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Monday, 27 June 1994
Page: 2027

Senator FERGUSON (5.02 p.m.) —My colleagues Senator Kemp and Senator Calvert have covered many of the aspects of the misuse of government credit cards which have been highlighted in Auditor-General's report No. 41 of 1993-94: project audit: the Australian government credit card: some aspects of its use. I wish to congratulate the Auditor-General and his staff on this report. There is one page that is highlighted in large letters that I believe underlines the whole area of misuse of credit cards. In the guidelines issued to some Australian government credit cardholders we see the following in the guidance to the Australian Taxation Office:

You should exercise extreme care in deciding what to spend public funds on. You should constantly be asking yourself `what would a member of the public think about this expenditure?'

If we go through all the case studies dealt with in the report, I wonder what members of the public would think about some of these items of expenditure, particularly some of those that have already been highlighted by my colleagues Senators Kemp and Calvert.

  I wish to draw attention to a couple of matters. For instance, one of the transactions referred to in the report related to a beauty salon. The way in which this came about was quite extraordinary:

On 11 March 1994 the department advised the ANAO that this transaction related to the purchase of trench grates and frames from an engineering firm. The engineering firm did not have credit card facilities. The wife of the owner of the engineering firm operated the beauty salon, which did accept payment by credit cards. For this reason the payment was processed through the beauty salon and not the engineering firm.

The conclusion of the ANAO on this case was as follows:

The ANAO concluded that the AGCC audit trail is inadequate and incomplete as:

. not all auditees provided sufficient explanation of the nature and purpose of the purchase, and

. not all AGCC holders were able to provide either some or indeed any of their documents.

Another important aspect relates to the use of these cards. Section 14 of the finance directions deals with the subject of travel and makes the following comment:

Expenditure on official travel is expenditure on purchasing a service to the Commonwealth; it is not intended as expenditure on or for the personal benefit of the person undertaking the journey . . . officers incurring or approving travel expenditure are likely to be called upon to publicly defend their decisions. . .

Yet audit report No. 21 reported that:

. . . between 23 March and 27 June 1993, 10,658 travel and travel-related AGCC transactions totalling $14.8 million were incurred using the AGCC, including $512,453 expended at 4 1/2 and 5 star hotels.

A lot of the travel related expenditure observed during the audit included:

. . . hotel accounts involving accommodation costs, restaurant meals, room service, mini-bar, gymnasium, movie hire, laundry and telephone calls; rental of vehicles; parking of vehicles at airports; and fuel.

An earlier audit on Australian government credit cards indicated that using the AGCC for travel is `particularly risky'. The risks include:

. . . exceeding entitlements, where the AGCC is used to pay for expenses, for example accommodation, which exceed an officer's entitlements; double dipping, involving an officer using the AGCC to pay for expenses for which travelling allowance has been paid; and personal expenses being billed to the AGCC.

In regard to hospitality, the finance direction lays down the following:

In exercising control on hospitality, Departmental Secretaries should ensure that any scrutiny of such expenditure is publicly defensible and should have regard to the policy that the provision of hospitality to Commonwealth Officials is not the primary function of publicly funded hospitality.

The Auditor-General's report makes the point that departments and agencies advised that 12 per cent of the transactions referred to them for review represented expenditure on hospitality. This expenditure included that which was incurred on alcohol and other liquid refreshments; entertaining at restaurants; gifts in connection with overseas visits; and working lunches and dinners for Commonwealth employees. I remind honourable senators of the initial guideline to which I made reference at the beginning of my remarks. Those concerned were asked to consider what a member of the public would think about such expenditure. The report states under the heading of hospitality:

Although there can be exceptions to the general rule that the provision of hospitality to Commonwealth officials is not the primary function of publicly funded hospitality, for many of these transactions it is difficult to see how the functions advanced the public interest or how the taxpayers benefited.

I wish to raise one or two matters before I conclude. When talking about asset purchases and cash advances, a report to the House of Representatives Standing Committee on Industry, Science and Technology in March 1994 stated:

The use of the AGCC for large capital purchases is inconsistent with the often stated aim of value for money in Government procurement.

Perhaps I could outline one example of a case where a government credit card was used for cash in an ad hoc fashion. Difficulties can arise in ensuring that any cash surplus is fully and correctly repaid. To give an example, a cardholder was attending a stock sale for the purpose of purchasing a pig. The pig was to be used to test heart monitoring equipment. The report states:

Upon arrival at the sale yards the AGCC holder was informed that payment by credit card would not be accepted—payment had to be in cash. The AGCC holder was aware that cash withdrawals on the AGCC were not permitted by his agency but, given time constraints, the AGCC holder decided to make a cash withdrawal at the local bank to pay for the pig and pig food. The AGCC holder later had to be requested to repay the unrequired balance of the cash advance.

That example gives some indication of the amount of abuse that has taken place with the use of these government credit cards.

  In looking at the abuse that has taken place, it is important to understand that the excuse often used is that the cardholders were not aware of the provisions governing use of the card. I point out that the internal audit of one department identified numerous transactions which were considered not to be for official purposes. Before being issued with an Australian government credit card, departmental staff complete and sign a form stating, firstly, that they will not use the Australian government credit card or permit it to be used for other than official purposes; and secondly, that they acknowledge that they have read and understood the conditions governing the issue and use of the Australian government corporate card issued in their name.

  If we look at all the instances cited in this report of abuse and misuse of credit cards, it is obvious that when these cards have been issued people have either ignored or deliberately misinterpreted the conditions governing their use. With all the case studies I have mentioned and those mentioned by my colleagues I come back to my original statement: I wonder what a member of the public would think about the expenditure.