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Wednesday, 30 May 1984
Page: 2130


Senator WATSON(12.20) —The Senate is debating cognately a number of Bills dealing with appropriation, Supply and audit. I wish to use the time available to me today to devote my remarks to a matter that receives very little attention in this chamber; namely, that of audit. The Opposition welcomes the introduction of the Audit Amendment Bill. While we acknowledge that the intention of the Government may be good, its progress down the path of improving management performance and accountability within the public sector has been both slow and disjointed.

The Bill seeks to do a number of unrelated things. Firstly, it seeks to grant leave of absence to an Auditor-General as determined by the Minister; secondly, it outlines a procedure for resignation of the Auditor-General with the delivery of a letter to the Governor-General; and thirdly, it determines the forms and conditions of appointment and of superannuation payments in circumstances of physical and mental incapacity.

The Bill also seeks to increase the limit under acts of grace payments within section 34A of the Audit Act from $25,000 to $50,000 for a single amount as an act of grace payment, and to double to $10,000 the amounts paid in any one year by way of periodic payments. I am not sure whether these increases are an indication of things to come. I assure the Senate that the Joint Parliamentary Committee of Public Accounts will be looking very closely, as it usually does, at any acts of grace payments. Furthermore, and I believe rather significantly, the Bill also enables concise recognition and identification to be made of the spending of funds, and amends the way in which departments in some cases traditionally manage their funds.

An act of grace payment is an amount which is not otherwise payable in pursuance of the law or under a legal liability. Only when a matter cannot otherwise legally or justly be considered and determined is it appropriate for an act of grace payment to be recommended. The Minister for Finance or a person appointed by the Minister for this purpose must be satisfied that special circumstances make it reasonable for an act of grace payment to be made. I wish to emphasise the very close working relationship between the Auditor-General and the Public Accounts Committee. Throughout the year the Public Accounts Committee examines all reports of the Auditor-General in detail. The Committee then takes evidence from selected departments and makes a report to the Parliament. The Government responds by way of a finance minute. The Auditor-General and the Public Accounts Committee, therefore, work very closely together in reviewing the stewardship and efficiency of the receipt and disbursement of public moneys.

I take this opportunity of welcoming the Government's 1984 paper called 'Budget Reform', particularly the changes forecast in Chapter 5. Several features of this paper are included in the Audit Amendment Bill which is now before the Senate. I refer, for example, to the truncation of appropriation for administrative expenditure. While in normal parlance truncation may be regarded as a grouping together or reduction of information, the purpose of this change is to manage the facilitation of the parliamentary scrutiny of government programs and activities more effectively. The other reform which I hope the Government will move into is the introduction of what are known as cash limits, whereby a cash limit is applied to block expenditure rather than to an individual item, and a number of related programs within the block are put together. This gives managers some discretion in moving funds from one area to another but with the knowledge that there would be no supplementation. I believe the clearer establishment of goals and objectives of government programs should be more clearly defined together with the development of what we might call performance indicators.

I take this opportunity to comment briefly on another aspect of audit; namely, internal audit, which I believe is an essential means by which management may monitor the effectiveness of management controls. By this mechanism management is kept informed of the appropriateness of systems and the procedures which it employs. It is regrettable that previous attempts to improve internal audit in the Australian public sector generally have been unsuccessful. I acknowledge that there are moves at the moment to try to enhance this status. I think one of the difficulties is that in the past many of those failures have resulted from an insufficient interest on the part of permanent or statutory heads. I think that the lack of support for internal audit by senior management was reported on in the 184th report of the Public Accounts Committee. That report stressed that it was essential that heads of departments and authorities cultivate a genuine interest in internal audit and learn to use it effectively.

It is regrettable that all too often the permanent heads tend to over- concentrate on policy matters and ignore administrative and financial affairs. This, of course, cannot be condoned. They have a clear obligation under the Audit Act 1901, as amended. It is clearly essential that internal audit officers must be motivated, qualified and experienced and that they must be capable of entering and encouraged to enter and stay in internal audit so that they can attain their full potential. There is some concern at the lack of internal auditors who have up to date automatic data processing skills in an environment in which progress is moving very rapidly. I believe the Public Service Board should continue to give a very high priority to the development of general standards for ADP auditing in the public sector.

The role of the Auditor-General is often taken for granted by both the community and this Parliament. Indeed, headlines may be created momentarily when an area of difficulty is discovered, but unfortunately in the past such issues often have been buried rather hurriedly as the media in particular moves on to another dramatic story often in an unrelated field. Unfortunately, far too little time is devoted to debate of the Auditor-General's reports. The problem does not stop there. Honourable members and senators do not always have the interest or the incentive to pursue such matters within the Parliament. The initial release, for example, of a Public Accounts Committee report is given only limited time for debate, if any, and the report does not come up again until perhaps some weeks or months later. The public concern and interest, therefore, tends to lessen with the passage of time.

I cite two pertinent examples as illustrations of my concern. It is hoped that two reports on today's Notice Paper will come on for debate this afternoon. I refer, firstly, to the Public Accounts Committee's report on HMAS Tobruk which was tabled on 7 March, nearly three months ago. Since this report dealt with some technical problems concerning both the design and the construction of the ship, the contaminated hydraulic system, defective sewerage systems, poorly designed and inadequate locker spaces, deficiencies in the project management of the Department of Defence and the tragic death of naval reserve Cadet Kenneth Dax, the matter should have been dealt with more promptly. Report No. 221 of the Minister for Finance (Mr Dawkins) on the Australian War Memorial was tabled even earlier, on 14 December 1983. Both reports illustrate the difficulties in debating reports promptly and fully at the appropriate time and not delaying debates. Acknowledging the increased interest by both Federal and State governments in financial reporting, I welcome the initiatives of the two major accounting professions-the Australian Society of Accountants and the Institute of Chartered Accountants in Australia-to establish an accounting standards board for the public sector under the chairmanship of a distinguished public servant, Mr R. G. Humphry. After all, nearly 20 per cent of the members of the Australian Society of Accountants are now employed in government.

As the present Auditor-General now approaches his retirement, I believe that it is right that this Parliament should pay a tribute to the value of his work, first in the Australian Taxation Office and in more recent times as a very distinguished Auditor-General. Keith Brigden, as Auditor-General, has brought to that office a determination to adopt approaches different from the traditional audit function. I welcome those initiatives. The large number of matters that have been drawn to the attention of the Parliament is evidence not only of Keith Brigden's competence but also of his officers' professionalism.

Keith Brigden's efforts in the past have, not unexpectedly, created some friction within the Service and have also brought comments from outside professional bodies, since in the latter case the Auditor-General always held a very strong view on the use of external auditors. In fact, he was very strongly of the opinion that accountability was best served by the Parliament's own auditor. I therefore take this opportunity of wishing Keith Brigden, who is now in hospital, a quick and complete recovery.

The Government has already named a successor to Keith Brigden. He is John Monaghan from the Public Service Board, a man whom I might say is not skilled in accounting but who is by profession an economist. While I do not doubt the qualities of Mr Monaghan, I believe it does not enhance the concept of professionalism, particularly accounting professionalism, within the office of an Auditor-General to appoint a man from outside the profession-an economist- particularly at a time when both the public sector and the Parliament are trying to raise and improve standards of management accounting techniques especially within the public sector. I wonder what would be the reaction of the legal profession if, for example, a psychologist were appointed as Solicitor-General. I thank the Senate for the opportunity to make these comments.