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Friday, 9 August 1946

Mr FADDEN (Darling DownsLeader of the Australian Country party) . - I support and confirm the views expressed by the honorable member for Wentworth (Mr. Harrison) regarding this alleged inquiry by Mr. Cond6 into our statements about the maladministration of the Salvage Commission. When I raised this matter, I referred particularly to the sale of refrigerators, and emphasized that the inquiry should be conducted by a judge of the Supreme Court who would be able adequately to sift and assess the evidence. The report submitted by Mr. Conde reflects the greatest attempt to white-wash a government department that I have ever known. The Government appointed Mr. Conde to inquire into the statements which I made. I use specifically the word " statements " because I do not desire any honorable member opposite to accuse me of having used' the word " allegations ". I made no allegations. I stated that I could not verify the statements and . claims which had been made to me, and I considered that I executed my trust as a representative of the people when I raised the matter in this House and pressed for a most searching inquiry. What has been the result ? Mr. Conde never interviewed me. or asked me whether I had any evidence to support by statements, who my informants were, or whether I could produce any material which might assist a proper investigation. I have in my possession the duplicates of receipts and warrants issued by the Salvage Commission regarding refrigerators. The Department of Supply and Shipping supplied to me the ledger-sheet as well as copies of warrants or receipts which were certified. What do they reveal? Mr. Conde could have got this information. What the Minister for Supply and Shipping (Senator Ashley), stated to me in reply to a question which I asked in the House was an untruth. He said, when I raised the matter, that ten refrigerators only were sold to Fostars Foundry at £10 ,each. Receipt No.- 62324 states that "the price includes" two cases of parts. The Minister did not mention this fact. There is a big difference between selling a refrigerator at £10, and selling a refrigerator with two cases of parts at the same price. The stock ledger lists one refrigerator sold by auction at £4 as being a " six hole display type ". It is fairly good buying at £4 ! But evidently Mr. Conde was satisfied without making any inquiry or investigation. Certain receipts are endorsed by the purchaser, "for my own personal use and not for re-sale ". If those were junk items selling at £9 10s. each, why is the admission made that they could be used and were. consequently serviceable, and why was the restriction placed on their re-sale? A. Simmick is described in pencil on the stock' ledger as a carrier, and consequently, the real name of the purchaser does not appear. The prices of these items to Simmick are £9 10s., £7, £7, £2, £7, £7, £7, and £7, respectively. Nine refrigerators were sold to Army officers, and one was sold to a woman in Adelaide for £7; Surely she . would not have paid the cost of transport from Brisbane to Adelaide if the refrigerator was- junk. Mr. Conde .used the white-wash brush 'too thickly and too crudely. He could have been even a little subtle in his investigations, called for the evidence and arrived at something approaching a reasonable decision based upon a proper investigation by a man of Mr. Conde's reputation. It is a scandalous state of affairs when the white-wash is used in an attempt to discredit the honorable member for Wentworth and myself. We are not irresponsible. We have a duty to perform, and when people make complaints to us about wilful waste and extravagant maladministration, we must raise the matters in this House. We did so in this instance. We asked for a searching inquiry, and the result is this nebulous white-washing document which purports to be findings based on searching investigation to elicit the truth. This Parliament and. the country should not tolerate that.

This bill provides for the granting of supply until the 30th November next. The amount which the Treasurer (Mr. Chifley), seeks is £45,030,000. That amount approximates the estimates that, the right honorable gentleman gave in his Financial Statement on the 12th July last. I direct particular attention to the method pf finance which the Government proposes to adopt during the next twelve months. The Treasurer stated that the provision of £30,000,000 for war services represents the amount which, it is estimated, will be available from revenue receipts for the period of .three months, after allowance is made for other obligations. Therefore, of the total amount of £302,000,000 which will be required for war services this financial year, the Government plans to' expend £120,000,000- from .revenue, and the balance of £180,000,000' will be. raised by loan. . I direct particular attention to that fact.

The Government's plans for this financial year contemplate the borrowing of at least £180,000,000. Let use examine some of the items for which we are asked to make provision. It ' is interesting to note the trend' of the Government's financial policy. The amount which the Parliament is asked to provide includes the sum of £3,500,000 for air- craft equipment and stores. The inference to be drawn is that in this financial year, the Government will expend about £14,000,000 in that direction. An amount equal to £1,800,000 a year is provided for standard ship construction. I shall connect that matter with some remarks which I propose .to make on the AuditorGeneral's report on that particular venture. My point is that provision is made in the Government's financial proposals £or giving effect to its socialization ideals. I also direct' attention to an amount of £8,7 60 provided for the next three months for the . Investigation Branch of the Attorney-General's Department. That is equivalent to an expenditure of £34,000 a year on that activity. "We must consider the . Government's financial requirements in the light of the Auditor-General's report. What has the Auditor-General said of the public accounts since this Government took office.? His report was laid on the table of this House last March, but copies were not. available for some time. The report is a scathing .document containing on almost every page examples of Government squandering, maladministration of every kind, bungling and inepitude. The comments regarding government departments call for a most searching examination, and, in many cases, stringent action, against those responsible for the inefficiency and wasteful expenditure disclosed in the report. I emphasize that these criticisms are not made by the Opposition. They are not the observations of a political party on the eve of the elections. They are made by a public official who is appointed to safeguard the interests of taxpayers. The Audit Bill was one' of the first measures 'passed by the Parliament of the Commonwealth when it was constituted 45 years ago.The importance of his office is beyond question. He can be described a.« " the watchdog of the public purse ". When a Minister i» :worn in a3 the head of a

Commonwealth department, he is required to assume complete responsibility for its administration. His duty is toensure that full value shall be received, for the money which the department expends. Yet, within the last four years,. with the Labour party in office, one report after another by the Auditor-General has criticized the administration in the most scathing terms. This officer, has reported that his strictures have been ignored, and that there has been little or no improvement of the position to which he has directed attention. In fact, repeatedly he has had to revert to criticism in his previous .reports. When other Opposition members and I have sought an explanation of the waste, extravagance and maladministration disclosed by the Auditor-General, the invariable' practice of the Minister concerned has been to present a report prepared by a public servant ; in other words, a " whitewashing " report. In the main, such reports are prepared by an officer of the department, the administration of which has been criticized by the Auditor-General. When the report has been given to the House, the whole matter has been shelved, and frequently the Auditor-General has found himself obliged to reiterate his criticism in his next report. His report' for 1943-44 was tabled on the 13th June, 1945. Even the Prime Minister and Treasurer (Mr. Chifley), had to admit that he had not had an opportunity to peruse it. Subsequently, I suggested that immediate action should be taken to investigate the highly unsatisfactory state of affairs that had been revealed by the report. The Auditor-General had strongly criticized inefficiency in accounting and stock-taking methods, as well as wasteful expenditure, particularly in the Departments of Munitions, the Army, and Aircraft Production. I suggested the appointment of an independent com- 'mittee of practising accountants, to investigate and report upon methods for improving the position, especially as some qf the transactions at which criticism had been directed had extended over three or four years. The Prime Minister replied that the matters relating to costing which had been brought under notice in the report would be considered. He said -

I know from my own experience that it is hard to obtain the services of extra men, but

II assure the honorable member that the Government will do whatever is possible to have -an examination made.

I was impelled to suggest an investigation because the Auditor-General's statements in that report were similar to those that he had made in his report for the year -ended the 30th June, 1943. Notwithstanding the serious nature of these repeated criticisms, the Minister for Munitions (Mr. Makin), dealing with -similar comments in the 1943 report, said -

The comment of the Auditor-General can .be described as exaggerated and giving a distorted picture of the situation. Most of it appears to be directed at the Victorian section.

The Auditor-General referred to these observations in his subsequent report, and added -

The inference is quite correct; the paragraph in question was headed " Munitions Stores and Transport Branch, Victoria ".

I have been greatly concerned at the Minister's statement, as it is my invariable practice where comment or criticism is considered necessary, to state the position as moderately as possible and to avoid overstatement in any respect

As regards the branch in question, my officers had been endeavouring for a considerable period to secure improvement in its accounting and control:. The Treasury had -also taken action.

In the circumstances, it is most regrettable that the Minister for Munitions, referring to the 1944 report,. should have seen fit to observe that the AuditorGeneral was not a production man and had only a rather theoretical knowledge, for which reasons he, the Minister, would prefer to he guided by production men. That a Minister should regard so lightly such an. important document as the report of the Auditor-General, is a serious matter.

I have abstracted from the latest report of the Auditor-General a few classic examples of the squandering of public money which should be devoted to other purposes in a much higher priority group; for example, the re-establishment and rehabilitation: of ex-servicemen. Unfortunately, the report is twelve months old, because it refers to the year ended the 30th June, 1945. The extravagance to which. it refers has doubtless been aggravated in the year that has recently closed. Here are examples of disastrous maladministration -

Munitions Department. - Discrepancies between accounts were considerably increased during the year, and a complete reconciliation was impossible. Audit representations regarding unsatisfactory accounting features are still unsatisfied. Authentic departmental records of assets purchased from Commonwealth Fund!1 cannot be established.

The Auditor-General reported in similar terms in 1943, and again .in 1944; yet the maladministration was considerably accentuated. I have drawn attention in this House to the estimates of private individuals in connexion with the construction of wooden vessels by the Shipbuilding Board, the amounts being £700,000 for a period of three months and £1,800,000 for a period of twelve months. One would have thought that some regard would ,be paid to the criticism that had been offered, when plans were being made for the future and an expenditure of nearly £2,000.000 was involved. This is what the Auditor-General has said in regard to that venture -

Standard wooden vessels completed cost £71 per deadweight ton - many, times the overseas cost of comparable vessels. Two hundred ton wooden vessels cost up to £7(1,000 a piece, caused in part "by heavy expenditure on overtime". Recently an endeavour was. made to dispose of some of these vessels,- with little success. The eventual loss will' be of staggering proportions.

Yet no attempt was- made to exercise more stringent control over expenditure. The Auditor-General said in regard to locomotive construction -

A substantial loss will result from this project.

These are his remarks in connexion with the cost-plus system -

Despite a recommendation regarding the fixed-price contract, the department still continued to let some cost-plus and maximum price contracts.

His recommendation in that regard was completely ignored, and the position was aggravated,, with the result that greater calls had to be made on the public purse. Tn regard to the Aircraft Production. Department, he said -

Control records, are incomplete, stocktaking has nut been reconciled with them. The government-owned material issued direct to contractors has. not been- brought completely under departmental control.. With regard to one contractor alone, the amount involved is £1,790,000 while in another case evidence has not been forthcoming to indicate whether £5,890,000 worth of materials supplied to one major contractor by the .department was properly controlled as to receipt, usage or return.

Numerous sub-contracts were placed on a basis which did not provide for the right to investigate costs. ' Four million pounds was paid to sub-contractors, and of those , which could he investigated, substantial refunds resulted.

Other extracts from the report are -

Stores and Equipment: - Stores records continue to be unreliable. Stock-taking immediately revealed numerous discrepancies - in many cases without seeking competent authority and without submitting details to the Audit Office.

Allied Works Council: - Plant and stores records could not be reconciled with control accounts. Purchases could not be traced, and numerous adjustments were made to stock ledgers without authority. Unsuccessful attempts have been made to correct the records.

Canteen Accounts : - During the year, deficiencies and irregularities were disclosed, stated to be largely due to pillage and loss in transit.

Stores and Plant Records: - Certain phases of accounting were seriously in arrear and audit examination disclosed numerous inaccuracies. Stores were over purchased and became unserviceable.

Salvage Commission: - Items not properly accounted for reduced the accumulated profit claimed, by £20,700. The accounts were so unreliable that the Chief Auditor, New South Wales, reported that " the position regarding stock records, stocktaking and related discrepancies is quite unacceptable to audit ". Another auditor had strong _ suspicions that some treaters were in a position to transfer better, class fabrics to their own stocks, and replace them- with lower class materials !

Food Control : - Losses amounting to £105,000 arising from the processing and sale of vegetables resulted during the year. £101,000. was expended on a project in northern Queensland which produced £15,800 worth of vegetables during the year, before it was closed down. The same department spent £42,820 of public moneys on a publicity campaign for increased food production.

Prime Minister's Department: - Stocktaking of the Council for Scientific and Industrial Research is seriously in arrears with regard to both stores and equipment. -

Department of the Interior: - As in previous years, working expenses of the Grafton-South Brisbane railway were incorrectly charged with £53,000 of capital expenditure.

Prices Commission: - Salaries in this branch jumped from £285,000 to £420,000 in the twelve months. This is an extraordinary increase and calls for some explanation. The cost of administration alone of the two commissions - prices and rationing, cost over £1,000,000 for the year.

Department of the Army: - Discrepancies; arrears," withholding of audit approval, failure to check deliveries, of Army goods such as tyres, and other unsound features mark the administration of this department.

Minerals Production : - Expenditure on. various projects to 30th June, 1945, was £2,584,000, and receipts totalled only £344,000.

One could give many more examples of. the appalling state of affairs which, according to the report, exists in Commonwealth departments. The most unsatisfactory feature is the complete apathy of the Government, and its total disregard of responsibility.

I wish to record my appreciation of the work of the retiring Auditor-General, Mr. R. Abercrombie: who has given outstanding service during the- eight years of his occupancy of that office. He has not had that departmental or ministerial co-operation which he should have had during the last three or four years. He has performed his duties fearlessly and most efficiently. I hope that' his successor will be guided by the example he has set, and will discharge his responsibilitieswith the same zeal, straightforwardness and courage.

Sitting suspended from 12.^5 to 2 p.m.

Mr FADDEN - I now draw attention to an item of £8,756 to cover expenditure by the Commonwealth Investigation Branch for a period of three months; proportionately the expenditure for the full year would be about £34,000. It is opportune to call attention to the fact that, during the war, the Commonwealth Security .Service was set up to carry out important functions associated with the security of Australia. When the war ended, the Government appointed a committee, which included the then Director General of Security, now Mr. Justice Simpson, to make recommendations concerning the future of the department. I understand that that committee recommended to the Government - that the security service should he terminated. When-the matter was raised in Parliament earlier this year, the Attorney-General (Dr. Evatt) gave an assurance that it was not intended to have a permanent security service, such as was necessary in war-time. Nevertheless, he added, there would have to be in the Investigation Branch of 'the

Attorney-General's Department some officers whose duty would be to watch security matters in Australia's interest.

It appears, however, that there is in Australia to-day, - at a time when we are not at war - an organization which is described as " Evatt's gestapo ". , This organization is under the control of a Colonel Jackson, who, I understand, was formerly Deputy Director of Security Service in Sydney. Two well-known. and experienced New South "Wales detectives, Detectives Wilks and McDermott, who were seconded to the Commonwealth for security work during the war, are, I understand, to-day associated with this gestapo. Side by side with this organization, we have the Commonwealth Investigation Branch, which cost £33,182 in 1943-44, and £35,804 in 1944-45, and provision was made for an expenditure of £38,800 in the financial year 1945-46. The security service cost £121,579 in 1943-44 and £134,184 in 1944-45, but the provision was cut down to £40,000 for 1945-46. I am unable to say what the security service actually cost in the last financial year, but I do say that Parliament and the people are entitled to know how an estimated expenditure of £40,000 was justified on a security service, while the Commonwealth Investigation Branch was functioning. ,

Furthermore, I understand that the permanent' head of the Commonwealth Investigation Branch is Colonel Longfield Lloyd, who is at present in Japan, and Major Rowland Brown is the temporary head of the department. What I want to know is, under whose control are Colonel Jackson and the officers of his department? Are they under the control of Colonel Longfield Lloyd, or under the direct control of the Attorney-General? Further, I want to know what is the nature of the work of this new organization - which is functioning in peace-time - that requires the services of detectives trained in police work?

In connexion with this subject, I have recently received details of the moneys expended out of two secret funds by the Labour Government during the past few years. The first secret fund, known as the Security Service Special Fund, was operated upon by the Government for nearly three years until it was closed in December, 1945. The sum ' of £8,662 lis. 4d. was spent but of this fund on security matters, including subversive activities. It is. the successor, except in name, to the fund known as the Australian Democratic Front Fund, established for similar purposes under the control of Sir George Knowles, the Solicitor-General at the time. Besides this' fund, there is another government secret fund known as the Investigation Branch Special Fund, from which the Government has spent £9,185 during it? term of office. A portion of these money* ' was used in investigating subversive activities in all States. It took a good deal of questioning on my part to obtain information about expenditure from these funds. I persisted in my endeavour to get the Government to admit that it had a secret fund similar to the one which uninformed members opposite have called a "slush" fund. I asked on the 19th July a series of questions, No. 4 of which was as follows : -

Have moneys from any of the above mentioned accounts and/or funds been used either directly or through any Commonwealth instrumentality or otherwise to control, police and/or investigate communism or communistic activities, and/or any persons, matter* or things associated in any way whatsoever with the Communist party of Australia.

Strangely enough, I received replies to all the questions I asked except No. 4, and that one was evaded. It would appear that honorable members opposite were ignorant that the present Government had carried on the same practice as the previous government by operating on secret funds. The only difference is t;hat thi? Government of which the honorable member for East Sydney (Mr. Ward) is a member, has spent more on secret fund.' than did the previous one. The reply which I received to my question was a> follows : -

This Government takes no responsibility for the manner in which the moneys made available through the Australian Democratic Front Fund were expended, but the disbursements from the Security Service Special Fund were, and the disbursements from the Investigation Branch Special Fund are, at all times subject to audit by the Chief Audit Inspectors.

As Prime Minister, I instituted an inquiry into certain disbursements from special funds, and the Minister for

Transport, at regular intervals, lias quoted in this House .carefully selected extracts from this report designed to "show that the practice of operating upon a secret fund is highly irregular. The shock of realizing that his own ministerial colleagues had been following the practice - which he so roundly condemns - to the amount of £17,847 all told, might well prove too much for him. Hisblood pressure has risen to danger-point often enough over a mere £300 expended from a similar fund,' by a government of which I was a member.

That particular fund was closed by the" present Government and I was informed that it took no responsibility for the disbursements therefrom. To put the record straight. I shall quote what the royal commission found with respect to every item paid out from this fund. Mr. Justice Halse Rogers said -

At the inquiry files were produced containing supporting documents in the shape of vouchers, invoices and receipts for every item. On 19th September, 1941, the Commonwealth Audit Office investigated all these payments and there is no evidence that any question 'wa.s raised as to the correctness of any account appearing in the cash book or the authenticity of any reecipt or any supporting documents.

With regard to £300, the judge found, as a fact, first, that Mr. Nelson received, the £300 from the fund, which was paid by the Deputy Crown Solicitor1 in Sydney in the first instance to a Mr. "Winkler. Secondly, he said -

I do not find anything in the evidence at all which could he regarded. as a ground for rejecting the evidence of Mr. Hughes and Mr. Fadden as to their reasons for making the money available.

Hie further said -

If Mr. Nelson did suggest such a campaign to Mr. Hughes - and that is what I have found - I oan see nothing ridiculous, and certainly nothing sinister, in the acceptance of the suggestion by Mr. Hughes and the subsequent adoption of it by Mr. Fadden. Consequently I can see no ground for rejecting their evidence as to their motive and certainly no ground for finding or even a suggestion that they entered into a conspiracy with Mr. Nelson to do something with him for some purpose unspecified.

And finally; Mr. Justice Halse Rogers stated -

For the reasons given, I am driven to the conclusion that I should find that the moneys in question were paid out of the account established in the name of the Australian

Democratic Front by . Mr. Watson under theinstructions of the Attorney-General, Mr. Hughes, with the approbation of the ActingPrime Minister, Mr. Fadden; that the moneys were paid out through Mr. Winkler to Mr. Nelson in accordance with the instructions of the Acting Prime Minister; that the pui posefor which the moneys were paid was that indicated in the receipts and in the letter from Mr. Watson to Sir George Knowles already referred to, that is to say that it had relation to the promise of the executive officers in the,coal industry that there would be free-loin from further strikes in the coal industry during the war and that it was meant for a campaign in support of the declaration of Mr. Nelson and Mr. Kellock.

That declaration enunciated the policy of" continuity of production of coal duringthe war, and it was published in the press of Australia on the 28th February, 1941,. just a fortnight after I, with the concurrence of the Advisory "War Council, had issued a warning of the grave menaceof Japan, and the possibility that it might declare war against Australia. Secret funds have been in existence in. this country for over 30 years, and it will no doubt be found necessary to employ them again, whatever party may be in power.

In conclusion, I wish to emphasize tothe Minister for Transport, to the member for Ballarat (Mr. Pollard), and to a few other - honorable members of the Government, that when they .criticize my expenditure of hundreds from secret funds, I can with equal facility point to the spending of thousands from the same public source, and on precisely the same objects by the Government of which they arc supporters. At least it can never be said of offer for its failure to protect our democratic institutions against the subversive doctrines -of those' who would destroy them?

Mr SPEAKER - The right honorable member's time has expired.

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