Title Rural and Regional Affairs and Transport Legislation Committee
09/02/2016
Estimates
AGRICULTURE AND WATER RESOURCES PORTFOLIO
Horticulture Innovation Australia Limited
Database Estimates Committees
Date 09-02-2016
Committee Name Rural and Regional Affairs and Transport Legislation Committee
Page 124
Questioner Bullock, Sen Joseph
CHAIR
Edwards, Sen Sean
Responder Mr Scherf
Ruston, Sen Anne
Mr Quinlivan
System Id committees/estimate/2ad2fdbd-b239-41d4-b5bb-ad282f50dc4e/0010


Rural and Regional Affairs and Transport Legislation Committee - 09/02/2016 - Estimates - AGRICULTURE AND WATER RESOURCES PORTFOLIO - Horticulture Innovation Australia Limited

Horticulture Innovation Australia Limited

[17:09]

Senator BULLOCK: How will the new sweet potato levy work within your funding structure?

Mr Scherf : The sweet potato levy will operate in the same manner as other statutory levies that we manage. We will work with the industry sector to develop a strategic investment plan for that levy. We will structure an advisory mechanism around a community-based structure for their marketing component to provide us advice in terms of that strategy and we will invest in a similar way that we invest with other—

Senator BULLOCK: Marketing is probably a key thing, isn't it, because we grow too many sweet potatoes at the moment. We need to boost demand. Is that not right?

Mr Scherf : That is usually the objective of most of the marketing programs anyway.

Senator BULLOCK: Yes. But their particular problem is not boosting the efficiency of the sweet potato growing industry; it is actually getting rid of the product.

Mr Scherf : I think you are right, yes; correct.

Senator BULLOCK: Are you aware of concerns about the new levy that the marketing component will not be sufficient to make a significant impact?

Mr Scherf : The issue of impact of marketing programs comes back, again, to the objective of the investment, and there are many levies that we manage that that statement may be applied to. However, when we work with the industry, we try to make sure that we drive the investment as hard as we can to be able to reach the objective that the industry is trying to satisfy. The sweet potato levy will be no different to the others in terms of trying to maximise that.

Senator BULLOCK: So you have a reasonable level of confidence that you will hit the mark?

Mr Scherf : We need to talk to the industry more directly in terms of consulting with them as to what their expectations are around that delivery. But, as is the case with the other marketing programs we run, once we get clear on that, we are pretty good at making that dollar go as hard as it can.

Senator BULLOCK: Fair enough. Has the industry provided you with a strategic plan?

Mr Scherf : They have included as part of their submission—in terms of the levy submission to government—a plan, but we are yet to work through that plan in terms of, again, its practicality and whether it has taken on board all of the contemporary issues that need to be addressed.

Senator BULLOCK: It may need work. Can you give us what you have to date?

Mr Scherf : Yes; certainly we can provide that.

Senator BULLOCK: So you can take that on notice and get that for me. Again a step into the dark. Can you provide us with an update on funding issues related to Cherry Growers Australia and Fruit Growers Tasmania?

Mr Scherf : Could you be more specific, please?

Senator BULLOCK: No, I cannot. Senator Ruston may be able to help; she is the full bottle on these things.

Senator Ruston: Hence the reason I whispered to Mr Scherf that it was rather a broad question. I was wondering whether there was anything specific you were—

Senator BULLOCK: I understand that they have had some problems.

Senator Ruston: The cherry growers?

Senator BULLOCK: Yes, that is right. Give me a hand.

Senator Ruston: I can advise the committee that I met with the cherry growers a couple of weeks ago in relation to particularly market access into China, which has been—

Senator BULLOCK: These are the mainland cherry growers?

Senator Ruston: Yes. I do not know whether you are aware, but because Tasmania has area freedom status, they do not have a problem—

Senator BULLOCK: I know they are doing well. They are going gangbusters; they really have got that by the throat.

Senator Ruston: Yes. Obviously there is a real issue—it is not a real issue, but one of our priorities has got to be to try and see whether we can get access to China particularly, but Asia.

CHAIR: It is very simple: we just have to find the right person to bribe.

Senator Ruston: Unfortunately, as a representative of the people and an operative within government, I cannot advocate for that.

CHAIR: I know. But a person with great experience of what happened when the Hong Kong people got cut out of the deal and the extraordinary level of facilitation and acceptance by most places in Asia knows it is a serious problem, which is against our culture but a reality. No-one likes to talk about it. It is a bit like the priest and the altar boys.

Senator EDWARDS: Which you have been talking about in another committee.

CHAIR: I have, yes.

Senator BULLOCK: Can you throw any more light on it? I think it relates to some funding arrangements; there has been a review and some changes and they are working with you?

Mr Scherf : I will try to shed some more light on it. The funding arrangements that prevailed under the old Horticulture Australia Ltd model for Cherry Growers Australia primarily, or for all IRBs in this regard, were based on consultation funding. That is now prohibited under our new statutory funding agreement for Horticulture Innovation Australia. What is permitted is service provision through a bona fide procurement process for all IRBs, including Cherry Growers Australia and Fruit Growers Tasmania. There are a number of programs that Cherry Growers Australia have provided services for in the past that are presently being reviewed. The reviews on those programs are due very soon—around March. In light of the funding that is likely to cease under those previous programs and projects, we have extended some of those projects to provide the opportunity for the review to be completed and for the—

Senator BULLOCK: It should re-establish their funding base at an adequate level—is that the plan?

Mr Scherf : Depending on what the review says. If the review suggests a different investment design, we would need to re-evaluate the provision of service by that provider and its appropriateness for the type of work that we need to look at.

Senator BULLOCK: This review is going to come down in March?

Mr Scherf : Yes.

Senator BULLOCK: The time limit for answers to questions on notice is 1 April. You have thrown a lot of light on this for me already because, as is so often the case, I did not know what I was talking about. Before 1 April, could you give us an update? Take that as a question: update us by 1 April on how that review has progressed?

Mr Scherf : We can certainly provide you with an update on what the status would be at that point in time in terms of moving that particular exercise through the system.

Senator Ruston: Senator Bullock, I will give a little bit of background. Horticulture Australia, which previously was a peak industry body owned organisation, changed about 15 months ago into an industry owned organisation, which is a reflection, I suppose, of the inquiry that we had into the levies when—

Senator BULLOCK: I remember, Senator Ruston.

Senator Ruston: Yes; who the levy payers are. One of the biggest reasons why that change was driven was because there was a perceived conflict of interest in that peak industry bodies were the ones that were making all the decisions about the levy payers' money when in many instances they did not know who the levy payers were. At the time the decision was made as part of that transition that peak industry bodies would be excluded from the day-to-day operation of the decision-making within Horticulture Innovation Australia, the new organisation. I can advise that, subsequent to the operation, and having looked at how the organisation has been running over the last 12 months, some things have come to light that would suggest that there would be advantages in re-engaging the peak industry bodies with Horticulture Innovation Australia so that they can have greater input into the decision-making process. In many instances, as with the cherry growers, they are truly representative of their industry.

I have had this conversation with the cherry people and we are working with Horticulture Innovation Australia, the voice of horticulture, which is a newly established peak industry body for the whole of horticulture. It is made up of the commodity groups that sit underneath it, including cherries Australia. They are having an informed discussion with the department and also with my office so that we can try and move Horticulture Innovation Australia to being a truly representative body of the levy payers, while recognising the role that is played by the peak industry bodies. Hopefully, by the next estimates, we will be able to have some really positive news on that front for you.

Senator BULLOCK: I am going to get news earlier than that. I will get news by 1 April because we will know about the review and I am going to get a—

Senator Ruston: You may not have the answer to some of the stuff that we are doing, but rest assured it is very positive. I think the commodity groups are quite happy.

Senator BULLOCK: I would expect nothing less from you, Senator Ruston. On a final area, I have fond memories of this from our last round because I do like true crime. Can you provide us with an update on the misappropriation of funds over 2014-15 to finance the production of Avenue Q by the entrepreneurial Mr Westley?

Mr Scherf : As I understand it, there were a number of questions from the last Senate estimates that we took on notice and we provided feedback on those, so I will not elaborate any further on those areas. But I can provide you with a general summary. The civil matters have concluded. Of course, that led to a guilty plea on 17 counts of fraud. With respect to the majority of funds that were misappropriated from our organisation, 98.7 per cent were recovered through that process in the Supreme Court. Clearly, as a consequence of that, no levies were lost in the context of grower money that we were holding in trust on behalf of levy payers. The criminal matter still remains before the court and is at the point of sentencing, which we believe will occur in March.

Senator BULLOCK: A 97½ per cent recovery: we have done well.

Mr Scherf : In the context of an all-round bad story and a bad experience, I think that is a positive that we can take out of it.

Senator BULLOCK: You would not wish it on others. We were talking, Mr Quinlivan, about others in the last round.

Mr Quinlivan : That is right.

Senator BULLOCK: As I recollect it, you said that there were lessons to be learned from this by the whole department.

Mr Quinlivan : That is right.

Senator BULLOCK: My question to HIA is whether they have taken part in the work of the department and shared your experience and been part of an investigation into the lessons that can be learned from the incident and the fraud governance arrangements that I hope have been put into place right across the department. Have you been part of that, and how has it gone, Mr Quinlivan?

Mr Scherf : I can answer the first part of that. We wrote to the department in November in terms of our initial lessons learned from the experience. We continue to put in place the outcomes from that experience in terms of a fraud control plan, an internal audit program that is underway at the moment—it has just commenced.

Senator BULLOCK: Has it thrown up anything at all?

Mr Scherf : It has only just commenced. It is my department that initially is taking part in this, so I have a degree of intimacy with the depth to which it is going. There is also a program of forensic data analysis that is underway for the 2013-14 period and the 2014-15 period as well. That is looking at data correlations between abnormalities that come through in the statistical information that sits in our finance system. We also have now imposed, as a mandatory component in our recruitment process, the requirement for police checks and so on. So there have been learnings that we have had. We have passed those learnings on to the department in the structure of a letter. We will continue to advise the department of any new elements that arise as we go through the operational side of the things that I have described.

Senator BULLOCK: Mr Quinlivan, what was your response to that letter, what has changed across the department as a whole and how do various agencies—

Mr Quinlivan : We sought that information about the experience and the lessons learned. That has been conveyed in writing to all the portfolio agencies. We have asked them to take that into account in their own fraud risk assessments and planning. At the next available opportunity, which will probably be the next meeting of all the portfolio agencies, we will be asking people for any feedback that they have. But the preliminary feedback was that most people felt that their fraud control measures were adequate. They cannot prevent fraud—clever fraud does happen—but there was a feeling that the measures that people have in place are best practice and would deal with—

Senator BULLOCK: So they are saying, 'That's those mugs over there; it couldn't possibly happen here'?

Mr Quinlivan : No; they are not saying that at all. They are saying, 'No fraud control plans and so on can prevent fraud; it does happen; it's part of life.' There were reasonable measures in place, but people were going to effectively check them against the experience that HIA has had and learn the lessons.

Senator BULLOCK: You sent them a letter following up on HIA's letter, you are going to have a meeting and you are going to take feedback. Apart from telling their story to you, are you going to get on the front foot and have a look at them?

Mr Quinlivan : We feel that we have done that. Their boards are responsible for these things. The boards have a lot of authority and responsibility for that—

Senator BULLOCK: Mr Quinlivan, in your position you cannot say, 'It's not my department.' It is of course your department.

Mr Quinlivan : It is certainly my responsibility within the department and I have a generic responsibility across the portfolio, but their boards have legal responsibility for having these arrangements in place and making sure that these risks—

Senator BULLOCK: In the light of this event, you do not think it is worth personally following it up to see that they are taking your message seriously?

Mr Quinlivan : We will be, if we have reason to believe that there is an issue elsewhere in the portfolio, but we have not got to that point yet.

Senator BULLOCK: I will not delay the proceedings any further, Chair. I will take it that Mr Quinlivan is very diligent in his work in this regard.