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Monday, 23 March 1987
Page: 1304

Mr MOUNTFORD —by leave-As Chairman of the Expenditure Committee of the House I would like to make a few comments on the report which has just been tabled by the honourable member for Deakin (Mr Beale), who chaired the Sub-committee which conducted the inquiry. It was a review by the Expenditure Committee of the Auditor-General's efficiency audit report on construction project management practised by the Department of Housing and Construction. The Audit report examined two major projects managed by the Department of Housing and Construction; namely, the National Acoustics Laboratory and Ultrasonics Institute at Chatswood, New South Wales, and the Australian Defence Force Academy at Campbell, Australian Capital Territory. The audit addressed DHC's approach to tendering systems and its review of project management performance. In broad terms, the audit inquiry was directed towards assessing the quality of these processes and the extent to which they contributed to the efficiency and economy of Commonwealth outlays on the two projects.

The Australian Defence Force Academy was estimated to cost $65m in July 1980, and the forecast cost as at June 1986 was $146.8m. The National Acoustics Laboratory and Ultrasonics Institute is designed for use as a combined laboratory and office complex. In April 1978 it was estimated to cost $12m and by December 1984 the funds authorised for the project stood at $25.5m The reasons for the increases are dealt with in the Auditor-General's Report and are commented on in the Committee's report. In particular, the Committee has commented on the variations to the contracts, cost overruns, tendering procedure and contract delivery method. We note in the report that the two projects undertaken had significant increases in apparent real costs which were out of kilter with the average cost performance of DHC with major construction projects.

In spite of the Audit Office's assurance that these cost escalations were not the reasons for selecting the two projects, there are references to cost escalation in the report. The two projects were not typical projects and the cost overruns so experienced are not indicative therefore of the Department's general efficiency on construction projects. In October 1985, the Minister for Finance (Senator Walsh) announced the Government's intention to introduce program budgeting. There has been acknowledgment that the presentation of information in program format accords with the major recommendations of the Committee's 1979 report. One of the features of program budgeting will be the program statement for each program including indicators of program performance.

The Department of Housing and Construction says that the performance indicators are, for each major construction project, timeliness, suitability and delivery costs. We have received hardly any evidence on how delivery costs are to be used as a measure of effective performance and have thus pursued this matter ourselves. Briefly, the Committee believes that a performance indicator that measures increases in `real' costs-total costs less inflationary increases-is required. This would be a `litmus test' indicator of DHC's cost performance. When the figures for projects completed in a particular year are aggregated, the result can be compared with the aggregations of previous years so that it would be possible to observe trends of better or worse performance. The Committee has made an appropriate recommendation. For those like the Auditors who are very interested in cost performance, this `litmus test' indicator would also help distinguish the wood from the trees.

There have been some 36 efficiency audit reports prepared by the Auditor-General-12 of these have been reported on by the Expenditure Committee and a further seven are under consideration by the Committee. The comments in these reports represent, I think, a consistent endeavour by the Committee to make a constructive contribution to the development of efficiency auditing. The practice of the Committee is that we look at not only the responses of the organisation that has been audited, but also the quality of the efficiency audit report. The first report on an efficiency audit suggested two categories of analysis: General to the efficiency audit process; and specific to the efficiency audit report.

In respect of this current report we have made particular reference to the audit report. Some of the comments will not be well received by the Auditor-General, but I hope he accepts the comments as an attempt to improve not only his operations, but the general acceptance of efficiency audit.

In respect of the audit report, we have found some of the conclusions as: `Unconvincing', para 3.12; `confusing and unconvincing', para 3.16; `unconvincing', para 4.13 and `unconvincing and superficial', para 4.17. In the report we draw attention to the differences between the Department of Housing and Construction and the Auditor-General's Office. Whilst the level of disagreement was somewhat constrained, I cannot but feel a more forthcoming approach by the Department of Housing and Construction may have been more productive. We say in the report:

DHC's evasiveness is the product of bureaucratic politics in that the Department did not want to sour too much its relations with the Australian Audit Office (AAO) and thus adopted the pretence of `accepting' recommendations.

As we note in the report, a great deal of time consuming work was undertaken by the members of the Committee to comprehend the information available or rather to put the information provided into a readily comprehensible format. The Committee has also made a number of recommendations which affect the Department of Housing and Construction. We suggest post-occupancy evaluations and the need for a cost-performance indicator of measures, increases and real costs. These have been dealt with in detail by the Chairman of the Sub-committee, the honourable member for Deakin.

In a very early report of the Committee, which dealt with the Parliament and public expenditure, presented in February 1979, the Committee noted that efficiency auditing was still in its infancy in Australia. The Committee suggested that efficiency audits be undertaken if for no other reason that they were the only reviews which would be made available to the Parliament. While efficiency auditing is no longer in its infancy, I am not sure whether it has yet reached maturity. Having read some of the comments by the Commissioner of Taxation in response to the audit report of the Australian Taxation Office on prescribed payments, I am sure that I am not the only one with such concerns.

I have recently noted a comment regarding auditors. It is in correspondence between the Commissioner of Taxation and the Auditor-General. In the letter, the Taxation Commissioner suggests that some of the comments in other audit reports `lend support to the picture of an auditor residing in an ivory tower, emerging only to shoot the wounded when the major battle is over'. As a former government accountant with audit experience, I am not sure whether I share his sentiments. However, having been involved in the review of this particular efficiency audit I have some sympathy for that view.

In the formative period of the Expenditure Committee, former Labor Treasurer and former Committee member, Frank Crean, hit the nail on the head when he was reported to have said that an efficiency audit was a curious juxtaposition of words, a combination of the subjective elements of efficiency with the precision of audit. Until standards are developed and accepted for efficiency auditing the problems that Frank Crean foresaw some 10 years ago will continue. The Expenditure Committee review indicates the need for the auditors to make explicit the criteria used to test efficiency and perhaps even to reach agreement with the auditee on the use of such criteria. We also believe that when auditors are told that their recommendations are not practical they should take this comment very seriously rather than brush aside such comments.

My overall impression is that the Australian Audit Office does not appear to have anyone to play the role of the devil's advocate. `You found a mistake-you beauty' appears to be the order of the day, rather than the adoption of a more professional accounting audit approach.

I once again pay tribute to the honourable member for Deakin for his diligence and dedication. As a shadow Minister he has many demands on his time and I, with the other members, thank him for his commitment to the Committee and the expertise he brings to it. I also thank other members of the sub-committee for their dedication and involvement during the period of the review.

I pay tribute to Mr Malcolm Aldons, who was Secretary to the Sub-Committee. Malcolm served the Committee as Secretary for some eight years from its inception in 1976 and then moved to the Procedure Office. He returned to the Committee for a short term as Acting Secretary and was very involved in this inquiry. Malcolm's commitment to the work of the Expenditure Committee and its role in the parliamentary process is unquestioned. I would like to acknowledge Malcolm's contribution and I thank him for his advice and assistance over the last four months. I also acknowledge the presence in the House of the Committee's new Secretary Mr Phil Bergin who already has shown his efficiency and expertise in the Committee's deliberations and hearings.

Earlier I referred to the comment about the auditor as someone who comes on to the battle field after the battle to shoot the wounded. I am not sure in this instance whether the Expenditure Committee was invited to take part in the battle between the auditor and the auditee. I think we have, however, resisted that temptation.

In conclusion, I note that the Committee has seven efficiency audits under consideration at present, and I understand that more are forthcoming. I hope that our comments about the work of the Auditor-General's Office will be seen as more constructive. The current debate between the Auditor-General and other officers of the Australian Public Service adds little on efficiency auditing, rather it belittles the efficiency audit process to which the Committee and many others are committed. I commend the report to the House.