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JOINT COMMITTEE OF PUBLIC ACCOUNTS AND AUDIT
12/05/2010
Auditor-General's reports Nos 4 to 21 (2009-10)

CHAIR —Do any of the witnesses present wish to make a brief opening statement before we proceed to questions?

Mr Cahill —I am happy to table my statement.

CHAIR —Mr Cahill’s statement is with all the members. I need a member to accept that as a submission into our inquiry. So moved, Deputy Chair. What about NHMRC?

Prof. Anderson —I would like to say a couple of words, just to pick up a couple of points in our letter submission. The first point is that on 1 July 2006—not 2007, as it says in the paper; that is our mistake—the NHMRC began a big change. It was becoming a statutory agency, leaving the Department of Health. A new CEO, me, was appointed around the same time. There are new governance arrangements, as the act was also changed around governance and the important aspects of setting us up as an independent agency. and I think many of the issues that the ANAO reported reflected my own concerns about the organisation when I joined, and there are a couple of additional things I would like to mention briefly.

I was very keen that we did establish the agency as a successful agency—a very important role, if I may so, in Australia to make sure that we bring research to improve the health of Australians. The key mechanism by which we do that is peer review, and there were a number of things that I felt really needed to be improved in peer review as we use this instrument to select the best grants and the best people to support in research. You have seen in detail the next matter, the grants management scheme, our research management information scheme—a very out of date, very patched-together sort of grants management mechanism, so we have worked hard to bring in the new system that the ANAO have commented on. We also needed to undertake a recruitment process. Two previous reports, and two since I have been there, that I commissioned, pointed out that the organisation needed more people with research and health backgrounds so that we could appropriately handle the grants that we got and make sure that we do that in the highest-quality way. So we have been progressively recruiting those staff with research backgrounds, from professorial level down, to make sure that internal capacity is augmented and some of the weaknesses that were identified can be dealt with.

The last thing I wanted to say is to emphasise the high quality of Australian health and medical research. We have just done an independent, quantitative analysis of the impact, and Australian health and medical research is at the very top—the one per cent most-cited papers around the world, Australia is there at 2.4 per cent. So we way out-do the rest of the world.

CHAIR —Could you repeat that for me? I did not quite understand what you said.

Prof. Anderson —This is a formal process that looks at how people cite each other’s work in their own science. We have done a very large analysis, but I am just picking out one statistic. If you look at the top one per cent cited papers throughout the world—which, of course, is mainly Europe and North America—you see that 2.4 per cent of Australian medical research is in that top one per cent. So one in 40 Australian papers are in the top one per cent—or one in 100 for the rest of the world. That is a completely independent measure of the quality of what we do.

CHAIR —Thank you.

Mr GEORGIOU —Can you give us a comparison? If it is 2.4 per cent in the top one per cent, what would be the US, Russia or whatever?

Prof. Anderson —The one per cent would really be set by Europe and the United States. I think—and I am subject to correction of this—that the US accounts for something like 40-odd per cent of all publications. So the world average would basically be set by the United States and then the major European scientific countries. Our 2.4 per cent is, in a sense, a comparison against the leading international countries—North America and northern Europe.

CHAIR —So we are punching above our weight again. Thank you for that introduction. As members of this parliament I think we have all seen the benefits of some of the grants and the outcomes. But we do wish to pursue some of the matters that the Audit Office has raised. I am looking at the appendix on page 111. I would like to ask you a question about the breakdown of broad research areas. How do you approach that? Are these set or fixed or do they vary? How do you approach the broad research areas that would qualify for grants?

Prof. Anderson —These are defined by the applicants themselves.

CHAIR —So you do not set initial guidelines?

Prof. Anderson —We do but in a way that I will explain in a second. This is how they defined it. What we have been doing is developing a series of funding vehicles to move our balance more evenly between basic research and applied research. If you look back at a snapshot of us 10 or so years ago or perhaps a little bit longer, you would see that the basic laboratory research, which is highly valuable—that is where Gardasil started off—was probably three-quarters of our research. In recent years, including in the very recent years since I have been there—we have introduced some funding vehicles that are specifically for health services research and public health research and we have also bolstered our clinical research so that we have different streams to support the promising people, and we do not compare lab scientists with clinical scientists or public health scientists. We have tried to balance things up by making sure that we shape our funding schemes to achieve that.

The scheme that the ANAO mainly looked at was our project grants scheme, which is 50 per cent—and our big one. But we have 20-odd other schemes that are more targeted to do what is implied by your question, Chair, to make sure that we have a stronger effort in most areas.

CHAIR —And there has been dramatic change over time in that area. Do you have any particular restrictions? Are there restrictions in place?

Prof. Anderson —Apart from what propriety would involve in terms of compliance and things, no, we say that we will fund any research that is relevant to health.

CHAIR —To the improvement of public health?

Prof. Anderson —Yes. That can be from very fundamental studies of the genome through to some very applied research in rolling out primary care services in rural Australia. There is a very, very broad spectrum.

CHAIR —Senator Barnett, who had to leave, raised complementary health and alternative health. Does that figure in the grants?

Prof. Anderson —Yes, it does. Through the project grant scheme—over the last three years, I believe—we have called for grants in complementary and alternative therapies specifically.

CHAIR —I would be interested in that.

Prof. Anderson —We advertise in our project grant scheme that we want some extra research effort in some particular areas. All of them are named in our strategic plan. Complementary medicine was in our strategic plan. So we do the normal peer review, and then our research committee looks at other grants that are rated five in our scale, which is really very good—must be funded, but the money usually runs out. So they look at those and they look down that list of grants rated category five and recommend to the NHMRC to fund additional grants if they are in that area—in this case in complementary medicine. So we do have a way of targeting specific areas that we identify in our three-yearly strategic plan.

Mr ADAMS —They are not used to discredit complementary medicine, are they? Could you give us a breakdown of what would be applied for?

Prof. Anderson —Yes. That is a very good question. It is a very diverse lot of grants. I do not have at my fingertips the wide spectrum of those but I remember a few. There have been quite a lot looking at Chinese traditional medicine, about the effectiveness of that. There have been some looking at Indigenous Aboriginal traditional medicines. There have been grants looking at the chemistry of extracting of herbs to increase purity and that sort of stuff. So it is across the area. This is a grant scheme where people can put to us any idea they want, but then our peer review panels will look at the research idea and, if a grant came with a clearly prejudiced expectation, then that is not a good scientific grant.

Mr ADAMS —No, sure. There is a lot of work being done on prospecting the biology of many plants out there, I understand, by drug companies and others to find natural remedies. Would the grants be come in to those?

Prof. Anderson —I should point out that many—perhaps most—of our PBS type medications come initially from the plant kingdom, so it is a rich source of material. I know that in Queensland in particular there are some particular programs around that. We are an evidence based organisation, so hopefully we come to this with the impartiality that science is meant to have. Claims are claims, and anything can be tested, but I certainly do not come with a set view.

Mr ADAMS —My colleague Senator Barnett was concerned about the same issue that I am concerned about, which is the commercialisation of the research. There is a lot of government money put in to this. There is a commercialisation. We are looking at the performance of that. We do not seem to have any way of looking at that. I do not think the Audit Office does a performance audit, in that sense, on whether we are getting bang for our buck here. Are we taking that money on? Can you enlighten us on that?

Prof. Anderson —Yes. I can say a couple of things. It has been said to us—in a report we have had internally from Access Economics—that the benefits to the Australian economy of the cochlear ear implant and CSL, including Gardasil, are about equivalent to the entire government’s investment in health and medical research over that period of time. We also did a study a couple of years ago—and we are repeating it—where we looked at 1,208 grants and asked the grantees what the benefits were. Quite apart from the rapid growth in patents and intellectual property protection they have done, they also reported on their leverage of funds into Australia. I think for every government dollar these people levered about 30c one way or another on top of that. Much of it was from international sources—from the Wellcome Trust and NAH but also from international companies.

I do not think there has ever been a rigorous study along the lines that you mentioned, Mr Adams, but the Australian Society for Medical Research have commissioned a study. They commonly quote the fact that there is about $5 benefit to the Australian economy for every dollar in medical research. But that is their figure. We can supply their paper to you, if you wished.

Mr ADAMS —Who was the organisation?

Prof. Anderson —The Australian Society for Medical Research. Their umbrella organisation has about 15,000 members, from memory, from medical research.

CHAIR —Before we leave the area of commercialisation, have you had any input into Commercialisation Australia? I am thinking of a particular health research group that has been funded under your programs that also then received a commercialisation grant to develop a test that is commercially sellable. Do you have any advisory role or input into that?

Prof. Anderson —Not directly. You are probably referring to our development grant scheme, which I should have mentioned earlier. Amongst our funding schemes, we have one that is a so-called commercial development grant. I think we are about to open for this year.

CHAIR —I see.

Prof. Anderson —In fact, we have—I have just seen the statistic. We fund a few dozen grants through that each year. They are very early proof of principle grants. So they are sort of the notorious gap between the discovery of the things and then taking things along commercially.

CHAIR —And being ready to commercialise it?

Prof. Anderson —Yes.

CHAIR —So there is that gap-filler that you administer?

Prof. Anderson —It is our effort to help in that area, given that we are fundamentally about funding health and medical research under our act. On that scheme there has been a very wide range of activities—from new devices, new chemicals, behaviour or cognitive inventions and so on.

Mr GEORGIOU —I would like to understand more full the issue of conflict of interest. Do you have an incidence of declared conflicts of interest, where people say ‘I have a conflict’? How often does this happen?

Prof. Anderson —We ask that in every case for everybody on any of our peer review panels.

Mr GEORGIOU —How many of them put their hands up?

Prof. Anderson —I would just like to be clear as to your question. Right now, members of our grant review panel are being sent 100 grants to review, and on every grant of those they have to declare what conflicts of interest they have on every grant. We try to contrive, as far as we can, that they do not have conflicts of interest, —so that we do not have their grant before their panel et cetera.

Mr GEORGIOU —What I am asking is: in any lot that you put out, how many people declare that they believe that they have a conflict of interest? Do you know how many say ‘yep’? Could it go to the Audit Office? Did you get a record of how many people actually disclosed a conflict of interest? Did you have a count?

CHAIR —Or are there many who actually do disclose a conflict of interest? Are there any?

Mr GEORGIOU —Yes, that is what—

CHAIR —Is there a written process?

Mr GEORGIOU —I am just trying to establish how many.

Prof. Anderson —There is a written process.

Mr GEORGIOU —How many actually put their hands up and say to NHMRC, ‘Thanks, but I have a conflict of interest’?

Prof. Anderson —We would probably have that information.

Mr GEORGIOU —Did you check it out?

Ms Geue —We did get some information from the NHMRC on that. We looked at a large spreadsheet of information gathered from the researchers—1,200 entries.

Mr GEORGIOU —Out of those 1,200, how many said that they had a conflict?

Ms Geue —That was 1,200 that did declare.

Mr GEORGIOU —Out of how many?

Ms Geue —We do not have that information. We would have to get that from NHMRC.

CHAIR —Can you just clarify that: that is 1,200 entries over what period?

Ms Geue —That was over about two years.

CHAIR —A person could have a multiple declaration, couldn’t they? That would not necessarily be the number of people, would it?

Ms Geue —Each person would have had to declare on each grant. So it could be less than 1,200 people.

CHAIR —And there was a formal record of it?

Ms Geue —There was a formal record of that.

Mr GEORGANAS —When I declare, what happens next?

Prof. Anderson —You leave the room.

Mrs BRONWYN BISHOP —What is a conflict of interest for the purposes of the declaration?

Prof. Anderson —There is a page or so of definition of that.

CHAIR —I think the guidelines for the members are in the report at page 119.

Prof. Anderson —The most serious one is where the applicant has a very close association with the grant that they are looking at—they are a co-worker, it is their student from the last five years or they are in the same medical research institute or university. There is that sort of level, but it can also be personal conflicts of interest or a commercial conflict of interest. For example, it may be a grant around a diabetes drug and I am a consultant for pharmaceutical company X.

CHAIR —Or a shareholder?

Prof. Anderson —Yes.

CHAIR —So direct pecuniary interest is one of the criteria.

Mr GEORGIOU —Does a declaration mean that you cannot attend for a particular examination or you are excluded from the group that does more macro assessments? What happens?

Prof. Anderson —The first step is that you do not even get to see the grant in the first place on the panel. Then, when the panel meets, you are outside the room. When the panel is ranking the grants, you are outside the room and the ranking is blind to you. There is a step when you get the grant to review. Then there is a step when you are in a panel making the final scoring of the grants.

Mrs BRONWYN BISHOP —Very often in medicine things become fashionable. A lot of people will say: ‘This is an area that government has shown interest in and there is likely to be a bucket of money around for this. Therefore, I will put in my application because that is the only way I am going to get access to funds.’ Is there much of that?

Prof. Anderson —That is a leading question. I guess scientists are affected by fashion as much as other people, but this project grant scheme is a scheme where 98 per cent of the funding is on the basis of the quality of the application, the quality of the people applying for the application and its relevance to health. They are the criteria. The panel looks at that. They may be affected by the same sort of fashion. I suppose fashion can sometimes be a sudden breakthrough in an area, like understanding how the chromosome is put together, that attracts people on a scientific fashion into the area.

Mrs BRONWYN BISHOP —I will give you an easy one: smoking. There are buckets of money around.

Prof. Anderson —There are not buckets of money through us for that. So we do not have a priority pot of money for smoking through the NHMRC. There may be other funds and sometimes these are really very important—for example, the charitable funding sector. We do some of the peer review for the charities to reduce their overheads, such as the Heart Foundation and the Cancer Council. They can much more easily direct research into a particular area if they have had fundraising efforts around particular matters.

Mrs BRONWYN BISHOP —Let me give you an unfashionable one: illicit drugs and naltrexone. How would that go?

Prof. Anderson —It would be judged the same as any other grant. It would go to a panel where there would be people who have the appropriate scientific and medical expertise to be able to judge the value of that.

Mrs BRONWYN BISHOP —Do you test whether or not those people on the panel have a bias one way or the other? That would not show up as a conflict of interest.

Prof. Anderson —Yes, I see what you are saying. These panels have 10 to 12 people, and the chair’s role is to make sure that they are all put to the test in what they are saying. Remember that not only do the panel have another 10 people looking at what they are doing but there are one or two written external reviews on every grant, so there is an independent review by experts. It is not impossible but hard to bring personal prejudice to the table because in this scheme we are funding one in five applications and they are scoring as ‘outstanding’ and ‘excellent’—the very top of the very good. For every one we fund, our panel has ranked three more as worth funding but unable to be funded. The pressure is so high that something that is just a passionate view is very unlikely to get up. But everything depends on the quality of the application.

Mrs BRONWYN BISHOP —So if somebody had published on an issue they would probably be included?

Prof. Anderson —They would have to have done more than eight publications. One of the criteria is to assess so-called track record, or record of research achievement, and this is so competitive that people have to have a string of publications in an area and usually a team of researchers. Very few of our grants go to an individual researcher. They go to teams. So it is hard to get that sort of thing through a committee.

One thing that we are accused of, through these panels, is being too conservative, which I think is not the case—but I would say that, wouldn’t I? This year we have introduced for the first time something called the Marshall and Warren award. This is to remind us that Barry Marshall and Robin Warren, Australians working in Perth, won the Nobel Prize for a very left field idea. They proved that stress is not the cause of stomach ulcers; it is a bug. This is to remind up and our panels that they always have to be good scientists but you have to look for the really novel idea as well.

Senator KROGER —Is there an incidence of institutions that are more successful in terms of the number of grants that they seek—that is, they have worked out the process and the criteria that are hitting the mark?

Prof. Anderson —It is a very interesting question. I should declare that I am on secondment from Monash, so if you hear any prejudice in my answer you will know that. Senator, I know you are from Victoria and—

Senator KROGER —I notice that we get a good slice of the grants.

CHAIR —And I was going to add, as a member from a New South Wales electorate: are they all in Victoria?

Prof. Anderson —It is commonly said that we have some sort of inbuilt bias to Victoria, but the rankings are not made by me, Clive or Tony; they are made by our panels. This year there are 440 people on the project grant panel and about an equivalent number on all our other funding vehicles—so that is a huge conspiracy of 800 or 900 people.

Mrs BRONWYN BISHOP —But they are not all Victorians.

Dr Morris —They are from all over Australia.

Prof. Anderson —They are from all over Australia. In fact, in the project grant scheme, Mrs Bishop—and I know where you are from—the representation of Victorians is way lower than the amount of funds that they get.

Mr GEORGIOU —Why is that?

Prof. Anderson —It is a serious issue and we always feel we have a responsibility to make sure, as far as we can, that every state has people on our panels as well as there being younger and older scientists, men and women and so on. It is something we really do take pretty seriously.

Mrs BRONWYN BISHOP —Just to follow up on Helen’s question, I guess you would consider that a particular institution with a reputation might get a few brownie points over one that might be in a different state without a reputation.

Prof. Anderson —Correct. I am very aware that the leading universities and medical research institutes work very hard to get the best possible applications in. They have internal meetings where they use people on our panels to say: ‘These are the things that work when you are putting an application in; these are the things that don’t. This is the level of excellence you have to get to to be competitive.’ The big universities, the Group of Eight, do very well no matter which state they are in, and the outstanding medical research institutes—the Walter and Eliza Hall, the Garvan, the Baker—also do very well.

CHAIR —The ANAO did note some deficiencies in documentation of key procedures, actions and decisions, and that there was a lack of sufficient transparency and accountability and suggested a range of improvements. Could you update the committee on what improvements you have taken, particularly to documentation and procedures?

Prof. Anderson —Yes. The key improvement here has been the establishment of a 21st century, modern, IT based grant handling scheme. As I said in my opening statement, and is documented in detail in the ANAO report, that was really just not up to the task. So we have rolled that out this year. The other key matter is that for the first time on this project grant scheme we will be able to have the peer reviews occur in our own premises rather than in a large hotel in Melbourne. That means that we will have a much better ability to document what is happening, including directly through—

CHAIR —So your controls can be put into place more easily.

Prof. Anderson —Absolutely. Other changes we have made this year include that every grant review panel will be chaired by an independent person. My own staff have recruited some with research backgrounds, some New Zealanders—and we are grateful to our cousins across the ditch—and some who are eminent people, great chairs, but without a grant application. Last year, as ANAO have pointed out, 2.7 per cent of the grants went to a panel on which the applicants themselves were a member. We are very confident with our own staff doing this this year; that we will have reduced that to either zero or a very small number. The documentation around the process during the panels has been increased.

Mr GEORGIOU —So a grant can go to somebody who is on the selection panel? Can you explain that?

Prof. Anderson —Some areas in medical research in Australia are very small areas—for example, some areas in nursing research, nuclear imaging and so on. Every panel member looks at about 10 grants, so we have fairness across the system, and sometimes it is very hard to find an appropriate panel member for that area. So that might mean that for that year they have a grant application in.

Mr GEORGIOU —But he or she is not there when considering their application?

Prof. Anderson —They are not there when they are being assessed.

Mr GEORGIOU —So they are then when they are considering a cluster of applications.

Prof. Anderson —And they are not there when they are being ranked and not there when they are being reported. We have our own staff as well as observers. So we also recruit lay people to look at these panels and report directly to us on how the panel has been operating. This is a very important perception that the research community keep us very much up to the mark on. They want a level playing ground, so they are very diligent with us to make sure that the process that I just described is in place so nobody gets a step up.

CHAIR —The audit report also drew attention to the certifying of the administering institutions, that there was not a good framework around that approval process. Could you tell us what has been done to implement a new framework?

Prof. Anderson —There are three things I will mention. Our own internal processes about this have been revved up and brought together in a separate section of the organisation. It is not the people who run the grant system but a group called the quality and regulation branch. They operate quite independently and they also receive complaints from researchers or anybody else, so it is separate to our research funding bit. We have kept working on the deed of agreement. This is the legal agreement that we have with the institutions. That has been out for consultation to the community. We have had very good feedback on about that. We are doing targeted retesting of those comments and we expect that to go to our research advisory committee and council very shortly.

Finally, the administering institutions overall policy framework, which had not been updated for quite a while, has been out for comment, as mentioned in the ANAO report. We got the feedback. We have just sent out the next version of that for consultation, and that has taken a little longer than we had hoped, for a couple of reasons. The first is that the Department of Innovation, Industry, Science and Research had just changed their rules about the support of the indirect costs of research, and that has impacted on the relationship between universities and medical research institutes. That has affected the way we need to approach our policy. As you are probably aware too, the government’s considerations around health reform, the role of research in that, and the comments about supporting the current costs of research and training also mean that we need to make sure that our policy does not stand in the way of the cooperation that we hope for. So there have been a couple of background things that have led us to be a little slower than we want. But it is out for comment and we are pretty confident that it will be completed by the middle of the year.

CHAIR —Before we go to the post grant awards I want to ask a question of the Audit Office. You found that the documentation for grant approval often lacked a clear trail and it was difficult to determine why scores had been altered—

Mr GEORGIOU —They have got it all in government advertising.

CHAIR —sorry, why scores had been altered or budgets altered. Does that mean that they make these decisions and then realise there is not enough money so they have to make some cuts, or what did it mean?

Ms Geue —There were obviously lots of records to look at, and when we were going through the files we noticed several things. Firstly, there were not complete records. They have a database that the NHMRC would be entering data into. They also had hard copies. We could not reconcile the full record, so it was not possible to tell what had really happened at the meeting. That was one thing. The gist of it was that when we looked at decisions at those meetings we could not really define who was always signing it off, who had actually made a decision to reduce the budget. That sort of detail was not in the transcript or the record of the meeting. They had preset forms as well, for some of those records to be put into, but they were often blank. We are not saying that the record was not anywhere, but it could have been in two or three different places and it was hard to mesh it together. From a transparency point of view, we could not, on the information we were provided, make a good judgment, I suppose, on how complete those actual transactions and decisions were.

Our suggestion to the NHMRC was to improve that record-keeping process so that when you go to a particular project you can see what happened at the meeting, how that money was arrived at, how the scores were really arrived at, rather than having to second-guess that something else was happening behind the scenes, particularly where there was a lot of money on grants involved.

CHAIR —The NHMRC might like to respond that.

Prof. Anderson —All of that will be fully in place for this round, helped by being able to do it in our own premises but also to do it online with our new system rather than in the piece-of-paper way that it was done in the past.

CHAIR —So the system will be more standardised and there will be more direct procedures to follow.

Prof. Anderson —It will be completely standardised.

Senator KROGER —Just in terms of progress, when someone applies for a grant is there consideration that in the end they may not get the full monies they are seeking? If they were seeking $100,000 but there is a view that they should be supported to the tune of $50,000, is that what we are talking about here?

Prof. Anderson —Yes. The panel has to do two things after all the written reviews have come in and the whole panel see it. They have to give it a score out of seven and they have to recommend a budget. They look at what the applicants have asked for and bring their hard-nosed scientific views to that and make a recommendation to us. Once that has been done there is no further alteration of either the budget or the score. That just flows on through; hence the need to make sure we record that very carefully.

Over the whole system of grant applications, the panels recommend budgets at 87 per cent—I think it was last year—of what the applicants ask. The applicants are relatively realistic, but you would not be surprised by a little bit of stuff in there. That is of course just for the direct costs of research. The indirect costs—paying for electricity and all that sort of stuff—has to come from different buckets. That is not what we do. That comes from formulas that are driven by the Department of Innovation, Industry, Science and Research through a scheme previously called RIBG now called SRE. The medical research institutes are not eligible for that, and we have a separate scheme that was given in a budget four or five years ago which gives the medical research institutes an additional 20c in the dollar for these indirect costs of research so that is the only additional thing.

It is possible for our research advisory committee and council once they have looked at the budget to ask for formula cuts across this if they wanted to make the grants go further. Last year we funded less than 23 per cent of applications, and our application numbers this year are well up, so the success rates are getting quite tight. It is then up to our council and research committee to decide whether they want to reduce the amount going to each grant to fund a few more.

Mr ADAMS —I am interested in that administrative process you just talked about. It was put to me by smaller intuitions that they have a disadvantage because bigger institutions get easier access and have more opportunities because they have to pay a lot of on-costs to receive a grant then use the grant. Being smaller, it makes it much more difficult. This is not something only in your area; this happens in many other areas. Is there a way of helping this bias in some way for smaller institutions?

Prof. Anderson —I think there are several views around this, Mr Adams. I think one of the views put is that smaller institutions need to think about whether their overhead costs compared to their research activities are not disproportionate. Larger institutions have that advantage of being able to have a lower overhead proportion. On the other hand, smaller institutes put this to me very strongly that they are more nimble, more able, more able to do innovative things, so there are two sides to it.

There are some issues here because we are very aware that institutions in the health sector struggle to get the overhead costs of hospital based research. It is very hard to have that sort of overhead. As somebody from a university, it does not flow at a great rate to a departmental level either and the medical institutes I have talked about get just 20c in the dollar. Another part of this is that hospitals are FBT exempt, so for us who fund across hospitals, universities and medical research institutes, these sorts of ways of supporting research—the indirect costs of research—are a bit of an impediment, I think. While we are very encouraging of collaboration, one of the reasons why we have been a little slower in rolling out our administering institution policy is to make sure that we do everything we can to encourage collaboration and do not allow some of these financial things to get in the way.

Mr ADAMS —Would you say there is a lot more collaboration in Australia now than there was 20 or 25 years ago?

Prof. Anderson —I think we—well, I was going to make an unparliamentary comment there—are really good at collaboration in this country, and that has been said to me so often by international researchers about the ethos here. I said earlier in passing that I am not sure any of our grants—maybe just a handful of the four or five thousand that we have—are held by one researcher; they are nearly always teams. People are able to hold more than grant and they often hold them with different teams. We have a big granting scheme, called a program grant scheme, which is deliberately to set up teams of researchers. Our study of the publications out of research show that very few are single author; they are collaborative teams. That is the way of medical research these days. You often need, say, a cutting-edge geneticist, a behavioural scientist, an epidemiologist and then a clinical oncologist on a grant. I do think there is something in the Australian characteristic, if you like, that makes that collaboration fairly easy. We hear this from Australians—who think this is a good thing—who come back to Australia after years in, say, the United States, where the culture around this is very different.

Mr ADAMS —I just want to come back to that issue of smallness versus largeness. You mentioned something about a tax or another cost structure that gets involved as well. Are there many of those involved in this area that prohibits decision making and process that needs to be dealt with in some way?

Prof. Anderson —Let me just make sure I have understood your question fully. For us, it is formula driven. They get 20c in the dollar from us, through competitive mechanism support. And this is available for anything that is not a university but is set up independently as a medical research institute. Off the top of my head, I cannot remember how many get that, but it is maybe two dozen or some number in that area. There are quite a lot of other institutions—special centres and so on—that conduct research, but they usually administer their grant through a university or through a larger medical research institute.

Mr ADAMS —You mentioned that hospitals have another cost structure involved which is a bit of an impediment.

Prof. Anderson —Yes. The issue there really is that there has not been a distinctive stream of funding through the funding of health to support research in a hospital setting. It does not mean that some hospitals have not been fantastic about that, but, if you are a hospital administrator—if you have ambulance bypass problems or patients stacked up in emergency—you can understand the priority. So I think it is important for the future that the support for clinical research is there beside the patients in the hospital and that the health services research is there in the health system and is supported in that sort of way.

Mr ADAMS —I think that is a growing trend, wouldn’t you say?

Prof. Anderson —Correct, and we at the NHMRC are very keen to make sure that the hospitals, institutes and the universities in these major settings—Sir Charles Gairdner Hospital in Western Australia, Royal Adelaide, Royal Melbourne—are brought together in a way that really can make this happen. We need facilities like Massachusetts General Hospital, University College London and Mayo Clinic here in Australia for patients’ benefit.

Mr GEORGIOU —Can I just ask a question about the audit report. You have accepted all the recommendations; can you give us some idea of what sort of fillip that report gave to your progress—in terms of both speed and intent. I am trying to the audit office a copy.

CHAIR —Are you there yet?

Prof. Anderson —I do not want to flatter our—

Mr GEORGIOU —You will not get another review for five years—

Prof. Anderson —I do not think anything in the report was a surprise. As I said in my opening statement, it certainly reflected some of my concerns when I was appointed halfway through 2006. We believe that all of the recommendations and the detail are being implemented. We are using our own audit committee of course to keep us on our toes about this. I will not table it, but here is the very detailed thing we are giving to our own audit committee to make sure we are on top of every aspect of this. We might have argued—but we did not—with some of the details. I cannot claim that I was not slightly hurt by some of it—no I am just joking.

Mr GEORGIOU —We are all hurt!

Prof. Anderson —They got to the heart of the matter of our project grant scheme, in particular. I would say, though, that that is just one of the schemes. It is the oldest one, and often with old schemes some of the practices of 10 years ago and so on have lingered on. I think we have always been more rigorous with some of our newer schemes, but this is a wake-up call in this scheme and we will get it right.

CHAIR —Could I draw attention to the one area in particular that was post award grants administration. I think the Audit Office have told us that, in terms of acquittal, you have signed off on all the acquittal processes and you are up-to-date on that, but what have you had to change and what have you done to improve the post award grants process?

Prof. Anderson —‘Hard work’ is the short answer.

Dr Morris —In brief, we have set up a specific section to do post award. I think as noted in the ANAO report, the emphasis of the NHMRC traditionally was on pre-award—getting the awarding of grants right—rather than on post award. I think shortly after Professor Anderson started with the NHMRC we worked to put greater emphasis on post award. We set up a specific section, developed some very comprehensive standard operating procedures and really focused on the acquittal process. I think we are down to less than 100 outstanding grants.

Senator KROGER —That is significant, because in here there were—

Dr Morris —The last time I looked it was around 100.

Senator KROGER —So you have really some made some advance on it then. That is great.

Mr GEORGIOU —Could I pursue one final point. In terms of the specificity of the recommendations for accountability that the ANAO has put forward, are there issues at the margins where you think too much is being demanded in terms of accountability and transparency? I am professionally interested.

Prof. Anderson —That is a very interesting question. One of the things that we are aware of is this tension that comes through peer review, I suppose, which is not really the same as procurement or normal government policy—the diligence we go through if we are getting services around IT or something. And, of course, peer review is an international thing where there are international norms and so on. I think in the discussions during the review I probably did have some concerns that there was perhaps a misunderstanding about what would work and what does not. Peer review is eventually an opinion by somebody who is worthy to give that opinion, but at the end of the day I think that the recommendations are compatible with nevertheless having high-quality peer review without influencing that. Indeed, on some of the things we talked about 10 minutes ago, it will improve that. For example, this year for our panels we are going to not only document it more but we are going to be making them nail their colours to the wall on each of our selection criteria, not just the overall one. I think that will improve things. People have to think through the specifics that we deal with. I hope I have not been overly flattering to the ANAO, because—

Mr GEORGIOU —You can never flatter anyone enough!

CHAIR —The deputy chair’s question implies that you could have a system and a process where you could tick off everything right but you may not necessarily still get the best outcomes.

13:04:26 —I think that is a very important matter. For example, on the conflict of interest thing, it is often said to us, ‘You’re too rigorous; it means that the people with the best knowledge are out of the room because they had this person as a student four years ago.’ However, on the other hand, is the perception of bias and the reality of bias.

CHAIR —We want the balance to be right.

Prof. Anderson —It is a different thing and it is something that we have to be constantly vigilant about.

Mr ADAMS —You could do a paper on that, Professor.

CHAIR —You might get funded to do a paper.

Prof. Anderson —I have done one for our website to try to explain to the research community why we do some of these things. It is due for updated, actually—it is two years old.

Senator KROGER —What percentage of grant applications are you obliging? Did you say that you were able to fill maybe 25 per cent of the grant applications that come in? What was the percentage?

Prof. Anderson —I have the figures here.

Senator KROGER —You suggested that it was on the increase.

Prof. Anderson —One of the issues is that our rate of applications is going up, and that is a challenge. Last year the success rate for the big project grant scheme was 23 per cent. For our fellowship for mid-career researchers it was 13 per cent—very low, very competitive. For the development grants—the commercial grants we talked about earlier—it was 20 per cent. That is pretty much the area. So there is a lot of good stuff. People often say to us, ‘I put this grant to the NHMRC three times and they won’t fund it.’ I like to say back to them: ‘You put it to us three times and three times we judged it worthy of funding but the money ran out before we got down the list.’

CHAIR —Thank you very much. It has been very useful. I think the audit report has highlighted all the areas we would have concerns about. But we take some confidence from your response, Professor Anderson, that these things are being pursued fairly rigorously and that the change process continues—and we wish you well with that. On behalf of the committee, I would like to thank all the witnesses who have given evidence today. The committee may have additional questions to put on notice which the secretariat will forward to you. But I think we have covered most areas. If that does happen, please note that four weeks is our usual requirement. So it would be appreciated if you could get those answers back to us in that time frame.

Resolved (on motion by Senator Kroger):

That this committee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 1.07 pm