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Monday, 30 August 1993
Page: 537

Senator MICHAEL BAUME (9.23 p.m.) —by leave—I move:

  That the Senate take note of the documents.

I will deal, first of all, with the report on ministerial portfolios. The Auditor-General provides this parliament with great assistance. His reports into the activities of government departments and other organisations provide us with a level of information which is vital in exercising our tasks effectively. The timing of these reports is also important in that we are, at present, undergoing the Senate estimates procedure where there are many appropriate questions to be asked of the departments and the ministers arising from the reports of the Auditor-General.

  I would like to deal not with the individual reports on each department, which, as I said, provide material for the Senate estimates procedure, because it would be duplicating in this chamber what we are doing so interestingly until the early hours of the morning in our committees—I believe one sat until 2 o'clock the other morning—but to deal with a current report in Audit Report No. 1 relating to cross-portfolio audits. The Auditor-General deals in a more general sense with some matters affecting various departments. In particular, I want to deal with two matters: firstly, financial administration and management effectiveness audits and, secondly, adherence to finance directive 2F—are in-house services fully costed?

  The first inquiry was into a series of small performance audits of financial administration and management activities in a number of departments and agencies which disclosed, according to the Auditor-General, a need for tighter controls particularly in devolved organisations. The Auditor-General said that senior management of departments and agencies needs to ensure that tests of accountability and cost effectiveness are met. He said that the management of property operations, procurements and debt needs particular attention. This is a vital element of any government's management and, fortunately, the Auditor-General has been able to establish where there is clear need for improvement.

  It was in 1992-93 that the audit office undertook a number of these small performance audits. They enabled the audit office to review some of the effects of the substantial devolution of financial management responsibilities to managers in state, regional and local offices. This is important because, as the Auditor-General points out:

Such managers are now responsible for ensuring control over a substantial element of the . . . $11b or so of annual expenditure on the administration of government programs.

The Auditor-General finds:

Whilst many audits indicated good results in local administration, the majority of audits resulted in detailed recommendations to agencies and substantial action by them, aimed at improving performance, greater control over resources, compliance with the law, or greater economy and efficiency.

In general, they do indicate areas of vulnerability.

  The reason this is so important, and why I want to draw it to the attention of the Senate, is that this is the same Auditor-General who is being squeezed for resources by this government; who had to make an announcement just before the budget that because this government was not providing him and his office with adequate resources he was putting off 100 employees. So here is the Auditor-General pointing out while there is the need for significant improvements that would save this government multimillions of dollars of taxpayers' money, he is being squeezed for resources and will not have the capacity to make these sorts of inquiries. It seems just crazy, unless one looks for other motives.

  Is it in this government's best interests for it not to be embarrassed by Auditor-General's reports pointing out that things could have been done better, that some managements are slack and that they should smarten up? In one of the small performance audits the Auditor-General's report states:

The scope for savings of at least $3 million in administrative expenses was identified.

The Auditor-General also looked at accommodation and property management. He notes that there has been some disagreement about what should happen to incentives for new tenants, such as rent free periods and cash incentives, which are now commonplace in property market operations, and whether the department should get the benefit of the cash free period or incentive payments or whether the money should be paid into consolidated revenue.

  This does raise the question that if there are all these incentives, such as rent free periods for new tenants, how come the Auditor-General's office is being forced by this government to pay a massively excessive rent to occupy the Australian Labor Party's head office building in Canberra? This matter has never be satisfactorily resolved. I would have thought, in view of the present situation, that the Labor Party would have been offering the Auditor-General a discount and perhaps a cash rebate in order to get its space occupied rather than have this incredible ratchetting up system whereby, as time goes by, it has to keep paying an even higher rent than the excessive rent it is already paying. The Auditor-General does make some comment about ratchetting up rents, and I will come to that in a minute.

  The audit office, as it says in this report:

. . . has commented in the past on the need for agencies with housing stock for purposes of staff rental to consider carefully the appropriateness of their housing stock levels. The ANAO identified one agency which had over 200 residential properties, valued in excess of $20m. The ANAO found that there was a need for the agency to rationalise and divest itself of residences in a number of locations where an adequate private rental market existed. In addition, rental contributions from employees were low, resulting in a negative return on investments. The agency has accepted the ANAO recommendations concerning the need for review and rationalisation.

That is why it is so vital that the audit office has adequate resources so it can save taxpayers' money in this way.

The report continued:

The ANAO noted cases where organisations did not have sufficiently clear national policy and planning arrangements for their accommodation needs. The need for effective review mechanisms was identified in one instance where `dead rent' of some $1.3m may have been incurred for leases which were no longer required because of a move to new premises.

Is it not incredible? Dead rent of $1.3 million was unnecessarily paid. The audit office notes that:

Negotiation entered into following ANAO recommendations led to the agency saving $0.5m of this exposure.

So there is another half a million dollars saved by proper inquiries by the Auditor-General, these sorts of inquiries being obviously put to some sort of risk by this government squeezing the resources of this money saving organisation—the audit office. The report states:

  The ANAO identified the case of an agency leasing a number of large offices in CBD or high rent areas at above current market rents.

This seems to relate to the Auditor-General's office itself which was, as I understand it, forced into the situation where it had to become the tenant of the Australian Labor Party at a rent in excess of the current market rate. The report further states:

The ANAO estimates that the excess of annual rent above market rent for 1992-93 was some $3 million. This included $1 million due to the effect of `ratchet' clauses, which prevent any downward adjustment of rents in declining markets.

It seems to be pointing the finger at one particular deal—the one that the government imposed on the Auditor-General himself to occupy a ratchetted up rental situation. The Auditor-General also observed instances of inadequate documentation of procurement decisions. He says that this meant that it was not clear to the audit office that value for money had been sought or obtained. There were instances of:

.no limit indicated on the amount of a purchase order

.no formal contracts between the Government agency and suppliers of services

.tender documents of unsuccessful tenderers destroyed—

I wonder what is happening to the failed tender documents of those people in the broadcasting area who are involved in the farce of tendering for the satellite and the other curious broadcasting contracts that the government has made such a mess of. It continues:

.purchase order requests which did not sufficiently justify the purchase of goods and services (including consultancies)—

it is amazing where some of these consultancies seem to go—and:

.insufficient documentation of how quotes were evaluated and why successful tenderers were selected.

In many instances we are often inclined to wonder why various successful tenderers were successful in the circumstances. There is one fascinating situation which the Minister for the Arts and Administrative Services (Senator McMullan) who is at the table, knows of only too well. That is the matter of a $4.9 million contract which was investigated at some length the other night in Senate estimates committee hearings, a contract which has gone to an organisation the principals of which appear to be very friendly to various members of the Labor Party. The tender was a farce, naturally, and the people who actually provided the work—many of them disabled people—have in fact not been paid for the work they did for this agency, this organisation, which claimed to be acting on behalf of the government because it had this contract. It looked like a mates contract. One of the principals had sought some time ago, unsuccessfully, to be a Senate candidate for a political party. There is no need to guess which political party. Other examples of deficient procurement practices include:

.a duplicate payment to a supplier of $380 000 as a result of a breakdown of controls within an organisation's accounting area.

.goods and services received or cheques raised prior to the raising of purchase orders. This practice could lead to unnecessary purchases being made or funds not being available to pay for the goods and services

.payments made in advance of need (which the ANAO estimated in one instance provided a benefit to the suppliers concerned of $40 000 in interest)—

surely the government should have got the benefit of that, not the supplier—

and inadequate acquittal processes for payments made in advance, and

.incomplete specifications leading to incorrect goods and services being provided to Government bodies.

I will briefly deal with the question of adherence to finance direction 25F which relates to in-house services and whether they are being fully costed. Finance direction 25F requires that:

Where a Commonwealth department or agency that operates on the public account produces or plans to produce goods or services that would otherwise be purchased on a commercial basis from the private sector or another Commonwealth body (e.g. the Department of Administrative Services) such in-house production must be justified having regard to its full cost to the Commonwealth.

The report states:

. . . the audit found that, while departments affirmed their intention to obtain value for money, the in-house production of services was usually not justified in accordance with Finance Direction 25F. For example, in relation to printing facilities costings undertaken were not complete and values were not attributed to such features as security, confidentiality and convenience.

They are obviously important matters but the departments have to establish that there is a reasonable value applied to those which overwhelms the need to get it done at the cheapest possible price, which may often be from an organisation outside the department. It continues:

However, the majority of property functions such as leasing, construction and fit-out did not require such justification as they were supplied under contract by the agencies of the Department of Arts and Administrative Services . . . On the other hand, property-related functions such as the co-ordination of repairs and maintenance and other facilities management requirements were provided in-house without the cost justification required by the Finance Direction.

What concerns me is that there is a need to ensure that Commonwealth agencies thoroughly and regularly review their operation and regularly assess the potential for gains in efficiency and effectiveness from competitive tendering leading to contracting out. Another problem is not simply the question of saving money; it is whether or not some departments are empire builders and seek to increase the scope of their activities. One area in particular that concerns me is the making of film or television video material. Film Australia used to have a monopoly over this. I must say I am not in favour of such monopolies and I think the removal of that monopoly was a sound idea so that departments could seek to get the best possible deal from wherever they could. The problem now is that there seems to be some evidence that some departments are in fact building up in-house empires that have the capacity to provide facilities that would be much better supplied by Film Australia, for which I have a very high regard.

  One final comment relates to print reproduction services. The report states that in response to an estimates question from Senator Parer, the Department of the Prime Minister and Cabinet `sought to briefly justify its printing facilities'. Senator Parer asked whether they could be justified and whether the printing could not be done cheaper outside. An extensive evaluation was not considered warranted by the department because it considered that an in-house facility was obviously cheaper than external suppliers. However, the report further states:

Since then, the Department has completed a review of departmental corporate services where outsourcing options for a number of services including photocopying, stores and consumables and library services, were being considered.

At last it is now recognising that the Auditor-General's view that the department had not sought to justify the existence of the facility in accordance with the direction, but rather relied on a short analysis in response to Senator Parer's question, was not enough. The audit office `considered that this exercise could not be viewed as a quantification of the full costs of the Department's printing facilities'. This goes on through quite a lot of departments which simply have ignored the requirement to ensure that they got the best deal done to save taxpayers' money.

  I note that the failure to follow this procedure is also evident in the Department of Primary Industry and Energy, particularly in the management of properties in the states, which is carried out in the regional offices of the Australian Quarantine Inspection Service. The Auditor-General found:

The justification and supporting cost analysis for the establishment of the property management function did not meet the requirements of Finance Direction 25F. The on-going allocation of resources to facilities management was also not evaluated in accordance with the Direction.

Is it not fortunate that the Auditor-General is prepared to show the government and departments where the government's own requirements are not being met? I think the Auditor-General is playing a vital role, a role that this Senate should support with great enthusiasm.

  I also note in passing that many other audits are in progress, as noted in the back of this report. One of them is an audit into Australia's preparedness for marine oil spills, which may interest the Australian Democrats, who so often seem to express great concern about these matters. I hope they will be supporting the Auditor-General in his endeavours to examine this thoroughly. The report states:

An audit of Australia's preparedness to deal with a major marine oil spill is in progress. The primary focus of the audit is on the adequacy of contingency planning arrangements, with particular emphasis on the integration of the various levels of Federal, State and Industry response, completeness of the plans and the regularity of update.

It is expected that the report of the audit will be tabled in the 1994 Autumn Sittings.

I look forward to looking at that report.

  The reason I mention it is to demonstrate that the Auditor-General is not simply looking at simple annual returns, annual reports and figures. He has a significant social role in this parliamentary process of reporting to this parliament. That is why I am so angered by the attempts of this government to cut back on the resources of such a vital organisation.

  The second report by the Auditor-General—Audit Report No. 2: Project Audit: Australian Bureau of Statistics—contains some matters that should be brought to the attention of the Senate, particularly matters relating to the confidentiality of important computer material. There has been a lot of discussion in the past about the census and how many people are uneasy about the volume of information that the census collects, particularly as it is personal information. The Auditor-General states:

Much of the information collected in the Census is of a private or confidential nature. As a result, the ABS has an obligation to protect the confidentiality of the information collected in the Census.

It also says that the same situation applies to many other similar surveys.

  I want to assure the Australian people—I am glad the Auditor-General has done this—that the report has concluded that the Australian Bureau of Statistics computer system could not be used to facilitate the release of personal information in contravention to the law. In other words, the computer information that emerges from the census is simply not available to anyone who could identify that personal information through the computer system. There is information in printed form which is destroyed by the Bureau of Statistics. I stress that there is no capacity for the computer to provide personal information relating to individual respondents. I think that is a very important finding by the Auditor-General and should bring comfort to those people who are uneasy.

  On the other hand, the Auditor-General has pointed to some problems that I think we should recognise. While the Auditor-General says that the ABS computing environment is not able to be accessed from outside the premises of the Bureau of Statistics, the risk to the security of ABS information is confined to individuals—by the way, it does not relate to the census, because the original information is not put into the computer—from within the ABS to whom the statutes apply. The problem is that the ABS multi-user computer platforms hold aggregated information of significant commercial value—for example, what the balance of payments and the unemployment figures will be, as well as a whole range of very significant matters which affect markets. In the opinion of the audit office, security of these computer platforms is inadequate. That is a very serious problem. The audit office therefore considers that sensitive aggregate information is unnecessarily vulnerable to unauthorised access.

  I must admit that I have often been concerned about the fact that just before some official statistics come out about various matters of substance, senior governmental people suggest that the figure will be very bad or at the top end of the range. It seems a consistent pattern. Then a couple of days later the figure for, say, the balance of payments comes out and it is not as bad as the government had led one to believe. Everyone says, `Isn't that marvellous? The deficit this month is only $1 billion instead of $1.2 billion'. We have to recognise it is the difference between someone being run over by a 15-tonne truck and being mown down by a 12-tonne truck: the person has still been run over.

  I am very concerned about this continual pattern of what appear to be governmental leaks—the government certainly appears to be well informed—of information that is about to come out. They are always a little worse than they eventually turn out to be. So the media response is, `They're not quite as bad, thank heavens. Isn't that wonderful?'. The proper response should be, `This is a disgraceful, disastrous figure'. It just happens too often.

  So I am very concerned when I see that in the opinion of the audit office security of these computer platforms is inadequate, and that the Auditor-General considers that `sensitive aggregate information is unnecessarily vulnerable to unauthorised access'. The major factors the Auditor-General says contribute to the inadequacy of the ABS computer system are as follows:

. . . at the time of the audit, there was no approved ABS IT security policy . . .

users are not required to be personally accountable for their use of the computer system in all situations . . .

This situation results from the use of functional computer user identification codes rather than codes which are uniquely identifiable to a given user—

. . . password usage on network and mid-range computers is not adequate . . .

. . . privileged access to the mainframe is granted too freely . . .

There are therefore too many staff members whose actions, whilst logged into the computer system, cannot be directly controlled or accounted for and the design and use of the mainframe database system does not provide for the proper identification and authentication of users.

  The Auditor-General says that the ABS accepted all 15 recommendations, three of which were accepted in principle, and is taking action to implement them. But I still say that it is a matter of major concern to me that this has taken place. This lack of personal accountability is clearly a weakness in the system.

  The Auditor-General believes that the weakness is because the ABS does not assign user IDs, which is the functional user identification, on a personal basis, in that the system promotes sharing of user IDs and passwords. Where user IDs are shared, actions performed on the computer system cannot be traced back to source. The ability to make users personally accountable for their actions while logged into the computer system is fundamental to the achievement of a satisfactory standard of computer security. I am glad that the ABS is now accepting over time the Auditor-General's recommendations. The Auditor-General does say, particularly in respect of one important point, that the response of the Bureau of Statistics will, when implemented, meet the thrust of the recommendation.

  I apologise for taking much longer than I had intended, but this is a very important matter. Many other matters should be raised, particularly the fact that the current level of security on the Unix and LAN platforms is below the standard that would be required for the protection of sensitive statistical information within ABS. I hope that these improvements do take place. I commend the Auditor-General for his very effective reporting.

  Question resolved in the affirmative.