Bills

Public Finance and Audit (Treasurer's Instructions) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 29 October 2014.)

Mr VAN HOLST PELLEKAAN (Stuart) (12:00): I rise to speak on this amendment bill and to say that I am the lead speaker for the opposition. I do not think that I will trouble the timekeepers with everything that is entitled to me. While I am sure it can be dealt with quite quickly, this Public Finance and Audit (Treasurer's Instructions) Amendment Bill 2014 is nonetheless an important piece of legislation. I say that the Liberal opposition supports the amendment bill. It is nonetheless very important, as I said. It will be dealt with certainly more fulsomely by the opposition in the other place, by the Hon. Rob Lucas, who is the shadow treasurer.

Essentially, this is about internal operating instructions clarification. It is perhaps about hierarchy as well. Treasurer's Instructions via the Public Finance and Audit Act in a certain way can take priority over other acts with regard to spending, entering into contracts, use of funds, acquisition or disposal of property, incurring liabilities, etc., by public authorities. It does this by essentially saying that the Treasurer's Instruction under the Public Finance and Audit Act are deemed to become part of and additional to the public authority's obligations under its own act.

This is generally for very good reasons, because it might well be that the Treasurer, or in fact the Minister for Finance, who at the moment is the same person, might have some accounting practices or might have some ways of conducting financial transactions on behalf of the public of South Australia which are very important, and those things might evolve over time. A new standard might come in that needs to be adopted by all public authorities, and so it makes good sense for the Treasurer to have the capacity to give instructions that all public authorities, acting under a range of different acts, should adopt in relation to these new and positive ways of operating.

In some ways, while these are actually Treasurer's Instructions, in some ways it might even be more relevant to the Minister for Finance and that minister's responsibilities in terms of having an oversight in not just where the money is coming from and going to, but in fact the process of how it is spent, and having to deal with the Auditor-General's questions later on.

It does throw up one important question, though. What happens if there is a conflict between the Treasurer's Instructions to the public authority and that public authority's existing obligations under their own act? I will come back to that shortly, but, while I say again generally that there are positive reasons why the Treasurer's Instructions would have this authority, that is a critical issue: what happens if there is a conflict?

I am advised by the Hon. Rob Lucas that one of the reasons that this amendment bill has come forward at the moment is because of an example that has arisen with regard to WorkCover. WorkCover is a public authority for the purpose of the Public Finance and Audit Act. It is therefore intended to be subject to the requirements of that act and Treasurer's Instructions. However, WorkCover obtained legal advice that indicated they believe provisions of the WorkCover Corporation Act means that they do not have to comply with the Public Finance and Audit Act or Treasurer's Instructions. The government has advised that the Solicitor-General disagrees with WorkCover's advice and their interpretation of the bill, so this bill is intended to ensure that WorkCover and any other public authority does have to comply with the Public Finance and Audit Act and the Treasurer's Instructions.

That is one example that has been brought forward by the Hon. Rob Lucas, and I am sure that the Treasurer would be aware of that situation. However, it does beg the question of what other examples might be out there, so I ask that the Treasurer, when he makes a further contribution to this debate, share with this house any other examples that might have come up or any other issues that may have led to the need for this clarification that we are working through at the moment.

What is the current problem with the scope of the Treasurer's Instructions that has meant the government needs to make these changes? Has the Auditor-General ever raised an issue that has led to a need to clarify this; if so, what was the issue or issues? Is there an example or examples of a particular provision of an act that is inconsistent with the Treasurer's Instructions? Assuming this legislation is passed, if the parliament has passed an act that provides that a body should be independent of the minister, does this give Treasury authority to override that and make the body subject to the Treasurer's authority via the Treasurer's Instructions? Of course, that then gets me back to the question I raised previously: what happens when there is a conflict?

I would like to point to a couple of clauses in the bill. I would be more than happy to come back and ask these questions in the committee stage, although I would be equally happy if the Treasurer, when he contributes further remarks in the debate, could clarify these issues. Essentially, looking at part 2, section 41, four additional clauses, which will replace the original subsection (4) in the act, are proposed to be inserted into the act by this bill. I will read the last two of them:

(6) Treasurer's Instructions are to be interpreted as being consistent with an act conferring functions or powers on a public authority if it is possible for the public authority to comply with both the act and the Treasurer's Instructions in the performance or exercise of the functions or powers.

The second clause, which I will refer to in a moment, provides:

(7) In particular, if an act confers on a public authority power to enter a contract or manage or apply a fund or other powers relevant to the receipt, management or expenditure of money, the acquisition or disposal of property or the incurring of liabilities, the authority must, in exercising the power, comply with Treasurer's Instructions—

which is all straightforward, but it then goes on to provide—

…unless it is not possible for the authority to do so and to also comply with any requirements relating to the exercise of the power under the Act.

So this bill clearly recognises that there may well be instances where there is a conflict.

Certainly in my reading of the bill (and I am happy to be advised otherwise), there is nothing that actually stipulates how these issues would be dealt with where a conflict does exist. It might well be that it is contained in another act that the Treasurer or his advisers are aware of, and I would be very grateful if that information could be brought forward because, clearly, where there is no conflict it is quite easy to understand that this would all be done for very positive purposes, as mentioned before; however where there is a conflict, that presents a very difficult situation with regard to how that public authority should conduct its business when it is caught between Treasurer's Instructions and the responsibilities and obligations of its own act.

One other hopefully very small question—it might just be that it is a term I have never come across myself—relates to part 2, clause 3—Amendment of section 4—Interpretation, which provides:

…after the definition of local government indemnity scheme insert:

Property means real or personal property and includes—

(a) a chose in action;

I am just not sure what 'a chose in action' means. It might well be a perfectly legitimate legal term that I have never come across. If the Treasurer could answer that question for me, and for the rest of the house because it appears that nobody else here knows what it means either, it would be helpful. It may well be quite a straightforward technical or legal term that none of us have come across. I will finish up here.

This does seem to be very sound logic, but we would like to know whether there are any other examples in addition to the WorkCover example that have meant that the government has decided to bring this bill forward. We would like to know whether there are any examples the government is aware of where there is or could possibly be a conflict between Treasurer's Instructions and that public authorities act. We would also like to know, please, how the government proposes to deal with those situations when and if there is a conflict.

Mr KNOLL (Schubert) (12:11): I rise also to speak on the Public Finance and Audit (Treasurer's Instructions) Amendment Bill. This is a bill that is short in stature but quite interesting in its application, which has led me to do a bit of digging. Again, as one of the new kids on the block, whenever I see things like this come before the house, I use it as an opportunity to expand my meagre knowledge and understand better the processes of this place and of the state government.

As a voracious reader of the Auditor-General's Report, Treasurer's Instructions Nos 2 and 28 are becoming more and more familiar to me as obviously they relate to financial management and also to the Financial Management Compliance Program relating to government departments. The Auditor-General goes through and looks through these two particular TIs but also references a number of other Treasurer's Instructions throughout the report looking at whether or not government departments have complied with these.

It is interesting to note how often there is a grey area, and certainly the Auditor-General's Report uses language of a more gentle and understated nature. For instance, within the Department for Education and Child Development, with reference to procurement, the Auditor-General says of the department that their policies are not consistent with the requirements of the Treasurer's Instructions. At the end of his report on the education department he said, 'Audit asks the DECD to review their policy with regard to TIs, especially in relation to the timeliness of payments made.' I highlight those two as merely a couple of comments that I came across while reading through the document, where the Auditor-General gently tries to suggest that, yes, there are these Treasurer's Instructions and, yes, they should be followed, but there are probably some instances where we need to tighten up on that.

I also note that throughout the report, not just within the education department but right across the report, he makes these gentle recommendations to the government. But there is one instance where it gets a bit more specific. In relation to the member for Stuart's comments earlier regarding what are the problems, page 121 of Part B, Volume 1 of the Auditor-General's Report goes through the Art Gallery board's financial dealings. I came across something interesting, because again I knew nothing of what the Art Gallery board did before I read this, and I would like to bring it to the attention of the house because it may be something that is being dealt with through this bill. It talks about the significant purchase of an artwork, 'On 7 November 2013 the Board purchased a significant work of art,' I am not going to get his name right, but it is Camille Pissarro, and I am sure that is an abuse of the way I should say it, 'titled 'Prairie à Éragny', and again I apologise to all French-speaking people.

This work was purchased for a total of USD4.253 million from Sotheby's in New York, which equated to a price paid by the Board of $4.593 million.

There was some discussion around how much the board should authorise to pay this, but before we get to that I would like to point out, 'The purchase of the Pissarro,' and I am reading again from the Auditor-General's Report, 'by the board outside of the monetary limits detailed in TI 8'. Treasurer's Instruction No. 8 says that there is a monetary limit of $1.1 million put on the amount that the board, or I assume government entities, can spend on significant pieces of infrastructure, or artwork in this case, without needing to go back for further approvals. Again, I am reading from the report:

From discussions with Board staff, it was not clear whether the requirements of TI 8 apply to the Board or whether specific Board powers detailed in the Gallery Act prevail.

So here is an instance where there is some ambiguity as to the primacies of the Art Gallery Act versus Treasurer's Instructions, and it meant that the Art Gallery board made the decision to purchase a piece of art worth $4.593 million, which may or may not have been at odds with Treasurer's Instruction No. 8. The Auditor-General goes on to say:

As a result, significant artwork purchases greater than $1.1 million may not be appropriately authorised for purchase by the Board if the purchase requirements of TI 8 are applicable to the Board. The Board responded that it acknowledges that it would be useful to seek formal clarification on the applicability of TI 8 for the purchase of artworks.

In this instance, I think the board itself is asking for the clarification which, hopefully, this bill seeks to redress, and I think that would be a very good thing. I will detail a little bit more about this purchase because the board approved the purchase price including the buyer's premium insurance and freight of $4 million.

The final purchase price of $4.593 million, which was the hammer price plus the buyer's premium only, exceeded the total amount that was approved by the board. Board staff identified that at the time of bidding an anonymous bidder was present who agreed to pay the amount in excess of $4 million. The Auditor-General obtained documentation to support these receipts from the anonymous donor but noted that two payments, totalling $500,000, were received in relation to the artwork.

One of those, the $150,000 contribution, was received on 28 October 2013, prior to the auction, so it seems as though—and I think what the Auditor-General is trying to say—the total purchase price exceeded the approved limit by $593,000 and that, of that $593,000, $500,000 was donated by an anonymous donor but, of that $500,000, only $350,000 was actually part of the top-up amount. Again, it seems as though the Art Gallery board has exceeded its own limit and certainly well exceeded Treasurer's Instruction No. 8. The Auditor-General goes on to say:

A lack of clarity in financial arrangements for major acquisitions may result in the Board making purchases of artwork that exceed Board approved purchase prices.

I think a lot of work needs to be done there in terms of not only how Treasurer's Instruction No. 8 applies but also how the board goes about making purchases.

Another fun fact I learnt while trawling through the Auditor-General's Report about the Art Gallery board is that they receive about $9 million a year in revenue from the state government, but on behalf of the people of South Australia look after a staggering $602 million worth of artwork that the state government, through the Art Gallery board, owns. That is something that really startled me.

I have come to learn that we have some beautiful paintings as part of that collection. There is a Tom Roberts in there. It really is going to spur me to go on and pay my gold coin donation and go down and have a look at some of these artworks and really appreciate the great expense and the fantastic pieces of artwork treasure we have in the Art Gallery and to make full use of them, given that they have come at significant cost to the South Australian taxpayer.

With those comments, I indicate that I am very much in favour of this bill, certainly in terms of how WorkCover, as a public body, deals with the Treasurer's Instructions, which is an issue this bill seeks to address. I also hope that the amendments in this bill help to clarify the arrangements under which the Art Gallery board operates. In clause 5—Amendment of section 41—Treasurer's Instructions, under subclause (2)—Section 41(4), it provides:

(6) Treasurer's instructions are to be interpreted as being consistent with an Act conferring functions or powers on a public authority if it is possible for the public authority to comply with both the Act and the Treasurer's instructions in the performance or exercise of the functions or powers.

I think that is very much the operative clause we are talking about and I hope the operative clause helps to deal with 'the lack of clarity', as the Auditor-General calls it, in relation to the Art Gallery board.

Mr PEDERICK (Hammond) (12:21): I rise to support the Public Finance and Audit (Treasurer's Instructions) Amendment Bill 2014. This is a bill that was introduced into parliament only on 29 October. The bill is attempting to clarify matters relating to the application and scope of Treasurer's Instructions and makes minor amendments of a statute law revision nature. The amendments seek to improve general understanding about the relationship between Treasurer's Instructions and provisions of an act providing a public authority with functions and powers.

I was very interested in the member for Schubert's information in regard to the Art Gallery of South Australia's buying art and operating outside of its own parameters. It will be interesting to see whether that is something that can be captured under this bill.

I am of the understanding that WorkCover has obtained legal advice that indicates that it believes that provisions in the WorkCover Corporation Act mean that it does not have to comply with the Public Finance and Audit Act or Treasurer's Instructions. I find that interesting when WorkCover is a public authority for the purpose of the Public Finance and Audit Act and is therefore intended to be subject to the requirements of that act and Treasurer's Instructions.

The government has advised our shadow treasurer that the Solicitor-General disagrees with WorkCover's interpretation and that the bill is intended to ensure that WorkCover and any other public authority have to comply with the Public Finance and Audit Act and Treasurer's Instructions. I note from the second reading explanation that it is about making a framework for the financial management of public finances. As I indicated earlier, it also provides:

The ability for the Treasurer to issue instructions binding public authorities is central to providing a framework that advances accountability, integrity and transparency for the benefit of the State.

It goes on to state that the main essence of the bill is as follows:

…to make it clear that a general provision in an Act establishing a public authority, such as a power to enter contracts (or even a more specific provision such as a requirement to have a particular body approve a contract), will not override a requirement of Treasurer's instructions applying to the public authority, for example, requiring an approval of the Treasurer or delegate to be obtained for entry into a contract.

As indicated, these amendments are designed 'to improve general understanding about the relationship between Treasurer's Instructions and provisions of an Act providing a public authority for functions and powers'.

There is an attempt to clarify the scope of Treasurer's Instructions so that it is clear that they may regulate any matter related to the receipt, expenditure or investment of money, the acquisition or disposal of property, or the incurring of liabilities by the Treasurer and public authorities. I note a couple of amendments that have been made to section 41(4) 'delete subsection (4)' and substituting several amendments in subsections (6) and (7). Subsection (6) provides:

Treasurer's instructions are to be interpreted as being consistent with an Act conferring functions or powers on a public authority if it is possible for the public authority to comply with both the Act and the Treasurer's instructions in the performance or exercise of the functions or powers.

Subsection (7) provides:

In particular, if an Act confers on a public authority power to enter a contract or manage or apply a fund or other powers relevant to the receipt, management or expenditure of money, the acquisition or disposal of property or the incurring of liabilities, the authority must, in exercising the power, comply with Treasurer's Instructions (including by obtaining any approval required by the instructions) unless it is not possible for the authority to do so and to also comply with any requirements relating to the exercise of the power under the Act.

I think there is some concern when I read words 'unless it is not possible for the authority to do so'. I would be interested in the Treasurer's comments in regard to that and why there would be certain instances where someone, as an authority, could not comply with this bill if it becomes law.

Apart from the fact that we are trying to tidy up the public audit functions of this act and the whole realm in regard to Treasurer's Instructions, we need to be absolutely certain that these are complied with and that there is no wriggle room. What I can see here is that there is wriggle room, so I will be very interested in the Treasurer's comments in regard to where authorities may still not need to comply, because that will lead into another legal argument similar to the WorkCover case, where they believe that they do not have to comply with the current legislation.

With those few words I support the legislation, but seek some explanation in regard to some of the comments made in the bill, and I wish it speedy progress through the house.