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Thursday, 10 October 1996
Page: 5173

Mr GEORGIOU(11.16 a.m.) —by leave—The Joint Committee of Public Accounts Report 346Guarding the independence of the Auditor-General makes a very substantial contribution to an office which is of the most fundamental importance to the parliament. The report is part of an ongoing process of strengthening the independence of the Auditor-General, a process which is still not complete.

It has been seven years since the JCPA's report The Auditor-General: ally of the people and parliament was tabled and the passage of legislation flowing from that report has been some time coming. But it is almost here and I do believe that the commitment by the Prime Minister (Mr Howard) `to establish a completely independent Auditor-General so that a fearless and authoritative surveillance of government departments can occur without intimidation from the executive' has given an important impetus to bringing the process of reform to fruition.

The report outlines the key components of the functional independence of the Auditor-General: personal independence in relation to appointment and tenure; a wide legislative mandate empowering the Auditor-General to audit the complete spectrum of Commonwealth functions; freedom to determine the audit program and to decide the nature and scope of audits; unrestricted access to information and the right to report any findings to the parliament; and adequate resourcing.

Enhancing the Auditor-General's independence through the mode of appointment and tenure is vital. The committee's recommendations do this by involving the parliament, through the audit committee, in approving by a two-thirds majority the government's nominee for appointment and by conducting a public confirmation hearing to take evidence from the nominee prior to approval.

The term of appointment of the Auditor-General was given considerable attention by the committee. In my personal view, if there is any single office of the Commonwealth that would justify appointment until retirement, it is that of the Auditor-General. This is particularly so given the fact that reappointment for a further term is not an option because it would substantially erode the Auditor-General's independence, as anyone who has witnessed the sad sight of a statutory officer seeking a further term would attest. Nonetheless, the committee's recommendation for a 10-year term is, I believe, a very effective alternative.

With regard to the Auditor-General's mandate to audit Commonwealth functions, there has been something of a tradition of affirming the need for an unrestricted mandate, yet qualifying this when it comes down to brass tacks. The Auditor-General Bill 1994 significantly qualified the Auditor-General's mandate by exempting government business enterprises from performance audits unless there was a request by the minister or by both houses of the parliament. While some shred of intellectual legitimacy may be given to such an exemption by murmurings about GBEs being subjected to market disciplines, no-one who has witnessed the lack of market discipline operating on some government business enterprises could take this seriously in real life.

Government business enterprises do spend taxpayers' money, they not infrequently waste it, and the parliament's capacity to make judgments on this should not be limited by exempting them from the scrutiny of the Auditor-General. In addition, I think it is a matter of principle that grand statements about unrestricted audit mandates should be accompanied by commensurate legislative powers. It is therefore laudable that the Joint Committee of Public Accounts has bitten the bullet and matched recommendation to principle by including performance audits of government business enterprises.

The task of securing the independence of the Auditor-General has both symbolic and substantive aspects. While the Audit Act 1901 leaves the Auditor-General's independence implicit, and this has not resulted in any executive interference in the Auditor-General's capacity to determine which audits would be conducted, the committee believes it is important that the Auditor-General's complete discretion in the discharge of audit functions and the Auditor-General's freedom from any direction should be specified in legislation.

The independence of the Auditor-General and the capacity of the parliament to fulfil its task of scrutiny depends on the ability of the Auditor-General to report to the parliament. The Auditor-General Bill 1994, however, did contain substantial qualification on the ability of the Auditor-General to report to the parliament. Most importantly, there is a wide ranging provision that the Auditor-General not release sensitive information in a report tabled in the parliament if—and I quote:

. . . the Attorney-General had issued a certificate to the Auditor-General stating that the release of the information would be contrary to the public interest.

The definition of `sensitive information' was so extensive that the committee could not visualise any form of moderately interesting information about government activities that could not be fitted into one or other of its categories. This was particularly concerning for the committee since the bill established no checks on the Attorney-General's power to issue a certificate and the parliament was not even to be informed that the Attorney-General had given a direction to the Auditor-General, let alone the reasons for the direction. It might seem far-fetched that this power would be exercised, but providing for such a capacity is in principle inappropriate. And if it is not to be used, why have it?

Accordingly, the committee has recommended that the restrictions on the disclosure of sensitive information should be restricted to the disclosure of information likely to prejudice national security; that the audit committee should receive an unabridged copy of the report; and that reasons for the exclusion of sensitive information should be reported to the parliament.

A key bone of contention over the years has been the issue of resourcing the Auditor-General. This has long been regarded as going to the heart of the Auditor-General's true independence.

The committee regarded it as being of fundamental importance that the resourcing of audit functions should be made transparent to the parliament, thus allowing the parliament to hold the executive to account for the level of resources appropriated for the Auditor- General to fulfil the statutory functions of the office.

Accordingly, the committee proposes that the audit committee should examine the estimates of the Australian National Audit Office and make recommendations to the parliament and to the responsible minister—who, given that the committee's recommendations are accepted, will be the Prime Minister—on the appropriate level of funding for the ANAO. The ANAO's estimates and the recommendation of the audit committee would then be considered by the executive as part of the normal budget process.

I turn finally to the issue of the designation of the Auditor-General as an independent officer of the parliament. The Prime Minister had indicated that the new government would make the Auditor-General an officer of the parliament. Nonetheless, the designation of the Auditor-General did exercise the mind of the committee and it certainly exercised the minds of some departments and authorities.

Having considered the various views, the committee concluded that the Auditor-General for Australia should be appointed and titled as an `Independent officer of the parliament'. The committee believes that this would be a very important symbol of the independence of the Auditor-General and of the Auditor-General's primary role in assisting the parliament in its scrutiny of the exercise of authority and the expenditure of public funds by the executive.

I believe that the JCPA report is a very good and very strong report which should significantly enhance the symbolic and substantive independence of the Auditor-General and the ability of the parliament to make the executive accountable to itself and to the Australian people, and indeed improve the functioning of the executive and ministers' capacities to oversight their departments and authorities.

I would also like to say that, as someone who has been involved in the partisan side of politics for a significant part of my life, it was a great pleasure to see the Joint Committee of Public Accounts operate in a totally non-partisan fashion. And I would like to thank the committee secretariat for completing a major task in an excruciatingly short period of time.