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Thursday, 10 October 1996
Page: 5172

Mr SOMLYAY(11.06 a.m.) —On behalf of the Joint Committee of Public Accounts, I present the following report: Report No. 346—Guarding the independence of the Auditor-General.

Ordered that the report be printed.

Mr SOMLYAY —I seek leave of the House to make a short statement in connection with the report.

Leave granted.

Mr SOMLYAY —The JCPA report No. 346 I am tabling today is of paramount importance to the future of the parliament itself. Prior to the 1996 election, the Hon. John Howard, now Prime Minister, gave a commitment to the Australian people to establish a completely independent Auditor-General who would be an officer of the parliament, as part of a broader strategy to restore authority, dignity and meaning to parliamentary institutions. The existence of a strong and independent Auditor-General is fundamental to the effectiveness of the parliament itself in its scrutiny of executive government. Indeed, a former Auditor-General told the JCPA in 1994 that he considered the question—who will control the Auditor-General?—to be one of the great battles between the parliament and the executive. It is a battle which has had a long history.

In 1902, the first Auditor-General in his first report to parliament stated that his office was inadequately resourced for the discharge of its audit functions. The JCPA has reported to parliament twice in the last decade on the desirability of strengthening the relationship between parliament and the Auditor-General. In its report No. 296 tabled in 1989, the JCPA informed parliament that the Australian Audit Office, as it was then, was in a state of crisis, that it was underresourced and that a lot of problems stemmed from parliamentary complacency.

The JCPA also reported that there was confusion about whether the executive or the parliament was responsible for the Auditor-General, with the result that the office was neglected by both. In report 331, tabled in 1994, the JCPA made a series of recommendations to amend the Auditor-General Bill 1994 to enhance the functional independence of the Auditor-General from the executive and provide for greater parliamentary involvement in the performance of the audit function. Today, seven years on from the original JCPA report, the question of where the Auditor-General fits in the framework of government still generates heated debate, as the committee discovered during this inquiry. However, the incumbent Auditor-General, Mr Pat Barrett, was in no doubt that he considers parliament to be his employer.

In this report the JCPA has recommended that the Auditor-General be declared in the Auditor-General Bill to be an independent officer of the parliament. The title encapsulates the role and status of the office of Auditor-General. The Auditor-General performs a function that is essential to parliament and parliamentary scrutiny but which the parliament itself has neither the technical expertise nor the resources to perform.

While acknowledging that the debate about the status of the Auditor-General is essentially about symbolism, we believe that symbolism is extremely important. To a very large degree, the way in which the position of Auditor-General is described influences public perceptions of the role and the significance of the office. It is important to note, however, that in the legislative model proposed by the JCPA the Auditor-General would not be subject to direction by the parliament. The JCPA has recommended that a guarantee of the Auditor-General's audit independence be enshrined in the Auditor-General Bill, putting beyond doubt that the Auditor-General has complete discretion in determining the audit program of the ANAO, the Australian National Audit Office, and in deciding the manner in which audits will be conducted.

The Minister for Finance (Mr Fahey), in referring this matter to the JCPA for inquiry, drew the committee's attention to the concerns that appointment of the Auditor-General as an officer of the parliament could damage the independence of that office. The committee has reviewed the legal opinions obtained by the Australian National Audit Office on this issue. The committee is concerned that these legal opinions were obtained in a vacuum of policy advice about the intentions or will of the government and the parliament in appointing the Auditor-General as an officer of the parliament. This is criticism neither of the legal opinions nor of those who sought them, but it is the reason why some of the legal concerns raised in the inquiry are not relevant to what the JCPA is recommending in this report.

The committee has attempted to allay the fears about the appointment of the Auditor-General as an independent officer of the parliament in this report, outlining in some detail what the JCPA means by that title and recommending provisions to be included in the Auditor-General Bill to clarify the meaning and intended ramifications of the title. In the JCPA's legislative model regarding the independence of the Auditor-General both the position of Auditor-General and the Australian National Audit Office would be established as statutory offices for whom the Prime Minister would take portfolio responsibility.

An important element of the new framework to underpin the independence of the Auditor-General is the establishment of an audit committee of parliament. The audit committee on behalf of the parliament would enhance the transparency of decisions taken in relation to the Auditor-General. In particular, the audit committee would approve the appointment of the Auditor-General, examine the proposed appropriations for the Australian National Audit Office and make recommendations to parliament and to the executive on appropriate levels of resourcing, monitor any executive directions to the Auditor-General and approve the appointment of the independent auditor and advise the independent auditor of parliament's audit priorities.

In his letter of referral, the Minister for Finance confirmed his intention to seek cabinet agreement that the JCPA be given the function of an audit committee. The JCPA is enthusiastic about the prospect of becoming an audit committee. The audit committee functions are an integral part of the JCPA's existing broad role of reporting to the parlia ment on means for improving public accountability.

In this report the JCPA has also recommended a range of measures that could be incorporated in the new Auditor-General Bill to support the functional independence of the Auditor-General. The committee was flying blind, not having been given a preview of the Auditor-General Bill 1996 and thus not being in a position to suggest specific amendments or additions.

The committee has recommended that the Auditor-General Bill provide for the Auditor-General to have a mandate to conduct the full range of financial and performance audits across the entire public sector, including performance audit in government business enterprises. The committee has also recommended that the Auditor-General Bill provide for the Auditor-General to be appointed for a fixed term of 10 years.

It will be apparent in this report that the JCPA considers the independence of the Auditor-General to be absolutely fundamental to public accountability in Australia. If the Auditor-General is not properly resourced or does not have a legislative mandate to carry out an effective and broad scrutiny of the public sector, then parliament itself is compromised in its ability to hold the executive government to account. I commend this report to parliament. I urge members and senators to take an interest not only in this report but also in the work of the Auditor-General, whose future effectiveness will have a major impact on the effectiveness of the parliament itself.

This report contains a series of recommendations which pose a challenge to the government. If adopted, these recommendations will go a long way towards restoring the authority and meaning of the parliament and securing the Auditor-General's independence from the executive. In conclusion, I would like to thank my colleagues on the JCPA, all those who gave evidence to the inquiry and the JCPA secretariat, whose collective commitment to the task has enabled the committee to table this report within two months of receiving the reference requested by the minister.