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House of Assembly - Fifty-First Parliament, Third Session (51-3)
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Auditor-General's Report

AUDITOR-GENERAL'S REPORT

In committee.

(Continued from 11 November 2008. Page 820.)

Mrs REDMOND: Although I am tempted to commence my questioning on the aspect of multicultural affairs, I will resist that temptation. I will begin my questioning at Volume I, page 90, on the Residential Tenancies Fund and the Office of Consumer and Business Affairs. Near the bottom of page 90, in the area dealing with the Office of Consumer and Business Affairs, it states:

The audit review identified that in a significant number of instances the office had not:

issued reminder notices within the timeframes...

issued penalty notices within the timeframes...

The explanation then goes on to state that the chief executive acknowledged the backlog and:

...that additional contract staff and use of overtime would be used to ensure all notices were up to date by 31 March 2008.

I assumed that, since this report was to 30 June, we would be able to find out whether or not the notices were up to date. The second part of the question is: given that it needed overtime and additional contract staff to get them up to date, is there a mechanism put in place to the satisfaction of the Auditor-General to keep them up to date?

The CHAIR: Before I invite the Attorney to conform with standing orders, I will indicate to the member for Heysen that I apologise for being late. My Telstra (supposedly) synchronised clock still does not say that it is 12 o'clock. There is provision in standing orders for somebody who is incapacitated to sit and I am very happy, if it is causing you difficulty, for you to sit.

The Hon. M.J. ATKINSON: The Residential Tenancies Tribunal falls within the portfolio of minister Gago.

Mrs REDMOND: I was actually asking about the Office of Consumer and Business Affairs, which appears in the heading under Auditor-General on page 90.

The CHAIR: It is part of the Attorney-General's Department, I understand, but consumer affairs are the responsibility of minister Gago. I was meaning to alert you to that earlier.

Mrs REDMOND: Page 92 of Volume I, the very last paragraph on the page, under 'Balance Sheet', indicates:

Total liabilities have increased by $9.6 million to $46.8 million due mainly to the recognition of a liability for lease incentives provided pursuant to the renewed operating lease for office accommodation.

That is quite a significant increase of more than 25 per cent. I would like an explanation as to what that paragraph means at the very bottom of page 92.

The Hon. M.J. ATKINSON: The assets and liabilities have increased. That is the short answer. The long answer is that lease incentive assets and liabilities increased in 2007-08 owing to renegotiation of the lease for office space at 45 Pirie Street. There were negotiations by DTEI, building management and AGD facilities management and development. The building owner offered a lease incentive of $6.8 million to the department. The incentive will be taken mainly as a contribution towards fit-out costs of the building. The balance will be taken as a rent-free period. The lease incentive asset and liability has been split in the financial statements between a current and non-current portion, reflecting the timing of the benefits received and costs owing.

As part of this, 45 Pirie Street will be restacked so that the arrangement of the Crown Solicitor's Office, equal opportunity, the Attorney-General's office, corporate services and the offices of ministers Zollo and Rankine will be more rational and efficient. However, that is not something that the member for Heysen should concern herself with, at least until 2014.

Mrs REDMOND: I will be happy to concern myself with it well before 2014—and, presumably, by March 2010. The Attorney responded by referring to this lease incentive. As I understand a lease incentive, it is a benefit that we are getting. That is why I am puzzled as to why the liabilities have increased by $9.6 million to $46.8 million.

What constitutes a liability for a lease incentive, if what we are getting is a benefit? As I understand the Attorney-General's answer, the landlord who owns the building is happy to have the Attorney-General's Department in there and, to that end, they will provide incentives, including fit-out and so on. I understand that. So, if you are getting that benefit, why on the books does that then come up—or does whatever come up—as a liability, which is increasing at a fairly dramatic rate?

The Hon. M.J. ATKINSON: I am told that, owing to very technical accounting, part of this is regarded as a liability over the full life of the lease, and I shall take the question on notice. Full marks to the member for Heysen.

Mrs REDMOND: No doubt the minister will be pleased to know that I have some more questions about leasing. I will continue with those now so that, if he wants, the Attorney can take them all on notice. That will be fine. At the bottom of page 121 of Volume I under 'Cash Flow Reconciliation', a series of things are listed under the heading 'Change in Assets and Liabilities'. I note that the third one down is 'Increase (Decrease) in lease incentive liability', which seems to indicate to me that whereas in 2007 there was a decrease in lease incentive liability of $203,000, this year the anticipated increase in lease incentive liability is over $6 million. Can I get an explanation as to what has caused that?

The Hon. M.J. ATKINSON: Alas, it is the same issue.

Mrs REDMOND: Very technical accounting?

The Hon. M.J. ATKINSON: Yes. If it helps, provision was made for increase/decrease in lease incentive liability, and there is a corresponding provision for increase in lease incentive receivable treated as an asset. Why it is treated that way by the accountants, I shall tell the member for Heysen in the fullness of time.

Mrs REDMOND: I have only one more question on these leases for the Attorney-General's Department and it relates to item 27 (over the page) under the heading 'Commitments'. The total operating lease commitments seem to have increased by more than 2½ from $29,012,000 last year to nearly $75 million this year. Is there an explanation in terms of what is happening within the department and why there is that significant increase?

The Hon. M.J. ATKINSON: We shall take that question on notice also, but my intuition is that it is the result of Forensic Science SA, the Office for the Status of Women and the Office for Volunteers coming into the portfolio.

Mrs REDMOND: I want to move to some questions concerning the Office of the Public Trustee. I particularly want to look at a series of things, starting at about page 142 of Volume I. Halfway down page 142 is the heading 'Trust Operations'. Audit review identified a number of matters in relation to trust operations. The main matters raised with the Public Trustee were instances where the internal control reports presented to the audit committee did not accurately reflect the underlying data.

I will go through each of these in order, but, if one goes down to the dot point below where the Public Trustee has responded, one will see that the Public Trustee advised that staff turnover in key positions during the year contributed to the situation. Is the minister satisfied that that is a complete enough answer to problems with internal control reports, and what processes and procedures are put in place to ensure that, regardless of what staff changes might occur in an organisation such as the Public Trustee (the main function of which, really, is looking after vast amounts of money for people who cannot look after it themselves), internal control reports do accurately reflect the underlying data?

The Hon. M.J. ATKINSON: The honourable member should raise thine eyes aloft. If she does she will see in the paragraph immediately above that, under 'Corporate Operations', it states:

The Public Trustee's response to the matters raised was considered satisfactory.

Mrs REDMOND: I have some difficulty with simply accepting that, given some of the other comments made by the Auditor-General about the Public Trustee's Office do tend to be less than specific. For instance, the second dot point under 'Trust operations' states:

a number of life tenant properties which were not directly covered by their own insurance policy.

The response is essentially, 'There is a blanket insurance policy, but there will be a change in business processes in order to seek specific direction on insurance of client property.' I just wonder whether that is a sufficient response. Is the minister saying on the record that he is satisfied that, provided the Auditor-General says in that general statement at the top that the Public Trustee's response to the matters raised was considered satisfactory, one should not be asking anything about the Public Trustee or its operations?

The Hon. M.J. ATKINSON: The member for Heysen puts words in my mouth. I am not saying that henceforth she is prohibited from asking questions about the Public Trustee. There is an upper house select committee looking at the Public Trustee. Criticism of the Public Trustee is made regularly in the other place by the Hon. Ann Bressington. The Public Trustee is the subject of scrutiny and vivid questioning and coverage by the Today Tonight program on Channel 7. All I know is that the Auditor-General has given an unqualified report on the Public Trustee, and the Auditor-General himself has said that 'the Public Trustee's response to the matters raised was considered satisfactory'. Unless I am given a proper substratum of fact to go behind the Auditor-General's opinion, I will not be doing that. I have long been a supporter of the Office of the Auditor-General, and the member for Heysen will recall the Auditor-General's unqualified support of me during the Crown Solicitor's Trust Account matter—a support which has been vindicated by events and the effluxion of time.

Mrs REDMOND: I note the Attorney-General's willingness to spend time talking about things which are entirely irrelevant to the consideration of the Auditor-General's Report of his office. I refer to the bottom of page 142 and page 143 and information technology. I may be wrong in my assessment of it, but there is an IT architecture project by an external consultant to look at the whole IT—

The Hon. M.J. Atkinson: What would you call it?

Mrs REDMOND: I would say, 'Let us look at IT processes.' An external consultant came in and did a study of the IT processes of the Public Trustee. It made certain findings which are delineated in the five dot points at the top of page 143. It clearly identified a range of areas where they needed to pay considerable attention to their IT activities. Page 143 states:

There was a lack of strategic focus within IT activities [and] an absence of a formalised ICT strategy document.

ICT policies and methodologies tended to be out of date or limited in scope.

There existed a lack of consistency in production information technologies for network management, application, database and operating systems software and hardware, many of which were older versions which had not been updated for a number of years.

Third party services contract and performance management were not formally carried out.

There was a limited business continuity planning and disaster recovery planning.

I would take some of those with a grain of salt to the extent that an external consultant coming in to assess ICT will invariably find things that need money spent on them, preferably through his consultancy or others in the same game. There is no doubt in my mind that there is a tendency for consultants examining systems to find more problems than necessarily exist, just because they are old.

Audit then goes on to say that it followed up these matters during the year and certain actions had been taken. Underneath that it says that 'Key matters from the audit review raised with the Public Trustee were the need to develop an annual ICT operational plan and, in line with SA government mandated ICT planning framework to support the ICT strategic plan'. The question is that the only response seems to be that it is transitioning to what is called 'a more mature ICT strategic planning framework', but it appears to me to indicate that the Public Trustee is out of kilter with the requirements of the government's own Strategic Plan in the failure to address these issues within time frames that should have been in place before this external report was even done. Is that not the case?

The Hon. M.J. ATKINSON: I am sorry, Madam Chair, if my East Turkistani hat was not removed when I answered an earlier question. A core business information system realisation working party has been established, with terms of reference approved by the ICT governance forum and the Public Trustee. Workshops have been held with staff to identify desired functionality improvements, and these were then prioritised by the IT governance forum. Work is continuing on the identified priorities.

For the information of the member for Heysen, rapid achievements have been made to improve ICT technology, resources, processes and governance. These include: comprehensive ICT planning and security risk management plans developed; effective governance model introduced; obsolete server licence risk resolved; 60 PCs replaced with a new standard operating environment; all printers multi-function devices replaced; software licence compliance established; desk-top software upgrades planned; ICT contract management procedures introduced; leading edge ICT infrastructure upgrade (due for completion this month); well-managed ICT funding model; comprehensive training for ICT team to improve skilled resources available; and business continuity risk minimisation and contingency planning developed or in progress.

The member for Heysen may recall that, early in the life of the government, the Public Trustee had to abandon a particular IT system because the proprietor of that system was going out of business. It also has: full-time business analysts appointed to ensure business needs are identified, analysed and prioritised within the IT governance framework; adopted Attorney-General's Department ICT policies where applicable; all capital and operating expenditure planned and self-funded; and a pledge to reach a mature ICT environment within two years. I think that is clear.

Mrs REDMOND: The bottom of page 143 refers to the operation of an electronic funds transfer facility. The types of transactions using that within the Public Trustee are, indeed, significant. They include: recurring payments to clients; periodic payments to vendors against vouchers and invoices presented on behalf of clients; special payments to clients; and telegraphic transfers to overseas client accounts or intermediary bank accounts.

There is no doubt that significant amounts of money are going out via electronic funds transfers. I am concerned about the possibility of fraud. The report goes on to state:

It was recommended—

that is, by the Auditor-General, I assume—

that Public Trustee review the circumstances and practice of modification to the electronic funds transfer file to consider alternative practices or modifications to systems to eliminate the need for manual alteration.

The Public Trustee responded that this matter is being assessed within the context of improving on existing controls, involving considerations of data encryption.

The question relates back to the fact that we have already had an external consultant, referred to on the previous page, who came in in 2007; so, it seems that a separate issue has arisen, not covered by the external consultant. Who in the Public Trustee's office has the skills and wherewithal to figure out what is needed to ensure the safety of electronic funds transfer? It seems to me—and I know from recent experience in relation to a hospital board on which I serve—that there have been cases of electronic funds transfers being abused to the detriment of organisations or those entitled to receive the money. I am puzzled about the timing of how this electronic funds transfer will be looked at, who will look at it, and when it will be addressed.

The Hon. M.J. ATKINSON: I know that the member for Heysen has long-standing anxiety about electronic funds transfer. She will remember that, during the last period of Liberal misrule in this state, in the Public Trustee—this is under the attorney-general of blessed memory, the Hon. K.T. Griffin—$A1 million was wired to a bank and went into the wrong account and disappeared in the former Soviet Republic of Georgia. So, yes, the member for Heysen has Georgia on her mind. I can tell you—

Members interjecting:

The Hon. M.J. ATKINSON: Both suits were made in Hoi An. The Public Trustee is presently looking at how best to allow the payment date amendment but not allow access to any other part of the electronic funds transfer file that may include data encryption. So, the short answer to the member for Heysen's question is that, under the Rann Labor government, we have not wired $1 million in Public Trustee money to the wrong account in Georgia.

Mrs REDMOND: Is the Attorney suggesting that no money has been lost from the Public Trustee in any way since the Rann government came to power? This is on the same page and is a supplementary question to the previous question. I will move on, because if we keep on talking I will not get in another question.

The CHAIR: The time has expired. I now call on the Minister for Industrial Relations, the Minister for Employment, Training and Further Education, the Minister for Science and Information Economy, the Minister for Youth and the Minister for Volunteers. We will do employment first.

Mr PISONI: My question refers to Part B, Volume II, page 503, 'Financial Management Reporting'. The report reveals that in 2005-06 they recommended that the department develop effective management reporting. This ensures effective management decision making. To date this has not been completed, with the department indicating that it will not be completed until three years after the Auditor's recommendation. Minister, can you advise why the process for implementing the Auditor's 2005-06 recommendation has taken so long?

The Hon. P. CAICA: There have certainly been rules covering the processes and requirements for, amongst other things, budget adjustments, but they are, of course, subject to variations as we move forward, although not so much variations but more refinements as we go forward. During 2007-08, priority was given to the review and update of the business rules that guide the implementation of the cost, volume and price budget methodology because of its critical importance to the financial business planning and budget development strategies for DFEEST.

Contrary to the assertions of the member, work has commenced on the development of a broader set of policies and procedures covering all those particular processes that are continuing to be, as we go forward, subject to further refinement.

Mr PISONI: They are not my assertions; I am simply quoting the Auditor-General. I refer to page 504, 'Expenditure'. Bearing in mind the minister's answer to the last question, the Auditor-General reveals constant non-compliance with basic internal controls such as delegated authorities being disregarded, limited accuracy of invoices and even such things as invoices being drawn after expenditure by way of retrospective invoicing of purchase orders, for example, and manipulation to avoid limit controls.

One of those manipulations relates to the department's policy. The Auditor-General reports here that department policy requires that, for individual purchases, credit card transactions must not exceed $2,200 unless previously authorised, but the audit found instances where transactions were split to ensure that they were within the limit. The minister has been in this portfolio for 2½ years: is this a culture that has developed under his leadership?

The Hon. P. CAICA: That is a very interesting question, of course, and also one that goes beyond the information within the Auditor-General's Report. What I would say to the member for Unley is that, in fact, what I have done in my 2½ years in this position is to ensure that the culture that existed is being changed through various processes. I will deal with the matters raised by the member in, I hope, the order that he raised those issues.

On the question of payment delegations, the introduction in 2008 of the Scanning Workflow Accounts Payable (SWAP) system has significantly reduced the risk of unauthorised invoices being paid. This system automates the accounts payment process from receipt of invoice through to cheque generation. The insertion of the authorising officer's position title is a mandatory requirement, and an electronic trail of processing each invoice is a feature, including the authorising officer's name.

I could go on about the particular process, but what I think I will say is that the existence of this new system ,functionally, is considered to provide sufficient risk management in regard to the use of appropriate payment delegations, particularly when it is complemented by internal audit reviews of payments. It is also worth noting that the internal audit that we are involved in supports the establishment of the SWAP system and the associated controls.

On the matter raised by the member in relation to the accuracy of accounts payable, all users of the SWAP system that I mentioned earlier are responsible for ensuring that the information on the scanned image of the invoice matches the data that is input manually to facilitate payment. The system forces these checks and cannot process details if, indeed, they are incorrect, which is a significant improvement on the manual payment process. Invoices are authorised into the system directly to Masterpiece, from which the payment is generated. Again, I could go into more detail, but I think that actually answers the question. To reinforce this point, I am advised that this was introduced in April, after the audit was undertaken.

On the final matter that was raised by the member, and that is the purchase cards and unauthorised transactions, a reminder has been sent to cardholders and supervisors regarding transaction splitting. A system report has been established which extracts transactions that may have been split into two payments exceeding $2,200, and this report is reviewed regularly by the purchase card system administrator. Of course, I would remind the member and the committee of the Auditor-General's own words:

In my opinion, the controls exercised by the Department of Further Education, Employment, Science and Technology in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities, except for the matters raised in relation to financial management reporting, risk management, expenditure, payroll and human resources, and contract management framework, as outlined under ‘Communication of Audit Matters’, are sufficient to provide reasonable assurance that the financial transactions of the Department of Further Education, Employment, Science and Technology have been conducted properly and in accordance with law.

Mr PISONI: On the same reference, the auditor also said that invoices were being paid more than 30 days after the invoice date. Considering the outcome of the summit for small businesses at a federal level at which the federal government promised to pay small business invoices in a timely manner, is the minister able to assure this house that accounts that are billed to his department will, in fact, be paid within the standard time of 30 days or the terms of sale of the suppliers?

The Hon. P. CAICA: Of course, as a department, we will continue to strive to meet the benchmarks set by Treasury and government in this particular area. We have not always met those requirements, but we are confident that the new procedures we have put in place will go a long way to ensuring that we do so. I accept, and I think that was an assertion, that there is a responsibility to meet those time frames, and that is what we are committed to do.

The CHAIR: Now we are moving to science. The member for Morphett.

Dr McFETRIDGE: I refer to the Auditor-General's Report, Part B Volume II, at pages 507 and 523. Some of these questions are of a technical nature so, if the minister cannot answer them now, I know he will get back to me. The Auditor-General states that expenses increased by $35 million, mainly due to an increase in grants and subsidies of $25 million resulting from an increase in grants for science and technology programs and grants provided for capital purposes. Can the minister provide a list of what the grants are and how much each grant program increased in comparison to last year?

The Hon. P. CAICA: Commonwealth government grants totalled $101 million in 2007, rising to $106 million in 2008, which obviously is a 5 per cent increase. Of course, I know that the member for Morphett and I would be at one in that whatever money we can extract from the commonwealth government in the form of grants we have a bipartisan approach to increasing that to whatever level we can.

Dr McFETRIDGE: You always ask for more.

The Hon. P. CAICA: That is right. In fact, if they say yes straight away, it only means you have not asked for enough the first time. In relation to the specific question about a briefing on the increase in the grants and subsidies, I can inform the member and the house that those very important programs increased from $16,980,000 to $19,151,000 during the time under audit; and vocational education and training programs increased from $11,331,000 in 2007 to $12,782,000 for the period under reporting. The science and technology programs (and I know the member for Morphett has a particular interest in this area) increased from $16,710,000 up to $29,683,000 during that time.

The member accompanied me to the grand opening of the veterinary science school at Gilles Plains, but that was in another reporting period. Certainly, there is the new veterinary science school at the Roseworthy campus, to which I hope he will be able to accompany me when I open it in the distant future. There are other increases that relate to tertiary student transport concessions, the skill centre programs and other specific grants.

Dr McFETRIDGE: Same reference, but page 513. Expenses for employee benefits increased between 2007 and 2008 by $231,000. How many more employees did science and innovation obtain for this increase in expenditure?

The Hon. P. CAICA: I thank the honourable member for his question. I do not have that exact information with me, but I undertake to get back to the honourable member and the committee with the specific circumstances around employee levels as they relate to the increase in wages during that period of time.

Dr McFETRIDGE: On the same reference: supplies and services have dropped by $267,000 for science and innovation between 2007 and 2008. Why is this?

The Hon. P. CAICA: I do not have the specific information required in regard to strategic procurement. However, I make the point that as an organisation—and of course the Directorate of Science and Technology is a compartment within the broader DFEEST umbrella—we needed to get the financial aspects of our house in order; I make no bones about that, and I have spoken about it in estimates. One of those aspects was to ensure, amongst other things, that appropriate checks and balances were in place with the purchase of goods and services—and, in fact, I think we have a far better system that approaches the strategic procurement of goods and services than we had prior to my becoming the minister.

Dr McFETRIDGE: I have a similar type of question, minister, on the same reference, page 513; and if you do not have the information I would be more than happy to receive it later. It is good to see the position reported there that the grants and subsidies between 2007 and 2008 increased by $4,198,000. What programs benefited from this increase?

The Hon. P. CAICA: I think that was generally covered in my answer to a previous question on grants and subsidies. In relation to the science and technology programs in which the member for Morphett is particularly interested I did mention a $13 million increase, and a significant amount of that relates to the grant of $12.07 million and a higher education capital-related grant of $5 million paid to the University of Adelaide to enable it to establish the new veterinary science school at Roseworthy campus. The remaining increase in grants expenditure was due to higher expenditure on the following programs, as I mentioned: the commonwealth vocational, education and training programs; tertiary student concessions for transport; intragovernment transfer; skills centre payments; employment programs, that also include labour market adjustment programs and public sector initiatives; and finally the seafood training program.

However, I understand that the thrust of the member's question was about the programs that specifically relate to the science and technology programs. There would be a variety of those in there, and I will come back to the honourable member and the committee with details of specific programs within that broader heading of science and technology.

The CHAIR: We are now on industrial relations.

Dr McFETRIDGE: I refer to the Auditor-General's Report Part C, State Finances and Related Matters, and employee expenses by type. How many EBs are still to be settled? The teachers' is underway at the moment, as is the firefighters' and a couple of others, and they need to be dealt with in the next few months.

The Hon. P. CAICA: I will do my best to answer this question but it is not a question that relates to the Auditor-General's Report. I know that the tricky member for Morphett is trying to do exactly that. Enterprise bargaining, by its very nature, is cyclical and, as an agreement expires, efforts are made to strike a new agreement. He is quite right in highlighting that we have the teachers' at the moment, the firefighters', and we still have executive levels to cover and, although that will not necessarily be the subject of an enterprise bargaining arrangement, it will still be the subject of negotiation.

I guess the other key one is that we have the Public Service Association around October next year. Even though it is not part of what ought be the specific questioning that relates to the Auditor-General's Report, I will undertake, as I always do, to give the member a briefing on the rounds of enterprise bargaining that are to come up over the next 12-month period.

Dr McFETRIDGE: I appreciate the minister's flexibility and I note that, yesterday, the Treasurer was quite happy to respond to questions on WorkCover, so perhaps the minister might do that, too. That is the next question, and I refer to Part C, page 45 of the Auditor-General's Report under 9.3.2 Public Financial Corporations Financial Assets. The Funds SA investments carry a footnote (b) stating that Funds SA's investments exclude WorkCover. Can the minister tell the house how much is invested and what has been the effect on returns as a result of the current global financial crisis?

The Hon. P. CAICA: Again, this is not a question that relates to the Auditor-General's Report.

The CHAIR: It is after the period of the report.

The Hon. P. CAICA: Not only that, WorkCover is not subject to the Auditor-General's Report, although I know that—

The CHAIR: Until 1 July.

The Hon. P. CAICA: —the honourable member is aware of the legislative changes that will make WorkCover accounts and the audit report subject to the Auditor-General's Report. In relation to the specific question raised, I presume that the member is talking about investments by the WorkCover Corporation.

Dr McFETRIDGE: Yes.

The Hon. P. CAICA: As I have said previously, you would have to have been lying under a rock not to know that we are in the most extraordinary global financial circumstances that anyone in this house has ever seen, except maybe for the Hon. Graham Gunn because he might have been around during the Great Depression. I am not attempting to be flippant but I do not have those specific figures. I have told you previously that it depends on what point at what time of any day with respect to what might be the impact of most particular investments.

I can give you a history, if you like, of the processes by which WorkCover has made its investments over an extended period of time (a 20-year history), but we look at three-year reporting cycles and they have been reasonable over that period of time. It is also safe to say that, like any other investment, whether under personal control or corporate control, government or otherwise, they will be impacted upon by this most unfortunate global circumstance.

Dr McFETRIDGE: I refer to page 46, the same reference. I have a number of questions on WorkCover but I do not think the minister wants to answer them at the moment, and that is understandable. I was concerned about my previous question yesterday. The Treasurer said:

I can confidently say to you that, between the release of that report—

he is talking about the annual report of WorkCover just released—

and the date in that report to the end of September, or the end of October...it is worse, because the situation has deteriorated.

It was almost $1 billion at the end of June. I would be interested to know what the unfunded liability is now?

The Hon. P. CAICA: Again, I do not have those figures. The unfunded liability is something that is done and audited over a particular year. I want to make the very important point that we have what is essentially an unfunded liability within WorkCover—we are all aware of that—but it needs to be looked at in two components: the claims liability component and the investment component. Legislative change was made in relation to bringing down—we certainly expect—the claims component of the unfunded liability.

I think this is vitally important, because it would be my expectation that, whilst those claims or that component of the liability will see a southward trend given the legislative change—and we spoke about that yesterday—we still have some time to see the effect of that. The other major component that will contribute to the liability is our ability to make money through investments. So, the point that I want to make clear is that, as we go further down the track—and I know that you will do what it is that you have to do, and I accept that, and I always have—we, in this house and, indeed, the broader community, need to be very mindful that there are a couple of components with respect to working out the unfunded liability.

Given the circumstances that we are being confronted with at the local, national and, indeed, the global level relating to investments and finance, we expect that we will not get the return that any of us would like on our investments, and that will have a contributing impact upon the unfunded liability, irrespective of the downward trend that we say will occur in regard to the claims component of the unfunded liability.

Dr McFETRIDGE: I have a number of questions on WorkCover relating to the comments made by the Auditor-General. If the minister wants me to ask the questions, I am happy to, and he can then answer them in the way that he likes. I have one question about which I would like some indication of the minister's attitude. When the Auditor-General takes over the audit of WorkCover, will he look at the way the case management contract has been managed and the way that a sole claims agent was appointed and allowed to put in a late tender?

The Hon. P. CAICA: I think it will ultimately be at the determination of the Auditor-General as to what he looks at. Not being an auditor, I suggest that he would look at all aspects of what constitutes the financial statements that will be under audit by the Auditor-General. The Auditor-General will determine what it is that he audits in relation to that particular matter, but I expect that it will be the full scope of the financial statements and how we arrive at those statements. Again, that is a question to ask the Auditor-General.

Dr McFETRIDGE: I thank the minister for his honest opinions. I look forward to next year's Auditor-General's Report, because I guarantee there will not be much on anything else other than WorkCover. I would like to thank the minister and his advisers.

The Hon. P. CAICA: I, too, would like to thank opposition members for the manner in which they have conducted themselves during this examination. I also thank my advisers for their appearance here today.

The CHAIR: Thank you, and I thank the member for Morphett especially for making it easier for us. That concludes the examination of the Auditor-General's Report.


[Sitting suspended from 12:59 to 14:00]


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