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Legal and Constitutional Affairs Legislation Committee - 29/05/2013 - Estimates - ATTORNEY-GENERAL PORTFOLIO - Australian Customs and Border Protection Service

Australian Customs and Border Protection Service

[09:02]

CHAIR: We are going to commence the examination of the Attorney-General's portfolio with the Australian Customs and Border Protection Service, then the Human Rights Commission and then moving through the program as we have identified. Everyone knows the drill. They are indicative time frames, of course.

I welcome Senator Ludwig, the Minister for Agriculture, Fisheries and Forestry and Minister Assisting on Queensland Floods Recovery and, of course, the minister representing the Attorney-General and the Minister for Justice and Minister for Home Affairs. Good morning to you.

Senator Ludwig: Good morning and thank you, Chair.

CHAIR: Mr Wilkins, hello.

Mr Wilkins : Good morning, Madam Chair.

CHAIR: Welcome to you and all of your officers in the department. Welcome back again. Mr Pezzullo, welcome to you and your officers from the Australian Customs and Border Protection Service. Minister, do you have an opening statement?

Senator Ludwig: No, thank you, Chair.

CHAIR: Mr Wilkins, do you have an opening statement and, if you do, do you want to give it now or later?

Mr Wilkins : Yes. I would like to say something in relation to some of the issues in the portfolio, which might be useful for the Senate to contemplate over the next couple of days, about where we are going on some issues. For example, there are two things that I am most concerned to draw attention to at this point in time. There is the fact that for budgetary convenience I have on my books the royal commission which has been set up into abuse. That is a major undertaking; it has bipartisan support. But it is a large budget and it has a large staffing contingent. All of the numbers are a separate cost centre in terms of the Attorney-General's Department, but for budgetary convenience it is shown on my books. The staffing is shown as staffing of the Attorney-General's Department.

Clearly it is important for me to make the point that this is entirely an independent body. We exert no influence or control over the operations of the royal commission. The royal commissioner would want me to emphasise that as well. The extent to which we are able to answer questions about the operations of the royal commission will therefore be limited, and appropriately so. I think that senators would understand that it would not be a good thing if the secretary of this department were delving into the actual operations of a body which is independent and dealing with such a sensitive subject matter.

On the other hand, there are some matters of a purely budgetary nature which we may be able to throw some light on. But I am just flagging that there may be limits to the extent to which I can enlighten the Senate on that. I know the royal commissioners themselves are quite keen to be transparent and accountable about these budgetary matters and the operations of the royal commission, and in due course I think they will make statements to that effect. They will be available probably to answer questions in some form, not necessarily to the Senate directly, but I think they are thinking through the best way of showing that accountability at a budget level. Obviously, they will be conducting their own operational decisions et cetera. I just want to make that point because I am going to be saying, if questions come up at a certain point of time, that I think it is inappropriate that they are directed to this department to answer.

I also make the point that it artificially expands the number of people in my department by some 117 people. That is an artificial increase, in the sense that they are not people working for the Attorney-General's Department; they are working for the royal commission. The actual numbers in the Attorney-General's Department have gone down by 47.

The other task force—which is probably not quite in the same category of independence, but it is independent; it is being run by Len Roberts-Smith—which is housed in my department is the Defence Abuse Response Taskforce, which, senators will be aware, was set up as an administrative body but under the independent governance of Len Roberts-Smith. That is looking at questions about, as it says, the Defence abuse response that came out of the DLA Piper inquiry and then was referred across to this task force. We can answer certain questions about that but, once again, some of the operational issues of the task force are matters for the task force, and I would not want to intrude into what are independent decision-making matters about judgements about individual cases. It would be inappropriate for this department to be directly involved in that. But, once again, for budgetary convenience, that is housed in my department. There will be 103 people working in that taskforce. So, once again, at least on their face, the numbers of people in the Attorney-General's Department have been artificially inflated.

So I just want to draw attention to that. If you look at the ASL numbers in the budget papers, you are left with the impression that the numbers have gone up significantly in the department. But, if you take out the number of people in the royal commission and the number of people working in the Defence Abuse Response Taskforce, the numbers are in fact falling by 47. So we have put a note in those figures in the budget papers to try and make that clear. But I make those two points—one a budgetary point, the other about the limitations of my capacity—and I think you would consider it would be inappropriate for me to answer some of the sorts of questions that might come from senators. I just wanted to make that point at the outset. Thank you.

CHAIR: Thank you, Mr Wilkins.

Senator HUMPHRIES: Thank you, Mr Wilkins, for that clarification. Whereabouts in the program will the Defence Abuse Response Taskforce fall, if there are certain questions, as you say, we can ask about that?

Mr Wilkins : If you wish, we can slot it into the civil area. I think that would be most sensible. In my department, it is the civil law area which is managing that. Or we can do it under the more general budgetary area.

Senator HUMPHRIES: I do not mind where, but just tell us where we can ask those questions.

Mr Wilkins : Okay, I am not quite sure either. It is under program 1.1 in group 2, I am informed.

Senator HUMPHRIES: Obviously, we have the issue of the independence of the courts to deal with across the board, and we know we cannot ask questions about decisions and processes that the courts themselves are exercising with respect to their judgements. But we do have the opportunity to examine the administration of each of those courts, and indeed several have been called in the next two days. I assume that there is a similar capacity to ask questions about the logistical operations of the royal commission, in the same way.

Mr Wilkins : That is what I am flagging. This is an open question; I do not know the answer to that. I am happy to have a discussion about that now. I know the Royal Commissioner is uncomfortable with that. You are right about the courts: there is some analogy between the way we deal with courts in this forum, and the way we might deal with royal commissions. I think it is probably better that I answer questions that I am able to answer about the royal commission's budget and operations. Would you want, for example, to talk to the royal commission about some of the issues about how they are setting up websites and stuff like that?

Senator HUMPHRIES: Well I personally do not have any questions, but it is possible colleagues might want to answer questions like, 'Where is the commission planning to sit?' 'What process are they using for taking evidence?' and things like that.

Mr Wilkins : I think that is beginning to get into areas that I cannot answer. And maybe, actually, you might need to talk to the royal commissioners themselves—

Senator HUMPHRIES: They are not appearing, are they?

Mr Wilkins : or to executive officers. Some of those things we might be able to answer, and some of them I think are going to be difficult. I think we might have to play it a bit by ear, Senator.

Senator HUMPHRIES: This is obviously going to be an exercise that will go on for quite a long time, over many future estimates.

Mr Wilkins : Yes, that is right. I am just trying to—

Senator HUMPHRIES: We may need to work out a way of being able to get the executive officer, or whatever, of the commission in front of the committee in future years. We cannot do it this year, I imagine, but in future years it might be necessary.

Mr Wilkins : Well we could try and do that. I think over a number of years we have managed to work out where the line is with the courts, so we will, as you say, probably have to do that in terms of the royal commission, and clearly there are legitimate budgetary issues that the Senate needs to be able to ask about.

Senator Ludwig: This also might be an unhelpful contribution, but we have had, to my recollection, the Cole royal commission and a few others that have gone before. Maybe we could get someone to have a look at what the arrangement was between the secretariat and the committee and that would at least give us a base to start from as to what is available.

Senator HUMPHRIES: You are right, Minister, it is an unhelpful contribution.

CHAIR: Mr Pezzullo, good morning and welcome to you, and your officers and people in Australian Customs and Border Protection. Do you have an opening statement for us?

Mr Pezzullo : I do. Since I last appeared before this committee in February I have had the honour of being appointed to the role, substantively, of Chief Executive Officer of this service. It is one of the longest serving agencies of state, having existed in one form or another since Federation. Indeed it is a great honour. I have also made several senior appointments in the last few weeks to ensure that we have the right leadership team in place. I have appointed a new Deputy Chief Executive Officer for border enforcement—Mr Roman Quaedvlieg APM, who is sitting with me at the table. Roman joins us from the Australian Federal Police, where he last served for three years as the chief police officer of the ACT. He will focus on the delivery of intelligence, targeting, compliance, enforcement and maritime security outcomes for the service.

I have also asked—and Marion has agreed—Ms Grant to take on an expanded range of responsibilities in addition to being the Chief Executive Officer for border management. Ms Grant has stepped up to the duties of Chief Operating Officer. Ms Grant is with me at the table as well. I have also appointed a number of other senior executives at the band 2 level. I will not go through the details as they are in my tabled opening statement, but I welcome them one and all to the service. They have all come from other agencies. These new leaders bring with them a wealth of experience and insight from across the public service including law enforcement, policing, as I have said, national security and service delivery. Their experience will add to our existing leadership team to better position the service to meet both current and future challenges.

I can also update the committee on the issue of customs and border protection reform. As the committee would be aware, last December the government announced an intention to undertake what was described as root and branch reform of the Customs and Border Protection Service. To that end it established a reform board which reports to the Minister for Home Affairs, Mr Jason Clare, and consists of the following members: the Hon. James Wood AO, QC, former Royal Commissioner of the New South Wales Royal Commission into the New South Wales Police Service; Mr Ken Moroney AO, AMP, former Commissioner of the New South Wales Police Force; and Mr David Mortimer AO, former CEO and chair or deputy chair of a number of significant private sector entities including TNT Ltd, Ansett, Australia Post and Leighton Holdings. The board has met five times, most recently yesterday. It is not my place to speak for the board of course. What I would say is that it has already assisted me quite significantly in shaping my thinking about a plan for reform, which I intend to finalise in the near future. I have also been assisted in this endeavour by the recently concluded Australian Public Service Commission capability review into the service, which I have on my desk as we speak.

Our reform program will consist of three interdependent tracks or streams of reform, entailing reforms in the following areas: our people and operating model, to create a more agile and capable service with a particular focus on the creation of a new enforcement agency model and a disciplined, uniformed career stream within that agency; modernisation of systems and processes, developing efficient and sophisticated business systems to give our staff the tools they need to do their job. This will include modernisation of border processes and intelligence capabilities and upgrades of our technology, services and practices so that we can deal with increasing trade and travel volumes and complexity. The third track focuses on integrity, to build a service culture which is hardened against corruption and this relates to our values, our identity and our professional standards and systems.

I would like to address this last theme in more detail and update senators on our work in this area. As I said at the last meeting of the committee in February, more arrests of our officers were to be expected in relation to serious allegations of corruption. Since that meeting on 12 February four officers of the service have been arrested by the Australian Federal Police in relation to serious allegations of criminal conduct and action was taken to immediately suspend these officers. All of these officers have been suspended without pay pending criminal and/or disciplinary proceedings. Two of these individuals are no longer employees of the service. They have resigned prior to the completion of internal inquiries although criminal proceeding remain on foot. Two officers have been suspended without pay pending the outcome of their criminal and other proceedings.

I can advise the committee that on 26 April this year, a former Customs and Border Protection Service officer, Mr Paul Katralis, was sentenced to a total of seven years' imprisonment with a non-parole period of four years. I should point out that Mr Katralis was not one of the four. He was arrested last year and subsequently charged, tried and convicted since the last meeting of this committee. In handing down the sentence in relation to Mr Katralis, the judge made comment that the sentence was to act as a general deterrence for Customs and Border Protection Service officers and, more widely, the Public Service, in relation to their abusing positions of trust for corrupt and criminal ends.

I wish to assure this committee that the service and its senior leadership is committed to taking strong and resolute action to deal with issues regarding the integrity of our officers and the service more generally, and gratifyingly, so are most of our people. The Customs and Border Protection Service has been alert to the risk of corruption and criminal infiltration for a number of years. We have appreciated the risk that criminal groups will attempt to infiltrate the service so as to gain access to sensitive information or even active support for the smuggling of illegal, prohibited and regulated goods.

As I outlined to the committee in February, we now have in place stronger corruption fighting powers from the parliament which allow for, amongst other things, the following: the integrity testing of Customs and Border Protection Service officers; the power granted to me as the CEO to make a declaration that an officer's employment has been terminated as a result of serious misconduct; mandatory reporting requirements under which officers are legally required to report instances of serious misconduct, corrupt or criminal behaviour; and drug and alcohol testing for all Customs and Border Protection Service officers.

In relation to the mandatory reporting requirements I can advise this committee that one of my first acts as CEO, which I undertook on the first day of being in the office, was to issue a CEO order making it a legal requirement for all employees of customs and border protection to report serious misconduct, criminal conduct and/or criminal behaviour. To support our officers in meeting these obligations, an integrity support and referral network has been established to provide support and advice on options regarding reporting obligations, or indeed as another avenue to report concerns regarding serious misconduct, corrupt and/or criminal behaviour. The members of the service have embraced the need to improve our integrity framework, and this was clearly evident when the call went out across the service for volunteers to be an integrity support officer in the network to which I have just referred. This was met with an overwhelming response from all levels within the service and resulted in more officers volunteering than there were positions available within the network.

To ensure that we are creating a culture that is resistant to corruption, I have also outlined to the senior executives of the service my expectations of them as leaders. It is the leadership within the service who set the culture, and who can influence in a very real way what our staff and those working with us think is acceptable behaviour. I have made it clear to the senior executive of the service that I am committed to stamping out corruption and dishonesty by setting a new direction and culture for the service. To this end I have stated very clearly that I will hold the senior leadership group accountable, including individual personal accountability as I am accountable, to stamping out corruption and creating a culture which does not stand for corruption. I have made it very clear that I expect senior leaders to exercise all due diligence with respect to matters of integrity by ensuring that their staff fully understand and act upon all of their integrity obligations.

The work I foreshadowed to this committee in February to enhance our organisational suitability checking processes to be better able to detect and deal with officers with criminal associations is progressing. In this work we are focussing on four key areas. Firstly, we are raising the standard and increasing the range of information and intelligence sources against which prospective employees will be checked and assessed from an organisational perspective. Secondly, we are redesigning our post commencement screening activities to be more flexible and dynamic, encompassing continual monitoring, education and, if necessary, tailored aftercare arrangements and risk mitigation strategies. An example is examining links between our staff and organised criminal groups which might arise through secondary employment relationships. Thirdly, the development of an early identification and intervention system which will attempt to proactively identify and work with staff to correct potential problematic behaviours before they become an issue rather than relying solely on reactive formal and punishment based systems. Fourthly, we are further integrating out integrity and human resource practices and processes so that positive behaviours are rewarded and recognised, and that data collected through our HR processes, like relevant work force metrics, can be used to support our proposed early intervention system.

We have also instituted a drug and alcohol testing program pursuant to the powers granted me by this parliament to further strengthen our integrity framework. A pilot drug and alcohol testing program commenced on 13 March 2013.

As of the 28 May, 551 Customs and Border Protection Service officers have been tested under this program. I should advise the committee that in instances where we have a verified positive result—that is, a positive drug or alcohol result that is confirmed by laboratory testing and verified by an independent medical review officer—the matter is now referred to our integrity and professional standards branch to commence a code of conduct inquiry.

The officer is informed of the verified result and the initiation of the code of conduct inquiry. As a service, we are cognisant of the fact that criminal organisations, as I said before, will seek to avoid the systems and processes that we put in place. Consequently, those systems and processes need to be continually enhanced and improved. To this end, and in order to strengthen our approach to these issues, I have decided to bring a more direct focus and accountability to bear by bringing together these functions in a new division within the service: the integrity security and assurance division under the leadership of an experienced service officer, Ms Jan Dorrington, as National Director for Integrity, Security and Assurance, and Chief Risk Officer.

In addition to this reform, there has been a further expansion of the remit of our integrity and professional standards branch. It now directly manages all disciplinary processes undertaken under the provisions of the Australian Public Service Code of Conduct process. This is already giving us, and will give us, a more integrated approach to managing professional conduct in our workplace, fighting corruption and criminal infiltration, and dealing with misconduct. To support this renewed focus and ensure that we have the capability, and the right professional standards practice model with the right processes in place to deal with integrity matters, I announced internally an integrity management review in March this year. This internal review is due to report to me this month. Indeed, I have seen a draft of the report and will be taking action on it in the weeks ahead.

Further to this, we have also implemented an online ethics course that will join the mandatory e-learning courses for all staff as they work through their performance assessment and feedback cycle. The new cycle will commence on 1 July 2013. However, I have encouraged staff to complete the ethics course as soon as practicable. But, certainly, it will be a mandatory requirement through the course of the financial year 2013-14. The online course sets out the expectation of ethical behaviour and will assist in embedding the enhanced integrity measures into our everyday work and thinking. It builds on the integrity briefing sessions, which are now mandatory for all new employees.

Our work to strengthen our integrity has not, however, detracted from our day-to-day business: that is, to protect Australia's borders, whilst facilitating legitimate trade and travel. On Monday of last week, I joined the Minister for Home Affairs, the Chief Executive Officer of the Australian Crime Commission and the Australian Federal Police Commissioner to launch the ACC's illicit drug data report for 2011-12. This report showed that, working with our partner agencies, we achieved a record 23.8 tonnes of seized illegal drugs during the financial year of 2011-12. That is up from 9.3 tonnes seized in the previous year.

Notwithstanding the fact that the volumes of trade and travel across the border are increasing—naturally so—we have seen an increase in the number of detections, with intelligence playing a significant role. From the financial year 2009-10 to April of this year, which is the most recent data that I have, we have seen an increase in the number of drug and drug precursor detection numbers to the tune of 69 per cent over this time. Now, the reality of our resource challenges has meant that over a similar period, we have seen a reduction in our staffing strength of around seven per cent of our total average staffing levels over this time.

These increased detections are not the result of just one factor; it is due to the layered approach that we employ to the protection of the border. This involves more targeted screening of cargo and passengers; better intelligence capabilities; enhanced collaboration with Australian law enforcement, as well as international partners; strengthened engagement with industry and the public through processes such as Customs Watch; and, fundamentally, the skill and trade craft of our officers.

I am determined to continue to build on this productivity and ensure that we are providing our officers with better training, giving them better systems and better intelligence support to do their job.

In conclusion, I wish to salute the silent majority of the service, who are hard-working diligent officers who understand their ethical and integrity obligations. Those who are at this very moment keeping our borders open to legitimate trade and travel and to securing those borders. We have recognised the need for change and reform in our service, and we have embraced it. I look forward to the committee's questions.

CHAIR: Thank you for that very comprehensive opening statement. Congratulations on your appointment as the permanent CEO, and to you, Ms Grant, in your enhanced role. And welcome to estimates, Mr Quaedvlieg.

Senator HUMPHRIES: I also confirm those welcome developments. Congratulations.

Mr Pezzullo : Thank you.

Senator HUMPHRIES: I want to ask you about some of the things you mentioned in your opening statement. The Integrity Support Office: is that a singular position?

Mr Pezzullo : Within a network. There is an integrity support referral network, which is a network of these officers, and then the individuals are known as Integrity Support Officers.

Senator HUMPHRIES: Are you saying there is a single person or are there several people with that role?

Mr Pezzullo : They are individual officers who are then, if you like, supported by a network so that they are trained, they all operate to the same standard and they have the ability to discuss relevant matters of integrity support practice with one another.

Senator HUMPHRIES: How many?

Mr Pezzullo : I will ask Ms Grant to check the detail, but we are aiming for a full complement, I think, of 30 such officers. Whether we are quite there or not I cannot quite recall. But we certainly had more volunteers for the positions than the number of positions we thought we would need. So we were oversubscribed in that sense, and that was the point I was making in my statement.

Senator HUMPHRIES: These are existing positions for which an added layer of responsibility has been—

Mr Pezzullo : That is right. I have modelled it fairly closely to, although I will not say it is identical to, a similar AFP network within the AFP and indeed most modern policing and law enforcement agencies. I will describe ours, but it is a template to some extent that I have borrowed from the AFP and other agencies. You have your formal whistleblowing processes. In our service, additionally, you have mandatory reporting requirements that create a legal obligation under what is known as a CEO order to report instances of serious misconduct, criminal behaviour and corrupt behaviour. Sometimes an officer might feel, 'I think I need to report this, or I think something sharp is going on. I am actually not sure if it is misconduct or criminal in nature. Maybe I am imagining it. To whom can I reach out, perhaps other than my supervisor, because there might actually be an issue about such behaviour within the work team. To whom can I reach out within my workplace or my broader region where I can ask some questions around the ethical challenges I am facing? Should I indeed report this or not?'

The network is designed to place officers in a distributed network across Australia, because you want people to be as local as possible to then provide that counsel and advice. In no instances—and I have made it clear to both officers at large under mandatory reporting but also to officers of the network—does that abrogate or obviate the need for reporting to then occur. But at least it provides some advice and counsel and indeed support for what potentially can be quite a stressful situation to the officers, particularly those who might be doing it for the first time. They might be in a position of having a power imbalance. They might be reporting against a very senior officer or their own superior. These can be emotionally and professionally stressful times. So the support network is really there not to stand in the shoes of our internal affairs function but to provide that additional support to the officer who might have such a concern.

Senator HUMPHRIES: And any officer who has a concern could approach any integrity support officer, even if they were not in the same area of—

Mr Pezzullo : I will just check the practice. It is obviously a network we are just starting up, so some of the finer points of practice might yet to be finalised. I think the logical situation would be to reach out to someone who is either functionally or regionally close to you, but if an officer felt concerned or wanted to reach out to someone else I think they could avail themselves of that. I will ask Ms Grant to speak to that.

Ms Grant : The mandatory reporting requirements require that for any officer who has information that needs to be reported it is mandatory to make that report. The system is set up so that they should report that directly to our integrity and professional standards area. But if they are not sure if it is a matter that does require reporting or they are perhaps not feeling confident about going directly to the integrity and professional standards branch, we have set up the integrity support and referral network and the integrity support officers to be there as a support to others officers in the service. You can go to one of those ISO officers and discuss the situation you are contemplating. The ISO officers are there to help the officer work out whether it needs to be reported or—

Senator HUMPHRIES: I understand, but my question is whether you can go to any ISO officer?

Ms Grant : Yes you can. The network is there at all levels of officers throughout the organisation in all parts of the organisation geographically. So you can go and speak to whomever you feel would have the confidential conversation, and the officer would have confidence in the officer they chose to speak to.

Senator HUMPHRIES: In your opening statement, Mr Pezzullo, you referred to 'redesigning our post-commencement screening activities to be more flexible and dynamic, encompassing if necessary tailored after-care arrangements'. Can you explain what you mean by that.

Mr Pezzullo : During the course of disciplinary or management proceedings, or indeed through the revitalised OSA checking, organisational suitability assessment checking, we are doing, it may come to notice that someone may be vulnerable through associations. I will give you a concrete example of something we are looking at right now. People might have authorised secondary employment arrangements to work in the private security sector. A number of agencies—policing agencies and others—have looked at that, not because of a sense that every single person who works in the private security industry inevitably comes across criminals or people with criminal backgrounds or associations, but, frankly, a number do. So the after-care arrangement in that case might be, 'Yes, you have authorised employment arrangements, and thank you for declaring it, as you need to, and that employment is approved. However, here are the risks and issues you need to be alert to in terms of working in that industry.' There might be a more regular use of the term 'after care'—there might be a more regular feedback process where people from the professional standards area speak to that officer periodically to say, 'How is that secondary employment going. Have you come across this, that or the other, and are you comfortable that you are not being compromised?' It is not a disciplinary process, and there is no suggestion in an after care arrangement that an officer is necessarily the subject of a disciplinary process.

Senator HUMPHRIES: You made reference to the new powers conferred on the Customs Service. These include integrity testing, power to make a declaration, an officer's employment has been terminated as a result of serious misconduct et cetera. How long have the powers been in your hands now?

Mr Pezzullo : The integrity testing powers commenced with immediate effect in December, when the legislation received assent, as I recall it. The drug and alcohol testing, the implementation of CEO orders on a range of matters, including mandatory reporting, came into effect pursuant to a regulation going through, so they came into effect in February.

Senator HUMPHRIES: Have you made any declarations that an officer's employment has been terminated as a result of serious misconduct, since you had that power?

Mr Pezzullo : No, and no proposals have been put to me. But the process is not an arbitrary one, as I think I explained in the February hearings, so I will not go over the detail. A stock standard disciplinary process, as it were, needs to be in place. If the sanction that arises from that disciplinary process is a decision to terminate, that is a process that is already available under the APS Code of Conduct provisions. The CEO's power to declare that termination as being connected to serious misconduct adds a layer of sanction on top of that decision, but it is something that is to be recommended to me as a result of those disciplinary proceedings.

Senator HUMPHRIES: Have there been any instances of mandatory reporting of serious misconduct, corrupt or criminal activity since that requirement existed?

Mr Pezzullo : Yes.

Senator HUMPHRIES: How many such cases?

Mr Pezzullo : I will take the exact number of reports on notice. Some of them—I know because the reports come to me regularly—were what I would call retrospective mandatory reporting, which is to say, 'The following officers have been charged. They have appeared in court, so they are known entities. And I had a relationship with that officer—we joined together and we went to a party with them once.' So there is that sort of level of reporting. That is triaged and examined and in some cases it leads to further inquiries. In other cases it might be, 'Okay, thank you for reporting it.' So the volume of the reports has to be discounted for what sort of actionable leads emerge from the report. I think I would prefer to come back to you on both of those.

Senator HUMPHRIES: It would be interesting to know what reporting has occurred of allegations about people not already in the criminal justice system.

Mr Pezzullo : All right. We will refine the data down to that.

Senator HUMPHRIES: You have mentioned that 551 officers had been tested for alcohol or drugs.

Mr Pezzullo : Yes.

Senator HUMPHRIES: Are those tests random and unannounced?

Mr Pezzullo : Yes.

Senator HUMPHRIES: How many officers are we talking about.

Mr Pezzullo : The head count of the service, including part-time employees, is around 5,600. Our average staffing level is 5,100—the full-time-equivalent workforce is 5,100.

Senator HUMPHRIES: So it is roughly 10 per cent of your full-time workforce. In a full year of operation, are you on average expecting to get through half or three-quarters of the workforce?

Mr Pezzullo : At the rate we are going—and in some cases we will be revisiting work areas and some people will be done several times during a financial year—I would anticipate that we would cycle through the entire workforce on a randomised basis, every 24 or 36 months. We are still working through the maths of that. The phase we are in—it is full drug and alcohol testing—is a pilot phase. I would like to review the results when the pilot ends—I will come back to you on the date that it ends, but I think from memory I decided the pilot would take us either to the end of May or June. We then won't stop it but we will evaluate it. We will look at the maths of it to see if we need to ramp up our effort to capture everyone in a year, whether we are comfortable that we are getting both a deterrent and an integrity intelligence effect over two years, or can we spread it out or recycle over three years. We are just going to work through the mathematics of it after the pilot concludes.

Senator KROGER: Is the pilot program doing testing onshore?

Mr Pezzullo : I am sorry.

Senator KROGER: Is it testing when the officers are onshore?

Mr Pezzullo : In any environment.

Senator KROGER: So you have testing when they are offshore during patrols, as well?

Mr Pezzullo : Yes. We have the capacity to. I will have to check whether we have actually done any on a vessel.

Senator KROGER: Who would actually undertake the testing on a vessel during a patrol?

Mr Pezzullo : The current practice—and again this is subject to a pilot and I will take decisions about whether to extend or vary this—is that it is in port. That is to say it is before they go on a patrol or when they come back. But under the arrangements we have set up the testing is done by a contracted medical services provider. But I have not excluded the possibility of our own officers being trained to conduct such tests with field presumptive equipment, like a breathalyser for alcohol purposes. The issue would be one of what you do with a positive result if someone is out at sea, in terms of standing them down and all the rest of it.

Senator KROGER: Exactly. So the pilot program at the moment is in port?

Mr Pezzullo : It is on land. But if the advice I get, and I think it through, is the requirement to do it on extended maritime patrols it is something I will put in place if I feel the need to.

Senator FURNER: What is the current mode of testing? How are you testing the officers?

Mr Pezzullo : It is a urine based presumptive test. The medical service conducts the test for us, but a service officer is the liaison point. You will be in a workplace and one of our officers will say, 'Mike, you are now required to come with me.' There will be no notice. They have to go to the established area.

The medical services provider then takes you through how the test will be conducted. You are offered an opportunity to make declarations as to, say, medications that you might be on—in fact, I am happy to breach my own privacy here and talk about how the process was applied to me. I required myself to be put into the randomised selection process, as part of the entire SES cohort being done early—they didn't know when they were going to be done, but they were all going to be done early. The nurse practitioner takes you through several forms and you sign various consents. They do give you an opportunity to indicate recent medical processes—particularly opiate related pharmaceutical products. You make your declaration and you go to the privacy of the appropriate cubicle for a urine based test. That is a secured area. An officer accompanies you, you conduct the test and come back with the relevant container. Sorry, I am going down to a level of detail here, but it is kind of important to the process. The cubicle has been sanitised, and that includes checking for secreted vials of urine to act as a substitute—so that is all checked. You come back, you hand the material to the nurse practitioner, he or she conducts the test on the spot; don't ask me about the chemistry of it, but they dip a stick into the thing—

CHAIR: The level of detail is fine!

Mr Pezzullo : Thank you, Senator!

Senator Ludwig: Keep going!

Mr Pezzullo : Would you like me to keep going, Minister? Okay! Depending on the colour coded responses you get an immediate presumptive reading. And then there are processes around what happens if the colours come back with a positive presumptive reading versus a clear result.

Senator FURNER: That was my next area: what the determination of a positive reading is.

Mr Pezzullo : I should emphasise: the urine based test is related to drugs. For alcohol, it is a straight breathalyser test.

Senator FURNER: Forgive me, Senator Humphries, if I am delving into your area of questioning, but in terms of identifying the positive side of the influence of the officer, do you have a tolerance level at all? Or is it zero?

Mr Pezzullo : With respect to alcohol, we did a lot of research, particularly in terms of what police services around Australia do. We have decided on a policy known as an 'alcohol-free workplace'. The tolerance is solely related to the tolerance that we think is reasonable in terms of machine error—so 0.02 is the absolute upper limit. For anything up to that we are allowing a factor for machine error. That is for people who are scheduled to be at work. In some cases, if you are required to come back to work on a no-notice basis—there may be some emergency or crisis—the tolerance is lifted to 0.05 per cent for alcohol, which is the driving limit; so you can safely drive a vehicle back into work. But if you are on call and required to come in, you are still required to be at the 0.02 level. The 0.05 level is if you have come in with no notice—in other words, you were not expecting to be called back in for some emergency or crisis situation.

Senator FURNER: So that is alcohol. What about drugs? Because I understand that some drugs build up a residual within the body and might still be in the system for a period of months.

Mr Pezzullo : Understood. We have three layers of checking there. There is the initial presumptive test, which the nurse practitioner with the medical services company undertakes for us. If there is a positive to establish what exactly we are dealing with—whether it is indeed the residue of a course of medication—there is a second level of analysis through a lab, which is also conducted by a contracted service provider. If there is still a concern about a positive reading for illicit drugs, we then refer the matter to an independent medical review officer, who reviews the entire case—including medication, any surgical procedures the officer had recently undertaken et cetera.

Senator FURNER: What are the disciplinary processes in terms of the identification of someone being positive?

Mr Pezzullo : For a breach of the alcohol-free policy, or the presence of illicit substances, if at the point of the lab test and a confirmation by the independent medical review officer there is that cause for concern—that is to say, it cannot be explained solely by the after-effects of a medical procedure—then there is the commencement of a code of conduct process. The officer is suspended with or without pay, depending on what the delegate decides about the severity—generally speaking, with pay; and we try to expedite the code of conduct process as much as possible.

Senator FURNER: I imagine you are commencing pre-employment testing as well.

Mr Pezzullo : Yes.

Senator FURNER: Okay. Thanks, Chair.

CHAIR: Thanks. Senator Humphries, we will go back to you then.

Senator HUMPHRIES: Thanks very much. Of the 551 tests conducted, how many have been positive for inappropriate levels of alcohol?

Mr Pezzullo : We have had nil breaches of the alcohol-free policy, I am glad to say. In terms of illicit substances, I might ask Ms Grant to speak to the detail of that. I do have some numbers here. I think there is one case that is currently in the process of being gone through by the independent medical review officer, but I do not think the other cases have got that far. But I will ask Ms Grant to speak to the detail.

Ms Grant : Out of the total number of tests, we had 26 presumptive positives which were then sent to the laboratory. Of those, only one has been a confirmed positive result—that was a confirmed positive result for a metabolite of cannabis. So that officer has been through the process explained by Mr Pezzullo—the medical review officer reviewed that case, the officer has been stood down and the code of conduct inquiry is currently underway.

The other 25 results, once they had gone to the laboratory, came back as being consistent with the declaration of medication that the officer had made before the test had been undertaken. Some turned out just to be negative when the more sophisticated laboratory testing was undertaken and some came back as not consistent with illicit use of the substance.

Senator HUMPHRIES: What is the difference between that and a negative result?

Ms Grant : It would indicate that the drug detected in the presumptive was present in the sample tested by the laboratory but in levels that would not indicate use of an illicit substance. That is particularly in the opiate category.

Senator HUMPHRIES: I still don't understand. You mean there was a very low level of that reading in the initial test and subsequently there was no detection at all of that opiate, or they were under a certain acceptable limit—is that what you are saying?

Ms Grant : It is a medication that was detected that the officer did not declare in advance of the test. So, some officers declared their use of prescription medications. We have had just one result that the use of the medication had not been declared by the officer prior to providing the urine sample.

Senator HUMPHRIES: All right. So, all of the 25 presumptive positives have been accounted for by either the subsequent test not confirming the presence of any illicit substance or it being a medication or something of that sort.

Ms Grant : That is correct.

Senator HUMPHRIES: Thank you. Can I commend you on the result with respect to seized illicit drugs in 2011-12—23.8 tonnes is a very significant amount. Of course, it does beg the question: are you getting those sorts of outcomes with reduced manpower and reduced testing—so you have the opportunity for fewer screenings than was the case—because there is in fact a greater volume in transactions in those sorts of drugs? Do you have any evidence that the better result is the result of simply better detection work, or because perhaps there is a greater volume passing through our borders?

Mr Pezzullo : The question is in part unanswerable, to an extent. These are, by definition, illicit markets, so as to their scale, the trends and ebbs and flows—other than what you are seeing on the street in terms of medical interventions, people being admitted to emergency departments and the street price of some of these drugs—there can only be inferred points of analyses about the size and scope of the market. This is a vexed question that has been troubling police and other agencies for decades—and, in a sense, we will never know, because these are not regulated markets: the main suppliers obviously do not report to anyone, by definition, and indeed operate in very great secrecy. So part of it is imponderable and will never be known. In other words, was there simply more cocaine coming across the border—or more heroin, or more Contact NT—for instance, and we are just scooping more of it up because of a volume effect? That is imponderable, Senator.

The way I prefer to look at it is at the strike-rate, or the productivity, if you like, of each individual officer—not that every single officer is involved directly in screening or in intelligence work. If the system is geared to support frontline activity, which it increasingly has been as we have worked through our efficiency process, is the productivity going up? Well, by definition, it is, because more seizures, both by number and weight, whichever way you cut it, across most commodity types and across most streams—that is to say, sea cargo, air cargo and the mail sector—and with the quantities by and large going up across all of those sectors, but with fewer officers, the productivity of each officer is going up.

Senator HUMPHRIES: Of that seizure of 23.8 tonnes, how many actual seizures does that amount to? Was that all in one seizure? Or was it 20 seizures et cetera?

Mr Pezzullo : No, there were thousands. I do have quite a lot of data on that. If you just allow me to go to that—or perhaps, Roman, you may want to start breaking it down. But, essentially, if I can start giving a general answer, and then perhaps Mr Quaedvlieg can back it up with some more detail: there are thousands of seizures. Some of them are as few as a few tablets or a small satchel of powder in a single envelope—that is counted as a seizure—and it goes right up to quite significant hauls of half a container or more of illicit drugs.

Senator HUMPHRIES: Okay. I am happy for you to take that on notice. Could I turn to border protection related issues.

Mr Pezzullo : Sorry, Senator, if I may—just to close that out: we will take it on notice, because there is actually a table I would like to provide to the Senate. But in the reporting year in question, for the drug report for 2011-12 that I mentioned, the number of detections—which, as I said, include everything from a full container right down to a small letter—was just under 7,000, to answer your question directly. But we will give you a breakdown and some more detail with the table.

Senator HUMPHRIES: Okay, thank you. I just want to confirm IMA numbers and boat arrivals according to the figures operated by your agency, please. My calculation of the number of IMAs since August 2008, when of course there was a change in policy by this government, is 694 boat arrivals carrying 42,187 asylum-seekers. Is that the figure you have?

Mr Pezzullo : I would want to check that, rather than just say off the top of my head. I have some data here by financial year and by calendar year, but August 2008 was obviously, as you mentioned, a change-in-policy point. So I would want to check the calculations, but the numbers sound broadly right.

Senator HUMPHRIES: Do you have figures for vessels and individuals for last calendar year?

Mr Pezzullo : Yes.

Senator HUMPHRIES: What are they?

Mr Pezzullo : For the 2012 calendar year the number of SIEVs, or suspected irregular entry vessels, was 278—by number of vessels.

Senator HUMPHRIES: Sorry?

Mr Pezzullo : Were you asking about the number of vessels or the number of people?

Senator HUMPHRIES: Number of vessels and number of people.

Mr Pezzullo : Oh, I am sorry. So 278 vessels.

Senator HUMPHRIES: Yes.

Mr Pezzullo : People—irregular maritime arrivals, exclusive of crew members—was 17,203.

Senator HUMPHRIES: And how many crew?

Mr Pezzullo : For the sake of completeness, crew was 391.

Senator HUMPHRIES: Can you give me the same figures for this financial year 2012-13 to date?

Mr Pezzullo : As at yesterday, 28 May, there were 359 boats. Irregular maritime arrivals, exclusive of crew, 22,159. And crew, 580.

Senator HUMPHRIES: Am I right in saying that April this year was the largest ever month for arrivals with 46 boats and 3,369 passengers?

Mr Pezzullo : I think that is the highest in both categories for a single month, since records have been held.

Senator HUMPHRIES: Talking about the projections in the budget—

Mr Pezzullo : I am sorry, Senator. Yes, in April, 47 vessels. That is certainly the highest going back with the records that I have.

Senator HUMPHRIES: And people?

Mr Pezzullo : People—exclusive of crew, I think this is. I will correct that if that is wrong—3,351.

Senator HUMPHRIES: And crew is another 18?

Mr Pezzullo : Ninety.

Senator HUMPHRIES: As you know there has been some commentary on the projection of future boat arrivals. What role does customs and border protection play in determining what those projections might be?

Mr Pezzullo : We do not play a direct role. I listened to and watched Mr Bowles's evidence. He is certainly right that we are a contributing agency to the larger intelligence process. We have a team within the intelligence division of the service that provides advice about trends and analysis, more for what I would describe as operational planning purposes, offshore disruptions, that are undertaken by the federal police and other agencies, and offshore strategic communications, so public information campaigns. They also provide an intelligence context and perspective so that Rear Admiral Johnston, the commander of Border Protection Command, can position his assets where they are going to have the most potent effect. We are not formally involved in the DIAC budgeting process, to the extent that DIAC sits down with Treasury, Finance and other agencies to work through the issues that I know have been discussed in this room for the last couple days. But we do not do financial year forecasts for estimates. It is not our role. But our intelligence reports, that I mentioned earlier, presumably are read and are absorbed and they are sort of in people's minds, I guess.

Senator HUMPHRIES: So when we see the projections made by DIAC, for example, of 5,400 arrivals for 2012-13 in the 2012-13 budget, or the revision to 12,000 arrivals at the time of MYEFO late last year, you have input to those figures but you neither agree nor disagree with those figures.

Mr Pezzullo : No. We have no role in vetting or certifying those figures at all. I have no doubt that our analysts talk. So a DIAC officer who is cogitating these things will, I am sure, because they talk all the time, speak to our officers. They might read our reports. They might form a view based on those reports. But in terms of a formal role in the budgeting process, no, we have no role.

Senator HUMPHRIES: I want to ask about the arrival on 9 April this year of a boat at Geraldton. Is that the first time that an irregular maritime arrival has managed to reach that far south from the coast of Western Australia?

Mr Pezzullo : I will have to check my geography, but five years earlier there was an arrival at Shark Bay. I am from New South Wales, so I am not intimate with the coastline of WA. If someone else can help me as to whether Shark Bay is further north or south, that would be good. Shark Bay is further north, I am told—there must be a couple of Western Australians here.

Senator HUMPHRIES: There are some well-travelled officers there, obviously.

Mr Pezzullo : Indeed.

Senator HUMPHRIES: So as far as you know that is the furthest south that a boat has ever gotten.

Mr Pezzullo : I do not know about ever. I am just comparing it with the most recent previous arrival, which was about five years prior to that time.

Senator HUMPHRIES: I understand that it was two members of the public in dinghy who intercepted the arrival. Is that true?

Mr Pezzullo : I do not think that they intercepted the boat. Some members of the public might have reported. I will have to check.

Senator HUMPHRIES: Can you give us a brief description of exactly what happened?

Mr Pezzullo : Having just been joined by Rear Admiral Johnston, I will make some introductory remarks and then ask the admiral to go into some detail. Specifically on the point asked, on that day at approximately 2.45 pm Australian eastern standard time the Geraldton Port Authority—I do not know how many members of that authority—and a member of the public advised Customs and Border Protection of a possible SIEV inside the harbour limits.

Senator HUMPHRIES: Inside the harbour?

Mr Pezzullo : Yes. At approximately 3.05 pm Australian eastern standard time on the same day, a Customs and Border Protection officer—our officer in Geraldton—who was operating with the assistance of the WA police, and we are grateful for the assistance that they were able to provide, boarded the Geraldton Port Authority vessel, the name of which I am told is Jorgensen. They intercepted the vessel within the port. So a combination of the port authority, one of our officers and WA police.

Senator HUMPHRIES: Is it true that your organisation was first made aware of the arrival of the vessel, though, by somebody from the West Australian newspaper contacting someone in Canberra about this?

Mr Pezzullo : I do not know is the answer. But how that gels with the port authority and a member of the public advising at 2.45 pm, I just do not know.

Senator HUMPHRIES: If you could take that on notice, please, that would be useful. Can you say exactly who first advised Customs and Border Protection?

Mr Pezzullo : Yes. I am advised that an officer of the port authority did so—I do not know if it is privatised there, but it is a state entity—along with a member of the public, either conjointly or separately, advised us at 2.45 pm on that day.

Senator HUMPHRIES: Okay. Where were the passengers from the vessel held while waiting for Customs and Immigration officials to arrive in Geraldton?

Mr Pezzullo : The advice that I have is that at approximately 3.05 pm the Jorgensen, the port authority vessel, went alongside. At approximately 3.50 pm—so about 45 minutes later—the Jorgensenwith our officer embarked, our officer exercising full power under the Customs Act and the Migration Act, escorted the SIEV to the wharf, where the 66 persons on board were transferred ashore for medical assessment and processing by Australian government authorities. We were assisted, I should keep stressing, by the WA police.

Senator HUMPHRIES: When you say 'processing', there is no processing facility at Geraldton. Where were they processed, exactly?

Mr Pezzullo : For initial border processing, just like we do with SIEVs that arrive in other locations, you do it on the wharf. It is a bag check and an identify check. Identity details are taken. Within about an hour, at 4.30 pm Australian eastern standard time, the Customs and Border Protection Officer—with the assistance, I must again stress, of the WA police, and I am grateful to Commissioner O'Callaghan and his officers for rendering that assistance—commenced the transfer of these persons from the wharf to a secure location inside the port authority area, where an initial medical assessment was also undertaken. I am advised that that was done by paramedics. I assume that they were from the WA ambulance service, but I stand to be corrected. The persons remained at the secure building, the port authority building, waiting for the arrival of additional Customs and Border Protection officers, DIAC officers and the DIAC medical team. DIAC took custody of the irregular maritime arrival group as a whole at 12.20 am the following morning, some seven hours later.

Senator KROGER: I understand there was one border protection officer. How many in total, including the WA police, who first boarded the vessel did a search for weapons and so on and then supervised them until they were handed over to DIAC?

Mr Pezzullo : I will take this on notice if I need to check with my colleagues in the WA police, but there would have been in the vicinity of about a dozen officers of the WA police force. In legal terms they were assisting our officer.

Senator KROGER: Sure; I understand.

Mr Pezzullo : Our officer was exercising powers.

Senator KROGER: You only had one officer on the ground. One person cannot do the impossible.

Mr Pezzullo : A very capable officer. She—

Senator KROGER: I am sure he or she is very capable, but no one can be that good to do it on their own. Was it the police who assumed management of the situation until DIAC arrived the following day?

Mr Pezzullo : The police assisted with the management of the situation. The only potential offence or only potential breach of Australian law or only issue that engaged Australian law—I am not aware of any state laws that were being engaged—related to the Customs Act but more particularly the Migration Act, and that is the Commonwealth regime. We can be assisted in the exercise of our powers and we often are by state and territory police, and that is what happened on this occasion. The accountability and the management rested with the officer on the ground, plus her support, so her commanders in Perth and commanders in Canberra who were providing guidance-counsellor advice and doing all the liaison with DIAC and making sure that DIAC was getting mobilised—because they do not have a presence there in Geraldton— and the WA police were providing that sort of close support.

Obviously it varied as patrol cars came and went, but I am advised that up to 15 Western Australian police assisted in the operation. They assisted with the processing under direction and guidance. They assisted with perimeter security to make sure that people were not absconding and, once the persons were in the port authority area, with gate control. We were able to deploy within about five hours five additional officers from Fremantle who got up there within five hours of the initial interception by the port authority vessel.

Senator HUMPHRIES: Were there 64 or 66 passengers?

Mr Pezzullo : There were 66 persons who were subsequently found to be of Sri Lankan nationality and that included six juveniles and one pregnant female. Initially, I do not know whether DIAC subsequently varied this, no crew were identified—in other words, the 66 who arrived were all treated as irregular maritime arrivals.

Senator HUMPHRIES: They were reportedly on their way to New Zealand.

Mr Pezzullo : Yes, indeed they were. We have a very high level of confidence around that. I should explain some of the background to that because it is an important part of this story. Following the arrival of this vessel and the circumstances we have just been talking about, I directed the service to conduct a full examination of the circumstances leading up to and during the arrival at Geraldton. I would like to advise the committee that this assessment has been completed. It is classified because it does involve reference to and the inclusion of operational and, more importantly, intelligence information and therefore I do not propose to release it publicly.

What I can say though—the general conclusions I am willing to share with the committee, based on the report—is that the review found the vessel's intended destination was indeed New Zealand. We have several ways of corroborating and confirming that. There was an absence of what we in the business call actionable intelligence—that is to say, intelligence that can lead to an operational response ahead of an event occurring. There was an absence of actionable intelligence about their subsequent decision to land at Geraldton, which was caused by their concerns about the seaworthiness of the vessel and the weather conditions. Therefore it would have been impossible for Admiral Johnston and his command, in the absence of such actionable intelligence, to pre-position a vessel in the approaches to Geraldton. The review found that with the assistance of our colleagues from the state jurisdiction the arrival in the circumstances was well managed on the ground and at the operational level.

Perhaps I could add, seeking your indulgence, that in the absence of actionable intelligence you always have to make a judgement about where to position your assets. The brutal truth of the matter is that over 99 per cent of such vessels arrive in what we call our north-west and northern patrol areas. Based on this figure, the majority of the admiral's assets, from Defence and those that I give him from the Customs marine fleet, plus our aerial surveillance and other assets, really need to be focused on those northern and north-western approaches. Geraldton is a long way south of that front line, as it were, if you want to use that term.

The other piece of information from the review that the committee might find enlightening is that over that time period—9 April was a Tuesday, and if you go back to the Friday 5 April, just taking that as a slice in time—the admiral's assets were responding to eight search-and-rescue operations in those far northern areas, and they were managing two other arrivals that were not related to search and rescue. So, frankly, it would have been poor judgement—and indeed, I would argue a dereliction of duty—to have anything positioned to the south of our northern patrol lines in the absence of clear and credible actionable information that would lead the admiral to make a decision, which I am sure he would discuss with me, about pulling one of our patrol vessels off the line to cover an approach to a port that, in relative terms, is in the south.

Senator HUMPHRIES: If this vessel was on its way to New Zealand, in what circumstances would we have otherwise said, 'You're not coming to Australia; you're going somewhere else' and let them pass through? Obviously they were not well on their way to New Zealand if they were going via Geraldton. But if this had happened in, say, the Torres Strait, or somewhere else—

Mr Pezzullo : I do not want to speak hypothetically. My preference would be to speak to the issue at hand. That is, we know from the GPS track and indeed from the intelligence and the evidence that we gained if not from the crew then from people who certainly seemed to be knowledgeable about the driving of the vessel that they planned what I would say to this committee and to the public at large was a very dangerous route: to cross the Indian Ocean, to steer as far as possible from what they presumed to be our patrol areas and the reach of our surveillance, to sort of hook around the south-western corner of Australia across the Bight, to hook around the southern part of Tasmania and then to pop across the Tasman Sea. Someone needs to say to these people, 'What were you thinking?' With the sort of vessel they set out with, with the lack of fuel and frankly probably even navigational capability and the rest of it, you would have to ask, 'What were you thinking?'

Senator KROGER: Clearly no-one onboard identified themselves as crew in terms of the way you describe it. You think that perhaps somebody onboard was crew.

Mr Pezzullo : But no-one, in the end, was assessed as being crew.

Senator XENOPHON: I have two lines of questioning, firstly in relation to the Kessing matter and secondly in respect of the issue of dumped solar panels in the Australian market. First, in relation to Mr Kessing, I wrote to the home affairs minister in relation to the review and to the Customs Reform Board, headed by the Hon. Justice James Wood, and asked whether Mr Kessing would be contacted by the board, given that he has written reports, back in 2002 and 2003, in respect of corruption within Customs and issues of border security. Are you aware whether the board has contacted Mr Kessing or do you believe, as the chief executive officer of Customs, that it would be useful for Mr Kessing to give evidence or to assist that reform board process?

Mr Pezzullo : In terms of the operations of the board I might just defer to the Secretary. We work with the board; we provide it information. But the administration of the board and how it is supported is a matter for the Attorney-General's Department.

Mr Wilkins : The board has not made contact with Mr Kessing. The minister made it clear that if he wished to make a submission to the board he was most welcome to do so.

Senator XENOPHON: Hold on, Mr Wilkins: if Mr Kessing makes a submission to the board outlining his specific knowledge, given the reports he prepared, he would be charged under section 70 of the Crimes Act. That is his dilemma, isn't it? Unless you guarantee that he will not be prosecuted for disclosing what he knows, won't he then be prosecuted?

Mr Wilkins : I do not think he will be prosecuted. I think it is all theoretical.

Senator XENOPHON: He has been prosecuted once before. You can understand there is a potential dilemma for him.

Mr Wilkins : I understand what you are saying. I do not understand that it is a real dilemma, but let me have a look at that.

Senator XENOPHON: He has already lost just about everything through being dragged through the courts.

Mr Wilkins : So, that is the reason he is not making a submission, is it?

Senator XENOPHON: Well, I am just putting to you that Mr Kessing, if he discloses what he knows, could be in breach of section 70 of the Crimes Act.

Mr Wilkins : I think it is highly theoretical. It has not even arisen in my mind.

Senator XENOPHON: He has been dragged through the courts once.

Mr Wilkins : Well, I do not think the board is interested in prosecuting.

Senator XENOPHON: Can we get a guarantee that if he discloses all that he knows he will not be subject to any prosecution?

Mr Wilkins : It depends, I suppose, what he discloses.

Senator XENOPHON: Oh, so he might be prosecuted now?

Mr Wilkins : Hold on; if he discloses, and presumably he will not, that he has been involved in some serious organised crime, then clearly the board is not going to guarantee that no action will be taken.

Senator XENOPHON: If he discloses the knowledge that he obtained when he prepared those two reports that were sat on and that were ignored within Customs, will he be prosecuted?

Mr Wilkins : He has already been prosecuted for that anyway, hasn't he?

Senator XENOPHON: But it will be a fresh offence. Double jeopardy would not apply.

Mr Wilkins : I think the answer is no. Let me take that on notice. If he requires some sort of undertaking or guarantee, we will have a look at that. I think we can deal with this in a common-sense way.

Senator XENOPHON: My final question in relation to Mr Kessing is that I have written to the minister calling on the minister to disclose the reports Mr Kessing prepared. I do not have those reports. My knowledge of those reports is contained in reports in the Australian newspaper, effectively, back in May 2005. Will those reports that Mr Kessing prepared now be released?

Mr Wilkins : I think you will need to ask the minister.

Mr Pezzullo : Sorry, Senator—I am slightly perplexed and indeed bemused. Perhaps it is just a paper-handling issue. I wrote to you on 22 March in response to your request to Minister Clare that the reports be released and the terms that you have just described. The minister referred your request to our agency; it was treated as an FOI request, because such documents have to be considered against the provisions of the FOI request so that operationally sensitive and intelligence related information is not in fact released inadvertently. A decision maker within my service—I have seen these documents, because I actually sent them to you on 22 March—made a decision to undertake what I would consider to be minimal redactions of some sensitive matters, and I wrote to you providing you with those reports. And I think—and I will check this with our FOI people—

Senator XENOPHON: For some reason I have not seen that, but I will check.

Mr Pezzullo : My apologies, Senator. Perhaps we should have done you the courtesy of letting your office know. And maybe it is lost in the mail somewhere. More to the point—and I guess just as a cautionary note to everyone—I will check with my FOI people. Having been released to you as the deemed FOI applicant, I think they are on our website now.

Mr Wilkins : They apparently are on the Customs website.

Senator XENOPHON: And I will check what has happened to that.

Mr Pezzullo : But, my apologies, Senator, if we did not—

Senator XENOPHON: No—no need to apologise. We will follow that through. In the limited time available, I just want to ask you about solar panels. Late last year the US placed a tariff of between 24 and 36 per cent on solar panels imported from China due to allegations of dumping. Just a couple of weeks ago the European Union imposed duties in the order of about 47 per cent on solar panels made in China. Last year the Prime Minister visited Australia's sole remaining maker of solar photovoltaic panels in Adelaide, Tindo Solar, a business I visited, which has about 10 employees. Richard Inwood, the part owner and business manager, is basically saying that Chinese companies are kneecapping rivals with this dumping and that the evidence of dumping in Australia is pretty compelling in terms of the costs involved. He says it is a complete dump and that they cannot compete fairly. The United States has acted. Europe has acted. What are we doing about these serious allegations of dumped solar panels? My understanding is that panels that are being rejected by Europe and the United States are being dumped here in Australia. Are we seeing more solar panels coming into the country?

Mr Pezzullo : I am not familiar with the case at issue, although I am aware of what the US and the EU have done. It has received publicity in recent times. Before I hand over to Ms Vivian, who is the head of our cargo trade division and has internal responsibilities for anti-dumping pending the establishment of the Anti-Dumping Commission, which is a matter that is on foot: whether it is solar panels or anything else, if a claim is made by way of application that injury has been felt in the terms that have been described, we go through a process of an anti-dumping investigation. What I do not know—and I am not sure how much we are willing to say in this forum—is whether such an investigation is on foot. But I might just ask Ms Vivian to illuminate us both.

Ms Vivian : Senator, you would be well aware that once we initiate an investigation we are very transparent and that is made public. Any applications we receive are confidential in nature while we are assessing them, but we do not have any formal investigations underway at the moment on solar panels.

Senator XENOPHON: But the United States acted last year. Europe acted two weeks ago, presumably after a period of investigation; they have imposed significant duties in relation to those dumped products. We have not even begun an investigation. Is that what you are saying?

Mr Pezzullo : Just to be clear, we have laws in this country; this parliament has passed a law that says that the way in which anti-dumping injury is assessed is on application. If no-one makes an application, there is nothing before us. That is the way the law reads; that is the law.

Senator XENOPHON: I have had discussions with Tindo Solar. They are a small company with a first-class product. I hope they do not mind me saying this, but they were quoted something like a million dollars to run an anti-dumping case. They just do not have those sorts of resources in terms of the legal fees.

Mr Pezzullo : I am not sure who is quoting them what numbers, but—

Senator XENOPHON: They were quoted by a law firm that specialises in these sorts of matters.

Ms Vivian : With the AIG group there is now an officer who has been particularly put in place to assist companies that cannot afford to run the anti-dumping investigations to put some of their applications together.

Senator XENOPHON: But they will not be able to run a case for someone. They can give general advice, but they cannot actually run a case.

Ms Vivian : No. They assist people in putting together their application to make a case.

Senator XENOPHON: But you realise that it is a very specialised and technical field that requires an enormous amount of evidence gathering, which is itself quite expensive. It means going to China and forensically looking at their books.

Ms Vivian : Certainly they are some of the costs that we bear.

Mr Pezzullo : That work is undertaken by Commonwealth officials, currently by officers of Ms Vivian's division and shortly by officers of the Anti-Dumping Commission who will be based in Melbourne. So, I do not know, and I will have to take on notice, what costs a company bears in forming the application. But they are not required by law to go off and hire their own private sleuths to do the forensic accounting work. That is what we do. But they have to put in an application.

Senator XENOPHON: They put in an application then they still bear the costs of such an application, is that correct?

Mr Pezzullo : Yes, and with whatever assistance the Australian Industry Group is willing or able to provide.

Senator XENOPHON: Sure, but Tindo Solar had 10 employees when I visited them last year and I daresay it is about the same now. Do you seriously expect them to have the money to run one of these cases?

Mr Pezzullo : I do not know whether they have the money or not.

Senator XENOPHON: I suggest to you they have not.

Mr Pezzullo : That might well be the case, but we apply the law as it currently stands.

Senator XENOPHON: But if they make an application to you, they have to bear largely the costs of this, despite some assistance around the edges.

Mr Pezzullo : They do not bear the costs of the investigation, the Commonwealth does.

Senator XENOPHON: But they have to bear the cost of running the case.

Mr Pezzullo : No, it is not a litigation. They are not running a case. They are making an application to, in effect, a regulatory body. They have to frame the application, yes.

Senator XENOPHON: They have to frame the application which, in itself, is something that they need to bear the cost of.

Mr Pezzullo : Until the point it comes in through the door, yes. Whether that is a million dollars or less or more, I just do not know.

Senator XENOPHON: Once it comes through the door, do they then bear any costs? They will still need legal representation at the point won't they?

Ms Vivian : It is up to each applicant as they do it. Once they put the application in they need to provide some evidence about what they are seeing in the dumping. We certainly undertake investigations, and the results are put up for them to respond to, so there would also be costs on their behalf in responding if they wanted to make some other points to us about what they are seeing as terms of evidence or the information that has been provided to us.

Senator XENOPHON: They do not need to engage counsel or anything, do they?

Ms Vivian : It is up to each company as to what they may choose to do, but there is no requirement.

Senator XENOPHON: Sure, there is no requirement, but it is a bit like being self-represented in a court case though isn't it?

Mr Pezzullo : We try not to run it as a court case.

Senator XENOPHON: I know, but it is highly technical.

Mr Pezzullo : I would not say it is adversarial, but it is certainly technical.

Senator XENOPHON: If it is technical that usually means you need a bit help. Can I get a separate briefing on notice with the department in relation to this and perhaps with representatives from Tindo Solar?

Mr Pezzullo : Yes we can do that.

CHAIR: We will now have a morning tea break.

Proceedings suspended from 10:31 to 10:49

CHAIR: We have got Customs and Border Protection with us.

Senator BIRMINGHAM: Can I just ask the department, is it correct that you have lodged an application under the Environment Protection (Sea Dumping) Act 1981 for permission to sink vessels?

Mr Pezzullo : I will have to get a competent officer to the table to answer that question; I just do not know. Under which piece of legislation?

Senator BIRMINGHAM: The Environment Protection (Sea Dumping) Act 1981.

Mr Pezzullo : We will give Rear Admiral Johnston a go at it.

Senator BIRMINGHAM: Excellent. Thank you.

Rear Adm. Johnston : The answer to your question is: yes, Customs and Border Protection, with AFMA, have lodged a submission for a dumping permit through to SEWPaC—that is correct.

Senator BIRMINGHAM: When was that application lodged?

Rear Adm. Johnston : It was submitted to SEWPaC on 11 February of this year.

Senator BIRMINGHAM: That application is to allow Border Protection Command to sink illegal entry vessels?

Rear Adm. Johnston : That is correct; yes.

Senator BIRMINGHAM: Is that in particular waters or generally?

Rear Adm. Johnston : The focus was at Cocos (Keeling) Islands, Christmas Island and Ashmore Island.

Senator BIRMINGHAM: What prompted Border Protection Command's decision to lodge that application?

Rear Adm. Johnston : We have a requirement to dispose of vessels under a number of circumstances, under the Customs Act. They tend to be when we find vessels that are unseaworthy, which might pose a risk to public safety or the environment, or where the cost of maintaining the vessel outweighs the value of the vessel to the Commonwealth. There are a number of provisions under the Customs Act by which we exercise, and which I exercise on behalf of the CEO, the decision to destroy a vessel. Accepting that was the circumstance we found ourselves in, we have needed to do it in a manner that was as environmentally suitable as we could. That is the basis of the sea dumping permit.

Senator BIRMINGHAM: BPC has already sunk hundreds of vessels, haven't you?

Rear Adm. Johnston : Yes, we have.

Senator BIRMINGHAM: Are you able to give us an estimate of how many have been sunk.

Rear Adm. Johnston : Yes, I can. I could give you the number of vessels that we have destroyed in the last two financial years: over the current financial year to 19 May, we have destroyed 299 vessels; six of which were handed to AFMA for destruction in Darwin, so they were not destroyed at sea; and, in financial year 2011-12, 101 vessels were destroyed, one, of which, was destroyed by AFMA in Darwin.

Senator BIRMINGHAM: Why is it that having sunk hundreds of vessels—300 in the last two years alone, without having a permit—that Border Protection Command now finds itself needing a permit under this 1981 legislation?

Rear Adm. Johnston : We have been pursuing the permit for a period. The Customs and Border Protection Service previously had a permit that expired. We are now seeking to reinvigorate that permit. We have a process, with each of these destructions that we conduct in the interim period, we have hired a scientific consultant to assist us with identifying appropriate locations for those destructions to occur. We have a range of guidelines that we apply about the depth of water and distance from land that we are using in the interim but we are seeking that formal permit application to be able to proceed and continue to destroy.

Senator BIRMINGHAM: When did the previous permit expire?

Rear Adm. Johnston : It was a Coastwatch approval in around 2005, but I would need to confirm that.

Senator BIRMINGHAM: That is a long period of expiration, if it was around 2005 through to lodging a new application for a permit on 11 February this year. Why was there this eight-year hiatus that the department was sinking hundreds of vessels without having a sea dumping permit?

Rear Adm. Johnston : I cannot answer that. I would need to take that on notice.

Senator BIRMINGHAM: When did you or Border Protection Command become aware of the need to get a new permit?

Rear Adm. Johnston : We have been working on it—certainly during my time in the command, which is now nearly 18 months—and progressing those discussions with AFMA and SEWPaC in gaining the consultants' advice on where they may need to occur. Certainly, we have been working on it over the last 18 months, but I am uncertain beyond that.

Senator BIRMINGHAM: Is there a risk that Border Protection Command has been operating in breach of the Sea Dumping Act by sinking these vessels?

Rear Adm. Johnston : We are aware of both domestic and international obligations around dumping. We are compliant with those and we have advised SEWPaC on every occasion that we are dumping, so the occasions by which we are doing it are known, and certainly the circumstances and locations are all recorded.

Senator BIRMINGHAM: If you did not need a permit for the past eight years, then why do you need a permit now?

Rear Adm. Johnston : Because I believe it is appropriate that we do operate under those permit arrangements, and we are seeking to do so.

Senator BIRMINGHAM: Surely, either it is unnecessary in the need to have a permit, because you have been doing it for eight years without a permit, or you do in fact need a permit, and for the last eight years you have been operating in some type of breach of the Sea Dumping Act.

Rear Adm. Johnston : Senator, I have no knowledge that would suggest that we have been operating in breach of the act.

Senator BIRMINGHAM: If that is the case then, why have SEWPaC felt the need to engage in ongoing discussions with you and presumably encouraged you to get a permit.

Rear Adm. Johnston : So that we can operate and ensure that those occasions when we are destroying vessels are in an environmentally compliant a manner as we can. So we propose locations and SEWPaC conduct their own review of whether those locations are appropriate, so we can have the right mechanisms by which we can operate.

Senator BIRMINGHAM: Can I ask about the assessment that you do, because I asked some questions on notice, and there are suggestions that the sinking occurs in areas that are spawning grounds for the southern bluefin tuna. The department of environment has indicated in response to their answers to questions that the department is aware that the sinking of vessels has occurred within an area which has been identified as the spawning grounds for the southern bluefin tuna. However, Border Protection Command in their answer state that BPC has not undertaken an examination of the impacts to specific fish breeds. Have these issues been raised at all in consultation with the environment department, because it certainly seems as if the two departments are speaking different languages on this issue.

Rear Adm. Johnston : Yes, they have. We have conducted further consultation with that department. I am aware of the claim. You are referring to Christmas Island here, where the southern bluefin tuna spawning ground is. The advice that we have received back through DAFF at the moment is that the spawning ground is actually around 1.8 million square kilometres in size. It is a very large ground. They believe that the primary area where the spawning occurs is about 1,000 kilometres east of Christmas Island. In reviewing our proposed location, the assessment around the southern bluefin tuna impact is being conducted, but the advice that we have at the moment is that destruction activities pose a very low risk to the spawning grounds.

Senator BIRMINGHAM: What is the total cost of sinking or destroying boats?

Rear Adm. Johnston : I do not have a cost by vessel. The means of destruction tends to be burning; that is the preferable means. With the biosecurity risk the objective is to be able to burn the bulk of the vessel and have the rest of it sink to the sea floor.

Senator BIRMINGHAM: Do you have a cost of the destruction program over the last year or two?

Rear Adm. Johnston : No, I do not. It is activity that is performed by those vessels that are assigned to Border Protection Command, so both Customs and Navy vessels, and we perform it as part of our routine duties.

Senator BIRMINGHAM: Do you have an estimate of the man-hours involved in the destruction activities?

Rear Adm. Johnston : No, Senator. I could give you an outline. It depends on the state and the size of the vessel, obviously, how long it might take. Typically it involves the removal of hazardous equipment and the establishment of particular incendiary or ignition zones on the vessel to ensure that it burns adequately, and then a process by which the ignition occurs, so it can take from one to a number of hours.

Senator BIRMINGHAM: Is there an independent inspection of the vessels by any environmental authorities before they are sunk?

Rear Adm. Johnston : No, there is not. Some of the circumstances are where we have intercepted a vessel and the people come ashore. We will hold the vessel. Sometimes they are too unseaworthy to bring into the harbour precinct, but each of our officers perform a condition report. We do quite a substantial condition report on every vessel. It looks at the full range of risks and the sea-worthiness of the vessel. We make an assessment about some of the environmental risks or what we observe from it, and we record that for each of these vessels we destroy.

Senator BIRMINGHAM: For each of the vessels over this eight-year period where there has been no permit, has there been consultation on each occasion with environment officials prior to the sinking of the vessel?

Rear Adm. Johnston : Not prior to it, but we inform them after it and the decision to destroy is one made under the Customs Act.

Senator BIRMINGHAM: So whilst you have that engagement with environmental officials it is after the fact and after the sinking. Have they raised, during that eight-year period, concerns at any time regarding the approach the BPC takes to sinking vessels?

Rear Adm. Johnston : None that I am aware of; certainly none in the last 18 months.

Senator BIRMINGHAM: But they have said you should get a permit.

Rear Adm. Johnston : We are working with them to get a permit. We both believe that is an appropriate outcome.

Mr Quaedvlieg : Senator, in relation to your question on costs, that the cost of burning vessels is negligible.

Senator KROGER: Firstly could I just put on the record my commendations to the men and women of the Border Protection Service. I had the opportunity to be up in Darwin a few weeks ago with them for a day and I spoke to a large number of men and women. I think their professionalism is absolutely outstanding. I noted your opening statement where you talked about drug and alcohol testing and so on in a small number. In my mind it must be very, very small, what you have addressed here, because it certainly was not reflected in my engagement, and I think that they are just fantastic and a real credit not only to their training but also to them as men and women.

Mr Pezzullo : I will ensure that your sentiments are passed on. They would very much appreciate hearing that.

Senator KROGER: Thank you very much. I am interested to know how many personnel are in the Border Protection Service?

Mr Pezzullo : In the service generally?

Senator KROGER: Yes. What is the total number?

Mr Pezzullo : Our average staffing level is about 5,100 full-time equivalents.

Senator KROGER: And most of them are full time?

Mr Pezzullo : Most are full time, but if you factor in part-time employees, people on leave and whatnot, people who have got some kind of standing as a border protection officer, our headcount is north of that—it is about 5,600. But our average staffing level across the year—paid full-time equivalent employees—is 5,100.

Senator KROGER: What is the attrition rate?

Mr Pezzullo : It is quite low. It would be single digits. I might have to take the precise number on notice, though.

Senator KROGER: Has there been any change to that attrition rate over the last few years, or has it been consistently—?

Mr Pezzullo : Unless Ms Grant has got a detailed brief in her folder I would probably prefer to give you an accurate databased answer. I think it is fair to say that it has been stable over time.

Senator KROGER: While I am happy for you to take on notice what the attrition rate is, given the way in which you have provided statistics before would you do that on a calendar year or financial year basis?

Mr Pezzullo : I am sure we could do both. Most would be financial year because our accounting and financial statements are all done financial year, but I am sure we could work a separation for the calendar year.

Senator KROGER: Financial year basis is fine, but an indication of the trend line for the last five years would be helpful.

Mr Pezzullo : Okay, Senator.

Senator KROGER: I go back to Senator Humphries' discussion about the boat that came into Geraldton. What struck me, when I was in Darwin, was the duress that your personnel are under because of the significant demands being placed on the service at the moment, which in turn manifests itself—I would suggest—in greater demands being placed on individuals than they have to deal with day to day and perhaps in their hours.

Mr Pezzullo : We are certainly very busy, from the CEO down, I can assure you

Senator KROGER: I am not suggesting that you are not. You could be putting your feet up while they are out there on patrol, but I am not suggesting that! When was the last time that you were able to allocate a Bay class to patrol the west coast, or even had one based out of Port Hedland—out that way down past Broome.

Mr Pezzullo : I will ask Admiral Johnston to join us again. Whilst he gathers his papers and his thoughts to join us, we do not generally patrol in the sense of saying, 'Well, we have not been down that way for a while so let's just go down again to see what's down there'. Some of our patrols do operate like that, but we are very much led by the intelligence not just in relation to irregular maritime arrivals but also incidents of violence or robbery at sea, pollution risks and illegal fishing. The admiral has an intelligence system within his command but he is also supported by a broader service-wide intelligence system as well as intelligence feeds from other agencies. He has a series of maritime risks that he has to manage, be they counterterrorism, violence at sea, armed robbery, irregular maritime arrivals, and that is clearly a very prominent part of our workload at the moment; there is no denying that. Then he has a pool of resources, some of which come from the Customs and Border Protection Service—the Bay class vessels you mentioned—but also aircraft, helicopters and other assets. He also has assigned to him, under his direct control, assets of the Australian Defence Force. But I might ask David to expand on these points.

Senator KROGER: Just before you do, Admiral, earlier on you said that 99 per cent of the patrols were north-west—

Mr Pezzullo : At the moment.

Senator KROGER: Yes, at the moment. Having seen what you are doing there, I am interested in looking at what the opportunity costs are, because whilst the focus at the moment is on border protection and identifying SIEVs and managing that process you were talking earlier about an increase in drug detection. Is it a trend that there is greater drug trafficking going on that we are perhaps not picking up? How do we determine what we are missing, what is happening over there, whilst we are focused up here?

Mr Pezzullo : I have given you some general comments that I think go to that point, but I might ask the admiral to amplify the answer.

Rear Adm. Johnston : I do not routinely have a vessel that would be patrolling around the Port Hedland area. As the CEO has indicated, we move assets on an intelligence led basis. There are a couple of parts of the answer to your question. We will fly surveillance in those areas where we have an indication that there is a need to do so. A few months back, we were flying in support of other government agencies on counternarcotic activities in those areas, so we do support. Where there is suspicion of an activity occurring I will adjust the resource allocation around that.

The other part of the answer to your question about patrol vessels is that while I have the bulk of the Customs fleet and a good part of the navy's patrol fleet there are other vessels and the Chief of Navy also moves vessels—certainly up from the port of Stirling or down in Fremantle up to the north coast. Those vessels also pass through the area including doing port calls on the WA coastline. There is, in part, a presence that is provided by Border Protection Command assets, but there are other defence activities right through the west and north-western area that also support our national presence in those areas.

Senator KROGER: Are exercises undertaken down there mostly with the Bay class vessels?

Rear Adm. Johnston : Do you mean specifically around Port Hedland?

Senator KROGER: Yes. Off the west coast there.

Rear Adm. Johnston : All of the Bay class vessels are assigned to me for operational purposes. They are employed on operations and we will cycle ships through various logistic ports for change of crews or fuelling arrangements, but there is not a Bay class vessel that is stationed down in Port Hedland.

Senator KROGER: How much down time does each vessel require for maintenance?

Mr Pezzullo : I might ask our national director for Maritime Support to join to us so that he can speak to that. If you have more questions about the intelligence and operational side of things, the admiral can deal with that. If it is more about logistics, maintenance and workforce, I might ask Mr Perry to join us.

Senator KROGER: Admiral, you said that if there was an indication through surveillance or intelligence channels that you needed to deploy assets into a certain area, but isn't that just responding to what you know as opposed to being pro-actively out there, building on that intelligence? You are basing it on intelligence you are getting that is coming out of Indonesia or from other commercial vessels or naval vessels or whatever. It does mean that we are not out there trying to gather our own intelligence, other than in critical areas where you have a flotilla coming through the different passages.

Mr Pezzullo : Senator, can I just make a general comment about offshore maritime security and I will ask the admiral to add to my answer. I do not think there has been a time for a sustained period at least in the last 15, 20 or 30 years where Australia has had what I would describe as a steady state maritime security environment. That is to say, when you can allocate resources on some of that preventative and pro-active patrolling work that I think you are going to. I will go back to 2005-06, when the government of the day quite rightly really put the acid on agencies to push back illegal foreign fishing. There was a particular socio-economic and other dynamics that were going on in the eastern part of Indonesia that were resulting in a lot of village-level sorties coming down south of, in effect, the line of control that relates to illegal foreign fishing. We concentrated in an area more to the east than the front line that we are currently doing and I remember the other side of the equation, because I was in the defence department at the time, trying to work through how to free up resources to help the then Border Protection Command and its predecessor Coast Watch to reinforce that line. We stripped vessels out of international exercises and we really put a lot of effort into it, in addition to international engagement with Indonesia. AusAID also got involved through capacity building and poverty alleviation on the ground. But in terms of maritime security there was a very strong focus and a highly successful campaign mounted through 2005-06 and it might have even gone into 2007. It really pushed those vessels back to protect our sovereignty in relation to fishing. Obviously in other times there have been other periods of intense activity in terms of irregular maritime arrivals—the period of 1999-2002 is of course well known. At other times fishing has been a problem for us. I think we have such a large maritime security jurisdiction that there is probably always going to be a time when there is a super-hot priority that is sucking a lot of resources in and then for the rest of it, to go to your point, you really are reliant on your intelligence feeds from other agencies. The actionable leads that I mentioned earlier you get from other agencies—we would never allow a small craft major narcotics importation to come in without assigning some kind of offshore asset which can go further out than the state and territory police forces. The federal police do not have any offshore maritime capability. We would never allow that if we had actionable intelligence. The sense you might derive from community policing in cities and towns, where you have a police force generally patrolling around—which is a terrific thing—to gain on the street intelligence is a notion that is not easily translatable to the sea. Indeed, even in policing there is increasingly a focus on using intelligence to attack the syndicates and really go to the hot spots of crime.

We also rely on reporting from the community. That is actually a good thing; Australia is a very big place. Citizens are encouraged to report what they see in the onshore and offshore domain through Customs Watch. We rely on some highly classified sources of information, which I will not go into detail about, which we can then use to protect our sovereignty, as well as obviously the organic capability that the admiral then has to do that general patrolling. If I can provide a slightly corrective perspective, the sense that in a steady state you would be patrolling just to see what is going on is not a very contemporary way of thinking about offshore protective maritime security.

Senator KROGER: Would it be reasonable to say that the primary focus of border protection and the assets, in particular, the Bay class, is the overall management of the SIEVs being identified and coming in?

Mr Pezzullo : At present and in recent years, that is empirically absolutely the case. That is where our assets are.

Rear Adm. Johnston : I could add that there is an overlay of activities. Some of the areas where we are postured in terms of irregular maritime arrivals are also key fishing zones for us, so the activities are often done concurrently. An aircraft surveillance flight that we may run that is looking for suspected irregular entry vessels also looks for illegal foreign fishing activities, marine pollution—a range of events. So all of the assets that I am using do multiple tasks concurrently rather than focus on a single activity. But certainly the stationing at the moment is partly driven around irregular maritime arrivals.

Senator KROGER: But Senator Colbeck just made a very valid interjection, asking how much of that is happening in the Southern Ocean at the moment. Is there any such activity happening in the Southern Ocean?

Rear Adm. Johnston : Senator, is your question how much patrol—

Senator KROGER: Surveillance.

Rear Adm. Johnston : We maintain satellite based surveillance around our high-interest areas, which are the Heard and McDonald Islands area. We maintain a continuous surveillance coverage to ensure that we have an understanding of what is occurring in those waters.

Senator KROGER: But we do not have any patrols happening at the moment, we do not have Dash 8s involved in any surveillance down there.

Rear Adm. Johnston : Aircraft surveillance in that area is very difficult because of the extreme ranges of it, so that is why something like satellite surveillance is very important to us.

Senator KROGER: I will move on from there. I understand that there is no money left to continue the contract with Ocean Protector. She has gone into port and is currently under maintenance. But given that that was one of two fat ships that was being used in the area, how is that going to affect the time that the Bay class vessels will be required to supervise SIEVs, whether it is a fat ship or whatever the logistics are to get them to a processing centre, whether in Darwin or Christmas Island?

Mr Pezzullo : In recalling, of course, that the other variable at play here is that more capable patrol vessels are coming online through what is called the Cape class program—

Senator KROGER: But not immediately?

Mr Pezzullo : Pretty soon. I will ask Mr Perry to speak to that.

Mr Perry : Ocean Protector is undergoing a maintenance period. It will be back in the next couple of days. We have that vessel on contract until 30 June next year. We also have the Triton, another large vessel, on contract until 30 June next year. That was extended in the last budget.

Senator KROGER: So we have extended the contract to 30 June 2014?

Mr Perry : That is correct.

Mr Pezzullo : That was a budget measure in the most recent budget.

Mr Perry : As Mr Pezzullo was saying, progressively, as the Cape class patrol boats come online, they will pick up some of that role. The first of those boats is undergoing its operational test and evaluation off Western Australia at the moment. We aim to pick the second one of those up somewhere around March next year, so we will have two of those. They have specific design capabilities to carry potential illegal immigrants on board.

Senator KROGER: How many?

Mr Perry : Up to 50 on each of those vessels. We will have eight of those, all of which will be in service by September 2015.

Senator KROGER: They are not in service until September 2015.

Mr Perry : Progressively. Over the next financial year, we will bring four of those into service.

Senator KROGER: Okay. I listened to your opening statement on your pilot drug and alcohol testing program. It is well know that sleep deprivation can be just as damaging to the individual's capability and capacity as alcohol and drugs. Are you doing anything to monitor your personnel in that regard, given that their turnarounds in many cases are very quick? It is not like that they are back in their own bed that night; they might be out for four or five days at a time.

Mr Pezzullo : To provide a slight correction, the drug and alcohol testing regime, while it may well have health and welfare benefits—and indeed if serious health issues emerge we have a protocol by which the officer is advised—is primarily and indeed in my mind solely an integrity measure. That is to say, it is another layer of defence. It is not about the vast majority of our staff, who are honest and hardworking. But it is about those who are doing the wrong thing and associating with the wrong people and taking the wrong substances. That program is designed as a deterrent and a detection measure against those very few officers. Your question suggests that as we are testing for illicit drug abuse or whatever that points to welfare issues and therefore you ask whether we are going to test for sleep deprivation. I just—

Senator KROGER: Not test, necessarily. But manage it and identify.

Mr Pezzullo : Manage it, yes.

Senator KROGER: Identifying that and dealing with it is just as big an issue.

Mr Pezzullo : We are very conscious, through our health and welfare policy framework, of a whole range of stressors and risks that our officers face, not just sleep deprivation, although that is very important and occasionally even I recognise that in myself. Mental stress in some cases is caused by high anxiety and high pressure situations. Is your question about the marine unit, members of which are offshore on patrol for very long periods of time?

Senator KROGER: Yes, them in particular. You are absolutely right. They are under enormous emotional and physical stress. They are in very physically and emotionally demanding circumstances and they have to deal with some very difficult things. The average Australian does not appreciate the sorts of confronting circumstances that these people deal with. Then there is the impact of that. Maybe they are having concerns about sleep deprivation when they are back on land.

Mr Pezzullo : Sure. I will ask Mr Perry to speak about the marine workforce. Then if you want to take the question more broadly I might have other officers come to the table.

Mr Perry : There are a range of measures that are covered in legislation such as the Navigation Act around working hours. We require our crew to maintain logbooks around that. That is one measure. To some extent, we are reliant on the commanding officers and the enforcement commanders to use their judgment about how tired their workforce. It might not just be an hourly issue; it might be, as you say, the degree of stress and the degree of physical activity that has occurred during a period.

One thing that we are doing, noting that this has been a fairly consistent level of workload, is looking at different fatigue management measures and encouraging commanding officers, if they have any concerns about the state of their crews, to get in contact with us. If there has been a specific incident, we provide counselling services as well and follow up to make sure that their mental health and wellbeing is being maintained. It is something that we are very mindful of and that we watch very carefully. We are regularly trying to improve our ability to monitor it and also provide them with additional skills so that they can self-monitor.

Mr Pezzullo : I know that you want to wrap this up, Senator, but I am conscious also not just of the impacts on our field operations at sea or elsewhere. But you have people in headquarters and in media units and people who are reporting to me and to other people working all sorts of hours—and not just for maritime reasons; the border is just a busy place; it is a 24 seven operation. All of my senior leaders have been given clear instructions around looking at the stresses on their people and at fatigue management. I have told them that if they need to come back to me for either a change in work patterns—maybe having some double shift arrangements or whatever—they can. All managers have been asked to actively look at that.

Mr Quaedvlieg : May I complete an answer in relation to your question around the Southern Ocean patrol and Senator Colbeck's indirect question? I should add that while it is true that there have been no Commonwealth vessels on patrol in the Southern Ocean since January last year, we do have collaborative arrangements with the French. The French have conducted six patrols of the Southern Ocean in that period of time. On three of those patrols, we have had Customs officers embarked on those vessels. In addition to that, we also have incidental satellite surveillance of any illegal, unregulated or unreported fishing vessels departing the Southern Oceans. We work with our regional country partners to ensure that those vessels cannot dock and offload in those jurisdictions. There is some additional comfort around our Southern Ocean coverage.

Senator KROGER: Thank you.

Senator FURNER: Mr Pezzullo, in your opening statement you identified a number of matters that deal with the integrity of customs. I congratulate you on bringing that in. A number of my friends are Customs officers and they welcomed that proposal and that ability to make sure that everyone within Customs is identified as having integrity. Is there anything other than what you have already identified that you can provide to the committee about the progress of the implementation of the new powers invested in you and the agency consistent with the Law Enforcement Integrity Legislation Amendment Act 2012 or is what you have already provided comprehensive?

Mr Pezzullo : It is fair to say that I kind of hit the highlights. There is lots of detail under each of those headings. I could go on for a very long time, but that might not suit the purposes of the committee. I would add one area that I sort of touched on but did not amplify that might be worth drawing to the committee's attention. I am concerned to ensure that we keep working after all of the ethics awareness training, the induction training and the after care arrangements that I discussed with Senator Humphries is put in place. It is the human condition that occasionally officers will make the wrong decision, associate with the wrong people and, frankly, doing the wrong thing. It does not matter whether it is the Customs and Border Protection Service or it is another instrumentality of the state, that happens; it is just human nature, regrettably so.

Conscious of that, we are also gunning up our professional standards area to really get it up to the standard that I would expect to see in a professional frontline law enforcement agency. We are moving away from just having a kind of internal affairs unit behind the locked door that gets up to whatever it does and that reports directly to the CO. The more contemporary practice, and certainly the practice that I am driving and insisting on, is to have what I call the spectrum approach. You go from early intervention, where you might identify behavioural or other issues associated with an officer's performance or conduct. That tends to get reported through management performance action and workplace management. That tends not to get to the internal affairs type area until it is too late. By having that early intervention through either management counselling and management remediation—and sometimes getting some corrective action going in terms of the behaviour of an officer or a work team—that then avoids the need for the sledgehammer later of an internal affairs type investigation.

In stepping up from better HR management practice, early identification of issues that are better treated through a code of conduct process is also better contemporary practice. Is it the case that a matter has to go all the way through to criminal proceedings? Sometimes the answer is absolutely. The cases that I instanced in my opening statement are very much matters that will be tested before the courts. It will be alleged that they very much relate to breaches of the criminal law. But there are other issues where the better remedy might be to treat a matter as a disciplinary issue. Bringing that within the purview of an integrated professional standards team that allows not only early intervention but more expeditious intervention through a code of conduct process is better contemporary practice.

And then at the really hard end—and I have talked about this in more detail in previous hearings, so I will not go over the detail—there is the supervision layer of ACLEI, the Australian Commission for Law Enforcement Integrity, where there are some mandatory referrals that I am, as an agency head, obligated by law to make to them. They then make the decisions about whether to open what I would call the hard end investigation—criminal-type investigation with all of the full powers that you would expect to see with criminal investigations: undercover, telephone intercepts and all the rest of it. They make decisions about that or, in some cases, refer matters back to me for treatment, subject to their overwatch and overview.

That is just a really quick attempt to sketch out what I call a full-spectrum approach to integrity, which is not just reliant on hardening up the internal-affairs-type capability that you would be familiar with, I am sure, but really treats it as a full spectrum that starts with better staff management practices at one end, right through to, if necessary, putting people into jail if that is what the courts so determine.

Senator FURNER: I have a question around the mandatory reporting requirements of officers. How has that been conducted? Have you seen an abundance of reports coming through? How would you deal with frivolous or vexatious claims?

Mr Pezzullo : I answered this in part previously in relation to Senator Humphries's question. It is probably fair to say that, after the orders were first issued in mid-February, there was something of a bit of spike—people had something on their mind or they were aware of matters that they had been mulling over. In some cases in those early days in particular, we saw a spike around named officers—so people who had been charged and brought before criminal courts. People would say, 'I joined with him,' or 'I went to a party with him,' or 'I knew him.' So there was a bit of a spike. We are probably now into more of a steady state. This is in immaculate handwriting so I can read this out to you. Remember this regime has been in place since February, so it is still probably early days—February, March, April and into May.

In the early period in February, we had 85 reports—mostly, it is fair to say, for reasons I have just mentioned, mostly related to the airport environment, particularly at Sydney Airport, which is where the charged officers worked. Post February—that is to say, in March and April—we have throttled back to an average of 59 reports a month. If that is indicative of a plateaued state, I just do not know; I would like to see a few more months' data. Just to complete the answer—because there was some interest in the integrity support and referral network, where officers are not making their formal report necessarily but are seeking some counselling around what they should report—we have had six reports to integrity support officers to date.

Senator FURNER: Just on those integrity support officers, how was the recruitment process conducted to get to the 30?

Mr Pezzullo : I will ask Ms Grant to take the committee through the steps for recruiting those officers, but I missed one element on this immaculately written note—which is my fault, not the briefing officer's. In February we introduced mandatory reporting, and it went up to 85 reports in February. We introduced it in mid-February, so it was 85 reports just in two weeks. Then in more recent months it has averaged back to about 60. Historically, prior to the introduction of mandatory reporting, we were looking at just under 40 reports a month—so 37.

I apologise I neglected to answer the other part of your question, regarding vexatious, frivolous complaints. The integrity and professional standards unit, because of that full-spectrum approach that I mentioned earlier, is aware of officers who might have grievances or matters that are being dealt with through code of conduct or HR practices, so they can reconcile the reports they are getting and work out: 'Is this is new information that we are seeing for the first time or is this perhaps connected to some ongoing grievance or indeed, if I look behind it, is it not really a grievance or a report at all?' Those officers are trained to look for those indicators. I might ask Ms Grant to speak to the issue of the recruitment of the integrity support officers.

Ms Grant : The integrity support officers, as we discussed earlier, are volunteers. We put out the requirement for having an integrity support officer network, and officers applied to become members of that network. We selected them based on their geographic location, because we needed an appropriate spread around the organisation, with the national basis of our organisation. We then needed to basically scrutinise those officers who put themselves forward, so we did referee checking of those officers. We did some integrity checking to ensure that the officers who were going to support the mandatory reporting referral network were of the highest integrity themselves. Those officers who were selected then went through induction training as to what was required of them in that role.

Senator FURNER: My next series of questions are for Rear Admiral Johnston. Rear Admiral, no doubt you would be familiar with a briefing done in 2010—it was secret but it now has been released on FOI—titled Report of the deliberate analysis activity: implications of a 'turn back boats' policy - 3 August 2010. It was done to consider the brief of the coalition's proposal to turn back boats. I want to take you to a couple of points in that report. It is difficult to determine, because some parts of the report are blanked out, but in regard to legal issues it indicates that to proceed in this area would be a matter of obtaining diplomatic clearances. It cites one incident involving the ACV Oceanic Viking and also says that the return of a vessel to its point of origin would require a yet-to-be defined level of positive identification of that point during the initial stages of the boarding process. I am familiar with the recommendations of the Houston review, particularly recommendation 19. Are we at a point where we have any legal obligation or any diplomatic relationships with external governments to initiate that part of the brief that this has identified?

Mr Pezzullo : I might take that question. The document in question relates to an incoming government brief that was prepared for a potential coalition government should that have occurred after the 2010 election. I do not intend to answer questions on turn-back or tow-back directly except insofar as to say this. Obviously we know when the election date is. There is going to be a caretaker period and there will be a period when agencies will no doubt come together to reflect on how to provide advice for both potential incoming governments. We will review that advice, which is, I think, getting on for three years old. There is a process that we will go through in the development of what are known as incoming government briefs.

As for the specific point about whether the conditions, if you like, are currently enlivened or able to be enlivened to address one of the Houston panel recommendations—I think it is recommendation 19, as you said—the answer to your question is that it is slightly moot, in the sense that I recall the Prime Minister, speaking to the government's response to the expert panel's report, said that they noted that recommendation and they said that it was not the government's policy to pursue it.

So, in terms of work that agencies and departments might do in relation to that expert panel's report, if the government's position is 'It's not our position that the conditions are appropriate; nor is it our policy position,' then, no, we have not done any active work on that, as you would expect us not to, because we are responsive to government policy and direction of the day. Is it the case that we will dust off the brief—that I think was released under FOI and that you have before you—three years after the event as part of our normal processes for developing incoming government briefs? The answer is yes.

Senator FURNER: There are some other parts of that brief. It is not just a case of this brief; there is certainly media attention on this particular area. Questions on this matter are raised in the Senate and the House of Reps on various occasions, so it is not just specifically the brief that I am relying upon.

Mr Pezzullo : Sorry, Senator. I was not suggesting that that is the case. I was just saying that, in relation to the brief that you have, take it as read that we will, with other agency colleagues, obviously need to revisit all of those issues as part of the normal democratic process of developing incoming government briefs for either potential outcome of the election.

Senator FURNER: As one example, just recently in the Australian, dated March 2013—the title of the article is 'Coalition's pledge to turn back boats "dangerous stuff"'—in an interview with Vice-Admiral Shackleton, who was Navy chief during the period of the Howard government, when there certainly was the policy of turning boats around, he indicated some concerns and indicated that it is 'dangerous stuff'. That seems consistent with what the brief is. He said:

If they (the navy) board boats against people's will then asylum-seekers will inevitably do what they did last time and that includes people jumping over the side, blowing up the engine and setting fire to their boats …

My main concern is the welfare of not only the refugees but also our professional men and women who work on these patrol boats that I have seen firsthand. I have been to Darwin. The brief goes to the extent of indicating that ADF personnel will be exposed to additional hazards, which could include deliberately lit fires, improvised weapons and potential physical assault, and there will be an increase in the need for the safety of personnel who will be required to rescue people who jump overboard, and there is the impact on morale and greater incidence of post-traumatic stress disorder.

Rear Admiral, I know the extent of pressure that our men and women are under. We have examined some of the evidence, as you would know, through the Defence subcommittee that I chair, in considering the care and welfare of our Defence men and women. Presently, no doubt, there would be extreme pressure upon them dealing with the number of arrivals, but, leading on to a policy that may be implemented of turning boats back, would a heightened risk of PTSD present itself to the men and women who work the Armadale boats up in northern Australia?

Mr Pezzullo : I must say, I am slightly reluctant, with all due respect, to see a circumstance where the admiral is placed in a position of, in effect, commenting on what might well be policy advice that is given in an incoming government brief or, indeed, should the election outcome be such, it is given to a new government. I do not in any way step back from any of those comments. It is a document that is on the public record. It talked about the potential for violence. It did talk about the potential for stress and trauma and the very issues that you have gone to. All I can really say in good faith is that we will revisit all of those issues. I will do it certainly with my colleague the Chief of the Defence Force, because we are the two frontline agencies that provide the assets. We have a very deep and intimate regard for the safety and welfare of both the people that we employ and the people in their care, such as asylum seekers. We will work our way through those issues. Such risks and such operating risks that might be around the implementation of such a policy will be drawn to the attention of the key decision-makers, who are ministers. But our job as agency heads is obviously to work through those issues with a view to how to implement the government's policy. If government policy changes, then our job is to be responsive to that. I guess what I am saying is that I would rather leave it at the general response level, whether it is violence, sinking, jumping overboard or post-traumatic stress disorder for our own staff or General Hurley's staff, or members. Just to anticipate, our answer is going to be the same: yes, we will keep those issues under review and we will provide appropriate advice.

Senator FURNER: You as an employer of these men and women have an obligation for their health and safety.

Mr Pezzullo : Absolutely. Indeed, one of the things which has changed since 2010 is the Workplace Health and Safety Act. So we will work through those issues. Each of the issues will be diligently worked through. Please be completely assured about that. But, rather than giving you a running commentary, I am giving you what will be the considerations that go into one incoming government brief. I am reluctant to go down the path of commentary on each of the issues. I am absolutely aware of employer obligations, as is General Hurley in the ADF. We will draw those to the attention of future decision makers in an appropriate manner, as you would expect us to.

Senator FURNER: No doubt you concur with the findings in the secret brief.

Mr Pezzullo : It was produced by my agency.

Senator FURNER: Do you also concur with the position of former Vice Admiral Shackleton—his recent comments about—

Mr Pezzullo : I do not see any need to provide commentary. I know David. He is a former Chief of Navy. I saw reports of his views. I did not read a transcript of what he said. But I do not feel the need to provide a commentary. We will provide a position on this issue in the appropriate forum at the appropriate time.

Senator COLBECK: I want to ask some questions about the application by SPC Ardmona for safeguard action in relation to imported canned fruit. My understanding is that the letter which was originally forwarded to Minister Ludwig, who is fortuitously with us this morning, has been referred by him to your agency, to trade and to the industry portfolios because everybody has a role to play in this. I just want to get a sense of the role this agency will play and the time frames around that.

Mr Pezzullo : I will get Ms Vivian, as she did earlier with Senator Xenophon, to speak to the detail. Our role is to enforce and apply what are known as trade remedies. We are not the policy agency and we work—

Senator COLBECK: I understand.

Mr Pezzullo : There are a number of measures available to Australian industry under statute. We administer a number of those measures. I will ask Ms Vivian to provide the detail.

Ms Vivian : For safeguards, in the sense you are talking about, it is the responsibility of the Productivity Commission to undertake the relevant investigations. Customs and Border Protection, as Mr Pezzullo stated, would look at any dumping or countervailing measures which were lodged with us. But, for safeguard actions, if, at the end of the day, there were an investigation which put on a tariff, we would enforce that. But we are not part of the investigation. We do not play any role in that.

Mr Pezzullo : A safeguard results in a tariff adjustment, does it?

Ms Vivian : It could, yes.

Senator COLBECK: My understanding is that a safeguard action would result in a tariff which would apply, initially, for 200 days and then be phased out over a period of three years. If that were to be put in place, you would apply that at the border.

Mr Pezzullo : Yes, if it were to be put in place. But our evidence is that safeguards are not a measure we apply. The two measures we apply or enforce which are somewhat relevant to this discussion would be an antidumping injury determination or a countervailing determination which relates to neutralising the effect of foreign subsidies.

Senator COLBECK: I was going to come to that. When Minister Ludwig referred that initial request for safeguard action to you, what action might you have taken as part of that process? It is just for information.

Senator Ludwig: Can I clarify?

Senator COLBECK: Again, Minister Ludwig, I am going on your public comments in this respect.

Senator Ludwig: The record will prove me right or wrong about this. My recollection is that I had said it was referred to the Treasury, trade and industry portfolios—not Customs. Customs are involved in the tariff side of things.

Senator COLBECK: Let's not argue about that.

Senator Ludwig: Normally it would go to the trade minister or the Treasury, depending on the nature of the decision made. If it were a Productivity Commission safeguard measure, it would normally go to the Treasurer because the Treasurer is the responsible minister for the Productivity Commission.

Senator COLBECK: Because they then refer it on to the Productivity Commission.

Senator Ludwig: I would have also sent it, for information, to the trade and industry portfolio. I doubt very much that I would have sent it to Customs. Customs are at the end of the line in this instance.

Senator COLBECK: That is established. There is effectively no role at this stage in the proceedings for Customs for that safeguard other than to enforce it, if it is put into place. Have you received anything from SPC Ardmona in relation to an antidumping or a countervailing measures application at this stage, because I understand that would come to you?

Ms Vivian : That is correct. Any applications, while we are assessing them, are confidential. But, once we decide to investigate them, we do publish them. We have not published anything in regard to SPC Ardmona at this point in time.

Senator COLBECK: So you cannot even acknowledge whether you have received anything?

Ms Vivian : No. It is of a confidential nature at this point in time, if we had received anything.

Senator COLBECK: Have you had any informal discussions with SPC Ardmona around what their options might be in regard to this?

Ms Vivian : At this stage, I am not aware of any discussions taking place.

Mr Pezzullo : It is possible that we have. If we have, we can come back to you on notice.

Senator COLBECK: If you could provide that advice, I would appreciate it. Thank you.

Mr Pezzullo : Just to be clear: the confidentiality pertains to the initial application. Once the investigation is launched, under my delegated authority, that is always public and transparent. It is on the website and the like.

Senator COLBECK: So you are not at liberty to advise whether you have received an application until you get to the stage where you decide that you are going to launch an investigation?

Mr Pezzullo : Correct. There are certain criteria that relate to prima facie judgement about where the potential injuries have been incurred, and then we go into the investigation phase.

Senator COLBECK: I understand that.

Senator HUMPHRIES: Looking at the budget papers, it looks as though Customs and Border Protection are sustaining a cut in its budget of about $61.4 million. That is what I get from the table on page 101 of the PBS. Given the things that you are going to be doing in the areas of integrity testing and so forth, which presumably come at a cost, where is that $61.4 million going to come from?

Mr Pezzullo : I will ask the Chief Finance Officer, Mr Groves, to join me at the table. The fact of the matter is, Senator—and we have had these discussions in these proceedings before—that the application of both general efficiency dividends and targeted efficiency dividends, as well all the other budget measures that are summarised in the PBS, for us, most heavily impacts in labour. We are a labour-intensive business. You will see the average staffing level has therefore been adjusted, largely to take into account the sorts of ons and offs. There are some ons. We get some workforce adjustment for passenger volumes that are coming through our airports and the like. We have also received supplementation that was alluded to in the previous answer to Senator Kroger's question about the extension of some quite significant maritime leases. That is sort of an on. And then there is the application of various other fiscal measures, which are offs. So when you put that all through the tumble dryer, it comes out, in part, as a reduction in average staffing levels.

Senator HUMPHRIES: I have got 20 people.

Mr Pezzullo : Approximately. I will ask Mr Groves to take you through the mathematics of that.

Mr Groves : Senator, could you just point out on page 101, I think you said, the differential that you were mentioning?

Senator HUMPHRIES: $61.4 million. It is the net total resourcing for the agency.

Mr Groves : If you look at the subcomponents on page 101, they relate to changes in refunds that we will be paying under the Customs Act and refunds of Customs duty. I guess it is administered in nature; it is not actually our departmental funding. The largest component of that relates to a measure that occurred in 2012-13 associated with refunds associated with the tobacco plain packaging measure. The refunds were actually higher in 2012-13 than what we expect to occur in 2013-14. That is the most significant component. Our departmental funding overall, when you take into account the different components, is actually a slight increase in 2013-14 over 2012-13.

Senator HUMPHRIES: And what part of the table do I find that in? Where does it indicate that?

Mr Groves : It is a little bit of a confusing table. You can see it best outlined in the second row.

Mr Pezzullo : I think it is a complex table.

Mr Groves : Yes, even as CFO I find it a little bit confusing.

Mr Pezzullo : I just find it complex.

Senator HUMPHRIES: There's an admission for you!

Mr Groves : If you look at the second row, our available appropriation in 2012-13 is 1,010,206, so just over $1 billion. Our departmental appropriation in 2013-14 goes up to 1,022,831. There are a number of subcomponents of different elements of our funding that then vary slightly, but that is probably a good indication of how our core departmental funding has moved between the two years.

Senator HUMPHRIES: Yet page 106 indicates at the bottom that the average staffing levels are anticipated to drop from 5,120 persons—full-time equivalents, I assume—to 5,000, a loss of about 120 positions. The budget is going up but the number of positions is going down. How do we explain that discrepancy?

Mr Groves : There are a number of components. A large part of our budget, about half, is made up of supplier expenses, so it depends on the nature of some of the movements between that. Based on our estimates, we have to fund things such as pay rises over and above the supplementation we get through the government process. Changes in our large supplier expenses also impact our ability to devote money to the labour budget, and that obviously funds people. There are a number of swings and roundabouts in there that come up with that final reduction in staffing numbers.

Mr Pezzullo : As I was saying before, there are a whole range of ons and offs, but things like long-term contracts around aerial surveillance, for instance, are in your supplier expense. We get adjustments for the extension of the maritime vessels that I have talked about before; that comes through as supplies. We are required to apply general government measures in relation to efficiency dividends. So when you net all that off, you then have to work out where the give is, if you like, that still allows us to perform our function. I talked earlier about the fact that, through the higher productivity of the officers—and we had that exchange before, so I will not go over that ground—there is never an easy solution here, but where can I take the least amount of risk and cover that risk with technology, screening, intelligence, analytics, whatever? And that is to have, yes, what is going to be fewer staff members. You have correctly identified the drop in ASL, average staffing level, which is not a head count figure but when you average out the full-time equivalent salaries. You basically increase their firepower in terms of their ability to detect, interdict, and seize things like narcotics with things like better intelligence and better links to the AFP and other agencies. That is the trade-off that the table is trying to speak to.

Senator HUMPHRIES: Can you tell us where the 120 staff—or whatever the figure is—are going to come from?

Mr Pezzullo : I have not made a final determination on that. We are working through what is known as the internal budgeting process. Now that our external budget has been set, we were given significant relief in terms of supplementation for those vessels. It would have been a very hard ask to attempt to offset all of those contract extensions. So we have got the certainty around the external budget. We are just working through with the executive a process of how to best allocate over the year, with a starting point position in June of this year, which we will keep under review and adjust having regard to things like attrition and future pressures and risks that might emerge. I obviously retain, as CEO, a degree of discretion around whether I wish to revise some of those initial determinations, but we will settle our internal budget over the weeks ahead and divisions will have operating certainty well ahead of 1 July this year.

Senator HUMPHRIES: The table on page 120 of the PBS indicates that one of the savings will be through reduction in the number of square nautical miles that is surveyed each year, with a reduction of 11 million square nautical miles each financial year from 2014-15. Have I read that correctly?

Mr Pezzullo : Those are the forward estimates years of course, but, yes, you are reading the table literally correctly.

Senator HUMPHRIES: Given that you emphasised before how things like surveillance of the Southern Ocean are taking place remotely, not with men and women out on planes and boats, and given the increased volume of vessels and the fact the vessels are now reaching places like Geraldton, is it really sustainable to plan such serious reductions in the amount of surveillance of our waterways in that climate?

Mr Pezzullo : I will make a general comment to respond, but the specific reduction in the measure from 2014-15 and beyond I will ask Mr Groves to speak to. The key answer to your question is that for 2013-14—the period up until the end of June of 2014, some 14 months away—we have been given by government, in the measure that you have directed our attention to, the same level of funding and resources. If I were of the view that, as part of the 2014-15 budget round I had a requirement to raise to the attention of the government of the day, the minster of the day, through the budget process of the day, the resourcing for the forward estimates period—so 2014-15 and beyond—of course I would, as a diligent agency head. But the figures that are currently budgeted for can be explained fairly directly in terms of that drop in 2014-15 and beyond in the three years that are described as the forward years by Mr Groves.

Senator HUMPHRIES: What you seem to be saying is that we are cutting the budget and the allocation to these activities at this point—

Mr Pezzullo : But no change in 2013-14.

Senator HUMPHRIES: Yes, but in the out years you are cutting the budget for these things.

Mr Pezzullo : Well, they are not the budget years; they are the forward estimates years.

Senator HUMPHRIES: But they are still projected in the budget for what you expect to be doing.

Mr Pezzullo : That is what is loaded up in the forward estimates.

Senator HUMPHRIES: So are you saying that if things get bad, if there is more activity, then you will come back and presumably have to ask government for more money to cover additional surveillance?

Mr Pezzullo : Well, every budget cycle is not entirely ground zero again, but it is important that all the ons and offs are addressed. If there are particular pressures, not just in this space but in others as well, in consultation with my colleague the secretary and others, we would revisit issues as required.

Senator HUMPHRIES: But there is no basis for assuming there will be less need for that surveillance, given what has been going on in the last few years. The pressure is ramping up, not going down.

Mr Pezzullo : I have been doing this sort of work for a hell of a long time and I find that, within budget years, there are causes for things to be adjusted. This time last year I did not have any certainty in relation to Senator Kroger's earlier question about the extension of very significant maritime leases. The government took a considered view of this based on hopefully what they would consider to be high-quality advice on the matter. They came to a view that, no, we need to not only fund this activity but indeed not offset it. That has obviously provided significant budget relief. I could not have said that to you a year ago—that is my point.

Senator HUMPHRIES: I realise budgets go up and down, but the budget projections surely need to be a reflection of what you expect to be the environment in which you are working in the future. You cannot project a need to decrease the amount of surveillance given the progressively ramping up level of activity in our oceans and the increasing problems, as the arrival of a vessel in Geraldton indicates, that we are encountering in that space. The idea of surveying less of the ocean in forward years simply does not seem to have any bearing on the pressures that are on this agency at the moment. It is purely a budget measure; it is designed to create a budget impression that you have got less pressure in the future, but there is no foundation for that, is there?

Mr Pezzullo : That is our best judgement at the moment, at least, of what our future budgetary requirements might be. As I say, I have been doing this for a hell of a long time. My sense in that these things are kept constantly under review, as they should be.

Senator HUMPHRIES: I know they are kept under review but on what basis do you claim there could be less need for surveillance of the oceans? What are the indicators? What is the evidence?

Mr Pezzullo : It is not an aggregated cut across the board. There is a specific cessation that cuts in in 2014-15. I might ask Mr Groves to explain that.

Mr Groves : At the MYEFO additional estimates update we received additional funding. Earlier we touched on ACV Triton, and we also received some additional money to maintain our vessel out at Ashmore Reef, the Ashmore Guardian. A third component that we received funding for for one year was associated with this component which was around some Reims aerial surveillance assets, which funded around 2,215 hours a year. That was considered and funded for the 2013-14 year. So at this point in the time across the forward estimates it is a terminating measure that terminates at 30 June 2014. Hence it is not in the forward years.

Mr Pezzullo : I think it is fair to say that whether measures are terminating or lapsing—and they mean slightly different things in a budget management context—you have to reflect what the termination period is. But in my very long and unfortunately sometimes too detailed experience with these things, terminating measures can be revisited, lapsing measures can be extended. All sorts of things can happen. At the moment we have a terminating measure that has been extended by the government for one additional year. We then have to reflect the fact that that funding drops off in that particular financial year.

Senator HUMPHRIES: You gave us some figures earlier on for the number of boat and passenger arrivals for both the calendar year 2012 and the financial year to date, 2012-13. They do not tally with the sorts of figures that we have been keeping, exactly, so would it be possible for you to table for both of those periods the actual boat, date of arrival, number of passengers and number of crew, please.

Mr Pezzullo : We will. Can you, just for the sake of the drafting officers, clarify which years you want.

Senator HUMPHRIES: You gave me the calendar year 2012 and the financial year 2012-13 to date. If you could give us a breakup of each vessel—

Mr Pezzullo : By boats, irregular maritime arrivals, and crew. I think they are the three categories.

Senator HUMPHRIES: Yes, that is right.

Mr Pezzullo : We will do that.

CHAIR: Mr Pezzullo, we are going to run out of time, so we are going to move on with the program. If people have got any other questions they can put them on notice. Otherwise we most definitely will not get through what we need to in the next two days. So thank you to you and your officers for your time this morning.

Mr Pezzullo : Thanks, Chair.