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House of Assembly - Fifty-First Parliament, Second Session (51-2)
2007-11-14 Daily Xml
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Auditor-General's Report

AUDITOR-GENERAL'S REPORT

In committee.

(Continued from 13 November. Page 1560.)

The CHAIR: I call the Minister for Education and Children's Services, Minister for Tourism and Minister for the City of Adelaide to the table.

The Hon. I.F. EVANS: On page 345, under 'Contingent Assets and Liabilities', there is a contingent liability in relation to the back payment of long service leave to certain classes of public servants, namely temporary relieving teachers, hourly paid instructors, bus drivers and other casual employees. Why is the department considering this when, under section 167(2)(a) and section 179 of the Fair Work Act 1994, a six-year limitation applies to such claims?

The Hon. J.D. LOMAX-SMITH: I thank the honourable member for the question. I did not catch the citations at the end, so I will ask you to repeat them, but I will begin by saying that this year, as last year, we have had unqualified audit reports from the Auditor-General and we have had a very good result. Clearly, there were some areas where the Auditor-General recognised that there was room for improvement, but overall we have had a very sound report this year for the Department of Education and Children's Services. I think that I should commend all those staff who have been responsible over the years for tightening up procedures, responding to previous comments and making sure that our systems are in order. I ask the member to repeat the quotation of those sections.

The Hon. I.F. EVANS: I referred to page 345 of the Auditor-General's Report under note No. 33 headed 'Contingent Assets and Liabilities'. It appears that the department has a contingent liability for the back entitlement for long service leave for temporary relieving teachers, hourly paid instructors, bus drivers and other casual employees. I am asking why the department is considering this claim when, under section 167(2)(a) and section 179 of the Fair Work Act 1994, a six-year limitation applies to such claims.

The Hon. J.D. LOMAX-SMITH: We are still awaiting the outcome of a dispute and we know that this matter has not been resolved, but we recognise that there is a requirement to have some recognition of liabilities for a whole range of classes of employees.

The Hon. I.F. EVANS: Will the entitlement of long service leave be awarded to the temporary relieving teachers, hourly paid instructors, bus drivers and other casual employees, regardless of whether they have individually expressed their objection to not being eligible for the long service leave?

The Hon. J.D. LOMAX-SMITH: We are still involved in a dispute before the Industrial Relations Court regarding the allowable break in service for accrual of long service leave, and I think it would be unwise for me to predict the outcome of that process.

The Hon. I.F. EVANS: Does the provision of the Fair Work Act apply given that these people were employed under the Public Sector Management Act? This is the six-year limitation. I repeat: does that apply given that they were employed under the Public Sector Management Act?

The Hon. J.D. LOMAX-SMITH: Those questions are not appropriate to be discussed in the Auditor-General's Report—they are legal matters which are in dispute at the moment.

The Hon. I.F. EVANS: Has the department reached a view as to whether individual temporary relieving teachers, hourly paid instructors, bus drivers and other casual employees will be eligible for the award of long service leave even if they have not formally joined in the claim?

The Hon. J.D. LOMAX-SMITH: These matters are before the court and they are not related to the Auditor-General's Report.

The Hon. I.F. EVANS: In the report on page 316, the Auditor-General confirms that the government has spent $10 million less on minor works and maintenance last year. Why is that so?

The Hon. J.D. LOMAX-SMITH: The explanation I have been provided with is that there have been some written-off assets and also some reduction in minor works. However, I think that, overall, the expenditure has risen over recent years.

The Hon. I.F. EVANS: I refer to page 313. Why is there no frequent reporting to the Chief Executive of an estimate of the backlog maintenance, as suggested by the Auditor-General?

The Hon. J.D. LOMAX-SMITH: The member has quite rightly observed that the audit noted that there was no frequent reporting to the CE of the estimated backlog maintenance. What has happened is that the department has reported annually on backlog maintenance and associated risks as part of the formation of the department's capital works budget. The ongoing maintenance requirements are one of the criteria used to determine capital works in schools. That information requires that the data also be kept locally at each school. The process of determining the urgency of those maintenance priorities is that the CE is informed on a regular basis of issues and the planned actions to address the identified risks.

Of course, there are a number of funding sources available to schools, including the urgent breakdown maintenance funding, the major capital works funding, and other regular asset-funding programs. The current budget allocations for those are as follows. The asset fund is $12 million; capital works, approximately $35 million; the contingency and compliance, $10.5 million; and breakdown maintenance, $20 million. What occurs very often is that there is some movement across those categories. In fact, it is often quite difficult for schools to determine the exact source of some of the funding, and we have been trying to streamline that process to make it easier to track and also easier for the schools.

We have made some additional reforms which were not specifically required, I think, but which have made it much easier for schools to get access to immediate support. What we did last year was to have a one-stop shop so that, instead of the school determining which of these funding lines their funding should come from, there is one telephone number to ring, and much of the difficulty can be resolved very quickly by using that process.

The Hon. I.F. EVANS: Does the minister receive regular reporting on the level of school maintenance backlog?

The Hon. J.D. LOMAX-SMITH: We have previously looked at backlogs in terms of an annual process. That is why we have invested more money into school maintenance and more money into capital within our schools. We recognise that we inherited such a large backlog and required greater investment, having been through a period of low investment in the past.

The Hon. I.F. EVANS: If the minister receives annual estimates of backlog maintenance, what was the last estimate of backlog maintenance the minister received?

The Hon. J.D. LOMAX-SMITH: I cannot recall the last number, but I believe it was in excess of $250 million. However, I will get that number back to the member.

The Hon. I.F. EVANS: Why has the department no risk management plan for school maintenance, as raised on page 313 of the report?

The Hon. J.D. LOMAX-SMITH: The member has quite rightly noted that the audit recommended that there should be a risk management plan to ensure that all risks associated with the maintenance of school buildings is systematically identified, assessed and controlled. This is a matter that should be viewed through the context of an essentially unqualified report. We have developed a risk management plan to ensure that the risks associated with the maintenance of schools are properly managed. However, the plan includes the involvement of DTEI in the management of these risks. The main highlights of the risk management plan are the establishment of risk management controls in the areas of infrastructure maintenance, payment process and accounting procedures, as well as work quality.

The Hon. I.F. EVANS: The Auditor-General reports that there is a concern that there is an increased risk of tuition fees being set at levels that do not cover teaching and other program costs in relation to overseas students. Minister, what does it matter if the tuition fees for overseas students are not set at levels that do not cover teaching or other program costs, and is it the intention that these fees be at full cost recovery?

The Hon. J.D. LOMAX-SMITH: We took the advice of the Auditor-General, and we have of late been reviewing the tuition fees—in particular, they were reviewed earlier this year. Overseas fee-paying students pay $10 million in tuition fees every year, and the majority of this is invested back into the system. The benefits of welcoming international students are not entirely pecuniary. Students in public schools have the additional opportunity to experience people from other cultures; there may be language opportunities and long-term friendships, as well as economic opportunities for our state. So, overseas students should not just be regarded as a source of income; there are other benefits to the community.

The Hon. I.F. EVANS: I am sorry, minister, but you did not answer the question. Is it intended that the tuition fees for overseas students be set at levels that are full cost recovery, as suggested by the audit?

The Hon. J.D. LOMAX-SMITH: We believe that there are benefits other than just financial but, clearly, when we are pricing our product within the market we like to be within a reasonable range in order to get the market share.

The Hon. I.F. EVANS: The audit raises, on page 310, the possible refund to overseas students of fees due to the lack of gazettal. When was the minister first asked to gazette the fees for the 2006-07 year?

The Hon. J.D. LOMAX-SMITH: That power is delegated and so I was not asked to gazette the matter. Having said that, it was an oversight about which no-one is pleased or satisfied and I have been assured that it will not happen again.

The Hon. I.F. EVANS: How much do we look like having to refund the overseas students due to the unfortunate oversight?

The Hon. J.D. LOMAX-SMITH: There were 674 students. There were a range of refunds for primary and secondary students. The families, of course, had been told of the prices which were not gazetted, so they were expecting a higher level of fees and, clearly, everybody was happy to get a refund. The good news, I suppose, if one can look at good news within this, is that those funds will probably be spent in South Australia.

The Hon. I.F. EVANS: On pages 310 and 311, the audit raises input validation checks and the department responds with a number of dot points on page 311. The three dot points set out reasons why the establishment of a computer system control is not possible in the department's view, despite recommendations since 2005 to establish the same. My questions are: what is the estimated cost as claimed in dot point 1? How much additional resource would be required to ensure all transactions are outsourced? With the additional resources and changes to the system, why are control transactions unlikely to be processed in time for pay runs?

The Hon. J.D. LOMAX-SMITH: The audit had proposed several options to ensure there was evidence of an independent check of each transaction process by payroll clerks. Options could be either manual, where the reported transactions be annotated with evidence of a check, or electronic, with a system amendment that would require an independent check of transactions before they were processed. DECS certainly had concerns related to the proposal, and these include the significant costs the member mentions associated with systems change to implement an electronic control mechanism, and concerns about the timeliness of transactions. Nevertheless, DECS is examining these options and trying to meet the concerns of the Auditor-General. Needless to say, there are negotiations underway. This includes a detailed examination of the proposal and an investigation of existing and alternative approaches, including those of other pay systems and payroll services.

The Hon. I.F. EVANS: I think I used the word 'outsourced' there, it should have been 'authorised', but I think the answer is the same. Page 312 raises the issue of school bus contractors and the prospect of a new system to pay school bus contractors is being considered. Can you enlighten us as to what the new system is and whether the appropriate industry body has been consulted, do they support the change and when is the change going to take effect?

The Hon. J.D. LOMAX-SMITH: DECS has looked at a new system and revised their accounts payable manual and have incorporated details of the types of checks that accounts payable officers are required to perform to prevent or detect invalid, unauthorised or incorrectly coded invoices. The new system for the payment of bus contractors has been implemented and appears to work well and the process is well underway in documenting the associated procedures. The review has been undertaken of the management control and payment for taxi transport commission by DECS. Further discussion and consultation will be undertaken with the taxi industry to determine the best solution to management control and payment for taxi transport commissioned by DECS.

The Hon. I.F. EVANS: I refer to page 313: are the new service level agreements with the Police Security Services Branch now in place? If not, when will they be in place? How will the agreement reduce the requirement for private sector security providers? If it does that there must be a saving: what is the annual saving?

The Hon. J.D. LOMAX-SMITH: The new arrangements will significantly reduce the requirement to engage private security services. The service level agreement will result in the Police Security Services Branch taking over the monitoring of all DECS electronic security systems in both metro and country regions. They will also manage all targeted patrols and alarm responses for all DECS sites in the metropolitan area. Currently, some of these services are undertaken by private companies. Their service level agreement has been finalised, with the matter signed off on 7 November. It is anticipated that the actual arrangements will be in place soon, but I am unable to provide a cost differential. If the member would like that we can seek that in the future.

The Hon. I.F. EVANS: I would desire that, minister. If you could forward it through in due course, that would be good. I refer to page 314: why has the department no system to ensure it is not being overcharged by contractors for maintenance?

The Hon. J.D. LOMAX-SMITH: I think that the question is actually a matter for DTEI because it conducts an audit of maintenance charges to ensure that prices are correct. I understand that this is in the DTEI reports.

The Hon. I.F. EVANS: Minister, you do not think it is an issue for you, given that you have a $250 million backlog of school maintenance and you spent $10 million less on school maintenance last year than the year before. You do not have any reporting to you other than once a year. The CEO does not get regular reporting on school maintenance and backlog. The Auditor-General tells you that there is not a system in place to determine whether you are being overcharged for school maintenance. You are saying that it is not your issue but, rather, an issue for DTEI. Do you not think that your department should be doing something about it?

The Hon. J.D. LOMAX-SMITH: I think the member is in error. We have not reduced our investment in school buildings. Over the past five years we have increased the amount that is used for maintenance from $10 million to $12 million each year. We have had a massive rebuilding program, as well as our School Pride initiatives and new PPP programs. It is an error to suggest that we are spending less money than before on our infrastructure. Having said that, we are not without checks and balances. I remind the member that we had an unqualified report. The issues that he has raised are ones that are reflected elsewhere in the report. I believe that these matters are referred to in the DTEI pages.

The Hon. I.F. EVANS: Is the Auditor-General correct when he says that other expenses fell by $14 million to $433 million due mainly to a decrease in minor works and maintenance of $10 million? Was there a reduction of $10 million in minor works and maintenance? Minister, a minute ago you accused me of being wrong. I want to determine whether I am wrong, you are wrong or the Auditor-General is wrong. On page 316 the Auditor-General says that other expenses fell by $4 million to $433 million due mainly to a decrease in minor works and maintenance of $10 million. I interpret that as being a decrease in minor works and maintenance.

The Hon. J.D. LOMAX-SMITH: I can explain it for the honourable member because he may not have noted the actual details. The repairs and maintenance resulting from fire loss and damage decreased because of a reduction in fires. In addition, there was a reduction in the repairs and maintenance projects because there were some delays in the commencement of major works. The reductions are explained by both cash flow reduction in fire damage and some of the work being funded in schools throughout their budgets. The headline figure the honourable member quotes does not reflect the expenditure on the ground.

The Hon. I.F. EVANS: I refer to page 316. Of the $44 million increase in employee benefit expenses, how much was due to the enterprise bargaining pay increases and how much was due to the employment of additional staff?

The Hon. J.D. LOMAX-SMITH: I think we may have discussed that previously during budget estimates. I do not have that data with me. I have not committed it to memory, so we will get back to you on that.

The Hon. I.F. EVANS: I think I may have asked the question in estimates and I am still awaiting a response, so it is a great opportunity for you to forward an answer to me. I refer to page 316. The non-current assets increased by $178 million, of which $174 million is the revaluation of land and buildings. Does that include the revaluation of land to be sold as part of the super schools project? If so, for each site what was the value in 2005, 2006 and 2007? I am happy for the minister to take the question on notice.

The Hon. J.D. LOMAX-SMITH: I understand that there is a revaluation on a three-year cycle through the department's assets. Regrettably, some of the valuations do not reflect the resale value—which is often just land value. That is particularly true in regional areas where the asset with improvements might appear on the books at a higher level than the saleable value because there is generally very little value in the improvements.

The Hon. I.F. EVANS: But is the valuation of the land in relation to the super schools project included in the valuation? Is it at open space value as a school or redeveloped value for housing? What valuation is in these figures? Is it the redeveloped value or the existing value as schools?

The Hon. J.D. LOMAX-SMITH: I cannot tell the honourable member which of our 1,000 school sites have had their valuations changed in the past year because I do not have that level of detail—and I doubt that anyone would. As far as I know, the schools that are the subject of amalgamation or closure relating to our new schools project, Education Works 1, are still recognised as schools.

The Hon. I.F. EVANS: It would be good if the minister can check and confirm that for me, because in the budget papers there are estimates of the sales values that are included in revenue figures. I refer to page 336: who was the consultant who was paid $257,000 for a consultancy, and what was the consultancy for?

The Hon. J.D. LOMAX-SMITH: I am unable to identify that from the consolidated list, which I presume is where the member is reading from. The DECS consultants fees were $68,000, and that related to two items. There were other consolidated costs from schools, about which I have no details.

The CHAIR: The time for examination of this section of the Auditor-General's Report having expired—

The Hon. I.F. EVANS: It is clear on page 336. There is one consultancy above $50,000, for $257,000. It is as clear as a bell in the Auditor-General's Report. It is under the number and dollar amount of consultancies above $50,000: one, $257,000.

The CHAIR: Order!

The Hon. I.F. EVANS: I am just asking what it is. It is only a quarter of a million!

The Hon. J.D. LOMAX-SMITH: The interpretation that I have been informed of is that the consolidated item relates to something in the field, and the $68,000 is a DECS number. However, that may be an error, and I am happy to check it.

The CHAIR: The time having expired, I call the Minister for Agriculture, Food and Fisheries and the Minister for Forests to the chair.

The Hon. R.J. McEWEN: I move:

That the sitting of the house be extended beyond 1pm.

Motion carried.

Mr WILLIAMS: Three amounts appear at page 844 of the Auditor-General's Report under the heading 'Exceptional Circumstances/Drought'. Those amounts relate to 2004, 2005 and 2006. Are the amounts listed the state government's contribution to the Exceptional Circumstances Program? Further down the same table appears the heading 'State Drought 2006', and an amount of $250,000. What is the nature of that payment?

The Hon. R.J. McEWEN: The shadow minister is absolutely right. The way in which this is recorded is obviously revenue irrespective of sources. So often we are accounting for federal money because we are spending on its behalf, and we see that with most of the drought programs. The honourable member is right: in capturing it, that is obviously money coming in and then services being delivered. In relation to the last specific item, 'State Drought', I presume that is simply our money, but I will check. That would be state appropriation into that fund.

Mr WILLIAMS: So, the first three amounts are federal money?

The Hon. R.J. McEWEN: No, they are a combination.

Mr WILLIAMS: Can the minister give us a breakdown?

The Hon. R.J. McEWEN: If it is interest rates subsidies it will be 90/10. However, it may be something else as well. One would assume that it is 90/10 because that tends to be the breakdown on EC. If it is not I will let the honourable member know.

Mr WILLIAMS: Over the page is a list of revenues under the heading 'Advances and Grants'. Note No. 14 gives a list of amounts the first of which is called 'Exceptional Circumstances/Drought Assistance, $7.9 million'. What is that money and how or why is it different than the others?

The Hon. R.J. McEWEN: I understand the difficulty the honourable member would have trying to reconcile that with expenditure in a year because it is revenue and the timing does not necessarily line up. One cannot simply add up expenditure and revenue and get the same totals in any one financial year. That is just reflecting revenue.

Mr WILLIAMS: That is the commonwealth revenues?

The Hon. R.J. McEWEN: It is only commonwealth revenues.

Mr WILLIAMS: With respect to the issue of EC funding (and I am quite happy for him to take this on notice), can the minister detail to the committee how many exceptional circumstances applications have been received for processing by his department since the declaration of EC areas across the state in the last 12 months? How many applications have been processed and how many have been approved? Also, has the government tracked the average processing time for EC applications and, if so, can he inform the committee of that time?

The Hon. R.J. McEWEN: Only part of that question is actually relevant to primary industries because, although we fund it in partnership, only part of that we manage on behalf of the federal government. It is the interest rate subsidy. The ECRS actually receives the applications. Even the pro forma is designed by the feds, but we manage that.

In terms of Centrelink and some of those other benefits, obviously I cannot respond. In terms of the one in which the honourable member is interested, the one that we manage is obviously ECIRS. Very recently we announced the thousandth application. They are averaging around a 90 per cent acceptance. We had one gap where they dropped a bit below that. We had a couple of over-enthusiastic (I might say) accountants assisting some people to put in applications which were not going to get over the threshold. There has now been a much more responsible approach. In relation to turnaround time, the maximum we have got out to is six weeks, but obviously we do map the turnaround time.

That is important, because the last thing we want is for these things to be held up and clients frustrated in any way. The other thing is that, unlike Centrelink, you can only backdate them three months. With interest rate subsidies, you can claim them and obviously the timing of them becomes important. Sometimes the accountant produces the advice, 'Wait until you have done your books.' Then you get a rush for a little while, then obviously, as you move in to harvest, people are preoccupied with other issues, so you will not see an orderly flow during the year either.

Mr WILLIAMS: I refer to page 834 under the headings 'Cash Outflows' and 'Cash Inflows'. Loans advanced to the rural sector and industry in the past 12 months were zero under cash outflows, but cash inflows shows loans repaid at $2.196 million. I believe that figure is not dissimilar to the previous year. Will the minister quantify to the house the quantum in dollar terms of the outstanding loans to the rural sector in industry via his department?

The Hon. R.J. McEWEN: What we have there is mopping up the last of those loans under the Rural Industries Assistance Fund. That has not been around for quite some time, but obviously some of them had long lead times, so you will see them being wound up. Other than that, no, we are not operating in that way; we are not a lending agent in that regard.

Mr WILLIAMS: Do you have a figure of how much is still outstanding?

The Hon. R.J. McEWEN: No, I do not. You would not think that there would be much left. Perhaps I should declare an interest: sometime in the past I had one of them, which I paid back in a timely manner.

Mr WILLIAMS: The reason I asked the question is that the other day I came across a constituent who still had one and I was somewhat surprised, to be quite honest, and then I noted in here that you are still getting repayments. On the same page under the same heading 'Cash Outflows' purchase of property, plant and equipment was $7.9 million (or thereabouts) in 2006 and $4.5 million in 2007. What sort of items are covered in there? I do not expect the minister to list things—property, plant and equipment—down to a few dollars, but I am assuming that some significant purchases are included and what has been the reason for the almost halving of the expenditure?

The Hon. R.J. McEWEN: Obviously we make a whole range of purchases on a regular basis. Off the top of my head, I would say the big difference between 2006 and 2007 was the purchase of the replacement boat for fisheries, the Southern Ranger, in 2006. Sometimes you will find a one-off, a significant purchase. I will check that. He says that I am correct. That is novel. The staff do not tell me that very often.

Mr WILLIAMS: On page 835 the expense listed as grants and subsidies has gone from $28.5 million in 2006 to $27.5 million. I guess that is not a huge change. In what areas are the principal grants and subsidies made? On the income side, advances and grants have gone from $44 million to almost $54 million. What makes up those advances and grants and what has caused this almost $10 million increase?

The Hon. R.J. McEWEN: The majority of that would be exceptional circumstances and the bushfire re-establishment grants, but a few other small ones might be in there. When you go to the top of that page, obviously, a number of programs are there and then they are actually consolidated, so there could be others within mineral resources or urban development as well.

Mr WILLIAMS: The figures I quoted are from program 4.

The Hon. R.J. McEWEN: Well done, yes. You are on the ball—just checking. I might add a bit more to my answer. For example in the previous year that $9.5 million for the Wine Industry Cluster was a one-off but, in terms of the others, I referred to the main ones being exceptional circumstances, drought, EC bushfire re-establishment, aquatic science, Renmark storm damage, and research and development cooperation program. So there are some other small ones in there.

Mr WILLIAMS: And the revenue side—the $10 million increase?

The Hon. R.J. McEWEN: That is where our funding partners contribute to that but the majority of that, again, is EC. That is the federal government.

Mr WILLIAMS: I refer to page 844 and branched broomrape. I have a couple of questions. Is that program also supported by the commonwealth government? Does the government believe that the area of infestation has now been defined? Does the department have a time frame in which it believes the eradication of branched broomrape from South Australia can be achieved?

The Hon. R.J. McEWEN: The reason that appears here is that we are a service provider to DWLBC in terms of the management of part of that program, so whether they have received any moneys I do not know. On the broader question, it is not an appropriate question to ask today but, equally, I do not have the answer. Certainly, I will bring back a more detailed briefing on where we are up to with branched broomrape.

Mr WILLIAMS: I refer to page 842 and program 5, Forestry Policy. Does the forestry policy unit have a role in assessing and promoting the use of plantation forestry in South Australia as a carbon sink?

The Hon. R.J. McEWEN: Yes, the forest policy on behalf of forestry generally has a role to develop government policy in a whole range of areas. They took over a number of roles which were embedded within the corporation which I felt did not appropriately sit there. A whole-of-government forestry program ought to be for the whole of government, not for the corporate entity.

From time to time, they would deal with a whole range of different things in their own right or things referred to them from the industry, or things referred to them by me. In fact, late last week, I met with them to ask them to do some more work on biofuel. Equally, I have asked the Chief Executive to identify a project officer specifically to map the total biofuel availability across all forest estate owners and downstream processes to see whether there is critical mass so that we could talk to the market about an integrated electricity steam pellet plant based on that aggregated volume of maybe 500,000 tonnes. However, that would not exist just within ForestrySA; obviously, it would be gathered from the other two main radiata estate owners, Green Triangle and Auspine, initially but, equally, the other sources of that, including sawdust, shavings, bark, etc.

So, yes, that is the type of thing I would ask them to do or, on behalf of that unit, we might even ask someone else to specifically project manage that. But, yes; not directly related to the carbon but obviously looking at how we can mitigate against some of these other things by better using biofuels to produce more friendly energy.

Mr WILLIAMS: I ask whether you can expand on that a bit, minister. I noted the establishment of the policy unit separate from ForestrySA and your comment that the Forestry Policy Unit should be about forestry policy per se rather than just with regard to ForestrySA. Can the minister advise whether there has been a change of outcomes from the unit due to the separation from ForestrySA?

The Hon. R.J. McEWEN: In fairness, I would have to say that it is probably too early to make that judgment. Obviously, what I would be looking for is a change of emphasis because now the policy would be more respectful of the needs of all estate owners, whether they be public or private, and perhaps some of the projects would be more downstream, rather than at the front end, which would have been the focus of ForestrySA. But, no, it is probably too soon to say that I am seeing a significant change in emphasis; I think it is only subtle.

However, from an industry point of view, they do now feel more confident to engage separate from the fact that they may have interests of a commercial nature, and they are the two things I was trying to separate. We do not want to feel that the commercial nature of supplying resource would in some way have an impact on what should be broad policy setting. You would expect there to be a subtle change. It is probably too soon to judge that, but I think that, once we start bedding down some of those projects, we will see that.

Mr WILLIAMS: Minister, I refer to page 836. The Auditor-General lists a number of policy objectives of your department 'to assist in achieving South Australia's Strategic Plan'. Has the department ever tracked the additional cost of aligning its actions with the demands of the Strategic Plan and, if so, what would that cost be?

The Hon. R.J. McEWEN: It is not their strategic plan; it is South Australia's Strategic Plan. It is obviously bigger than the state government, but, obviously, the state government has a very significant influence over that. One of the key agencies within the state government will be very much part of developing the plan. So, I would not say, then, that there is a cost in us doing something with someone else. Obviously, we are part of developing and monitoring it over time while those targets are reviewed; that is just the nature of our business.

Mr WILLIAMS: I guess the question is: what cost benefit analysis has been done with regard to the State Strategic Plan? I have noticed that every government publication that comes out—it is not unique to your agency—refers every action to the State Strategic Plan. I am curious to know what cost this has put—certainly within your agency—onto the public sector for just going about its normal duties by having to justify everything it does by aligning it with something that is in the State Strategic Plan.

The Hon. R.J. McEWEN: I think it is actually the reverse. I think: what benefit is it to have a more coordinated across-government focus on those key drivers for the state that are particularly the ones that are driven by the state government? It makes a lot of sense to have one hymn sheet, to have one broad vision for the state, and ensure that we are aligning our resources and our efforts in a way that achieves that. So, you would actually measure that in terms of a benefit, not a cost.

Mr WILLIAMS: Interesting answer, minister. On page 836 the Auditor-General notes that the principal sources for the funding of the department's programs include research grants from industry research corporations. How much of the $86.5 million of employee benefits and costs identified under program 4, Agriculture, Food and Fisheries, on page 835, is derived from this source; that is, what portion of total employee wages is derived from grants? Does your department track the effort and cost involved in sourcing such grants?

The Hon. R.J. McEWEN: The question obviously points to a very important issue, which is that SARDI gathers its revenue from and provides services to a whole range of clients, some of them state, some of them federal, some of them industry bodies, etc. So, of the $60 million-odd that SARDI spends, the customer for about $18 million of that is the state, and the rest of it then is a whole range of others. I could not, just off the top of my head, break that down. If there is around 42 to $45 million of revenue left and how much of that is spent on wages and salaries I would not know. We can get you that answer, but certainly most of it is. It is intellectual endeavour so you would expect a high proportion of that to be individual research scientists and their support staff, but I have not got an exact number. I do not know if somebody wants to guess—come on be brave, put it on the record. No; they will not guess.

Mr WILLIAMS: Back to forestry policy, I refer to page 842 of the Auditor-General's Report. With regard to sustainable forestry, does the government believe that the continuation of plantation forestry in environmentally sensitive areas, such as the Adelaide Hills, remains sustainable in the long term?

The Hon. R.J. McEWEN: In answer to that question I might also refer to page 1044, the South Australian Forestry Corporation, because the shadow minister does make the point that the charter of the corporation is narrow, and I will just quote from that page: maintain plantation forestry for commercial production; encourage and facilitate regionally based economic activities based on forestry; conduct research related to the growing of wood for commercial purposes, etc. The corporation has just reported to me in terms of the Mount Lofty Ranges review of operations 2007, in confidence, but I am certainly happy to share information with the shadow minister.

I should put on the record that part of the reason that I asked for this work to be done was because the shadow minister in the lead-up to the 2006 election indicated that should the Liberal Party win government it would look closely at the Adelaide Hills. I thought that was a valid question and, equally, I felt that a starting point should be the corporation's view of that. Obviously, we would have to roll it out beyond that.

The corporation in its findings to me in the executive summary talks about the lack of economic scale, the lack of suitable available land at affordable prices, infrastructure that limits transport efficiencies, a small customer base without the economies of scale, forest protection issues (especially fire), community perception and population pressures, and relatively high unit costs of production. Obviously what it is saying is that within its charter it is difficult for it to achieve its narrow corporate focus with that investment in those locations.

Does that mean we would be exiting? Not necessarily, but this gets back to the shadow minister's earlier question about the role of the policy unit vis-a-vis the corporation. The corporation says that in terms of its narrow charter it could do much better investing that money in the Green Triangle. It demonstrates on a number of fronts and a number of commercial measures that the Green Triangle is a far better place to produce those timbers for mill gate sales.

We now need to scope that in terms of some broader issues around watershed, recreational activities and other features that the forest estate might provide to a community, but not necessarily be seen as a direct corporate benefit, so not necessarily measured in the same way by ForestrySA, equally noting that on ForestrySA's balance sheet there is a revenue stream because it provides a range of services which need to be paid for.

I will continue that work. I would be happy to make this report available to the shadow minister in confidence. I only say 'in confidence' because there is some material in there of a commercial nature. Obviously, we do not want other parties knowing that level of detail about ForestrySA's operation because from time to time we have to go into the marketplace to sell product in the best commercial manner possible. I will do some more work now in terms of the broader question, the starting point being the ForestrySA report 'Mount Lofty Ranges Review of Operations 2007'.

Mr WILLIAMS: I am delighted that the minister has been doing that work and following up on what I thought was a good bit of policy I put forward on behalf of the Liberal Party at the last state election. More recent work I have been doing indicates that there is another issue, to which (I suspect) forestry operations may be contributing; that is, the contamination of water by chemicals used in the forestry sector—which might be something that was not looked at in that report.

I refer to page 825. The Auditor-General raised the issue of the potential for invalid expenditure processes within the department's accounting systems. It notes that the department considers the risk to be low. On what basis does the department make that assessment?

The Hon. R.J. McEWEN: As part of Treasury Instruction 8, for very small amounts of money you can commit verbally. We did not think it was a risk because we could not find anywhere we had committed any expenditure verbally. It is not the normal practice. If you were in the practice of doing that there is a slight risk. It is not our practice, therefore we did not believe it was a risk. Under Treasury Instruction 8 it is something that can be done under some circumstances.

Progress reported; committee to sit again.

[Sitting suspended from 13:05 to 14:00]

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