Auditor-General's Report

AUDITOR-GENERAL'S REPORT

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (15:26): I move:

That standing orders be so far suspended as to enable the report of the Auditor-General 2006-07 to be referred to a committee of the whole for consideration of the report.

Motion carried.

In committee.

The Hon. P. HOLLOWAY: Mr Chairman, for the convenience of the committee, it may be better that if members have questions of my portfolio we deal with those first and then sequentially through my colleagues the Hon. Carmel Zollo and the Hon. Gail Gago. That might make these proceedings move more quickly.

The Hon. D.W. RIDGWAY: I refer to page 903 of the report, which states:

Opportunities for improvement have been identified in the areas of completion of new digital camera procedures, accounting treatment applied to some of the costs for collecting expiation revenue and follow-up of invalid notices.

Will the minister please explain how a notice is invalid, and indicate what additional accounting treatment needs to be applied in relation to the costs involved in collecting expiation revenue?

The Hon. P. HOLLOWAY: Audit testing identified one week where 'I' notices, which are licence disqualification notices, and other invalid notices were not adequately reviewed per the ENS Invalid Notices Report. It was noted on the report that this was due to the training of new staff. However, it is important that 'I' notices are followed up in a timely fashion so that relevant information is passed on to the Department for Transport, Energy and Infrastructure in an efficient manner so they can be aware of impending licence cancellations.

Audit discussions with the ENB staff reveal that since this time 'I' notices where the corresponding manual traffic infringement notice has been fully completed are now not made initially invalid, to allow data transfer regarding licence cancellations to go through to Transport SA. Any issues then relative to the 'I' notices are subsequently identified and corrective action taken. Where other invalid notices are not followed up in the week of the report, these notices will recur on future reports until the matter can be finalised.

I think that is the issue referred to by the honourable member. The South Australia Police advise that changes have been made to the receipt of 'I' notices which should lead to more efficient uploading to the Department for Transport and Energy Infrastructure systems.

The Hon. D.W. RIDGWAY: Point 2 raised by the Auditor-General was the accounting treatment applied to some costs of collecting expiation revenue. Would the minister please offer some clarification?

The Hon. P. HOLLOWAY: My advice is that the audit noted that an issue was raised in 2004-05 in relation to deducting commission amounts from the total expiation fees from two perspectives: (a) the accounting treatment was incorrect and (b) the amount transferred to the Department of Treasury and Finance was incorrect, that is, legal compliance under the Expiation of Offences Act 1996. SAPOL responded that it would alter its practices and seek additional funding from the Department of Treasury and Finance to cover its collection costs. So, SAPOL has initiated processes with respect to dishonoured cheques so that costs are not debited against expiation revenue.

The Hon. D.W. RIDGWAY: My next question to the Minister for Police refers to Volume 3, page 920, under the heading 'Remuneration of Employees'. Here the 2006-07 Auditor-General's Report lists various remuneration brackets and notes the number of employees earning within these brackets for the previous two financial years.

I note that there is a pattern within the top five brackets of remuneration where, for example, in 2007 there is one employee in the bracket $220,000 to $229,000 where there was not one in the preceding financial year. There are a number of questions on this table, and I see that there is a note from the Auditor-General to say that the top band of $570,000 to $579,000 includes remuneration for a person who retired during 2006-07 and includes associated leave entitlements. Will the minister state whether any one employee received a pay rise from a lower remuneration bracket in the 2005-06 financial period to the 2006-07 financial period and, if so, what is the position of that employee?

I will explain it again. If you look at the 2005-06 line you will see, for example, that there is an employee whereas there is not one for this particular year. Also, for example, on the $260,000 to $269,000 line in 2006 there was one employee, in 2007 there is not, yet there is one in the next bracket ($300,000 to $309,000) but not for 2006. Is that just an example of police officers and senior officers' salaries going up?

The Hon. P. HOLLOWAY: Police officers get the standard EB increase each year, so from time to time you will get transference from one band to the next. There is some distortion within the table because you get people like the former deputy commissioner, who retired during 2006-07, who received associated leave entitlements. The former deputy commissioner had been in SAPOL for over 40 years, and such people could have a fair amount of accumulated leave. We have had questions on this before.

The $100,000 band was set following a recommendation of the Economic and Finance Committee, of which I was a member at the time way back in 1993, and it has not been indexed since that time. You can see the effect if you look at the table on page 920 and how at the lower end there has been a significant increase in the number of employees. Originally the $100,000 cut off was meant to be highly representative of the number of executives in the department.

If one looks at the SAPOL staff with remuneration greater than $100,000, for 2006-07 there are 13 executive positions and 427 in senior management—for a total of 440, of whom 434 are police and the other six are non-police, compared with the 251 last year. The number of executives is 13, compared with 12 last year. At the other levels there has been a movement up in salaries of employees and there are a number of reasons for that.

If one looks at the number of employees whose remuneration exceeded $100,000 for 2006-07, it consisted of adding the following components to produce a final figure: superannuation co-contribution, base salary penalties, overtime, leave loading, clause 14 allowance (which is for single station operators), and other allowances including Comcen loading, long service leave payments, lump sum payments and motor vehicle payments. All could apply.

An assessment of the list of 440 employees identified supports the conclusion that the increase is predominantly driven by wage increases under the South Australian police enterprise agreement, the EB of 2004. The last wage salary increase pursuant to this enterprise bargain came into effect from 30 June 2005, with a 3.5 per cent increase for all salaries. The increase in base salaries contributed to a flow on increase in the amounts paid as overtime penalties and allowances, so as well as the 3.5 per cent of base salary it can flow on into some of the 11 other categories I have mentioned.

In previous years the total number of employees in this category consisted primarily of senior officers and executives. The large increases in each of the past two financial years is not reflective of any significant increase in the numbers of senior officers and executives. Predominantly the large increases comprise middle management—Police Act positions such as senior sergeant and sergeant, where base salaries have been incrementally increased pursuant to enterprise agreements. Where this total package may have been just below the $100,000 mark last year, that number, with the 3.5 per cent EB increase that came into effect on 30 June 2005, has pushed many during that year over the $100,000 mark, hence the significant increase from 130 to 267 within that band.

The Hon. D.W. RIDGWAY: If we look at the bottom two bands, I understand that the $570,000 to $579,000 remuneration on was for the retiring deputy commissioner. In the previous year there was an individual on the $370,000-$379,000 band: what was that particular person's band for? I am assuming that the next band is likely to be the Commissioner himself, at $300,000-$309,000.

The Hon. P. HOLLOWAY: I believe that is correct and that the Commissioner is the top of that band, other than the exception, which is identified in the text as being the Deputy Commissioner, who retired. So, I assume in 2006 it was some other person who had retired, a senior officer. We can check that. I am just trying to think whether there was a senior officer who retired. We can confirm that, but I suspect that that is what it is.

The Hon. D.W. RIDGWAY: My question is for the Minister for Police, and I refer to page 921, Volume III, 'consultancies paid/payable'. I notice that in this past financial year SAPOL engaged a consultant for services and supply which totalled $78,000. Can the minister provide details of that consultancy?

The Hon. P. HOLLOWAY: I will take that one on notice.

The Hon. D.W. RIDGWAY: Mr Acting Chairman, it was my intention to use 10 minutes of this 20 minutes and then throw it open to other members.

The ACTING CHAIRMAN: You have already used 14 minutes.

The Hon. D.W. RIDGWAY: I will ask this last question then. I have other questions I can come back to. My question refers to page 903, Volume III, 'Licensing and Registration of Firearms'. In the report the Auditor-General identifies opportunities for improvements in SAPOL's licensing and registration system for firearms. Pertinent to the question I asked earlier today relating to that: does the minister intend to improve these systems as part of an overhaul and amendments to the Firearms Act?

The Hon. P. HOLLOWAY: Ultimately we will need improved computer systems. As part of the budget there is some money for computer systems for secondhand dealers and pawnbrokers. In relation to firearms, one of the things future budgets will need to look at is improving the computer systems because clearly that will enable us to maintain better licensing. If I recall my conversations with the Commissioner correctly, there are issues about whether we have national lists as well, and I think that is something that probably needs to be discussed at a police ministers' conference about whether this register should go national.

That is what has happened with DNA, where we have now gone to a national database, and that has been largely funded by the commonwealth. Obviously we would appreciate it if the commonwealth would fund part of this. It is one of the issues, in fact, that is on the agenda for the minister's council later this week in New Zealand; although, of course, the commonwealth will not be there because it is in caretaker mode, but the Commissioner will be representing South Australia.

So, that is really where we need to go in the longer term. In relation to the short-term issues raised by the Auditor-General, there are several matters. One is to maintain follow-up of the expired licences. As of 1 July 2007, there were 62,177 current firearms licences in South Australia, and about 200 people do not renew their firearms licence on time each month. In addition to reducing the number of expired licences, the firearms section strives to ensure that the number of expired licences does not increase above the residual amount.

So a benchmark for the reduction in the number of outstanding expired licences by 25 per cent, to 536 outstanding licences, has been set for the 2007-08 financial year.

In relation to the dealer return register, a standard operating procedure has been written to ensure that the dealer return register is maintained and kept up to date. In terms of the timely review of outstanding purchase permit reports (an administrative check procedure to determine whether licence holders who have obtained permits to acquire firearms actually go ahead with a purchase), the issues identified by audit are now being treated as a whole of branch responsibility. The ensuing workload has not been spread throughout all sections of the firearms branch, and procedures have been put in place to ensure that the report is now completed in a timely fashion.

However, and as I said, one of the issues we will have to address at a national level is whether or not we should move to a national register and whether the federal government will assist with the establishment of such a register.

The Hon. M. PARNELL: My question is to the minister in his capacity as the minister representing the Treasurer, and relates to Part B, Volume IV, page 1203, and the section covering the South Australian Superannuation Board. Page 1203 contains a list of the seven separate investment options available through Funds SA—namely, high growth, growth, balanced, moderate, conservative, capital defensive, and cash. My question is: when will we see an ethical or socially responsible investment option added to that list?

The Hon. P. HOLLOWAY: I think, as the Acting Treasurer, I signed off on an answer to that question for the member some time back. However, I will see if there is anything further to add to that by referring the question to the Treasurer and bringing back a reply.

The ACTING CHAIRMAN (Hon. R.P. Wortley): The time having expired, I call the Minister for Emergency Services, Minister for Correctional Services, Minister for Road Safety, and Minister Assisting the Minister for Multicultural Affairs.

The Hon. S.G. WADE: I refer to Part A, page 3, of the Auditor-General's Report in respect of public-private partnerships, as follows:

A significant consideration before a PPP procurement is initiated is whether the government is satisfied that a PPP provides a net benefit to the public compared to conventional public sector procurement.

Can the minister explain what processes the government has in place in relation to the new prisons project in fulfilment of that assessment of net benefit?

The Hon. CARMEL ZOLLO: As one would expect, we have governance arrangements in place. We have a chief executive steering committee, which is chaired by the Under Treasurer and which provides project governance and oversight. We have to prove value for money compared with the public sector comparator. Within the government agency, the project is managed by a dedicated project team, with DCS being the lead department.

The Hon. S.G. WADE: Considering that the government has already decided to retain custodial services within government, will the public sector comparator, to which the minister refers, exclude the operational efficiencies of the one provider (the public sector comparator, for example) providing custodial and non-custodial services? If it does not do so, it provides an unfair advantage to the public sector in terms of the public sector comparator.

The Hon. CARMEL ZOLLO: A range of functions are associated with the operation of the prison. The government has resolved that custodial services will be delivered by public sector employees, but other services will be identified and subject to the value for money test. The government will go through a rigorous assessment process to assess all proposals, and value for money will be the principal consideration in all these things. I stress that there will be a rigorous assessment process.

The Hon. S.G. WADE: My query is not so much in terms of the government's incremental breach of its no privatisation guarantee. That is a moral issue the government has to deal with. My issue is more to do with the construction of the public sector comparator. As I understand it, the government said that custodial services will not be provided by the private sector. Presumably, the private sector comparator allows for custodial officers in a situation where they could provide oversight of a prisoner within the public sector model that will not be available to a private sector operator.

If you like, they will have to cope with DCS officers and, in addition, they will have to provide their own officers. It seems to me that there is an inherent injustice or disadvantage to the private sector in bidding against the public sector comparator. That is the issue I seek to address.

The Hon. CARMEL ZOLLO: First of all, I will clarify the situation in relation to the comparator. For all operations based on a good practice model there is no advantage for anyone, as custodial services will not be subject to a value for money test. Other services may be privately provided if they can present value for money; that is, they are cheaper and better than the comparator. We do not agree that there is an inherent disadvantage. This is the approach that the government has decided it will take. Again, all proposals submitted for assessment to the DPP will be assessed on equal terms, allowing, as I said, for the custodial services to remain with the government. The consortia will have to prove that it can deliver value for money, as just mentioned.

The Hon. S.G. WADE: Perhaps I am misunderstanding how the government anticipates the prison will operate. If the government thinks that there is no benefit to the public sector in having an integrated custodial and non-custodial service, is the government then intending that, when a private sector service is provided—for example, psychology, medical, and so forth—the custodial care of the prisoner at that time will be provided by the private sector? Otherwise, the private sector model must be more expensive, because they would have to wear the cost of custodial care when they are also providing a non-custodial service.

The Hon. CARMEL ZOLLO: Quite simply, the provision for custodial services will be excluded from the public sector comparator and the value for money test.

The Hon. R.D. LAWSON: I wish to ask the minister a question from information contained on page 263: the program schedule of expenses and income for 2007. It shows that in 2007 the income from prison labour was $1.9 million in general terms, but in the previous year it was slightly over $2 million. Can the minister explain why it is that the income from prison labour this year covered by the report is less than that for the previous year, and what are the factors that led to that decrease?

The Hon. CARMEL ZOLLO: I am advised that there is a relatively small decrease in revenue from the prison labour. Prison Industries undertakes work on behalf of businesses and customers in the private sector and is subject to general fluctuations in the business cycle. In the past 12 months there have been some fluctuations in agriculture and horticulture on prison farms due to the drought conditions.

The Hon. R.D. LAWSON: Will the minister assure the committee that that decrease (slight as it may be) is not as a result of any policy adopted by the government in relation to labour?

The Hon. CARMEL ZOLLO: I can assure the honourable member that there have been no changes in policy.

The Hon. S.G. WADE: I refer to Part A, page 3 of the Auditor-General's Report, the section dealing with Public Private Partnerships. It states:

In 2006-07, expenses for these initiatives were limited to the costs of PPP consultants.

My questions to the minister are:

1. What consultants were engaged in relation to the new prisons project?

2. What was the cost of the consultants?

3. What was the role of the consultants?

The Hon. CARMEL ZOLLO: We will take that on notice and provide the detail to the honourable member at another time.

The Hon. S.G. WADE: I refer to Part B, Volume I, page 258 of the Auditor-General's Report. The report highlights the number of privately provided service contracts renewed by this government. I ask the minister whether any of these contracts will be impacted upon by the new prisons project.

The Hon. CARMEL ZOLLO: It is still to be determined, but there may well be some impact in relation to the prisoner movement contract. That contract is due to expire on 30 June 2008, and the new prison project will not come on-line until 2011 so, again, that is still to be determined. We do not anticipate any impact on the home detention monitoring or the management of the Mount Gambier prison at this time.

The Hon. S.G. WADE: Will the minister confirm that the reason why the prisoner movement contract was extended for only 12 months was in consideration of the new prison project?

The Hon. CARMEL ZOLLO: My advice is that it was extended for only a year because of the requirements of the Free Trade Agreement with the United States.

The Hon. S.G. WADE: I would like the minister's confirmation in terms of the scope of these contracts. I presume the home detention monitoring contract is limited exclusively to the electronic infrastructure and that there is no oversight role in terms of the monitoring role.

The Hon. CARMEL ZOLLO: That is correct.

The Hon. S.G. WADE: Page 5 of Part A of the report notes the governance risk management requirements and enabling legislation of SAFECOM. With regard to SAFECOM, have anticipated delegations, policies and procedures been approved and implemented as recommended by the Auditor-General?

The Hon. CARMEL ZOLLO: Did the honourable member make reference to page 1017?

The Hon. S.G. WADE: Yes; pages 5 and 1017.

The Hon. CARMEL ZOLLO: I understand that the SAFECOM instrument of delegation for payroll was approved at SAFECOM'S September board meeting, which updated previous delegations from the Emergency Services Administrative Unit (ESAU) to SAFECOM. SAFECOM policies and procedures for time sheets and leave management are currently being prepared. The bona fide report policy was approved by SAFECOM at its June 2007 meeting. Training has been provided to all managers in the CFS, SES and SAFECOM. It should be noted that the existing MFS system is still being utilised and was not the subject of audit comment.

A signatory list to support the checking and authorisation of transactions is currently being prepared. Output reports from the KRIS payroll system have been expanded to include specific reports identifying all required transaction cheques for each pay run. The financial delegation's policy has been updated to clarify the separation of procurement and expenditure authority. This change was approved at the September SAFECOM board meeting. Expansion of the delegation's authority to include a signatures list for use by accounts payable is approaching completion and will be implemented in 2007.

SAFECOM purchasing procedures were commented on by the Auditor-General relating to the requirement of certification that goods have been received prior to approving invoices for payment. SAFECOM's purchasing procedures have been modified to include the requirement for a 'goods received' note or other appropriate certification of goods received.

The Hon. S.G. WADE: I understand that, since the period on which the Auditor-General was reporting, the minister announced that Mr David Place would be taking on further roles, including a role called the Commissioner for Fire and Emergencies. What is the nature of that position? Is it a statutory position? Is it created under section 67 of the constitution, or some other basis?

The Hon. CARMEL ZOLLO: I advise the honourable member that it is a working title approved by crown law to supply the leadership, governance and policy direction to the sector.

The Hon. S.G. WADE: If he was to take any legal or administrative actions, Mr Place would undertake that in the name of either a CEO of SAFECOM or as Chair of the SAFECOM board?

The Hon. CARMEL ZOLLO: That is correct.

The Hon. S.G. WADE: Having made those changes to the administrative arrangements and considering they fall after the reporting period, will those changes to the administrative arrangements necessitate further changes to the delegations, policies and procedures?

The Hon. CARMEL ZOLLO: My advice is that the chief executive delegations will remain the same.

The Hon. J.M.A. LENSINK: In relation to DEH, which is referred to in the volume listed as Part B, Volume II, on pages 358 and 359 the Auditor-General's Report states that the department does not have a methodology in place to ensure that all administered crown land has been recorded in the balance sheet, and it also states that the Auditor-General was unable to form an opinion on the values of property and so forth. Will the minister comment on where any amending progress is at and whether these remarks have any relationship to the comments in the financial budget outcome that was tabled just today that the DEH increase in net worth was a $254 million reduction in the fixed assets of DEH due to a change in valuation methodology? Are those two related, and what is the valuation of crown land?

The Hon. G.E. GAGO: The audit qualification for the property, plant and equipment component of DEH's administered items schedule relates to DEH's inability to reliably identify all crown land and determine an appropriate value for these assets. Crown lands are comprised of 14,000 unallotted parcels of crown land, 5,494 perpetual leases relating to leased crown land, and leases and licences relating to infrastructure on, and access to, crown land.

The department has indicated to the Auditor-General that it anticipated being able to address the qualification issue progressively over a number of years. It is worth noting that the necessary verification and valuation of these tenures is extremely labour intensive and requires, obviously, significant resources and time to complete. In addition, an ongoing procedural framework will need to be developed and implemented to ensure that future transfers of ownership between agencies are accurately recorded within the LOTS (Land Ownership Tenure System). When all crown land can be identified, ambiguity will still exist as to whether the Crown and by default DEH or another department controls the respective parcels of crown land.

The control aspect is a fundamental accounting test for inclusion as an asset of the reporting entity. The department recently initiated a project that will progressively address the identification issue for the crown lands data over a number of years. The project will involve verification and correction of crown land information stored in lots and the development of a conversion program to bring the data into the department's tenement and billing system (TABS), documentation of accounting business rules for recognition and valuation of the land and also modification of the TAB system to meet the business and audit requirements of crown land.

In respect of the second part of the question in relation to the reduction of asset values, I report that this relates to the DEH entity rather than the crown lands qualification in the administered entities. In December 2006, the department identified a possible error in the revalued assets values reported in the 2005-06 financial statements. A review was undertaken that confirmed the error and identified a number of other less significant issues.

The majority of the errors related to the process of updating the asset data for the data dictionary re-evaluation undertaken in June 2006. The errors were caused by a combination of human error and a complex process requiring significant manual intervention and calculations. The summary of actions recommended as an outcome of the review included a plan to correct the data and implement improvements to the procedure systems and controls, including additional reconciliation tools and appropriate action to ensure that the staff have acquired levels of skills to accurately maintain the assets register.

The methodology for correction of data was documented and reviewed by the Auditor-General's team, and the data corrections were completed prior to the preparation of the 2006-07 financial statements. The 2005-06 asset values were restated in the 2006-07 financial statements and the corrected data was reviewed as part of the 2006-07 year and audit. No major issues were identified and as a result of these corrections the revaluation increment of $365 million originally stated in DEH's 2005-06 financial statements has been reduced by $220 million.

The Hon. J.M.A. LENSINK: On page 374 of the same document is a table at the bottom that refers to employee benefits, expenses and other costs. On my rough calculation the long service leave has increased from 2006-07 by some 31.7 per cent. Will the minister advise as to whether there has been an unusual take up of those benefits or whether it is due to some other factor?

The Hon. G.E. GAGO: I have been advised that the increase is as a result of remuneration increases through enterprise bargaining agreements and through the reclassification of officers, hence over time the liability has increased. There is no compulsion to take long service leave.

The Hon. J.M.A. LENSINK: I refer to page 375, the item 'supplies and services'; where the second to last item is 'heritage advisers', which I think is an increase from 2006-07 of some 25 per cent. Will the minister advise whether that is the result of an increase in the number of heritage advisers employed and where those people are employed, if that is the case?

The Hon. G.E. GAGO: We employ advisers to assist local councils, which has been a deliberate strategy under our heritage directions initiative established several years ago. Supplementation is received over roughly a four-year period.

The Hon. M. PARNELL: My question is to the minister in her capacity as representing the Minister for Water Security. I refer to the Auditor-General's Report part C, pages 7 and 8. Page 7 is a reference to public-private partnerships and the Auditor-General's statement is that the policy is that the government needs to be satisfied that the PPP provides a net benefit to the public, compared with general public sector procurement. On page 8 there is a note that two government announcements—the desalinisation plant and the doubling of the water storage capacity in the Mount Lofty Ranges—will be built to guarantee South Australia's long-term water security. These represent an investment of more than $2.5 billion, which is an investment greatly exceeding the entire proposed capital investment program for 2007-08.

My question of the minister is whether the government is proposing any component of public/private partnership funding for the Adelaide desalination plant, and if so what assessment process will be put in place to ensure that any PPP provides a net benefit to the public.

The Hon. G.E. GAGO: These questions address matters that are, in fact, not part of my portfolio responsibilities but those of minister Maywald.

The Hon. M. PARNELL: Will you take the question on notice and bring back a reply? I asked you in your capacity representing that minister.

The Hon. G.E. GAGO: I am happy to do that.

The Hon. J.M.A. LENSINK: The Auditor-General's Report highlights some significant financial issues with the department, and I quote from Volume V, page 1594, where it refers to 'a structural budgetary deficit and requirements to meet savings' and states that this impacts on the department's current and future planning. Can the minister advise what action is being taken to address that, and can she expand on some of those issues that are impacting on planning for the department?

The Hon. G.E. GAGO: Following an unfavourable budget outcome for the 2004-05 financial year, the department undertook a detailed analysis of its budgetary position and identified the existence of a structural budget deficit of about $5 million. The deficit refers to the gap between the historical internal budget and approved budget advised by the Department of Treasury and Finance. While the elements that constitute the structural deficit are difficult to trace, it is likely that a component of this may be linked back to the time of the department's inception in 2002, following the transfer of functions and funds from other departments; that is, the funds transferred may have been insufficient to meet the cost of the functions and programs vested with the newly formed department.

Notwithstanding, the department has since implemented successful measures to manage this deficit as part of the overall budgetary control, and it is pertinent to note that it has achieved a balanced net operating budget result, in both 2005-06 and 2006-07 financial years. It is also relevant to note that the department's progress in enhancing its overall financial management is progressing, with the implementation of improved internal controls. While it acknowledges some of the weaknesses identified by the Auditor-General in his recent report, the department has clear and robust strategies in place to manage its finances effectively, consistent with the principles of the Treasurer's financial management framework.

It is also pertinent to note that the membership of the department's financial committee includes a senior representative from Treasury, following the reconstitution of the committee in 2005. The revelation of a structural budget deficit followed detailed and complex financial reconciliations and identified the need for the department to take proactive measures to mitigate the impact of this deficit on its operations and still enable it to achieve its approved budget targets of 2005-06 and 2006-07 financial years, and those going forward.

This planned improvement has already been witnessed during 2006-07. The department recorded a favourable result of $2.9 million in its net result, when compared with the approved revised budget, and a $3.5 million improvement, GFS basis measured. The department has implemented stringent controls following the 2004-05 financial year in order to effectively manage its budget position and has reported satisfactory budget outcomes over the last two financial years. The chief executive has complied with the Treasurer's budget model and has successfully managed the department's budget position consistent with the demands of the revised chief executive accountability.

The Hon. C.V. SCHAEFER: Page 1594 states:

Limitations were apparent in DWLBC's system which records outstanding water levies and penalties. As a result, interest had not been applied to outstanding water levies and penalties as required by the Natural Resources Management Act 2004.

Later on it says, as I recall, that legal advice was sought as to how much of that was to be paid. Can the minister tell us what action has been taken to collect those levies and penalties, or otherwise?

The Hon. G.E. GAGO: I seek clarification: is that the Natural Resource Management Fund?

The Hon. C.V. SCHAEFER: No. Sorry, I think I have meshed two of my questions. My question relates to the non-collection of levies and penalties, which is dot point 3 under 'Specific Control Matters', page 1594, Volume V.

The Hon. G.E. GAGO: I have been advised that WILMA does not have the system capability to calculate overuse penalties when allocations are reduced. Pursuant to section 132 of the NRM Act 2004, the minister has issued a notice of restriction on the taking of water from the River Murray prescribed watercourse to 60 per cent of licensees taking allocation for 2006-07.

Consequently, penalties for 2006-07 were manually calculated outside of the system, and this manual calculation of penalties increases the risk of errors. The department implemented sufficient processes and checklists to ensure that there were adequate internal controls over the calculation of penalties, but potential future systems for accounts receivable would assist in rectifying this problem, going forward, and avoid the requirement for manual calculation.

The Hon. M. PARNELL: Going back to the answer the minister gave the Hon. Michelle Lensink in relation to the structural budget deficit of $5 million, the Auditor-General notes that the department identified a number of proposed one-off measures and a combination of expenditure-saving and cost recovery initiatives. The minister referred, in general terms, to some internal ways of saving money, and my specific question is: are there any particular programs that have been cut? If so, what are those programs?

The Hon. G.E. GAGO: I have been advised that (and to the best of my knowledge) no programs have been cut. The department has looked at applying and adapting additional efficiencies and cost savings. It has also had regard to how we conduct our business and improved efficiencies there, while still maintaining high service and delivery standards.

The Hon. J.M.A. LENSINK: In relation to the same issue, the underlying deficit (and I note that the Auditor-General identifies that part of the difficulty in establishing a working budget is because the 2006-07 budget was delivered late in September), can the minister advise what appropriations were provided to the department in order to assist? Can she also advise what appropriations over and above that amount were provided in that financial year for expansion programs to meet EBs and so forth?

The Hon. G.E. GAGO: I have been advised that the department has received standard increases for enterprise bargaining and other indexation appropriations such as CPI. No other specific additional appropriations have been received.

The Hon. D.W. RIDGWAY: I thank the Leader of the Government in this place for the opportunity to read a couple of questions on notice. The first question is to the Minister for Police. In Volume III, page 921, under Public-Private Partnership Leases, it states that expenses for the public-private partnership lease increased from $594,000 in the 2005-06 financial year to $3,027,000 in the 2006-07 financial year. Obviously, and as we all know, this relates to the development of new police stations under PPPs. My question is: will the minister outline all the contractual details—such as the costs, terms, annual payments and handover details—for all police stations built under public-private partnerships?

My second question is again to the Minister for Police. Under Accounts Payable on page 903, Volume III of the Auditor-General's Report, the minister states the need for SAPOL's management to ensure that authorisation of expenditure is independently checked. Can the minister advise the committee on what basis that authorisation of expenditure within SAPOL is being independently checked?

I also have a couple of questions for the minister in his capacity as Minister for Mineral Resources Development. Volume III, page 825 of the most recent Auditor-General's Report states, under Unauthorised Payments—Expenditure, that the review of paper-based controls implemented by PIRSA over accounts payable, amongst other things, did not provide assurance that all purchasing transactions were authorised. On the same page the report goes on to state that PIRSA's reliance on high level detective controls, rather than preventative controls over transaction processing, exposes the department to a number of financial risks. The department has responded that it will not proceed to implement an automated approval system, and the Auditor-General has identified a potential risk of invalid expenditure processing. My questions are:

1. What is the estimated cost to the department over the 2006-07 financial year of unauthorised transactions?

2. Does the minister intend enforcing any preventative controls in the foreseeable future; if so, when will they occur and what will they be?

3. Will he ensure that there is no opportunity for informed and trusted employees with access to certain information to process invalid and unauthorised payments?

In relation to the collection of royalties (Volume III, pages 826 to 827, Petroleum Revenue), my questions are again to the Minister for Mineral Resources Development. On page 826 of Volume III of the most recent Auditor-General's Report, it states that in September 2005 the department initiated an external review of royalty payments made by Santos Ltd. The review identified a number of uncertainties regarding how producers calculated royalties payable to the state in accordance with the Petroleum Act 2000.

An outcome of the review was a significant repayment of royalty moneys to Santos. The review identified a number of recommendations to improve the process which, according to the 2007 audit of PIRSA, are yet to be fully implemented. Over two years on from those recommendations being made, my questions to the minister are:

1. Why have the recommendations of the external review still not been fully implemented?

2. Will the minister guarantee that all royalties payable by producers for the 2006-07 financial year were calculated correctly?

I refer to page 826, Volume III, Masterpiece Fixed Asset to General Ledger Reconciliation. The Auditor-General states that certain reconciliations were not performed for the period following November 2006. My question to the Minister for Mineral Resources Development is: will he guarantee that all financial statements of the department throughout this period were not materially misstated?

I refer to Volume III, page 827, Mining Review, where it states that approximately $64 million of the $78.5 million in royalties received by the department is collected by BHP Billiton Olympic Dam Corporation. The Roxby Downs (Indenture Ratification) Act provides that, on the minister's request, BHP must submit to an external audit report with respect to royalty returns. The report also states that quarterly audited royalty returns have not been requested since September 1998. As a result, the department relies on an historical analysis check. The Auditor-General states that this data provides limited assurance that the mining royalties collected in accordance with the act are correct. My questions are:

1. Why has the minister not requested that BHP submit to an external audit during his time as minister, given that it has not happened since 1998?

2. Can he guarantee that all mining royalties have been collected since 1998?

3. How does the minister propose to ensure a more transparent and verifiable process for calculating royalties under the review of the indenture act?

4. Can he guarantee that, with the minerals mining boom we are about to experience in this state, all royalties will be collected under a more transparent and verifiable process?

The Hon. P. HOLLOWAY: I will take those questions on notice.

The ACTING PRESIDENT (Hon. B.V. Finnigan): That concludes the examination of the Auditor-General's Report.