HEALTH SERVICES CHARITABLE GIFTS BILL

Committee Stage

In committee (resumed on motion).

Clause 1 passed.

Clauses 2 and 3 passed.

Clause 4.

Dr McFETRIDGE: The minister may have answered most of this when we were discussing the title of the bill. Clause 4(1), public health entity, provides:

Subject to subsection (2), the Governor may by proclamation declare an entity, or part of an entity, engaged in the provision of a health service—

What sort of health services does SAHMRI envisage delivering? Is that clinical testing, pathology services, or does it fit under the broader description in the Health Act of a health service?

The Hon. J.D. HILL: The SAHMRI, of course, is an independent research facility and it will be prescribed under subsection (2)(b), which means that it will be outside of the scope of the provision, so it will not be something that will have a public health entity complexion, if you like.

Dr McFETRIDGE: In regard to the new positioning of the Hanson Institute, can the minister tell the committee what is happening with the Hanson Institute and where it will fit in under this new legislation?

The Hon. J.D. HILL: The advice I have is that the Hanson Institute will be covered by this legislation. It is at the end of the bill in schedule 1, specified bodies. It states:

The following bodies are specified for the purposes of the definition of prescribed gift in section 15:

(a) the body known as the 'Hanson Institute'.

That is how it will be covered. At the moment, funds are being received for the Hanson Institute, but of course the current commissioners are not properly set up to deal with those funds and there was legal advice that they were acting ultra vires. We got through it by creating a constructive trust. This is now giving them the powers to properly deal with those resources.

Clause passed.

Clause 5.

Dr McFETRIDGE: In relation to the new Health Services Charitable Gifts Board that is being established to continue the work of the commission, clause 5 provides that the commissioner will hold office for a period of three years on conditions approved by the Governor and can then be eligible for reappointment. Is there a retirement age or anything with these board appointments?

The Hon. J.D. HILL: No; that is an interesting point. We have not put a retirement or terminating clause in there. If the opposition wants, I am happy to consider an amendment in the other place. I would have thought nine years or something like that is probably reasonable, but we have not included it in this particular case.

Dr McFETRIDGE: The only reason I ask the question is that new eyes and new thoughts in these positions are often good. I am not saying that we have not had great commissioners in the past either.

Clause passed.

Clauses 6 to 10 passed.

Clause 11.

The Hon. J.D. HILL: I move:

Page 6—

Line 14 [clause 11(1)]—Delete '(payments)'

Lines 16 to 19 [clause 11(2)]—Delete subclause (2)

There are three related amendments and the first one is the test. The three amendments address a technical problem with clause 11 of the bill and, if I may, I will talk about all of them at one time. Clause 12 of the bill provides that there will be an executive officer of the board. Clause 13 provides that the board may appoint staff. Clause 11(2) of the bill provides that the commissioner's remuneration, allowances and expenses are to be deducted from the funds or trusts held by the board under the act.

No provision is made in clause 11(2) for deducting the remuneration, allowances and expenses of the executive officer or the staff of the board, or the expenses thereby incurred. The government's amendments, of which this is the first of three, addresses this. Amendment No.3 is the substantive amendment in that it inserts a new clause 13A into the bill which replaces clause 11(2).

It provides that any (a) remuneration, allowance or expense payable to a commissioner, executive officer or staff of the board; or (b) expense incurred by the board in the performance of its functions under the act is to be paid out of the funds or trusts held by the board under the act. This is consistent with the position under the current act. In fact, it was left out during the drafting procedures, as I understand it.

Amendment No.1, which deletes the reference to the defined term 'payments' in clause 11(1), is consequential upon amendment No.2, which deletes clause 11(2) from the bill. The term 'payments' is used exclusively in clause 11(2). It is really just to make sure that the people who work for the commission and the commissioners themselves can be paid what is reasonable.

Amendments carried; clause as amended passed.

Clauses 12 and 13 passed.

New clause 13A.

The Hon. J.D. HILL: I move:

Page 6, after line 33—After clause 13 insert:

13A—Payment of remuneration, expenses etc

(1) Any—

(a) remuneration, allowance or expense payable to a Commissioner, the executive officer or staff of the Board; or

(b) expense incurred by the Board in the performance of its functions under this Act,

is to be paid out of the funds or trusts held by the Board under this Act.

(2) Amounts to be paid under subsection (1) must be deducted from the funds or trusts in accordance with guidelines, determined by the Board and published in the Gazette, relating to the payment of such amounts.

Dr McFETRIDGE: What percentage of funds is used in paying allowances and expenses? You hear some horrendous cases where funds are gobbled up by fees and charges and expenses. I was pleased to hear a report the other day that one of our hospital research institutions is allowing only a maximum of 10 per cent to be—

The Hon. J.D. HILL: It is a lot less than that. There would be a sitting fee for the members of the board, and I am not sure from memory what that is. That is prescribed by a Premier and Cabinet schedule which determines levels of responsibility. There is a DPC schedule that says what particular board members are paid. If we can find that information for the honourable member, we will provide it to him. It is in the annual report somewhere.

Member for Morphett, there is one staff member, so whatever his salary is; and the three commissioners get an allowance which is determined by the DPC. I cannot tell you of the percentages, but it is a very tight organisation. We are just looking through the annual report to see whether we can find those expenses. In 2008-09, the administration costs were $440,000. That covered the commissioners' remuneration in 2009 of $47,000, orders of remuneration of $14,000, accounting fees of $17,000 and administration costs of $139,000, which, I guess, covers the salary.

The expenses for administration were $440,000 in 2009. Then, of course, there is the total application for institutions—the other expenses, the grants and so on—which was $8 million. That is, what, roughly, 5 per cent, or something, I guess.

New clause inserted.

Clauses 14 to 16 passed.

Clause 17.

Dr McFETRIDGE: Subclause (2)(b) provides:

may give the whole or part of the gift to any public health entity or prescribed research body...

I refer back to a Sunday Mail article of almost a year ago, 7 February 2009, which states '$80 million RAH bequest go to build MAJ'. The article further states:

Millions of dollars in donations and bequests specifically willed to some of Adelaide's biggest hospitals are set to be shanghaied to the $1.7 billion Marjorie-Jackson Nelson hospital regardless of donors' wishes.

It goes on to quote a former valuer-general and a former commissioner, John Darley. He was chair of the commission from 1987 to 2007. He said that he had sought legal advice on the ramifications of a name change—whether that is still applicable, I do not know. He said:

This means now that if the MAJ is built those gifts meant for the RAH can go to the MAJ. There might be further legal argument on that point but, as it stands, if people think they are giving a donation to the RAH it can go to the MAJ.

The inference here is that it can go to any other destination that the commissioner sees fit. Also, there is a comment:

Under the changes, even money specifically willed to other hospitals in the then Central Northern Adelaide Health Service, including The Queen Elizabeth and Lyell McEwin hospitals, as well as the RAH, could be diverted to the MAJ according to legal opinion.

Minister, could you give us a comment on that?

The Hon. J.D. HILL: I do recall that article. It was a total beat up; it is not true. All the funds that have been provided by way of donation and which are held by the commissioners will be applied by them in the way they see fit, in accordance with the law. What we are doing here is giving them some flexibility.

I think I gave the example earlier of Hillcrest Hospital, where they are holding some money that they cannot spend because Hillcrest Hospital does not exist any more. To give a practical example, if someone gave money to The QEH for renal research because they liked the work that Toby Coates was doing at that hospital, but Toby Coates' research team moved to the Royal Adelaide Hospital (which it has done), that money could not be spent, under the arrangements currently in place. However, the board would now have the flexibility to apply it to where the research would be done. Bear in mind that subclause (2) is strongly coloured by subclause (3), which provides:

In managing and applying a portion of the charitable assets attributable to a particular donor the Board must—

(a) consider the intent, as far as it may be reasonably ascertained, of the donor;

So if a donation comes in, they have to do what the donor wanted, they have to follow the intent of the donor. If something has changed for some reason—for example, a particular activity does not exist in a particular hospital any more, but it happens in one nearby, or the effort has been transferred to another place—then they can look at that. Subclause (3) further provides:

(b) so far as is reasonably practicable, apply that portion of the assets in a manner that the Board considers is most likely to achieve the intention of the donor.

It is all about the intention of the donor, and the board using its judgement as to where that is best placed. It is not about the government interfering or trying to take money away from anyone. I know that it has been characterised in that way, but I can assure the honourable member and the committee that it is not the intention of this legislation. In fact, it would be illegal for the government to attempt that.

Clause passed.

Remaining clauses (18 to 30) passed.

Schedule 1 passed.

Schedule 2.

Dr McFETRIDGE: The Investment Advisory Committee is being established, and clause 1(4) provides:

The minister may determine the remuneration, allowances and expenses….of a member of the committee.

This is additional to the expenses I asked about before. I assume these will be of a minimal nature as well?

The Hon. J.D. HILL: That is correct.

Dr McFETRIDGE: Clause 2 of the schedule provides:

The functions of the Committee are as follows:

(a) of its own initiative…to provide investment advice to the Board

I assume, once again, that that advice can be disregarded by the board. There is that issue coming back to one of the members being an employee of the administrative unit of the Public Service. I assume that the board members can take or leave that advice.

The Hon. J.D. HILL: Absolutely correct. The commissioners' powers to invest will be expanded, so they can invest in shares or stocks. All we are saying is that there should be an advisory body which has some expertise which is linked into Treasury arrangements, into SAFA and all the investment authorities that we have as a government, so that they are able to access that advice and that knowledge, as well as advice from the outside world. If they choose to reject or ignore that advice that is entirely up to them. It is absolutely within their power to do so.

Ms CHAPMAN: Do I understand it that, whilst the board can reject the advice of the committee, they are able to take other financial advice and have it paid for?

The Hon. J.D. HILL: That is what they do currently.

Ms CHAPMAN: I understand that, but I will just go back to clause 14 on functions. I cannot find that there. It says that they have to consult the committee.

The Hon. J.D. HILL: They are the functions of the advisory committee, not the functions of the board, that you are referring to.

Ms CHAPMAN: Perhaps you misunderstood my question. The function of the committee—we are talking about the establishment of the Investment Committee—has certain functions. In a way, that is academic. That is the establishment of the committee itself. Can the board, having rejected the advice of the committee, which it is bound to ask for, have paid for its own advice from other financial advisers?

The Hon. J.D. HILL: My advice is that there is nothing to stop it from doing that. For example, under 'Functions of Board', it goes through a whole range of things that it has powers over. For example, paragraph (e) states, 'to fulfil any fiduciary and other duties that arise out of the functions of the Board under this Act'. I think that paragraph (c) is probably the most telling measure. It states:

to determine, after consultation with the Investment Advisory Committee established in Schedule 2 and any other body considered appropriate by the Board, appropriate investment strategies for the charitable assets...

Ms CHAPMAN: I take it then it is clear that they have permission to do that from that clause. Is the Investment Advisory Committee, which is the section we are on, required in any other government body or semi-government statutory authority?

The Hon. J.D. HILL: I will get some advice on this, but my understanding is that generally, bodies which have assets which are held on behalf of agencies of the Crown—so this is an independent authority which has been set up to manage somebody else's money, not the taxpayers' money—there is a requirement that they invest through the state's financing authority (SAFA), and they become an investment body.

One of the options that we looked at when we were constructing this legislation is whether or not we should say 'If you want to go into the sharemarket, or if you want to have a more risky kind of profile, then SAFA will do it for you.' We talked about that and the commissioners, I think, in the discussion, preferred to have a more direct role. So we have given them a greater amount of flexibility and a greater amount of authority than we would apply in most other cases that I am aware of.

So the question as to whether there are other bodies which might have an advisory committee established to support investment, I do not think arises, because generally they do not have the same sort of level of discretion. Their financial holdings are managed through SAFA, but I will get that checked, and if that is not correct I will give you a more complete answer.

Ms CHAPMAN: I agree with you. Let me give you an example. If we are talking about the Motor Accident Commission or the Land Management Corporation, obviously they are using taxpayers' money. They manage taxpayers' assets and they have very strict requirements, including recent charters that have been changed in both of them, which keep them very much attached to Treasury. That is understandable and I am not here to debate that, obviously.

When we are talking about managing someone else's money, an example might be the University of Adelaide, or any of the universities for that matter, which have significant money that is paid to them, and which they really hold on trust for the purposes of exercising their duties under the act, namely providing education and research opportunities to their students and clients. They have certain obligations under the Trustee Act, I think, in addition to their own act, but that probably only applies to bequests that they have.

There are situations of others where that exists. I am not talking about what I would call semi-government institutions such as WorkCover, the Motor Accident Commission, etc. I am talking about where people hold money, effectively on trust, for someone else, not the taxpayer per se. I do not know of any so I am just asking whether you, minister, are aware of any? If there are not any, who came up with this idea? Was this your idea, Treasury's idea or whose idea?

The Hon. J.D. HILL: I am not aware of any similar organisations. The suggestion from this I think originally arose from Treasury, which wanted us to have a conservative way of managing these assets. We are talking about $80 million, which were invested. You have to understand the context of this.

Currently, the commissioners cannot speculate with this money in the way that this will allow them to do. They can buy property or they can hold cash. In fact, it forces them to sell shares. That is obviously not very smart, because if somebody gives them BHP shares one day and then the market crashes the next day and they have to sell them it is obviously not in the long term interests of the beneficiary. So, this gives them greater flexibility.

To maintain that fairly conservative approach, which is in the current legislation, Treasury suggested a committee along these lines. I am sure that if Treasury were asked, they would prefer it if all the funds went through SAFA, but, as I say, I have not accepted that advice. This is kind of a halfway house, if you like, between giving them more flexibility but also ensuring that there is some proper level of advice. As I said before, they can ignore the advice if they choose. They can develop their own strategy, but they have to listen to that advice, and I think that is perfectly proper and very sensible.

Ms CHAPMAN: Minister, you indicated earlier that you had provided me with correspondence in response to a request. I acknowledge that, just after the debate had resumed this morning, this information was provided, and I thank you for it.

You have already identified what the current—as is reasonably achievable—asset position is at 30 June 2010 and how those trust funds are currently identified; that is, what is the donor that is currently the beneficiary of them. The nearly $82 million, which is the bulk of the funds, is under the name of the Royal Adelaide Hospital, but it is identified as holding money on behalf of the Hanson Centre for Cancer Research and the IMVS. How much for each of those entities—loosely entity, as you describe them?

The Hon. J.D. HILL: I can't. That is information that the board has. I am happy to ask the board for that information. I do not currently know it. This has been one of the problems, of course, that essentially the Hanson Institute, the IMVS, have been considered to be part of the RAH. I suppose originally that would have been the case, but over time they have become separate entities. I am happy to get information for the member and provide it to her before the matter goes to the other house, subject, of course, to the board's willingness to provide that information to me.

Ms CHAPMAN: Given that they are subject to your appointment, minister, I would have thought that it would be reasonable to have that information. The bequest form that the Hanson Institute publishes on their website I suggest clearly identifies when the donor wants to specify that it is to the Hanson Institute, which, as you say, is not an incorporated body as such on its own; it is really just a trading name for the purpose—I was going to say of attracting cancer research funding—of seeking those investments and seeking people to change their wills to do so.

I think the documentation that they provide—at least that I have seen at present, and I have happened to, through personal experience, seen it in the last 10 years—should be able to be easily identified. I am not so sure about the IMVS; but, if, as the Hanson Institute have said in their own reports from time to time, they might have received $20 million in one year, for example, in bequests, they have a pretty good idea about what they have processed. I would appreciate that.

The other matter that I want to raise is that in the material that you provided there are two pieces of real estate owned by the commission via this current act which have tenants—the government. One I will quickly read. It states:

The CCF owns a commercial building at 8 Greenhill Road, Wayville. This multi-tenanted building has the Satellite Dialysis Clinic (the clinic) as one tenant. The Clinic was initially established by The Queen Elizabeth Hospital and is now managed by the Adelaide Health Service, which is technically speaking the Government tenant. The lease on this tenancy expires on 7 March 2011. The annual rental for the last year has been $118,934.40 ex-GST, including car parking.

I am not worried about the rental here, because the previous annual report tells us that the properties have been revalued and that now there have been re-lease arrangements to bring the rental on these properties up to some commercial standard. For the moment I accept that the 8 per cent which has been used for the other major asset is a reasonable return. I am not sure why the commissioners have not charged your government or any previous government that has occupied it a proper commercial rental, but that is probably by the bye at the moment. At least they are now.

I suppose that hastens my concern about whether these properties are going to be prepared for sale, which is a power that you are about to give to the commissioners. The tenancy on this building in Wayville, with one of your entities in it, expires in a couple of weeks. My question is: is the minister aware of whether this Queen Elizabeth Hospital clinic is going to renegotiate a tenancy and extend its occupancy of that property? Secondly, is he aware of any intention of the commissioners to sell that property?

The Hon. J.D. HILL: I will answer the second part first. No, I am not aware of any intention of the commissioners to sell property. They have demonstrated that they are long-term property holders, and I am not aware of any intention on their part, although I suppose from time to time they need to consider whether it is wise to sell a piece of property and to buy another property.

If this legislation is passed, they will have a lot more flexibility. They will be able to get a more balanced portfolio, but because of their inability to hold shares they have tended to have to concentrate their assets into two classes, and those classes are property (and that is largely where they have had their money) and in cash.

Of course, cash is not the best place to keep a lot of assets, particularly if you are storing them for future use, so I would expect that, once the legislation is through, they would develop a strategy for a balanced asset portfolio. As to what they may do with any particular class of assets or any individual items, I have absolutely no knowledge. They have not told me about any of their intentions. I have not asked them as to what their intentions might be. I doubt if they have even developed intentions at this stage, because they have been waiting for this legislation to go through.

In relation to the renal clinic, I am not aware of any intention by the agency or either party to the lease to change the occupancy. I can certainly seek some advice. We are not aware of it. It has not been brought to my attention. So, I would assume it is a needed function. In fact, I am sure they are quite happy to stay there. It is quite a good arrangement where the commissioners own the building, they lease it back to Health, Health pays the rent and the rent goes back into a hospital; so everybody wins in that arrangement and they are the kind of arrangements that have been worked out over decades, I expect.

Ms CHAPMAN: The other question for completeness on this is the Citi Centre Building, of course (this is the Town Acre 86), which also comprises substantial value. The current site value for rental purposes is $17.7 million, according to your information here. The lease expires on 20 August 2019. The next rent review is in August this year and your department is the principal tenant. Is there any intention by your department to conclude that, to your knowledge, or are you aware of any decision made by the commission to sell that property?

The Hon. J.D. HILL: No, there is no intention for us to move from that building. It is perfectly adequate. It is well located and well established so, no, none at all.

Ms CHAPMAN: What about the water and transport departments? They are both moving. Anyway, I won't go into that. Can I then ask about the question of sale itself. You mentioned, if I understand it correctly, that the commissioners are almost forced to stay in real estate because they do not have much choice, but the reality is that they can sell real estate. Under the current act, they have your permission, as minister. They have to show special circumstances under the act. I assume from that that there has been no application under section 15 by the commission for them to sell any of their real estate. Has there been no application under section 15 by the commission for you to give permission to sell any piece of real estate?

The Hon. J.D. HILL: Certainly not the large bits. I cannot recall—it is a possibility, I suppose. They might have had a house or something they wanted to sell, but I am not aware of it. It certainly would not have been a substantial item if they did do it. Sometimes, I think, for example, somebody might leave their house to the Royal Adelaide Hospital. It goes to the commissioners and the commissioners might liquidate that asset because it is old or it needs repair or something like that. I imagine they would be the sorts of circumstances when they might sell property, but certainly I am not aware of any substantial piece of property. I can check on it and get back to you, but I do not believe that in the time I have been minister that any properties have been sold.

Schedule passed.

Schedule 3.

Ms CHAPMAN: In relation to clause 6, what is proposed here is in relation to money that is held for the old IDSC, which no longer exists, and Metropolitan Domiciliary Care Services trusts, and I am not sure what their status is at the moment. Essentially, if money is held for their benefit, this is a special provision for them and those funds can be transferred to whatever institution you see fit. I think I am right in suggesting that there is $435,000 there for Metropolitan Domiciliary Care Services from your letter and $53,000 for RDC Inc., and they are funds that you are going to have the responsibility of transferring.

I indicated in my contribution on the debate that I am concerned that this money has been sitting there for a long time and isolated from being used, to be frank, especially when I read statutory committee reports that are 13 years old. How long this has been sitting there, I do not know, but I suspect a long time. Whilst I have been critical of the delay in this matter, I would like to know what is proposed to be done with those moneys and to what benefit they will be applied.

The Hon. J.D. HILL: I think that is a good question. The commissioners have a very small amount of funds, and the member indicated the amount. It is a very small proportion of the total amount of funds—0.5 per cent, or something like that, I guess, from quick mathematics, so less than half a per cent. They can only expend the interest earned on those funds. The interest you would earn on $500,000 a year is $25,000 or $30,000. Small sums each year could be spent now, so really there is not a lot of substance there any longer.

The provision in clause 6 is that the minister who is responsible for the Family and Community Services Act (my colleague minister Rankine) would have a duty then to use these funds in as close a way as she possibly could to the intention that was made at the time that they were given. I am not sure precisely what intention was made; some of them were probably given for general purposes to help disabled people in South Australia; others might be for a particular disability. I cannot actually say.

I am sure that the minister will go through it and set up some process, and I am sure that they will be used to assist people with disabilities access either services or equipment, or they might help in the establishment of some infrastructure in a community setting. I just cannot say, and I do not know if the Minister for Disability Services has turned her mind to it.

Ms CHAPMAN: Also in that list is the Mount Gambier District Health Service, $678,000. Is that the hydrotherapy pool money or is part of it for something else? It is just other investment. Thank you.

Schedule passed.

Title passed.

Bill reported with amendment.

Third Reading

The Hon. J.D. HILL (Kaurna—Minister for Health, Minister for Mental Health and Substance Abuse, Minister for the Southern Suburbs, Minister Assisting the Premier in the Arts) (17:36): I move:

That this bill be now read a third time.

Ms CHAPMAN (Bragg) (17:37): I thank the minister for his responses. I remain concerned about the future of this fund and its accessibility to government, perhaps for less scrupulous ministers in the future (who would know). It does concern me that we have moved to a model which is not consistent with other trustee provisions in this state and which, I think, imposes an unrealistic burden on those that are there.

I thank those who have served as commissioners in the last 123 years, including Judith Worrall, the current chair, and current members. I also thank the Hon. John Darley, a former chair, who is now here in the parliament. Each of these people have come with very considerable legal expertise and other areas of expertise that have served the donors well in the past. To some degree, I think it is a bit of an insult to impose on them an obligation to consult on financial matters through the committee procedure which is being adopted. Unique as it may be, I think that it is unfair to both current and past commissioners.

The other thing that concerns me is that it has taken so long. There has clearly been a necessary requirement—not just because of what the Auditor-General and crown solicitors have said, and even Finlaysons Solicitors 12 years ago (this is not a new issue)—for government to allow a change in relation to powers of investment, which could have easily been dealt with in 1999 when there was a previous government. When they came here to deal with other amendments, they could have dealt with it then.

In the nine years of this government, they have had plenty of opportunity to remedy that, but they have not. It is my view that the commissioners have been held to ransom over the opportunity to be able to have this cleared up (which does need to be done for them to continue to operate) in exchange for acquiescence to a structure that I think is cumbersome and unnecessary, and leaves all the health services vulnerable and now completely under the control of government.

I thank all those who have served us for over a century. It has been a fantastic organisation. It has safely husbanded the funds of those who have given generous donations. If that dissipates in the future and we see the Citibank building on the market in the next few months, to bring to fruition the dream of former treasurer Foley, I suppose, sadly, my contribution will have come to pass. It is not something I want to hear but, if it comes to pass, I think that will be the demise not just of those who so generously donated in the past and currently form some $85 million worth of investment but for those in the future who might be deterred from ever making a contribution in the full knowledge that it will be dissipated or applied, really, at the behest of whoever is in government.

So, I say thank you to the commissioners and for whatever term they have left; I understand they will continue until their current term expires. They can, of course, be disposed of and new commissioners put in, which, again, does not fill me with joy. Nevertheless, we will see whether the minister is right in his expectation that this is a structure that will serve us well and will not be raided by this government or future governments.

Bill read a third time and passed.