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Thursday, 23 August 2001
Page: 26576

Senator CALVERT (3:55 PM) —On behalf of Senator Gibson and the Joint Committee of Public Accounts and Audit, I present the following report of the committee: Report No. 382: Tactical Fighter Operations; Magnetic Resonance Imaging Services; High Wealth Individuals Taskforce: Review of Auditor-General's Reports 1999-2000, Fourth Quarter. I move:

That the Senate take note of the report.

I seek leave to have my tabling statement incorporated in Hansard.

Leave granted.

The statement read as follows

Madam President, on behalf of the Joint Committee of Public Accounts and Audit, I present the Committee's Report No. 382—Tactical Fighter Operations; Magnetic Resonance Imaging Services; High Wealth Individuals Taskforce. This is our Review of Auditor-General's Reports for the fourth quarter of 1999-2000.

Madam President, the Committee held a public hearing on 3 November 2000 to discuss these ANAO Reports with the relevant Commonwealth agencies. I will briefly discuss issues in each of the selected reports in turn.

Audit Report No. 40 examined the Tactical Fighter Operations. The Committee reviewed the administration of Tactical Fighter Operations (TFOs) by the Royal Australian Air Force (Air Force). The JCPAA focused its examination on air superiority and regional capabilities, and management of the fast-jet pilot workforce. Air superiority, which encompasses tactical fighter operations, airborne early warning and control (AEW&C), and air-to-air refuelling (AAR) is critical to the defence of Australia.

The JCPAA supports initiatives outlined in the 2000 Defence White Paper to acquire AEW&C and enhance Air Force's AAR capability.

The management of the fast-jet pilot workforce comprising recruitment, training and retention is a major issue for the Royal Australian Air Force, and ultimately Australia's defence. It is unacceptable that there are insufficient numbers of fast-jet pilots. In a crisis situation, Australia's ability to sustain extended air combat could be under serious pressure. The ANAO should conduct a follow-up audit to assess how Air Force is addressing this issue.

In the second report selected, the Committee reviewed the audit on the Magnetic Resonance Imaging Services. It examined effectiveness and probity of the policy development processes and implementations involved in improving access to the Magnetic Resonance Imaging (MRI) Services.

The audit concluded that there were areas for improvement by the Department of Health and Aged Care in its policy development, risk management and in its management of negotiations with representatives of the Royal Australasian College of Radiologists. The number of machines for which eligibility for MBS rebates was sought greatly exceeded expectations. The desired distribution of machines was still not fully realised. Expenditure for MRI services also exceeded anticipated amounts.

Chief among the ANAO findings was a lack of adequate documentation by departmental officials. The Committee also found it disturbing that DHAC was so lacking in rigour in its probity arrangements, given the professional interests involved. The department's open-ended approach to risk management was deficient, especially in its handling of conflicts of interest and its acceptance of statutory declarations at face value as proof of date of order and installation. Until the cut-off date of 10 February 1998 came into effect on 1 November 1999, almost $46 million had been paid in medical rebates, some to machines subsequently deemed ineligible.

The Committee recommended that the department improve its practices in contract management and urged departmental officers to base its guidelines on the ANAO Better Practice Guide on Contract Management (2001). In addition, the Committee has noted that the department has made an effort to improve its record keeping, its risk analysis and risk management. The Committee, however, would have more confidence in improved future performance by DHAC if DHAC frankly recognised and addressed these major flaws.

Madam President, the Committee debated long and hard on the probity issues raised by the MRI audit and repeatedly sought information from DHAC as it sought to come to grips with why arrangements went horribly wrong. The JCPAA finally concluded that not only did DHAC lack clear guidelines to assist its staff but it took an ad hoc approach to risk management.

DHAC's original risk management strategy failed. All MRI scanners assessed as eligible for benefits, received them. Once paid, these benefits could not be recovered, even though the machines were ineligible because of the cut-off date. The large number of machines on order exceeded that anticipated by DHAC. The Minister was not kept informed as he should have been. ANAO stated in its report that it was the Minister who insisted that something be done as soon as he found out that new machines were still being registered.

I am proud to tell the House, Madam President, that the Committee did not split on party lines during the arduous debates on some of the sensitive issues which it considered. We worked hard to get a consensus and succeeded admirably in focusing on how this report on MRI policy development and implementation can assist the DHAC and the HIC to improve their accountability and their risk management strategies. I believe that officers in DHAC have noted the lessons learnt and will ensure there will be full and accurate record keeping, especially of negotiations and meetings, from now on.

I now turn to the final ANAO report the Committee reviewed in this quarter—High Wealth Individuals Taskforce.

Audit Report No. 46 on the Tax Office's High Wealth Individuals Taskforce considered the management and operations of the taskforce and assessed its performance against the outcomes specified by the Government. The audit report concluded that the management and operations of the taskforce was effective and that the taskforce was achieving the revenue targets set by the government.

The audit report also found that the taskforce had contributed to the development of administrative and legislative proposals to address undesirable tax minimisation practices.

In its review of the High Wealth Individuals Taskforce, the Committee took evidence on taskforce resourcing, litigation and settlement procedures, the revenue raised by taskforce activities, taskforce involvement in addressing tax minimisation techniques and taskforce reporting of outcomes.

The Committee supports the work of the taskforce and sought to assure itself that adequate resourcing would continue to be available to the Tax Office to fund the work of the taskforce. The Tax Office has indicated to the Committee that it has made a decision to continue with the taskforce approach of looking at high wealth individuals.

The Committee endorses the Tax Office's allocation of resources based on a properly planned risk management approach.

The High Wealth Individuals Task Force established a Compliance Management Strategy to address its responsibilities. One of the elements of this strategy is litigation and prosecution.

The audit report found that the taskforce conducted settlement processes in accordance with the ATO's Code of Settlement Practice. The report also found that settlement processes had been conducted with a view both to protection of revenue and to fairness to the High Wealth Individual taxpayer concerned.

The Committee notes that the Tax Office has a fairly rigorous process in place to guide settlements.

The Committee was interested in the issue of revenue targets for the taskforce.

Based on analysis of a sample of taxpayers and their related entities, a figure of $800 million per year was derived by the Tax Office as on order of magnitude estimate of revenue potentially at risk from aggressive tax planning and minimisation arrangements used by some High Wealth Individuals.

The Government's required revenue targets for the taskforce were $100 million in each year from 1997-98 to 1999-2000. The ANAO concluded that the taskforce had achieved its revenue targets for the first two years. The Committee ascertained that the Tax Office had also met its revenue targets in 1999-2000.

In relation to taskforce involvement in addressing tax minimisation techniques, the Tax Office confirmed that there had been a very substantial volume of advice from the taskforce to government, which had suggested areas for systemic policy reform.

The audit report concluded that while there had been some public release of information on the taskforce's activities, the external reporting of the taskforce's performance could have been more comprehensive.

The major reporting of the results of its work on High Wealth Individuals is in the Tax Office's Annual Report. The Tax Office also indicated that it had issued a number of press releases over the period of the taskforce's existence.

The Committee considers that publishing the results of and issues involved in the taskforce's operations are important for community education and compliance and that more attention should be given to this area. The Committee recommends that the Tax Office make further efforts to promote greater public awareness of the taskforce's activities and achievements by disseminating more widely the information contained in the Commissioner's annual report.

May I conclude, Madam President, by thanking on behalf of the Committee the witnesses who contributed their time and expertise to the Committee's review process.

I am also indebted to my colleagues on the Committee who have dedicated their time and effort to reviewing these Auditor-General's reports. As well, I would like to thank the members of the secretariat who were involved in the inquiries.

Madam President, I commend Report 382 to the Senate.

Question resolved in the affirmative.