Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Joint Standing Committee on Electoral Matters
06/02/2014
Conduct of the 2013 federal election and matters related thereto

BOYD, Mr Brian, Executive Director, Performance Audit Services Group, Australian National Audit Office

McPHEE, Mr Ian, Auditor-General, Australian National Audit Office

O'NEILL, Dr Patrick, Director, Performance Audit Services Group, Australian National Audit Office

Committee met at 13:17

CHAIR ( Mr Tony Smith ): I declare open this public hearing of the Joint Standing Committee on Electoral Matters inquiry into the 2013 federal election. This inquiry was referred by the Special Minister of State on 5 December 2013 to look at all aspects of the 2013 federal election. The hearing today will address matters in relation to the missing Senate votes in Western Australia. As the Court of Disputed Returns has not yet made its findings, the committee will not be making any comment on the court proceedings. The line of questioning that we will pursue will go to the issue of the lost votes and the events that led to that. Before introducing the witnesses, I ask a member of the committee—may I suggest the deputy chair—to resolve that the media may broadcast all public hearings in relation to this inquiry.

Mr GRIFFIN: So moved.

CHAIR: So carried. I refer members of the media who may be present at this hearing to the need to fairly and accurately report the proceedings of the committee. I now call our first witnesses, from the Australian National Audit Office. Although the committee does not require you to give evidence under oath, I advise you that the hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings in the respective houses. I will hand over to you, Mr McPhee—good to have you here.

Mr McPhee : Thank you, Chair. I have a brief opening statement, if you are comfortable with that.

CHAIR: Yes.

Mr McPhee : The Australian National Audit Office has conducted three audits of the administration by the Australian Electoral Commission of Australia's electoral system. Two of the reports on these audits, tabled in April 2002 and April 2004, focused on the integrity of the electoral roll. The third audit report, tabled in April 2010, focused on the 2007 election. The objectives of this third audit, reflecting the matters raised by this committee when it asked the ANAO to undertake the audit, were to assess the effectiveness of, firstly, the measures taken by the AEC to ensure the accuracy and completeness of the electoral roll, particularly during the period prior to the announcement of the 2007 general election, and, secondly, the AEC's planning and preparation for and conduct of the election.

As the committee is aware, each federal election is a complex logistical event, and the challenges faced by the AEC in conducting elections are increased by the uncertain timing and the short period of time between an election being called and polling day. These circumstances make more difficult the tasks of mobilising a large temporary staff of some 70,000 people operating in the order of 8,000 polling booths, conducting mobile polling in remote locations and collecting votes at various overseas posts.

The inquiry into the 2013 WA Senate election, commissioned by the AEC and produced by Mr Keelty, raised of range of issues involving AEC culture, planning, systems and practices that contributed to the loss of 1,370 Senate ballots in Western Australia. This included staff training and performance and the suitability of the premises used for the storage and counting of ballots, as well is the transport arrangements employed for completed ballot papers.

Our audit report into the preparation for and conduct of the 2007 election canvassed some similar matters. The audit report examined the challenges faced by the AEC in obtaining sufficient suitable staff given that more than 10 per cent of polling officials were still to be recruited one week out from the 2007 election, with many key polling staff appointed only on polling day. The audit report noted that this left little time for these staff to be trained or for the AEC to be confident that they were competent in the exercise of their assigned duties.

The report discussed shortcomings in the AEC's implementation of its performance rating process for polling staff which meant that staff identified as not performing to the required standard in an earlier election might nevertheless be engaged again to assist with subsequent elections. Further, the report identified a number of instances of difficulties with reconciling the number of ballot papers issued and votes cast, the breaking of seals not being recorded or witnessed, and officer-in-charge returns not being witnessed. In addition, the report suggested ways to improve the suitability of polling booths and fresh scrutiny premises. Finally, the report identified that there would be benefits from the AEC examining options for the storage and transport of completed ballot papers that would provide greater security.

We made nine recommendations, and the AEC agreed to each of these—one with a qualification. Most relevant to the committee, two recommendations sought to encourage a more strategic approach by the AEC to the selection, recruitment, training and performance evaluation of polling staff. The seventh recommendation related to the selection of polling places and fresh scrutiny centres. Part of one recommendation related to the transport of completed ballot papers. Apart from our annual reports of financial statements of the AEC, we have not conducted any other audits of the AEC since 2010.

I am accompanied today by Mr Brian Boyd, an executive director in my office, and Dr Patrick O'Neill, who were both involved in our most recent audit of the AEC. We would be very pleased to respond to any questions or issues the committee has.

CHAIR: Thank you, Mr McPhee. Do Mr Boyd or Dr O'Neill wish to add anything at this point?

Dr O'Neill : No.

CHAIR: Thank you for that statement, Mr McPhee. You outlined in great detail the work that you have done and the series of recommendations that you put forward based obviously on what you saw as significant vulnerabilities. Firstly, to what extent, to your knowledge, has the AEC implemented those recommendations? You told us they agreed to them, but—

Mr McPhee : Yes, and that is the extent of our understanding: the AEC agreed with these matters. As you appreciate, our audit processes have a high level of engagement with the agencies as we work the issues through and complete the audit, and they have agreed with the recommendations, but to my knowledge we have not gone back to check any of the matters in any detail.

Mr Boyd : There is a separate obligation on agencies to report to their audit committees on their progress with implementing ANAO audit recommendations and, like all entities, the AEC has those processes in place. I guess one of the risks as we see it within the overall framework—and we have done a couple of audit reports in this space in the last 12 months or so—is that sometimes agencies report to their audit committees that they have implemented an action recommendation and sometimes it shows that it has taken them some time to do so but the audit work we have done in recent times has actually drawn to attention the fact that, even when agency audit committees are advised that recommendations have been implemented, they may not actually have been. So this is an area where, in the last little while as an Audit Office, we have done some audit work in some agencies to tease this out a bit more, and that sort of work is something we will keep looking at as we go forward.

CHAIR: Can I put it to you this way: the reason I asked that question, you would appreciate, is that, unless the recommendations are implemented, not a lot is achieved. Given the work that you did at that time and the vulnerabilities you identified, what was your reaction when you heard of the lost votes in the Western Australian Senate count? Was it something that made you think, 'Well, they can't have implemented the recommendations'?

Mr McPhee : It is a difficult question. Clearly by implementing the recommendations—and not only implementing the recommendations but having regard to some of the evidence we put forward—there were signs that their systems and procedures clearly did need tightening up. We have in recent years focused our recommendations on what we believe to be significant matters, but that is not to say there are not other areas of the report that also need to be read and considered by the management and those with governance responsibilities to see what further action is required. In our view there was clearly work for the AEC to do to tighten up its training, improve its recruitment and—while the report does not go to this level of detail—build a culture which had more discipline around the processes required on polling day and how they were executed.

So, when you do hear of matters going astray, there are two things. Firstly, we reported in relation to the 2007 election. We are not across the detail of the responses that the commission did, so on the one hand we did not have any further information, but there are enough signs in our report and the subsequent report to say there is commonality in some of the issues being raised in both reports, and it does raise the question of whether sufficient attention was given to some of these areas.

Having said that, the last thing I would say is that there is no such thing as a guaranteed outcome in any of these areas. Obviously, when you have a lot of temporary staff and a lot of matters to be dealt with on polling day and in the counting subsequently, there are many things which can go astray. So I think the goal must be to try to build a culture and processes that get disciplined outcomes, because of the importance of the function that the AEC performs for the nation.

CHAIR: Mr McPhee, you made nine detailed recommendations. You said you looked at all of the critical aspects through polling day and through the counting of the votes. Just for the benefit of the public, if I were to sum up your recommendations to the AEC, they were: 'There are serious vulnerabilities here and, if you do not address them, one day you're going to have a big problem.' Is that a fair summation?

Mr McPhee : I think that is fairly close. I would certainly say, as I mentioned, that they did need to address matters. There needed to be leadership and tight governance around the processes to build a stronger culture and to build stronger processes. From the time we viewed the matters, and certainly in the later report, there seems to be the same message. So there is a job ahead of the AEC, here.

CHAIR: I am going to ask one more question and then defer to my friend and colleague the deputy chair. We have a number of members and senators here, you will appreciate. Just after your work on the 2007 election—I think you published your report in 2009—

Mr McPhee : It was in 2010.

CHAIR: we had the 2010 election. Then there were serious problems in a couple of House of Representatives seats: Flynn and Boothby. You would be aware that.

Mr McPhee : Yes.

CHAIR: You might want to tell us of your knowledge of that. The last committee reported on this. I think 1,300 votes in Flynn and nearly 3,000 votes in Boothby had to be excluded from the count. Do you want to enlighten the committee on your knowledge of those events?

Mr Boyd : We obviously have not audited the preparation and conduct of that election but certainly we are aware of those events. We are aware of what is publicly known about what caused the situation. Again, I think the AEC received some questioning at estimates as to what it was doing to prevent a recurrence. From our perspective, there was the 2010 election. When we did the audit of the 2007 election there had been a similar instance of votes in terms of the prior election in 2004. So as auditors we look at this and say, 'Obviously the Western Australian Senate situation is not the first time this has arisen.' That is the time when it probably had the greatest potential electoral impact in terms of the state as a whole. Whilst not saying the earlier occasions were unimportant they did not seem to directly influence the outcome for a particular seat or, in the Senate situation, for a state.

CHAIR: I think that is an important point, Mr Boyd, because you went to the AEC before the 2010 election and said, 'There are serious problems with your systems and if you don't address your systems and your culture there is going to be a big problem one day.' Having got that report the AEC went to the 2010 election and two big problems occurred. They occurred in seats where it did not affect the outcome. Is it fair to characterise that as a second warning, after your warning, of the necessity to fix these problems and to deal with them quickly and professionally?

Mr Boyd : I guess you could also suggest that maybe there were some other indications as well. We foreshadowed in our report that the AEC itself had commissioned a risk assessment prior to the 2007 election in terms of the transport arrangements for completed ballot papers. It made some suggestions but, as we noted in the audit report, the AEC did not action that at that time. As the Auditor-General has indicated, management has governance responsibilities. You have to exercise your discretion as to what you do and what you do not do with the resources that are available to you but I guess in some way you could say that the series of elections in which there have been problems in this area has now culminated. Maybe there were a few warning signs which, had they been heeded, might have prevented the situation that is now facing the AEC.

CHAIR: The AEC did have a series of early warnings.

Mr McPhee : If I could just generalise it, I think we all want our organisations to be learning organisations. We want to learn from experience, and when things do not go the right way you have to say: 'Do we need to address that? How do we do it? What is required?' I think that is the question for the AEC: have they been sufficiently alert to some of these signals that you are referring to, to build stronger processes into the organisation where required? We all have issues within organisations and I say, in my own place, that the most important thing is that we gain from the experience, we learn, we adjust our policies and our approaches, we put in the training required and do all the things that this parliament would expect of an office like mine. That is what you want. You want your staff to understand that that is the way you work.

Mr GRIFFIN: I have a couple of questions with respect to what I think you were saying before. You made recommendations in our last report but you actually have not gone back in—which you would not normally do—to check whether things have happened with respect to implementation of those recommendations. My first question is: do you think it would be a reasonable thing for you to go back in and have a look and, if you were to do so, how long would you need to do it?

Mr McPhee : Firstly, through our work with various committees it has come to our attention that the agencies' responses to our recommendations have not been as strong as we would have liked on the ground. That is, they agree with us but then, as Mr Boyd said, they have processes in place to say that they have implemented them and audit committees do tend to keep an eye on that sort of thing, and so on. But particularly through the Public Accounts and Audit Committee and committees like yours and others, the message is actually that the performance of agencies has not been as strong as we in the office might have thought. That explains why we ourselves have started to do more follow-up audits in this area.

Mr GRIFFIN: I will give myself a plug. When I was Deputy Chair of Public Accounts and Audit about 100 years ago, as you would recall, I remember at that time we did a review of recommendations that we had made and we found that many of the recommendations we made, which had been agreed to, had not been implemented. That is going back to about 1997, I think.

Mr McPhee : Yes. As Mr Boyd said, just recently we have followed up in two particular reports, one in the Defence department and one involving three or four agencies where we have followed up recommendations we made to assess the performance and, in a word, it was pretty 'ordinary'. You are quite right. Implicitly what you are indicating is that it would be helpful if the office did a little more of this and I am saying to you that we are on the case.

Mr GRIFFIN: Absolutely. Particularly in the context of this current inquiry, it would be very useful if ANAO was able to go in and have a look, and I am asking whether you would be able to do that given your current workload and circumstances and, if you are, how long would it take you to do it?

Mr McPhee : Firstly, when we get a request from committees we always treat it as a priority, so the short answer is: if the committee were of that view we would seek to schedule it. I am in the hands, particularly of Mr Boyd, as to the time, broadly, we would need if we were to follow up on these matters.

Mr Boyd : It is a difficult question to answer in some ways because it depends—

Mr GRIFFIN: How long is a piece of string?

Mr Boyd : I was trying not to say that myself! I will bore you a little bit with our audit methodology approach, because there are a couple of ways of doing this sort of audit. One is at a very upper level where you are looking at what management has said it has done and whether that looks adequate. But the key thing often with these sorts of ones is that you actually want to go below that and satisfy yourself that what they say they have done they have actually done and that takes a fair bit more work. So first of all, it can be done reasonably quickly. The second sort of audit, because you are teasing things out, takes a bit more time.

Mr GRIFFIN: I guess my thoughts on it would be in the context of the fact that there has been a lot of work done within the AEC in response to recent events. There has been the Keelty report and there may well be some scope and some existing information to work off there which might make things a little bit quicker. I will raise it with my committee colleagues at a later stage, but I certainly will be seeking that action.

The other point to raise at this stage is that I would like your thoughts on the question of the AEC as an organisation. From my point of view the AEC is an incredibly unusual organisation when it comes to government bodies because, although it does activities on an ongoing basis, its principal focus is on a particular activity, usually on a triennial basis, and in the situation where it goes from having a very small permanent workforce to, in relative terms, a massive casual workforce employed, say, once every three years. Do you have any comments on the question of the particular issues that that produces which makes it a bit unusual compared to other organisations?

Mr Boyd : Mr Griffin, just before we move on, if I may, in terms of an audit maybe it would help us if the committee was able to give us some indication as to what time frame you would be looking at in needing that input from us, which would help inform our decision-making as to whether we do an audit and what it would look like.

Mr GRIFFIN: I am happy to raise that with committee colleagues and get back to you.

Mr Boyd : In terms of the other question: yes, it is most definitely a very unusual organisation in that way. A substantial part of the work we did in that audit report was actually looking at how the AEC addressed that situation of being an organisation of a fairly small size, in many ways, for most of the time, but then as they are moving into what they expect to be an election year how they go about ramping up with that large temporary workforce. That is what a lot of the things we were looking at related to: the fact they were doing the same things they were had been doing for quite some time, when it came to recruiting that large temporary workforce, and perhaps—as in other areas of their work, such as the maintenance of the electoral roll—those things were not really, as we saw them, working as well as they once may have, and in our assessment they certainly were not likely to be serving the AEC well going into the future.

So we were suggesting recommendations both at a broad level, where they needed to sit back and think more innovatively about their workforce strategies—how they would actually go about employing these people—as well as, at the detailed level, some of the basic things about making sure their processes are actually documented and understood and people are trained to apply them and so forth. So we were looking at both levels. But, certainly, that nature of the AEC being a very large organisation of temporary people for a very short period of time, doing very important work, compared with a much smaller core staff of people just down the road from here, is something that is quite unique to the AEC.

Mr HAWKE: Thank you for your presentation. I want to ask you some questions in relation to the culture of the organisation. You have spoken about the necessary changes in culture that you are considering in your recommendations and from your auditing of this organisation. We all know, with the benefit of hindsight, that there are problems with the AEC, but you almost, with the hindsight of previous elections, had foresight about what might happen—with recommendations about transport and storage, personnel and training. These things seem to be pretty prescient with regard to the recent circumstances of the last election. Do you think there is a culture of resistance to change within the AEC, whether in the management, the permanent staff or in the broader organisation—or is there anything you have uncovered that would suggest resistance to change in these key areas?

Mr McPhee : Whether the word 'resistance' is the right word, the thing that has crossed my mind, at least, is that the report raises a range of areas that need attention and there seems to be a recurrence of some of those issues. Speaking broadly, when that happens you expect the governance arrangements, the leadership group, the managers, to pick up on that and say, 'Okay, we have an issue here: what strategies are required, how do we reinforce it.' Because culture, at the end of the day, is about leadership, tone at the top, leaders showing the way and supporting staff through training, good processes and good practices. We are not in a position to comment about how the AEC is placed today. All I am saying to you is that there are signs here that suggest those are the areas I would look at if I were addressing this issue directly.

Mr HAWKE: Most certainly. Let me ask you a different question. You audit a lot of bodies, a lot of organisations and agencies. How does the AEC compare, in terms of its implementation of recommendations you make, with other agencies—in general? Do you think it is an organisation that is receptive to the regular recommendations you have made? Is it more or less agile than other agencies of government?

Mr McPhee : At one level, in agreeing with our recommendations, they are common with many organisations. We touched earlier on the experience of where, even though agencies do agree with us, sometimes the implementation is not as strong as we would like to see—in fact, sometimes it is non-existent. We have produced reports in that area in the last year or two that shows that. But it is really hard to compare the AEC with other agencies. Because we are not in there enough, looking at that, it would be unfair of me to make a comparison and say they are the same or worse than other organisations. I think we are all saying there are signs here that, on the face of it, do not seem to have been addressed—and that does not reflect well on the governance and management within the AEC.

Mr Boyd : I guess we are also informed by the fact that, as the Auditor-General mentioned in his opening remarks, we have done two earlier audits on the maintenance of the electoral roll. The second of those was a follow-up of the first audit. In that second one we said that the AEC was slow to implement the earlier recommendations—most had not progressed very much at all. I guess that is not a good sign for us. In terms of this particular audit report, one of the recollections I have of the audit process is that the AEC never had much in the way of disagreement with us at any stage of the audit process. We work through a number of stages where we say, 'Here are some potential recommendations we are thinking about'—to get their input and their comments back if we have missed something. Most of the recommendations as tabled are very similar, if not identical, to the very early draft recommendations. So, at no point through the process, did the AEC indicate to us it had difficulty with the recommendations or that it was accepting them reluctantly. If anything, it was the opposite. The discussions around the report were more about the analysis we had done and the way we crafted our words and so forth—which is a good sign, I guess.

One of the lessons we have learned as an organisation, which we keep referring to and which we are acting on now, from recent years is: just because an agency has agreed with us throughout the audit process and then agrees with the recommendations, we can't necessarily trust that they will have implemented them or implemented them effectively. Rather than addressing the intent of what we are driving at, sometimes they will just address at a very superficial level the point being made without addressing the heart of the matter.

Mr HAWKE: You are saying that culturally the AEC needed to change its practices? You are saying that very clearly to us to avoid these situations.

Mr Boyd : One of the strengths I certainly noted when we were doing the audit of the AEC is that they have a lot of corporate memory and corporate history. You see some organisations with a high degree of turnover—external people coming in, people leaving and so on—whereas the AEC, at the time we did this audit, was much more an organisation where people worked their way up through the organisation. That gives you some real strengths as an organisation, but one of the things it does not give you is different ideas and different perspectives or people looking for new ways of doing the same sort of thing over time. I guess that is behind some of the recommendations we made. We said: 'Okay you have been doing things a certain way for a long time and, yes, they worked well initially but they are working less well now. As we look to the future, we think they will work even less well and so it is time to look at fresh approaches and new ideas.' In some recommendations we were not necessarily saying, 'This is what you should do, but it is that your old ways are not really working and we don't think they'll work into the future. You need to rethink things.'

Mr HAWKE: Sure. More modern leadership practices and cultural practices. Do you think that is a fair characterisation of cultural change—that there needs to be some leadership of cultural change within the organisation?

Mr McPhee : It is absolutely essential.

Senator RHIANNON: Mr McPhee, I want to continue exploring this issue of the culture of the AEC. You spoke about the tone at the top and I would like you to expand on that, because I wonder what that means. Are you suggesting that the AEC leadership has a poor culture or that the leadership team is failing to inculcate an approach of integrity and adherence to policies and procedures among staff at all levels? Or is it that they intend to do that and they have a good culture, but they do not have the resources to do it? I thought there could be three ways of interpreting your original comment.

Mr McPhee : It is a good question, Senator. If you read the literature today about governance practices, it talks about the hard and soft dimensions of governance. We auditors tend to focus, by and large, on the hard—that is, the structural issues. What is the board structure? What is the committee structure? What are the processes, the procedures, the policies? All of that stuff. We look at the arrangements; we do the testing; we look at the what happens in practice. The literature says that the people or soft side of governance is as important as, or arguably more important than, the procedural issues. What we want is for organisations to try to have the right culture. So, we need fewer rules and procedures in practice so that people understand what is required, the disciplined approach to address a matter and produce good results. The question always is: where is the balance between the policies and the practices and the rules versus how much do you rely on individuals understanding the risks and managing themselves and the organisation to the best effect?

Our comments about the AEC are really just drawing off our audit report. They are saying that a range of events are occurring here. There is some recurrence of issues. It is a sign of an organisation that needs to give greater attention to that. Under normal circumstances, you would expect the senior managers, the government's board, to recognise that and say: 'We need to do better here. We can't afford to continue to have these recurrences because they could become more serious'—the point that is being made by other members of the committee. Then you say, 'What's required?' It is training, it is making staff understand the importance of these matters to the outcomes—the outcomes are absolutely critical to this country, so you do not need a more compelling reason—and so on. But that takes leadership.

That is from the very top. It is for the senior managers to say, 'Actually, this is important. It goes to the heart of democracy in this country.' Then you say, 'As a result, we're going to put more emphasis on our practices; we're going to put more emphasis on our training'—whatever is required. That sets the tone. The senior managers have to carry that message forward and the area managers et cetera need to pick up on the message. If they do not get on board they should think of something else to do. It is the job that we expect of public sector agencies.

I am not in a position to know exactly what has occurred within the AEC, so I am giving you a fairly theoretical response to your answer, Senator, but the signs are there. The question obviously of the AEC is: in the light of this, what has been done? How did you react?'

Senator RHIANNON: Can you bring in the issue of resources as well? Sometimes you can have all the good will in the world and you actually do have what you have identified as being needed, but, if you do not have the resources in something as enormous as running an election, I imagine that that would be a challenge to improving the culture and to giving the leadership. Could you bring that into the equation?

Mr McPhee : Absolutely. Those of us in senior positions, with important roles, do have issues around resources. I can relate to that because I have taken it up with government, I have taken it up with committees and worked it through. So there is that; but, equally, there is an expectation that everyone will do the very best they can within the existing envelope of resources as well. A compelling case can be made when you have done all you can, you can demonstrate that and you are still short. Then you can explain you have got a gap and you need more resources. I would say that, if you believed resources were the problem, the question I would ask is: 'What have you done about it? Who have you told? Have you said it to the minister, have you said it to your committee when you were discussing these matters?' I think it depends a little bit on what action has been taken by the AEC.

Senator RHIANNON: We do know that there is not much money being given out to public departments. That is widely known. That is why I was asking the question specifically on that issue of resources. I am saying it is an a excuse but it is clearly very relevant. You have made this really important point, but there is this big factor such as, with all the good will in the world, with all the right culture et cetera, there are some things that cannot be achieved. That is the bit that I am still not sure about.

Mr Boyd : If we look at it this way, Senator, the way the AEC's resourcing works is that they are funded on the cycle, such as it were. As they work up to an election their resourcing increases. We did not see anything in the 2007 election, and I am not aware of anything for the 2010 or the 2013 elections which said that the effect of resourcing constraints over recent years has meant the AEC did not have the dollars to be able to employ the polling booth people, the proper DROs and so forth, that they needed. That may be the case but I am not aware of it. The key thing that we looked at in terms of resourcing was more that around 10 per cent of polling place people had not been appointed within one week of the 2007 polling da With that sort of time frame, there is very little time to train people and make sure they understand your procedures and apply them. This includes people such as officers in charge of polling booths. They are very important people. Our audit report said the more significant resourcing issue was having the right people on board sufficiently early so that they would have an understanding of policies and procedures and could apply them, having them properly trained so that things would go off to the best extent possible, without a hitch, on the day that it really mattered.

Senator RHIANNON: You gave that worrying information that the employment of some staff only starts on polling day. How do you train such people? Is this something you have looked at? I felt that that could illustrate the point. Was it the sloppiness of management that they just did not get around to employing people in time, or was it because of budget constraints and the best they could do was start people's employment on election day?

Mr Boyd : It was not budget constraints—there were a range of factors. Some of them were circumstantial. Seventy thousand people is a lot of people to find in the community who are prepared to do what is quite onerous work. It is a long day, and it is not easy work, as you would all know. Not everyone who turns up to a polling place is going to be polite and pleasant to deal with. Invariably the same people election after election come back, and after a while we all get a little bit older and you may no longer wish to do it but equally you may have such a bad experience last time that you do not return. There are challenges for the AEC getting new people wanting to contribute. Some of their research shows that younger people are less community minded to do that sort of work, so that is a challenge. There are a range of factors at play, so the result for us was to say that all this means that you need to sit back and re-look at how you go about this recruitment exercise.

Senator KROGER: Shortly after the election I was asked to proxy for the federal electoral commissioner in Nepal, where Australia had directed just under $1 million to help set up election practices and processes, including training, and in fact we had two AEC officials over there essentially helping to train. I am concerned about our spending $1 million in another country, helping them set up practices for a democratic election which required the same number of volunteers that we are talking about here, when we do not seem to have got our own house in order. At any stage has there been consideration about doing the whole thing differently. If we cannot get it right, being able to put out on the ground 70,000 full or part-time officials, have you considered doing it in a different way?

Mr Boyd : The AEC is very conscious of how it sees the act requiring them to do certain things. They are in some ways legally driven by that, and you can certainly understand that. But they also see that the act means they cannot do things in different ways and so forth. Certainly sometimes you can see that that is the case. The point we made is that there is an obligation on them at an administrative level, where they see the act is impeding them doing things in a different way and perhaps a better and more efficient and effective way, to come to the Joint Standing Committee on Electoral Matters and draw this to their attention. I am not talking about the broad policy parts of the act but about things which relate to the basic nuts and bolts of how you run an election on the ground. By that I mean instances where this or that was not done all that well and perhaps could be looked at another way. The response was, 'The act only lets us do it a certain way,' and our response was, 'If that's your view, you need to draw that to the attention of the committee and see if you can gain the committee's support to perhaps change that part of the act. The comment we made was that, when we look at the review that is done after each election, we see that the AEC submission is very much focused on the policy matters of the legislation and so forth rather than the more administrative matters.

Senator KROGER: You are suggesting things about the so-called 'culture'. It would be great to hear from you what your definition of 'culture' is. My antenna goes up when I hear about an agency with a culture, because I think: 'Crumbs! An agency should not have a culture. It should be rigorous. It should be transparent.' It does my head in when I hear that an agency or an organisation has a culture. What you are suggesting, then, is that we are dealing with an organisation that is not innovative or reflective in the way in which it undertakes its obligations to fulfil its charter and that in actual fact it is ticking boxes? Am I being a bit harsh?

Mr Boyd : They are probably not the words we would use, but—

Senator KROGER: I am happy to stand by the way I have put it, though.

Mr Boyd : As I was saying before, there are a couple of things about the AEC. One them is that, at the time we were there, the strength was that people were working their way up. But, of course, it means that you are used to the way things have always been done and you are comfortable with it and you keep progressing. That does not always mean it is wrong, but getting some new ideas in is not wrong either. Some of the other matters are very well versed in the legislation and what it restricts us from doing.

Some of our recommendations said: 'You need to sit back and start looking at new ways—different ways; innovative ways—where you see the legislation stops you doing that and has an impact, and, where you see the legislation stops you doing that and has an impact, you need to come to your committee of the parliament and draw all this to their attention. If you get their support, you might get those parts of the legislation changed.' That was our explicit comment in the report.

Senator KROGER: Just on a couple of technical things: did your three audits go to the conduct and professionalism and capacity of the AEC presiding officers on the day of the various elections?

Mr Boyd : Two early ones did not, because they were solely focused on the maintenance of the roll. But, with this one, because our audit work was after the election—audits usually are—what we did was go and see by-elections that were underway on the ground. I understood that you yourselves went out this morning to Queanbeyan, and we did similar things so that we could see, through a by-election process, what was happening on the ground as the by-election was being conducted. By doing that we could understand what the records told us when we talked to the AEC people and listened to how they said things worked. We did not just talk to the people in Canberra; we went out to a number of the divisions to see people on the ground. But we also wanted to see it in action on the day of an election. In our case we had to rely on a by-election to do so. We thought it would give us an extra insight.

The other comment on some of the questions coming to us is that the AEC as an organisation is strange: it is probably a number of organisations, because when you get to election day the divisional returning officers and their division in some ways are almost an organisation in themselves. You have the AEC central in Canberra and the state electoral officers, but then you have the divisions, and, when it gets to polling day, it gets down to that level—the officers are in charge of each booth. So it is quite an unusual organisation in that way, which gives them a whole range of challenges but also—we try to approach it positively—some opportunities. These people can give you a wealth of feedback coming back up so that Canberra centrally can know what is going on out on the ground. Some of the work we looked at in our audit report was how the AEC learned through that process.

Senator KROGER: If we went around the table we all individually could provide copious amounts of anecdotal evidence of concerns about rulings or inaction on the day of the election, and it has always been a bugbear of many where that information—although it is reported in the AEC—ends up, if it actually goes anywhere. So it would be interesting to know whether there is any proper process in which those concerns, complaints or whatever are actually dealt with.

I have one final question, which goes to my first question. Notwithstanding that elections are a legislative process, run according to an act, what is holding us back as a committee from considering other processes which might make this a more modern and rigorous process, such as mandating the presentation of ID to register to vote, such as electronic voting? There are innumerable considerations that could be put before us. Is there anything preventing this committee from exploring or seeking input from witnesses as to alternative processes that we could consider?

Mr Boyd : Certainly not to my understanding, no.

Senator KROGER: Mr McPhee?

Mr McPhee : No. I have known committees to be quite broad in these areas. Clearly, that is down to your terms of reference and the scope of your particular inquiry.

CHAIR: The scope certainly provides for that, Senator Kroger. We have already indicated that we are looking at a whole range of matters. Each election throws up important matters, and we are dealing, I suppose, with the two most significant matters that blew up out of the 2013 election, today and tomorrow. But we will look broadly at all those sorts of issues, as we have done in the past.

Senator KROGER: Thank you.

CHAIR: We will now move to questions from Mr Goodenough and then Senator Ruston.

Mr GOODENOUGH: My question relates to the adequacy of the response by the AEC to the audit findings. Is it customary practice, as part of good governance and accountability, for an audit register to be maintained, addressing the audit findings and formally reporting on the status of the implementation of suggested remedial actions found in the audit?

Mr Boyd : In respect of the recommendations, yes, it is. That is a process which generally works through the agency's audit committee, and invariably ANAO officers, usually our financial statement colleagues, participate in all audit committees, with performance audit people on the more significant entities, as the agencies themselves are responsible for monitoring their implementation of audit recommendations. So there is that process there, yes. But, as we were saying earlier, one of the issues which has become live for us in recent times and which we are trying to do something about is not necessarily trusting that, when an agency says it has actioned and implemented an agreed recommendation, it has actually done so.

Mr GOODENOUGH: And there are achievable time lines, deadlines set?

Mr Boyd : They usually set themselves time frames. With the two audit reports we tabled recently, both cases showed that the tendency was to not meet the time frames but to continually extend them. You might eventually implement the recommendation but, in the AEC's case, if it takes you six general elections to get there, it is probably not of as much value as it would have been if you had done it in a more timely manner.

Mr GOODENOUGH: My second question relates to the treatment of the ballot papers in urban versus non-urban areas. Coming from Western Australia, I know that the missing ballots came from polling booths that were outside the metropolitan area. Did the audit have any findings that resourcing might have been an issue in that circumstance?

Mr Boyd : Not so much resourcing—but we did comment on the transport arrangements. Senator Rhiannon asked questions in terms of resourcing. One of the things AEC has looked to do to get more efficiency in its resourcing is to, in some cases, combine functions. Mr Keelty's report noted that, in certain cases, vote counting was centralised across a number of divisions to thereby get some efficiencies in the process. But when you have remote locales—and let's face it, this is Australia; it is a very large nation and there is a lot of remote voting—the challenge for the AEC is to maintain appropriate controls over those ballot papers throughout the entire process, including, basically, when they have finished their first count at the booth, getting them back to the fresh scrutiny centre in a reasonable process. Then they are usually warehoused. As in this case, the issue became apparent once they were brought back, in a close vote, from the warehouse for a recount.

There can be a lot of movements of ballot papers. You would be familiar with the fact that once you start counting them and the papers get put in the different piles there are many steps at which something can go amiss. That is what Mr Keelty points to, in more detail than we did, in terms of the need for control at each step of that process. That is not something that will be news to the AEC.

One of the things that we observed in our report was about the staffing issue—I am not talking about resourcing—of having enough people with the right skills, experience and training on the day. When we looked at this we found instances on the day at polling places where it was not apparent that the ballot papers had been properly handled so that you could clearly track them on their way through, with the seals being opened and witnessed in that the right way—X went out and Y came back, reconciling the difference and knowing what has happened. There were those little gremlins at the time we did this audit report.

Senator RUSTON: Recommendation 8 of your report goes to the matter of credibility of election results. Issues have been identified in your report for 2007 and the consequential information is now available about the 2013 election. Do you think those issues are capable of substantially reducing the integrity of the outcome of the election results—both real and perceived?

Mr Boyd : We would say, yes. In some ways public confidence in important institutions is such an important matter. As we noted in the audit report, for the 2007 election the outcome in terms of the ministry being sworn in actually happened before the AEC had finished its work because there was such public confidence in the way the AEC goes about its work. The challenge here is in going forward. If that confidence reduces then there could be delays in the swearing-in of a new ministry—be there a change of government or not. All that would change the way government in this country would work, I would suggest. That would be the case, even if it is only the perception that changed.

Certainly from what we could see when we did this audit there was a high degree of public confidence in the work of the AEC. Senator Kroger noted that the AEC has, for many years, been going overseas—not just to Nepal but to other countries—to help nations, particularly newly emerging democracies, to implement elections. That is something where Australia has had a very fine reputation—therefore it has gone internationally. The current commissioner made comments after this came to light that this did not reflect well on the AEC. That would be my answer.

Senator RUSTON: That is in terms of what is perceived. In terms of what is real, do you think there is any potential for an election result—whether it involves a seat in the Senate, or overall—to be affected? Are these issues that we are talking about severe enough to do that? I suppose the case in Western Australia has proved that it is that severe. Overall, are you concerned that the severity of the potential downfalls that have been highlighted in all this can actually impact on the outcome of an election?

Mr Boyd : I think that we would think: yes. For various reasons across our audit work we have spent a bit of time working through electoral results—particularly in House of Representatives seats when we looked at grants programs and so forth. That is the context. If I look at the number of seats which are considered safe or fairly safe versus those which are marginal, I think there are many seats which would be considered to be at play across elections, particularly in elections which are expected to be quite closely fought. The margins in some seats have now become so fine that, yes, you can see a risk. As we saw in the last parliament, the question of which of the major parties is in power can be a matter of one or two seats. A changed result in a close seat could change the government of the nation, so, most certainly, I would suggest it is more finely balanced and more important now than ever.

Senator RUSTON: You indicated before some of the implications of the act, and you said that procedures that are possibly less efficient are being caused by the very nature of the act. Did I read that right?

Mr Boyd : That is where we have looked at how the AEC has done certain things, we have asked them whether they have looked at alternative ways of doing things, and they have discussed with us the fact that, from their perspective, the legislation prevents them doing these things in any other way or time frame.

Senator RUSTON: Can you give an example of a situation where a change that you have recommended or the AEC has brought to your attention that they would like to see happen has been prevented from happening because of the act?

Mr Boyd : Probably not. The issue for us is not about the AEC bringing those changes forward and the act preventing them; it is more about us asking questions about whether we can do something differently, whether they have looked at alternative ways, and them saying, 'We don't think the act would allow us to; therefore, we haven't progressed that matter.' Certainly, looking at some of the changes they were looking at in terms of online recruitment and those sorts of things, there are certain procedural requirements in how they go employing people and so forth. As you get through the legislation, you see that, in terms of the DRO and the state electoral offices, some of these positions are recognised in the legislation, so there are explicit requirements.

Senator RUSTON: I see. It probably goes to Senator Macdonald's issue about the statutory appointment of the state managers. Thank you.

Senator IAN MACDONALD: My first question follows on from the matter Senator Ruston just mentioned. Do you have a view, have you looked at the recommendation of this committee previously about the statutory appointments of AEC managers that impacts upon the ability of the commissioner to achieve national uniformity? Is that something you have looked at?

Mr Boyd : We have not looked at the committee's recommendation in the sense that we have not done any further audit work since then, but certainly it is something we looked at in the course of our audit work more broadly. As I was saying earlier, it is an interesting organisation. You have a national office and a commissioner but you also effectively have fairly independent state officers who are recognised under the legislation, and the DROs before them. So it is a different organisation in that sense.

Senator IAN MACDONALD: Have you commented on that?

Mr Boyd : No.

Mr McPhee : Just for clarity, Senator Macdonald, we would see that as a policy matter, and our role does not extend to commenting on—

Senator IAN MACDONALD: But wouldn’t it relate to whether the organisation is operating efficiently and effectively—might you comment in that context?

Mr McPhee : Potentially, if we saw that as a significant factor in the efficiency of the organisation we might raise it in a very respectful, roundabout manner.

Senator IAN MACDONALD: Of course.

Mr McPhee : Every public sector organisation has the responsibility to, if they believe legislation is constraining outcomes or efficient operation, at least raise that with ministers and/or committees and seek to have the matter addressed. It applies whether you are dealing with the financial framework, my own legislation or any legislation. We all have a responsibility to raise it if we see significant impediments.

Senator IAN MACDONALD: I understand the point. My issue is where others besides the organisation themselves see it as a bar to proper operations of the electoral system. Excuse my ignorance on this—I should know better—but can you initiate audits of your own volition or do you have to be asked by a minister or a committee?

Mr McPhee : I have very broad scope to initiate any audits. There are some legislative constraints in relation to GBEs but otherwise I have very broad scope to institute audits within the Australian government public sector. The point I was making a little earlier was that, if I get requested by a committee or a minister, I obviously give that priority. But in the main our program is self-initiated.

Senator IAN MACDONALD: Are you considering making steps towards an inquiry into the last election, particularly from the Western Australian point of view but also more widely, or are you waiting for a request? I am pretty certain one will come from someone.

Mr McPhee : Given the current committee process, we thought we would see where you came out and what your views might be and obviously have regard to that.

Senator IAN MACDONALD: Finally, I have just had a look through the 2013 annual report of the AEC; I looked in the index for ANAO and you are mentioned four times, though not very significantly. One mention says you provide quarterly audit activity reports to the BAC, and in the last year there were no specific performance audits in relation to the AEC. What does that mean? What quarterly reports do you provide?

Mr Boyd : Quarterly reports are where we inform audit committees of what activity we are undertaking, both particular to their organisation and cross-portfolio. That is in both performance audit and financial statement audit contexts because we audit them—that is where it more often relates to the AEC, with telling them where our audit of their financial statements is up to.

Senator IAN MACDONALD: So it is purely financial—it is not on performance?

Mr Boyd : Particularly in relation to the AEC, although they get told about our cross-portfolio work, because we might not be auditing them directly, but if we are doing an audit of procurement activities they might need to know and address the recommendations as well.

Mr GRIFFIN: Your point is: it is not particular to them.

Mr Boyd : No.

Senator IAN MACDONALD: But I thought it was instructive that in their annual report there is no comment made about them following up on recommendations you have made before. Perhaps they have done that in previous reports, but that is sort of instructive. Just following on from that—and I think Mr Goodenough asked a similar question—has it never been the ANAO's practice to actually go back and review the agreement of agencies you have audited? In this instance, the AEC say, 'Yes, we agree with you'—

Mr McPhee : Within our program of audits we schedule what we call follow-on or follow-up audits in certain cases. So we do have a program of those. The message is, though, that we need to put more emphasis there because the performance of agencies has not been as strong as we anticipated it would be.

Senator IAN MACDONALD: Here is a Dorothy Dixer for you: are you able to do that with the new current resources or do you need more?

Mr McPhee : It is an issue. Clearly that has been an issue. The answer is: we have current capacity to do more follow-up audits, and that is what we are doing because we have learnt from experience that performance has not been as good as we might have thought.

Senator SMITH: Mr McPhee, audit report No. 28 talks about the audit sample or the field work that you undertook, and I am just wondering what process you went through to identify those 24 sites that you went to; they are identified at table 1.1 in the report. How did you come to that—

Mr McPhee : I will ask my colleagues to respond.

Mr Boyd : It is not random in the sense that our focus was actually on trying to get a representative sample. We were trying to take into account a range of considerations. For example, we did not want to have solely metropolitan areas; we felt we needed to have a cross-section, not just one state and territory. There were various judgement factors brought into play to try to give us some confidence that that sample would give us something which was sufficiently representative across the AEC. You would never resource an audit to go everywhere, and that is something we also discussed for the AEC—not for them to vet what we were saying, but to say if they could see anything which would suggest to them that it was not representative. One of the reasons for that is: if the agency thinks that we have not done sufficient work or sufficiently representative work, they are less likely to accept our findings and recommendations. So the focus for us is to make sure that they know that we will do a rigorous, robust job, because then if we have something to say it is more likely they might listen to us.

Senator SMITH: So you went to three states and one territory and, in the case of New South Wales, you went to nine sites. I am just wondering why you would not have gone to every state and territory and perhaps gone to a lesser number of sites in those states and territories.

Mr Boyd : It was one of our considerations—those sorts of options. But our thinking as to New South Wales was that we felt we could get a range of metro, rural and more remote within one state. It probably relates to Senator Macdonald's question, because one of the things there is: because the state managers are, in some ways, somewhat autonomous, if we just did, say, one in each state and territory, we thought we would not get enough coverage within a state for that particular AEO.

Senator SMITH: I see it slightly differently, Mr Boyd. I think because state offices do have greater autonomy that would be reason enough to go into each state and territory just to make sure. I will come to consistency in a moment. Then in the report it talks about having gone to four out of seven states and territories but it does not actually mention which four you went to. At page 44 it says: 'Thirteen of the AEC's 127 divisional officers—which we talked about—'as well as fieldwork at the offices of four of the seven state and territory Australian electoral offices.' Which four were they? They are the four states.

Mr Boyd : That is right. I was just thinking maybe we were not clear enough in referencing to the table.

Senator SMITH: We do not have any reference to Western Australia. By your own admission in the report and in your earlier evidence, there appears to be a systemic problem in the AEC, because in the 2007 report you used the word 'slow' about its implementation in regard to other audit work, and then we have the Western Australian debacle in the most recent election. So it does appear that there could have been some powerful alarm bells ringing as a result not just of this but of the previous audits and now what we have in Western Australia, because perhaps that sample audit was not as expansive as it could have been.

My next question goes to what observations you made about the consistency of the AEC's practices across the country. When Senator Smith goes to vote in Western Australia in downtown Albany and Senator Kroger goes to vote in downtown Melbourne, is the experience of the Australian elector the same on that day and are the processes that support the election consistent across the country? I could not see anything in the report that might have reflected on that. Have you any observations or comments on that?

Mr Boyd : The sorts of questions you are asking us and that you have obviously asked yourself, Senator, about areas for consistency go to the thinking that we go through in working out how we go about the audit. But certainly one of the reasons we went for this approach of having more than one in each state rather than doing maybe just one in each state and territory was that we could then see the consistencies within the state, within the division, and that is where we found the inconsistencies. They were more between polling places and so forth rather than just being this state did it that way and that state did it a different way. It seemed to be more specific at the division level and at the polling place level. That was where we were noticing those sorts of inconsistencies, and that often got back to the resourcing situation, including: how long has the DRO been in the position as the DRO? Is the DRO someone who has been seen as a highly performinging DRO or not? It is the same with OICs and so forth. How early were the OICs brought on board? Did that influence considerations?

Senator SMITH: I agree with Mr McPhee's opening comments. This is iterative. One set of evidence leads to improvements et cetera. This is my final question. We talked about internal audit committees in Commonwealth agencies. What does a gold standard look like? What are the features of that internal audit committee or audit process that make it suitably robust for a Commonwealth agency? I ask the question because when the AEC come before us, I would like to be able to say, 'Against these criteria, would you give yourself 10 out of 10 or one out of 10?'

Mr McPhee : The audit committees have been one of the most significant improvements in governance structures that we have seen in public sector agencies. They play an important role. I think the message is that these days they need to have independent members on them. Some would argue you are better off having an independent chair rather than an in-house chair. I am fairly neutral on that, but you can have an argument about it.

The other thing is that generally they are just not audit committees. They are often audit and risk committees, because it puts the emphasis on whether the organisation is managing the risks in achieving its objectives in a coherent and sensible manner. So their role is to look at the reports from internal audits to see that they the recommendations are being progressed; it is to look at external audits and liaise with the external auditor on the financial statements but also on the performance audit program. I think they need to assess whether the organisation is responsive to matters being raised and whether the organisation has a got a suitable strategic and risk management framework for all of their functions. The reason the independence is there is to bring external perspective but also objectivity.

One of the historic issues in audit committees with just internal people in the past has been things can get a bit cosy, people do not prod as much as they might and all those sorts of things. The most important thing is the chair has a direct line to the CEO to pass on the views of the committee and to report the views of the committee on issues of concern. The committee is intended to be a close adviser on issues of risk management and control within the organisation.

CHAIR: We conclude this part of the hearing. On behalf of the committee, I thank you for your attendance. As was foreshadowed by the deputy chair and a number of other members and senators, we will be in further contact with you. This is the first day of our hearing and if we seek additional information we may invite you back in a few weeks.

Mr McPhee : Thank you. This is a very important inquiry and we wish you all the best.

Proceedings suspended from 14:31 to 14:40