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Thursday, 27 November 1986
Page: 3895


Dr WATSON —On behalf of the Joint Committee of Public Accounts, I present the 262nd report of the Committee, relating to guidelines for annual reports, and I seek leave of the House to make a short statement in connection with the report.

Leave granted.


Dr WATSON —The 262nd report provides comments and recommendations by the Joint Committee of Public Accounts on guidelines for the preparation of departmental annual reports. The Public Service Act 1922, sub-section 25 (6), requires a department to provide its Minister with an annual report on the department's operation for the year ended 30 June. As a result of an amendment to section 25 earlier this year, departmental annual reports are required to be in accordance with guidelines presented to the Parliament from time to time by the Prime Minister after approval by the Joint Committee of Public Accounts.

On 1 September 1986, the Prime Minister (Mr Hawke) forwarded a set of guidelines for consideration by the Committee. The proposed guidelines will replace the 1982 guidelines and reflect the Government's recent Public Service reform measures. The guidelines will require departments to provide details of, amongst other things, implementation of the financial management improvement program, staff budgeting and program budgeting. Information should also be provided on matters such as activities in the field of occupational health and safety, the operation of a department's industrial democracy plan and its equal employment opportunity plan. The Committee recommends the inclusion in the guidelines of several clauses which it believes will increase the accountability of departments and place emphasis on the performance aspects of departmental activities.

The Committee believes that, in addition to giving an account of a department's administration and management, an annual report should provide an accounting to the Parliament and the public of the department's performance. Accordingly, the Committee recommends that the guidelines provide that the orientation of annual reports should be towards the performance aspects of departmental activities as well as the administrative and managerial aspects.

Since annual reports are a record of a department's operations, the Committee believes that users of reports should be provided with information about the reasons for any significant changes in a department's operations or procedures. For instance, an annual report should provide details about major judicial decisions and reviews of the objectives or structure of a department and also significant consumer complaints or suggestions which have resulted in a change to the department's operations or procedures.

To ensure greater accountability of departments the Committee also believes that annual reports should include details about any breaches of forward obligation limits and any other breaches of the Audit Act 1901 and the Finance regulations and directions. In the same vein, the Committee believes that Parliament is entitled to know of the reasons for any significant delays to, or amendment, deferment or cancellation of, a department's programs.

In view of the recent government administrative reforms aimed at providing departments with more responsibility and flexibility in managing resources, the Committee believes that a departmental Secretary should provide and certify a financial statement which will reflect his or her financial management responsibility. The Committee agrees with the Department of Finance's view that financial statements provided in annual reports should do more than merely elaborate on data already provided in the financial statements prepared by the Minister for Finance under section 50 of the Audit Act 1901. The Committee recommends that the guidelines require financial statements in annual reports to provide, at least, the details specified at pages 10 and 11 of the report until such time as section 50 of the Audit Act is amended and the Minister for Finance (Senator Walsh) determines the form of the financial statements. The Committee understands that amendments to section 50 are expected to come into operation on 1 July 1988. I seek leave to incorporate in Hansard pages 10 and 11 of the report.


Mr DEPUTY SPEAKER (Mr Mountford) —Order! The document is not in accordance with the guidelines laid down by the Speaker.


Dr WATSON —Perhaps I should read those points out so that they do get into the Hansard, because the Committee believes that they are fairly important. Pages 10 and 11 state:

In line with the devolution of greater management responsibility to departments, the Committee agrees with the Department's proposal that-

the Minister for Finance's responsibility for furnishing section 50 statements be reduced to include only aggregate information from each department; and

responsibility for reporting detailed financial information be transferred to each departmental secretary who should provide audited certified financial statements in a form determined by the Minister for Finance, as part of the department's annual report.

The Committee recommends that paragraphs B.1 and B.2 be omitted and the following paragraphs be inserted:

1. An annual report should include an audited statement prepared by the department and certified by the departmental secretary. The certification should state that all departmental expenditure for the financial year has been made with due consideration to economy and in accordance with the Audit Act 1901 and the Finance Regulations and Directions.

2. Financial statements should be in accordance with the form determined by the Minister for Finance pursuant to section 50 of the Audit Act 1901. Where section 50 does not provide for such a determination or no such form has been determined, the financial statements should include, as a minimum, the following information:

(a) details of receipts and payments of annual appropriations on a program basis and explanations of variance from budget figures;

(b) details of free services provided by other agencies with an estimate of the amount;

(c) details of individual Trust Account operations under sections 60 and 62a of the Audit Act 1901;

(d) a schedule of cash and investment balances;

(e) a statement of amounts of debtors and creditors by program;

(f) a schedule of amounts of prepayments;

(g) a schedule of capital commitments and outstanding loan balances;

(h) a schedule of major capital assets operated (by class); their value and the date and method of valuation.

3. Financial statements should be accompanied by an explanation of significant changes from one year to the next and must be consistent with other published financial data (any material differences should be explained). Data should include current year actuals and budget estimates and actuals for at least the previous year.

4. Where a department undertakes operations of a commercial or quasi-commercial nature in respect of which the Minister for Finance has determined, pursuant to section 41D of the Audit Act 1901, the form in which it shall prepare financial statements for those operations, the departmental annual report should:

(a) incorporate financial statements in the form determined;

(b) provide information as to the operational performance of the undertaking (eg the operating surplus as a proportion of working capital provided, trends in turnover, etc.) including, where practicable, non-financial performance measures.

Committee Comment and Recommendation 14

The Committee recommends the insertion of a sentence providing that the financial statements referred to in paragraph B.4 must comply with the Guidelines for the Form and Standard of Financial Statements of Commonwealth Undertakings, issued by the Department of Finance.

In concluding my brief statement to the House I wish to thank the staff of the Public Accounts Committee, and in particular Cathy Clune, who actually supervised the preparation of the report. I commend the report to honourable members.