Bills

Statutes Amendment (Public Sector Audit) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 23 September 2015.)

The Hon. G.E. GAGO (16:51): It is the position of the government that we not support the Statutes Amendment (Public Sector Audit) Bill 2015 which proposes to change both the Public Finance and Audit Act 1987 and the Public Sector Act 2009.

The reasons expressed by the Hon. John Darley MLC for the bill relate to supposed restrictions on the Auditor-General's remit under the Public Finance and Audit Act 1987. The act already requires the Auditor-General to express an opinion on the controls exercised by an agency in relation to the expenditure of money, and states that he can report on any matter that should or, in his opinion, be brought to the attention of the parliament and government. This does not support the Hon. John Darley's position that there are restrictions on the Auditor-General's remit.

There is also a mandate for the Auditor-General to examine the efficiency and economy with which a public authority uses its resources in relation to other jurisdictions. It is noted that the mandated provisions for performance type audits contained within other state and territory auditor-generals' enabling act are broadly consistent with the existing provisions of the Public Finance and Audit Act 1987. Further, we are not aware of any current concerns raised by the Auditor-General in relation to his powers or requests to make any changes to the Public Finance and Audit Act 1987 in relation to that.

The proposed amendments to the Public Sector Act 2009 are also, in the government's view, unnecessary. The current framework for chief executives to lead and manage an organisation and its resources, including efficiency dividends in line with the government's priorities, is sufficient, we believe, for the good order and efficient running of the public sector.

Further, the requirement in the amendments to have chief executives undertake a full review of all their agency's activities at the same time, over a six-month period, duplicates existing processes and is likely to be disruptive and costly, which is entirely opposite to the supposed purpose of the amendment. As a result, we do not see any benefits to be gained from the proposed amendments to the Public Sector Act as being proposed by the Hon. John Darley, and it is for these reasons that the government opposes this bill.

The Hon. R.I. LUCAS (16:53): I rise on behalf of Liberal members to indicate that we will be supporting the second reading of the Statutes Amendment (Public Sector Audit) Bill. However, I will outline some significant concerns with the bill as it is currently drafted, and I have indicated to the mover that should the mover proceed to the third reading stage today, then the Liberal Party would not support a third reading of the public sector audit bill today.

The genesis of this has been a consistent position that the Hon. Mr Darley has adopted at the Budget and Finance Committee, for which I have had much admiration. He has asked a relatively simple question of virtually all chief executives who have come before the Budget and Finance Committee as to, in essence, whether they have done a root-and-branch operational audit of all their expenditure. What does that mean?

Put simply, the Hon. Mr Darley has been saying that he is personally not supportive of a model of expenditure reduction that works on the basis of the efficiency audit approach that is applied equally across all departments and agencies or applied across most departments and agencies. This government would now say that, in recent years, police and some aspects of health expenditure might have been excluded from some of the all-encompassing efficiency audits that nevertheless apply to all other departments and agencies.

As I said, I personally have considerable sympathy for the position the Hon. Mr Darley has put and the principle behind his questions before Budget and Finance and the elements of the drafting of this bill. The Hon. Mr Darley is saying that governments, ultimately, should be looking right across the board at what functions they are currently funding and, in having to make the difficult decisions of making budget cuts, should decide which functions are either of no priority or, more likely, lowest priority.

They should reduce the expenditure on that particular function and then have available expenditure for higher priorities or new priorities for governments in terms of public funding, rather than, as I said, applying the efficiency audit model of 1 per cent or 2 per cent across the board in terms of all the existing functions of that department or agency.

In expressing sympathy for the principle behind that aspect of the bill, the dilemma we have with the model that is envisaged in this particular bill is that, essentially, it is saying that the existing chief executive officers will conduct this operational audit within six months of the commencement of the act. The Hon. Mr Darley will know, with the greatest of respect, the quality of some of the existing chief executive officers of some departments. I certainly would not have confidence that those particular chief executive officers should be the ones responsible for the operational audit.

This is especially so when one looks at other aspects of the draft bill from the Hon. Mr Darley, which essentially appears to indicate that any minister or government has to implement the findings of the audit conducted by the chief executive officer. In my view, that cuts across the whole notion of ministerial responsibility or, indeed, cabinet responsibility for decision-making. Whether we like it or not, however we might judge the competence of ministers or cabinets, ultimately I respect the view that chief executives and departments, by and large, are there to provide advice. Ultimately, the decisions have to be taken by ministers, cabinets and governments and not by the chief executive officer.

I would also say, for even the most competent chief executive officer we might see in the public sector, whoever he or she might be, the notion that there should be a requirement on me as a minister of a Liberal government or a Liberal cabinet to implement his or her decisions about the priorities or results of any operational audit is essentially wrong, as I said, in terms of proper corporate governance and wrong in terms of how decisions should be taken under our system of ministerial and cabinet responsibility.

There are alternative mechanisms for operational audits. We have seen them used in this and other states at the national level. We have had the Sustainable Budget Commission model, which essentially tried to adopt that model. There are significant elements of that report that were not implemented by government. I can certainly understand why some elements were not implemented; with others, it is harder to understand why particular decisions were not implemented, but essentially they were decisions of this current government.

There have been audit commissions. The former Liberal government had an audit commission, and certainly at the national level and interstate there have been various versions of audit commissions. I have to say that my personal view is that, if an incoming government were to have a sustainable budget commission or an audit commission, it would certainly make sense. But, in terms of an ongoing long-term government, my view is that there is a prominent role for a treasurer to adopt in terms of driving operational audits.

There are processes through cabinet decisions, and Treasury enacting cabinet decisions, requiring ministers to come back with results and ministers similarly requiring their chief executives to come back with results of an operational audit in terms of getting their own finances in order. Certainly, that is the sort of principle I personally support. I think it is not inconsistent with the position the Hon. Mr Darley has put at various meetings of the Budget and Finance Committee, albeit it is different from the current draft the parliamentary counsel has constructed for the Hon. Mr Darley for this bill.

In concluding my comments on that aspect of the bill, I would say—and I give this assurance to the Hon. Mr Darley—that if there is an incoming Liberal government, or if a Liberal government is elected in 2018, the essential principles of looking at operational audits and trying to act upon the results of operational audits would certainly be a feature of the decision-making of an incoming Liberal government. It would not be under the model that is proposed or outlined in this bill, but I think the Hon. Mr Darley would be not unhappy with what a new Liberal administration might do in terms of investigating the priorities of government departments and agencies.

The second aspect of the bill is one that puzzles me. Having had a quick discussion with the Hon. Mr Darley and without putting words into his mouth, as he can outline it himself, it appears that these have been drafts the parliamentary counsel has included in this particular draft of the bill. I thought perhaps the Auditor-General, in some report somewhere which I had missed, must have expressed some concern about the extent of his powers, but that does not appear to be the case, as the Hon. Gail Gago has outlined on behalf of the government.

Certainly, even if he had, the drafted changes to me potentially do not add anything of use to the existing powers of the Auditor-General anyway. It does remove various provisions in the act that apply to the Auditor-General. For example, it removes references to investigating efficiency and economy of use of resources with a broader notion of 'any other matter'. 'Any other matter' can be, as it suggests, any other matter; it certainly can include efficiency and economy of use of resources, but I am not sure that I would agree that the phrase 'efficiency and economy of use of resources' has been a limiting factor for the Auditor-General.

As I have outlined, privately to the Hon. Mr Darley, and I now place it on the public record, as he is aware we have an annual visit from the Auditor-General to the Budget and Finance Committee, which I think is in just three or four weeks' time. I would hope that the Hon. Mr Darley, if this bill does not progress beyond the second reading at this stage, might at least explore these potential changes to the Public Finance and Audit Act as they relate to the Auditor-General's powers with the Auditor-General. We can certainly tease out whether or not there is any tweaking that parliament should look at in relation to the powers of the Auditor-General.

In my humble view as a non-lawyer, I am not supporting the legislative model of operational audits, but even if I was supporting a legislative model of operational audits—that is, requiring it across the board for everyone within a certain time period—I think that that could be achieved without having to change the powers of the Auditor-General. Parliamentary counsel may well have a different view of that. Let's hear that particular debate, and also let's hear whether or not the Auditor-General and his officers have a view on this particular matter.

In relation to that aspect of the bill, it will certainly make sense to at least put some of these propositions to the Auditor-General in three or four weeks' time when he comes before the Budget and Finance Committee. With that, I indicate on behalf of the party our position. Certainly, at this stage, if it were to proceed to a second reading vote we would be prepared to support that. If it went beyond that to a third reading, at this stage we would be forced to vote against the third reading of the bill.

Debate adjourned on motion of Hon. G.A. Kandelaars.