have you had any discussions with the Zealand government about the measures that they are undertaking?
Mr Sedgwick —There are a couple of things here. One is that the Australian government has developed its policy position and made it clear some time ago. The position of the government is the one that you alluded to at the beginning. NBEET is to be abolished and the work of the ARC is to be carried forward. This is in the context of the new framework for the ARC that was announced in the government's white paper last Christmas. That is the position that the government has taken, irrespective of what other governments may have done in other places.
In terms of our own understanding of the New Zealand approach to higher education and indeed post compulsory education more broadly, if my memory serves me correctly, an officer from our counterpart agency in New Zealand has come to address a senior level group in our organisation. I was not in Canberra that day so I was not present, but we do have a reasonable understanding of what they are doing and why. The government has chosen to do some things that are similar and some things that are not.
—What things do you regard as being similar?
Mr Sedgwick —If you want to have a long debate about higher ed between Australia and New Zealand, I think we should do it in the context of higher education where the higher education people can answer in detail. A number of the approaches that we have looked at have got some similar elements, particularly in terms of greater empowerment of students. We have just gone about it in different ways.
Senator CARR —This in no way indicates that there is a possibility of a change in direction in the Australian government?
Mr Sedgwick —No. You have specifically asked us about New Zealand, and I answered you in that context. We maintain a watching brief on a number of jurisdictions around the place. For some, it would take the form of surfing the net, with an occasional visit. A visit to somewhere like New Zealand is a little easier; the plane trip is not quite so onerous. You should read nothing into the fact that we maintain a degree of contact with a number of our counterparts.
Senator CARR —On PBS page 20, there is a summary of budget measures. In the minister's press release on 12 May entitled `Beazley's education blunder continues', he claims that the opposition, in speaking out about that budget, has ignored $62.9 million spending on the SPIRT program, $13.4 million on the Discovering Democracy Program, $47.3 million on the ASTF and $109 million for the New Apprenticeships. In the summary of budget measures, there are no additional moneys actually shown. Why is that?
Mr Sedgwick —Those programs are formally known as being lapsing programs in the budget processes that we go through. In those cases, though, the forward estimates had included a provision to enable those programs to be funded in future years should the government so decide. In this year's budget process, the government considered whether or not it wanted to continue those programs and it made a judgment that it did.
So there is provision in the appropriation bills when they come forward to enable the funding to be put at the levels that you were just talking about. But because the forward estimates had already included notional sums of those orders of magnitude, the convention that Finance adopted this year was that they would be shown as zero in the measures table because they did not add to the budget bottom line.
Senator CARR —I would point to another example where the PBS does not actually demonstrate what the department is intending to do.
Mr Sedgwick —I am not sure that that is correct. Can you just bear with me for a second?
Senator CARR —Certainly in terms of the summary of budget measures, which is another document on top of this, is it not?
Mr Sedgwick —The portfolio budget statements have been compiled with the guidelines that we were talking about earlier on. The tables in the body of the text and the description of the measures reflect the budget conventions that we have been asked to adopt. In the appendix at the back, which we were talking about, you will find those numbers that reflect the level of the appropriation against the administered item.
Mr Watson —SPIRT is not separately identified under outcome 3 in appendix 4.
Mr Sedgwick —The dollars are there but the program is not separately identified. As I said to you earlier, there is not a program presentation of the budget. It is an output based one.
Senator CARR —Where do I find the Discovering Democracy Program—$47 million?
—Again that will be in this table. Whether it is separately identified or not, I am not sure.
Senator CARR —I do not think it is separately identified. You would expect the ASTF to be identified. Perhaps you could show me that.
Mr Sedgwick —Again, we will need a colleague who was involved in putting the numbers together to tell you where it is precisely but, as I can see, the ASTF is not separately identified. The numbers are there.
Senator CARR —For the committee's benefit, I do think that this ought to be enough.
Mr Sedgwick —Sorry, I correct that. Output 1.3 is about half way down that block of text—20.3, 20.5.
Senator CARR —With regard to those items that are not separately listed, I do think that the committee ought to draw attention to the inadequacy of the PBS in those matters.
Mr Sedgwick —A judgment needs to be made about the level of detail that is provided.
Senator CARR —It might be the case, but I am suggesting to you that the department of finance guidelines are inadequate. You are saying that you are following them but I cannot follow these items because they are not separately listed, yet the minister feels it necessary to criticise the Leader of the Opposition for not identifying these programs in the budget. They are not listed in the budget, it would seem to me.
CHAIR —At the start of the estimates we did ask people to raise any concerns about the PBS. You have done that, and that is fine.
Senator CARR —We are doing that.
CHAIR —It is on the record and that was what was requested.
Senator CARR —In the budget measures document the Discovering Democracy Program, as I have it listed in front of me, has no forward estimates moneys allocated.
Mr Sedgwick —What it has is no money in addition to the forward estimates. The forward estimates included a notional allocation for that program. It was a lapsing program. It required a decision of the government in order for it to be maintained. That is why it is in the measures table.
Mr Watson —Could I correct something there? The funding for these particular items is identified. If you look at page 30 of the PBS you will find the Australian Student Traineeship Foundation with the dollars which were included there, and if you look at page 81 of the PBS you will find information there on SPIRT and RIEF, so the information is actually identified within the PBS.
CHAIR —Sorry, on page 81—SPIRT?
Senator CARR —On the bottom of page 81—Strategic Partnerships with Industry.
CHAIR —I see that.
Senator CARR —My point, nonetheless, is that this is not very clear. The tables at the back do not indicate it. You have to hunt around this document a fair while before you are able to discover the various nooks and crannies in which these items are referred to.
—I would draw your attention to the fact that it was not where I first went to, and I acknowledge that. But the material that Mr Watson was just reading to you is under a heading under each outcome and is called Measures Disclosed in the 2000-01 Budget Affecting Outcome—whatever it is, number X.
Senator CARR —Can you give me an indication as to the amount of money spent per person on education? There is an article that appeared in the Australian on 9 May this year, which put the view that the levels had declined to the lowest levels since 1991-92. The article says that spending under the current government dropped from $560 to $497 per person in the first three years of the government, or 11.4 per cent. Are you able to confirm or deny those figures?
Mr Thorn —I think you are referring to a report in the Australian regarding a paper, `Trends in Commonwealth social expenditure and employment in the 1990s,' which was authored by Dr Linda Hancock and Ms Sally Cowling from the Centre of Public Policy at the University of Melbourne.
Senator CARR —Yes.
Mr Thorn —In response to your question, our analysis of that paper indicates that the comparison was made using figures drawn from budget papers over the period but which did not take account of two major changes in terms of presentation of expenditure over that period. The first was the change in the treatment of HECS from a cash to an accruals basis and the second was the transfer of the Austudy under 25s from the education portfolio to the social and welfare portfolio in 1998-99. On that basis we do not believe that the figures presented in that paper represent an accurate reflection of what has gone on in terms of expenditure per capita.
Senator CARR —Do you have any figures on the amount spent on education as a proportion of GDP?
Mr Thorn —There are several sources of information about expenditure as a proportion of GDP. As you are aware, the Australian Bureau of Statistics puts out a regular series on an annual basis in a publication, Expenditure on education in Australia, and in addition the OECD puts out some figures in Education at a glance, which comes out on an annual basis. They are usually the two major sources of data on education expenditure as a proportion of GDP.
Senator CARR —Are you able to confirm that the spending on education as a proportion of GDP over that same period referred to in the article earlier has declined from 1.94 per cent to 1.61 per cent?
Mr Thorn —I think we have got to be clear about what we are talking about here. In terms of the ABS, this is expenditure on education that includes public and private sources and personal benefits as payments as a percentage of GDP. In 1997-98, which is the latest year available, it was 5.2 per cent and, in 1994-95, it was 5.3 per cent of GDP.
Senator CARR —Thank you. Do you have the funds spent on schooling as a percentage of GDP?
Mr Thorn —I would have to take that one on notice and we will probably get back to you later in the day. Certainly, the ABS estimates will provide a figure spent on schooling.
Mr Sedgwick —We do have those figures. If you ask for them again when our school's people are here, I am sure they can answer that for you.
—I am happy for you to take it on notice; you can give it to me later in the day. I have another issue in terms of the staffing matter, Mr Sedgwick. I am interested to know whether or not you believe there are any staffing implications of proposed legislative changes that the government has announced already that is in regard to the quality agency and higher education and the ESOS Act?
Mr Sedgwick —The ESOS Act will involve the need for additional staff. We are moving to put those staff in place pretty well immediately. My recollection of the numbers is that we would be putting another five people into that task. The other question was?
Senator CARR —It was on the quality assurance agency.
Mr Sedgwick —I am not aware of how the quality assurance agency is intended to be funded, but I can check that for you immediately.
Senator CARR —I would be interested to know what additional functions you believe the department will be required to undertake under the ESOS Act changes that have been announced.
Mr Sedgwick —Again, when our people are here, we can go through that.
Senator CARR —I will leave that until later on.
CHAIR —Thank you, Senator.