Auditor-General's Report

Auditor-General's Report

In committee.

The CHAIR: I declare the examination of the report of the Auditor-General 2023-24 open. I remind members that the committee is in normal session. Any questions have to be asked by members on their feet and all questions must be directly referenced to the Auditor-General's 2023-24 Report and Agency Statements for the year ending 2023-24, as published on the Auditor-General's website, and the Update to the Annual Report, as tabled in this house on 15 October. I welcome the Premier and the member for Hartley, the leader, and I call for questions.

The Hon. V.A. TARZIA: Question one references Part A, Agency outcomes of note, SA Health, page 17. The Auditor-General noted a $956 million overspend by SA Health, an 11.5 per cent overspend for the second year in a row. Premier, do you concede that you have no plan to fix the health system and the ramping crisis?

The Hon. P.B. MALINAUSKAS: No.

The Hon. V.A. TARZIA: Referring to the same page, given the budget blowout in 2022-23, why were these issues here not anticipated for the last financial year? Every single consolidated entity exceeded the expenditure of the budget set out in financial year 2023-24.

The Hon. P.B. MALINAUSKAS: Obviously, when it comes to health funding, the budget contemplates a range of variables and, as the Leader of the Opposition would appreciate, much of health funding is activity based. What we have seen within the health system over a sustained period now, and certainly over the last 12 months, is a range of variables in terms of increasing demand, not just in terms of volume but also in terms of complexity: comorbidities, the health system being burdened with an increasing number of aged-care patients stuck in beds. All of these variables add considerable cost and that reflects itself in the system.

Of course, one must contemplate the counterfactual, which looks like severe cuts to the health system that are driven through an appetite to achieve a particular budgetary outcome as distinct from delivering the health care that people require as determined by our clinicians and medical professionals.

The Hon. V.A. TARZIA: I refer to Part C: Agency Audit Reports, page 114. The Auditor-General notes the budget set for the consolidated entity in the 2024-25 state budget is $160 million less than its actual expenditure for 2023-24. The question to the Premier is: on what assumptions are you relying that you will spend less this year than the last?

The Hon. P.B. MALINAUSKAS: Is that across the government or in health?

The CHAIR: Leader, can I just remind you the Premier is not the minister responsible for health. While I have allowed some questions in a general sense, I think if we get to the specifics they should be directed to the Minister for Health because the ministers also have the respective advisers who can advise them. I assume this officer is from Premier and Cabinet and not the health department. Premier, I am happy for you to leave it to the health minister to answer.

The Hon. V.A. TARZIA: It is 40 per cent of the budget, so he might want to answer accordingly.

The CHAIR: I think it is going to be more productive for us to have the relevant ministers cover their portfolios. I have allowed a few questions because you are new to the job, but now we will get back to it.

The Hon. V.A. TARZIA: I thought it was a reasonable question.

The CHAIR: I did not say it was not a reasonable question. You need to ask it to the right person.

The Hon. V.A. TARZIA: Do you want to rule accordingly? You are the boss. I take it that I am also not able to ask about FTEs; are you going to shut down that as well?

The CHAIR: First of all, that is commentary and a reflection on the Chair and you will withdraw that comment.

The Hon. V.A. TARZIA: I am just asking.

The CHAIR: No, you will withdraw the comment.

The Hon. V.A. TARZIA: I can withdraw it.

The CHAIR: Secondly, in net terms of FTEs, the Premier would not have that level of detail, nor would his advisers have that level of detail. Can I suggest you interrogate the Premier about anything to do with Premier and Cabinet and any other ministerial responsibility that he has.

The Hon. V.A. TARZIA: What I will do then is move to Part A, chapter 5, emerging issues, page 29. The Auditor-General has raised concerns about forecasted significant increases in net debt, reflecting the SA government's large capital program, over four years of the budget, including spending on a number of significant infrastructure projects. Just speaking generally, is the government concerned about net debt?

The CHAIR: I think you are straying again. That is a question which should be directed to the Treasurer as he would have more details. You will have an opportunity to do so shortly. If the Premier is happy to provide an overview, that is fine, but I would not expect the Premier to have the detailed break-up.

The Hon. P.B. MALINAUSKAS: Obviously the government has been rather diligent in its fiscal settings—both diligent and deliberate. The government has obviously delivered surpluses—not just forecast surpluses but we have actually got to the business of delivering surpluses to make sure the budget is in a strong fiscal position. Naturally, as the government starts to roll out its major infrastructure projects, ones that indeed I understand enjoy bipartisan support, such as the biggest infrastructure project in the history of the state, the completion of the north-south corridor, as that comes on the books we see debt escalate accordingly. But it has been the government's view to make sure that we are in a position to be able to manage that appropriately, consistent with strong fiscal settings, and hence our determination to deliver the budget surpluses that we have delivered.

The government has been able to maintain our strong credit rating with our credit rating agencies, but this is naturally something that we monitor closely, particularly with other ambitions the government has, like the Northern Water project and so forth. I am happy to indulge the Leader of the Opposition on the matter. I would hate for him to misunderstand the determination for this session to focus on the criteria that governs its operations by me not answering these questions.

Given the indulgence that I have afforded the Leader of the Opposition in answering his questions, because I am willing to, I do think that for the purposes of the remainder of the session we are best placed to abide by the rules that govern the process which, of course, is a focus on the Department of the Premier and Cabinet.

The Hon. V.A. TARZIA: I am happy to abide by your ruling, sir, so I will do my level best. There are various statistics referred to on page 283, relating to 'income, expenses, assets, liabilities' and effectively the financial position. You have answered a question about net debt, but I understand that a relatively small percentage of the budget overruns on the capital program could significantly impact the state's overall financial position. Are you concerned about any of those risks at all?

The Hon. P.B. MALINAUSKAS: I am just trying to find the reference to anything that the Leader of the Opposition just referred to on page 283.

The Hon. V.A. TARZIA: It is talking generally about financial statistics.

The Hon. P.B. MALINAUSKAS: We are not here to ruminate on general financial statistics. That would invite discussions about the share market, the strong performance of the South Australian labour market and our record export growth. We could talk about other key metrics we are seeing in South Australia, such as nation-leading construction activity and nation-leading dwelling starts. If we want to talk about general statistics, I fear that would lend itself to the government talking about South Australia's relatively strong economic performance relative to the rest of the country, but I fear that would deny the Leader of the Opposition the chance to interrogate the government as is his responsibility on matters pertaining to the Department of the Premier and Cabinet.

The Hon. V.A. TARZIA: On page 283, in terms of significant events and transactions, $995.4 million of assets relating to the Adelaide Festival Centre, Festival Plaza Public Realm and associated—

The Hon. P.B. MALINAUSKAS: It is 195.

The Hon. V.A. TARZIA: $195.4 million of assets relating to the Adelaide Festival Centre, Festival Plaza Public Realm and associated land were sold to the Adelaide Festival Centre Trust and Urban Renewal Authority. Why was that done?

The Hon. P.B. MALINAUSKAS: I am advised this is actually within the Minister for Arts portfolio, but that is connected to DPC so I am happy to try to avail the Leader of the Opposition with some details. The Minister for Arts is responsible for the arts components that sit within the Department of the Premier and Cabinet, for the benefit of the Leader of the Opposition, but nonetheless the Urban Renewal Authority has led efforts to implement a revised ownership structure for the Festival Plaza's precinct that aligns with the new buildings onsite and the state's contracts with developers of the site.

In November 2021, cabinet noted the proposed division of title for land within the Adelaide Festival Precinct owned by the Premier, separating the land occupied by the Adelaide Festival Centre and surrounding curtilage from Walker Corporation's integrated development and SkyCity's expansion building.

In 2022-23, two of three new land titles were created, with ownership to be Renewal SA. Land assets for one title primarily incorporate the SkyCity expansion building and transfer to Renewal SA during 2022-23 recognises a donated asset of $3.011 million. The second allotment primarily incorporates the Walker Corporation's integrity development works and surrounding public realm, including Walker-delivered components of the public realm.

The remaining assets associated with this allotment and a proportion of the state-delivered Festival Plaza Public Realm and the finance lease were sold to Renewal SA during 2023-24. The total value of assets sold to Renewal SA was $96.3 million, Renewal SA of course being a state owned entity; however, consideration was provided for the sale, resulting in the outcome. A section of the land comprises assets controlled by ASER Services Corporation under the Riverbank Act 1997 and therefore no consideration was provided for the transfer of this land.

The third allotment, which includes the Adelaide Festival Centre and surrounding curtilage assets and a portion of the state-delivered Festival Plaza Public Realm, was sold to the Adelaide Festival Trust. The funds were received from the sale and returned to the Treasurer's Consolidated Account.

The Hon. V.A. TARZIA: I refer again to page 283 in terms of financial statistics. The number mentioned there is 515 FTEs. How does that compare to last year?

The Hon. P.B. MALINAUSKAS: Do you want to ask another question while they are getting it?

The Hon. V.A. TARZIA: Respecting the will of the Chair, in terms of Part B: Controls Opinion, page 22, these apply to all agencies. In terms of page 22, under 'Summary of findings and recommendations', it states:

What we found

Our audit of a sample of goods, services and asset procurements found that public authorities need to better manage their procurement planning and evaluation processes.

The Auditor there has raised what I think are really concerning findings around potentially government procurement practices, including contracts signed after services started. Is the Premier aware of any of those contracts that applied to the Department of the Premier and Cabinet?

The Hon. P.B. MALINAUSKAS: I have just been advised that there are no such findings that are related to DPC.

The Hon. V.A. TARZIA: In the same section in Part B, page 22, the Auditor also noted that sometimes key records were missing, incomplete or inadequate, including complexity assessments. Does the Premier have any evidence that any of those records were within the Department of the Premier and Cabinet?

The Hon. P.B. MALINAUSKAS: I am advised not.

The Hon. V.A. TARZIA: Again, '4.2.1 Summary of findings and recommendations':

the contract value was not specified in a number of contracts. During the procurement process the supplier provided their average annual volume and intended fixed price for the service with no limit on the total contract value specified

Does the Premier have any evidence that that contract value and those issues applied to any contract within DPC?

The Hon. P.B. MALINAUSKAS: I am advised not.

The Hon. V.A. TARZIA: Again, in the same section, 'Summary of findings and recommendations', the Auditor noted:

conflict of interest documents and confidentiality agreements could not be located or were not completed

Is there any evidence that any of those findings applied to any contract within the Department of the Premier and Cabinet?

The Hon. P.B. MALINAUSKAS: Probably the best way to answer that question—given the sequence of questioning that the Leader of the Opposition is asking about those matters as identified in Part B pertaining to DPC—is that on page 285 of Part C: Agency Audit Reports under audit findings in respect of the Department of the Premier and Cabinet, you will see in the last sentence there it says, 'There were no significant findings.' That was in respect of DPC generally, as written by the Auditor-General.

The Hon. V.A. TARZIA: I refer to Part C, page 287, within the Department of the Premier and Cabinet:

Total expenses increased by $210 million (49%) to $636 million in 2023-24. Employee benefits expense increased by $4.1 million (6.1%) and supplies and services increased by $36.2 million (29.4%).

Are we concerned that employee benefits in DPC are increasing faster than wages statewide?

The Hon. P.B. MALINAUSKAS: This is able to be explained quite readily by the Department of the Premier and Cabinet taking on new responsibilities or taking control of other functions from other agencies. The Leader of the Opposition will see on page 287, in the first dot point under expenses, that the increase in salaries and wages is $5.2 million. It goes on to say, and it is very explicit here for the benefit of the Leader of the Opposition, who must have missed it, that that increase of 11.2 per cent is:

…mainly due to an increase in FTEs for the new Office for AUKUS, the transfer of Creative Industries employees from DIIS—

so we have taken over that responsibility from DIIS and transferred it to DPC—

and digital and cyber initiatives funded from the Digital Investment Fund—

which was set up by the Treasurer in the last state budget.

The Hon. V.A. TARZIA: I refer to Part C, page 287, in terms of ICT charges:

ICT charges, up $5.5 million (21%), mainly due to additional ICT costs of $5.8 million associated with the Microsoft 365 operating model, including electronic messaging, licence fees and cloud platform services.

I notice that charges there are increasing quite rapidly. The question there is: what productivity output are we seeing as a result of that?

The Hon. P.B. MALINAUSKAS: A high-quality Public Service delivering for the South Australian government and for the people of South Australia.

The Hon. V.A. TARZIA: Yes, but it seems quite significant. Can you point to any examples of that efficiency, that productivity? It is up by $5.5 million just in charges alone.

The Hon. P.B. MALINAUSKAS: The advice I have received is the figure that the Leader of the Opposition refers to going up by $5.5 million is not exclusively for DPC, it is for other ICT services across the government. I am advised that the agency that is responsible for the management of these types of services for other agencies is, indeed, DPC. I am advised that it is not an increase that is exclusively for the Department of the Premier and Cabinet, it is an increase that we see across government. Of course, as the Leader of the Opposition would be aware, there is any number of ICT functions that are being performed and upgrades, reforms and changes that are being applied across government throughout every agency.

The Hon. V.A. TARZIA: I refer to Part C, page 288: 'the Music Development Office transferring from DIIS to DPC in October 2023.' Why was that? I notice that there was an increase in funding of $1.5 million (39.4 per cent). Why did that transfer occur? Can you talk me through that?

The Hon. P.B. MALINAUSKAS: Part of the effort the government has undertaken to boost support for arts and cultural sectors in this state is to try to have a consolidated effort. We have found that there has been a disparate spread, and I think this has been a challenge for state government for a sustained period, about where is the natural home for many of these organisations or offices to sit. We have formed the view, as a government, that there is a value in bringing all the arts-related functions of government into a central agency within the Department of the Premier and Cabinet. This is a reform being pursued by the minister, one that enjoys my and the rest of the government's support.

If we are honest about it, there is no perfect solution here. There are good arguments for having some elements of the creative industries within an organisation like DIIS—or now DSD—but we have formed the view that arts-related functions should be within the Department of the Premier and Cabinet, having a consolidated policy with a consolidated set of motivations around the performance of those functions. That is why the move.

It would be very easy to simplistically disparage the decision of former governments to put these functions into DIIS, but I can actually understand the motivations for why that was done. It was a weighing up of competing variables, but we decided that it is better to have it in a central agency. That gives it the ability to focus on both a cultural element and also an economic element.

The Hon. V.A. TARZIA: There was an offsetting and decreases in grant funding—this is page 288—in relation to multicultural grants of $940,000, 14 per cent. Is the Premier able to provide a list of those grants?

The Hon. P.B. MALINAUSKAS: That is a question best put to the Minister for Multicultural Affairs, but I will take this opportunity to come back to the answer regarding the FTEs that the Leader of the Opposition was looking for. As the Leader of the Opposition noted, it was 515 this year and it was 480 last year.

The Hon. V.A. TARZIA: How many of those do social media?

The Hon. P.B. MALINAUSKAS: How many of them have social media accounts or—

The Hon. V.A. Tarzia: No; how many operate on social media?

The Hon. P.B. MALINAUSKAS: My social media? I do not know; that would be my office rather than the Department of the Premier and Cabinet. My advice is that that increase is a function of the centralisation of a number of functions, including the arts-related functions I referred to earlier.

The Hon. V.A. TARZIA: In relation to page 286, and specifically from the DPC area—as per your request, sir—DPC's appropriation funding has varied markedly over the last five years, reflecting different responsibilities it has had over that time, as it is shown in that chart. I am curious to understand why the responsibilities of DPC seem to continually be altered. Why is that changing?

The Hon. P.B. MALINAUSKAS: You will see the graph at the bottom of page 286 there. You will see there was a huge explosion in the resources that were allocated to the Department of the Premier and Cabinet. I cannot speak to that; that happened under a former administration.

Once we got elected, being a really fiscally disciplined outfit, what you will see is that we said, 'Well, enough of this huge growth in the Department of the Premier and Cabinet.' What we have done is we have curtailed that growth. You will see that it came down once we had that discipline and focus put in place. It is difficult for me to comment, though, on the decisions that were made when the Leader of the Opposition was sitting around the cabinet table as part of the budget process.

The Hon. V.A. TARZIA: In that case then, why has the funding not decreased? Are you saying it has?

The Hon. P.B. MALINAUSKAS: You will see it has come down. The Leader of the Opposition will see that steep curve going up there. Imagine if that had continued. I shudder to think. What we have seen there is that it has come down.

The Hon. V.A. TARZIA: Other income is up $4 million,189 per cent, mainly due to an increase in the return of unspent grant funding of $2.6 million and an $860,000 payment received for a recovered doubtful debt. Are you able to explain that? It is on page 286. That will take us to the bells, sir.

The Hon. P.B. MALINAUSKAS: I am advised that this is a sum that was owed to the people of South Australia from the New South Wales government. With our disciplined focus, I am trying to recover everything that is owed to the South Australian taxpayer for various services that we performed for the New South Wales government. We went chasing it down and we got the convicts to pay. I say that with affection. That was a debt that was owed to the South Australian government from the New South Wales government for services rendered. It is paid and we are grateful for it.

The Hon. V.A. TARZIA: What was it?

The Hon. P.B. MALINAUSKAS: Some bicentennial functions that we performed for New South Wales.

The CHAIR: Time has expired and there will be a change in ministers. While the next minister and member of the opposition take their seats, I will quickly read out what I am required to do here. I remind members that the committee is in normal session. Any questions have to be asked by members on their feet and all questions must be directly referenced to the Auditor-General's 2023-24 Report and Agency Statements for the year ending 2023-24, as published on the Auditor-General's website, and the Update to the Annual Report, as tabled in the house on 15 October. I remind members that questions should relate to the minister's portfolio responsibilities. I welcome the Treasurer and the member for Flinders and call for questions.

Mr TELFER: Thank you, sir, and being the Treasurer, as we have heard this morning on radio, it encompasses everything. I look forward to that fulsome and thorough analysis. In Part A, on page 29, there is some commentary from the Auditor-General. In that the Auditor-General raised concern around the forecasted significant increases in net debt reflecting the SA government's large capital program over the four years of the budget, including spending on a number of significant infrastructure projects. Are you surprised that the Auditor-General has flagged this as a significant issue?

The Hon. S.C. MULLIGHAN: I thank the member for Flinders for his question. I am not surprised that it is highlighted by the Auditor-General because it is a prominent feature of this government's budgets that we are investing so heavily in infrastructure, largely on projects that have enjoyed bipartisan support for more than five years in South Australia. I am talking about the completion of the north-south corridor and also the establishment of a new Women's and Children's Hospital, which the member probably sees is what is contributing mainly to the increase in general government sector debt and that contributes mainly to the increase in overall government debt across the forward estimates.

Mr TELFER: Net debt for the non-financial public sector is expected to increase from $27.9 billion at 30 June 2024 to $44.2 billion in June 2028. What is your plan to stop government debt spiralling, or is it your government's plan to continue to see this figure increase every year?

The Hon. S.C. MULLIGHAN: I have made it clear as I have handed down each of the government's three budgets that we expect debt to increase as we take on the task of building these two major infrastructure projects in particular. Both of them are due to be complete around 2030 or 2031, and two things follow from that: one is that necessarily the government has less flexibility to embark on a broad range of other projects at the same time as we are undertaking these two major projects, and it also means once the substantial task of building those two projects is complete then there will need to be a pretty quick return to a more normal level of annual capital expenditure out of the state budget.

Those two elements will mean that the increases in debt which come onto the state's balance sheet not only are primarily in the general government sector and primarily because of those two major projects but that will lead to a curtailing of further debt beyond those two projects and an ability, as the budget grows between now and then, to start reducing that debt after those two projects are built out.

Not only is that the task that the government has set itself in agreeing to carry out these two projects and take on the debt necessary for it but that will be the strategy by which the state's debt is managed into the medium term.

Mr TELFER: Continuing on page 29, there is some commentary from the Auditor-General around the Northern Water project. What is the estimated cost and timeline for completion for Northern Water?

The Hon. S.C. MULLIGHAN: That is a project that is being managed by the Minister for Infrastructure, so he would be able to provide more accurate particulars than me, but there are, of course, a couple of different things to consider. One is the cost of the project and also how the cost of the project is met, and there remains a range of options before the government in how to meet the cost of that project.

Only one option is for the government to fund it itself, but it is also possible that we may partner with other funders for that, including, for example, whether there is some form of contribution from the offtakers—the offtakers being the entities that purchase the water from the desalination project, one of which may be BHP. There may be other offtakers, and there may be other funding contributors towards it, but we still have I think a good 12 months—and, again, the Minister for Transport will be able to provide more accurate details around this, but we still have at least a good 12 months before we get to a position where we reach what is called the final investment decision (FID) about whether the project is investable or not.

Over the course of the next 12 months or so the funding arrangements for the Northern Water project will also be considered, so the funding arrangements for that, I guess what I can say in short, or to summarise that answer, are not yet finalised.

Mr TELFER: Just on that, when is the expected date for the final investment decision?

The Hon. S.C. MULLIGHAN: I think we are looking at—and, again, I will have to defer to my colleague the Minister for Infrastructure—some time either at the very end of 2025 or in the first half of 2026, but I will just have to confer with him and bring back a more accurate answer for you.

Mr TELFER: What is the expenditure so far on the Northern Water project?

The Hon. S.C. MULLIGHAN: I do not have that figure with me but I am happy to confer with him and bring back what detail I have available.

Mr TELFER: Is the Treasurer aware if the government is still committed to Cape Hardy as the preferred location for the project?

The Hon. S.C. MULLIGHAN: My understanding is that Cape Hardy has certainly been a focus of investigations, but my understanding is that the project team has been careful not to be exclusive in those site investigations and that, during the course of the project to date, there have been a number of locations which have been looked at. Again, I will have to check with the Minister for Infrastructure who is managing this project directly, but I do not think a final decision has been taken on the site. I am certainly aware that a significant amount of investigation has gone into Cape Hardy.

Mr TELFER: Just on that answer, do you know how many locations have had a significant amount of investment put into them? Is Cape Hardy the one that has had a significant proportion put into it or are there several that you speak of that have received the same sort of attention?

The Hon. S.C. MULLIGHAN: Not being the minister responsible for delivering the project, I do not have those details front of mind but I am happy to take that away and see what information I can provide after conferring with the minister responsible: the Minister for Infrastructure.

Mr TELFER: Continuing on at page 30 of Part A, it speaks a bit about the proton therapy unit. What is the current status of the proton therapy unit?

The Hon. S.C. MULLIGHAN: This is a project which was entered into by SAHMRI, which is not a government organisation but an organisation that the government has some membership of: the South Australian Health and Medical Research Institute. Back in 2017 I think it was, the then SAHMRI board entered into this proton therapy initiative and that involved them going through a market process to select a supplier and provider of proton therapy for the proton therapy initiative. They selected a US-based company called ProTom International, and it became clear—I think I am correct in saying—before the March 2022 election, but certainly since the March 2022 election, that there were challenges for ProTom International to deliver against the contract that it had signed.

Parking that to one side, the proton therapy initiative was to be provided within a newly constructed building which was given the working title of SAHMRI 2—now known as the Australian Bragg Centre: the building which has been built adjacent to or immediately to the east of the original SAHMRI building. That building was built by Commercial & General in an arrangement that had been struck with the then SAHMRI board and, as I came to understand it, on the basis that the proton therapy initiative would be housed in the basement, in a specially constructed and specifically designed bunker for the proton therapy facilities and treatment rooms, and then the remainder of the building would be then made available for rental for certain commercial purposes, whether that be research space or office space or similar uses.

During the course of 2019, under the term of the previous government, the building developer Commercial & General approached the then Liberal government and in particular the then Treasurer, Rob Lucas, asking for additional government support for that proton therapy initiative. In early 2020—in April 2020 I think it was—the then Liberal government made a series of undertakings to try to provide greater financial support and comfort for the construction of that building, which meant that SAHMRI would be required to underwrite a level of commercial rent for the Australian Bragg Centre building, including rental for the bunker space, as well as commit to taking out a number of floors within the upper floors of the Australian Bragg Centre building for more than 10 years, I think. You can imagine what taking out multiple floors of commercial rental space is worth in the current market. We are talking millions of dollars a year and, over more than a 10-year period, tens if not hundreds of millions of dollars.

It then became clear once we were in government that, as the proton therapy initiative was struggling to be delivered, they were seeking additional support from the state government. The only support which we provided to them was to provide them with some changed payment arrangements, so no additional payments but paying payments according to different milestones and including making payments so that they could pay their suppliers.

It quickly became clear at the end of last year that there were serious concerns over whether they could deliver the initiative, and we took the decision to send officials from both SA Health and the Department of Treasury and Finance over to the US to visit ProTom International directly to try to establish whether they had the capacity still to provide this project. Since that time, over the last nine or so months, the SAHMRI subsidiary company, the Australian Bragg Centre for Proton Therapy and Research (ABCPTR), has been negotiating with ProTom International in an effort to try to get that project back on track. At the same time, SAHMRI, assisted by the state government, has tried to investigate whether there are alternatives for the bunker should ProTom International not be able to make good on their contract, particularly around whether another proton therapy initiative can be placed into that.

My understanding is that those processes still continue. It is taking a long time, and longer I think than anyone envisaged, but it is necessary that we take our time with this because if we do not exhaust every opportunity to try to succeed at delivering proton therapy in the Australian Bragg Centre it will delay the access to this important new form of cancer treatment for Australian patients—not just South Australian patients but Australian patients—and Australian patients, including South Australian patients, will continue to have to fly overseas to get this particular type of cancer therapy.

I realise the frustration it is causing everyone and the consternation over it. This is not a situation which is of this government's making. We have inherited this particular problem, but we are working through it as diligently as possible and trying to leave no stone unturned to make sure that we exhaust every avenue to make sure we give this the best chance of succeeding.

Mr TELFER: Is the Treasurer confident that the initiative can be delivered?

The Hon. S.C. MULLIGHAN: I would like to be more confident. The principal challenge with this is that the preferred supplier of the proton therapy initiative, ProTom International, their particular treatment unit, or their particular technology, was then used and the building was designed for that particular treatment equipment, that particular proton therapy equipment. As I understand it, not having actually physically seen one of these pieces of equipment myself, these things weigh in the tens of tonnes. They are very, very big, and while there are a handful of manufacturers and suppliers of these pieces of equipment worldwide, each one tends to be particular and different to other suppliers in terms of size and technology and physical make-up.

The challenge has always been trying to give ProTom International every chance to make good on its contractual obligations but, failing that, can somebody else's technology fit in the bunker which was specifically built for another model? That is what SAHMRI and its subsidiary ABCPTR, supported by the state government, has been trying to investigate over the last nine months. I would not even be confident giving a percentage chance of success. All I can say is we are trying to exhaust every avenue to make sure that we can succeed in this endeavour.

Mr TELFER: Can the Treasurer give an indication to the committee of his expectation of the timeframes around delivery?

The Hon. S.C. MULLIGHAN: I will come back to you on the specific dates, but my recollection from the original plan for ProTom International was that they were due to deliver equipment onsite and that there was a process of approximately 18 months to two years for installation, testing and commissioning before the first treatment for patients. It is my recollection they have already missed the initial date of bringing the equipment to site, so they are already late, but I will come back to you with what dates we have got access to.

Mr TELFER: Thank you Treasurer for taking that on notice. The commentary on page 30 speaks a bit about the costs. Can the Treasurer give the committee an indication on the expected budget implications, in recognition of the commentary that the Auditor-General put in there around the agreement between the state and the commonwealth? What are the budget implications for the state?

The Hon. S.C. MULLIGHAN: Really there were two forms of financial support from this. There was the $68 million which represented the amount that the commonwealth is providing. The commonwealth is providing that money for the state and then the state to make it available to SAHMRI, to then make it available to ProTom International. As with most money that is provided to an entity from the commonwealth, it usually has to come through state and territory governments.

There was also an initial contribution from the then state government in the order of $9 million or $10 million from the state government. I have not got that detail in front of me, but I will refresh my memory. The budget impact has already occurred on the state's finances. What is left is the unspent portion of the commonwealth's funding on the ProTom International contract.

If we are to enter into some future arrangement, of course, with a different supplier, we will be starting afresh with a new contractual arrangement and likely afresh with a new cost. We don't know if that is possible yet, but in the event that it does become possible then there will need to be a further discussion between the commonwealth and the state about how that is to be funded and who funds it. We are not at that point yet and I think we have still got some months to go yet until we understand whether another provider can use the facility that has been built to deliver the initiative.

Mr TELFER: At the bottom of page 30 the Auditor-General highlights his intention to provide a status update on the project in a separate report to parliament this year. Can the Treasurer give an indication of when he expects that report to be available to be tabled in parliament?

The Hon. S.C. MULLIGHAN: I can't. That is a matter entirely for the Auditor-General. He might consult with the Department of Treasury and Finance and SA Health, for example, in seeking information or documents, but we will not have direct control over whether he provides that. It may well be that if he completes the report before the end of the year—sometimes I think we have received Auditor-Generals' reports out of session. But I am also advised by Treasury that it may, in fact, mean that he does not finalise his report until February next year, is my latest advice from Treasury just now.

Mr TELFER: In Part C of the Auditor-General's documentation, pages 91 and 92, there is some commentary and structure around some of the royalty payments that come into the state government's coffers. Can the Treasurer give me an indication: are there mining royalty payments currently in arrears and, if so, what is the total dollar figure of the amount in arrears?

The Hon. S.C. MULLIGHAN: As the member might appreciate, there are a number of mining and mineral extraction operations that are liable to pay royalties to the state government and, off the top of my head, this is directly managed by the Department for Energy and Mining, so I could not speak authoritatively on what the required payment regime is without getting a more detailed briefing from them.

I am only aware of unpaid royalties of substance from one company and that is GFG, as I have previously disclosed to the house. My understanding is that that liability remains for GFG, that there is still an outstanding amount of royalties. The government is currently engaged with GFG about their capacity to make good on how far behind they are with their royalties and to make sure that that is done as expediently as possible.

I am also advised that, under the terms of the Mining Act, it is not for me or indeed the Minister for Energy and Mining to disclose the individual financial circumstances of particular companies that are regulated by that act. I am willing to confirm that they are behind in their royalties—I think that is appropriate to do and I have done that from day one in this house—but I am advised that I cannot particularise the amount by which they are behind.

Mr TELFER: I certainly respect that, Treasurer. I was talking generally about arrears in royalties and the risks to the Treasury bottom line when it comes to arrear payments, but if you have indicated that only the one company is in arrears I will respect the commentary you have provided.

Continuing on in Part C, page 440, there is a designation of FTE-equivalent employees and by my calculations there are an additional 74 new FTE employees filled within the department this financial year. Can you give an explanation as to that, by my calculations, near on 5 per cent increase in FTE?

The Hon. S.C. MULLIGHAN: Yes, sure. There has been a transfer of responsibilities particularly from the Department of the Premier and Cabinet to the Department of Treasury and Finance. Without having the details in front of me, that relates primarily to some of the ICT functions that were previously housed within DPC that are now located within Treasury and Finance and that includes the Office of the Chief Information Officer and staff and also includes the Office for Data Analytics and their staff, but I can bring back some further details about that if that is of interest to the member.

Mr TELFER: Thank you, I would appreciate that. On page 450 in Part C, the Auditor-General has found an increase of $57 million in increased revenue into DTF from the SA Water Corporation this financial year. How much of that revenue has gone into consolidated revenue as opposed to SA Water infrastructure projects?

The Hon. S.C. MULLIGHAN: I am happy to check that. My recollection from the budget papers is that, while dividends may increase or indeed decrease year on year, most often the community service obligation, or the amount of money that is required to be paid by the state government back to SA Water, is usually greater than that dividend payment, meaning it is rare to have an overall net benefit from SA Water's operations, but I am happy to check that and come back to you if you like.

Mr TELFER: I would appreciate that. On page 443 of Part C there is some commentary around payroll. According to the Auditor-General's Report:

From a sample of 19, we found six instances where there was no evidence that quality assurance checks for new starters were performed.

From a sample of 19, we found 13 instances where employee transfer supporting documents could not be provided or the documents were not signed as reviewed.

From a sample of 19, we found seven instances where there was no evidence that the employee pay increment report was reviewed.

Given that a third of instances examined found no quality assurance checks for new starters were conducted, two-thirds of employee transfer documents were not completed in adherence with standards and more than a third of examined instances of employee pay increment reports were not examined, how can the public have confidence in the internal auditing processes of the department?

The Hon. S.C. MULLIGHAN: I am happy to take that on notice. From the Auditor-General's commentary here it is not clear to me whether, with the sample of 19, there are three different samples of 19 or whether there is a sample of 19 and three different findings are made. I might take that back to Shared Services. There was also a change in accommodation arrangements for Shared Services during the course of the year and I will ask Shared Services whether the disruption to their physical workspace contributed to any of the issues that are highlighted here. I am happy to take that on notice and bring that back.

Mr TELFER: On page 3 of Part B, the Auditor-General declares continuing concerns regarding government operations in the space of asset management, contract management, procurement and payroll, after previous warnings. What measures were recommended—e.g. what warnings were previously made by the Auditor-General—but not put in place to address these concerns?

The Hon. S.C. MULLIGHAN: Perhaps in the interests of time I can bring back an answer for the member so as not to interrupt the examination of the next minister. Thank you, shadow treasurer.

The CHAIR: I declare the examination of the Treasurer on the Auditor-General's Report complete. I now call on the Minister for Climate, Environment and Water to be examined on her portion of the Auditor-General's Report. I remind members that the committee is in normal session. Any questions have to be asked by members on their feet and all questions must be directly referenced to the Auditor-General's Report 2023-24 and Agency Statements for the year ending 2023-24, as published on the Auditor-General's website, and the Update to the Annual Report, as tabled in this house on 15 October. I welcome the Deputy Premier and the members for Colton and Chaffey.

Mr COWDREY: I refer to page 100 of Part C of the report, the third dot point:

Floods in 2022-23 caused damage to assets owned by DEW along the River Murray…

Can the minister confirm which body, whether that be SA Water of the Department for Environment and Water, is responsible for the maintenance and repairs of the salt interception scheme infrastructure in South Australia?

The Hon. S.E. CLOSE: We have started with a nice complex set of arrangements to convey. Essentially, this is a relationship between the MDBA, DEW and SA Water: the MDBA is, in most cases, directing what is to happen; SA Water does the operational activities under that direction; and DEW is responsible for monitoring and providing information.

Mr COWDREY: In the context of that answer, given that DEW essentially monitors the equipment—that is the understanding from the answer provided—can the minister confirm whether all infrastructure associated with the salt interception scheme that was damaged during the floods has been repaired and is now operational?

The Hon. S.E. CLOSE: Just to clarify, the monitoring to which I referred is more the monitoring of the river that the department does and provides to the MDBA. In terms of the infrastructure, we would have to check with the MDBA what the status of the infrastructure is.

Mr COWDREY: In the context of the answer provided, are you able to, when seeking that answer from the MDBA, provide an indication to the house of the particular locations of the infrastructure that is still to be repaired?

The Hon. S.E. CLOSE: We will take all of that on notice and get that level of detail.

Mr COWDREY: Has the department done any modelling on the impact of the potentially failed repairs in regard to the salt interception scheme and any issues in regard to crop irrigation due to high salinity?

The Hon. S.E. CLOSE: I am advised that it is the MDBA's responsibility to oversee the management and operation of the interception schemes; however, we are not at present aware of any concerns that have been raised about salinity in the river and, therefore, we are not aware that that would be a matter of concern for the MDBA.

Mr COWDREY: So there has been no advice provided to you as minister that there are any salt issues? In raising that, are you aware of the targets that were met in regard to the salt interception scheme in 2019-21 not being met?

The Hon. S.E. CLOSE: The advice I have is that the overall management of the salinity in the river is considered to be done well. There was a spike when Lake Bonney came back but apart from that we consider that to be well-managed.

I think part of the question the member asked is taking us to a previous reporting period. We can take that on notice and get a proper briefing for the member. It is not something we have here for the Auditor-General's Report.

Mr COWDREY: In regard to page 108 in the Murray-Darling Basin Authority commentary provided within the report, has the department provided any advice to the minister in regard to the draft new water agreement and the principles underpinning that draft?

The Hon. S.E. CLOSE: I understand that draft principles have been circulated and have been available for us to comment on. However, if we can just understand that with the National Water Agreement—which I believe is what the member is asking about—the commonwealth government will propose what the National Water Agreement ought to look like, the new one under the National Water Initiative. Once they make that proposition—which has not yet taken place—we will undertake consultation with our communities in order to help determine what the state government's position will be.

I appreciate that there has been some concern amongst the community about what that might look like, but we have been reassuring the community that whatever the commonwealth is presently doing—which is still in process and still being drafted—there will be a separate consultation that we will undertake in order to determine our position in relation to that.

I attended a meeting recently with Minister Tanya Plibersek, a water stakeholder meeting led by her. I was very happy to be there to hear from a number of people about what their concerns and interests were both about the National Water Agreement and also, of course, the Murray-Darling Basin Plan. That was useful for me, but that will not be sufficient consultation for us to determine what the state government's view will be.

Mr COWDREY: In regard to the consultation you have just outlined, are you able to provide any more detail to the committee in terms of what the South Australian government will be committed to in terms of that consultation, what that looks like, how rigorous it would be?

The Hon. S.E. CLOSE: We will meet with all the stakeholders once they have the documentation so that we are able to understand what their views are. There are a lot of stakeholders, but it is a defined group of people who will be interested, and we will make sure we are hearing from all of them.

Mr COWDREY: In regard to the same issue, will the minister be undertaking a Regulatory Impact Statement in regard to the potential new water agreement prior to becoming a signatory?

The Hon. S.E. CLOSE: That is a possibility. We will wait until we see it to determine whether that would be a useful input.

Mr COWDREY: So it won't be required. You will take a view first?

The Hon. S.E. CLOSE: I do not believe it is a required part of the process. The government needs to form a view about what its position will be on the commonwealth's proposition. If a Regulatory Impact Statement is deemed to be merited, depending on what is in the draft agreement from the commonwealth, then we will do that, but we would not do one unnecessarily.

Mr COWDREY: I take you to the financial report, which is attached to appendix 2, part 3, of the report. In section 3.2, under board and committee remuneration, the department has indicated that there has been a significant increase in terms of the number of people with board positions this financial year on last: 133 in 2023 jumping to 168 this financial year. Are you able to provide an indication to the committee why the sudden increase in board positions?

The Hon. S.E. CLOSE: We are not certain. We do not believe we have created a number of new boards. We will take that on notice. It may be a function of the salary margin, but probably not, or perhaps board vacancies that had occurred previously that had not been filled. That can happen. I recall when we were in opposition, the Native Vegetation Council entirely stopped functioning because the board had not been replaced. It may be that we are still catching up on some of those, but we will look into it and provide an answer.

Mr COWDREY: So despite recording these numbers in the financial statement of the department, the department has no view as to why the increase?

The Hon. S.E. CLOSE: We will provide the advice on what has occurred. It may well be filling vacancies that have been left for some time.

Mr COWDREY: Just one more point of confirmation before we turn to the member for Chaffey, confirmation from the minister in regard to again the financial report attached to section A at item 4, 4.1, which lists the expenses for the department. Adelaide Beach Management has had nearly $3 million less spent this financial year. Are you able to confirm that that is the case?

The Hon. S.E. CLOSE: I understand that is a question of carryover, that we had a carryover at year end so we will be spending that money.

The CHAIR: Member for Chaffey, you have the call next.

Mr WHETSTONE: I would like to move on to the Department for Industry, Innovation and Science. On page 472, the agency financial statements, was the department's audit completed before the annual report was tabled?

The Hon. S.E. CLOSE: I understand this is a function not of being late, it was not late, but that the Department for Industry, Innovation and Science, as it was then, was such a small department that it is not one of the ones that was chosen to be published. There are smaller agencies that are not.

Mr WHETSTONE: Just for clarification, were the relevant financial statements presented to the Auditor after the report was tabled, or were there any financial statements presented after the report was tabled?

The Hon. S.E. CLOSE: The financial statements are part of the pack that was presented on time, it is just that the audit report is published later by choice of the Auditor.

Mr WHETSTONE: Moving on to page 3 regarding income, the appropriations are $7 million less than the previous year. Is any of this change due to cuts within the department?

The Hon. S.E. CLOSE: I understand substantially that was about Creative Industries moving out of the Department for Industry, Innovation and Science and into the Department of the Premier and Cabinet.

Mr WHETSTONE: Regarding expenses on page 3, there was $13 million less in grants and subsidies that were issued this year compared to last, but have any of the grants been cancelled or unallocated?

The Hon. S.E. CLOSE: Again, largely the answer lies with that changing machinery of government where Creative Industries moved out and took a grant stream with it. The Research and Innovation Fund dropped a bit, which was part of a natural decrease that had been foreshadowed in forward estimates, and then there were two time-limited projects. There was the See It LIVE music support package, which was a function of post-COVID recovery, and the River Murray Flood grant program which, again, came to an end because of the flood coming to an end.

Mr WHETSTONE: On page 4 regarding assets, DIIS's assets have seen a significant reduction since 2023, so what is the reason for the change?

The Hon. S.E. CLOSE: I understand that the assets decreased substantially and that it was overwhelmingly a transfer of cash. The explanation for that is that there is a return of surplus cash to Treasury which is a function of—as the member may well be aware, having been a minister, the departments hold some surplus cash to be able to meet expenses, but there is a Treasury policy about agencies not holding too much. It is not that the money disappears, it is where it sits, so only a certain amount can be held by an agency and the rest sits with Treasury, and so that was a transfer that related to that. There was a little bit with Creative Industries, but overwhelmingly that is the explanation.

Mr WHETSTONE: Has the Department for Industry, Innovation and Science had to limit its assets as part of the transition to DSD?

The Hon. S.E. CLOSE: I think the simple answer is no.

Mr WHETSTONE: On page 6 regarding cash flows and the investing, last year the Department for Industry, Innovation and Science made nearly $6 million in proceeds from selling property, plant and equipment, yet there was none this year. Is that part of the transfer? Can you just give me an understanding?

The Hon. S.E. CLOSE: It is not an agency that is normally selling land. That was an unusual year, and it was about the winding up and the sale of TechInSA, which is part of the north-south corridor development. That land that had been held was effectively sold and otherwise, in the normal course of events, it is not something that this agency does.

Mr WHETSTONE: If that was sold last year, you are saying there was an asset, whether it was a piece of land; is that what you are saying? Yes. That was sold last year. Were there any sales this year?

The Hon. S.E. CLOSE: No, there were not.

Mr WHETSTONE: Again, referring to page 6, the department also received over $6 million in capital contributions from government last year and none this year, so was there a purchase?

The Hon. S.E. CLOSE: We will have to take that on notice. We did get that, and it is probably one of those one-off transactions, but we need to track back through what that was and we will explain that.

Mr WHETSTONE: I refer to net cash. For Industry, Innovation and Science, cash on hand is down $12 million on last year. Can you give me an understanding of why that is?

The Hon. S.E. CLOSE: That is what I was starting to get to when we were talking before about the drop in assets. Nearly $12 million of surplus cash moved from the department to Treasury, not that it is not accessible and still part of government, it just triggered that policy of agencies not holding too much surplus cash. There is a buffer that they are able to hold, as I say, to meet the requirements of making sure they meet payroll and other obligations, but when that gets too much it gets transferred into the Treasury line rather than the agency line and that is what occurred for the agency at that time.

Mr WHETSTONE: Can you just clarify that? Did that money disappear into the Treasurer's black bucket or is that there for a claw back at any time?

The Hon. S.E. CLOSE: It really is where it is held. Should we need it, we just go to Treasury to ask for it. I like the idea of the black bucket that the Treasurer has, but in fact the way that Treasury operates is pretty transparently within government. It is sitting with them but is accessible by the agency in need.

Mr WHETSTONE: Very unusual that a Treasurer would give anything back. Referring to the budget performance expenses on page 16, the department spent $17 million less on grants than was budgeted for, so why was the grant program so heavily overbudgeted?

The Hon. S.E. CLOSE: Again, that transfer of Creative Industries is by far the largest part of the explanation, so it was $17.2 million lower than the original budget, as the member has identified. With Creative Industries, that explains $16.6 million of it. So it is essentially the move of Creative Industries taking that with them.

Mr WHETSTONE: Just on the budget performance income, why did the department receive $3.3 million from the Governor's appropriation fund? That is on page 17.

The Hon. S.E. CLOSE: That is the language that is used that really describes when decisions are made during the year for the department to be able to do more and have a funded project. That is how the money is then identified as coming through from the Governor's Appropriation Fund. If I can just have a quick minute, earlier I was asked about an increase in the number of people on boards in the Department for Environment and Water. I am advised that the answer is that the way that co-management boards are treated is now different so that they are now being included, and that there are also two new co-management boards.

Mr WHETSTONE: I have a final question and then the member for Colton would like another. What corporate services did the department provide to the Department for Energy and Mining for $1.2 million?

The Hon. S.E. CLOSE: ICT and procurement.

Mr COWDREY: Just very briefly, in Part C: Agency Audit Reports, page 93, in regard to the EPA section, there is commentary in relation to the Gillman warehouse that was procured by the EPA. Are you able to outline what the purpose of that facility is, whether it is additional storage/operation or whether there has been another site that has been disposed of?

The Hon. S.E. CLOSE: At Netley we had two separate labs and the lease has expired. One was for a radiation laboratory and the other was an air quality laboratory. We have consolidated those and located them at Gillman in an area where I went and opened different buildings that that company had recently built on the same property. We walked past that area, but I have not seen inside it. That is the explanation of what is in there.

Mr COWDREY: Two properties that were disposed of, I assume. Are you able to outline where those two properties were, and the total value?

The Hon. S.E. CLOSE: Sorry, I said they were both at Netley, and that is wrong. One was Netley and one was Byron Place in the city. They were leased, and so as their contract came to an end we moved out of those and moved into this single location in Gillman.

Mr COWDREY: Is the current arrangement a lease arrangement, and are you able to outline the procurement process or lease-seeking process that resulted in the new accommodation?

The Hon. S.E. CLOSE: As often happens, or as I think almost always happens, DIT coordinates the location of various parts of government and they found this place for us to lease. It is a 10-year plus tenure option.

The CHAIR: I declare the examination of the Deputy Premier and Minister for Climate, Environment and Water is now complete.

Progress reported; committee to sit again.