Senator WATSON —On behalf of the Joint Committee of Public Accounts, I present report No. 349 entitled Review of Auditor-General's reports 1995-96 and report No. 350 entitled Review of Auditor-General's reports 1996-97: first quarter . I move:

That the Senate take note of the reports.

I seek leave to incorporate my tabling speech in Hansard .

Leave granted.

The speech read as follows—

These are the first reports arising from the JCPA's new public hearing-based review procedures.

These two reports do not attempt to analyse in detail all of the audit findings and recommendations. Instead they draw attention to the key issues discussed at the hearings and highlight any commitments given by witnesses.

Having said that, may I turn now to Report 349, Review of the Auditor-General's Reports: 1995-96 . Three public hearings were held in order to take evidence on the 14 reports selected by the JCPA for closer scrutiny.

Among the reports listed is Audit Report No. 28, 1995-96, Jindalee Operational Radar Network (JORN) Project , Department of Defence. After considering the evidence taken in relation to Audit Report No. 28, on the JORN Project, the JCPA decided that the issues canvassed in the Audit Report warranted further examinations as part of a full and separate inquiry. The inquiry is currently still under way and will be reported separately, probably in the 1997 autumn sittings.

The terms of reference for the JCPA's JORN inquiry are:

As part of its statutory responsibilities to examine reports from the Auditor-General, the committee shall inquire into and report on Audit Report No. 28, 1995-96 Jindalee Operational Radar Network Project, Department of Defence (June 1996) and any circumstances connected with matters raised in the audit report.

The committee's inquiry will focus on:

(a)   the management of the project by the Department of Defence; and

(b)   the performance of Telstra Corporation Ltd in its capacity as the prime contractor for the

In regard to the remaining Audit Reports, further examination of the issues involved resulted in the six recommendations contained in Report 349.

I would draw particular attention to Recommendation 1, in which the JCPA seeks amendments to the Cabinet Handbook so that any potential liabilities to which the Commonwealth may be exposed as a result of action being recommended in a Cabinet Submission or discussed in a Cabinet Memorandum are clearly identified and costed.

This recommendation arose from the public hearing into Audit Report No. 14: The Sale of the Commonwealth Serum Laboratories (CSL) , when the committee discovered that the then Minister for Health had been provided with verbal briefings only prior to committing to the arrangements underpinning the sale of CSL Consequently the Commonwealth incurred an uncapped liability in relation to a number of potential claims.

The committee considers that it is totally unsatisfactory for departmental officials to enter into substantial agreements on behalf of the Commonwealth without written ministerial consent or approval. There needs to be an appropriate paper trail so that accountability and probity questions may be answered.

The JCPA is pleased that recently, the Department of Health and Family Services has been successfully investigating commercial insurance arrangements in relation to CSL indemnities. The committee supports such initiatives and considers that greater incentive and flexibility to consider risk retention and risk transfer in relation to the Commonwealth's exposures will result in greater accountability in public agencies.

JORN project.

In its third public hearing session for 1995-96 audit reports, the JCPA focused on the client services programs. Announcements made in the 1996-97 Budget impacted significantly on the programs and methods of service delivery which were the subject of the six audit reports being examined at that public hearing. The committee therefore decided to review the programs in the light of future changes so that the relevant departments and agencies take client service needs and accountability into consideration when implementing the budget changes.

One concern which emerged during this public hearing was the difficulty experienced by ANAO officers in gaining audit access to information from third party providers of client service programs.

Although the Auditor-General Bill 1996 which is currently before the parliament, provides the Auditor-General with unfettered powers to obtain any information required to fulfil audit functions, this power would be enhanced considerably if it were specifically referred to in contracts between the Commonwealth and third party providers.

Recommendation 6 in Report 349 therefore urges the Department of Employment, Education, Training and Youth Affairs, when establishing contracts with private sector employment placement agencies, to include contract provisions which make explicit the Auditor-General's statutory authority to obtain information from third party service providers.

Madam President, it is clear that much work needs to be done by DEETYA and DSS (within a relatively short time frame) to ensure that integrated and contractually sound performance measurement and monitoring systems are in place for the introduction of the employment placement market. The committee believes it has played a part in ensuring that both departments are fully aware of the need to incorporate accountability requirements into the management arrangements they are drafting for the new programs.

Madam President, I now turn to the 1996-97 audit reports.

Two reports of the Auditor-General were the focus of the first quarterly public hearing for 1996-97. These were Audit Report No. 5, Accounting for Aid. The Management of funding to Non-Government Organisations and Audit Report No. 6, Commonwealth Guarantees, Indemnities and Letters of Comfort . Report 350 focuses on the main issues raised during the public hearings.

The JCPA notes the audit finding in Audit Report No. 5 that AusAID's regime for the management of funding to NGOs is generally of a high standard and that aspects of the management framework are at the leading edge of international best practice.

The committee is reassured by AusAID's advice that evaluation and audit activities will continue, as a check on the new performance reports to be provided by NGOs.

The JCPA awaits with interest the Simon's review of the overall priorities, objectives and focus of the Australian aid program and, in particular, the findings of the review in relation to the role of NGOs in the delivery of Australian aid.

The Report contains two recommendations for further action in relation to Audit Report No. 6, 1996-97, Commonwealth Guarantees, Indemnities and Letters of Comfort.

The recommendations in Audit Report No. 6 are designed to improve agency awareness and management. In order to encourage agencies to focus on a responsibility that most Chief Executive Officers have been neglecting, the JCPA recommends that the Department of Finance seek statements from agencies on the steps they have taken to address each relevant recommendation in Audit Report No 6.

The JCPA considers that the current state of reporting on liabilities is clearly deficient and recommends that full statements of off-balance sheet liabilities associated with guarantees, indemnities and letters of comfort should be a mandatory inclusion in annual financial statements of departments.

Madam President, I am confident that our new review and reporting procedures will result in more timely and effective parliamentary examination of audit reports and that this will be to the benefit of all parties involved: the Parliament, the ANAO and audited agencies. The JCPA looks forward to receiving the government's response to its reports.

May I conclude, Madam President, by thanking all those people who contributed their time and expertise to the JCPA's round of scrutiny hearings, held between July and October 1996, upon which these two reports are based. The JCPA has been appreciative of the full co-operation it has received from the people involved.

Madam President, I commend the reports to the Senate.

19 March 1997

Question resolved in the affirmative.