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House of Assembly - Fifty-Second Parliament, First Session (52-1)
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Auditor-General's Report

AUDITOR-GENERAL'S REPORT

The Hon. J.D. HILL (Kaurna—Minister for Health, Minister for Mental Health and Substance Abuse, Minister for the Southern Suburbs, Minister Assisting the Premier in the Arts) (16:02): I move:

That standing orders be and remain so far suspended as to enable the report of the Auditor-General for the year ended 30 June 2010 to be referred to a committee of the whole house and for ministers to be examined on matters contained in the report in accordance with the circulated timetable.

The DEPUTY SPEAKER: I have counted the house and, as there is not an absolute majority of the whole number of members present, ring the bells.

An absolute majority of the whole number of members being present:

Motion carried.

In committee.

The CHAIR: Before we begin I remind members that the committee is in its normal session, so any questions are to be asked by members on their feet and all questions must be directly referenced to the Auditor-General's Report.

Dr McFETRIDGE: I refer to the Auditor-General's Report, Part B, Agency Audits, Volume 2, page 589. I would like to ask the minister about the new Royal Adelaide Hospital and the costs—there are no secrets about where we are going today. Even as late as March, the minister was saying that the cost of the hospital was $1.7 billion yet, according to the Auditor-General's Report, cabinet signed off in November 2009 on a nominal value of $1.8 billion. What is the final, publicly-stated figure for the cost of the new Royal Adelaide Hospital? Is it $1.8 billion, as it is in the Auditor-General's Report, or is it another figure? If it is another figure, how do we know that figure if no-one has seen the tenders?

The Hon. J.D. HILL: I thank the member for his question; essentially, it is the same question he asked during the budget process and similar to one asked of the Treasurer during question time a few weeks ago. I will say what I said in the budget estimates process and what the Treasurer said: the advice we have is not to comment on these figures as we go through the process in relation to the public-private partnership. That is coming very close to fruition now. The analysis of the bids is very actively underway, and we expect that we will settle on a preferred tenderer sometime in the next four to six weeks. After that time, it will be easier for government to comment on the figures.

However, I just make the general point that we are very confident that we will get the hospital through a PPP process in a way that will provide good value to the state. All the figures that the government determines, in terms of its exercise, refer to what it might cost if it were to be built by the public sector, as a comparison for the actual costs for the private sector. So, these are in the nature of estimates or projections. The final amount will be known soon, and I am very confident that we will get a good deal.

Dr McFETRIDGE: On the same reference, in the minister's response during estimates he quoted the Treasurer as saying that, as it relates to the capital costs of this bid, the taxpayer will certainly be very pleased with the outcome. That is the capital cost; what about the range of services? Will you reduce the scope or the size of the hospital, the range of services and facilities, to keep it within what might be seen as an acceptable cost?

The Hon. J.D. HILL: I guess there are several parts to that, but I am confident that the operating costs will come in in a way that will be of good value to taxpayers as well. The range of services, the scope, is as was put to the tenderers back in late last year or early this year, whenever it went out (I cannot actually remember now). We put the tender documents out, and a number of players expressed interest; two were finally chosen to do the detailed work. As I understand it, the scope might change at the margins as the planning processes go through, but the scope is as it was. There is no reduction in the anticipated size and throughput of the hospital. We need a hospital that is able to do certain things, given the projections that we have for the health demands of our population, and I am very confident that we will get a project delivered which will provide good value but, more importantly, very good medical services for our community well into the future.

Dr McFETRIDGE: Same reference. Are you aware of any other predictions of the cost of the hospital? I understand that there are ever-increasing costs with this hospital and the only way that it is going to be capped is by reducing the scope. I say that because the Premier stood up at the Blue, Yellow and Pink Ball that was held on Saturday night and told the 900 people there that we are getting a new hospital that is going to cost nearly $2 billion. So, is it a $2 billion hospital now or is it a $1.8 billion hospital that was a $1.7 billion hospital?

The Hon. J.D. HILL: I am not sure how that relates to the Auditor-General's Report, to be perfectly frank. As I have said multiple times now, we are very confident that we will get a hospital that we need of the size that we need and with the throughput that we need for the future population of our state at a price which will be good value for the public. You will only have to wait a few weeks (six weeks or so) before we settle on a final tender, and we expect that contract finalisation will occur in the first quarter of next year. So, we are very close to finalisation. I can assure the member that this hospital will deliver the kinds of services that we have said it would, it will have the number of beds that we said it would, and so on and so forth.

Dr McFETRIDGE: I am still concerned that you may deliver the hospital, but will it be on budget and on time? I say 'on budget and on time' because Dr Sherbon told the Budget and Finance Committee in August that the hospital construction—not the site clearance—would not start until early 2013, you told the estimates committee that it was going to be a five to six-year build, so that makes the hospital a $2 billion hospital being delivered in 2018, and possibly 2019 now. What are we getting, minister?

The Hon. J.D. HILL: I suppose it is understandable that the member for Morphett has trouble understanding some of these issues, they are quite complex. The reality is that the tender process will deliver a hospital by 2016. The construction will start pretty well as soon as the finalisation of the contract, which is, as I say, in the first quarter of next year. The preliminary works have already begun in terms of some of the site works, road entrances and the like. The first part of the process of building the hospital will be excavation and the construction of the frame of the hospital, if you like, and, while all of that is going on, detailed work occurs over the internal design. I guess it is a fairly standard process that occurs. So, the process begins as soon as the contracts have been signed.

Dr McFETRIDGE: I think I am a reasonably intelligent bloke and I think I have a reasonable level of comprehension, and that is not how I understood it, but I have listened to the minister. Let us move on to another area that we did raise in estimates and which is very pertinent to this afternoon's 30 minutes, that we have half a billion dollars worth of health spending, and that is the non-operating funds. This is the third time that the Auditor-General has asked questions and raised issues about the special purpose accounts, the non-operating funds in our hospitals: in 2008, 2009 and again in 2010. I am referring to pages 587, 588 and 589 in that same reference, Part B, Volume 2. I understand that finance managers in hospitals were told that they were to manage all cash as consolidated accounts. So, you are mixing your non-operating funds with the operating funds. How do these financial managers report on the consolidated accounts and separate the non-operating funds from the operating funds?

The Hon. J.D. HILL: The advice I have is it is done through the general ledger and standard accounting practices. The member raised questions in relation to the operating funds in estimates. There have been issues raised by the Auditor-General in relation to it, and I can assure the member and the house that matters are being attended to, both in relation to the individual officer, who was counselled and has now been formally counselled. That involves a written statement to him and to a number of the officers, I think—two or three, from memory.

What we are attempting to do in the health portfolio, which—I have to make a political point—has been opposed every step of the way by the opposition, is to develop an integrated approach to the management of the resources of the health portfolio. Rather than have a whole range of individual boards who make decisions, have their own accounting systems, their own industrial systems, their own recruitment systems, their own procurement systems and their own clinical systems, we are getting a consolidated set of arrangements in place. The transfer from the arrangements which were in place before I became minister to the arrangements we are putting in place now does take time. There are transition issues, and from time to time you find bits of the system are not as they ought to be. However, we are heading in a direction to make sure that we have a very good set of integrated standards.

In relation to the error, that was made by the officer. There was no attempt to convert the cash of the department for personal use and there was no attempt to apply the funds for a purpose for which they had not been provided for in budget or for which they were not created. What the officer was trying to do was apply, I guess, what the business sector or other sectors might see as standard cash management; that is, he was trying to make sure that the amount of cash that was held received the highest return through moving it around the banking system. That was not in accordance with the standards, I suppose, that should appropriately apply, but we will make sure that those standards are introduced and that the operations in future are appropriate.

An honourable member interjecting:

The Hon. J.D. HILL: It was an error, and I have said so during estimates, but you can keep asking questions about it.

Dr McFETRIDGE: As the member for Norwood keeps reminding us, and I have tried to remind this place, it was not a once-off; it was 2007, 2008 and 2009. It is not just a rogue operator; this is an issue within the department. As the Auditor-General says on page 589, 'managing the periodic liquidity challenges that the total cash of the region has'. Why is that so, minister? What is wrong with the timing of the cash flow in the department? Why are we having to manage periodic liquidity challenges?

The Hon. J.D. HILL: I would have thought any organisation, whether it is a government department or a personal bank account, has liquidity issues. You have to manage the flow of cash to meet the demands on your purse, so you have to manage that in an appropriate way. There are always cash management issues, as well as budget issues. A department or an agency is given a budget of this amount, but they are not given all of that cash on the first day of the budget year, as I understand it; the cash flows through. Part of the job is to make sure that you manage the cash in an appropriate way. You do not want to have too much cash sitting around, because that obviously comes at a cost, nor do you want to have too little, because that comes at a cost.

The role of government and Treasury generally is to make sure the supply of cash to the agencies is at a rate that the agencies need it to acquit the demands on them, and then the agencies—the central agency, like SA Health, and then the outer agencies (the regions and the other parts of our system)—have cash going to them in an appropriate way. Managers of funds within those sections manage the cash flow in such a way as to maximise the benefit for the system overall and for the public purse. I think that is obvious, and that is what happens here. We have to manage liquidity and that is what the officer was trying to do. He stepped outside the prescribed boundaries for doing that—

Mr Marshall interjecting:

The CHAIR: Member for Morphett, would you like to ask a question or does the member for Norwood want to keep on saying things? If you want to say something, member for Norwood, you can stand up. It was such a vigorous interjection that I thought it was—

Mr Marshall interjecting:

The CHAIR: Don't roll your eyeballs at me.

Mr Kenyon interjecting:

The CHAIR: No. Do not roll the eyeballs. Carry on, member for Morphett.

The Hon. J.D. HILL: I just say to the member for Morphett: get your backbenchers in line and I will not sit down and stop answering the question. The point I was making was that any organisation has to manage its cash. Our department is increasingly doing that in a coordinated, integrated way with higher standards. There are still some parts of the operation which were not at that point, and the issues in each of the previous three were different issues, though they did relate to that one area of activity.

Dr McFETRIDGE: On that, does the executive director of finance and administration not set the drawdown limits on the cash for the hospital? Is that person setting those drawdown limits then not forcing the hospitals to seek other sources of funds so that they can manage their liquidity challenges? In this case, this person at the Lyell McEwin was pulling money out of the non-operating funds without approval. These people are the meat in the sandwich, and it appears to be higher up the chain where the drawdown limits are being set. Would you like to comment on that, minister?

The Hon. J.D. HILL: I think the member perhaps needs to have a little lesson on how the portfolio works. It is a bit different from other portfolios.

Mr Goldsworthy interjecting:

The Hon. J.D. HILL: It is hardly worthwhile standing here then.

The CHAIR: I am very conscious of the time, but can I just say that you, the members on my left, seem to be tripping yourself up with the interjections. That is just a reflection.

The Hon. J.D. HILL: I am happy to answer the question.

An honourable member interjecting:

The CHAIR: Do you want him to answer the question? Minister Hill.

The Hon. J.D. HILL: I was about to explain how the portfolio works because it is important to understand this in terms of that question. Unlike other agencies, where the department and the agency are effectively the same thing so the money flows from the centre right through to all of the units, in health we have regions which have their own responsibilities. The Department of Health gets money from Treasury and then distributes that to the various regions, which then have their own budgetary processes and their own responsibilities. They report separately through the various budgetary processes and are inspected by the Auditor-General separately.

What my colleague on the left does, the senior finance officer, is to make sure that cash is provided to the regions in accordance with the requirements. If they say 'We need so much cash' for whatever the budget purposes are, he supplies it. In this particular case, the individual officers at that hospital were obviously trying to manage the cash at a local level in, and it seemed to be sensible, but it was not within the parameters that they should have operated. They have now been formally counselled, and the systems have picked up the issues that the Auditor-General identified, and it has been corrected.

Dr McFETRIDGE: So 2007, 2008, 2009, 2010—let's hope it does not happen in 2011. On page 588 there is a reference to the Lyell McEwin Hospital transferring $4 million from the South Australian Finance Authority cash management account on 18 May, then on 19 May an additional $3 million was paid from this account, and this left a $1.1 million cash deficit for the operating funds, which were topped up by the private practice funds and non-operating funds. That is $7 million. To move that across from the cash management to the South Australian Dental Service, I would not have thought that would be a rogue operator. That would have been a senior management decision. I would have thought that the chief finance administration officer, the executive director, would have known about that, Dr Sherbon would have known about it, and possibly you would have known about it, minister—a $7 million movement like that.

The Hon. J.D. HILL: As I have been advised—I was just clarifying what I thought was the case—when this occurred we had a regional financial structure in place. We are now moving away from that to have a centralised financial management structure. Of course, I think I was subject to criticism from the opposition for cutting jobs in regions by doing this. A number of opposition members asked me questions about how appalling it was that we were centralising all these functions, and now the member for Morphett is asking why it was not centralised before. Well, it was not.

Dr McFetridge interjecting:

The Hon. J.D. HILL: Well, if you think that the chief finance officer and the CE of the department would be aware of all of that detail, that would imply that it was a centralised accounting system, which it was not; we are moving to that now. I will also point out that we have a budget in health of $4.5 billion, that is $4,500 million. While $7 million is a large sum certainly to me (I do not know about the member for Morphett), within the overall health portfolio we would go through $7 million on an average morning, I think, from memory.

I will just give you some of the detail. The A-G identified that there was a $4 million transfer from the Lyell McEwin SAFA cash management account to statewide services within the South Australian Dental Service. The balance of the Lyell McEwin operating funds in the SAFA account was $1.9 million. An additional $3 million was paid from the Lyell McEwin operating funds in the SAFA account on 19 May 2010. This resulted in a $1.1 million cash deficit by the LMH operating funds in the SAFA account. This cash deficit was funded, in effect, by private practice and not NOFs.

The LMH operating cash in the SAFA account returned to a positive cash position on 20 May 2010 with a return transfer of $4 million. The transfers are in relation to meeting cash flow requirements within the then Central Northern Adelaide Health Service region, and we have processed to manage the issue of timing in regards to cash flow funding from the department. No funds were inappropriately used—I think that is the important point. That is the detail of what happened. The general point that I made at the beginning stands.

Dr McFETRIDGE: No funds were inappropriately used, but they were used without the permission of those from whom it should have been sought. What were the policies in place that caused the Lyell McEwin Hospital to draw down on the private practice funds and the non-operating funds?

The Hon. J.D. HILL: This kind of pretend mock rage does not really suit you, member for Morphett. We know that privately, in practice, you are a nice guy. I know you are under pressure from your own side, so you have to appear to be a bit macho, but it really does not suit you, member for—

Mr Goldsworthy interjecting:

The Hon. J.D. HILL: —and it certainly does not suit you, member for Kavel. What I was trying to say in a polite, calm and consistent way is that the individual officers who were involved in this were trying to do what they thought was the right thing, which was to minimise the amount of cash that was not being used for a productive purpose. They did it contrary to policy guidelines. They should not have done it, they have been disciplined, and we will do everything we can to make sure it does not happen again, including changing the structures and centralising the financial arrangements in the department.

Dr McFETRIDGE: You are centralising the arrangements, but are you going to separate the reporting of the non-operating funds and the operating funds so that it is clear what the bottom line is in each of those areas?

The Hon. J.D. HILL: The advice I have is yes, we will. I should not have said 'disciplined'; they have been counselled, which is the appropriate language, I gather.

Dr McFETRIDGE: For four years in a row they have been counselled. That would be more than counselling them. I have a lot more questions on those non-operating funds; however, there is a bigger issue out there that we need to deal with, but we will not get anywhere near that at the moment. I refer to page 589, the whole of health finance supply and asset management system Oracle, the Oracle corporate system. Does the department know what its true financial position is at the moment?

The Hon. J.D. HILL: I am advised yes.

Dr McFETRIDGE: That will be news to a lot of people I have been speaking to. My understanding is that the hospitals have limited access to information, including debt management, internal reporting and FTE figures. If that is correct, why is it so?

The Hon. J.D. HILL: There do not appear to be any particular issues. We are transitioning, as I have said, to a new integrated, centralised system, which will provide in the longer term much better financial information to everyone. The September reporting is being issued and the full-time equivalent figures are being finalised at the moment.

Dr McFETRIDGE: Referring to the same reference, using the Oracle system, do you have a system for patient billing currently and what information do hospitals have currently to follow up their debts?

The Hon. J.D. HILL: I am advised that the patient billing system is done through the patient administration system, I think it is called, and that is a different system, which has been in place for many years, and that is continuing.

Dr McFETRIDGE: So, that is not going to be integrated into the Oracle—into the whole of the health, finance and asset management system?

The Hon. J.D. HILL: The advice I have is that the patient billing will not be part of the Oracle management system.

Dr McFETRIDGE: I refer to the same reference again. Did the department seriously believe that it could implement a general ledger system across all sites and with all of the interfaces required within the 10 to 12 months program that was set up?

The Hon. J.D. HILL: The advice I have is that phase 1 of that project was delivered on time, on 1 July. There are always issues to work through, but the general ledger arrangements were put in place in time.

Dr McFETRIDGE: Referring to the same reference again, my understanding is that hospitals cannot get information on their bottom line. If they cannot get information on their bottom line, how can the department have information on its bottom line?

The Hon. J.D. HILL: I guess that, if they have those concerns, they have an obligation and responsibility to pass them on to the finance manager, the CEO or the minister, rather than the opposition, but I am not advised that that is the case. We have issued, I am told, something like 8,000 management reports in the last week. But, of course, as I said at the beginning, the arrangement we have in place is that the Department of Health provides funds to the various regions, which then have their own systems, and all financial systems will now go through Oracle.

Dr McFETRIDGE: Same reference. In the Auditor-General's Report, it is stated that it is anticipated that the fully integrated system will be completed December 2010. Are you still confident that the system will be fully integrated and completed by that time?

The Hon. J.D. HILL: The advice I have is the department is on track to deliver phase 2 of the project on time, which is the date you have mentioned, end of December this year.

Dr McFETRIDGE: In the last few minutes left, I will switch to another issue. There are a lot more questions to come on Oracle, I can guarantee that, minister. Part A, the Audit Overview of the Auditor-General's Report, page 13, the South Australian Ambulance Service back pay calculations. On page 13 it says that when the payroll was transitioned 'as is' from the South Australian Ambulance Service to Shared Services, there were numerous errors and an unacceptably high error rate, in the order of 50 per cent. An expense of $18.3 million was reported for back pays.

Minister, can you tell the committee what is happening with recovering that back pay? Is it like the Queensland nurses, where they are going to be hunted down (so to speak) to recover that back pay?

The Hon. J.D. HILL: The advice I have is the overpayments and the underpayments are probably in the order of several hundred thousand dollars in both directions and the agency is working with the responsible agency (Shared Services) to work through how to both recover and obviously make sure that people get their correct pay. Finally, I take this opportunity to thank my officers who have supported me today, particularly John O'Connor, who has been the Finance Director in SA Health now since 2007 and who has announced his retirement from the health department. I would like to wish him well and thank him very much for his outstanding service.

Dr McFETRIDGE: I thank Mr O'Connor for his efforts over the years, too. He is joining a number of other senior executives who have left recently and I wish him well in his consultancy business, or whatever you are doing, John.

Mrs REDMOND: I refer to the Auditor-General's agency report, Part B, Volume 3. At page 967 there is a long list of employees who received remuneration of $100,000 or more, and up above that it says, 'In 2009-10, 57 employees met the $100,000 threshold for the first time.' Why were there so many employees that went up over the $100,000 threshold, given the dire straits of the economy?

The Hon. M.D. RANN: What often happens is that, with bracket creep in terms of wages, people who were on $97,000, suddenly—with CPI and various adjustments—end up being on over $100,000. People see this as there being a whole lot of new people in the department. I understand that a total of 170 DPC employees were remunerated in excess of $100,000 in 2009-10 and 57 employees met the $100,000 threshold for the first time—so the leader is right—and a total of 13 DPC administered employees were remunerated in excess of $100,000 in 2009-10. I am advised that what happened is that most people who were on ASO8—so, they are not part of the senior executive service—because of that bracket creep I mentioned before, went over the $100,000 mark, and hence it appears to be a whole lot of extra people. As far as I understand it, that was the main cause.

Mrs REDMOND: Further down, at the bottom of the column, I note that there was no-one in the $360,000 and above bracket last year but, this year, there are two people in that bracket and, indeed, one in the $400,000 and above bracket. Can you tell us who they are and why they are earning over $360,000 a year?

The Hon. M.D. RANN: I am always interested in who is earning more than both the Premier and the Leader of the Opposition, given our awesome responsibilities. I imagine one of them would be Chris Eccles, who is the CEO, and Warren McCann in his role in public sector reform. We will get you a report on the others.

Mrs REDMOND: I refer to page 987 of the same volume. This is a different group of people. We have the remuneration of employees on that page as well. Can the Premier advise whether any other staffers from his office receive greater than the 9 per cent standard superannuation, such as the 26 per cent superannuation received by Nick Alexandrides? If so, how much do they receive?

The Hon. M.D. RANN: The ones you are referring to are mainly judges in the Industrial Relations Court. A whole range of functions were put over into the Premier's department, under the DPC, that had not been there before. So, we basically had the industrial relations and a range of other areas—I think we had recreation and sport at one stage as well. So, whilst they do not report to me as Premier for administrative reasons, they were just bundled up under the department, which is about making savings and efficiencies.

Mrs REDMOND: That is all very well, but I am really more interested in why anyone gets 26 per cent superannuation and whether other ministers allow their staff to get 26 per cent superannuation.

The Hon. M.D. RANN: Of course, some people come into positions with substantive positions that were held in the department for many years, but I am happy to get a report for the leader.

Mrs REDMOND: I will look forward to reading it. I refer to page 1528, which is in the Department of Trade and Economic Development. Of course, one of the portfolios that you are being scrutinised on is that of economic development. I note that there is a significant drop in the overseas trade representation figure on that page. Towards the top of page 1528, under 'supplies and services', the figure goes from $586,000 to $2,000 in the current year. What is the explanation for that?

The Hon. M.D. RANN: Are you referring to the department of industry and trade?

Mrs REDMOND: Trade and economic development. I assume that since you are appearing here as, amongst other things, the Minister for Economic Development, I could ask you about economic development.

The Hon. M.D. RANN: The Minister for Economic Development, but the department of trade and industry does not report to me. However, I can ask the head of that department to come and sit beside me. When we were elected we discovered that the Liberal government had set up an office in Washington and, I think, New York; it was an extraordinary amount of money for virtually zero return, so we closed them. We also found that an office had been set up by the Liberals in, I think, two places in Indonesia—certainly in Jakarta, and maybe in Bandung, from memory, where the guy who was the South Australian rep used to wear a gun in a holster around his leg or something. We closed those down. What we do is put—

Mr Bignell interjecting:

The Hon. M.D. RANN: Yes; SA Water as well, which seemed odd.

Mrs REDMOND: Have these all closed in the last 12 months?

The Hon. M.D. RANN: I was explaining that what we do is go through and make substantial cuts; we make cuts where we believe we are not getting value for money. We do a review, and the department has taken some big hits.

Mrs REDMOND: Those cuts where you were not getting value for money, do they include the cuts to CITCSA, the Council for International Trade and Commerce South Australia, which represents 40 chambers of commerce?

The Hon. M.D. RANN: CITCSA was cut in the last budget round on the basis of an evaluation of priorities. It would be good to be able to fund everything, but I guess in government you have to make hard decisions. Sometimes it is really important for organisations to, basically, show where they have made successes.

Mrs REDMOND: I am a little confused, Premier; are you saying that CITCSA did not give value for money?

The Hon. M.D. RANN: What I am saying is that we have made decisions which are hard ones, and they include the cuts to CITCSA.

Mrs REDMOND: If it did give you value for money—and I submit that it did, given that your $200,000 per annum investment returned $80 million in exports to this state—why would you say that was a priority of your government, to remove that $200,000 of funding?

The Hon. M.D. RANN: My challenge to the Leader of the Opposition is to demonstrate what that $80 million was made up of.

Mrs REDMOND: I will happily have Nick Begakis and Leon Coppins tell you about it, if you would like to meet with them and explain why it was either not value for money or it was not one of your priorities in trying to increase the exports of this state.

The Hon. M.D. RANN: You have made a big call in terms of $80 million; it would be interesting to see you substantiate it.

Mrs REDMOND: I am taking that figure, Premier, from figures given by those two gentlemen in speeches at the Czech Republic Independence Day celebrations last Friday night. You may not think that is an appropriate source, but that is what they said was the value of the CITCSA organisation for the $200,000 investment that the government was making until defunding it.

The Hon. M.D. RANN: If the private sector was making $80 million out of the work of CITCSA then presumably the private sector would fund CITCSA the $200,000 needed, as opposed to it being a function of government. That is why I have a question mark over the authenticity of those figures; I would like to see them substantiated. If they were substantiated, if a chamber of commerce was making that sort of money, $80 million of exports, out of its work, then I would imagine it would easily be able to fund it itself, given that the message from the Liberals over the years has been that government should get out of the way of business.

Mrs REDMOND: Premier, the message from you, or at least from your minister, the Hon. Mr Koutsantonis, at the CITCSA annual dinner this year was very supportive of the existence of and the work done by CITCSA.

The Hon. M.D. RANN: I am sure that CITCSA has done a tremendous job over the years. That is not the question. The question is whether the taxpayer should pay for it. Given its spectacular success of the claim of $80 million, I would imagine that just a trifling proportion of those export profits could be directed to CITCSA.

Mrs REDMOND: Can I ask whether any of your trade missions overseas have ever involved any input from CITCSA?

The Hon. M.D. RANN: I am sure they have. My trade missions have generally involved going to India, China, the United States and Britain, and usually the work is done both by the department, and by our representatives in China and our representatives in India—we have Mr A.K. Tareen, who is doing a spectacular job—and I think the results can speak for themselves, given that one of the main aims of going to India was to increase the number of overseas students. Since we targeted India, and I am the first premier to have done so, there has been an exponential increase in Indian students. I guess it is the same with our drive to recruit overseas students from China. We have gone from about 6,000 overseas students at the start of last decade, to about 34,000 to 35,000, with growth projected to go to 60,000. It is already our third biggest export.

Mrs REDMOND: In response to that answer can I ask a further question; that is, if the results of trade missions speak for themselves, and, according to Nick Begakis of the CITCSA organisation, this budget and the removal of the CITCSA funding and the removal of the people from the department will mean that we have no capacity in this state for trade missions, either inwards or outwards, what is going to be the effect of that?

The Hon. M.D. RANN: That is just not true. There will still continue to be trade missions; they will be targeted. It is interesting that you are asking these questions when you know that they come under another minister's line, but that is fine. The fact is that they will be targeted trade missions. As I say, if CITCSA is responsible for $80 million worth of exports in a year then the loss of $200,000 of taxpayers' subsidy would be totally incidental to its existence, because companies would be lining up to put in money.

Mrs REDMOND: Perhaps we will move onto another topic. On page 949, Interpretation and Analysis of the Financial Statements, I notice that the employee benefits have increased almost 10 per cent from $83 million—a lot more than $200,000—last year to $91 million this year. Can the Premier explain why there is an almost 10 per cent increase in employee benefits in the Department of the Premier and Cabinet for the current year?

The Hon. M.D. RANN: I will check those for you. There are TVSPs from last year in there, but we are just seeing if we can give you some more information on that. I understand that it is a combination of inflation, TVSPs and also movements in the valuation of long service leave, but we can get more details for the honourable leader.

Mrs REDMOND: I would appreciate that, Premier. Still on the same page, knowing that the government is really hot on the compliance with Treasurer's Instructions, what explanation can the Premier give about the indication on that page on the implementation of Treasurer's Instructions 2 and 28? There is a fairly long explanation that:

In 2008-09, audit reported that although the department—

so, that is the previous year—

had undertaken work to identify its existing policies and procedures, the documentation of those policies and procedures had not been completed. In addition, a framework had been established for the adoption of the financial management compliance program, but the program had not been actioned.

Then, a year later, it is still not in place and the compliance program has still not commenced. What is the explanation for the delay, given that other people lose their jobs for failing to comply with treasurer's instructions?

The Hon. M.D. RANN: In terms of compliance with Treasurer's Instructions 2 and 28, Treasurer's Instruction 2 requires public authorities to develop, implement, document and maintain policies, procedures, systems and internal controls to assist chief executives with their financial management responsibilities. Treasurer's Instruction 28 requires public authorities to develop, implement, document and maintain a robust and transparent financial management compliance program. A financial management toolkit was issued with Treasurer's Instruction 28 to assist chief executives with the identification of their financial management responsibilities.

The department made significant efforts in 2009-10 to meet the requirements of Treasurer's Instruction 2 and Treasurer's Instruction 28. In particular, a financial management compliance framework was developed. Implementation is ongoing and is subject to review in 2011-12. The department has assessed compliance requirements and prioritised a list of policies and procedures according to the business risk associated with each item. Policies and procedures relating to taxation, bank reconciliations and assets are the primary focus.

A new web-based policy portal is being developed to help with compliance by ensuring policies and procedures are readily available. This portal is planned to be available by the end of 2010. A draft compliance testing program has been developed. Currently an online tool is being investigated that can be integrated with the policy portal to facilitate the implementation of this program during 2010-11.

Although a comprehensive compliance program was not implemented in 2009-10, there were a number of activities in place to achieve the department's compliance objectives. These include:

Audit and Risk Committee. The Audit and Risk Committee reviews compliance requirements and activities on at least a quarterly basis.

Internal audit. One of the objectives of all internal audit projects was to ensure compliance with relevant government requirements. Internal audit reports alert management to any compliance issue that may arise during the course of the audit.

Shared Services SA. The department's corporate affairs branch is regularly liaising with Shared Services and compliance issues from both sides are identified, discussed and rectified.

So, a whole range of measures are underway to ensure compliance.

Mrs REDMOND: Premier, the concerns were raised a year ago and it is still not in place. I take it from your answer that you are saying, 'Notwithstanding that, we've put in place some other things to make sure that everything is hunky-dory.' Why did this Audit and Risk Committee not identify that there had been a failure to segregate the duties of receipting and reconciling moneys for SafeWork SA if they are so good at covering the gaps until you get your systems in place?

The Hon. M.D. RANN: Internally, that was recognised and addressed, and we are in the process of making sure there is more fulsome compliance in the future.

Mrs REDMOND: How can you say it was recognised and addressed if one of the concerns that the Auditor raised was 'for SafeWork SA to review the lack of segregation of duties for receipting and reconciling moneys received'?

The Hon. M.D. RANN: I mentioned to you before that, in terms of the range of initiatives that have been addressed, obviously that audit report for SafeWork will be addressed seriatim.

Mrs REDMOND: On page 968 of the same volume, a few lines from the top of 'supplies and services', which is a continuation from earlier items, there is 'general administration and consumables'. For some reason, general administration and consumables goes up considerably from $4,840,000 to $8,501,000. What explanation is there for that dramatic increase in general administration and consumables?

The Hon. M.D. RANN: I will get you a report on that. I understand that we had a whole range of things in the portfolio that come about because of WorkCover, industrial relations and so on, and that a number of things were listed where in fact we recover the money—like medical panels in relation to WorkCover. We can give you a full report on that.

Mrs REDMOND: I appreciate that there is a number of things involved, but why such a dramatic increase?

The Hon. M.D. RANN: There is a range of other things including an across-the-board settlement involving state records on copyright and a range of other issues, but we will get you a full report. It is quite a simple explanation. It is about money that is actually recovered in other areas.

Mrs REDMOND: Thank you, I will look forward to the report. Just a few lines further down there is quite a significant increase also in contractors and consultants from $4,608,000 up to $6,783,000. Is there an explanation for that dramatic increase?

The Hon. M.D. RANN: We will give you a report on, say, all consultants above $10,000.

Mrs REDMOND: Further down on the same page under grants and subsidies in item 8 there are several I wanted to ask about. In particular, I notice that the Aboriginal community assistance grant, I assume it is, has gone down significantly to more than half of its value—$4,231,000 down to $1,000,873. Is there an explanation for that?

The Hon. M.D. RANN: It is basically that it will appear in another line. It is to do with some things that were transferred over to Families and Communities. It appears as things like Better Pathways; they just have different names.

Mrs REDMOND: Is the Premier indicating that, although it is in different places and under different names, the Aboriginal Community Assistance Program in the generic sense of those words is still receiving the same funding as it was?

The Hon. M.D. RANN: They are certainly receiving funding. We can give the actual figures. But what has happened is that there are just different names for something that was under a different umbrella description. We can get you a report on that.

Mrs REDMOND: I understand that you are saying it has been transferred to other projects, what I am trying to get at is: is the same amount of money being basically applied to the same activities, albeit in specific names?

The Hon. M.D. RANN: Given that we have been over time putting in a lot greater effort into Aboriginal engagement, I am sure that would be the case, but we will check and give you a report on it.

Mrs REDMOND: On the very next line, I am sure the same does not apply to the Adelaide Symphony Orchestra operating grant. What is the explanation for the significant drop in the grant funding for that?

The Hon. M.D. RANN: We will take that on notice.

Mrs REDMOND: Well, we will keep going. A couple of lines further down is the Department of Health, which did not have any figure for it last year but suddenly there is $1,374,000 under Premier and Cabinet, and I am curious as to what it is in Premier and Cabinet that requires a payment regarding the Department of Health?

The Hon. M.D. RANN: Are you referring to the $1,374,000?

Mrs REDMOND: Yes.

The Hon. M.D. RANN: It is the relocation cost to move out of the Glenside property as part of the Adelaide Film and Screen Centre in 2009-10. As you would be aware, the construction of the Film and Screen Centre is now very much under way, and I am looking forward to opening it next year. It is to do with the relocation costs.

Mrs REDMOND: I will assume that you may wish to give these on notice, but could I also get explanations for why there is a significant drop in the funding for the International University Precinct project and, concerningly, of the Aboriginal community essential services assistance on the next page? It is a continuation of item 8, about halfway through the section on item 8 on the next page. It goes from $2,976,000 million down to $344,000, and also Breaking the Cycle goes from $564,000 down to $43,000. I am happy if you take them on notice, but I would like to have an explanation as to those.

The Hon. M.D. RANN: In terms of the university city, when you look at what we have been doing, which has been all about the badging of Adelaide as a destination for overseas students, it is extraordinarily helpful, when we are marketing ourselves as a university city, as an education city, in terms of attracting overseas students. We have been spectacularly successful to be able to say that, in addition to the three existing universities, we have had things like the Royal Institution of Science (which is the first time the RI has gone outside of Britain and 220 years), or the University College London. Of course, in places like India it is well known because not only is it number four in the world, but one of its alumni was Mahatma Gandhi. We also have Carnegie Mellon—top universities—and, hopefully, in the next few months there will be another university announcement as well. Because it has gained its own momentum, it is not necessary to maintain the unit at the existing strength.

On the other issue of Aboriginal Affairs, that money now appears in a different line under fuel purchases, under community infrastructure on page 968, and that has gone up. Rather than being a cut, it is actually an increase in funding; it just has a different title.

Mrs REDMOND: Yes, I saw that community infrastructure has gone up to just over $5 million. So you are saying that community infrastructure is going to take care of the whole of the Aboriginal community essential services assistance?

The Hon. M.D. RANN: It has been transferred from one line to another, because we have taken on responsibility for running the power lines and infrastructure in the APY lands. You would be aware that for years there was a run on oil, and with a combination of working with Amanda Vanstone in her role as the federal minister for Aboriginal Affairs, they provided a power station, we provided the reticulation, which was about well over $20 million, and the power station was probably about $10 million, and we have taken on responsibilities for running that.

Mrs REDMOND: I assume that this might be the last question. I refer to page 955 of the same volume. I notice that in the budget the net result for the cabinet office was $7.1 million for this year, but in this document the disaggregated disclosures show a net result of $7.6 million for this year. Why the difference between $7.1 million and $7.6 million? It is only half a million dollars. I know the Treasurer thinks $100 million does not matter between friends, but half a million matters to me and to people like CITCSA.

The Hon. M.D. RANN: The $100 million certainly did not mean much to the former Liberal government, which handed over $100 million to a group of consultants to sell ETSA straight after it promised the people of the state it would never do so—$100 million for a group of consultants, which is the biggest consultant pay out in history by the Liberal government. I will get a report on it. I would imagine it is a commissioning of a report, or something like that. We will check it out.

The Hon. I.F. EVANS: Volume 5 of the Auditor-General's Report, page 1685, deals with ForestrySA dividend; Volume 4, pages 1172 and 1173, deals with ForestrySA generally. I am just trying to get some more detail on exactly what is in the budget in regard to the sale of forests. In the Mid-Year Budget Review, you say that the amount for the sale of the forest is on a 'business as usual' basis. A 'business as usual basis', I would assume, means that ForestrySA is getting money from the sale of all of the rotations. So, is the amount of money in the budget for the sale of the forest based on one rotation, two rotations or three rotations?

The Hon. K.O. FOLEY: An amount for the sale of the rotations is in the forward estimates. It is in 2011-12. I will not disclose to the house the figure, for obvious reasons. As I said in the house today during question time, we have not finalised, we are still waiting on advice as to whether we sell forward two rotations or three rotations. Again, for commercial reasons, I do not want to go into public discussion on that. As I also said today in the house, we have undertaken scoping work on it; in fact, I will be having discussions with Treasury in the next week or so about where we are at. We are doing some impact statements.

The important point here—and particularly with the member for Mount Gambier being with us—is the government is not selling the business. ForestrySA will remain the entity which the purchaser of those timber assets will be contracted to, supplied to ForestrySA. What we are doing is selling forward the timber rotations to maximise a lump sum payment by which we can reduce debt. As I said in the house today, it is in the budget (a figure) and we will make public exactly the final process. We have undertaken scoping work. We are now doing other local impact work to ensure we comply with all cabinet requirements and then we will make the decision.

The Hon. I.F. EVANS: I will go through it one by one. My understanding is that no land will be sold. I think the government has made that clear previously. If ForestrySA is going to continue (in your words) to own the business, does that mean that ForestrySA is going to continue to own the land and the trees, and the only thing that is going to be sold is the harvesting right at a period in time when the trees have reached their economic growth limit for sale?

The Hon. K.O. FOLEY: Those details have not been finalised as yet. Again, it is premature for us to say exactly how we will proceed with the sale of the rotations until such time as we have finalised a position.

The Hon. I.F. EVANS: I do not understand why you as Treasurer who is selling the forest and the adviser cannot give us more detail, because two years ago in the Mid-Year Budget Review you advised the house that the Mid-Year Budget Review estimates are compatible with ForestrySA continuing on a business as usual basis. A business as usual basis means that ForestrySA has available to it the proceeds from all forward rotation sales.

Did we put in the budget a figure based on the sale of one rotation, two rotations, three rotations or four rotations? You must have picked a range because someone somewhere has made a judgment about a range of figures and they have put them in the budget. I do not want to know the figure, I understand the commercial confidentiality of the figure, but if it is business as usual, then one assumes that it is all rotations, not just one or two.

The Hon. K.O. FOLEY: These are rotations in their individual cycles of 30 years. We have a figure in the budget for a number of rotations which I am not going to share with the committee. We are getting advice. Initially we were selling two rotations. There may be more value in a third rotation, but it is business as usual for ForestrySA. Nothing will change with ForestrySA. It is about who owns the trees and about the timber which will be contracted to ForestrySA, and they will operate as they have in the past.

The Hon. I.F. EVANS: Let me clarify that. ForestrySA will not own the trees. As part of the sale process, ForestrySA will not own the trees for 30 years. You just said that it is about who owns the trees and who gets the harvesting rights. Now they are two distinct and different issues. Can you clarify to the committee: is it the intention that the trees are going to be sold, owned by a private operator for 30 years and then harvested, or is it to be that ForestrySA is to own the trees for 30 years and then you sell the harvesting right at 30 years? Which option is it?

The Hon. K.O. FOLEY: You have to sell something. I mean, honestly, you are missing the point: we are selling the trees. You have to sell something, you cannot just sell a picture of them, but the part of the deal will be that ForestrySA will manage the plantation and it will choose its harvesting arrangements. I am not sure what its current harvesting arrangements are, but that is a separate deal altogether. It will be business as usual. Again, I do not know who will come forward to buy the trees, but my guess is a super fund or someone looking for a government-guaranteed business. It will be an attractive product for various fund managers, I guess.

ForestrySA will continue to manage the plantation on behalf of the owner and continue to harvest and contract, whoever it does in its normal course of business, the harvesting rights. So, the only difference in the whole operation will be that, instead of timber plantations appearing on our balance sheet, or on our books, we are transferring the ownership to the private sector for an up-front payment, but ForestrySA will remain the manager of that plantation under the agreement, and it will be business as usual. So, in a sense, it is a balance sheet transaction and should not affect the operation of ForestrySA at all.

The Hon. I.F. EVANS: As to when the trees are harvested, will that be a decision of the owner or ForestrySA as the manager?

The Hon. K.O. FOLEY: That would be a matter of an agreement between the owner of the asset—the timber—and ForestrySA. If it is a commercial purchaser, he, it, or whatever you want to call it, will operate in a commercial manner. I assume that ForestrySA now has various arrangements and tenures for its harvesting rights, for whatever is in its best commercial interests. It would be a matter between the owner of the timber and the business itself.

The Hon. I.F. EVANS: Moving onto a slightly different topic, Volume 2, page 589 of the Auditor-General's Report talks about the new RAH PPP. Previously, you have mentioned that there was an option for the state government actually to make a capital contribution towards the RAH as a way of lowering the PPP payment. Has that decision been taken and will the state government be making a capital contribution as part of the process, or will it be totally funded by the tenderers?

The Hon. K.O. FOLEY: As we have always said with the PPP, it has to provide value for money for the taxpayer. The whole process of a public-private partnership is that it has to be value for taxpayers. If the bids cannot beat what would be the public sector comparator or building it ourselves with a build-and-construct contract, you would have to consider whether or not it is worthwhile going forward with the PPP.

What we have also said on the public record to date is that global financial markets have been in turmoil and are still in a degree of turmoil. I think the Premier might have said today in a meeting that, when you dodge a bullet—as Australia would appear to have done—people do not think there was a bullet shot. There was and we dodged it, but most of the world has been hit with it. Equity and debt in the international financial markets reflect the cost of borrowing. It is no secret that the cost of borrowing internationally is higher than it would normally be in a normal balanced considered financial environment.

I have said repeatedly, and I am happy to say it again today, that one of the options always open to government will be and could be—and it may not be—for the government to provide a capital grant to the project or, indeed, we could choose to become (and I will save Hansard the trouble of my using the technically correct Latin term) one of the financiers of the project in the financial consortia.

Those decisions have not been taken. We are still analysing the value-for-money case put forward in these respective bids. This is an incredibly tortuous and lengthy process, but we believe that whatever we finally land will be a superior outcome to what would be the case had we gone about it as a normal government-build project. However, we will have to wait and see, and I have to be very careful what I say on those issues, given that we are still in the middle of evaluating these tenders.

The Hon. I.F. EVANS: Have there been any discussions with the commonwealth about contributing to the new RAH? If so, what was the nature of those discussions and what decisions have been taken there?

The Hon. K.O. FOLEY: We have certainly not approached the commonwealth for a capital contribution towards the project. Under the new health agreement—assuming it all gets sorted out, because there are still some anomalies, and it depends on whether or not your federal colleagues in Canberra support the legislation—assuming that it goes forward in the way former prime minister Kevin Rudd and Nicola Roxon put forward, the commonwealth, going forward, would pick up 60 per cent of the cost of the capital servicing component of the PPP.

The Hon. I.F. EVANS: So that this poor layman can understand it, that 60 per cent of the cost of capital, is it 60 per cent of the borrowing cost of the tenderer, loan and interest repayments, or is it 60 per cent of the government's costs if it borrows?

The Hon. K.O. FOLEY: These things have not been finalised because we are still in discussions with the commonwealth about how this will land. Some states are doing PPP and some are not, so we have to sort that out. However, we would expect that the commonwealth would pick up 60 per cent of the financing costs of the project and 60 per cent of the depreciation value of the project.

The Hon. I.F. EVANS: Does that include this project, the RAH? The legislation has not yet been signed off federally and you have not signed off yet on the tender, so is it your understanding that, once we sign the tender—if the legislation goes through as Kevin Rudd intended—then, even though our tender might be signed before the new health agreement takes effect, the costs as you just described them will be covered by the commonwealth?

The Hon. K.O. FOLEY: That switchover point will occur at the point we lose 30 per cent of our GST. I think that is initially put down as the 2014-15 financial year. Of course, the project will be under construction by then, and if it is a pure PPP there will be no government contribution prior to that—depending, as I said earlier, on whether or not we choose to be a part-financier of the project, given the issues I raised about the global financial markets. We would have to pick up those costs until such time as we reach the switch point, which is when they take the GST from us—or when we give it to them, that may be a better way to describe it. I am also advised that there are some transitional provisions envisaged prior to the 2014-15 handover, so it may be that there are some transitional obligations taken up by the commonwealth, but as yet that has not been finalised.

The Hon. I.F. EVANS: Could those transitional obligations be payments to the state?

The Hon. K.O. FOLEY: I am told that there is likely to be a transition period on the GST, but the agreement with the commonwealth is that it is on a no worse off basis. Hopefully—you never know, you might be sending me a thank you card in three years' time, and you will be sending me a thank you card for a lot of things we have done, just quietly, if there was to be a change of government—the commonwealth—I lost my train of thought then when I was giving that gratuitous—

The Hon. I.F. Evans interjecting:

The Hon. K.O. FOLEY: Yes, all right. What we are hoping is that over time, from 2014-15 onwards, the health systems embedded in each state will have a growing contribution from the commonwealth, because the reality has been, all the way through, as long as the Liberal Party were in office and I am sure back in the Bannon days, but certainly in the past 10 years, that the state's capacity to meet the rising health cost means that we have to undertake massive surgery in other parts of the budget, and that is what we are seeing in this budget.

The Hon. I.F. EVANS: I move on to Auditor-General's Report, Volume 2, page 590, which is the commonwealth health and medical research centre. Is the commonwealth payment for the health and medical research centre still $200 million, or has it increased; who is responsible for any blowout in the construction cost; and is there any GST clawback on this particular project? Is it one of those projects where we get the money up-front and then there is a GST adjustment in following years?

The Hon. K.O. FOLEY: I will take the last question first. You are right, this is something that we are battling consistently with the federal government when out of the kindness of their heart they choose to give us a lump sum payment, but under horizontal fiscal equalisation we can lose up to 90 per cent (sometimes) of the grant that we get from the commonwealth. I have trouble explaining that one to my colleagues at times when they think the commonwealth is being generous, and I guess that from a commonwealth point of view they are, but under HFE it gets washed around the system.

We have been able to have this project quarantined from that arrangement because it will be a payment from the commonwealth directly to the South Australian Medical Research Institute (SAMRI) which will not be on the state government's balance sheet. The issue of cost overruns—we would be hoping that there will be no cost overruns. If there were to be cost overruns that would be a matter for the commonwealth and, I guess, the state to address. We are advised that the costs that they have included have been very well tested.

The Hon. I.F. EVANS: I have a similar question but on the Adelaide Oval. Given that the Adelaide Oval grant will be coming straight to the state government and not to SACA, will that mean that there will be GST clawback on any money given by the federal government for Adelaide Oval? With the desalination plant the grant comes to the state government, and there is clawback because it is a contributed asset. You have just advised us that on the other project where the grant goes direct to the research centre that it is not a contributed asset in that sense and therefore GST clawback does not apply. So, will there be GST clawback on the Adelaide Oval grant?

The Hon. K.O. FOLEY: Of course, one is assuming we get money from the commonwealth. However, hypothetically, if we do (which means we have to win the World Cup) there might be a little bit of clawback, but you need to put that in the context that the large generosity of the national government is that all states will be given a similar amount of money. My understanding is that all participating states will be offered up to a certain amount of money, consistent around the states. I am not sure if the ACT is in the mix. We might lose a little bit through washing it out through HFE but, given that most states will be getting it, it would be a small impact.

The Hon. I.F. EVANS: I refer to the Auditor-General's Report, Volume 5, page 34, which talks about the Convention Centre. This is the issue that has been raised in other committees, but no answer as yet has been given. The election commitment listed this particular grant as a recurrent funding payment in the general government sector. Is this still a recurrent funding payment in the non-financial public sector and what is the impact on the forward estimate years?

The Hon. K.O. FOLEY: We have provided and will be providing this money as an equity injection. You have two ways of making these contributions: you can either make a capital grant or you can make an equity injection. The rationale for this is that the debt still accrues on the state's balance sheet, so the debt is still there.

The Hon. I.F. EVANS: Is that the non-government sector or the general government sector?

The Hon. K.O. FOLEY: It appears in the general government sector because we are providing the debt, so we incur the debt. Because of the nature of the operations of the Convention Centre, they will not be in a position to fully service this amount, and an equity injection seemed a sensible thing to do.

The Hon. I.F. EVANS: I refer to the Auditor-General's Report, Volume 2, page 636, which talks about HomeStart finance borrowing. The Auditor-General notes that HomeStart finance has increased its borrowing limit from $1.35 billion to $1.75 billion. Is the HomeStart debt included in the general government sector debt or the other sector debt, and how much HomeStart debt was written off in 2008-09 and 2009-10?

The Hon. K.O. FOLEY: On the earlier question, I should also say that the other reason we put an equity injection into the Convention Centre was for their own accounts as well, because if we provided a grant that would come on their books as revenue and they would be seen to make a $300 million profit, depending on what years they came in. It just seemed to us to be a cleaner way to do it, but money is money; it is the same effect.

In terms of HomeStart, I will come back to the house with moneys that have been written off, but my advice is that it has been minimal in terms of their balance sheet. The HomeStart debt appears in neither the general government sector nor the non-financial sector as a financial business such as the Motor Accident Commission or WorkCover. It appears when we consolidate the total government debt, which appears no doubt in our annual financial statements.

The Hon. I.F. EVANS: Audit Overview on page 13 raises the issue of Shared Services SA. It raises the issue that there was a 50 per cent error in the back pay of ambulance officers, and this incurs a tax and superannuation problem for the ambulance employees. Firstly, how can Shared Services be so incompetent to have a 50 per cent error? That is a huge error rate in back payments. Secondly, what is being proposed to solve the tax and superannuation problems of the individual employees as a result of this 50 per cent error of Shared Services SA?

The Hon. K.O. FOLEY: I do not agree that it demonstrates incompetence. What it demonstrates is that—

The Hon. I.F. Evans interjecting:

The Hon. K.O. FOLEY: You know, as a former cabinet minister—and I am sure you could both privately and publicly recall many incidents where in large organisations shit happens, and—

Mr Marshall: So that's the technical term for this?

The Hon. K.O. FOLEY: The technical term for this. What we are doing in the exercise of Shared Services is we are undertaking a massive reform of the state public sector. We are taking 52—

The Hon. I.F. Evans interjecting:

The Hon. K.O. FOLEY: Yes—52 agencies where we are taking all of their payrolls and a large number of their back office operations. What has occurred, unfortunately, in a few cases—and the ambulance would appear to be the most acute—is that not only has the error been made from officers within Shared Services as that has been amalgamated, but there have also been problems with data transfer and records kept by existing agencies.

One of the great benefits of Shared Services is that you will get a common platform, a common methodology and a common system of payments. The reality is that, among the vast array of government agencies, as you would recall as a former minister, there are all different ways of managing payroll, and it would be fair to say that some of the agencies were pretty ordinary in the way they had managed payroll. It is very unfair to single out Shared Services for error without acknowledging—

The Hon. I.F. Evans: Super and tax? What's happening with super and tax?

The Hon. K.O. FOLEY: Yes, I will come back to the house with a considered answer, because I think we are still negotiating our way through those. I am advised that the taxation issues are relatively simple and are being sorted out. The super issues are being sorted through with SuperSA on a one-on-one basis to get them reconciled. But it is not unexpected that there would be glitches. If you have a look at what occurred in Queensland, I think you could call that incompetence where nurses were not paid for weeks if not months. It is not surprising, whilst unfortunate, that these things do not go as smoothly as one would like. This is a significant reform, and I reckon if I was to go back through my 17 years in this parliament, you and I having joined the same day, I bet you they have buggered up our payroll in this joint a few times. We probably do not even know about it. They probably owe us money.

The Hon. I.F. EVANS: If they owe us money, Treasurer, I am happy for you to look at that and forward through the appropriate correction. Auditor-General's Report, Volume 5, page 1690, talks about the $33 million error. Can you explain how Treasury simply forgot or did not account for the cash transfer to Consolidated Account?

The Hon. K.O. FOLEY: That was an easy hit on a Sunday.

The Hon. I.F. Evans interjecting:

The Hon. K.O. FOLEY: Yes, I was just wondering why he didn't pick it up earlier.

The Hon. I.F. Evans interjecting:

The Hon. K.O. FOLEY: Have you really? I look forward to it. In late June 2009, there was a transfer of $80.102 million from the surplus cash working account to the Consolidated Account in accordance with the cash alignment policy. That is something I brought in, incidentally, a reform that did not exist under the former government. Included in this—

The Hon. I.F. Evans: I think your agency couldn't get it right.

The Hon. K.O. FOLEY: Well, if you want to be critical of Treasury, go right ahead, but, as I said, mistakes occur in government.

The Hon. I.F. Evans: I wasn't being critical, I was just repeating what he said.

The Hon. K.O. FOLEY: Oh, well; if I look back on some of your bureaucracies, Mr Evans, there were plenty of stuff-ups by your departments under your administration. Included in this transfer was $33 million from the industry finance assistance account, which was an administered fund. The transaction was approved by myself and the cash was returned to the Consolidated Account prior to 30 June 2009 in accordance with the Treasurer's approval. The $33 million in cash was correctly transferred between the bank accounts, accurately recorded in the Treasurer's account. The receipt of the $80.102 million is recorded in the Consolidated Account receipts, Statement A, page 6, 2008-09 Auditor-General's Report, Volume 6. The general ledger journal reflecting the $33 million cash alignment transfer between these administered funds was not processed in 2008-09 and was subsequently processed in 2009-10 as a prior period adjustment, as it is related to the previous financial year.

The error in the general ledger was identified by the Department of Treasury and Finance in September 2009 through departmental internal controls, and the correcting general ledger journal was processed in 2009-10. We identified the error ourselves because we have good internal controls. The $33 million in cash was never lost or missing. It was always in the correct bank account, and it was simply the general ledger that required updating, so that the $33 million cash was recorded against the correct account.

The $33 million error correction disclosed in the 2009-10 financial statements was to ensure that the operating balance for equity correctly reflected the $33 million cash transfer that occurred the year before. Given this involved a transfer of cash between two treasury accounts, there was no overall impact on budget outcomes. The Department of Treasury and Finance is reviewing its processes in relation to processing the return of surplus cash to the Consolidated Account to ensure that the appropriate journal entries are recorded in the accounts of the entities impacted by the transfer. The Treasurer will be advised when this process has been completed. As part of the 2009-10 year-end process, all surplus cash working account journals for DTF-related entities were checked and have been verified. Does that answer your question?

The Hon. I.F. EVANS: It does. I have one last question. Can you update the committee on who leaked the Sustainable Budget Commission report?

The Hon. K.O. FOLEY: Oh, yes. I think we are getting close. The bloodhounds are still sniffing. I am not going to give you any story out of this, Greg Kelton or Michael Owen, if you are listening. Analysis of the computer data has assisted the government investigator with several lines of inquiry. It sounds like The Bill, doesn't it—'several lines of inquiry'.

Interviews have been conducted with a number of employees and follow-up interviews have been conducted with several. The investigation phase is now almost complete. The government investigator plans to conduct interviews this week, commencing 25 October 2010 (yesterday), with one or two more employees who could not be interviewed last week due to work commitments. He will then prepare a report to the Crown Solicitor on the outcome of the investigation. The Crown Solicitor will advise the government concerning the outcome and any recommended action. I have not been interviewed or considered as a suspect.

Mr HAMILTON-SMITH: My first question is on defence, and it relates to page 267 of the Auditor-General's Report. I know I asked some questions about this during estimates, so I am just seeking further information, or an update at least if the situation has changed. What is the name of the existing Defence SA contractor which was awarded the $18.6 million site preparation works project for stages 3 and 4 of Techport Australia which was mentioned in the Auditor-General's Report?

The Hon. K.O. FOLEY: I have no idea. I may have been advised, but I have forgotten, which I apparently do occasionally. We will come back to you as soon as we can on just who the contractors were.

Mr HAMILTON-SMITH: Can you also advise whether there was any other work that this contractor was performing for that or any related project? I think the point the Auditor-General makes is that you used an existing contractor for this work.

The Hon. K.O. FOLEY: They often do that. It may well have been that they were doing work on the general Techport project and it was appropriate to assign them a further piece of work. The one thing I do know, with Andrew Fletcher and his team, is that probity is absolute, but I am happy to get an answer for the member.

Mr HAMILTON-SMITH: Why were the requirements of DPC Circular 28—Construction Procurement Policy Implementation Process not adhered to in this case and why was DTI not engaged to carry out the work and has an exemption now been provided?

The Hon. K.O. FOLEY: Again, I will get a more detailed answer. I do not have anyone here from Defence, I am sorry. What I will say is that I guess (it always worries my staff when I guess), and to the best of my recollection, Defence SA, particularly with both Andrew Fletcher and his team having the skill sets to do that work and administer that work from within Defence SA, chose not to use DTI, but I will get a full answer for the member.

Mr HAMILTON-SMITH: Can the committee take it that the system will now change to that required by DPC Circular 28?

The Hon. K.O. FOLEY: I will get clarification on that, but Defence SA operates its own contracting arrangements. I will find out whether a permanent solution has been put in play to that or whether or not it is seeking exemptions as it goes along.

Mr HAMILTON-SMITH: In regard to competitive tender process, which I think is a point the Auditor-General was hinting at, why did Defence SA, in this case, not invoke a competitive tender process and what action has been taken since to ensure that there is not a recurrence of that?

The Hon. K.O. FOLEY: I guess it is not unusual for there to be comment by the Auditor-General on matters relating to practices that do not fully align with what would occur in the normal public sector. In relation to Defence SA, with its own board and senior private sector expertise (as we had that discussion about the Motor Sport Board, with some of its contracting arrangements and the way in which it presents its accounts) both are right. I will get a fulsome answer for the member, but I would guess that they may again sit in this situation where what Defence SA is doing is correct from its charter and it might be at variance with the public sector norm. But I will get all of that clarified and get a proper answer for the member.

Mr HAMILTON-SMITH: I suppose I could make the point that, in terms of being a model citizen, in compliance with DPC requirements and circulars and Treasurer's guidelines, it would set the right example to all other departments if departments or agencies reporting to the Treasurer strictly adhered to the Auditor-General's requirements. I suppose I am making a point rather than asking a question. I move to the issue of contractors. I refer to page 285 of the report. Why has expenditure on contractors in Defence SA risen from $1.44 million in 2009 to $3.2 million in 2010; and could you name the top 10 contractors? I think this was something I asked during estimates.

The Hon. K.O. FOLEY: I guess again that that would be to do with the work we have been doing with concluding the project which is Techport, but Defence SA also has responsibility for Technology Park. That is a really good story; I must do a Dorothy Dix on that. What we have been able to do with Tech Park in the last 12 to 18 months and various other projects that it is supervising such as DSIC and whatever that other acronym is that we have there somewhere is a really good story.

Mr HAMILTON-SMITH: If you do not have your defence people here, this might need to be taken on notice. I notice that total expenditure on Techport Australia's commercial and educational precincts and the supply precinct, stages 3 and 4, is estimated at a total combined cost of $40.9 million in the budget papers, but in the Auditor-General's Report total expenditure to date was put down as $35 million, with a further $2 million of expenditure forecast in 2010-11. There is a discrepancy of nearly $4 million.

The Hon. K.O. FOLEY: Underspend.

Mr HAMILTON-SMITH: Yes, that is the point. I am asking you: are you expecting an underspend of around $3.92 million on that project?

The Hon. K.O. FOLEY: We will check that, but I can tell you, if there is an underspend, we will scoop it back, we are never short on that. Again it just shows the expertise that Andrew Fletcher and his team have brought to managing these major projects. Andrew Fletcher, having come from the private sector and these large contracting areas, has been able to manage the project extremely well.

Mr HAMILTON-SMITH: Moving to the issue of Victoria Park, which is mentioned in the Auditor-General's Report at page 1,293. Have you had a chance to determine the break-up of that $3 million that was spent on the cancelled Victoria Park? I think you undertook to give us an indication of where those moneys were dispersed.

The Hon. K.O. FOLEY: What I will do is get an answer. I do have to stick to protocol here. I am happy to take the other questions, if you want to hand them to me, and I will get you a written answer on them.

Mr HAMILTON-SMITH: That would be great.

Progress reported; committee to sit again.


At 17:58 the house adjourned to Wednesday 27 October 2010 at 11:00.


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