Auditor-General's Report

AUDITOR-GENERAL'S REPORT

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Planning, Minister for Business Services and Consumers) (15:56): I move, without notice:

That standing orders be and remain so far suspended as to enable the following Supplementary Reports of the Auditor-General for the year ended 30 June 2011—Audit Agency Reports, November 2011, Audit Agency Report, Department of Health and Associated Health Services, April 2012—be referred to a committee of the whole house and for ministers to be examined on matters contained in the reports in accordance with the timetable as distributed.

The ACTING SPEAKER (Hon. M.J. Wright): We need to count the house to make sure there is an absolute majority present. There's not; ring the bells.

An absolute majority of the whole number of members being present:

Motion carried.

In committee.

The CHAIR: We will now inquire into the Supplementary Reports of the Auditor-General 2010-11. The first minister to take questions will be the Deputy Premier, Attorney-General, Minister for Planning and Minister for Business Services and Consumers, for 15 minutes. The member for Bragg.

Ms CHAPMAN: I refer to the Auditor-General's Supplementary Report for the year ended 30 June 2011 as tabled in the parliament in November 2011 and the division relevant to the Attorney-General's Department commencing on page 1. I refer to the findings and comments on page 3 that this report was delayed because 'Audit did not meet with the expected quality standard'. What steps were taken between 30 June 2011 and November 2011 to ensure that the supplementary report did meet the quality standard?

The Hon. J.R. RAU: I am advised that the following has taken place during the current financial year in preparation for the 2011-12 accounts:

Early development of a detailed task list and plan for the preparation of the 2011-12 financial statements;

A change in the mix of resources expected to be allocated to complete the accounts at the end of the year;

A better understanding has been reached about the complexities and detail associated with the completion of the department's financial statements;

Ongoing discussion with Shared Services has identified potential new risks and issues that will need to be considered for the year end statements; and

Early discussions with staff of the Auditor-General's Department about various matters that require their opinion.

I am advised that staff of my own department are now confident that, based on the work undertaken with Shared Services, the department's financial statements will be in a position to be included in the Auditor-General's Department's main report to parliament for 2011-12.

Ms CHAPMAN: On that issue, Attorney, I think I understood that, for the purposes of preparing this year's annual report, you had done certain things which you are satisfied will make sure that you get it in on time next year by presumably October 2012, and I appreciate that. In the ongoing discussions you had with Shared Services, what was it that they had failed to do that you are now confident they will get right and get it in on time?

The Hon. J.R. RAU: Thank you for the question. I am advised that the matters that I set out before were in effect the matters that were drawn to the attention of the department as being—

Ms Chapman interjecting:

The Hon. J.R. RAU: Okay:

Early development of a detailed task list and plan for the preparation of financial statements;

A change in the mix of resources expected to be allocated to complete the accounts;

A better understanding about the complexities and details associated with the completion of the department's financial statements;

Ongoing discussions with Shared Services to identify risks that will need to be considered; and

Early discussions with staff of the Auditor-General's Department about various matters requiring their opinion.

I am advised that those items to which I referred earlier were, if you like, matters which came out of last year's preparation of return process and which were identified as matters that needed to be improved.

Ms CHAPMAN: That answer really just outlined that there is a plan and that there will be some monitoring. As I understand it there was identification of risk but it does not actually tell us what went wrong and what is actually going to be done—apart from having a plan—to make sure that it is brought in on time. What were the risks? What were the issues that caused it to be late in this information coming from Shared Services?

The Hon. J.R. RAU: I think that I understand the honourable member's question, and I am advised that probably that is a matter that might best be directed to Shared Services.

Ms CHAPMAN: If it is a matter that you are not familiar with, how can you be confident that it will be remedied this year?

The Hon. J.R. RAU: As I said, my advice is that there were a number of matters which could be and should be given greater attention in the course of the preparation of this year's returns. Those matters are the ones I went through a moment ago. I am advised that the taking of those steps should ensure that next year we do not wind up having the delay that occurred last year.

Ms CHAPMAN: So are you able to identify, then, any reason why they were late this year? What did they say to you? What was the explanation that Shared Services gave to you? I appreciate all the plans and processes to get it in place for this year, but what was it that went wrong or that they found impossible to deal with that caused you the real embarrassment of having to come here months later?

The Hon. J.R. RAU: I do not want to be in a position of in any way being unhelpful to the honourable member in relation to these questions. I think, having exhausted my resources in terms of reliable information on the topic, that I should take that last question on notice.

Ms CHAPMAN: On page 3 reference is made to the SA Aquatic & Leisure Centre. This was a facility that was built, of course, through DTEI and then transferred to your department under a management contract for the YMCA effective from April this year. I think it was officially transferred on 24 March last year. There is some complaint by the Auditor-General about the contracts not being signed until 29 June 2011.

My question is in relation to the handing over of responsibility of the swimming centre asset to your department on 24 March. Will the minister confirm what payments have been made to rectify the defaults, fix warranty issues or complete the unsatisfactory work since that date? As the minister is aware, Baulderstones were called in to mop up the mess and, of course, there is other litigation happening between the government and Mr Candetti about the operation. Could I have the payments made to remedy the defaults, and what other fixed warranty issues were there?

The Hon. J.R. RAU: Whatever the role of the Attorney-General's Department may or may not have been in terms of the history that the honourable member has just given, it is my understanding that this particular session is about Business Services and Consumers, and I do not understand, unless I am misunderstanding my advice, that Business Services and Consumers had any role at all in relation to any of those processes.

The honourable member may be aware that the umbrella of the Attorney-General's Department, notwithstanding various machinery of government changes, has at various times had a number of ministers with different portfolios under that umbrella. For example, recreation and sport certainly was there and I do not think it is there now but—

Ms Chapman interjecting:

The Hon. J.R. RAU: Yes, I know. I guess my point is that, as the responsible minister for business services and consumers, that aspect of the Attorney-General's function was not directly, as I am advised, involved at all in that particular series of events to which the honourable member referred. It may well be that recreation and sport, as an aspect of the AG's function in a broader sense had something to do with it—I do not know, and I am not in a position to answer that question. I am advised that Business Services and Consumers did not have anything to do with that particular matter.

Ms CHAPMAN: Even if the department of transport attended to the remedying of the problems to finish the facility ready for the sports events, will the Attorney provide that information if, in fact, he finds that there was an area of responsibility that his department had at that time? According to the Auditor-General's Report, the transfer did take place on 24 March. You inherited a $100 million asset for management and the responsibility for it, and somebody somewhere in your government undertook probably millions of dollars worth but, in any event, significant work to it. It seems to me that somewhere along the line, if you are in charge of it and another department does anything on it, you either know about it or should know about it and have some understanding about why it is happening and who is paying for it.

The Hon. J.R. RAU: I give this undertaking to the honourable member. I will ask those who advise me to review the questions and the answers that I have given and, if it turns out that I have in any way not fully explained the relationship between consumer and business services in that particular transaction, any omission will be rectified in that written answer.

But can I also say that I suspect—and this is only what I suspect—that the honourable member is possibly being led astray by the fact that the head of the Attorney-General's Department, Mr Maguire—who I wish to thank for his great efforts on behalf of that department and wish him well for his future in other endeavours. I am sorry that is a very short soliloquy but I will find another time for a more lengthy one.

The point is that Mr Maguire had at one point as I recall seven ministers to whom he was responsible. I, for one, found that rather frustrating because, number one, I could not have as much access to Mr Maguire as I often would have liked, although he was always very accommodating; and number two, sometimes some of the other ministers were asking him to do things that I would have preferred he did not do. But you see, he was able to do that because they were completely separate machinery of government units that were attached to the Attorney-General's Department with him as the chief executive officer of that agency. I think that is the correct way of describing it.

I suspect that what the honourable member has discovered is one of those elements which does not—even though it has got under the umbrella of Attorney-General's Department. Even now, not everything which is under the umbrella of the Attorney-General's Department is something in relation to which I have any ministerial responsibility. I think emergency services, for example, fit into that category presently.

Ms CHAPMAN: I assume from that that Mr Maguire is overworked and did not get a chance to tell you everything that he should have. Perhaps that is the reason why he is going off to look after the MAC and, if he only has that job, it might be a little easier for him to undertake that task. However, quite clearly at the bottom of page 4, the management of this contract is not just subcontracted out to the YMCA. The Auditor-General finds, in fact, that it is a dual responsibility of the department—that is, the department about which apparently you do not get reported to very much. It is raised in the context of some criticism of the Auditor-General about the contract not being executed until 29 July, but it is a joint management arrangement according to the Auditor-General. So, it is certainly something you should have known about.

In any event, the remediation of this work has taken place. As you are aware, the Minister for Infrastructure has informed cabinet that he had a conflict of interest concerning Mr Alex Candetti, the Director of Candetti Constructions, who had actually built this, and then of course as we know Baulderstone came in to remedy the breach as such to make it fit for purpose for a certain event. When the did the Minister for Infrastructure inform cabinet that he had a conflict of interest?

The Hon. J.R. RAU: If we are talking about a cabinet discussion, I am not in a position to get into that, as you know. More particularly, I think the problem from my point of view with the question is that it suffers from the same difficulty as the last few.

Ms Chapman: I know nothing?

The Hon. J.R. RAU: Well, can I put it this way? Mr Maguire has been a very talented chief executive. He has been able to manage seven different ministers simultaneously and separately and independently. I give an undertaking to the honourable member that if, contrary to my belief and understanding, CBS has anything to do with the matters to which the honourable member has referred, I will get a supplementary answer to the honourable member.

The CHAIR: That concludes the examination of the Supplementary Report of the Auditor-General 2010-11 for the Deputy Premier, Attorney-General, Minister for Planning, Minister for Business Services and Consumers. We now come to the examination of the Supplementary Report of the Auditor-General 2010-11 for the Minister for Transport and Infrastructure, Minister for Housing and Urban Development for 15 minutes.

Ms CHAPMAN: I refer to the report of the Auditor-General: Supplementary Report for the year ended 30 June 2011, tabled on 22 November 2011 in this house. In particular, I refer to the Land Management Corporation, under this minister's portfolio, commencing at page 82. As the chairman will no doubt be aware, the Land Management Corporation is an entity which no longer exists; it has since been replaced by the Urban Renewal Authority. Nevertheless, it was operative during the relevant time.

Firstly, I refer to pages 89 and 90 and, in particular, to the Port Adelaide Waterfront Redevelopment. Subsequent to this report being provided, I was provided with a briefing by Mr Wayne Gibbings who was, at that time, the chief executive officer of this entity—and he is with you today—to confirm that there had been a delay in the reports to the Auditor-General in respect of a particular venture. Was the venture responsible for the delay in the report, the Newport Quays development?

The Hon. P.F. CONLON: I assume you mean the joint venture. In essence, as I understand it from memory, it was a dispute between the Land Management Corporation and Newport Quays. There was an argument between the Land Management Corporation and Newport Quays with regard to valuations on marina land, from memory, which of course was relevant to some land tax obligations, I think. It was thought to be resolved but, as I understand it, the Auditor-General then concluded that he was happy to sign the accounts without the resolution of the argument. It has not been of enormous moment for the accounts.

Ms CHAPMAN: Has that since been resolved? If so, has there been any land tax payment made?

The Hon. P.F. CONLON: No; they are still in dispute about the value of the land.

Ms CHAPMAN: On page 90, however, the Auditor-General refers to the delay due to a number of factors, including the 'inability to obtain all development approvals for proposed stages and the effect of the global financial crisis', etc. So in relation to the Newport Quays development, what development approvals were not obtained, and for what particular stages?

The Hon. P.F. CONLON: What you are referring to is the delay in the actual project development, and I would think that some of those approvals may not actually be relevant to this audit period. In fact, we inherited this project from you, from the previous Liberal government. I can get you some detail on some of those approvals. I knew there were difficulties with reports around Incitec Pivot. It has been pointed out to me, and I think you will understand, that those peripheral delays had nothing to do with the audit, nothing to do with the delays in the audit. In fact, it is probably not terribly relevant to the audit, but I am happy to provide whatever information I can.

Off the top of my head, it is a former industrial site. Issues were raised, I think, by WorkSafe or the EPA around Incitec Pivot's ammonium nitrate stores; I think that is what it is called. We are continuing in discussions with Incitec Pivot, hoping one day to have them relocated. There has been a series. There was that one, and I think there were issues around buffer zones around Adelaide Brighton Cement, but they are not relevant to this audit. We are happy to provide you with that information. Most of it is on the public record, I think.

Ms CHAPMAN: I am happy for the minister to take that on notice. I agree it did not relate to the reason for the delay in the audit, but it did relate to what the auditor had found in relation to the development being delayed, and that is why I was asking you about that. I will accept that you are going to take that on notice and provide the detail of that.

Page 120 refers to capital expenditure commitments for the Newport Quays development, specifically capital works for precinct 5, which was underway in July 2010, but is now on hold. What expenditure was incurred by LMC in relation to precinct 5, and what was the total estimated cost for this precinct?

The Hon. P.F. CONLON: Neither of the officers here could give that to you off the top of their heads, so they will have to take it on notice.

Ms CHAPMAN: Page 124 sets out under paragraph 38 events after the reporting period, of which the Auditor-General makes some note. Now, of course, this is on the public record, that the Newport Quays development has been cancelled. Did the LMC advise the government that the Newport Quays development was not financially viable, and if so, when?

The Hon. P.F. CONLON: No, that is not the case, so the second part of your question does not apply. I cannot imagine what sources the question. The Newport Quays development, as you know, was delayed by a number of things, but in particular the market for apartments after the global financial crisis was extraordinarily difficult. The underlying value of the land has not changed; the underlying capacity to have development there has not changed. The only thing that changed was there was a view that, since, for a number of reasons—including the Incitec Pivot that I mentioned before—there was going to have to be a hold on that part of the project for some time, because of the general attractiveness of the marketed apartments, it was a good opportunity to have another look, as I say.

This was a project that went to the market under the previous Liberal government in 2001. We had another look, at some length. We considered it at some length, and the board made recommendations. It is pointed out to me that one of the considerations was that we were not getting from the project what we had hoped, in terms of the rejuvenation of the port centre. That was fairly obvious. The consideration was that, given there was going to have to be a hold in that current stage of the project in any event, it was a good time to rethink whether it was achieving the objectives that we had set out to achieve. It was our view that the best outcome for the taxpayer, for the government and for the people of Port Adelaide was to start again. I think that was a very good decision.

Ms CHAPMAN: Should I take it, minister, from what you said that the board had discussed it, and that they had recommended the cancellation of the Newport Quays, and that they had recommended that it be aborted, because of Incitec Pivot, or any other reason?

The Hon. P.F. CONLON: I think they went a little further than recommending it; I think it was a decision of the board. Of course, if we didn't like the decision we may have said something about it, but it was not a matter that was taken on the spur of the moment. From my memory we had many discussions about the progress of the project; whether it was meeting its objectives over time and the fact that it was going to be held up by a number of things given that it was on pause. At the end of the day my understanding is that it is actually a board decision, which I am pretty sure I reported to the cabinet and cabinet agreed with the decision of the board.

Ms CHAPMAN: For the purpose of pursuing an alternate development that is underway now, is the necessary prerequisite to development that the superphosphate company is relocated and is that still being attended to?

The Hon. P.F. CONLON: We believe that it is a very wise thing to do in any event. It would certainly be necessary for some parts of this project—it is a very large project—but given that the ammonium nitrate is stored within a certain distance of existing dwellings that were there long before this project we believe it would be a wise thing to do in any event. I have not had an update on those discussions recently but they are continuing. Even if we weren't proposing to do further development down there—I see the member for Port Adelaide is here—we would be concerned, having been advised of this, to relocate that factory to what we see as a more appropriate place, in any event.

Ms CHAPMAN: Having made the decision that it would be wise to do it, is the government saying that it would not develop that site around the Newport Quays area unless that project is relocated, setting most things over and above the EPA?

The Hon. P.F. CONLON: I did not say that and after I have finished you may seek to reinterpret what I say in any way you desire. I know that you are of legal training and you are very clever with words and I will do my best up against you. What I have said is we believe it is desirable to move that factory if we can, and we have not gone beyond saying that at present. That is certainly our ambition and we believe we will achieve it.

Ms CHAPMAN: Is there any rule, regulation or EPA report that says you cannot build around it without breaching that?

The Hon. P.F. CONLON: You have to understand that part of the issue is that people have built there because it is zoned as a residential area. It is only when a development application is of a sufficient size that it actually triggers some of those people looking at it—by that I mean WorkSafe and the EPA. People have built in the same vicinity that the Newport Quays development would have been in, and that is why we believe it is wise, in any event, to seek to relocate that development.

My understanding of it is that the risk to the locals from ammonium nitrate is extremely low and the likelihood of there being an accident is extremely low, but given what we have been told we still believe it is wise to seek to relocate it. It was only drawn to our attention as a result of the development application triggering the involvement of those agencies.

Ms CHAPMAN: But having triggered it, it is your intention for as long as you are minister to not recommend to progress any redevelopment proposal until that issue is resolved?

The Hon. P.F. CONLON: Feel free to keep putting proposals that I am not putting. What I am saying to you is that we believe that it is desirable to move it. Another outcome would be that the licence conditions are changed in regard to how they handle materials, which removes the small risk that is there. So there is a range of things that might occur. What I am saying is that we believe the most desirable outcome at present is to relocate because we think for a number of reasons other than the ammonium nitrate it is probably more appropriate for those industrial sites to be in another place. We have industrial land and we are working with those people, but there is a range of ways that this thing might proceed if the company is not relocated.

Ms CHAPMAN: What was the total government expenditure on the Newport Quays development, and what was the total revenue to government from the project?

The Hon. P.F. CONLON: That is obviously not all in this audit period so we will have to go away and get that information for you.

Ms CHAPMAN: Point 3.5 on page 106 refers to the Lochiel Park development. Will the minister confirm the status of that development? In particular has all of the land that was supposed to be handed over to the Campbelltown council been handed over and, if not, why not?

The Hon. P.F. CONLON: As you would no doubt be aware, those discussions with Campbelltown council are still ongoing. We would expect the council to hand it over within a 12 month period. By that we refer, of course, to the open space, not the development that is owned by the people who built houses there.

The CHAIR: That concludes the examination of the Supplementary Reports of the Auditor-General 2010-11 for the Minister for Transport and Infrastructure, and the Minister for Housing and Urban Development. We now come to the examination of the Minister for Health and Ageing.

Progress reported; committee to sit again.