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Wednesday, 1 December 2004
Page: 76

Senator MARK BISHOP (3:16 PM) —At the outset I must say that this qualification by the Auditor-General in respect of his report on the management of finances in the Department of Defence is about as serious as it is possible to get. It is exactly why we do have an Auditor-General to advise the parliament. As the custodian of the public purse he advises the parliament about financial mismanagement, financial management, financial irregularities, the valuation of assets and the extent of liabilities. It is not just the size of the black hole, although $8 billion is a huge amount of money in anyone's language. It is a figure that is incomprehensible. Yet the government is not aware of where $8 billion of various assets might be located—somewhere or anywhere around Australia. That figure of $8 billion is the equivalent of two-thirds of Defence's annual budget. The Auditor-General's report is simply about incompetent management of the Department of Defence in the past and in the present. And one suspects, on the basis of past and current performance, that well into the future that incompetence in the area of management will continue.

The government, through Senator Hill and Senator Minchin, have responded by saying that this is just an accounting issue, an issue of assets and liabilities, an issue of whether the left-hand side of the column balances the right-hand side of the column. They say, `Don't you worry about it, boys over there, it's just a matter of simple arithmetic.' But that is not what the Auditor-General said in his report. The Auditor-General said the opposite is the case. Fundamentally, the government cannot account for $8 billion of assets and liabilities. What does that amount to? It includes general stores, I am told, ammunition, property and the cost of accrued leave. There is $2.03 billion for the general stores inventory and $845 million of explosive ordnance. They do not know what its value is or in what warehouse, if any, it is located and they do not know in what part of Australia that explosive ordnance might be found. There is $2.86 billion of repairable items and $1.39 billion in land, building and infrastructure. They do not know where it is so they cannot value it. How can you not know where land and buildings are? How can you not have a valuation of the joint down the road? Without those sorts of details we have no idea where taxpayers' money has been spent for the last 10 to 15 years in this department.

Nor, of course, do we know about the true state of all existing assets and liabilities within the Australian Defence Force. If this were a private company the obvious thing would have happened: the board of directors would have resigned en masse; senior management would have been asked to leave; the regulatory agencies would have been invited to come in, to look at the books and find out where the mess was; and maybe some sort of report might be made to the shareholders of the company. The board of directors would have been sacked and some of them would probably go to jail for their gross mismanagement. What we have here is the government's own public sector ADF HIH. In the simplest terms it is nothing other than a gross public outrage.

From another point of view, what sort of confidence does this give Australians about the capacity of the Australian Defence Force and the management and administration of the Department of Defence? We do not know what stocks of ammunition we have. We do not know what general stores we have. And to brush this off as a simple accounting problem, a simple arithmetic problem, a simple matter of maintenance of records, is simply too trite, too simple and too glib. The worrying point is that it is more than five years since accrual accounting was implemented across government agencies. Why hasn't this problem been identified before? If records were inadequate last year, the year before and the year before that, why haven't the necessary system changes been put in place to correct those errors and deficiencies? Here we have (1) ignorance of the problem and (2) an accumulating problem year in, year out in the Department of Defence. Moreover, it is a management problem. On top of that we have had the same minister with responsibility for the Department of Defence for three years. Why hasn't he taken issue with the secretary of his department and with the Chief of the Defence Force? Why hasn't the riot act been read to all of those persons at a senior level? (Time expired)