SALARY SACRIFICING

The Hon. R.I. LUCAS (14:52): I seek leave to make an explanation before asking the Minister for Industrial Relations a question on the subject of fraud and salary sacrifice.

Leave granted.

The Hon. R.I. LUCAS: In the Brisbane Times of 6 July, under the heading 'Salary sacrifice: $500,000 "taken" from 7600 government workers', the Queensland minister said:

I am informed that the alleged fraudulent transactions impacted the accounts of 7580 current or former Queensland government employees and totalled $492,763.

The Queensland minister then went on to be very critical of the security arrangements of Remuneration Services (RemServ), one of two companies providing salary packaging services to the government. Further on, the minister said that he was particularly concerned that the government had allowed only two companies to provide salary sacrificing packages in an arrangement he described as a 'cosy duopoly'. In the Herald Sun on 12 July, the Queensland minister was quoted as saying that RemServ, one of two companies that handle the government's salary sacrifice service, first suspected the alleged fraud as far back as December 2010 and that RemServ had finally uncovered the alleged scam in June 2011.

RemServ is an associated company of Maxxia, the company the minister has given a monopoly contract to handle the salary sacrifice arrangements here in South Australia for public servants and about which there have been a number of questions in this house relating to tender arrangements and the government's decision to give a monopoly power to this particular company in relation to salary sacrifice provisions for public servants. My questions to the minister are:

1. Did the tender arrangements for the contract require the tenderer to advise the government of any knowledge of these issues in other states and territories and, if not, why not?

2. Given the claims by the Queensland minister that Maxxia's sister company (as it describes RemServ) suspected the alleged fraud in December 2010 and uncovered the scam in June 2011, did Maxxia advise the government of this issue during the tender process for the monopoly arrangement in South Australia and, if not, have they breached the terms of the tender arrangements managed by the government?

3. What precautions has the government now taken to ensure similar fraudulent behaviour, as occurred in Queensland, does not also occur in the monopoly arrangement the minister has approved here in South Australia?

4. Does the minister now agree with the Queensland minister and the Queensland government about concerns with monopoly or duopoly contract arrangements in relation to salary sacrifice arrangements for public servants in South Australia?

The Hon. R.P. WORTLEY (Minister for Industrial Relations, Minister for State/Local Government Relations) (14:56): The Queensland government issued a media release on 6 July 2012 regarding suspected fraudulent activities during a period in which Remuneration Services (known as RemServ) was providing salary sacrifice services. I understand that McMillan Shakespeare Limited, the parent company of Maxxia Pty Ltd, acquired RemServ which then became a subsidiary of McMillan Shakespeare Limited.

Maxxia Pty Ltd is the current provider of salary sacrifice services within the arrangements that apply to the South Australian public sector. I am advised that Maxxia Pty Ltd has advised Public Sector Workforce Relations of the following: the suspected fraudulent activity commenced some years prior to McMillan Shakespeare's acquisition of RemServ; the alleged fraudulent transactions have been traced to a former RemServ employee who left RemServ over two years ago; in the main, the fraud transactions were for very small amounts and were apparently executed in a very sophisticated manner; McMillan Shakespeare's internal auditors (BDO) detected the issue as part of their routine risk and compliance review activities. This came to light on 22 November 2010 when it was reported to the board audit committee by the McMillan Shakespeare Group internal auditor (BDO) that 61 payment transactions in the RemServ business may not be legitimate business transactions and that further investigations were underway.

The findings were advised to the relevant stakeholders, including the Queensland Department of Justice and the Queensland police, and investigations are ongoing. RemServ repatriated the respective funds to the employer trust accounts immediately. In respect of the South Australian government's principal agreement with Maxxia Pty Ltd, a $10 million bank guarantee has been provided to the South Australian government which exceeds the value of salary sacrifice funds currently held on trust on deposit.

Through its parent company, McMillan Shakespeare Limited, Maxxia has extensive insurance cover in place including over $120 million of crime and fidelity insurance. Maxxia's payment controls process is the subject of regular internal audit review and includes the independent secondary verification of new/amended bank account details when they are added to the salary packaging systems. In accordance with the new principal agreement, the trust accounts balance will be the subject of audit review each month and the annual substantive audit will now be half-yearly.