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Joint Standing Committee on Electoral Matters
06/07/2012
Australian Electoral Commission analysis of the Fair Work Australia report into the Health Services Union

EDGMAN, Mr Brad, Director, Funding and Disclosure Section, Compliance, Australian Electoral Commission

KILLESTEYN, Mr Ed, Electoral Commissioner, Australian Electoral Commission

PIRANI, Mr Paul, Chief Legal Officer, Australian Electoral Commission

C ommittee met at 10:03

CHAIR ( Mr Melham ): Welcome. I declare open this second public hearing of the Joint Standing Committee on Electoral Matters on the Australian Electoral Commission's analysis of the Fair Work Australia report on the Health Services Union National Office. The FWA report completed in March 2012 examines the administration and expenditure of the HSU National Office. The Special Minister of State sought advice from the AEC on whether there have been any failures to comply with the provisions of the Commonwealth Electoral Act as disclosed by the information in the FWA report. On 16 May, the AEC responded to the Special Minister of State with a 22 page analysis of the FWA report in relation to disclosure statements under the Electoral Act. The AEC has since provided the committee with an addendum to the analysis. The AEC has also provided the minister with a list of possible measures for improving the Electoral Act. The minister has asked the committee to examine the AEC analysis and the list of matters provided by the AEC.

Today the committee will hear from the AEC. The committee will look at the possible measures identified by the AEC and discussion on the AEC analysis of the FWA report will follow. The evidence today will be recorded by Hansard and be covered by parliamentary privilege. I now welcome representatives of the AEC. Thank you for appearing today to assist the committee with its inquiry. The committee has received your submission. I am interested to know if we can commence the hearing with the possible measures that you have listed in your submission as to where there could be some deficiencies that could be looked at, the first one being the reconsideration of the appropriate level of the disclosure threshold.

Mr Killesteyn, the committee has previously looked at a lot of these measures and made related recommendations. There can just be a brief analysis.

Mr Killesteyn : Thank you, Chair. I might just make an opening statement, if I can.

CHAIR: Yes. Sure.

Mr Killesteyn : This goes to both the analysis that we provided back on 16 May as well as some of the recommendations. As you have noted, on 16 May the AEC released its analysis of the implications of the Fair Work Australia report into the HSU national office for obligations arising under the disclosure provisions of part XX of the Commonwealth Electoral Act. On 28 June 2012, the AEC released an addendum to the AEC analysis which took into account the additional information that had been received from the New South Wales branch of the ALP and from the lawyers representing the HSU national office. Both of these documents are attached to the AEC submission to this inquiry.

The AEC analysis of the Fair Work Australia report was released as quickly as possible due to the continued public interest involved and to give time for members of parliament to digest the complex analysis of the application of the requirements of the Electoral Act to the information contained in the Fair Work Australia report. Indeed, work on the AEC analysis commenced on the evening that the Senate publicly released the Fair Work Australia report, prior to my receipt of the request from the Special Minister of State contained in his letter to me of 8 May 2012.

What the AEC analysis attempted to do was to examine each item of expenditure described in the Fair Work Australia report as assisting Mr Thomson in his election bid during the 2007 election and to make an assessment on, firstly, whether that item of expenditure was disclosable under the Electoral Act; secondly, who had the disclosure obligation; and thirdly, whether that item of expenditure was actually disclosed in one of the political expenditure or donation returns lodged over the 2006-08 period. The AEC analysis points out that the AEC is not making comment on, nor can it be taken to have made comment on, the question of whether the payments and donations made were or were not properly authorised by the various entities in which Mr Thomson was involved over the period leading up to the 2007 election. That is not the role of the AEC. Nor does the AEC analysis carry any implications for the veracity or otherwise of the findings of the Fair Work Australia report in terms of the charter that Fair Work Australia has to carry out. All the payments identified in the Fair Work Australia report have been taken at face value and simply assessed against the provisions of the Electoral Act in terms of an obligation for disclosure.

Whether or not the payments were properly authorised under either the relevant union rules or under industrial laws is not material to the disclosure obligation arising under the Electoral Act. The disclosure provisions of the Electoral Act are detailed and specific as to whether disclosure is required. Notwithstanding that a series of payments may have the same essential character, seek a particular electoral outcome or be made over an extended period, the act determines that disclosure is affected by the precise point at which—sorry, I am just waiting until—

Mrs BRONWYN BISHOP: No. I can hear.

CHAIR: She has the written material.

Mr Killesteyn : I will start again. Notwithstanding that a series of payments may have the same essential character or seek a particular electoral outcome or be made over an extended period, the act determines that disclosure is affected by the precise point in time at which a person becomes a candidate and when an election is called, the nature of the payment and the disclosure threshold that applies from time to time. Indeed, in prescribing what should be disclosed, the act also implicitly sets out what does not need to be disclosed. From the perspective of a candidate, disclosure of donations received is not required for any gifts received prior to a new candidate becoming a formally endorsed candidate of an election and disclosure of expenditure is not required for expenditure incurred and the benefit derived before the issue of a writ for an election and then only for expenditure in the nature of general advertising.

Moreover, the Electoral Act provides for reporting to be made in the case of a candidate for an election by an agent of that person and for campaign expenses incurred by each campaign committee in each contested federal seat to be rolled up into a single political party return. It is common practice for the candidate agents to lodge nil returns as provided for by the Electoral Act. This often makes it difficult for any observer to conclude what has actually been spent in any federally contested seat. The Electoral Act is also quite specific on which entity the obligation for disclosure falls. Notwithstanding, again, that there may be a common participant in the payments or donations, the disclosure obligation falls on the entity from whose resources the payments or donations are made. This reflects the well-known legal principle that a body corporate is separate from the owners, officers and employees of the body corporate, and there is no provision in the Electoral Act that operates so as to lift the corporate veil.

The addendum to the AEC analysis concluded what the circumstances of this matter show. Firstly, there were difficulties with the availability and accuracy of records held by the HSU National Office, which led to uncertainties over the characterisation of expenditure that had been incurred on the credit cards issued to its various officers and employees. Secondly, those difficulties led to some amounts of electoral expenditure that have been identified in the Fair Work Australia report not being included in any disclosure return lodged by the HSU National Office, while other amounts were included which probably were not electoral expenditure—for example, the total of the salaries from Ms Stevens and Mr Burke. Thirdly, the HSU National Office took reasonable measures in 2009 to attempt to comply with the disclosure obligations contained in the Electoral Act. Finally, the total amount of electoral expenditure that has been identified in the Fair Work Australia report and which has not been disclosed is less than the disclosure threshold that was in force at the relevant time. In these circumstances, the AEC has been unable to identify any public interest that could result in action now being initiated against the HSU National Secretary, Ms Kathy Jackson, in relation to the apparent failure to fully disclose three items of political expenditure in the HSU National Office returns for the 2006-07 and 2007-08 financial years.

In my letter to the Special Minister of State of 16 May 2012, I indicated that the circumstances of this matter highlighted a number of aspects of the disclosure and reporting regime contained in part XX of the Electoral Act, which are worthy of review. For example, a fundamental element of an effective disclosure regime is the ability to match the returns of donors with the returns of recipients of donations. Under the current provisions, a donor has to disclose all gifts made to the same state branch of a registered political party that total more than the threshold amount during a reporting period. Yet if these gifts are made on different days and are individually below the threshold amount then the details of the gifts made do not need to be disclosed by the recipient because of subsection 314AC(2) of the act. Cross-checking of donations in these circumstances becomes problematic.

In my letter to the Special Minister of State of 16 May 2012, I also made 17 suggestions for possible amendments to the disclosure regime under the Electoral Act which would be of assistance to address some of the limitations that have been highlighted by this matter. Accordingly, I look forward to this opportunity to present to the committee the reasoning behind each of the 17 recommendations for change and to answer questions relating to those mattes.

CHAIR: Mr Killesteyn, I will come to the reasoning behind each of those recommendations a little bit later. I propose to hand over to Mrs Bishop, but before I do I want to immediately go to one of the recommendations. It is your first recommendation 'Reconsideration of the appropriate level of the disclosure threshold' and if that threshold had been, for instance, reduced. There is a bill currently languishing in the Senate that has $1,000 disclosure threshold. Would that have had an impact to what was disclosable in relation to these matters?

Mr Killesteyn : Of course, it would have had. The lower the threshold, the greater are the reporting obligations that arise both in terms of donors as well as recipients of those donations. As our report said, the AEC does not have a view on what the appropriate disclosure threshold should be. If you go through all of the jurisdictions across Australia and, indeed, jurisdictions overseas, you see many different levels of disclosure thresholds. There are some that are lower than ours and, obviously, there are some that are high. For example, if you look at Canada as a comparable jurisdiction, their disclosure threshold is I believe, $1,500. If you go to the United Kingdom, they have a disclosure threshold for central parties of £7,600 or the equivalent of about A$11,000. You see quite a variety of disclosure thresholds from very low comparable to the Australian federal scene.

CHAIR: So when you say that a measure is the reconsideration of the appropriate level of the disclosure threshold, what does that mean if you do not do not have a level that you want to recommend to the committee or to the parliament?

Mr Killesteyn : It means, ultimately, there is a question of balance that the lower the threshold the more you are likely to capture and the more that you are likely to see the sorts of circumstances that arose in relation to this particular matter being revealed. However, the balance is that the more you capture the greater is the obligation that is imposed on donors and the greater is the workload that is imposed on the AEC.

You could take this to the level of having no disclosure threshold at all. That would obviously be terrific in terms of transparency but, equally, you could also suggest that that would present such a level of detail that transparency would be mitigated because you would have so much work to do, and the ability of the AEC to process this information and put it in the public domain would be compromised.

We are suggesting that the committee may, once again, want to consider this issue. If it is concerned about the sorts of issues that arose in relation to Mr Thomson, then it can lower it, but if it believes on balance that the disclosure threshold provides a reasonable level of information for the public, then it can leave it as it is.

Mrs BRONWYN BISHOP: I might say right at the outset that I disagree with what the commissioner had to say. The most important and worrying aspect of what you had to say this morning of the Thomson affair is that you take no regard of the fact that there was no authorisation for payments made by Mr Thomson. You say that it is none of your business. In fact, if you read the FWA report and their findings, again and again and again they say they were unauthorised payments therefore the money is either misappropriated, fraud or theft—take your pick—but you say it is none of the AEC's business. That would seem to me to be a flaw in the act, and I did not see in any of your 17 recommendations any suggestions as to how to remedy that.

The Special Minister of State, as we would remember, wrote to the commissioner on 8 May seeking advice on whether or not there had been any failures to comply with the provisions as disclosed by information in the recently published Fair Work Australia report into the Health Services Union national office. The commissioner had developed a detailed analysis, which I think you did in how many days, four?

Mr Killesteyn : We started on 7 May when it was handed out and that evening was the first time I commenced looking at it. I was phoned and told that the Senate had released it.

Mrs BRONWYN BISHOP: When did you find it?

Mr Killesteyn : My recollection is that it was 16 May when we put it on the internet.

Mrs BRONWYN BISHOP: When did you finish it, in fact?

Mr Killesteyn : Just before that on the sixteenth.

Mrs BRONWYN BISHOP: So, you took eight days. You have also told the estimates committee that you did not investigate it and that you merely did an analysis. Is that correct?

Mr Killesteyn : That is correct, Mrs Bishop. We had the Fair Work—

Mrs BRONWYN BISHOP: You told me before that you have no investigating powers. He also says, 'At the time I sought advice from the Electoral Commission on any issues concerning the operation of the Electoral Act which could be considered for possible remedy.' I think it is a very serious and glaring error that there is evidence provided—that you, in fact, looked at—that says that these payments were unauthorised but that that was not a matter for you. In your report—in your analysis—you say that they were disclosed by the HSU, therefore that is enough.

CHAIR: I am not trying to stop you, but I think the Commissioner is entitled to comment.

Mrs BRONWYN BISHOP: When I have finished he can.

CHAIR: Yes; the question is how—

Mrs BRONWYN BISHOP: The point is this: the most serious defect that I can see in the act at the present time is the fact that, in your own words, you do not care whether money disclosed is misappropriated, stolen, fraudulently acquired or whatever. If it is in the return that satisfies you. That seems to me to be a serious inability of the act to properly operate and there should be a suggestion for a remedy. To date there is none.

CHAIR: I might get you to respond to that. The comment I would like to make—

Mrs BRONWYN BISHOP: I would just like to finish, just so we know where we are.

CHAIR: Sorry. I do not want to stop you.

Mrs BRONWYN BISHOP: I refer you to the Electoral Commissioner's analysis—that is, all of it—and the list of matters to the Joint Standing Committee on Electoral Matters for our consideration. He did not ask us to report, but I guess that is implicit in his letter. I am taking it that way; we will report. We were asked to look at your analysis and then also to look at the list. Perhaps you would like to comment now on what I see as a glaring error and give your response.

CHAIR: I suppose my interest in your comment, as well, is to address this question: are you really saying that this is a matter that might needed to be amended in other acts rather than the Electoral Act?

Mrs BRONWYN BISHOP: No, no; I am saying—

CHAIR: I just want that clarified.

Mrs BRONWYN BISHOP: That is my question.

CHAIR: Yes, that is, in a nutshell, Mrs Bishop—

Mrs BRONWYN BISHOP: You ask another one later.

CHAIR: It is your question, but I am cutting it down.

Mrs BRONWYN BISHOP: Well, please do not. My question stands. It is a great gaping hole in the act. What is your remedy to fix it?

Mr Killesteyn : Can I firstly comment on this question of whether the payments were authorised or not. At present, Mrs Bishop, the AEC is in a position where the matter of the authorisation or not of the payments is still subject to some legal process. These are—

Mrs BRONWYN BISHOP: You mean police investigation.

Mr Killesteyn : No. It is the Fair Work Australia report. The Fair Work—

Mrs BRONWYN BISHOP: And the police—

Mr Killesteyn : That may be a concern for the police—

Mrs BRONWYN BISHOP: But not by you.

Mr Killesteyn : No, because we have to take the payments at face value. Until that matter is proven one way or another in a court of law, the AEC is unable to take that matter into account. We look at the payments and whether they have been made. We have looked at the entities from whose resources those payments were made and then we have determined whether the payments were disclosable or not. The act does not provide any basis for—

Mrs BRONWYN BISHOP: I did not say it did. I said it is a defect in the act. What is your suggested remedy?

Mr Killesteyn : There were a number of suggestions. One, indeed, was in relation to having an independent audit of the returns that are made by donors as well as recipients. At the moment—and it has been the case since 1983—the returns are provided simply on the basis of trust. One possible measure is to require all recipients and all donors to have their returns independently audited by some third party.

Mr Pirani : There is also, Mrs Bishop, an existing mechanism in the act, that I raised specifically with Ms Kathy Jackson and with the lawyers for the Health Services Union. Indeed, I had a conversation with the lawyer for the Health Services Union national office, where I clearly indicated that I would not expect any return from the HSU national office to include amounts of money that had been misappropriated or may have been stolen.

The process that currently exists in the act is the process in section 318. At the time of lodging a return if a person is unable to categorise and approve the payment then they put in a section 318 notice. When we got the three returns from Ms Jackson in October 2009 there was no 318 notice so I had no position to go behind the return to try and investigate anybody else.

Mrs BRONWYN BISHOP: I will come back to all of that. At the moment I want to go to section 17(2A) of the Electoral Act. That requires that a report—

Mr Killesteyn : Section 17?

Mrs BRONWYN BISHOP: Section 17(2A) says:

A report in relation to an election must include a list of the names of all persons who, in the opinion of the Commission, are or may be required to furnish a return under subsection 305A(1) or (1A) in relation to that election.

I have had cursory look on the internet to try and find that list that you prepared in accordance with the act after the 2007 election and could not find it, so I am asking you to provide me with a copy of the list that you were required to provide under the act.

Mr Pirani : Mrs Bishop, I would need to take that on notice and have a look at the 2007 report.

Mrs BRONWYN BISHOP: I am sorry, but it is a requirement that says:

Reports by the Commission

(2) The Commission shall, as soon as practicable after the polling day in:

   (a) a general election and any Senate election that had the same polling day as that general election; or

   (b) a Senate election (other than a Senate election referred to in paragraph (a));

prepare and furnish to the Minister a report of the operation of Part XX in relation to that election or those elections.

And (2A) says:

A report under subsection (2) in relation to an election must include a list of the names of all persons who, in the opinion of the Commission, are or may be required to furnish a return under subsection 305A(1) or (1A) in relation to that election.

I want that list, please.

Mr Pirani : Mrs Bishop, I will need to take that on notice. I do not have the 2007 election report with me. I am assuming that it mirrors what we did in the 2010 election report, where those details appear at appendix 5 of the 2010 report. But I will take that on notice and will find the 2007 election report. It should be in one of the appendices.

Mrs BRONWYN BISHOP: It would be very helpful if you could find one of the people you brought along with you and they could go out and find it for you so we could have it in this hearing.

CHAIR: What you are saying, Mr Pirani, is it is in the 2010 report; you just have not got the 2007 report with you?

Mr Pirani : I accept Mrs Bishop's point that we have not included the list of all the people who lodged returns—

CHAIR: because of the threshold—

Mr Pirani : No—our practice has developed whereby we include a list of the people we identified should have lodged a return and had not. That is the practice that has developed. I accept what Mrs Bishop has said in relation to the requirements of section 17(2A) and we will go back and have a look at the 2007 report to see. Again, I acknowledge this is not in what was required to be tabled under section 17(2A), but we do put up all the donors and the actual returns on the website. Our practice has developed whereby all that we disclose in the appendices is the people who we have identified have not lodged a return or did not lodge it within time.

CHAIR: Who are in breach?

Mr Pirani : Yes.

Mrs BRONWYN BISHOP: As well, subsection (2C) of section 17 requires:

Subject to section 17A—

which protects certain particulars—

the Commission must include in any report under this section particulars of the operation of subsection 316(2A) since the preparation of the last report under this section that included particulars of the operation of that subsection.

That would have been, presumably, after the 2007 election. I want to know what happened to inquiries that you did under that section after the 2007 election and where that is reported. I would like the report as well.

Mr Pirani : That is in the report. I also note that, on a question on notice that you raised at one of the previous hearings, we went through a breakdown of the numbers of notices that have been issued under 316(3) and 316(3A). We did an analysis of those for each of the election years.

Mrs BRONWYN BISHOP: Yes, we did, and we were talking at that stage about 316(3), and you continually asserted you had no power to investigate anything because you had no reasonable grounds of suspicion. I am not interested in 316(3) anymore; I am interested in (2A). Since we have had all those discussions, I found that you put out, on a regular basis, a disclosure compliance review. Here is a copy of it. In that you say:

I am writing to advise you that the Australian Electoral Commission will conduct a compliance review of the disclosed return lodged.

And then you put in the particulars.

The AEC conducts reviews of political parties and associated entities periodically to address compliance with the funding and disclosure provisions of the Commonwealth Electoral Act. Section 316(2A) of the act permits authorised officers to require an agent or officer of a political party to produce, in the manner specified, documents and evidence for the purposes of finding out whether the disclosure obligations under the act have been complied with. In fact, section 316(2A) does not talk first about political parties. It talks first about:

An authorised officer may, for the purpose of finding out whether a prescribed person—

and a 'prescribed person' is someone who is mentioned in section 17(2A)—that is the one I have asked you for the list of. It then says: 'the financial controller of an associated entity' and then 'or the agent of a registered political party'.

The section gives you power to issue a notice of compliance to a prescribed person, a financial controller of an associated entity or a political party. I would like to have a list of all the compliance reviews you have done post 2007 of prescribed persons and associated entities, as well as political parties. I particularly want to know whether you did a compliance review of the HSU. I would like to know whether you have done a compliance review of any trade union. Have you?

Mr Pirani : Yes. In relation to the HSU national office the answer is—

Mrs BRONWYN BISHOP: No, the HSU—

CHAIR: Let him answer!

Mr Pirani : In relation to the HSU national office the answer is no, because the HSU national office is not an associated entity—

Mrs BRONWYN BISHOP: We will go into that in a moment.

Mr Pirani : We will have to take on notice the issue about any other associated entity.

Mrs BRONWYN BISHOP: I asked you specifically about the HSU. I did not mention the words 'national office'.

Mr Pirani : But the HSU is not a single body.

Mrs BRONWYN BISHOP: On the return that you accepted, it says that it is put in by the HSU, the Health Services Union. That is what it says it is reporting.

Mr Pirani : The return that we accepted from Ms Kathy Jackson was on behalf of the HSU national office.

Mrs BRONWYN BISHOP: 'Person or organisation covered by this return. Name: Health Services Union.'

Mr Pirani : It is the HSU's national office.

Mr Killesteyn : It is the HSU's national office.

Mrs BRONWYN BISHOP: No! It does not say that. It says: 'Person completing this return.'

Mr Killesteyn : It may not say it on the return, Mrs Bishop, but it is the HSU national office.

CHAIR: Correct me if I am wrong. Kathy Jackson is actually the national secretary—

Mrs BRONWYN BISHOP: Was—

CHAIR: Was the national secretary of the national office. That was her position.

Mr Pirani : That is correct.

CHAIR: She did not have an office—

Mrs BRONWYN BISHOP: I am not really interested in Kathy Jackson today.

CHAIR: No, no, but if she signed it—

Mrs BRONWYN BISHOP: Today I am interested in Mr Thomson.

CHAIR: No, but if she signed it, she signed it as secretary of the national office. I am not trying to confuse anyone here; I am trying to clarify.

Mrs BRONWYN BISHOP: I am sorry—on this return it says: 'Person or organisation covered by this return; name, Health Services Union; person completing this return, Kathy Jackson; capacity of position, national secretary; postal address, as above.'

CHAIR: That is the national office.

Mrs BRONWYN BISHOP: It does not say anything about office—nothing at all.

CHAIR: It says national secretary.

Mrs BRONWYN BISHOP: But I want to come to this question of associated entity. Who do you think supplies the national office with money?

Mr Killesteyn : The national office of the Health Services Union?

Mrs BRONWYN BISHOP: Yes.

Mr Killesteyn : Its members.

Mrs BRONWYN BISHOP: Precisely. So they own it—right?

Mr Killesteyn : I do not know what legal capacity there exists with the members as to whether they own it or not. They are not like a shareholder of a corporation, Mrs Bishop. I am not sure what the point is.

Mrs BRONWYN BISHOP: You would not say that the federal secretariat of the Liberal Party was not part of the Liberal Party, would you?

Mr Pirani : They are not part of the NSW branch of the Liberal Party, which is separately registered—

Mrs BRONWYN BISHOP: I did not ask you that.

CHAIR: You have asked him a question; he is answering it.

Mr Pirani : It has a separate registration process under our act. In relation to the union structure—and it is included in our background here—we had advice from the union itself and from the lawyers of the union pointing to a provision in the Fair Work (Registered Organisations) Act saying that the Health Services Union national office was legally separate from each other branch that had separate legal status because of the Fair Work (Registered Organisations) Act.

That is the basis on which we were dealing with this matter.

Mrs BRONWYN BISHOP: So that was your sole source of legal advice as to whether or not the national office was an associated entity?

Mr Pirani : The separate registration under the Fair Work (Registered Organisations) Act, yes.

Mrs BRONWYN BISHOP: No other legal opinion?

Mr Pirani : No other legal opinion.

CHAIR: There is no other opinion asserting the contrary, is there?

Mrs BRONWYN BISHOP: So you simply got it from the union?

Mr Pirani : No, we also looked at the Fair Work Australia website, which has a list of the separate registration of all the various bodies that made up the Health Services Union at that time. Then we had a discussion with both Ms Kathy Jackson and the lawyers for the Health Services Union national office, and they directed us to a particular provision in the Fair Work Act which deemed the national office to be separate from the other bodies that made up the Health Services Union. I will just try to find where that is referred to.

CHAIR: Could I also ask you: in your understanding, is it not common within the union movement to have the national office separate from the state offices, similarly to the political parties? The national secretariat of the ALP is separate from the New South Wales office.

Mr Pirani : If I could just refer you to page 56 of our submission. I refer to the contact—

Mrs BRONWYN BISHOP: Which submission?

Mr Pirani : The submission to JSCEM. It refers to contact that I had and a letter that I had from the senior lawyer for the law firm Slater and Gordon. When we were originally dealing with this matter, we initially had formed a view that the national office of the Health Services Union may well have been an associated entity. We were directed to several provisions that were in the Fair Work Act under which they were able to argue­—and I agreed with the view—that the national office, because of these provisions in the Fair Work (Registered Organisations) Act, was legally separate and therefore was separately registered for the purposes of the Fair Work (Registered Organisations) Act. Therefore it was a separate body corporate and legal entity from each of the other branches.

Mrs BRONWYN BISHOP: What was the position in 2007, before the Fair Work Act was passed?

Mr Pirani : Our understanding is it was the same, but I would have to take that on notice because I did not look at the transitional provisions.

Mrs BRONWYN BISHOP: I'm sorry, but you must look at the position in 2007, because that is the period that is relevant—not the fact that the returns were in excess of two years late. What action did you take to ensure that those returns came in a timely way?

Mr Killesteyn : The action is detailed in annex 2 of our submission. There is a detailed chronology of all of the actions that we took to ensure—

Mrs BRONWYN BISHOP: Tell them to me. It is important to the narrative.

Mr Killesteyn : It is in annex 2, which—

Mrs BRONWYN BISHOP: What action did you take to get those returns in before they were finally submitted in 2009?

Mr Pirani : We undertook numerous contacts with Michael Williamson, Kathy Jackson and the lawyers for the national office of the Health Services Union in relation to the material. We had conversations­—

Mrs BRONWYN BISHOP: What was the first time you did that?

Mr Pirani : The first time I did that was on 20 May 2009.

Mrs BRONWYN BISHOP: So what did you do prior to that—nothing?

Mr Pirani : This goes to the issue that you raised earlier. We had two returns that were signed by an officer of the New South Wales branch of the union. We had a separate third-party return that was signed by Mr Michael Williamson. So we were having some issues ascertaining at the outset which entity within the HSU structure had lodged returns and how they related to the particular expenditure that appeared in those articles in the Sydney Morning Herald. So the first time I had any idea that there was an issue in relation to this was when those articles were raised in April 2009.

Mrs BRONWYN BISHOP: Yes, but you told me previously that you did not see the one that had the details of the expenditure.

Mr Pirani : But the details of the expenditure­ that they had in that—

Mrs BRONWYN BISHOP: You just happened to miss that one.

Mr Pirani : The photograph did not refer to any electoral expenditure.

Mrs BRONWYN BISHOP: To the contrary—it did. I will find the evidence where you said you did not see it.

Mr Pirani : Indeed, but when you presented it to me at that hearing we had a look at the photographs of the actual credit card statements and they did not include any electoral expenditure. None of the matters that are covered in the Fair Work Australia report were in the photographs of those credit card statements—

Mrs BRONWYN BISHOP: You told me you could not see it, so you were not worried about it? The one Mr Michael Williamson put in—did you issue a compliance notice to go in and look at the HSU?

Mr Pirani : No.

Mrs BRONWYN BISHOP: Why?

Mr Pirani : We had no grounds.

Mrs BRONWYN BISHOP: You did not need grounds?

Mr Pirani : Yes, I do. I need to have some grounds on which I can exercise these powers.

Mrs BRONWYN BISHOP: No, you do not.

CHAIR: Can you tell us why you say you need grounds. I just want that on the record at this stage.

Mr Pirani : These are coercive powers.

Mrs BRONWYN BISHOP: No—this is the thing. Section 316(2A)—

Mr Pirani : I am not arguing that it is section 316(3); I accept and acknowledge the distinction which you have raised between the two of them. Nonetheless, it is a coercive power. For the Commonwealth and the AEC as part of the Commonwealth to be exercising rights of entry, rights of obtaining information, we have to have some information before us before we go in—

Mrs BRONWYN BISHOP: You do not have right of entry under (2A).

CHAIR: I would like the witness to be able to answer.

Mr Pirani : The third article that was written by Mark Davies reported comments from Mr Williamson that none of the expenditure that had been reported in the articles had been included in the returns that he had lodged. So I am not clear what I would have achieved if the authorised officer in the AEC had gone in to look at Mr Williamson and the New South Wales branch.

CHAIR: I am not interested in that part at the moment; I am interested in clarifying what you say about the fact that you could not go in on a fishing expedition.

Mr Pirani : That is what it was. We had no information to suggest that the returns that had been lodged by Mr Williamson or the return that had been lodged by Mr Gibson were subject to any of the concerns raised in the article.

CHAIR: But if you had information to that effect, that puts it on a different level, does it not?

Mr Pirani : It does.

CHAIR: Then you would have been able to go in?

Mr Pirani : Indeed.

CHAIR: In your opinion.

Mr Killesteyn : Or we would have approached the parties to seek voluntarily the information. Our first approach is to try to deal with this in a voluntary way rather than immediately resorting to coercive powers under the act. I think that is standard practice for most electoral commissions.

Mrs BRONWYN BISHOP: The act is very straightforward. Under 316(2A):

(2A) An authorised officer may, for the purpose of finding out whether a prescribed person, the financial controller of an associated entity or the agent of a registered political party has complied with this Part, by notice served personally or by post on:

(a) the agent or any officer of the political party; or

(aa) the financial controller of the associated entity or any officer of the associated entity; or

(b) the prescribed person or, if the prescribed person is a body corporate, any of its officers;

as the case may be, require the agent, financial controller, person or officer:

(c) to produce, within the period and in the manner specified in the notice, the documents or other things referred to in the notice; or

(d) to appear, at a time and place specified in the notice, before the authorised officer to give evidence, either orally or in writing, and to produce the documents or other things referred to in the notice.

At no time does it require entry.

CHAIR: Let me intervene at this stage and give you my public defender's view of the section you have quoted. I want to clarify, because this is very important issue. I am not trying to dismiss you.

Mrs BRONWYN BISHOP: We are not asking you for your lawyer's opinion.

CHAIR: It is important because there is a dispute and I want to clarify it, either for you or against you. Firstly, it says 'may'. There is a question of 'complied' and the thing that interests me is that (c) and (d) talk about the documents or other things referred to in the notice. It would seem to me that the inference there is that you have to have some material that you are actually referring to before you take the action under this particular section. It is not a fishing expedition section. You are looking at particular documents, you are naming them and you detail them before you take that action. Is that a fair interpretation of the—

Mr Pirani : That is the approach the AEC takes.

Mrs BRONWYN BISHOP: On your own website you put up what is required. When you send out this letter—and I think I will table this, because we have not seen it before.

CHAIR: That is fine. We will wait before we table it.

Mrs BRONWYN BISHOP: This is the sort of letter that goes out to political parties. I take it you are doing it to see whether or not they have complied. You do not have the evidence that anyone is trying to distort anything, are you, when you are asserting that? Are you asserting, when you write to a political party, that they have done something wrong?

Mr Pirani : No.

Mrs BRONWYN BISHOP: So you are just using ordinary powers?

Mr Pirani : Yes.

Mrs BRONWYN BISHOP: And if you went into the HSU, you would just be using your ordinary powers?

Mr Pirani : Yes.

Mrs BRONWYN BISHOP: You say you conduct these reviews periodically, so we are going to get a list of the number of associated entities and prescribed persons that you have done these periodical reviews of?

Mr Pirani : We will take that on notice.

Mrs BRONWYN BISHOP: Your staff are getting that now, aren't they? In an annexure to this, you tell them what you want. Technical specifications for computer data—and you tell them how that is to be put in to you and you tell them what you want—all Excel spreadsheets; financial transactions of a foundation, if there is a foundation; statements of all banks and financial institutions, including investment accounts, broker accounts applicable for the period; bank reconciliation statements for each account, as at 31 June; audit and financial statement for the relevant financial year; terms and conditions of all loans outstanding; a list of all gifts in kind received during the relevant period; working documents, clearly demonstrating the financial totals; and receipts, total payments and how total debt figures shown on the annual disclosure term were derived. That is pretty extensive. That is requiring you to do a pretty good, solid compliance audit without making any negative complaints about the way in which the political party is conducting itself. The same would apply to any of the other people in that act, whether they be a prescribed person or an associated entity. To have gone into the HSU to do a periodic review would have been absolutely normal, but you did not do it.

Mr Pirani : The HSU national office is not an associated entity—

Mrs BRONWYN BISHOP: I did not ask you that.

Mr Pirani : They are not a section 17(2A); therefore section 316(2A) could not be used.

Mrs BRONWYN BISHOP: I did not ask you about the national office. I asked you about the HSU itself.

Mr Pirani : But the HSU is not a single entity.

Mrs BRONWYN BISHOP: There is a union—the Health Services Union.

Mr Pirani : There are multiple branches of the Health Services Union.

Mrs BRONWYN BISHOP: Right. And you could have gone into any associated entity branch. An associated entity is one where they have voting rights, and the union has voting rights and preselections. Is that not right?

Mr Pirani : Some members of the HSU—some of the branches did have voting rights within the Labor Party, but my understanding is that the state branch of the Labor Party undertakes the preselection. I have no further knowledge about how that took place in relation to Mr Thomson's preselection.

CHAIR: (Indistinct) preselection of votes in New South Wales.

Mrs BRONWYN BISHOP: Putting aside the HSU New South Wales branch, let us now go to what you have just described for us. You have described for us that you have no powers to go into the HSU national office because you have accepted advice from the union solicitors that it is not an associated entity. Correct?

Mr Pirani : Correct.

Mrs BRONWYN BISHOP: You accepted the union advice that they are not an associated entity; therefore, you cannot go in and have a look.

Mr Pirani : Under section 316(2A)—that is correct.

Mrs BRONWYN BISHOP: In order to see whether there is compliance with the act and that disclosure takes place, it would really be a desirable thing for you to be able to do that, would it not?

Mr Pirani : Yes.

Mrs BRONWYN BISHOP: So there is a defect in the act. Where is your recommendation to deal with that defect?

Mr Killesteyn : We have made recommendations in relation to our coercive powers and suggested that if the committee so sees that the coercive power should be clarified, then so be it.

CHAIR: So it is on the record—

Mr Killesteyn : It is No. 14: increase the AEC's coercive powers. So we are suggesting in that particular recommendation that we have taken a conservative view about our powers. I will acknowledge that, Mrs Bishop.

Mrs BRONWYN BISHOP: The problem is—

Mr Killesteyn : If you will allow me to finish. If the committee believes that the coercive powers should be strengthened, then it can make that recommendation.

Mrs BRONWYN BISHOP: I do not believe that at all. I believe you have sufficient powers; you could have used section 316(3), but you have a good excuse that you utilise as to why you will not use it. I have no confidence at all that increasing your powers would mean that you would use them at all.

Mr Killesteyn : It is more than an excuse; it is based on an analysis of our interpretation of the act.

Mrs BRONWYN BISHOP: Yeah, right!

Mr Killesteyn : If the committee believes that our analysis is incorrect then the way to deal with that is to make a recommendation to increase the coercive powers and make that clearer.

CHAIR: There has also been a bit of history in this over the years, hasn't there, Mr Killesteyn? It was before you came, in relation to the commission's powers to investigate certain fundraising activities of the coalition emanating from Victoria—the Millennium Forum. You were around at the time, I think, Mr Pirani.

Mr Pirani : No, I was not. However, the reasonable grounds test is something that is similar in most common-law jurisdictions around the world. It is the same wording that is used for search warrants et cetera under the Crimes Act. So it has a defined meaning and it has the limitations: we are not allowed to go on fishing expeditions, we have to have prima facie evidence and we have to have material—given that it is the same test that is in the Crimes Act—that would be necessary to convince a judge that it has been lawfully issued.

CHAIR: But this has been around for a while, and both sides of parliament have not changed those powers to give you further powers.

Mrs BRONWYN BISHOP: No, they do not need further power. In the act they also have the power—if they believe there are documents that they want and that they are not getting—to go to a magistrate and say, 'These are the grounds on which we believe we should look at these documents; please let us have a warrant so that we can go and have a look.'

Mr Pirani : Not under our act. There is in the Crimes Act. I acknowledge that there are provisions in the Crimes Act for warrants.

CHAIR: If we adopt your recommendation 14 and legislation is passed then there will be no dispute on whether we have the powers or not. It will be pretty clear, won't it?

Mrs BRONWYN BISHOP: Yes, there will. The problem is this—

Mr Pirani : Sorry, Mrs Bishop. Can I just correct the record: you are correct.

Mrs BRONWYN BISHOP: Yes, of course I am correct.

Mr Pirani : In section 316(8) and 316(9) it is referred to the magistrate's powers.

Mrs BRONWYN BISHOP: I find that absolutely stunning. You are the legal adviser to the AEC, and you did not know that in your own act you had the power to go and get a warrant to go and look at documents, and you told me that I am wrong until you—

CHAIR: I do not know that that is what he said.

Mrs BRONWYN BISHOP: Yes, he did.

CHAIR: There is a question as to reasonableness.

Mrs BRONWYN BISHOP: He told me there was no power in the act, and it is subsection 3A.

Mr Killesteyn : We are trying to be helpful.

Mrs BRONWYN BISHOP: No, you are not.

Mr Killesteyn : We are trying to be helpful. We have given you our interpretation of the powers under section 316. What we have suggested is that if there is a different view on that then it is open for the committee to clarify that.

CHAIR: That is all right.

Mr Killesteyn : But the interpretation of our powers under the act is based on legal analysis—

Mrs BRONWYN BISHOP: No, it is not.

Mr Killesteyn : of what is available to us on the question of reasonable grounds. Indeed, I have had the opportunity of discussing this issue with a number of other electoral commissions most recently, including in the United Kingdom.

Mrs BRONWYN BISHOP: That is not our jurisdiction.

Mr Killesteyn : No, but let me just finish. They also have a similar provision that allows investigations to be commenced under the reasonable grounds test. Their advice to me is that they have not yet used that power because of the issues around the basis of the circumstances that are needed to warrant reasonable grounds. This is not unusual in terms of jurisdictions for electoral commissions. If, however, the committee believes that the reasonable grounds test should be removed then that is for the committee.

CHAIR: You are offering a way through.

Mrs BRONWYN BISHOP: No, I do not believe the reasonable grounds test should be removed. I do believe that you should exercise it, and I do believe that there was sufficient evidence around concerning this matter in the issues raised in the Sydney Morning Herald and the stories that were around while you still had power to investigate and the deadline had not been reached. Then that journalist suddenly becomes the press officer to Mr Combet and he is no longer writing for the Herald. But I find that you simply did not take the evidence around. You did not as a commission exercise the powers that you have, and I would have no confidence at all in giving you more powers because I do not believe you would exercise them with any more responsibility.

CHAIR: As you have made that comment, it is now incumbent on me to allow the commission to respond. I do not think it is going to be helpful if we are just going to have a two-hour slanging match here. We are actually looking for some solutions.

Mrs BRONWYN BISHOP: Mr Chairman, what I am asking with that is this: having identified that gap in the act meaning that they cannot go to the HSU national office because of the contrivance that the state branches have formed a national office and therefore, because it is not covered by the Fair Work (Registered Organisations) Act—but we do not know what the position was in 2007 because you did not look at it, and that is another question we need to look at—

CHAIR: I will tell you who we might call: former senator Nick Minchin, who knows this stuff backwards. I was on the committee with him when we were having all these blues about finding out where money was coming from. Let the commission—

Mrs BRONWYN BISHOP: I do not think that is a valid point.

CHAIR: The point I am trying to make by that—and it needs to be put on the record; it is as if this is a recent invention—is that this has been around for years. It has been looked at by the committee.

Mrs BRONWYN BISHOP: I have not been on this committee before.

CHAIR: I know, and I am trying to tell you that I have. We made a report on political funding, which is a part of recommendation 5. It is important to say that this is not something the commission is raising today; it has been raised years ago and nothing has been done. At the end of the day, we have to take—

Mrs BRONWYN BISHOP: We did not have a Mr Thomson before.

CHAIR: I understand that.

Mrs BRONWYN BISHOP: And we did not have a government depending on his vote.

CHAIR: I understand all of that, but what I am telling you is: your revelations are not new.

Mrs BRONWYN BISHOP: They are relevant and they are important because—

CHAIR: I did not say they are not relevant.

Mrs BRONWYN BISHOP: the minister for state has said that he has sought advice from the Electoral Commissioner on any issues concerning the operation of the Electoral Act which should be considered for possible remedy.

CHAIR: And the commission has said—

Mrs BRONWYN BISHOP: And to have a grab bag that says, 'Just give us more power,' does not say, 'Here is a specific problem. Here is what I require as a specific remedy.' It is not there.

CHAIR: Point made. Mr Killesteyn.

Mr Killesteyn : I have just a couple of points. Ultimately, the objective of part 20 of the act is disclosure. There are a number of ways that that could be achieved. The coercive powers are in relation to those points at which the AEC believes that you are not getting cooperation from a particular party. Annexure 2 illustrates that, right throughout the whole of the process and the consultations and discussions with the HSU national office, we were receiving cooperation from them. There was no need at that time to exercise any of the coercive powers under the act. Ultimately, the objective of the act was achieved because we had disclosure.

Mrs BRONWYN BISHOP: You had the opportunity to use the powers under 3A to go in and look at those documents to find out whether or not they had been authorised and properly dealt with. We found two important gaps. Firstly, you say and you accept the advice of the union's legal advisers—nobody else's—that you cannot go in. You accept that advice and therefore you have identified a hole in the act that does not permit you to do a compliance audit of a contrivance by other union bodies to create a body spending money in an election which is beyond your compliance audit function. Problem: you have not given us a direct solution to that question. Secondly, in your report to us you have identified a problem in that you cannot match donor and donee donations because under the act at the moment, whereas the donor must make a declaration, the donee does not have to make such a declaration, if the individual donations made on a different day are under the threshold. You do not make any specific recommendation about that; you simply say it is a fact.

Now we come to the question of the analysis you have done of Fair Work Australia's report. I want to deal specifically with your findings in your analysis of the salary of Ms Stevens and the relationship of that to the disclosable period—that is, after 13 April 2007, when Mr Thomson was an endorsed candidate, ending on 24 November 2007, being the date of the election. Fair Work Australia finds that Mr Thompson had no authority to pay those wages or credit card accounts, it was outside his powers and, therefore, they are not lawful payments. They are either misappropriation, theft or fraud. But you say that is not a matter of concern to you because the act does not require you to look at whether or not moneys that are in returns are the result of misappropriation or theft. So there is another hole in the act and there was no recommendation to deal with that.

But if we deal specifically with that part of the wages of Ms Stevens, namely $31,000, that was paid during the reportable period by the candidate, there is no disclosure by the candidate. The ALP says it did not disclose it and Mr Thomson put in a nil return; so he has not disclosed it. The fact of the matter is that $31,000 of her salary in that reportable period was applied to the election campaign of Mr Thomson. Nowhere have you said that this is a problem. In fact, in your so-called analysis you just write it off by saying that it was disclosed by the HSU. You do not say anything about the National Office; you say the HSU. You think that is okay, so it gets a tick. This is a political expenditure return; there is a serious problem. What is your answer to that?

Mr Pirani : The information was disclosed in the return.

Mrs BRONWYN BISHOP: No, it wasn't.

Mr Pirani : With respect, Mrs Bishop, it was. The return from the HSU National Office included the total salary of Mr Burke and the total salary of Ms Stevens. They were disclosed.

Mrs BRONWYN BISHOP: But after 13 April, it is required to be disclosed by the donor.

Mr Pirani : And the donor's money that was being used to pay her salary was the Health Services Union National Office.

Mrs BRONWYN BISHOP: No. The recipient of the gift was Mr Thomson.

Mr Pirani : Sorry. The payment was made by the Health Services Union National Office. That is identified clearly in Mr Nassios's report, because that was the issue about whether it was appropriately authorised. The payment was made by the Health Services Union National Office and it was disclosed in their third party political expenditure return.

Mrs BRONWYN BISHOP: Mr Pirani, you are not listening to me. It is an amount of $31,000, above the threshold, paid during the election reportable period and it needed to be disclosed by the recipient of the gift.

Mr Pirani : The amount was disclosed by the Health Services Union National Office as the third party—

Mrs BRONWYN BISHOP: That is the donor.

Mr Pirani : payment.

Mrs BRONWYN BISHOP: The 'donee' needs to disclose it.

Mr Pirani : They disclosed it as a third party political expenditure. It was not a donation.

Mrs BRONWYN BISHOP: It is a donation during the reportable period of the election.

Mr Killesteyn : Mrs Bishop, we are having a difference of interpretation.

Mrs BRONWYN BISHOP: No, we are not. I am not interested in the money paid prior to 13 April. I am interested in the money paid in the reportable period.

Mr Killesteyn : Yes, and what we are saying is that it was disclosed as political expenditure rather than as a gift.

Mrs BRONWYN BISHOP: It is not disclosed by the 'donee', Mr Thomson, or the ALP.

Mr Killesteyn : It was political expenditure by the HSU National Office.

Mrs BRONWYN BISHOP: It was a gift.

Mr Killesteyn : We can have a difference of opinion on that.

Mrs BRONWYN BISHOP: No, we can't, actually.

Mr Killesteyn : Our interpretation is that it was political expenditure.

Mrs BRONWYN BISHOP: How convenient.

Mr Killesteyn : It is not 'convenient', Mrs Bishop; it is a matter of interpretation.

Mrs BRONWYN BISHOP: How convenient!

CHAIR: Your interpretation of the act is that it was properly disclosed as political expenditure.

Mrs BRONWYN BISHOP: Where is your legal advice to that effect?

Mr Killesteyn : It is political expenditure by the HSU National Office.

CHAIR: Is this the first time you have heard that it should have been disclosed in a different form or by different people?

Mrs BRONWYN BISHOP: In their own report they say it could have been required to be disclosed in different terms.

Mr Pirani : It was raised in the media, Chair; so it is an issue. The view that has been taken is that it was disclosed by the union and it was all that was required for the donor, if it was a donation; but they disclosed it as a third party political expenditure return.

CHAIR: And your professional opinion is that that complies with the act.

Mr Pirani : That is correct, based on the information that is in the Fair Work report.

Mrs BRONWYN BISHOP: No, it is a gift. Tell me why it is not a gift. Tell me why it does not comply with the definition of a gift.

Mr Pirani : The issue here was: was it for the benefit of a registered political party or a state branch?

Mrs BRONWYN BISHOP: Yes.

Mr Pirani : It was not being paid to a candidate, so it cannot be a 305A.

Mrs BRONWYN BISHOP: It was a gift of the person.

Mr Pirani : It was not paid to a candidate, so it cannot be a 305A. So the issue becomes, under 305B, whether it is a gift to a political party in relation to what took place, and subsection (2) states:

… If a person makes a gift to any person or body with the intention of benefiting a particular registered political party or State branch of a registered political party, the person is taken for the purposes of subsection (1) to have made that gift directly to that registered political party or branch.

In relation to the issues here, it could not be a candidate return because a candidate return excludes ones from the party—that is 309(1). So the issue we have here is: is it a gift that was made by the Health Services Union National Office to the ALP New South Wales Branch?

Mrs BRONWYN BISHOP: No. According to section 305A:

The person must provide a return—

okay, they did for the gift—

in accordance with this section if:

(a) the person makes a gift or gifts, during the disclosure period in relation to an election, to any candidate in the election or a member of a group;

That donation was made directly to Mr Thomson.

Mr Pirani : I do not accept that.

Mrs BRONWYN BISHOP: Not to the ALP, to Mr Thomson.

Mr Pirani : I do not accept that. The salary was paid by the Health Services Union to Ms Stevens.

Mrs BRONWYN BISHOP: The section continues: 'the … amount or value of the gift …'. It is the value of the gift. It does not have to be a cash payment to be a gift, you know that. It can be many things. A gift is a gift, and this act is meant to cover those things.

CHAIR: All right, it has all been put down—we agree to disagree. We will move on.

Mrs BRONWYN BISHOP: No, we cannot agree to disagree. This is a failure of the act. Here is a gift that has been made. Mr Thomson himself purported, in the words of the FWA, to authorise the expenditure, which he had no power to do—it was not authorised. They are the people who did the investigation. They looked at the report. They have said that it was not authorised by the national executive nor by the national council. Neither had authorised the spending of any monies in support of the campaign in Dobell, yet during that whole period Ms Stevens was employed exclusively looking after Mr Thomson's in his campaign to win the seat of Dobell. Equally, Mr Burke, although he allegedly stopped working for Mr Thomson and the HSU on 6 April, then went to work for the duty senator—but he kept his HSC credit card. The only way those credit cards got paid was when Mr Thomson authorised the payment. There is expenditure on Mr Burke's credit card for items relevant to the campaign of Mr Thomson, but all you put in your report is: 'disclosed by the HSU'. In other words, there is disclosure there that has not been properly made by the donee—not the donor. It has been made quite clear in Fair Work Australia's act who has the benefit of taking evidence. You say you did not. You merely did an analysis of what they wrote, gave it a tick and said it is all lovely. I am sorry, the Australian people will not accept that.

CHAIR: You can put that in your report. Next question? I do not think we are going any further on this; it is all there.

Mrs BRONWYN BISHOP: The problem is this: the Electoral Commission has looked at this report—by the way, did you look at the BDO Kendalls report?

Mr Killesteyn : We still have not had that made available to us.

Mrs BRONWYN BISHOP: It is an annexure to FWA. We have evidence from Mr Pirani earlier that he never asked for it—ever—even during—

CHAIR: It has not been released by the Senate committee. That is the evidence that was given to us in May.

Mrs BRONWYN BISHOP: Has the AEC asked for the BDO Kendalls report?

Mr Pirani : Not recently.

Mrs BRONWYN BISHOP: When did you ever ask for it?

Mr Pirani : We asked for it when we first approached Kathy Jackson, when we were doing work—

Mrs BRONWYN BISHOP: What date?

Mr Pirani : May 2009. We were told that the report was not available at that stage.

Mrs BRONWYN BISHOP: In the transcript, when I last asked you the question, you told me that you had not asked for it.

Mr Pirani : At that time we were aware because there was a letter—

Mrs BRONWYN BISHOP: It is recorded in the Hansard.

Mr Pirani : No, Mrs Bishop, that is not correct. What you asked me about was the statement we tabled in the Senate in relation to whether the BDO Kendalls report was relevant to the fact of the late lodgment of the returns by the national office of the Health Services Union.

Mrs BRONWYN BISHOP: That is not the transcript I am looking for.

CHAIR: When you get the transcript put it to him accurately. I am not saying you are not trying to, but I think we should go to the source. If you need assistance with that that is fine. I just think we need to have it accurately looked at.

Mrs BRONWYN BISHOP: I know it is in here; I have read it.

CHAIR: That's okay; take your time.

Mrs BRONWYN BISHOP: On 11 September 2011 I asked Mr Pirani about the BDO Kendalls report, which was prepared in relation to the expenditure in the HSU when Mr Thomson was secretary, and whether he had ever asked for a copy of this report, to which he replied:

I asked for any documents and any other assistance she could provide…I do not recall asking specifically for those reports. Certainly in the email correspondence I do not recall specifically asking for the BDO Kendalls report.

CHAIR: That does not mean that he has not. He now says he has.

Mrs BRONWYN BISHOP: I am sorry, but he said he had not.

Mr Pirani : I do not recall whether I specifically asked for it, Mrs Bishop. You are correct.

Mrs BRONWYN BISHOP: And it was not in your emails. Are you telling me you still have not got it?

Mr Pirani : We do not have the report.

Mrs BRONWYN BISHOP: When did you last ask for it?

Mr Pirani : I have not asked for it because we have no power now. At the time when they were preparing the information to prepare the returns, and on a couple of occasions since that time, we went back to them to request further information about the basis of the record keeping and the records that were available for the three returns that were lodged with us in October 2009. We have not gone in and specifically requested a copy of the BDO Kendalls report.

Mrs BRONWYN BISHOP: The BDO Kendalls report is mentioned 28 times in the FWA report, which you did an analysis of. How can you honestly say you could give a decent analysis of their report without looking at the annexures to the BDO Kendalls report, which was so important to their findings?

CHAIR: Can I just interpose here and let you know that the evidence we got in Melbourne from Fair Work Australia's Ms O'Neill is that none of the annexures have been released. I think it is important to say that. None of the annexures have been released by the Senate committee. You are damned if you do and you are damned if you don't.

Mrs BRONWYN BISHOP: In the eight days that you took to do a review of the FWA report did you write to the Special Minister of State and say, 'We cannot really do a proper analysis of this report without the annexures to the report'?

Mr Killesteyn : No.

Mrs BRONWYN BISHOP: Why not?

Mr Killesteyn : We took each of the payments that were identified under the Fair Work Australia report. We applied them against the law and we made a view about whether they had been disclosed or not. That is what we did.

Mrs BRONWYN BISHOP: As you read the FWA report you would have read all the references to the report. If any report was referred to me that was lacking the annexures to that report, which are intrinsic to the value of the report, I would simply write back and say, 'I cannot do it until I receive that report.' But obviously near enough is good enough, is it?

Mr Killesteyn : I acknowledge that. But what we did, as I have said on many occasions, was to analyse the payments identified in the Fair Work Australia report because that is what the public interest was around in relation to whether those payments have been disclosed or not.

Mrs BRONWYN BISHOP: The minister said he asked you to do a review of the report. He did not say, 'Just look at these bits of it.' He asked you to do a proper analysis on whether there had been gaps in the act.

Mr Killesteyn : Indeed, and that is what we have done.

Mrs BRONWYN BISHOP: And you did a slapdash job.

Mr Killesteyn : I do not regard it as slapdash.

Mrs BRONWYN BISHOP: No, I know you do not—that is also rather disappointing. Let us go back to these amounts.

CHAIR: Hang on.

Mr Killesteyn : I just wanted to cover your earlier comment about persons who were required to lodge a 2007 federal election return. This was the question you asked earlier, Mrs Bishop.

Mrs BRONWYN BISHOP: No, I asked for a copy of the list of people in your report.

Mr Killesteyn : I have it here.

Mrs BRONWYN BISHOP: Can I have it, please.

Mr Killesteyn : I can give you the full report if you like.

Mrs BRONWYN BISHOP: Give me anything you like. I want the list.

CHAIR: Are there are any questions arising out of that? This is the list of people who did not disclose. Is that correct?

Mr Pirani : This is the list of people who we have identified who had been included in some other return who we believed had a donor reporting obligation that was not lodged on time.

Mrs BRONWYN BISHOP: I am sorry; that is not what I asked for at all.

CHAIR: I know you asked for that, but they said that this is what they put in. I am trying to clarify.

Mrs BRONWYN BISHOP: What I asked for was the report under section 17(2A), which is:

…a list of the names of all persons who, in the opinion of the Commission, are or may be required to furnish a return under subsection 305A(1) or (1A) in relation to that election.

That is the list I am asking for. Is this it?

Mr Killesteyn : Yes.

Mrs BRONWYN BISHOP: Is this the total list?

Mr Edgman : Appendix 4 there is now the total list of prescribed persons that was arrived at after the 2007 election.

Mrs BRONWYN BISHOP: I did not ask for that. It said 'all persons', not 'prescribed persons'.

Mr Edgman : They become prescribed persons by being named in that report.

Mrs BRONWYN BISHOP: That is correct.

Mr Edgman : That is all persons.

Mrs BRONWYN BISHOP: So is this the total list?

Mr Edgman : That is right—appendix 4 there, which lists five.

CHAIR: So this is the list of those who are required to report who have not reported.

Mr Edgman : It is from those who have to lodge a donor return.

CHAIR: And you draw that from other returns.

Mr Edgman : The only way, at that stage, that we are able to identify them is because they are named on candidate returns. This list now—

CHAIR: So you draw from candidate returns a list of people who are required to lodge as donors who have not lodged, and this is the shame file, basically. This is what you publish. I am not being critical of you.

Mr Edgman : No. That is the full list. On that list you will see that we have acknowledged that we have received returns from all five persons listed.

Mrs BRONWYN BISHOP: And you will be fascinated to hear who they are.

CHAIR: I am sure you will tell us, Bronwyn.

Mrs BRONWYN BISHOP: Anthony Windsor, Hills Transport, Kindilan Investments, Manildra Group—

CHAIR: Manildra!

Mrs BRONWYN BISHOP: Yes, for donations to Tony Windsor.

CHAIR: Yes, and they were giving it to everyone at that time. It has been very rewarding!

Mrs BRONWYN BISHOP: And Mist Consulting. There is nothing in there about gifts from trade unions. You did not expect to get returns from them about gifts?

Mr Edgman : That list is put together from persons that we are able to identify at that time as having a disclosure obligation as a donor. These days, with the changes to part XX of the act, this list now really only covers donors to candidates who are above the threshold. So at the point in time this list is put together, the only information we have to work on is from the candidates' returns themselves listing donations they have received. There is certainly no evidence at this stage of any other allegations that persons had made donations, so we had no basis to name them in a report as being believed by us to have had a disclosure obligation.

CHAIR: My understanding of this is that a lot of these people who are identified are people who have not understood their obligation to lodge a return. So you extract that from the candidates' returns. They are subsequently notified and subsequently lodge nominations. Is that the way that it generally operates?

Mr Edgman : That is really the only way that we are able to identify donors and get returns from them. That is not just at election time—

CHAIR: But has the experience been that a lot of these people who have been identified were not aware of their obligation to donate?

Mr Edgman : That is very often the case. Until they get a letter from us—

CHAIR: So it is not a question of deliberately seeking to hide their donations.

Mr Edgman : We find that most people, once they receive the obligation letter from us, will comply and lodge their return fairly speedily.

CHAIR: So then you subsequently publish the people who have subsequently complied?

Mr Edgman : This is the list of all the people that we believed needed to comply.

Mrs BRONWYN BISHOP: Where is the next list, of the ones who did comply? When you did compliance and you found people who had complied, where are they listed?

Mr Edgman : This is the list of donors to candidates. We have no right under the act to do compliance reviews or audits of candidates' returns.

CHAIR: No, but there is a list, isn't there, published, of people who have complied after a certain period of time? That is put on your website.

Mr Edgman : Yes. You will see, I think, that with the last round of annual disclosures there is a list of those parties, associated entities and donors that we believe have failed to meet the deadline for lodging their return.

CHAIR: There are those who have failed. But those who meet the deadline get published at a certain period of time, don’t they?

Mr Edgman : That is right. All those returns are made public come 1 February of the following year.

Mrs BRONWYN BISHOP: I will come back to that in a moment. I am now going on to 2C and the other thing that I asked for. The act says:

… the Commission must include in any report under this section particulars of the operation of subsection 316(2A)—

that is the compliance audit—

since the preparation of the last report under this section that included particulars of the operation of that subsection.

Where is that?

Mr Pirani : It will be in the report.

Mrs BRONWYN BISHOP: Can you find it for me? Here is your report. It is a very slim volume, for dealing with so much.

Mr Edgman : Mrs Bishop, I do not believe that there is a list in this report of who we have conducted compliance reviews of. So we will need to take that on notice and put that report together.

Mrs BRONWYN BISHOP: Well, you have not complied with the act then. Do you agree you have not complied with the act?

Mr Edgman : It was not my understanding that we had an obligation—

Mrs BRONWYN BISHOP: The act says:

Subject to section 17A, the Commission must include—

not 'may', 'must' include—

in any report under this section particulars of the operation of subsection 316(2A) since the preparation of the last report under this section that included particulars of the operation of that subsection.

Mr Edgman : There is a discussion about the number of reviews that we have done, but we have deliberately taken the decision to not list—

Mrs BRONWYN BISHOP: To not comply with the act.

Mr Edgman : No, I do not believe it is not complying with the act.

Mrs BRONWYN BISHOP: I want to see a list of everybody you have done a compliance audit on. I want that list.

CHAIR: Can you take that on notice?

Mrs BRONWYN BISHOP: How quickly can we get it because it is relevant to this hearing.

CHAIR: We have not reported on the hearing yet.

Mr Killesteyn : I will undertake to get that to you very quickly.

CHAIR: As soon as you can.

Mrs BRONWYN BISHOP: Can we get it straightaway? You must have a list somewhere.

Mr Killesteyn : As I said, Mrs Bishop, I will undertake to get it to you well before this inquiry concludes.

Mrs BRONWYN BISHOP: No, today I want it.

CHAIR: She is looking for it before one o'clock.

Mr Killesteyn : I will do my best, Mrs Bishop.

Mrs BRONWYN BISHOP: You have all those employees back there at the AEC, couldn't you get one of them to find it?

CHAIR: If it is possible to have the list before we rise today, that would be terrific. If it is not possible, asap. Try and get it before one.

Mrs BRONWYN BISHOP: The act requires it to be published. They have not complied with the act and we cannot get the list.

CHAIR: The request has been put in. If they can get it before, that would be great. I think it is a list of where you have done compliance audits. Is that what you are asking, Bronwyn? What period?

Mr Pirani : It was after 2007.

Mrs BRONWYN BISHOP: As a result of 2007, is it? I want to go to the question of the 2007-08 reporting. According to the HSU national office Third party return of political expenditure for the 2007-08 it spent $516,000 on public expression of views on an issue in a federal election by any means. Did the HSU provide the AEC with a breakdown of this figure? Were any of the figures mentioned in tables 1 and 2 of your AEC analysis included in that amount?

Mr Pirani : The answer to the first question is no, they did not provide a breakdown. They were not required to.

Mrs BRONWYN BISHOP: Why not?

Mr Pirani : The act does not require them to.

Mrs BRONWYN BISHOP: There are regulations to the act, what do they require?

Mr Pirani : There is nothing in the regulations that require that. In relation the actual amounts, we set out in both our analysis and in the addendum to the analysis which of those particular amounts were disclosed after we had subsequent contact with the HSU to confirm whether or not that expenditure had been included in those returns.

CHAIR: What page is that.

Mr Pirani : I am referring to page 44 of our submission that refers to the various amounts. Then we have table 2 at pages 45 and 46 that go through the specific amounts. Again, that is based on information that we subsequently obtain from the Health Services Union national office. Further, in relation to the addendum that appears at annexure 3 at page 62 through to page 65 of our submission, we go through the specific amounts there as to whether or not they were included in those returns.

Mrs BRONWYN BISHOP: I find the way in which you have dealt with that totally disingenuous. The fact of the matter is you have given a tick to the HSU for having simply disclosed it without getting any details or particulars. All you had to do was ask for them. In a compliance review you ask for everything that people have. In this issue, which you know is highly contentious, you seek pains at every aspect to just tick it off.

Mr Pirani : The HSU national office, Mrs Bishop, I again remind you is not an associated entity. We are unable to undertake—

Mrs BRONWYN BISHOP: We dealt with that. We have just found a hole in the act and you have done nothing to recommend the way over that. Fair Work Australia were asked to make analysis. Mr Thomson contravened—and it deals with sections of the RAO—by failing to exercise his powers and discharge his duties with a degree of care and diligence that a reasonable person would exercise if he or she were the national secretary of the HSU.

CHAIR: That has nothing to do with—

Mrs BRONWYN BISHOP: Just a moment—yes it does. In the same circumstances as Mr Thomson incurring and purporting to authorise each item of expenditure upon which you are relying for the HSU to file a return of National Office funds totalling $71,000—this is part of those amounts that you have just read out—listed in the table at paragraph 197, in circumstances where neither the national executive nor the national council has authorised the expenditure of money in support of the campaign in Dobell and none of this expenditure was for, or for a purpose identical to, the general administration of the HSU, you simply give that a tick and you say, 'Everything is fine.' Well, it is not, and there is no corresponding donee return. First of all, you say 'an essential part of an effective carrying out of compliance' is that you are able to match donor and donee gifts and you note that, if the amount is paid on a different day on a different amount, it does not have to be disclosed by a donee. You do not make any recommendation about how to overcome that difficulty.

With regard to the $31,000 paid in the disclosure period for Ms Stevens's wages, it is just brushed over as dealt with by the HSU when it is not. It must be dealt with in that disclosure period. With regard to the credit card of Mr Burke, you brush it all under the carpet and say, 'HSU did it; it's fine,' when it is not, because items on that card show that there was expenditure in that election for the benefit of getting Mr Thomson elected. And yet you make no recommendations in your 17 as to how these things should be dealt with to be overcome. You make a grab bag to say, 'Just give us more power.' I would not give you an inch more power until I could see what sort of responsibility you were going to use, to in fact use the powers you have already got.

CHAIR: I will ask the commission to respond to what you have just said. Then we will move on. We are not—

Mrs BRONWYN BISHOP: I have got several other issues—

CHAIR: I do not mind you pursuing the issues, but what we are not going to have is Groundhog Day with the same assertions going backwards and forwards time and time again. We have got an hour and a half. I want you to have an opportunity to cover everything and leave me with a chance, if possible, to cover some other aspects.

Mr Killesteyn : I can only respond to a couple of the points, Chair, starting with the last one. The AEC have not asked for an increase in our powers; we simply suggested that these powers need to be clarified. We have made an interpretation of our powers. Obviously, Mrs Bishop, there are differences of view on that. We have taken a fairly conservative view about powers. If the committee believes that the powers ought to be clarified, then so be it.

In terms of your statement that the AEC has 'exonerated', to use a word, the payments made by Mr Thomson or authorised by Mr Thomson, we have not done that. We have not made any commentary at all in relation to whether those payments were properly authorised or not. That is a matter still to be prosecuted in another jurisdiction. We have simply taken the payments and made an assessment, as required under the act, about whether they were disclosed or not.

Mrs BRONWYN BISHOP: I want to again ask you about whether or not in a number of things you got any breakdown, and then I want to quote to you from your own website.

I have asked you about the $516,000—that is half a million dollars—spent on this election. According to the HSU's National Office political expenditure report 2007-08—which, I remind you, was two years late—it spent $24,850 on printing, production, publication and distribution of any material that is required by section 328A of the act to include a name, address or place of business. Did the HSU provide the AEC with a breakdown of this figure? Were any of the figures mentioned on tables 1 or 2 of the AEC's analysis? Did they include this amount?

Mr Pirani : They were not required to include any breakdown, and no, we do not have any information about that.

Mrs BRONWYN BISHOP: And you would add you did not ask for any breakdown—you just accept what the HSU tells you?

Mr Pirani : That is one of the schemes that is in the act at the moment.

Mrs BRONWYN BISHOP: According to the HSU's National Office third party political expenditure—which is two years late and given by a person who is not the person who was doing the authorisation at the time: $17,387 on broadcasted political matter, in relation to which particulars are required to be announced under subclause 4(2) of schedule 2 of the Broadcasting Services Act.

Did the HSU provide the AEC with a breakdown of this figure? Were any of the figures mentioned on tables 1 or 2 in the AEC's analysis on pages 14 and 15 included in this amount?

Mr Pirani : In relation to your first question, they are not required to give the breakdown. In relation to the matters that are mentioned in tables 1 and 2 of our analysis, yes, they have provided information from that and that is included in those pages I referred you to previously.

Mrs BRONWYN BISHOP: In which way did they provide information that these amounts were included?

Mr Pirani : We wrote to Ms Jackson and when there became an issue about whether Ms Jackson still had access to records for the national office of the Health Services Union we wrote to the lawyers for the national office of the Health Services Union and they provided a response as to what had been included and had not been included in those specific amounts. They are listed in table 2 and they are also listed in the addendum.

Mrs BRONWYN BISHOP: How did you know that those specific amounts were included?

Mr Pirani : We accepted the advice of the lawyers.

Mrs BRONWYN BISHOP: And what was the advice?

Mr Pirani : The advice is indicated in the submission. It is included at two parts. Firstly it appears at page 59, where it has Central Coast Radio, Australia Post, The Entrance Print, Nova Radio Group, PK Printing. Then we have at page 62 the establishment of the Long Jetty campaign office, the payments to the Dobell FEC, the campaign bus and the payments to LBH Promotions.

Mrs BRONWYN BISHOP: That does not help very much. Where is the evidence for that? What evidence did they supply you with?

Mr Pirani : They supplied it in writing responding to a Commonwealth officer exercising Commonwealth functions.

Mrs BRONWYN BISHOP: But you were not asking the person who was required to furnish the return, you were asking the lawyers.

Mr Pirani : Given that the national office of the Health Services Union was a legal entity, I was asking the legal entity. Because there were issues—

Mrs BRONWYN BISHOP: You didn't, you asked the lawyers.

Mr Pirani : Sorry, Mrs Bishop, I had to approach a legal entity. There became an issue with all the court proceedings that were going on as to who was the appropriate person within that body for me to approach. In the end, after previously approaching Ms Jackson, the last approach we made was directly to the law firm Slater and Gordon, who confirmed that they still had instructions on behalf of the national office of the Health Services Union. So I went to the body and the person who had instructions to respond and to act on behalf of that legal entity.

Mrs BRONWYN BISHOP: Let me get this right. You are telling me you did not know whether the national office of the Health Services Union still existed but you went to their lawyers, who told you they had instructions from that body, and you accepted that.

Mr Pirani : No, that is not what I said. I said that previously I had approached Ms Kathy Jackson, and I did it on numerous occasions from about June 2009. But after the Fair Work Australia report came out there were issues about Ms Jackson's status within the national office of the Health Services Union. Given that I had previous contact with the lawyers, Slater and Gordon, I approached the lawyers to, first, ascertain whether they still had instructions and then to approach them for them to get instructions from their clients to respond to us in relation to whether those amounts had been included.

Mrs BRONWYN BISHOP: So let us get that right. You were not sure whether or not Ms Jackson was the national secretary of the Health Services Union, so he went to the Health Services Union national office lawyers and asked them could they get instructions from the HSU from someone so they could something that she cannot tell you. Is that right?

Mr Pirani : I was seeking a response from a legal entity, which was the Health Services Union national office, and I approached their lawyers to obtain that advice.

Mrs BRONWYN BISHOP: But you did not know where you were writing to Kathy Jackson whether she was the secretary and therefore you did not do it, so you went to the lawyers and then they asked Kathy Jackson.

Mr Pirani : Previously I had spoken and written to Ms Jackson on the basis that I was still aware she was the national secretary of that body. I was aware of the legal proceedings have going on in the Federal Court of New South Wales and therefore it was not clear to me at that time whether Ms Jackson was still holding that position and indeed whether she still had access to the records.

On that basis I directly approached the lawyers, who confirmed that they still had instructions on behalf of the legal entity, the national office of the Health Services Union.

Mrs BRONWYN BISHOP: They might have had instructions but did they have access to the documentation? You do not know that.

Mr Pirani : They wrote an extensive letter back, which I understand has been tabled in the Senate, setting out the information.

Mrs BRONWYN BISHOP: How about we table it here?

Mr Pirani : I do not have that letter with me but I will make arrangements for that.

Mrs BRONWYN BISHOP: Fancy that!

CHAIR: Let's just continue to keep it civil and ask questions and let people answer. If we could get a copy of that letter so it could be tabled, that would be appreciated.

Mrs BRONWYN BISHOP: Let's put it on the record. Kathy Jackson became the National Secretary of the HSU national office on 6 December 2007. You had no contact with Kathy Jackson until 2009. Is that correct?

Mr Pirani : That is correct.

Mrs BRONWYN BISHOP: Isn't that you not carrying out your responsibilities?

Mr Pirani : With respect, we had issues trying to identify which bodies within the Health Services Union had lodged the various returns, which ones would have been an associated entity and which ones were not. That took some time.

Mrs BRONWYN BISHOP: Irrespective of whether they were an associated entity or not, as a third party they would have to put in a return. How many other returns were late? How many other trade unions were late?

Mr Pirani : I would have to take that on notice, Mrs Bishop.

Mrs BRONWYN BISHOP: Of course you would.

CHAIR: I don't mind questions but I don't think certain comments need to be made.

Mrs BRONWYN BISHOP: According to the HSU's national office political expenditure report, for the 2006-07 year it spent $378,472 on public expression of views on an issue in a federal election by any means. Did the HSU provide the AEC with a breakdown of this figure? Were any of the figures mentioned in table 1 or 2 included in this amount?

Mr Pirani : The answer is the same as to the previous questions. They are not required to give a breakdown. To the extent that those amounts were identified in chapter 7 of the Fair Work report, we included our analysis of those in table 1, table 2 and in the addendum.

CHAIR: Could I have a resolution that a subcommittee be formed consisting of Mr Melham, Mrs Bishop, Mr Somlyay and Senator Carol Brown. Moved, seconded, carried. That just allows us to continue through, because we are losing some members.

Mrs BRONWYN BISHOP: I am going to ask about each of these amounts specifically; it is important to have it on the record. According to the HSU's national office political expenditure report 2007-08, it spent $16,426 on printing, production, publication and distribution of any material that is required by section 328 and 328A of the act to include a name, address or place of business. Did the HSU provide the AEC with a breakdown of this figure? Were any of the figures mentioned in tables 1 and 2 in the AEC's analysis included in this amount?

Mr Pirani : The answer, again, is the same as the previous ones. No, they were not required to give a breakdown. Yes, we subsequently got information about some of those amounts and they are included in table 1, table 2 and in the addendum.

Mrs BRONWYN BISHOP: According to the HSU national office political expenditure report 2007-08, it spent $9,394 on carrying out opinion polling or other research relating to a federal election or the voting intention of electors. Did the HSU provide the AEC with a breakdown of this figure? Were any of the figures mentioned in tables 1 or 2 in the AEC's analysis on pages 14 and 15 included in this amount?

Mr Pirani : The answer again, on the first part, is: no, they did not provide a breakdown. The answer on the second part is: no amounts for opinion polling were identified in the Fair Work Australia report. Accordingly, they are not included in those tables.

Mrs BRONWYN BISHOP: I want to go to your own website concerning compliance reviews. It says:

The AEC undertakes compliance reviews of … political parties and their state branches and associated entities.

It does not mention prescribed persons on the website. It states:

In a standard compliance review the section 316(2A) notice will require delivery of the following documents and records.

•   The full set of financial records including the general ledger and all subsidiary ledgers.

•   The chart of accounts.

•   The trial balance as at 30 June.

•   Statements of all bank/financial institution accounts, including any investment accounts and broker accounts, for the 13 month period from 1 July to 31 July of the year following the financial year under review.

•   Bank reconciliation statements for each account as at 30 June of the financial year under review and 30 June of the previous year.

•   Audited financial statements for the financial year.

•   Terms and conditions of all loans outstanding as at 30 June.

•   A list of all gifts-in-kind received during the financial year including their valuation.

•   The working documents used in collating the disclosure return clearly demonstrating how the disclosed total receipts, total payments and total debt figures were derived.

These records do not necessarily constitute a final, exhaustive list of the records required for the conduct of the compliance review and further records may be requested. As mentioned above, in certain circumstances the financial records of a sample of party units will be sought. Still further records may be requested arising from specific issues identified in the course of the compliance review. For instance, the AEC may wish to review the Minutes of meetings where it believes that financial discussions may have taken place, but, in recognition of the sensitivity of some of these Minutes, AEC staff will only view them on the party's premises and only take notes or copy extracts where they evidence a possible failure in disclosure.

Wherever a political party or associated entity utilises computerised accounting software or otherwise maintains or possesses financial records electronically, the AEC will require those records to be provided in an appropriate electronic format, not hardcopy. It is also essential to the efficacy of a compliance review that the integrity of the records provided can be assured. The AEC, therefore, will require dumps of the accounting database to be provided, not extracts of data.

That is a pretty exhaustive and definitive statement of what you require in a compliance audit. Yet you accept at face value from a trade union a simple statement, 'Yes, that's in.' Yet you exercise this rigour in another part when the act requires you to be rigorous on all parties, not just the ones you choose.

Mr Pirani : The provisions of the act cannot apply to the Health Services Union national office because it was not an associated entity.

Mrs BRONWYN BISHOP: That is why I want to know about prescribed persons.

Mr Pirani : How are they a prescribed person?

Mrs BRONWYN BISHOP: A prescribed person is anyone who goes into the list. If you do not put them on the list, they do not become a prescribed person, do they?

Mr Pirani :    But that is only for donations in relation to a candidate.

Mrs BRONWYN BISHOP: Correct. It says that donations that are made and gifts in kind are required in your compliance audit. You specifically spell it out:

•   A list of all gifts-in-kind received during the financial year including their valuation.

When I asked you about the gifts in kind made to Mr Thomson or to the ALP, you told me they do not have to make that declaration with regard to the wages and services of Ms Stevens.

Mr Killesteyn : Because although it was regarded as political expenditure by the HSU—

Mrs BRONWYN BISHOP: No, it is a gift to a candidate.

Mr Killesteyn : We have been through this one before.

CHAIR: There is no need to­—

Mrs BRONWYN BISHOP: In that case, according to you, Mr Killesteyn, anybody could make a gift of the services of someone during an election period and you would just say it is political expenditure.

Mr Killesteyn : No, we would have to look at the circumstances in each case.

Mrs BRONWYN BISHOP: But you have not looked at the circumstances. You have just made a decision.

CHAIR: Could I ask whether there are other similar instances? Let's put it on the table: during the Your Rights at Work campaign a lot of assistance was given to Labor candidates. Mr Pirani, I take it that a lot of that was disclosed as gifts to political parties, not to candidates.

Mrs BRONWYN BISHOP: No.

CHAIR: I am asking the question; I do not know. I am trying to find similar instances. What I am thinking of is Your Rights at Work, where people would have worked on local campaigns. Were declarations coming in or not in relation to those, or hasn't there been anything similar?

Mr Edgman : We have, in conducting compliance reviews, seen cases where union staff were lent to the ALP to help with the campaign. They have been included in receipts as gifts in kind from the ALP branches.

CHAIR: Sorry, to whom? To the party or to the candidate?

Mr Edgman : To the party. The candidates invariably lodged nil returns. The act deems any activities of their campaign committee to be part of the party.

CHAIR: Then the party declares them. So this is consistent with what has happened in other instances that you are aware of.

Mr Edgman : Yes.

CHAIR: That is not inconsistent with the practice at the time. Sorry, but I am just trying to clarify.

Mrs BRONWYN BISHOP: That would be the case if the ALP had disclosed Ms Stevens as a donor to the party.

CHAIR: That is another matter.

Mrs BRONWYN BISHOP: The evidence before us is that it did not.

CHAIR: That is another matter.

Mrs BRONWYN BISHOP: That is the point.

CHAIR: We have had this big blue about whether it is to the political party or the candidate. I am asking: what has it been taken to be in the past?

Mrs BRONWYN BISHOP: No—

CHAIR: You have a concern if the party has not disclosed it. That is a separate matter. That is not Thompson. The debate at the moment has been whether Thompson should have disclosed this as a gift to himself.

Mrs BRONWYN BISHOP: That is right.

CHAIR: What you are telling me is that the practice has been that it gets disclosed to the party. The candidate gives a nil return; the obligation is on the party.

Mrs BRONWYN BISHOP: No. What the witness said was that he has seen instances—

CHAIR: Yes; that is okay. That is all I am trying to establish: what is the practice?

Mrs BRONWYN BISHOP: No; it may not be the practice. It may only be an isolated case. How many instances have you seen?

Mr Edgman : I could not even hazard a guess. The way we conduct a compliance review of a major party is that we review the central records of the party. We then do a review of a sample of their branches—they are all out posted. With the large parties they run to the hundreds. We take a sample of 20. That will include a range of the different types of branches. So if it is an election year there will be—

Mrs BRONWYN BISHOP: Branches of what?

Mr Edgman : These are the local branches, the FECs and SECs.

CHAIR: In the process that we have identified, can I just clarify whether the same thing happens with the conservative side of politics?

Mrs BRONWYN BISHOP: The who?

CHAIR: The Liberal Party or the National Party. Are there instances of nil returns and then it is the party? So this is not a practice peculiar to the Labor Party. On the conservative side of politics the same thing happens so that the state branches—

Mrs BRONWYN BISHOP: That is—

CHAIR: I am not trying to—

Mrs BRONWYN BISHOP: That is not what is at issue. The conservative side of politics does not have a trade union movement.

CHAIR: I understand that.

Mrs BRONWYN BISHOP: It does not have any equivalent.

CHAIR: Your whole debate has been that the requirement was really on Mr Thompson to disclose it as a gift.

Mrs BRONWYN BISHOP: No.

CHAIR: I am trying to establish what the practice is. Is it nil returns and it then becomes the party's obligation?

Mrs BRONWYN BISHOP: No, no. I said at the beginning that it had not been disclosed either by Mr Thompson or the ALP. The ALP has not disclosed it. Mr Thompson is the person who has authorised the expenditure of the money on Ms Stevens. It is the finding of fact by FWA.

CHAIR: And tell me—

Mrs BRONWYN BISHOP: And it says that he had no authority—

CHAIR: That is a separate issue.

Mrs BRONWYN BISHOP: It is a most important issue.

CHAIR: I just want to establish that he put a nil return in—

Mrs BRONWYN BISHOP: Yes, he did.

CHAIR: for the 2007 election.

Mrs BRONWYN BISHOP: Yes, he did. I have it here. What I am saying is that that return is wrong, because the ALP has not disclosed it as a gift to the ALP. Neither has Mr Thompson. The fact of the matter is that Mr Thompson had no authority to authorise that expenditure, which means it is misappropriated money.

CHAIR: That is a separate issue but there is also a—

Mrs BRONWYN BISHOP: It is a vital issue for this AEC.

CHAIR: There is a disclosure level, which you increased to $10,900.

Mrs BRONWYN BISHOP: I am talking here, of over half a million dollars. I am talking about nearly a million dollars. I am not talking about 10,000 bucks; I am talking about a million bucks.

CHAIR: I am going to put up the white flag of surrender in a minute.

Mr Killesteyn : I can understand the point that you are making, Mrs Bishop. The only thing I would offer is that the HSU national office, in making a decision to disclose that amount in their return, ultimately took responsibility for that payment.

Mrs BRONWYN BISHOP: I am sorry; what you are talking about is somebody who came into the office afterwards and had no knowledge of it. The BDO Kendalls report is vital to this analysis, because it goes through chapter and verse where there are records that are simply missing—

Mr Killesteyn : Yes, I am saying that—

Mrs BRONWYN BISHOP: Therefore it was possibly beyond the competence of the person who filed that return to have done it.

Mr Killesteyn : I am saying that, but also—

Mrs BRONWYN BISHOP: But you are not prepared to look behind it.

CHAIR: He has not got it.

Mrs BRONWYN BISHOP: Yes, he has.

Mr Killesteyn : The HSU national office, in our discussions with them, were alerted to the possibility that they could lodge a section 318 notice—

Mrs BRONWYN BISHOP: And they did not do it.

Mr Killesteyn : and they did not do it.

Mrs BRONWYN BISHOP: Correct. But that does not make it right.

Mr Killesteyn : At face value, they accepted responsibility for the payment; they had an opportunity to excuse their responsibility.

Mrs BRONWYN BISHOP: With respect, Mr Commissioner, Blind Freddy—pardon the colloquial expression—would have known there was nothing normal about what was going on at the HSU. You seem to be the only official government entity which is prepared to think it was perfectly normal and business as usual. That is just not a reasonable thing to have concluded.

Mr Killesteyn : And that is not what we have said. We have simply said that we have looked at whether the payments had been disclosed under the Electoral Act. We have made no comment about whether those payments were properly authorised or not.

Mrs BRONWYN BISHOP: Under the Electoral Act, you have the power—which your own legal adviser did not know about until I drew it to his attention—

CHAIR: No, that is not true.

Mrs BRONWYN BISHOP: Yes, it is. He denied he had any such power­—

CHAIR: That is not true.

Mrs BRONWYN BISHOP: and then sought to correct the record.

Mr Killesteyn : It was in relation to the issuing of warrants.

CHAIR: You are verballing him, Mrs Bishop.

Mrs BRONWYN BISHOP: I am not. Fortunately, it will be in the Hansard.

CHAIR: I know it is in the transcript. I will listen to it.

Mrs BRONWYN BISHOP: Play it back, if you like.

CHAIR: You can play it back 10 times. This is what happens when—

Mrs BRONWYN BISHOP: An authorised officer has reasonable grounds to believe—

CHAIR: Can I just say that this is the problem when one is at cross-purposes and when people interrupt when someone has given half an answer—it is contorted. I am not trying to stop you; all I want to say is that the misinterpretation here—which is an innocent misinterpretation—occurred because of the interaction at the time. Ask your question, and when it is completed, let them answer without interruption.

Mrs BRONWYN BISHOP: Just for the record, Mr Chairman, I said to Mr Pirani that under the act he had powers to go before a magistrate and get a warrant for documents. Mr Pirani replied: 'No, only under the Crimes Act. There is no power in the act.' He then had to correct his statement once he had looked at it. I find it incredible that, all the time we were dealing with this section of the act, he had no knowledge of it. He could have used those powers and gone in and had a look at those records to clarify the position. The court could have knocked it back.

CHAIR: You will get a chance, Mr Pirani, because that was not my interpretation of what happened. Mr Pirani, put your position and then we will be moving on.

Mr Pirani : No, I accept Mrs Bishop's characterisation in relation to that. But again, it is still the reasonable grounds test in subsection (7) that we need to go through before we get to the warrant.

Mrs BRONWYN BISHOP: But I am saying that when you talk about section 316(3), about needing reasonable grounds, you make the decision as to whether there are reasonable grounds. However, when you use the provisions of section 316(3A), it is the magistrate who makes the decision as to whether there are reasonable grounds or not.

CHAIR: Do you take advice on reasonable grounds or is it your sole prerogative to decide, Mr Pirani? Do you at times take AGS advice, for example, on reasonable grounds?

Mr Pirani : We had a discussion at one of the earlier hearings about the advice that we have had in previous matters relating to reasonable grounds, and reference was made to the case of George v Rockett, which is the relevant High Court decision. That is the basis on which we were looking at whether we had reasonable grounds in respect of section 316(3). We also included a response in relation to that issue in our request for advice from the DPP. Again, I note that that advice has been claimed by the Special Minister of State to be subject to public interest immunity.

Mrs BRONWYN BISHOP: But you are aware, Mr Chairman—as is everybody else that has anything to do with the law—that the DPP does not give advice.

CHAIR: That is not right.

Mrs BRONWYN BISHOP: The DPP is there to receive a brief of evidence which it then says is or is not adequate. It does not give gratuitous advice to people as to whether or not they have reasonable grounds to use their powers.

CHAIR: You have the Australian Government Solicitor—

Mrs BRONWYN BISHOP: But he is not the DPP.

CHAIR: Yes, I know. I am saying that the DPP will make a determination on the brief that is given to it as to whether there are reasonable prospects of success.

Mrs BRONWYN BISHOP: But that is the whole point.

CHAIR: Everyone has different roles here, and we should not verbal the others.

Mrs BRONWYN BISHOP: Let's get it right. Mr Pirani has given evidence before that the only person he sought legal advice from was the DPP. He had prepared no brief of evidence to request an advice about.

Mr Pirani : Sorry, Mrs Bishop, I have never said that I did not prepare a brief. I said the matter was referred to DPP and we got a response in relation to the material that was referred to them.

Mrs BRONWYN BISHOP: On which question?

Mr Pirani : On the issue of a prosecution.

Mrs BRONWYN BISHOP: Correct.

Mr Killesteyn : In relation to late lodgement of the returns.

Mrs BRONWYN BISHOP: Correct. That is a completely different question.

Mr Pirani : We have a very good relationship with DPP over many years, where they have offered assistance and advice in relation to taking a prosecution forward.

Mrs BRONWYN BISHOP: Yes, but first you have got to prepare a brief of evidence—which you say you cannot do and it has to be done by the police.

Mr Pirani : In relation to evidentiary matters, yes, you are correct.

CHAIR: We have had this debate in years gone by.

Mrs BRONWYN BISHOP: I just wanted to have it on the record again. In answer to your specific question, Mr Pirani, you make up your mind whether or not you believe you have reasonable grounds. Is that right?

Mr Pirani : The authorised officer makes up their mind. I am not an authorised officer as to whether they believe there are reasonable grounds, yes.

Mrs BRONWYN BISHOP: When have we had that authorised officer make a determination concerning the need to exercise the powers about going in to look at the national office of the HSU, for instance, that there were no reasonable grounds? Did anyone ever ask an authorised officer to make that decision?

Mr Pirani : Yes.

Mrs BRONWYN BISHOP: And?

Mr Pirani : The authorised officer formed the view there was not sufficient basis to go and exercise that power.

Mrs BRONWYN BISHOP: Without telling us who he was, can you give me the date that the authorised officer was asked to consider the matter and the date on which he determined that he had no reasonable grounds to go into the HSU national office?

CHAIR: In the meantime, Mr Killesteyn, did you have something you wanted to add?

Mr Killesteyn : Yes. There is obviously a question about the interpretation of 'reasonable grounds'. Mrs Bishop, I would just point out that we have made that public, it is posted on our website about the basis upon which we have reached a view about the interpretation of reasonable grounds. If there are alternative views then we are more than happy to look at those, but those views are there and transparently.

CHAIR: I think you will find, Mr Killesteyn, that most MPs would prefer a conservative view, because they do not want to be raided by the AEC. If you raid an MP's office and go over the top you will hear them squeal.

Mrs BRONWYN BISHOP: They have been raiding MPs offices, of which you are well aware, Mr Chair.

CHAIR: Yes, I am, and that is why you have got to be cautious.

Mrs BRONWYN BISHOP: They were not too cautious at the time.

Mr Killesteyn : I acknowledge that we take a conservative view of the act.

CHAIR: As you should.

Mr Pirani : The actual date when the authorised officer made the decision was 16 October 2009.

Mrs BRONWYN BISHOP: And he was specifically asked—

Mr Pirani : About 316(3); yes, he was.

Mrs BRONWYN BISHOP: He was asked to exercise his powers under 316(3) to look at the national office of the HSU?

Mr Pirani : That is correct.

Mrs BRONWYN BISHOP: And he decided that he did not have sufficient grounds?

Mr Pirani : That is correct.

Mrs BRONWYN BISHOP: What was the basis of his deciding that?

Mr Pirani : All of the material, because he had the file.

Mrs BRONWYN BISHOP: All he had was your file?

Mr Pirani : He had the AEC file, with the various advisings and other things that were on it, and all the material.

Mrs BRONWYN BISHOP: Did he seek legal advice as to whether or not—

Mr Pirani : That was part of what was on the file.

Mrs BRONWYN BISHOP: What was on the file?

Mr Pirani : The legal advice, the DPP advice, all the issues about George v Rockett, all the issues and the previous advisings that we had about the reasonable grounds test.

CHAIR: And that is where there has been public interest immunity claimed—in relation to that legal advice. That's okay. It wasn't you, Mr Pirani—

Mrs BRONWYN BISHOP: But nobody has used the powers under 3A, because, presumably, he did not know he had them.

Mr Pirani : The power under 3A was in relation to determining whether or not a body is an associated entity, isn't it?

Mrs BRONWYN BISHOP: No.

Mr Pirani : '… an authorised officer has reasonable grounds to believe that a person is capable of producing documents or other things, or giving evidence, relating to whether an entity is, or was at a particular time, an associated entity'. Paragraph A. We had not reason to use those powers. They were not considered.

Mrs BRONWYN BISHOP: When did you decide that the national office of the HSU was not an associated entity? You had not always been of that view.

Mr Pirani : That is correct.

Mrs BRONWYN BISHOP: When did you change your mind?

Mr Pirani : I first had the discussion with the lawyer from Slater and Gordon—

Mrs BRONWYN BISHOP: So you did not take any independent advice; you took the union's advice.

CHAIR: Let him answer.

Mr Pirani : We got legal advice and we had a look at the material that had been raised, we had a look at the provisions of the Fair Work (Registered Organisations) Act and we accepted the argument that was put in the legal views by Slater and Gordon.

CHAIR: When you say that you took legal advice, was it other than from Slater and Gordon?

Mr Pirani : Only myself.

CHAIR: Only yourself; I am just trying to clarify.

Mr Pirani : I had a look at the relevant provisions that were referred to and I agreed with the submissions that had been put by Slater and Gordon and also by Kathy Jackson that the national office of the Health Services Union was not an associated entity.

CHAIR: Thank you.

Mrs BRONWYN BISHOP: That is the big problem, isn't it? You did not have a discussion with the Australian Government Solicitor, only with the solicitors for the union.

Mr Pirani : I am a practising solicitor myself. I have an unrestricted practising certificate. I am employed as the chief legal officer to the organisation, and the decision was made that we did not need to go out and get external legal advice on something that appeared to be straightforward based on the relevant provisions in the Fair Work (Registered Organisations) Act.

CHAIR: Your views are well known in relation to this matter and you have not been challenged by anyone to the contrary, have you?

Mr Pirani : Not that I am aware of.

CHAIR: But your views are well known. You have not been hiding them under a bushel in relation to the reasonableness test.

Mr Pirani : Certainly not.

CHAIR: There is nothing that has come across your path that has questioned your interpretation.

Mr Pirani : Not in relation to that status of—

CHAIR: No, I am asking a particular question.

Mr Pirani : No.

CHAIR: Do you have a document for us and what is it?

Mr Killesteyn : Yes, I have the list of section 316(2A) reviews completed since 2007, which we are happy to table now.

Mrs BRONWYN BISHOP: Can we have that now?

CHAIR: Can you say how many there are?

Mr Killesteyn : There are probably 150.

CHAIR: Thank you. You do not mind if I table that?

Mr Killesteyn : Not at all.

CHAIR: Is there anything else you want to table?

Mr Pirani : I am also tabling the letter from Slater and Gordon dated 23 May 2012 addressed to me. It sought further information about the payments that were listed at table 1 and table 2 of our analysis.

CHAIR: I propose to table a copy of a list of reviews completed since 2007, which runs for almost five pages, covering the period 2007, 2008, 2009, 2010, 2011 and 2012.

Mrs BRONWYN BISHOP: So it is two elections' worth.

CHAIR: It is two elections' worth. It is four years. I also propose to table a letter from Slater and Gordon to Paul Pirani dated 23 May 2012. It is a four-page letter from Marcus Clayton, National Practice Group Leader, relating to the Health Services Union national office returns lodged under part XX of the Commonwealth Electoral Act 1918 for the 2006, 2007 and 2008 financial years. There being no objection, it is so resolved. I thank the Commissioner and officers for their swift response.

Mrs BRONWYN BISHOP: I am just amazed.

CHAIR: You are amazed?

Mrs BRONWYN BISHOP: There is not one trade union on this list, not one—not a single trade union is on this list. I am absolutely staggered.

CHAIR: Maybe they are all doing the right thing.

Mrs BRONWYN BISHOP: That is not the point. Everyone is deemed to be doing the right thing. There is not one trade union—not one. Why is this the case?

Mr Killesteyn : I cannot give you an answer, Mrs Bishop, about—

Mrs BRONWYN BISHOP: I bet you cannot.

Mr Killesteyn : why there is not a trade union. It is the first time I have seen that list put together.

Mrs BRONWYN BISHOP: You are the Commissioner and it is the first time you have seen it. That is wonderful! Not one!

CHAIR: Let me just proffer an explanation—

Mrs BRONWYN BISHOP: I can think of one.

CHAIR: in relation to a lot of them. It happens to be the major political parties registered under the Electoral Act who have primary responsibility, so you have the Labor Party, the Liberal Party, John Curtin House, the Australian Greens, the National Party et cetera.

Mrs BRONWYN BISHOP: The one that acted for Mr—

CHAIR: It is interesting. The Canberra Labor Club has been one, and there are also SA Progressive Business, the 500 Club in Victoria and the Jim Killen Young Liberal Foundation. It seems to me to be a—

Mrs BRONWYN BISHOP: There is not one union on that list, and I want an explanation for why not.

CHAIR: There is the Chifley Research Centre.

Mrs BRONWYN BISHOP: It is absolutely outrageous.

CHAIR: Perhaps what you might do for us in the supplementary is just indicate what your criteria are in relation to these.

Mrs BRONWYN BISHOP: The criteria are associated entities which are trade unions. There is not one. In this addendum you sent in here, where you are talking about the issues that I have been talking about—

CHAIR: Hang on. Can I just say that in 2011—just so we understand, before the sky falls in—the Health Services Union appears here, so it is not true to say there is not one trade union.

Mrs BRONWYN BISHOP: We were told in evidence that they had not been given a compliance order.

CHAIR: I am just reading from the letter that someone has blown up, saying 'no trade unions'.

Mr Killesteyn : Sorry. The one in 2011 is HSU East.

CHAIR: Yes. It just says 'Health Services Union'.

Mr Killesteyn : It was the HSU East union on which we went and conducted a compliance review.

CHAIR: Can I just say that John Curtin House Ltd, the Labor campaign—

Mrs BRONWYN BISHOP: That is not a trade union.

CHAIR: No, but I do not want it to be thought that the progressive side of politics has been left untouched here.

Mrs BRONWYN BISHOP: They are not matching ones that come from the other side. The fact is that the trade union movement provides all the money for the Labor Party and its expenditure—its whole Your Rights at Work—and there is not one.

CHAIR: In 2010—

Mrs BRONWYN BISHOP: The HSU back in 2011, after the period when you can—

CHAIR: In 2010 the Labour Movement Education Association—

Mrs BRONWYN BISHOP: It has nothing to do with the trade union movement.

CHAIR: What we can do—I am sure the point has been made—is that you might come back to us as to the basis upon which those reviews were—

Mrs BRONWYN BISHOP: There is page after page after page: the Higgins club, twice; the Indy Foundation; John McEwen House; the Liberal Party of Australia; the Liberal Party of Queensland; the Don Chipp Foundation; the Kooyong club; the parliamentary Liberal committee—

CHAIR: Maybe part of the reason is that in between election years I do not think the trade union movement gives a lot of donations to the Labor Party.

Mrs BRONWYN BISHOP: Oh, get out! There is $76 million on Your Rights at Work.

CHAIR: That is right—a campaign—

Mrs BRONWYN BISHOP: Even the Eros Foundation gets a going over.

CHAIR: You can blow up. What I am interested in is the basis upon which the reviews are done.

Mrs BRONWYN BISHOP: Here's a suspect one: the Lady Wilson Foundation. It was certainly important for that to have one!

Mr Killesteyn : Perhaps I could ask Mr Edgman to give information about it.

CHAIR: Do you want to just give us a preliminary, Mr Edgman?

Mrs BRONWYN BISHOP: I—

CHAIR: Let him give the preliminary.

Mr Edgman : We look at all the possible returns that are lodged in a year. We cannot go anywhere near reviewing all of them, so we place our emphasis upon political parties—which are the major players under the act, of course. Our major emphasis on associated entities is on those that are in effect conducting financial transactions of the party. Most of those that you will see there are fundraising organisations for the political parties, so they are in effect financial arms of the political parties. That is our primary focus. What we do say as part of our policy in selecting them is that for any associated entity caught by the last four paragraphs of the definition of 'associated entity'—which is where the trade unions—we will reserve the right to go and exercise a 316(2A) compliance review notice on them if we believe that the circumstances warrant it, which is why we went to HSU East.

CHAIR: In 2011.

Mr Edgman : That is right.

Mrs BRONWYN BISHOP: And what did you find?

Mr Edgman : We found that with their amended return—and this is the reason why we looked at them—they had lodged a return, as you may well understand—

Mrs BRONWYN BISHOP: For nil, and subsequently $24 million.

Mr Edgman : That is right. So we went in to do a compliance review of their records to see whether the amended return was now correct, and we found that that return, as amended, is now correct.

Mrs BRONWYN BISHOP: Were they penalised for putting in a false return the first time? Nil to $24 million is a bit of a gap.

CHAIR: Let him answer the question.

Mr Edgman : No legal action was commenced against them.

Mrs BRONWYN BISHOP: Of course not.

CHAIR: Is that the organisation of which Kathy Jackson—

Mr Killesteyn : No, that is HSU East.

Mrs BRONWYN BISHOP: The Williamson one.

Mr Killesteyn : Our assessment of the HSU East matter was also on our website. We are happy to table that for you, Mrs Bishop.

CHAIR: Yes, if you could do that.

Mrs BRONWYN BISHOP: It is the only trade union on this entire list. Further, I do not see GetUp! on here either. Amazing. As I said, we managed to find the Lady Wilson fund all right and also the Indi foundation and the Murray2 super club but we cannot get to GetUp! with all its millions of dollars.

CHAIR: You are not aware of continuous fundraising between elections—

Mrs BRONWYN BISHOP: I am now going to the letter from Slater and Gordon. I think it is important to note—

CHAIR: Let me just finish this. You are not aware of continuous fundraising by trade unions between elections that would lead you to do the reviews? Is that fair or unfair?

Mr Edgman : That is correct. Our knowledge of how trade unions fund the payments they make to the Labor Party is that it is from membership dues and maybe any investments that they have. So there is really little information not already on the public record about the derivation of that money—where the source is of those funds.

CHAIR: You became aware of certain information concerning HSU East, and that triggered your inquiry. That is why it appears on the list.

Mr Edgman : That is right. We would reserve that right to look at any other associated entity that falls within those last four categories if we believed that there was some question about the finances they declared.

CHAIR: Thank you. Mrs Bishop wants to go to the letter.

Mrs BRONWYN BISHOP: It states:

In December 2008 the HSU National Executive appointed Slater & Gordon—

of course, that is the Prime Minister's old firm—

to engage a suitable forensic accounting firm to assist them with an analysis of the financial records and provide a report on the suspected irregularities. Slater & Gordon engaged BDO Kendalls as forensic accountants and the firms delivered their report ("the Slater & Gordon/BDO Kendalls Report") to the HSU National Executive on 15 June 2009.

Again, right throughout the letter this report is important. Yet, you have given an analysis and ticked off on the HSU's returns as adequately covering amounts when the BDO Kendalls report is fundamental to understanding what was in the Fair Work Australia report, and you have not even asked for it.

Mr Pirani : Mrs Bishop, can I just also point out that our coercive powers under the act do not override legal professional privilege. If one has a look at how BDO Kendalls was engaged, it was engaged by Slater and Gordon on behalf of the Health Services Union National Office. So that is one of the issues that we need to look at in relation to any review of the powers that are here as to whether we would need the power to override legal professional privilege.

Mrs BRONWYN BISHOP: The report was an annexure to the FWA report, which you were asked to analyse; therefore, you analysed an incomplete report.

Mr Pirani : We were asked to analyse the report that had been released by the Senate, and that is what we analysed. We could not analyse something that we did not have.

CHAIR: Indeed, the report was released by the Senate. It was speculated to ensure that it was covered by parliamentary privilege. Again, we heard from Fair Work Australia that the annexures were not released. Fair Work Australia took a very conservative view in terms of the releasing of any of the report. My recollection of the evidence—and correct me if I am wrong, Mrs Bishop—is that they were saving it for the DPP.

Mrs BRONWYN BISHOP: No. She said that she would take advice as to whether she could release it. I find it unacceptable that a Senate committee can have that report and this Joint Standing Committee on Electoral Matters cannot.

CHAIR: And we have asked for it.

Mrs BRONWYN BISHOP: I go back to Mr Gray's letter where he says that he asked you, the Electoral Commission, whether or not there had been any failures to comply with the provisions of the Electoral Act as disclosed by information in the recently published Fair Work Australia report. That report has not been published in full, but it led me to believe that you must have had access to it because he would not have asked you to deal with an incomplete report—but apparently he did. And you did not even ask for the rest of the report.

CHAIR: Hang on. We have evidence in front of us that the commission asked for the report some time back.

Mr Pirani : We asked for all related documents that relied on producing the material and the return to us.

CHAIR: That is right—not in relation to this report.

Mr Pirani : No, in 2009.

Mrs BRONWYN BISHOP: This letter from Slater and Gordon says:

The third party political expenditure and donor returns submitted by the HSU on 13 October 2009—

they are the belated ones—

were largely based upon the findings of the Slater & Gordon/BDO Kendalls Reports—

which you have not seen.

The report was prepared by the firms with a particular focus upon the credit card expenditure during the period.

Yet I have put to you that the credit card expenditure by Mr Burke while he was working for the duty senator on the Central Coast to assist Mr Thomson with expenditure to assist that campaign has just been ticked off and kicked under the carpet by you.

CHAIR: Can I just ask something in relation to this matter. Was the material that you received, which was the Fair Work Australia report—not the annexures—sufficient for you to do an assessment in relation to whether there were breaches of the Electoral Act? In other words, on the face of it you have all the material in relation to the donations or money that was expended, and then you made your various assessments. You then made a number of inquiries in relation to an extra four matters. What more would you be assisted by in terms of your determinations? I am just giving you my view, and if you do not agree then tell me you do not agree. In terms of your role under the Electoral Act—not in relation to whether there was a proper disclosure to the union executive or whatever, which is dealt with under a separate act—it seems to me that you have everything you need to do what you are charged with. Am I wrong on that?

Mr Pirani : In general terms you are right. However, we have acknowledged in our assessment—

CHAIR: That is what I want to know.

Mr Pirani : that there are specific areas where there is not sufficient detail to enable us to make a firm conclusion. In this regard, I specifically draw your attention to page 40 of the submission, where we have acknowledged in relation to Ms Stevens's salary:

However, the duties that Ms Stevens performed that solely related to the election campaign of Mr Thomson after 13 April 2007 could be argued to have been more appropriately disclosed in another return.

Mrs BRONWYN BISHOP: Correct.

Mr Pirani : It says:

The information contained in the FWA Report does not provide sufficient information to enable a conclusion to be reached.

CHAIR: That is okay. So there is that qualification. What else is there?

Mr Pirani : There was the other area where we raised the concern of the issue about the Dads in Education Father's Day donation. We raised an issue on that one that it was not clear what the arrangements were in relation to that donation—

CHAIR: That is page 42.

Mr Pirani : and whether that included a right to appear on television. Again, right at the end we say:

Further without any information concerning whether the payment of the sponsorship included any rights of publicity it is not clear whether this involved any disclosure obligation on the HSU National Office under section 314AEB …

So there are some areas where we have looked at the Fair Work Australia report, we have applied the prism of the Commonwealth Electoral Act and there was still not sufficient information for us to be able to offer a firm conclusion.

CHAIR: But you put the qualified comments in there.

Mr Pirani : We have attempted to put the qualifications in there.

CHAIR: Apart from those, for everything else that you have put in there there is sufficient information that you received for you to reach those other conclusions.

Mr Pirani : In relation to the analysis, yes, but not in relation to whether I would have a provable case to commence prosecution with.

CHAIR: That is a separate—

Mr Pirani : I draw that distinction.

CHAIR: Okay.

Mrs BRONWYN BISHOP: On the last page of this letter it says:

It is also worth noting (as the AEC report into these issues dated 16 May 2012 does) that as National Secretary of the HSU until 14 December 2012, Mr Thomson failed in his responsibility to ensure that the Donor Annual Returns for the 2006-07 financial year and the Annual Return Relating to Political Expenditure for the 2006-07 financial year were lodged on time … Mr Thomson was of course best placed at the time to identify which transactions were of an electoral nature.

CHAIR: So you are endorsing the Prime Minister's former law firm, Slater and Gordon, are you?

Mrs BRONWYN BISHOP: No, they were also the solicitors for Mr Wilson, I remember.

CHAIR: Are you embracing that comment?

Mrs BRONWYN BISHOP: I am saying that Slater and Gordon are saying that Mr Thomson should have been the one filing the returns, but the Electoral Commission did nothing about getting them in in time, for two years. I am saying that the bottom line is that nobody can really know what is the truth of those credit card accounts and so on until we see the BDO Kendalls report, a forensic report which you have not seen and which these people base their returns on but you cannot check. You have not even asked for it.

Mr Pirani : If I can just draw a distinction, that paragraph that you have read out is only in relation to 2006-07. For the 2007-08 financial year, which covers the majority of the expenditure within the disclosure period, there was a return that was lodged by Ms Jackson. Therefore, I readily acknowledge and readily accept that paragraph for 2006-07, but in 2007-08 the responsibility for the return to be lodged in November 2008 rested with the relevant officer in the national office of the Health Services Union at that time.

CHAIR: Just pause for one moment. I table a disclosure compliance review, undated­—

Mrs BRONWYN BISHOP: I am tabling it.

CHAIR: Mrs Bishop is tabling it. It is undated but it goes for five pages.

Mrs BRONWYN BISHOP: That would have gone out to all the people on this list, and the only trade union to get one was HSU East.

CHAIR: The motion is carried, so that is now tabled.

Mrs BRONWYN BISHOP: I find that a most extraordinary lack of due diligence by the AEC. I find their request for more powers to be without foundation at all because they do not use their existing ones. If I can sum up, the most important thing that has shown up in these hearings is that you care not whether money has been stolen or misappropriated as a result of fraud. As long as it is in the return, you give it a tick. There is quite a need to find some way of repairing the act to put an onus on you to report it to police if there is a suspicion that money has been misappropriated. It must be investigated properly and not simply ticked off because it has been included in a return.

CHAIR: Do you want to respond to that?

Mr Killesteyn : The matter of the appropriation and whether it was authorised or not is a matter that is being prosecuted by Fair Work Australia. It would seem to me to be somewhat incongruous that you have not only that agency but also other agencies trying to investigate whether these payments were properly authorised or not.

Mrs BRONWYN BISHOP: You deny you have any power to investigate. Other agencies did investigate.

Mr Killesteyn : That is not our role. Our role is around disclosure. It is quite clear in the act. We are not a police force. Here we have an example—

Mrs BRONWYN BISHOP: I did not say you were. It should be referred to the police. You cannot say it is okay to tick it off because it is in a return when there is plenty of evidence to show it was misappropriated—

CHAIR: I am sure you will recommend those things to the commission in your—

Mrs BRONWYN BISHOP: particularly when you were asked by the minister concerned to do a proper investigation, which you have not done.

CHAIR: Do you have further matters?

Mrs BRONWYN BISHOP: Yes, three things. First, we will want to see these people again. Ms Jackson and Mr Williamson have been mentioned quite extensively today. I think it is important that we hear from them, but we will certainly want to come back and talk to the AEC after we have seen other material.

CHAIR: One of the things we talked about was the list of possible measures. I want to quickly go through those, if I can. We have had a discussion about reconsideration of the appropriate level of the disclosure threshold. The second one was to introduce administrative penalties for objective failures such as failing to lodge on time. Do you want to say anything extra about that?

Mr Killesteyn : I think the case illustrates the difficulties of taking prosecution action for what are essentially objective matters of failure. We think there would be value if an administrative penalty allowed us to impose a small monetary sanction. Certainly the evidence from overseas is that this would instil greater urgency in the minds of those who have an obligation to lodge.

CHAIR: Your third recommendation related to providing that financial penalties be offset against public funding entitlements, perhaps combined with the AEC withholding a small percentage of such entitlements for a period of 12 months following an election.

Mr Pirani : The suggestion here is this. At the present stage the AEC has to produce individual officers within a political party and associated entities and a donor in relation to any failures. Having penalties offset against public funding entitlements would provide a neater, easier and more cost-effective way to recover any amounts.

CHAIR: 'Require the compulsory and timely auditing of all records held.'

Mrs BRONWYN BISHOP: We are not going through these now. This will be dealt with when we get the additional information back. If you think we are just going to get a tick off for this list of grab bags—

CHAIR: I am not asking for a tick off; I am asking for the material.

Mrs BRONWYN BISHOP: Yes, you are.

CHAIR: Bronwyn, I would never ask you anything—

Mrs BRONWYN BISHOP: You are asking for a tick off.

CHAIR: Is there any supplementary material you want to give us in relation to those 17 recommendations or do you want to reserve that for another day?

Mr Killesteyn : The only thing I would say is that the independent auditing of disclosure returns may be worth considering, given the sorts of issues that we have uncovered here. Essentially, there is a lot of work associated with the returns. The ability of the AEC or indeed of any agency to audit every single return, I think, will lead to a significant cost. Here is a potential way of ensuring that donors and others who have an obligation provide information which has been audited. We have long arguments in relation to whether particular agencies are associated entities. We have had ongoing arguments about Coastal Voice. Other arguments have been raised about GetUp! One matter that we are suggesting is worthy of consideration is that we simply move to a third-party registration scheme, which would avoid all of the arguments. Essentially, they are subjective arguments and a third-party registration scheme would clearly result in additional work but may avoid some of the subjective issues associated with assessing whether an agency is an associated entity.

The practice of campaign accounts is used overseas; it is certainly a practice used in Canada. It is a mechanism for ensuring that all donations and all expenditure flow through a single account, which makes it much easier for audits and compliance to be determined. Those are the main ones that we would be keen to pursue.

CHAIR: I thank you for your attendance today. The additional material that we have asked for has been put on notice. It has not been provided.

Mrs BRONWYN BISHOP: My objection to the grab-bag list at the end of the report, which in no way relates to the FWA report, is that it is just a grab bag. There has been no attempt by the Electoral Commission to identify specific loopholes, which I have managed to identify today, and a specific remedy to deal with that problem to be brought forth. That would be a proper way for an agency to behave. I have seen no evidence of that at all. I would like you to go back and do some work in that endeavour.

CHAIR: If you feel that you can assist the committee in that regard or if you want to make a comment—

Mr Killesteyn : We will have a look at the transcript.

CHAIR: We could be assisted in terms of some of the specificity.

Resolved (on motion by Mrs B Bishop):

That this committee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at public hearing this day.

Subc ommittee adjourned at 12:27