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Thursday, 5 May 1994
Page: 345

Senator MICHAEL BAUME —I move:

  That the Senate take note of the document.

At the outset I apologise to those at the Hansard table for the fact that I have no voice; I hope that they will be able to hear me.

  Senator Robert Ray interjecting

Senator MICHAEL BAUME —The minister may well be pleased that I have no voice. It will not discourage me, I assure him. I also assure Senator Ray that although I might not be able to speak very well, I can still oink with remarkable skill.

  This is an important report by the Auditor-General into the Australian Trade Commission. It is an efficiency audit into the export market development grants scheme and its efficiency and effectiveness. It relates to what is the lifeline of Australia, namely, our export industries; it is the lifeline on which our economic survival must depend. Therefore, it is important that any scheme that provides assistance and incentive to exporters should be examined and made to work as effectively and efficiently as possible.

  This scheme is the largest item in Austrade's budget. Over the past 17 years some $4.5 billion in current dollar terms has been spent on this scheme. Austrade provides export market development grants amounting to $150 million to $250 million a year, depending on the government's enthusiasm at the time, to actual and potential exporters in accordance with the Export Market Development Grants Act. The majority of claimants receive their grant in the year that the claim is submitted.

  The Auditor-General has made a whole series of recommendations which I am glad to see Austrade has decided to accept. I commend Austrade for that and also commend the Auditor-General for the recommendations themselves. This report reveals that although there appears to be widespread support for the scheme—naturally, I suppose, from the business community which receives the grants—the auditor notes that:

. . . the nature of the scheme has made direct measurement of effectiveness elusive. The lack of performance measures combined with Austrade's minimal annual reporting of its largest budget item leaves Parliament inadequately informed of the scheme's effectiveness given the high profile of the scheme and the frequency of legislative changes required.

  Numerous strategic planning documents exist which theoretically guide the scheme. Some of these documents contain outdated material. Although a Major Priorities Document 1993-94 has been produced, no one document summarises the overall position and direction of the scheme.

  Austrade's responsiveness to its clients (both private and public) is impeded by the structure and wording of the Act and regulations. Austrade has pursued, and is continuing to pursue, improvements to the Act and procedures to accommodate the changing needs of the business community and to better target EMDG resources at the points of highest risk of misuse and fraud.

I shall return to the subject of fraud in a moment. The auditor notes that:

All claims are investigated in order to prevent overpayments, misuse and fraud as well as to assist claimants in maximising the grant received. As a result, many millions of dollars are deducted from claims and a large but lesser amount is added to claims each year leading to the conclusion that the quality of claims is generally below expectation.

  The EMDG Unit is upgrading the scheme's risk management and fraud control procedures. Improvements to the fraud control plan, initial risk assessment and quality controls are, however, recommended.

As I said earlier, Austrade has agreed to accept those recommendations. On the question of information—and this is important for the parliament—the auditor notes:

Despite the fact that Austrade acquires extension data (from the information on the claim forms and the regular use of surveys), and conducts analysis of the scheme on a day-to-day basis, Parliament is provided with only very basic statistics (numbers of claims lodged and processed and the total value of grants paid) through the Austrade Annual Reports and the Annual Budget Program Performance Statements.

We will be dealing with those matters in the estimates committees a little later this month. In the Auditor-General's view:

. . . these statistics provide Parliament with little information about the clients of the scheme (how the eligibility criteria are working), the use of the grant moneys (whether grants are addressing export barriers) and the overall effectiveness of the scheme (whether grants are increasing exports and an export culture developing). The question of effectiveness requires performance measures, the development of which so far has proved to be elusive. Austrade has the information, however, to provide more meaningful reports on the focus and use of the scheme.

I should let Austrade know that at the up-coming estimates hearings we in the opposition will certainly be requiring it to provide some of that information. Let us have some information that is more meaningful than has been provided in the past.

  There have been reviews of the scheme and the Audit Office notes that it recommends that:

. . . more information on the focus, use and effectiveness of the scheme be reported to Parliament and, in this report, has provided guidance on how this could be achieved.

I understand that Austrade has accepted that view. The Auditor-General also makes a point that we should stress too:

. . . the pursuit of performance measures is not a waste of resources as it is only through these efforts that the factors that have assisted successful exporters can be identified.

  I wish now to deal briefly with the questions of the amounts paid under these arrangements and the capacity for fraud. Austrade itself considers that decisions made under the scheme attract a high rate of administrative appeal. This is not only costly but is partly a function of the perceived complexity, particularly in the wording of the act.

  The audit office view is that Austrade is being impeded in its attempts to respond in a timely fashion to market demands, and has recommended that, before the current scheme is renewed, the opportunity be taken to review the structure and wording of the act, regulations and procedures. There have been many amendments to the act, particularly over the past 11 years of this government; but there is still, extraordinarily, this enormous need for correction to the whole thrust of the act. As I said, it has been going now for something like 17 years and it is unfortunate that it has taken until now for the need for these corrections to be so effectively recognised.

  The EMDG act has significant powers to deal with fraud and misuse of the scheme; but the Auditor-General says that the difficulty has always been in proving intent. As a result, there has been a lower number of referrals to the Australian Federal Police and an even lower number of actual fraud cases pursued. Given the experience of other government programs, Austrade believes that the level of misuse and fraud could be greater than the statistics indicate and, before grants are paid, it is pursuing strategies that would prevent misuse and fraud.

  A major strength in preventing false payments is the regular site visits to all claimants and the annual investigation of all claims. But in the majority of cases these investigations result simply in corrections either in reducing the amount claimed or in increasing the amount to be paid, which of course is only infrequently. The level of negative adjustments is very significant, indicating in addition to the possibility of fraud and misuse that the quality of claims is certainly inadequate. By the way, the Auditor-General says that the quality of claims does not appear to be improving, even with the claimants' increasing use of export consultants.

  The cause of inaccurate claims lies with the structure and wording of the EMDG act, and recommendations to change the act and regulations have been made previously. The work of the EMDG unit and the way the claimants submit these forms obviously must be improved. One thing that should be examined is an audit office recommendation that penalties be imposed where claims are inaccurate, particularly in the sense of overclaiming.

  Finally, I stress that the audit office recommends that more information on the focus, use and effectiveness of the EMDG scheme should be reported to parliament on an annual basis in order to provide feedback on the relevance of eligibility criteria, the export barriers being overcome with the assistance of the grant moneys, and the impact on Australia's export earnings and export culture. I am glad the Auditor-General is, as usual, noting the significance of the parliament and the need to report to parliament on these matters. I commend the report to the Senate.