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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-06-18 Daily Xml
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Auditor-General's Report

AUDITOR-GENERAL'S REPORT

The Hon. P.F. CONLON (Elder—Minister for Transport, Minister for Infrastructure, Minister for Energy) (15:55): I move:

That standing orders be and remain so far suspended as to enable the Supplementary Report of the Auditor-General entitled Agency Audit Reports and a Matter of Specific Audit Comment—June 2009, to be referred to a committee of the whole house and for the Minister for Transport, Minister for Infrastructure and Minister for Energy to be examined on matters contained in the report for 30 minutes.

Motion carried.

In committee.

The CHAIR: I remind everybody that this is not estimates. It is the standard committee procedure, so you must stand to ask and answer questions. It is imperative that questions relate to a line of this report of the Auditor-General.

Dr McFETRIDGE: I refer to the whole of the report. Does the minister expect this year's audit to be on time and unqualified and, if not, why not?

The Hon. P.F. CONLON: Do I expect this year's audit to be on time and unqualified? I would hope both of those things but—

The Hon. M.J. Atkinson: It'd be nice.

The Hon. P.F. CONLON: That would be nice. Can I assure the member that, unlike the previous government, we wait for the opinion of the Auditor-General. We do not seek to direct the Auditor-General as to what his/her opinion should be. Can I also say to the member, if he is concerned about Auditor-General's reports and whether they are qualified or make criticisms, I point out that what has occurred in the Department for Transport, Energy and Infrastructure is extremely mild in comparison to some earlier Auditor-General's reports on other matters.

The Hon. M.J. Atkinson: Patrick, it's not like publicans and sinners.

The Hon. P.F. CONLON: No. I might refer the learned member to the Auditor-General's Report on the Hindmarsh soccer stadium just so that we understand it in a proper comparison between this fear of a qualified audit and what a bad audit report really does look like.

That report, you might remember, had headings in it like 'In a Nutshell What Went Wrong', 'The Undermining of the Public Works Committee Process', 'Other Major Failures of Due Diligence' and 'Inadequate Feasibility and Cost Benefit Analysis', and there was a section about the tourism minister called 'Mrs Hall: A Conflict of Interest and Duty'.

I think it is sufficient to say that it was completely scathing of the processes of the previous government in regard to the soccer stadium. It was reported in the media as being unprecedented—I think was the term they used. They said it was damning. I think eventually it cost a few people their jobs, but that is when you should be concerned. The problem was that it was not a lone occurrence for the previous government in terms of audit reports.

I refer to the Auditor-General's supplementary report—like this one—on the Electricity Businesses Disposal Process. It did not say that there was a problem with reconciliations. It said quite extraordinary things. It said that the Treasurer, as a matter of law, contract out of an obligation to ensure procedural fairness. It said that ERSU's (which was the unit set up) arrangements had 'significantly diluted the accountability obligations normally required of advisers'. It said that the government was at significant risk in terms of price because of them. It said that there was no evidence that the process was controlled.

I will remind members that we are talking about some consultants that were paid $100 million. It is quite a lot of money. It pales with the final failure of reconciliation, which I think was in the order of $5,000. I do not want to bore the house with it, but basically it is an absolutely scathing Auditor-General's Report on the processes for the sale of billions of dollars worth of assets and the payment of $100 million to some consultants.

There was another report on the engagement of advisers; another one on relevant long-term leases and another supplementary report on electricity. So, I just want to make the point—before we get all het up about a qualified audit because of some original problems with the software system making reconciliations which were eventually traced back—that, as I understand it, not a single cent was lost to the taxpayer. That is not what it was about. As I understand it—and I will check with the advisers—in the end, we found $5,000 that was in the wrong column; it should have been somewhere else. That is the extent of the problems, at least in a dollar sense, identified in the audit.

I hope that the next audit will be on time and will be unqualified. If it is not on time or if there is going to be a qualification, what I am not going to do—if I can give this undertaking to the house—is institute legal proceedings against the Auditor-General, as we saw in regard to one of those reports, with actions taken by the former ministers in your government. So, I hope it is on time, but what I will say is that we will respect the role, the position and the opinion of the Auditor-General. If the Auditor-General decides that it should not be on time or that it should be qualified, that is what he will decide. What I will say is that I am absolutely confident that I will never get a report that looks anything like the ones you have under your government.

Dr McFETRIDGE: It was not under my government. I was not there. Things could have been done better, but that is just life. We will move on. We should look at the second page of the Auditor-General's letter; it is pretty interesting. Page 38 of the Auditor-General's Report states:

It is audit's view that the breakdown in controls over reconciliation procedures and other areas exposed the department to the risk of:

loss or misappropriation of funds

inaccurate processing and reporting of transactions

not processing transactions in accordance with department policy

Minister, has anyone been charged for driving an unregistered or uninsured vehicle without a licence due to the SAPOL computer system not matching with the TRUMP system?

The Hon. P.F. CONLON: That is an interesting question, given that the Auditor-General's Report does not say anything of the kind. In fact, that is the sort of question that we say is slightly out of left field, or no field at all. The Auditor-General, for the benefit of the member for Morphett, has gone into great detail to identify issues with the operation of the TRUMP system.

Dr McFetridge interjecting:

The Hon. P.F. CONLON: Sorry? You want to interrupt during your half hour—be my guest. There was a reference there to being exposed to some risks, and you asked whether someone was therefore falsely charged.

Dr McFetridge interjecting:

The Hon. P.F. CONLON: The detail is very considerable. What it shows is that some of what the Auditor-General identified as failings concerned the reconciliation of moneys. Can I just say that, having gone into that much detail—it is a bizarre question, anyway—one would assume that that was not the case. What I would really like the member for Morphett to do is actually refer to something that is contained in the report and not some sort of invention of his own. There is plenty of matter here to talk about. I am quite happy to talk about that, but you cannot just invent matters that have not been raised by the Auditor-General. I am utterly unaware of any circumstances that you suggest. None of my officers indicate that they are aware of any such circumstance. In short, it is yet another McFetridge special—a pure invention.

Dr McFetridge: We'll wait and see about that.

The Hon. P.F. CONLON: We'll wait and see, will we? Don't you think that, if someone was wrongly charged, they would have defended it? If you know of someone, we are quite happy to look at the circumstances, but it is not contained in the Auditor-General's Report.

What the Auditor-General did identify were risks, but I have to point out that he has not identified that any of those risks were realised; that is, the system, he says, exposed the department to risk, but he does not say that the risks were realised. There is no indication that the taxpayer has lost a cent out of it, and I have no indication that someone, as a result of this, was wrongly charged with driving an unregistered vehicle. I would have thought that, if a person was wrongly charged with driving an unregistered vehicle, they would probably say, 'Well, hang on, my vehicle is registered.' If you have that evidence, please be my guest. I suspect that if something like that did occur, we will see.

Dr McFetridge: It's sorted.

The Hon. P.F. CONLON: It's all sorted?

Dr McFetridge interjecting:

The Hon. P.F. CONLON: All right. I refer you to Madam Chair's suggestion that you confine yourselves to matters contained herein. None of my officers are aware of the issue you have suggested. If you believe it is there, you can explain it to me.

Dr McFETRIDGE: Same reference. The Auditor-General referred to inaccurate processing and reporting of transactions. Are all registration documents now being processed accurately? Are people still being given registration documents where the third party insurance and emergency services levy have been charged but not the registration fee?

I have copies of documents here, where the total fee was $437, but what was charged was the $265 for everything but the registration fee; and there is a receipt for $265 here. There is another receipt here for $33 for a trailer, but a charge of only $6 for the admin fee. There is another case here where a fellow paid $37; the receipt was for $26. When he paid the total fee of $37, the person at the Registrar of Motor Vehicles wrote it on there, but there was no further record, no official receipt was issued.

The Hon. P.F. CONLON: Yes. You refer to matters that were dealt with in this chamber some considerable time ago. There is no doubt that there was much discussion about some original teething issues with the introduction of the TRUMP system. I will point out two things. There was an allegation of somebody being wrongly charged, and now we have receipts that do not have the right figures. I come back again: it is a repeated form of behaviour of this member to raise matters that have no substance. Oh yes, the Legionnaires' disease in the trams. Does everyone remember that one? The toxic black substance, which turned out to be carbon. A good proportion of the honourable member is made of carbon, but, apparently, in this case it was a toxic disease.

There is no doubt—and it has been canvassed at some length—that the TRUMP system had a number of teething problems. I point out that the matters that were raised by the Auditor-General were also matters that occurred at the start-up of the TRUMP system. I would point out the difference between the degree of those problems and the difficulty seen in other states at the commencement of these new systems. I think WA went into complete gridlock for a fortnight with the introduction of its new system. We had some teething problems; I am happy to say they were much smaller. I regret that people may have been incorrectly billed. It is always very frustrating when a document turns out to be inaccurate. It has been deeply frustrating for a number of people on that side when documents turn out to be just not accurate but, yet again, complete inventions.

Dr McFetridge interjecting:

The Hon. P.F. CONLON: You can ask another question in a moment. I must say, though, that I am starting to wilt; the sweat is breaking out under the grilling. There is absolutely nothing new in what you have raised. If you want me to confess that there were teething problems with the start-up of the TRUMP system—

Dr McFetridge interjecting:

The Hon. P.F. CONLON: You can ask another question in a minute; you've got another 16 minutes. Yes, there were teething problems. Were they to the extent that we have seen in other states? No, not at all. Do we wish it had not happened at all? Yes. Do we regret any inconvenience that it caused people? Yes, but, you always take a risk when you start new and complex systems. As a result of the system, our software now has a greatly increased functionality for people, which has seen some benefits that I can go into, if you like.

Do we wish there had not been teething problems? Yes. Is the way to avoid teething problems with a new system not to install it, which, of course, was the approach of the previous government, which underinvested everywhere? Did things go wrong? Yes. Were they as bad as in other places? No. Do we regret them? Yes. I am always happy to come in and front up to my responsibilities in that regard.

Dr McFETRIDGE: Increased functionality—does that mean that it is fixed? I don't know. I refer to page 105 of the Auditor-General 's Report, which states:

Audit found that, in relation to TRUMPS, excessive privileges had been granted to personnel which exceeded access necessary to perform their jobs. This provided the possibility for users to perform unauthorised transactions, to compromise the integrity of production data and change confidential data on the system.

Can the minister guarantee that no personnel compromised the department due to being granted excessive privileges which exceeded the access necessary to perform their jobs?

The Hon. P.F. CONLON: If the learned member reads the preceding introduction, from memory (I am not looking at it), it refers to EDS personnel and other private personnel who are employed to create software for the program. It does not refer to people not having access to data, because no-one had unauthorised access to data. It refers to those consultants having access—and this is the briefing that I have been given on it—to other areas of software that they did not need to develop the particular product they were making.

What they could have done, I am told, is go to another page and change one of our documents; not change data or access data, but change the look of one of our web pages or one of our documents. I guess it is a risk, but I am flat out bewildered why you would want to bother doing that unless there is something a bit odd about you. It has no risk, in any case, of anyone gaining access to data that they should not. Access to hard data is strictly controlled, and there is absolutely no evidence of anyone accessing that data who was not entitled to it, and there is no evidence of people who were entitled to access that data having not used it properly.

The other thing I am told they could have done by having excessive privileges is cut off access to a server. Again, I am not sure to what end they would do that, but, certainly, that is the risk. These matters have been dealt with, but I am afraid that it is not nearly as terrifying as the member for Morphett would have us think.

Dr McFETRIDGE: On page 36 of the Auditor-General's Report the following is stated:

In April 2008 the external accounting firm reported to the Department the results of its review. The report noted that staff working with the new system did not have the knowledge and skills required to operate the system and that this was impacting on revenue collection and disbursement processes. It also noted that discrepancies arising from the system's implementation, variations in banking and clearing accounts were not followed up or effectively controlled.

Does the department now have staff with the knowledge and the skills to operate the system?

The Hon. P.F. CONLON: Yes.

Dr McFETRIDGE: What was the cost for the external accounting firm's report, and will the minister table that report?

The Hon. P.F. CONLON: I will take advice on whether it should be tabled. I do not believe that it should: I think it is an internal document. How much it cost I do not really know. We can find out. However, believe me, in terms of the cost of a brand new system of software with increased functionality—does the member want me to explain what that means? It means it can do more things than it did before. I am sure that the member will find that the cost of that was small and was a good investment, in terms of the introduction of a very substantial new software system with increased functionality.

Dr McFETRIDGE: 'Increased functionality' can mean it was turned on, when it was not working at all. Page 38 of the report raises the issues of loss or misappropriation of funds and not processing transactions in accordance with departmental policy. Why were monthly bank general ledger reconciliations not performed until February 2008, even though TRUMPS had been in operation for five months?

The Hon. P.F. CONLON: There were, as has been identified—and, while the member was meandering off on thoughts of his own, when he said that increased functionality can mean that it was turned on, can I indicate to the member for Morphett that it is a completely ridiculous remark. I can give him an example of increased functionality. There are some services available—

Dr McFetridge interjecting:

The Hon. P.F. CONLON: No, mate; if you want to throw comments in you are going to get them answered. Increased functionality does not mean it was turned on. From memory (I do not have this in front of me), there are now things that can be done online that could not be done before. So, it is more convenient for the customers of those agencies. I understand that, in future, there will be further things that we can arrange, including BPAY, I think, which will be possible in the future as a result of the increased functionality of the new software. It does not mean that it was turned on. In short, it means that it can do more than the old system could: it can offer more convenience and more services to customers than the old system.

I might point out some of those. There is an increased range and availability of transactions via the internet; vehicle dealer and agent delivery channels; recreational boating system registration renewals now online; driver's licence renewals and replacements will be internet capable by September; increased state revenue through more stringent checking of client eligibility to claim concessions; and more flexible payment options, including the use of BPAY. The BPAY project is in the early development stage but should be delivered next financial year. The vehicle inspection booking system is online. There is a whole range of things that it provides to customers that the old system did not (you can turn over the page and there are more, but I am getting a bit bored with it). That is what that means.

With respect to the member's question, there were considerable complexities with the start-up of the TRUMP system that made it difficult for people to get those reconciliations done. They had to go back and do them over a several month period to bring them into line. However, again, I point out that, from where it started to the present, going back and doing all this work with the Auditor-General has seen us now, as a result, in terms of, I think, $1.1 billion of turnover, with $5,000 that ended up in the wrong column. That was the end net result of these difficulties. As I said, I wish it had not happened, but I will take that in front of giving a bunch of spiv consultants $100 million for buggering up the sale of electricity assets.

Dr McFETRIDGE: Page 103 of the Auditor-General's Report talks about the department's response to the formal sign-off and defect management. The report states:

The Department advised that the Steering Committee made the decision to 'go live' subject to resolving matters raised by the South Australia Police. Audit was advised that both the DTEI Chief Executive and the Minister's Office were aware of the date the system was to go live.

Were the matters raised by South Australia Police resolved prior to the TRUMP system going live and, of the 308 outstanding defects in the system, ranging from critical and major through to minor, how many of them were those raised by South Australia Police?

The Hon. P.F. CONLON: The answer to the second question is none. Here is what the member for Morphett is suggesting: that we knew that matters raised by the police had not been sorted out but we went live anyway. We are smart guys, are we not? Of course those matters were sorted out before it went live. Can I tell the member for Morphett that, when the system was being introduced, as the minister, I was well aware of what had happened in Western Australia. We had very rigorous meetings, during which I asked these people whether, when we started it up, what happened in Western Australia was going to happen, and I asked them to make absolutely sure that that was not the case. In fact, from memory, I remember asking the then chief information officer to be involved and to have a look at the processes to see how we were going, and every care was taken.

I will explain. When you are in government you do not like getting in trouble: you kind of like not being in trouble. In fact, I love being bored. I reckon one of the best things in government is being bored because when you are bored nothing is going wrong, so I try to avoid it. That is what we did. The people did a big job putting this up—they did better than Western Australia and they did not do as well as we would have liked but, in the circumstances, I will take it. The truth was that we had to start it some time. People believed they had it fixed. They did that in good faith. They believed they had got every base covered and, when it started, there were a few things wrong. There were a few inconveniences for people and some difficulties in reconciliation.

I point out again, from memory, it is $1.1 billion worth of turnover and something like four million transactions. For four million transactions and $1.1 billion worth of turnover, at the end of the day there is $5,000 in the wrong column. It is important that we keep it all in perspective. We did our best. They did their best to make sure it would work smoothly. It worked better than in some other places and it did not work as well as we all would have liked. However, I am sure you are happy that it did not work well, because what else would you have to talk about?

Dr McFETRIDGE: On page 52 of the Auditor-General's Report it states that $2,703,000 was obtained in 2008 as 'resources received free of charge'. Can the minister provide details of this item and where it is provided from?

The Hon. P.F. CONLON: I will have to take it on notice and get back to the member.

Dr McFETRIDGE: On page 41 of the Auditor-General's Report concerning debtor follow-ups, have debtor follow-up procedures now been implemented?

The Hon. P.F. CONLON: We can give you lots of detail if you want, but yes, they have.

Dr McFETRIDGE: I refer to Note 16 in the Auditor-General's Report at page 74. How much rent is the state government paying for the accommodation of DTEI in the new city premises?

The Hon. P.F. CONLON: There are a couple of small points about the question. One is that I do not think the department is there yet. Secondly, auditors-general reports look backwards to 2007-08. From memory, the decision to go there was at Mid-Year Budget Review time, after the end of the 2007-08 financial year that the Auditor-General has looked at here. So, it is a bit puzzling that the member would ask that question.

Dr McFETRIDGE: On page 34 of the Auditor-General's Report—and I know I have asked this question before but we would still like an answer—why has the minister not instructed the department to treat the commonwealth grants received as income as specified in AASB 1004 and APF V when the Auditor-General has raised this issue in previous reports?

The Hon. P.F. CONLON: The first time I answered this question was I think about a year ago, and I will answer it again. I am glad the member for Schubert came in, because he will like the answer, even if the member for Morphett does not. You asked me a few weeks ago and you are asking me again now, as if we did not tell you the answer. Here is what happened. I will go through it again, exactly, I think, as I have said previously.

About 24 hours before the end of the financial year, the federal government (then John Howard's government) sent us an offer of $100 million to do works on the Sturt Highway, many of which are now being enjoyed in the electorate of the member for Schubert, I think. They said, 'You have got 24 hours. Say yes or no.' Here is what we are arguing about: we are arguing about accounting standards. If it was accounted in one column we would have had to refuse it because it would have gone to the budget bottom line, and no-one can add $100 million to their budget bottom line 24 hours before the end of the financial year. What would have happened if you accounted it that way is it would have gone to pay off debts and then we would have to find another $100 million. So we asked Treasury and they said it could be accounted so that was deferred expenditure, or deferred income, or something. So we took Treasury's advice because that meant we could spend $100 million on roads in South Australia.

The Auditor-General subsequently believed that it should have been accounted differently. It was a little late, because we had agreed to spend the money. However, I will say this again so that the member can understand it. If I get advice from Treasury that I can take $100 million from the commonwealth and spend it on a South Australian road, I am going to do it every time. There are people driving on that road now who would not have been driving on it if it had been accounted differently because we would not have been able to accept the money. If the major criticism of the opposition is that I managed to get $100 million of commonwealth money and spend it on South Australian roads, I am guilty as charged.

The CHAIR: The committee has concluded its examination.

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