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Tuesday, 14 December 1993
Page: 4523


Senator CAMPBELL (4.46 p.m.) —The Auditor-General's report No. 21 of 1993-94, entitled Australian government credit card—its debits and credits, which Senator Short has just referred to, is an alarming report. As he said, we were given an early taste of the report because of some leaking last week. However, our worst fears have been more than confirmed by the actual report itself. Senator Short has gone through some of the detail in it and I will seek to cover some other points.

  What we need to understand is that not only does this report follow on from the inquiries into the performance based pay scheme and the inadequate dealing with under-performing officers, where it was revealed last week that one non-performing officer had cost a department $300,000 to go through the procedures related to inefficiency, but also this report follows on from the one which was tabled a couple of weeks ago—which the people of Australia have yet to forget and I hope should never forget—on the inefficiency, maladministration and financial mismanagement of the sports rorts affair by Minister Kelly. I cannot believe that she is actually still a minister. What all of these reports show the Australian people is that no-one is responsible any more.

  This Auditor-General's report contains pages of evidence relating to what should have been an efficient scheme for government purchasing that has run amuck over six years. No-one has reviewed the scheme to see whether or not it is working properly. When I asked Senator McMullan last week what he was going to do about it, he had a very carefully prepared brief which said that if anyone was found to be misusing the system they would be fined $20,000 or put in gaol. That is all very well, but the trouble is that over the last few months we have seen evidence that no checks have been made to see whether fraud has taken place or whether anyone is misusing the scheme. As Senator Short said, the Auditor-General's report states quite clearly that we cannot assess what fraud has taken place within this system because no-one knows what is going on.

  One of the most alarming statements made by the Auditor-General early on in the report was that `There was no understanding of how the AGCC was used'. That lack of understanding was by the departments that use the card. In other words, we have 16,000 credit cards, some of which have credit limits of $2 million every month. So that is a $24 million per annum credit limit running around the country in the hands of some 16,000 Australian public servants who have very little understanding of how they are used.

  The report highlights the fact that most of the people using the credit cards have had insufficient training. In ATSIC, which was just referred to in another report, there was absolutely no training in the use of the credit cards. The better example, of course, is that of the Department of the Arts and Administrative Services, where training has been 100 per cent effective. But there are other departments that use the card quite regularly, such as Defence, where the training is less than adequate.

  To quote the Auditor-General's words, the report highlights some interesting expenditure on things like:

. . . chocolates, electricity generation and distribution—

I ask honourable senators to envisage how a credit card could be used to pay for electricity generation and distribution—

floor coverings, flowers—

that reminds us of the Tax Department revelations—

gas production and distribution, guns and ammunition, licensed clubs, lingerie—

an interesting expenditure—

. . . mens and ladies fashion clothing, musical instruments—

just to mention a few. Many Australian taxpayers' minds would boggle as to why credit cards, being paid for by the taxpayers, would be used on many of these items.

  One of the more serious concerns of the opposition, which it shares with the Auditor-General, is the cost of using the credit cards. Originally, the scheme was introduced back in 1987 as a way of reducing paperwork and transactions costs and, therefore, saving taxpayers' money.

  All honourable senators would recall what used to happen a few years ago. A box of paper clips or something like that might cost $20, but with all the red tape that is involved in purchasing something for the Commonwealth or state governments, such as filling in requisition orders, issuing the cheque and having it cross-checked by half a dozen under deputy secretaries and assistants, the cost of purchasing the box of paper clips might be $60 when it should have been only $20.

  There is no doubt in anyone's mind that if we have a credit card system that has proper accountability, proper checks and proper audit trails, purchasing a box of paper clips for $20 using that system would be much more efficient. So the opposition does not oppose the use of a credit card system; indeed, we support it. However, we must learn from the alarm bells that the Auditor-General is ringing and make sure that we put in place adequate controls, checks, scrutiny and substantiation of all these expenditures.

  As Senator Short said, the original system was designed for purchases of less than $1,000. Indeed, what we have had are examples of expenditures well in excess of that. In fact, in the period between 23 March and 27 June this year, when the trial was run, there were 3,647 transactions in excess of $5,000. I remind the Senate: for a scheme that was designed and devised to expedite and make more efficient purchases of less than $1,000, there were 3,647 individual transactions in excess of $5,000 just in three months of the last financial year. These transactions represented something like 44 per cent of all expenditure on credit cards. So nearly half of all these expenditures was way in excess, more than five times in excess, of the guidelines.

  As Senator Short said, there was one interesting purchase where a credit card was used to buy a bomb suit for $893,000. The cost of these transactions is an important point. If the credit card system is used wisely, it will save the taxpayer money. In the case of the bomb suit, the cost of the transaction, including the minimum transaction fee, which is an added expense of using a credit card, was $11,603. The government actually pays that sooner or later, even though it is a charge that the bank puts on the supplier of the goods.

  A sensible purchasing officer who wanted to buy a bomb suit would go to the suppliers of the bomb suit—which is nearly $1 million worth of expenditure, just under $900,000 dollars—and negotiate with them. I think any of us would do that if we were using our own money to buy ourselves a bomb suit. Of course, if we had the choice of paying that supplier by cheque or electronic funds transfer or credit card and the supplier knew that the credit card would cost him something like $11,000 in servicing fees, it is not silly to assume that if we were to use an alternative purchasing method we could probably negotiate the price of the bomb suit down by somewhere in the vicinity of $10,000 or $11,000. This is a fact that the Auditor-General highlights.

  We understand—and it is understandable—that public servants are probably frustrated by the process that one would need to go through to get expenditures on these sorts of items approved. If a public servant needs to buy himself a bomb suit and he has a credit card that has a $2 million a month limit on it, it is probably a lot quicker to use the credit card.

  One of the other major concerns—and I will restrict my remarks because we have a long week ahead of us, and my Whip has just given me the wind-up signal already—is the potential for fraud. Senator Short referred to the fact that only a few cases of fraud have been detected. They are very hard for the Auditor-General to pinpoint because of the incredible lack of scrutiny of expenditure; there could be fraud going on all around the place and we would not know about it.

  The report deals with the use of credit cards for personal use. On page 94 under section 30.6, it states:

Examples have come to notice where a cardholder has used the AGCC for private purposes. This has been reported by the cardholder shortly afterwards, accompanied by payment for the private expense. Alarmingly, the attitude of those cardholders and, indeed, that of the management of their agencies, sometimes appears to be that this is tolerable as the Commonwealth is not out of pocket and the cardholder has reported the matter.

This is a serious matter of concern because, in that case to which I have just referred, the cardholder was honest. He turned up on the Monday morning and said, `I spent some money on some private use over the weekend, and here is the money', so the Commonwealth is not out of pocket. For every one of those honest people, there are probably a couple of others who use the card for private use and no-one ever finds out. The trouble with this situation is that one of the other uses of the card is for cash withdrawals, which is explicitly against a number of guidelines and generally discouraged.

  We see from the Auditor-General's report that, in the last financial year, there were cash transactions and cash withdrawals in excess of $500,000. The mind boggles to think of holders of Commonwealth government credit cards going to handy tellers and withdrawing hundreds of dollars. The average transaction was actually $600 for these credit cards.

  Many of them, I am sure, were for proper purposes and would have been properly accounted for. But the Australian taxpayer needs to know that all of that expenditure is being properly acquitted and properly substantiated. I suggest that we are inviting fraud. I am sure that 99 per cent of public servants are totally honest, decent human beings who serve the Commonwealth in the best possible way they know how. But, when we give 16,000 Australian citizens a credit card on which there is a limit of up to $2 million and allow them to get cash out of the handy tellers—there is no bar on it; they have the plastic in their pockets and, if they want to go and get the cash, they can get it—we are inviting fraud; we are saying, `Here, come and get me'.

  I conclude by saying that there is international experience in this area which the Auditor-General has analysed. The federal government of the United States has a similar scheme; however, it has much stricter guidelines. The use of the card is better controlled and the average transactions are a hell of a lot lower than the average in Australia. The holders of those cards generally stick to using them for small purchases of less than $1,000. Also, there is a bar on those cards for cash withdrawals, which is one of the opposition's serious concerns with this report—they just cannot get cash, even if they want it. The Americans also have a far better system of scrutiny of expenditure.

  This report is a very detailed one. With the renegotiation of the Australian Government Corporate Card coming up in June 1994, it is extremely timely that the taxpayers of Australia, the Department of Finance and the relevant sections of the Department of the Arts and Administrative Services have this report when reviewing a system that has been in place for six years. It is quite incredible to think that this scheme has been in place for six years and only now do we have a review of it.

  But, again, this is indicative of some of the problems that are being experienced with this general devolution process. I believe that devolution in concept can be very good, as long as that devolution does not mean that in the process we dissolve responsibility, as opposed to devolving it. One of the problems we have here is that no-one in this parliament seems to be held responsible when these schemes muck up. The Minister for the Environment, Sport and Territories (Mrs Kelly) will not take any responsibility for the maladministration and financial mismanagement, let alone the blatant, corrupt pork-barrelling, which has taken place during the sports rorts affair.

  Either the Minister for Finance or the Minister for the Arts and Administrative Services, or both, should at least take responsibility for what has taken place in respect of the Australian government credit card. If they will not take responsibility for what has taken place over the last six years, they should take responsibility for fixing it up and bringing back accountability. Someone has to take responsibility.

  I would like to see Mr Willis get up in the other place and say, `We are going to fix this. This is what we are going to do'. But in response to this report, the Department of Finance has basically said, `We just want some modest changes'. This report demands sweeping change to purchasing. It does not require fiddling at the edges; it requires a lot more accountability, checking and scrutiny to ensure that Australian taxpayers know that their money is not being wasted.