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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 (resumed on motion).

(Continued from page 4738.)

The CHAIR: We will now deal with matters relating to the Minister for Education, Minister for Mental Health and Substance Abuse, Minister for Tourism and Minister for the City of Adelaide. I remind members that normal procedures for the committee of the whole house apply, and participants are required to stand to ask and answer questions. Questions must relate to identified lines in the Auditor-General's Report for June 2009. The member for Unley.

Mr PISONI: This question relates to Part B of the Auditor-General's Report, Volume I at pages 288 and 289. Is the minister able to explain to the committee the section headed 'Certification of school maintenance charges (metropolitan sites)'? The third paragraph states:

Contractor invoices are paid by DTEI's Facilities Manager, who recharges DTEI for this work. DTEI then recharges DECS for work performed.

Is the minister able to advise the committee how that process works; and, in the case of the Building the Education Revolution (BER), if we look at, say, the school halls program, is she able to give a figure as to how much of the grant allocated to the school is actually spent at the school?

The Hon. J.D. LOMAX-SMITH: The question relates to the amount of funding that is allocated through the very generous funds donated as a stimulus package by the federal government. This, I believe, started as a $14.9 billion project and is now over $16 billion. I am very happy to say that every part of the allocation to the schools goes to the schools. The state government does not, as has been misrepresented in some quarters, take a service fee out of the funds that are allocated. They get 100 per cent of the money that they have been offered for building halls, gyms or whatever. Part of the Primary Schools for the 21st Century funding comes through to them.

Mr PISONI: So, are you saying that DTEI does this work for nothing? It states:

Contractor invoices are paid by DTEI's facilities manager, who recharges DTEI for this work.

So, I would imagine that there would be costs to be recovered in both those instances. It continues:

DTEI then recharges DECS for work performed.

Are you saying that public servants do this work for nothing? What I am interested in is the actual cost of that process.

The Hon. J.D. LOMAX-SMITH: I think the member for Unley is talking at cross purposes. The BER projects, on the line that he is interrogating, are not recorded there. I have given him the correct answer for the BER project but, in fact, it does not relate to this page or this issue. This is about maintenance issues, so he is actually asking a question unrelated to this budget item.

Mr PISONI: Are you telling me that DTEI does not have anything to do with maintenance in schools? I am asking how this process works? It states that contractor invoices are paid by DTEI's facilities manager, who recharges DTEI for the work, and then DTEI recharges DECS for the work. I want to know what that costs. It is a simple question. It relates purely to this page and this line; I have read it out.

The Hon. J.D. LOMAX-SMITH: As I said, I think the member for Unley has addressed his question in relation to the Building the Education Revolution, a federal government project, and I will reiterate my answer that this page does not reflect that program.

Mr PISONI: Minister, you are deliberately avoiding the answer.

The CHAIR: Order! Member for Unley!

Mr PISONI: This is about costs incurred—

The CHAIR: Member for Unley!

Mr PISONI: —inside a department for invoicing.

The CHAIR: Member for Unley! This is not the place for debate or asking general questions. It relates to matters contained specifically in the Auditor-General's Report. Your reference was to page 288 of Volume I, Part B. The headings on that page are: 'School maintenance. Development and documentation of a service level agreement with Department for Transport, Energy and Infrastructure' and 'Certification of school maintenance charges'. The minister has indicated that the question you are asking does not relate to school maintenance charges and is, therefore, not related to this page. I ask you to move on.

Mr PISONI: I beg to differ, chair. It states on page 288:

Contractor invoices are paid by DTEI's facilities manager, who recharges DTEI for this work. DTEI then recharges DECS for work performed.

I want to know what it costs to do that. We have all this handling of money and invoices and I want to know what it costs.

The CHAIR: Member for Unley, sit down!

Mr PISONI: For heaven's sake.

The CHAIR: Member for Unley, sit down!

Mr PISONI: If she does not want to answer she should just say that she does not want to answer.

The CHAIR: Sit down and keep quiet. Member for Waite.

Mr HAMILTON-SMITH: I would like to ask a question about substance abuse. I refer to Volume II, page 589, which deals with the Southern Area Health Service. I observe that it is difficult to find clear information in the budget papers about spending and investment on drug and alcohol services through DASSA. Similarly, there is not a lot on it in the Auditor-General's Report. Could the minister advise the house what is the total budget of DASSA and how much money is being spent, and, in particular, could she tell us where we might find a more detailed statement of the breakdown of DASSA expenditure?

The Hon. J.D. LOMAX-SMITH: I thank the member for that question. He is quite right, it is difficult to find those numbers within these documents. I think that is one of the challenges with mental health, because the funds are not easily identifiable. I am very happy to take that question on notice and give the member a briefing, if he would like, about how the DASSA system works. It would be quite useful for the member to understand that and I am very happy to arrange it.

Mr HAMILTON-SMITH: Thank you, minister, I appreciate that. I do not know if we could do that before the end of the year, but it would be great. I will contact your office. My second question deals with the same volume and page, Southern Area Health Service. I am interested in the value of DASSA's properties at Norwood, Joslin and North Adelaide. Is the minister able to give us that information?

The Hon. J.D. LOMAX-SMITH: I think you are referring to Norwood, Joslin and North Adelaide?

Mr HAMILTON-SMITH: Yes.

The Hon. J.D. LOMAX-SMITH: For those properties I do not have an evaluation. Clearly, there would be some Valuer-General comments for those pieces of land. We can find that information for you.

Mr HAMILTON-SMITH: I refer to Volume II, page 589, recurrent funding to the various health services. I understand that it is the government's intention to sell Norwood, Joslin and North Adelaide and reinvest the funds from the sale of those properties elsewhere into the budget. Could you inform the house of those plans, when we might be planning to sell those, and will the proceeds be going into the new mental health facility at Burnside, or will they be expended on other items?

The Hon. J.D. LOMAX-SMITH: Clearly, there is a significant change in the bed locations and how the services will work in the future across the whole system. Those items are not in the Auditor-General's lists. I am very happy, again, to give you a complete briefing on the bed plan and where the services will be located in the future. It is actually quite complicated. It is not delineated in these documents.

Mr PISONI: Okay, let's try this: can the minister explain the process that is outlined in paragraph 3 under the heading 'Certification of school maintenance charges'—page 288?

The Hon. J.D. LOMAX-SMITH: The member is now discussing maintenance within schools, and this item reflects metropolitan sites only, as the heading suggests. School maintenance is managed by a whole of government facilities management contract. That is administered by DTEI. I am informed that a standard contract management fee of approximately 2 per cent is paid by DECS to DTEI, and those matters are managed through accounting processes with proper audit control and proper monitoring.

You will note that this is clearly the case, because, in relation to the Auditor-General's Report, it is quite clear from his comments that he has advised that in all material aspects the financial statements present fairly the financial position of DECS in accordance with Treasurer's Instructions and the Australian accounting standards.

In terms of all of the matters that had been raised, actions were taken, as outlined throughout the document. So I think that the general audit facility in terms of checking those transfers of costs and moneys are acceptable to the Auditor-General.

Mr PISONI: I again refer to page 288, school maintenance. The AG noted that DECS has not developed a service level agreement with the Department for Transport, Energy and Infrastructure for the provision of facilities management services; therefore, basic specific roles and responsibilities are not detailed, such as approval to incur expenditure responsibility for verifying quality work, monitoring and reporting the subcontractor report performance, auditing charges, and responsibility to verifying work quality. Why, minister, has DECS waited for the Auditor-General to draw its attention to such a significant fault in processing in dealing with contractors—the quality and timeliness of their work and payments made to them?

The Hon. J.D. LOMAX-SMITH: The question that the member asks relates to a new agreement that was begun in July, and the service level agreement is currently in draft form and will be finalised by the beginning of next year.

Mr PISONI: I refer to the same volume, page 289, reconciliations from International Education Services. The Auditor has noted inconsistencies in reconciliations dating back as far as July 2005. When will the firm contracted to resolve these variances complete its investigation and when will the results be available, and will they be publicly available?

The Hon. J.D. LOMAX-SMITH: Will you excuse me? I think you were asking about International Education Services.

Mr PISONI: I will give you the question again, minister. It states that the Auditor has noted inconsistencies in reconciliations dating back as far as July 2005, and this is in reconciliations by International Education Services. Then I asked the question: when will the firm contracted to resolve these variances complete its investigation and when will the results be available? Will they be made public or published? This is on pages 289-90.

The Hon. J.D. LOMAX-SMITH: I have identified the paragraph in question. It does relate to the International Education Services. These reconciliations have been completed and the general ledger and IES database now both reconcile, but this reconciliation will continue as part of our normal processes and it will be monitored on an ongoing monthly basis.

Mr PISONI: Referring to pages 286-87 on outstanding monthly leave returns and flexi sheets, the Auditor-General noted that 31 per cent of monthly leave returns and flexi sheets due in 2008-09 remained outstanding to May this year. This is an ongoing problem which was identified some years ago. When in 2010 is the electronic system projected to be in place and how will it solve the problem?

The Hon. J.D. LOMAX-SMITH: Considerable effort has been put into improving this area of activity and, in order to make the process more efficient, DECS has indeed developed an electronic bona fide certificate system to simplify the process. It is anticipated that implementation will occur in term 1 of 2010. I think that most people would understand that an electronic system would be more effective than a manual one, and I think that goes without saying.

Ms CHAPMAN: I refer to Part B, Volume II, which covers the health portfolio. I think, as the minister has indicated, she does not have any discrete division of this for mental health; however, all of mental health is incorporated therein. At page 567 is the provision for comment by the Auditor-General in respect of the $147 million spent on capital funding for health services, and I think in response to previous questioning on page 589, the capital funding incorporated by each unit spent in the relevant year which is to 30 June 2009. My first question is: how much has been spent to 30 June 2009 on the Glenside Hospital redevelopment?

The Hon. J.D. LOMAX-SMITH: Clearly, this has been a very technically challenging exercise. You can imagine that to be involved in rebuilding a hospital it has been necessary to move those staff who were occupying office areas and move the patients to suitable accommodation. It would not be acceptable to the government to put patients in substandard accommodation which they would have to occupy, albeit for a short term stay. It was important that we refurbish the temporary accommodation to a proper standard. So, the funds that have been expended on the site are the interim arrangements for those staff and patients who have been moved from the southern side of the site to the northern side of the site.

In addition, there have been fees involved in the design of the new hospital and only a couple of months ago building work began on one of the non-hospital facilities on this site—again, on the eastern side of the location. The funds that were expended in 2007-08 were $1.402 million and, in 2008-09, $4.095 million. That related to master planning, design processes, project enablement (which is the jargon for supporting the occupants of the site while they are in interim accommodation) and project management. As I have said, there was the beginning of one of the developments on the site, not the actual 129 bed hospital but the intermediate care centre, which is on the far east of the site, as you would know, very close to Masada College.

Ms CHAPMAN: During that time, the property in the centre of the site was sold to the Department of the Premier and Cabinet for the Film Corporation, and I think $2.5 million was the price. Has your department received that on the income side, or has it gone to someone else?

The Hon. J.D. LOMAX-SMITH: We have not actually sold any land at this stage. As far as I am aware, this was an internal transfer.

Ms CHAPMAN: That is why I need to be clear about this, minister. Internal or not, it is disclosed on the Premier's side of the ledger, and he has to pay that money because he is getting that land, and it will be transferred across to him. It has a value, and it is property that will now be inalienable for the purposes of development in your portfolio—obviously, it has taken on a new flavour—and that is the figure that is there. Are those funds being transferred to you on paper or in reality? Are they coming to you, or are they going to some other department?

The Hon. J.D. LOMAX-SMITH: I am sorry, but I am unaware of the item line the member is talking about. I am not sure which item in the documentation she refers to.

Ms CHAPMAN: I am referring to the redevelopment of the hospital. I can also refer to the actual Premier's provision in the budget for 2008-09, which is the year the subject of the Auditor-General. He developed a $43 million development but, in addition to that, $2.5 million is the consideration agreed upon. He has told the parliament that it was as per the evaluation, so neither I nor anyone else could buy it. He has bought it and he has developed it already.

So, it would be concerning to me if, in fact, you ever let him start building on it without actually paying for it or having the title transferred to him. I would like to be clear on whether or not he has it; if so, has he paid for it and do you have the money?

The Hon. J.D. LOMAX-SMITH: I think that the item to which the member refers occurred in a subsequent financial year and not in the one under question, so I am not sure that it is the subject of debate in this Auditor-General's inquiry. However, if the member recalls, the letter that was written by the Hon. Iain Evans, suggesting that sale of land at Glenside would be possible, was written under the cover of a minister, I think, of the Department for Environment and Heritage.

Ms CHAPMAN: We know that the title is held by the Minister for Environment and Heritage, and minister Gago has told us that many times and answered questions about it when she was the minister; she held both titles of minister for mental health and minister for environment. She confirmed that the title was in her name as the minister for environment, which was not unusual for some properties under the old minister for lands.

Some property ended up in the Department of Health and some ended up in the department for environment. This is a mental health facility, and it has been there for over 100 years. It is on the books as an asset of the Department of Health. When we asked this question, minister Gago did not know whether or not she was getting the money. It would be concerning if this asset was sold off, remembering the statements made by the government to date that they need to sell off part of this property to facilitate the development of the hospital. I would like to know whether you are sure that you are getting it or whether you have it.

The CHAIR: Member for Bragg, I think that the minister has acknowledged that looking at the mental health area is rather difficult, given the current layout of the accounts. She has also indicated that the events to which you refer occurred after the period to which the examination relates. I am just not sure that the minister can go any further. Does the minister wish to say anything or have I summed it up?

The Hon. J.D. LOMAX-SMITH: I think I have explained that the transfers that she refers to are in a different financial year and relate to the Department for Environment and Heritage. I do not think there is any more to add.

The CHAIR: The member is welcome to ask questions in the remaining question times.

Ms CHAPMAN: Thank you. I think I am entitled to that, irrespective of your approval. So I can be clear about this, minister: do you expect to receive it one way or the other into your department or haven't you budgeted to receive that money?

The CHAIR: Member for Bragg, this is not a question relating to the Auditor-General's Report for the year ending 30 June 2009. Does anyone else have any questions?

Ms CHAPMAN: I have a number of questions. There are letters to the Auditor-General in respect of the proceedings in the District Court at the moment, as you know. They are both against me as the defendant, in the case where the Department of Health is seeking to overturn the decision of the Ombudsman for the production of documents in relation to the Chapley preference arrangement for part of the subject property.

My question to you is: has your department received a bill yet from the Crown Solicitor's Office as to how much it has spent in the 2008-09 year for legal costs associated with those proceedings, and if so, how much?

The CHAIR: Member for Bragg, can you give us a reference for your question?

Ms CHAPMAN: I am referring to 'Supply and Services' at page 575, which is $228 million for the subject year, and that relates to expenses that are paid. As the minister knows, if she uses the services of the Crown Solicitor's Office for her department, they get a bill.

The CHAIR: I think the member for Bragg has been here long enough to know that every component of the line it is not subject to scrutiny, but is the minister able to provide any assistance?

The Hon. J.D. LOMAX-SMITH: Any matter that is before the court is beyond our ability to comment upon.

Ms Chapman: I was just asking how much you paid for it.

The CHAIR: Order!

The Hon. J.D. LOMAX-SMITH: But judging from the fact that the member describes something that is happening currently, I do not believe that it is relevant to discuss that matter within last year's budget.

Ms CHAPMAN: Do you know anything about these proceedings, minister?

The CHAIR: Member for Bragg, that is not a subject for the Auditor-General's Report.

Ms CHAPMAN: Can I ask you whether you or your department have actually informed the Auditor-General about these proceedings?

The CHAIR: I doubt that that is a subject for the Auditor-General's Report, either.

The Hon. J.D. LOMAX-SMITH: I do not believe that is an item that one would generally inform the Auditor-General about because he is reflecting on last year's documentation for last year's accounts, and I would refer you to the fact that you have told me that you are asking about an action that is occurring now.

Ms CHAPMAN: It is probably more disturbing to hear that answer than anything because these are proceedings that have been going on since prior to the end of the financial year 30 June 2009. Obviously, you do not know anything about what costs might have been paid for them so far by your part of the department as the action being taken to challenge the production of those documents as directed by the Ombudsman.

Yes, they are ongoing and next year I might ask you or your successor some questions about what you might have spent in the 2009-10 year on these proceedings, but if you do not know anything about these proceedings or you do not know how much money is being spent on the them, that is of great concern to us and I would be concerned if you were to tell me that you are not even aware whether anyone in your department has told the Auditor-General about these.

The CHAIR: Order! The member strays into areas that are for general question time questions. They are not areas for which the minister is expected to be briefed for this report. Minister, do you wish to say anything?

The Hon. J.D. LOMAX-SMITH: I remind the member that freedom of information is something that we have opened up significantly since being in government. We are more accountable, more responsive and faster to respond, and as a minister, of course, I have no role in making those determinations. They are made by officers within the department and I would always allow them to make the proper decisions. I know that previous governments have interfered and been involved more closely but that is not the way we operate.

Ms CHAPMAN: If you are not aware whether the Auditor-General has been informed about the costs, is it your intention, minister, to inquire as to what might have been spent on these proceedings to date, a cost which comes out of your budget?

The CHAIR: Again the relevance of this to the Auditor-General's Report is doubtful.

The Hon. J.D. LOMAX-SMITH: I do believe that it is incumbent on us to cooperate in any way with the Auditor-General and we will do that in whatever way is necessary. We will make any documentation available to him and we are very happy to do so. We have nothing to hide.

Ms CHAPMAN: I think minister Conlon answered this question without any detail at the time, but my question is: has the government signed a contract to sell part of the Glenside site to the Chapley family (or its nominated company) and, if so, for how much?

The Hon. J.D. LOMAX-SMITH: This is a question that we have answered several times before. The answer does not change, but, in any case, whatever the answer was, it is not relevant to this discussion, and perhaps you would like to turn to your left to the member for Davenport who also offered this land for sale.

Ms CHAPMAN: Wrong. Don't mislead the house on that.

The CHAIR: Order!

Ms CHAPMAN: You may not be aware of this considering that, so far, I am not sure you even know about the proceedings or you certainly have not told the Auditor-General, but I will ask you this question anyway for the record. Has the Auditor-General been informed that, even if the appeal is successful—

The CHAIR: Order, member for Bragg.

Ms CHAPMAN: I haven't finished the question, yet, Madam Chair. If you let me finish asking the question—

The CHAIR: That's right; and I would ask you to take your seat for a moment.

Ms CHAPMAN: No, I won't. I dissent from your ruling to sit down, thank you. I will conclude my question and I will invite you as chair, of course, to give your ruling on whether you think it is acceptable—

The CHAIR: Member for Bragg, I am going to allow that to pass because of the time.

Ms CHAPMAN: —that there is a liability to pay the legal costs of the respondent.

The CHAIR: I warn the member for Bragg.

Ms CHAPMAN: What, for asking a question? Give me a break.

The CHAIR: For arrogance and contempt of the chair.

Ms CHAPMAN: Under what standing order? I dissent from your ruling, Madam Chair. It is a disgrace that you should try to silence this parliament when we are entitled to ask about billions of dollars that are being spent by a government. We all have a responsibility, every single one of us, to question ministers about what the Auditor-General has already gone through. When this government does not even tell the people of South Australia, let alone this parliament or the Auditor-General, what is going on in the courts and what it is costing, then it has a lot to answer for.

The CHAIR: The member for Bragg is aware that there is a standing order relating to disobeying the order of the chair. I think it might be useful if we just report that the examination of the Auditor-General's Report has concluded.

The Hon. J.D. LOMAX-SMITH: Madam Chair, the examination of my portfolios is complete.

The CHAIR: I declare the examination of the Auditor-General's Report concluded.

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