Senator WATSON(10.59 a.m.) —On behalf of the Joint Committee of Public Accounts, I present report No. 346 entitled Guarding the independence of the Auditor-General . I move:

That the Senate take note of the report.

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 the parliamentary institutions. The existence of a strong and independent Auditor-General is absolutely fundamental for the effectiveness of parliament itself and its scrutiny of the executive government. Indeed, former Auditor-General John Taylor told the Joint Committee of Public Accounts 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 a long history.

In 1902 the first Auditor-General in his first report to the parliament stated that his office was inadequately resourced for the discharge of his audit functions. The Joint Committee of Public Accounts has reported to the parliament twice in the last decade on the desirability of strengthening the relationship between the parliament and the Auditor-General.

In report No. 296, which was tabled in 1989, the Joint Committee of Public Accounts, which also then I was a member of, informed the parliament that the Australian Audit Office, as it then was, was in a state of crisis, that it was under-resourced and that a lot of problems stemmed from parliamentary complacency. The Joint Committee of Public Accounts 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 No. 331, tabled in 1994, the Joint Committee of Public Accounts 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 to 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 its inquiry. However, the incumbent Auditor-General, Mr Pat Barrett, was in no doubt that he considered parliament to be his employer.

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

While acknowledging that debate about the status of the Auditor-General is essentially about symbolism, we believe that symbolism is important. To a very large degree, the way in which the position of the 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. I think the Clerk of the Senate would be pleased to note that.

The Joint Committee of Public Accounts has recommended that the guarantee of the Auditor-General's audit independence be enshrined in the Auditor-General Bill, putting it beyond doubt that the Auditor-General has complete discretion in determining the audit program of the Australian National Audit Office and in deciding the manner in which audits shall be conducted.

The Minister for Finance (Mr Fahey), in referring this matter to the JCPA for inquiry, drew the committee's attention to concerns that the 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 neither a criticism of the legal opinions or 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 particular report.

The committee has attempted in this report to allay fears about the appointment of the Auditor-General as an independent officer of the parliament, outlining in some detail what the JCPA means by the title and recommending provisions to be included in the Auditor-General Bill to clarify the meaning and intended ramifications of this title. In the JCPA's legislative model for guaranteeing the independence of the Auditor-General, both the position of the Auditor-General and the Australian National Audit Office would be established as statutory offices for which 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 the parliament and to the executive on appropriate levels of resourcing. It would also monitor any executive directions to the Auditor-General, 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 functions of an audit committee. The JCPA is enthusiastic about the prospect of becoming the Audit Committee of Parliament. The Audit Committee functions are an integral part of the JCPA's existing broad role of reporting to the parliament on means of improving public accountability.

In this report the JCPA has also recommended a range of measures that would be incorporated into the new Auditor-General Bill to support the functional independence of the Auditor-General. The committee was flying blind, not having seen 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 a full range of financial and performance audits across the entire public sector, including performance audits 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 the 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 to account.

I commend this report to the parliament. I urge all senators to take an interest not only in this report but in the work of the Auditor-General, whose future effectiveness will have a major impact on the effectiveness of parliament itself. This report contains a series of recommendations which pose a challenge to government. If adopted, these recommenda tions will go a long way to restoring authority and meaning to the parliament and securing the Auditor-General's independence from the executive. It has taken seven years to get to where we are today, and I regard this as a hallmark decision.

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 as requested by the minister. In particular, I would like to thank the chairman of the committee, my colleague Mr Somlyay MP.

Question resolved in the affirmative.