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House of Assembly - Fifty-Second Parliament, Second Session (52-2)
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Auditor-General's Report

AUDITOR-GENERAL'S REPORT

In committee.

(Continued from 13 November 2012.)

The ACTING CHAIR (Hon. M.J. Wright): We now proceed to examination of the Minister for Education and Child Development. I remind members that you need to be on your feet and that all questions must be directly referenced to the Auditor-General's Report.

Mr PISONI: Minister, I will take you to page 412, 'School audit arrangements'. Are you able to advise the number of schools that do not 'meet the respective needs of the Department and Audit'?

The Hon. G. PORTOLESI: Before I answer that question, which I will take on notice, can I also take this opportunity to introduce Mr Chris Bernardi, Director of Finance and Investing in the department, and Mr Anthony Creek, Assistant Director, Financial Accounting. I will take that question on notice.

Mr PISONI: While you are taking questions on notice on this matter, minister, could you bring back also the areas in which schools are not meeting the respective needs? What needs are not being met by the department and Audit and for how long have those schools been in that position?

The Hon. G. PORTOLESI: Can I ask the member to repeat that question? He wants the information about the schools that are not meeting the audit requirements; is that correct? Is that the first question?

Mr PISONI: That is correct.

The Hon. G. PORTOLESI: What was the nature of your second question?

Mr PISONI: The nature of the second question is the areas of the audit that are not being met by those schools.

The Hon. G. PORTOLESI: I will check to see if we in fact collect and collate that level of detail. If it is available, I am happy to bring it back.

Mr PISONI: The Auditor-General actually says that there are schools that do not meet the respective needs of the department, so surely there is a list of needs. What I would like is the list of needs and what needs are not being met, just to make that clear.

The Hon. G. PORTOLESI: I repeat what I said two seconds ago, that I will do my best to bring back a response.

Mr PISONI: Referring to audits again, on page 413, the report states:

Consequently school financial audits will continue to be conducted by contractors while work on the school audit reform project continues...

Are you able to advise the number of contractors that are working on this project, how much money has been spent on contractors and any future budgets for those contractors in the forward estimates?

The Hon. G. PORTOLESI: Because of the nature of that outsourcing contract, there is quite a bit of information that we will need to pull together, and that is what we will do and bring back a response.

Mr PISONI: At page 414, authority to raise invoices, the Auditor-General concludes that the department and Shared Services SA do not check that invoice and credit note requests are authorised and identified instances where request forms processed were not properly authorised. Is the minister able to advise the house on how many occasions that has happened and the total value of invoices where that has happened?

The Hon. G. PORTOLESI: The department's Accounts Client Services officers check invoice/credit note/debit note request forms for completeness prior to forwarding a request to Shared Services, where the invoices are raised, and it is the department's intention to negotiate with Shared Services SA in ensuring that no request is processed without first being checked and signed by the department's Accounts Client Services unit. We will ensure that all requests are signed by an officer with the appropriate level of financial delegation. I say that by way of general statement. In relation to the more detailed request, we will take that on notice and seek to bring back a response, if that is appropriate.

Mr PISONI: Can you also bring back in that answer how many cartridges were purchased that did not go through the proper authority?

The Hon. G. PORTOLESI: I am happy to bring back a response. It may take some time to collect that information because schools have a great deal of autonomy in relation to what they are able to purchase. I am happy to take that on notice but want the house to note that there is a degree of autonomy in our systems that means it will take us some time to collect that information, if at all.

Mr PISONI: On that same matter, minister, can you advise, if schools do have autonomy to purchase, as you have just claimed, why a memo went out to schools, dated 10 October this year from Mr Gino DeGennaro, mandating that things such as toner cartridges for both metropolitan and regional sites be purchased through Corporate Express or OfficeMax exclusively and that additional mandated items in metropolitan sites are a mandated purchase from these two organisations? Are you able to advise as to whether your office was consulted, firstly, about Mr DeGennaro's memo and also by the minister responsible for Shared Services (the Minister for Finance) about this change of arrangements?

The Hon. G. PORTOLESI: I am talking about two different time frames and the member is referring to the stationery contract that minister O'Brien is responsible for and made some announcements in relation to just recently. Of course, that impacts on schools. Clearly, I do not have any information with me about the nature of the communications between the department and my office in relation to a circular that the deputy chief executive distributed. There are many circulars of varying degrees that are put out, so I will have to take that on notice.

Mr PISONI: So you are saying that you have no recollection yourself of this circular being discussed with you by the deputy chief executive or anyone else within your department before it went out?

The Hon. G. PORTOLESI: I did not say that at all, and what I said is that I would bring back a reply. Don't verbal me.

Mr PISONI: I asked the question, minister. I didn't hear a date. I didn't hear you say that you were told. So, were you told?

The Hon. G. PORTOLESI: Your question was about the communications—

The ACTING CHAIR (Hon. M.J. Wright): Order! One at a time.

The Hon. G. PORTOLESI: —and I said to you that there were many circulars that were put out and that I would get back to you about that. I am aware of the circular to which you refer.

Mr PISONI: Were you told about it before it went out? That was the question. You are telling me that you have to come back to the parliament with that answer. Is that what you are saying?

The Hon. G. PORTOLESI: This demonstrates how ill prepared you are for your job.

Mr Pisoni: I think it shows how little you know about yours and how much interest you have in it. I think that is what it shows.

The ACTING CHAIR (Hon. M.J. Wright): Order!

The Hon. G. PORTOLESI: Are you finished?

Mr Pisoni: Go on. You're on your feet. Off you go.

The Hon. G. PORTOLESI: You asked a question about whether I knew or the level of communication or contact there had been between my deputy chief executive and my office in relation to this circular. Now clearly that is not information that we would contain at a meeting at a questioning session like this one, but I said to you that I would get a response back to you. But I also said to you that I am well aware of the circular to which you refer.

Mr PISONI: And I am asking you: were you aware of the circular before it went out?

The Hon. M.F. O'BRIEN: Point of order, Mr Acting Chair. Having been through this process on numerous occasions myself, there has to be a reference back to the Auditor-General's Report. These are extraneous matters.

The ACTING CHAIR (Hon. M.J. Wright): I was wondering the same thing whether the member is still referencing the Auditor-General's Report.

Mr PISONI: It is page 414, as I indicated prior to asking these questions.

The ACTING CHAIR (Hon. M.J. Wright): And is there reference there to Mr DeGennaro's letter?

Mr PISONI: There are references here to purchases and credit invoices.

The ACTING CHAIR (Hon. M.J. Wright): Alright.

The Hon. G. PORTOLESI: That is a generalist reference and the member opposite is referring to a stationery contract. In the spirit of openness, I am very happy to bring back a response. It is completely reasonable that that degree of information about who said what when is not the kind of information that I would have at an Auditor-General's briefing but I am very happy to bring back a reply.

Mr PISONI: Can the minister please advise either now or bring it back why Mr DeGennaro in this letter to schools wrote:

Whilst other categories of goods are not mandated I encourage you to purchase those items from the contracted suppliers...

On what basis is the department instructing or recommending one supplier over another?

The Hon. G. PORTOLESI: I clearly will need to refer that question to the deputy chief executive who after all is the author of that circular.

Mr PISONI: The next question refers to page 415 on debitor management. The Auditor-General refers to accounts receivable and Shared Services have conducted a follow-up of overdue invoices within 10 days. Is the minister able to—and I appreciate that this will need to come back to the committee—indicate the value of the debitors that—

The Hon. G. Portolesi: Debtors.

Mr PISONI: —are longer than the 10 days at the end of the month at the latest available?

The Hon. G. PORTOLESI: We need to decipher the member's question and when we do that we will bring back a reply.

Mr PISONI: Just to make it easy for you, minister, what I want to know is the value of overdue receivables at the latest available and, while you are at it, I would also like to know how much value in receivables was written off last financial year?

The Hon. G. PORTOLESI: Yes, I am happy to do that.

Mr PISONI: This question refers to page 424, in Volume 2. The auditors found that 239 registered caregivers had not been reviewed. Can the minister advise if this is still the case? I also note that the reviews should have been completed within 10 weeks, with 25 reviews occurring a week. How many carers were rejected as carers through this review process?

The Hon. G. PORTOLESI: At the time of the audit, the carer assessment and registration unit currently had, I am advised, 240 outstanding reviews, the latest due date being February 2012. This figure is derived from a physical count of all assessment reviews that have been received by the unit. Two part-time workers have been assigned to concentrate on finalising all outstanding reviews and are completing approximately 25 reviews per week. I will look at the member's question in more detail and, if I can, I will bring back further information.

Mr PISONI: This refers to page 427, the C3MS function. Can the minister please advise how many terminated employees had access to this system when the November 2011 report was prepared and how many terminated employees still have access to the system?

The Hon. G. PORTOLESI: I do not have any information that can assist me in relation to that question, but that is an important question. I will take that one on notice.

Mr PISONI: Can the minister inform the house, then, what information is available to terminated employees who still have access to the C3MS?

The Hon. G. PORTOLESI: I will need to check with the department about their processes around termination of employees and how people exit the strategy that have access to that kind of information.

Mr PISONI: Perhaps you could also bring back how many terminated employees did have access to the C3MS at the time of their termination?

The Hon. G. PORTOLESI: Same.

Mr PISONI: Sorry?

The Hon. G. PORTOLESI: I am happy to investigate further.

Mr PISONI: Are you happy to bring that back?

The Hon. G. PORTOLESI: Yes.

Mr PISONI: Is the minister able to advise what action she has taken since the report was published in November 2011 that found that a significant number of terminated employees still had access to the system? Could she advise what action has happened since that report was published?

The Hon. G. PORTOLESI: The department advises me that action is certainly underway to address this issue and implement the recommendations in a timely manner. I am very happy to bring back a more detailed response.

Mr PISONI: Are you going to be bringing the actions themselves back to the parliament?

The Hon. G. PORTOLESI: I will address your question as articulated a second ago.

Mr PISONI: No, I am actually asking whether you are going to bring back the list of actions that will deal with this matter.

The Hon. G. PORTOLESI: I will respond to your question.

Mr PISONI: I am asking you whether you will bring back the list of actions that you will implement to deal with this matter. It is a simple question, minister.

The Hon. G. PORTOLESI: No, here you are putting words into my mouth again. I will answer your questions and bring back a report to you on those recommendations.

Mr PISONI: Page 430 of the Auditor-General's Report refers to the—

The Hon. G. PORTOLESI: I beg your pardon, what page?

Mr PISONI: This is page 430 of the report which refers to the Digital Education Revolution program. Are you able to advise whether your department has a program of replacing the computers that were purchased under that program, what the cost of that program is, and when that program will begin?

The Hon. G. PORTOLESI: I am happy to bring back a detailed response to the member that provides that information.

Mr PISONI: I refer to the recharge for teacher practicum program. This is on page 413, minister. The Auditor noted that agreements for payments have still not been finalised with the University of Adelaide and Flinders University. There is an outstanding amount there of $689,000 as of 31 May 2012. The original figure, I think, when this dispute began, was about $3.1 million on 2 June 2010. Is the minister able to advise whether a settlement has been reached about future payments and whether the outstanding amount has been either settled and, if so, what the settlement figure was?

The Hon. G. PORTOLESI: Thank you for that question. A core element of all undergraduate and graduate teacher education programs is the professional experience placement. Satisfactory performance during the placement is an essential component of the teaching qualification and teacher registration. As prescribed in the Teachers (DECS) Award, the department pays teachers an allowance for supervising university students undertaking the teaching practicum program. It is the department's policy to recover the cost of the supervision from the tertiary providers where the undergraduate teachers are placed.

The providers are UniSA, University of Adelaide, Flinders University and Tabor College. The department has developed a formal, binding, commercial quote deed-for-fee and on-costs for the supervision of professional experience placements (that is the title) that establishes the obligations of all parties in regard to the fee paid by tertiary providers to the department for teachers to supervise the professional experience placements.

The deed covers the period 1 April 2011 to 31 December 2013 and has provision to be extended for a further three years. The University of South Australia has signed the agreement; however, formal agreement from the University of Adelaide, Flinders University and Tabor College still has not been reached, and the department continues to work with the relevant tertiary providers regarding this matter.

Mr PISONI: Is there still an outstanding amount for the University of Adelaide and Flinders University? The Auditor-General's papers refer to $689,000 outstanding as of 31 May. Can you advise whether that has been settled and, if so, was it settled for that amount or for less?

The Hon. G. PORTOLESI: I will take that on notice.

Mr PISONI: Has UniSA settled its account in full? What is the value of its account?

The Hon. G. PORTOLESI: I will take that on notice.

Mr PISONI: Are you also able to advise what the allowance is that is paid to teachers who participate in the practicum program with the universities?

The Hon. G. PORTOLESI: I do not have that specific information with me but it is very easy information to give to the member and I will endeavour to do that.

Mr PISONI: Can the minister advise if there has been any reduction in the practicum hours offered to students since the revised EBA arrangements were introduced in 2010?

The Hon. G. PORTOLESI: That is a question that we will need to refer to other parts of the department, the HR people in the department, so we will bring back a reply.

Mr PISONI: I refer to page 454. It shows an increase in the number of employees who receive remuneration above $130,700. It has increased from 284 to 326 from 2011 to 2012. Can the minister advise how that has come about and whether it is an increase in existing salaries or whether there have been additional staff hired at that scale, and what those positions are, if that is the case?

The Hon. G. PORTOLESI: Those employees earning over $134,000 per year are employed under either the Education Act or the Public Sector Act. The number of individuals who earned over $134,000 in 2011-12 was 326. They include 200 Education Act site-based employees, 84 Education Act non-site-based employees, 33 Public Sector Act executive employees and nine Public Sector Act non-executive employees. The increase of 42 individuals who earn over $134,000 is primarily due to salary increases. These increases have primarily occurred for officers employed under the Education Act.

Mr PISONI: Are there any new employees who came in, or new positions created at those levels?

The Hon. G. PORTOLESI: We will need to check that.

Mr PISONI: Will you bring that back?

The Hon. G. PORTOLESI: Yes.

Mr PISONI: At page 432, 'Administered items', it refers to grants to non-government schools from the commonwealth and South Australian governments. Can the minister advise what the average per capita funding is from the state government for students at non-government schools?

The Hon. G. PORTOLESI: We will need to go to the Office of Non-Government Schools to find that information, and I am happy to do that.

Mr PISONI: Is the minister able to—this is on the same topic—tell the house whether she has been advised of any likely impact either in the way of an increase or a decrease as a result of new funding arrangements post Gonski?

The Hon. G. PORTOLESI: I do not understand the question; it is barely English. Give it to me in English if you can.

Mr PISONI: Does the minister see this funding level as being likely to increase or decrease as a result of new funding arrangements post Gonski? Basically I am asking whether you have had any briefings or asking if any work is being done in the department about the impact of the federal government's Gonski review?

The Hon. M.F. O'BRIEN: Point of order. I see no reference in the Auditor-General's Report to Gonski. This is purely a policy matter and way beyond the purview of this inquiry.

The ACTING CHAIR (Hon. M.J. Wright): I uphold the point of order.

The Hon. G. PORTOLESI: Can I just say in relation that the member opposite is asking me to speculate on discussions that are underway in relation to Gonski.

Mr PISONI: Do you support Gonski?

The Hon. G. PORTOLESI: Yes, we do support Gonski. Can I just clarify something in relation to the C3MS statement I made earlier? I may have stated that we have commenced actions, but what I will need to do is check that. I will come back with specific details in relation to that.

Mr PISONI: This refers to pages 421 to 422, 'Eligibility of Department employees', and employee housing. The Auditor found numerous failures in record-keeping and eligibility checks. Are you able to advise what the process is for eligibility for employee housing and why it is that your department has failed or, as described by the Auditor, has numerous failures to record the record-keeping and eligibility checks?

The Hon. G. PORTOLESI: The management of employee housing is outsourced to the Department of Planning, Transport and Infrastructure. The department has a framework for the employee eligibility criteria and allocation procedures for housing accommodation. Eligibility for government employee housing is currently granted to permanent departmental teachers in the regional areas of South Australia. Information provided to employees includes housing eligibility information. The department website content is being continually updated to provide clearer information on the eligibility criteria for employees.

The departmental processes in place for confirming ongoing eligibility for subsidised government housing include the receipt of a report from DPTI that identifies DECD employees occupying government housing. This report is then used to perform a confirmation process with respect to the eligibility of employees occupying a government subsidised house. Reviews of inactive employees and property ownership take place at the end of each financial year. A report identifying all departmental employees who have been in government employee housing for five years or more as at 30 June 2012 has been requested from DPTI, which is responsible for administration of government employee housing across government.

A report identifying any DECD employees making manual rental payments as at 30 June 2012 has also been requested from DPTI. This will enable identification review and follow-up, if necessary, of the ongoing eligibility of employees in government employee housing who are not on active duty, such as those on maternity leave. In respect of the documented procedure, this will be progressed in the 2012-13 financial year.

The ACTING CHAIR (Hon. M.J. Wright): Thank you, minister and shadow minister. We now go to the Minister for Employment, Higher Education and Skills, Minister for Science and Information Economy, Minister for Recreation and Sport. Can I remind members that you have to be on your feet if you are asking a question and all questions must be directly referenced to the Auditor-General's Report. Member for Stuart.

Mr VAN HOLST PELLEKAAN: Thank you, minister and advisers. My questions refer to Part B, Volume 4, page 1182, to begin with, about the YMCA contract at the aquatic centre. Can the minister confirm that payment to the YMCA for the 2011-12 year is $2.521 million?

The Hon. T.R. KENYON: Yes, member for Stuart. There is a slight rounding error because, if you are going to round to the nearest thousand, it should be $2.522 million. The actual number is $2,521,992.

Mr VAN HOLST PELLEKAAN: The next question is: can the minister confirm that the projected figure for the tender submission was $2.278 million? If that is correct, please explain the nearly $0.25 million overrun.

The Hon. T.R. KENYON: Part of the contract with the YMCA is that there are projections on how many patrons they will get into the facility, then we basically make up the difference. We are paying them to run and manage on a per patron cost, essentially. They have projected returns and the contract allows for variations in payments based on the patronage numbers.

Mr VAN HOLST PELLEKAAN: There will be an adjustment?

The Hon. T.R. KENYON: Yes, that is right. We have forecasts; they are not guaranteed payments. The forecasts we have are not guaranteed, but they are based entirely on patronage numbers.

Mr VAN HOLST PELLEKAAN: So, that gap then is purely because of higher than expected usage—purely directly related to the extra patrons?

The Hon. T.R. KENYON: No, in this case it was lower than projected patronage, so they do not make the revenue they expected to make, then there is a negotiation where we verify their numbers. They say they have lost a certain amount or they have not made up a certain amount, we verify that with them, negotiate with them and then make the difference as agreed or make the extra payment as agreed.

Mr VAN HOLST PELLEKAAN: But, minister, how it can it be then that, if the patronage was lower than projected, you paid them more than was projected to operate the centre?

The Hon. T.R. KENYON: You might recall that there were a number of rectification works that needed to be done, to bring the pool up to speed, as a result of the building process. That meant they could not use the pool for a number of days while they were doing that, and that meant they did not get the same patronage. Obviously, the patrons spend a certain amount. They pay admission and you would expect them to pay a certain amount at the kiosk and those sorts of things.

Mr VAN HOLST PELLEKAAN: I will just add that they would have received over and above their payment.

The Hon. T.R. KENYON: They have to prove to us that they did not meet their revenue targets as a result of those interruptions. If they can prove that, then we make it up to them. The contract is a shared risk contract, in effect. We obviously do not want the YMCA to go broke running our facility and we do not want to pay more than we have to to run the facility. If they can prove that it is not their fault that they did not meet their projected income, then that is when we can negotiate on the payments, and that is why the payments were higher in this case, because there were a number of days when the pool needed work, and it had to be shut so the work could be done and, therefore, they missed out on those revenue targets and we made them up.

Mr VAN HOLST PELLEKAAN: Given then that it has been approximately $2½ million for the 2011-12 year, is the department's projection of what it will pay over five years still approximately $6½ million?

The Hon. T.R. KENYON: At this stage we believe their targets are achievable. It is a relatively small adjustment for last year, and it must be remembered that was the start-up year. Their programs are running, their patronage is good, and we expect the targets to be achievable throughout the life of the contract.

Mr VAN HOLST PELLEKAAN: Can you provide a breakdown of the estimate over each of the five years?

The Hon. T.R. KENYON: The projected payment for the 2012-13 financial year is $1.427 million; 2013-14 is $1.069 million; 2014-15 is $892,000; and 2015-16 is $786,000.

Mr VAN HOLST PELLEKAAN: Moving to page 1233, ORS expenses, I refer the minister's attention to the community sports hub report. You have stated that the community sports hub report has been presented to you and that it has been considered and will be released for public consideration as soon as possible. When do you expect the report to be released, given it was a highlight in the 2012-13 budget and you have had the report for approximately five months?

The Hon. T.R. KENYON: We are just making some changes to that to take into account changes to CRSFP and Strategic Plan targets. We can have that out relatively quickly, with any luck, before Christmas.

Mr VAN HOLST PELLEKAAN: Moving now to page 1232, in regard to the Office for Racing, given that it has been confirmed that the Office for Racing will be merged with the Office for Recreation and Sport, what do you expect the cost savings will be to the department as a result of the merger?

The Hon. T.R. KENYON: It is roughly the cost of one full-time equivalent position, so about $100,000.

Mr VAN HOLST PELLEKAAN: I will ask one more question and then hand over to the shadow for training, science, and technology. On page 1252, in relation to the Recreation and Sport Fund, can the minister advise whether he has received any advice from Treasury regarding the cost implications to the Recreation and Sport Fund as a result of the sale of SA Lotteries?

The Hon. T.R. KENYON: My advice on that is that we have not received any advice from Treasury on that effect.

Mr PISONI: I refer to page 636, income and expenses, under the heading 'Student and other fees and charges', for example. According to NCVR figures, in 2011 we had a total of 117,907 students enrolled in higher education, VET and schools. That figure is now down to 56,615 for this year. Are you able to advise what resources in the way of FTEs were responsible for managing the 117,000 foreign students in 2011 compared with the 56,000 total in 2012?

The Hon. T.R. KENYON: I apologise; can you clarify what you are seeking?

Mr PISONI: In relation to international student numbers, there were 117,900 and that includes higher education, VET, schools and other courses. For 2011, which the audit papers refer to, and 2012, I am asking for the full-time equivalent resource in the Department of Further Education to service the 2011 international student numbers compared with the resource in 2012 for servicing the 2012 numbers? I am sorry I did not make that clearer initially.

The Hon. T.R. KENYON: The answer is within DFEEST itself there are three. There were three FTEs in 2011 and that number remains the same in 2012. However, obviously, a lot of the involvement with international students in my department is within TAFE itself and I will need to get back to you with numbers and take that on notice.

Mr PISONI: On page 655 it refers to tertiary student transport concessions. Last year we had that figure at $22.444 million and this year it is $16.7 million. Are they for local students, international students or a mixture of both; and, if it is a mixture, can I have a breakdown?

The Hon. T.R. KENYON: My advice is: both, that it involves international students and domestic students. We are one of the few states that offers concession to international students. It is anyone with a concession card, and in South Australia overseas students are eligible for that.

Mr PISONI: Could I have a breakdown of international and local students?

The Hon. T.R. KENYON: I will take that on notice and get back to you with that.

Mr PISONI: At page 635 in relation to the student information system, the contract was entered into for $18.1 million over 10 years, in 2009, I believe. The Auditor-General states that the project planning implication of the system will total $20.4 million over three years from 2009-10. Are you able to advise if the $18.1 million is the total value of the contract and any addenda or additional contracts that have been signed since the initial contract, and what the breakdown of the $20.4 million over three years for the planning implementation of the system is?

The Hon. T.R. KENYON: The $18 million over 10 years covers the purchase and ongoing licensing of the software to implement the Student Information System (SIS), so you purchase the licence for 10 years for the cost of $18 million, as well as vendor support for implementation and maintenance. My advice is that there have been two contract variations since covering the licensing of the UC4 job scheduler, which is $6,000, and the licensing of the Procedural Language Structured Query Language (PL/SQL) script editor, which is $5,600, plus an annual maintenance of $1,027. UC4, the job scheduler, allows for daily tasks in the student and finance systems to be automated as an overnight process without staff intervention. The PL/SQL script editor is a technical software tool that allows PDF documents such as student invoices to be made available for students on self-service. There are no other variations to the contract is my advice.

In addition to that, there is an implementation budget of $20.4 million over three years to cover the cost of configuring and implementing the system to meet TAFE's requirements. This budget included the cost of vendor support covered under the contract plus a project staff drawn from within TAFE and DFEEST as well external contractors. So, $20.4 million is the total cost including the $18 million. The total cost of the system is $20.4 million.

Mr PISONI: I just want to make that clear. The system including the implementation is $20.4 million. The minister is nodding. Are any invoices being paid by the department outside of the contract to the contractor or anyone acting on behalf of the contractor or working on the system outside of the terms of the contract?

The Hon. T.R. KENYON: My advice is that other than the two I told you about—the UC4 job scheduler and the PL/SQL script editor—no, we are not aware of any. Aside from that, there are the everyday contractors that we have involved with TAFE and the department that come and do IT work for us and they would have to interact with SIS but they are not contracted specifically to work on SIS or anything like that.

Mr PISONI: Are you employing or contracting any contractors from overseas to deal with this new Student Information System at the moment?

The Hon. T.R. KENYON: My advice is that we are not aware of any. SunGard itself is an American company, so obviously there are people from SunGard that we deal with, but my advice is that there are no subcontractors coming from overseas.

Mr PISONI: I refer to pages 630 and 631, Internal audit reviews. DFEEST initiated three internal audit reviews conducted by an external audit firm: June 2011, the SIS risk assistance review; August 2011, the Information Security Management Framework compliance review; and May 2012, the SIS post-implementation review. Are you able to supply the names of the companies, contractors or consultants that conducted those reviews and also the cost of the reviews? Will you provide the member for Unley with a copy of the reviews?

The Hon. T.R. KENYON: Deloittes did the post-implementation review, and I can also get you the breakdown of costs and the other contractors that did the other reviews you mentioned. I will take that on notice. My preference is to release to you those reports. If there is a reason I cannot do that, I will let you know, but if I can I will get them to you.

Mr PISONI: The August 2010 report was found to have, according to the Auditor-General, particular concerns regarding user access management and management of privileges access, which were to be completed by December 2012. The audit found that these should be addressed with urgency. Are you able to advise whether the process has started to deal with that? If not, why not and, if so, when will it be complete?

The Hon. T.R. KENYON: My advice is that all the key risks that were mentioned by the Auditor-General have been addressed and there is some tidying up of other works ongoing. We are just working our way through the minor issues as we go. I can tell you that the following examples or issues have been given priority attention: user access review and modifications to enhance system security; reassessment of duties assigned to staff to improve controls; additional reporting to monitor controls and support reconciliation; and a revision of the training plan and expanded targeted rollout, including mandatory information security training; business processes have been reviewed, including the introduction of smart forms, to optimise the efficiency and effectiveness of the system and improve data quality and reporting; and improvements to process and information to manage student debts.

There have also been modifications and enhancements to SIS that accommodate the implementation of Skills for All, enhance enrolment processes and improve the usability of the system from a student and staff perspective. I think the short answer is that we have done all of the urgent work and there will be ongoing maintenance over time to address issues.

Mr PISONI: This refers to page 643, and there is a reference there to the Office of TAFE. Are you able to provide the board fees that have been allocated for the new board of the corporatised TAFE, from the chairman down to the board members?

The Hon. T.R. KENYON: It is probably best that I take that on notice and get back to you as quickly as I can with it.

Mr PISONI: Did you sign off on it?

The Hon. T.R. KENYON: Yes, I did; I can give you a total number, I think, but it will not take long. I will get it to you as quickly as I can.

Mr PISONI: Thank you very much.

The ACTING CHAIR (Hon. M.J. Wright): Thank you minister, thank you shadow minister. We now move to the Minister for Transport Services. I am sure that members need no reminding that questions asked must be by members on their feet and that all questions must be directly referenced to the Auditor-General's Report. We will give the minister an opportunity to get into position and for her advisers to join us.

The Hon. C.C. FOX: Thank you. I would like to introduce to my left Mr Terry Crackett, the Executive Director of Business Services in the Public Transport Division and he will be helping us here at this moment in time.

Ms CHAPMAN: Thank you, minister. Transport services—the Department of Planning Transport and Infrastructure commences at page 1164 of Volume 4 of the Auditor-General's Report. At page 1166 and 1167, the Auditor identifies the qualification for his report. That is not a very attractive thing to have in any audit, of course, and I would expect, having read it, that the grants to which this applies are largely under the jurisdiction of minister Conlon and, I suppose, his area of responsibility, if I am correct, so that he might take some responsibility to make sure that this four-year error is not repeated. But I will ask, just for completeness, minister: are any of the grants that have been treated in this matter relevant to your part of the portfolio?

The Hon. C.C. FOX: That would be under minister Conlon's jurisdiction, but I believe it relates to 2010-11 not to 2011-12.

Ms CHAPMAN: The following is an extract from the 2011-12 independent auditor's report but it relates to the four years preceding that. Anyway, it is nothing to do with you.

The Hon. C.C. FOX: No.

Ms CHAPMAN: Thank you, that is alright, that is good. Bus contracts are outlined, commencing on pages 1171, and I will come back to some of the discussion on that by the Auditor. Page 1184 lists the expenses and the variations, and you will see there at about point two on that page, 'Expenses for the year total $1598 million...and are mainly attributable to:' and they then list under supplies and services that $171 million was paid to bus service contract payments (bus contractors). On 20 June at budget estimates we were told that the estimate of result for 2011-12 was $167 million and that the budget for 2012-13 was $171 million. Why were the total contractor payments $4 million higher than what was projected in July, and what is the revised budget for 2012-13?

The Hon. C.C. FOX: I will have to take that on notice and have it checked.

Ms CHAPMAN: I remind you that if you are having a look at it, as you well know, there were service changes commencing as of 1 July. We were not able to identify any of that service change cost, which we know is significant but, nevertheless, would not have been able to attribute for that $4 million difference, so we are very keen to have that clarified. If, in fact, the wrong figure was given and it should have been $171 million then you will appreciate why we need to have the revised budget for 2012-13.

Still on bus contracts, for the 2011-12 year, please provide on notice a breakdown of payments to each of the bus contractors for metropolitan bus services. We also request a breakdown under each of those contracts in the categories of regular payments and extra payments—extra payments being things such as the shuttle service for train lines and special events. If that information is not with you today we are happy for it to be taken on notice.

The Hon. C.C. FOX: Certainly.

Ms CHAPMAN: Certainly that will be provided, or certainly you will take it on notice?

The Hon. C.C. FOX: Take it on notice.

Ms CHAPMAN: Thank you. We will just go back to the commentary. The commentary on this commences on 1171. There had been some considerable discussion about the process compliance performance indicator and the fee adjustment calculations. Over on page 1172 you will see at about point 3 on that page the paragraph commencing:

The audit review found that during the year the Minister applied discounts to the fee adjustments applicable under the contracts with the bus operators.

It then goes on to set out the total value of those fee adjustments which, for the total of the period, was some $1.145 million. As we know from information that you have already provided to us, there were fines to bus companies for this period which totalled approximately $255,000, so we are really looking at a net discounting of some $900,000 which, of course, the Auditor-General has made some comment about. I have not reread all that commentary as I am assuming you are familiar with it.

The Hon. C.C. FOX: Yes.

Ms CHAPMAN: A little further down on page 1172 the Auditor-General says this:

...it was not clear whether the discounted fee adjustments were determined in accordance with the provisions of bus contracts.

The Hon. C.C. FOX: They were.

Ms CHAPMAN: What I would ask you to tell us, given his statement—and I think you, as the new minister, are indicating and suggesting that they were—what was the formal process used for the calculation of the fee adjustment discounts?

The Hon. C.C. FOX: It is important to set the context in which this audit of the bus contracts was undertaken. The period covered by the audit included the transition period to both new contracts as well as the transition to a new service provider. Although the Auditor-General's final report raises these five potential areas for improvement, the findings reflected the transition that was being undertaken and have all been addressed by the department subsequent to the audit in rolling out the new performance measurement framework.

The fee adjustments that were applied by the department have been reviewed. They have been confirmed as correct in accordance with the performance provisions within the contracts. Prior to applying the full level of the fee adjustments, and without prejudicing my rights under the contracts, I considered any mitigating factors and initiatives that were provided by the contractors and, where appropriate, reduced the level of fee reductions applied.

Furthermore, under the contracts, as minister I may reallocate demerit points among the performance indicators to better reflect performance management priorities once in any consecutive 12-month period. The department has recently undertaken a review to this effect and amendments have been agreed with contractors which better reflect the practical application of the contract intent. Formal contract variations are currently being prepared by crown law and, as noted on page 1172, this will be a subject of further review by the Auditor-General in 2013.

Ms CHAPMAN: That may be a general explanation of what has happened over that unhappy period, minister, but my question was: was a formal process used in calculating the fee adjustment discounts?

The Hon. C.C. FOX: Yes, it was.

Ms CHAPMAN: What was it?

The Hon. C.C. FOX: If you go to schedule 11 within the contracts, you will therein see the formula that was used. It is quite a mathematical formula. I am not a mathematician myself, so we actually went to some extent to have it fully explained and unpacked. That is entirely what we were working with and that was within the parameters of the contracts and within the parameter of the schedule.

Ms CHAPMAN: Why was the process compliance performance indicator not established and agreed to by you and the private operators before the contracts commenced and still not agreed at the time of the audit?

The Hon. C.C. FOX: As indicated in the report, the terms and conditions of the contracts are extensive and relatively complex and, as such, we recognise that having an effective contract management framework finalised and fully in place is critical. The new contracts, however, establish benchmarks in key areas based on amended criteria, and it was not possible to reach complete agreement with bus contractors until the measurement in the new operating environment had been undertaken over a period of time.

In order to ensure that an effective and ongoing monitoring regime was in place for what are significant contracts, as you are well aware, the existing contract management framework was applied in the interim period to the new contracts where it was appropriate to do so. Subsequent to that audit, agreement was reached with all contractors, and the contract management framework has been fully implemented for the July 2012 to September 2012 quarter.

Ms CHAPMAN: I am not sure that that actually explains why it had not been done before but, in any event, you say that under the new regime that process compliance performance indicator is actually in there. Is it the situation then that the benchmarks were not in the contracts?

The Hon. C.C. FOX: As you are aware, there were three bus companies that came on board as of October last year. At least one of those bus companies did sign up to the performance benchmarks. Two of them did not initially, and the reason behind that is they were operating in such a new environment that they actually wanted to make sure that the benchmarks were possible to reach.

Ms CHAPMAN: So, having signed up the contracts without the benchmarks in place, do you agree then that that was a significant factor in the discounting of the fines that you applied in the following year?

The Hon. C.C. FOX: No.

Ms CHAPMAN: So, the fact that the benchmarks were not in the contract were no factor at all in your discounting of the fines in the following year?

The Hon. C.C. FOX: The discounting which occurred was based on mitigating factors. As you would be well aware, companies have to bring before you their reasons for a lack of performance in certain areas across those seven criteria benchmarks.

Ms Chapman: Those benchmarks, minister, won't be in the contract.

The Hon. C.C. FOX: The seven criteria are in the contract. When we write to them, they then write back to us and say, well, it was impossible to meet on-time running in a particular sector of a particular route because of—and I use this only as an example—the Harris Scarfe development, because of pipeline works, because of Southern Expressway works. The reality is that there is an enormous amount of infrastructure being built in and around Adelaide and there were a number of routes which were disturbed. In taking everything into account, one had to be reasonable.

Another example would be Clipsal. The disruption around Clipsal is quite significant and we have to take those things into account. These are not events that bus companies impose upon the citizens of South Australia. They are run by the government for the people of South Australia and we have to take those events into mind when we are applying fines of this sort. It is very important to practise some level of common sense and some level of flexibility, because, if you did not, you would just be absolutely unreasonable. I do not think that we as a department can punish any service provider for events that are effectively beyond their control.

Ms CHAPMAN: So, the two parties to this contract, of course, are the bus contractors and the government. The government knows what major works and major events are going to occur and they sign up these contracts. Apart from the Clipsal race and the development of the Harris Scarfe property—

The Hon. C.C. Fox: Which is not a government project.

Ms CHAPMAN: I understand, but it is right opposite the department, minister. It is blindingly obvious. You walk out the front door of your department and there it is, so please do not be cute about this.

The Hon. C.C. Fox: I'm not being—

Ms CHAPMAN: Both of these projects are well-known to the government.

The Hon. C.C. Fox: Member for Bragg, I am not being cute.

Ms CHAPMAN: What other excuses did the bus contractors give you, minister? What other excuses did they give you for you to give them a discounting of nearly $1 million?

The Hon. C.C. FOX: First of all, I would like to point out that the project to which you refer is not a government project. It is a project which is carried out by private individuals, and while I have mentioned a number of state government funded infrastructure events, the reality is that there are private individuals and business enterprises which go out there, they invest in our state, they invest in infrastructure. It is not all the government's work on the roads so, first of all, let's make that very clear: we are not dealing just with government projects. Far be it from me—or, indeed, I would say anybody else in this place—to stop that private sector from investing and expanding.

The other thing I take issue with there is the member for Bragg's use of the word 'excuses'. 'Excuses' makes it sound as if these companies were being deliberately bloody-minded. They were not; they were being quite—

Ms Chapman interjecting:

The CHAIR: Order, member for Bragg!

The Hon. C.C. FOX: I do not wish to begin any sort of misleading narrative around bus companies and their responses to events on roads, to events of infrastructure occurring which are out of their control. These are not 'dog ate my homework' excuses. These are very valid reasons on most occasions why some running has been disturbed.

Ms CHAPMAN: Apart from Harris Scarfe, what else did they give you as the basis upon which you accepted that they should get an $888,000 discount?

The Hon. C.C. FOX: I believe that the member for Bragg has actually already received that information in an FOI application.

Ms Chapman: No, I haven't. So the answer is?

The Hon. C.C. FOX: The answer is that I can get all of that detail to you. Off the top of my head, I think there are a whole pile of different reasons. Obviously I have stated the Harris Scarfe one, Clipsal, north-south pipeline, South Road works, the expressway works—we can get that. We will take that question on notice and bring that list back to you.

Ms CHAPMAN: Were all of the contractors aware of the exact performance measures that they would have to meet prior to the contracts commencing? Does your answer before indicate that it was two out of three, or did I have that incorrect?

The Hon. C.C. FOX: All contractors were aware of the performance measures, but the actual benchmarks themselves needed to be accepted by all of the bus contractors. By way of example, the requirement to meet on-time running was tightened from five minutes 59 seconds to four minutes 59 seconds. Until there was a clear understanding of the impact this change would have on the benchmarks via measurement over time, contractors were not in a position to endorse the performance framework. There are the performance measures and then there are the benchmarks.

Ms CHAPMAN: If I have it correct, they all knew what the performance measures were, but the benchmarks were still uncommitted?

The Hon. C.C. FOX: The bus contractors knew what the benchmarks were, but they actually just had to run them to see that they would agree with them, as I have explained previously.

Ms CHAPMAN: I understand. I have never actually signed a contract where you have the bits hanging out at the end but, anyway, they came together eventually. You say, I think, minister, that that did not have any impact on the discounting. The discounting was for the list of events and interruptions that you say you took a sympathetic approach to and gave them a discount. Thank you.

The Hon. C.C. FOX: No, no, no. I did not use the word 'sympathy'.

Ms CHAPMAN: Well, I would hate to see what an unsympathetic approach was. In any event, why did it take a year for the contract management plan to be established for the new bus contracts?

The Hon. C.C. FOX: Sorry, member for Bragg, I apologise. Could you just reiterate that question for clarification?

Ms CHAPMAN: Why did it take a year for a contract management plan to be established for the new bus contracts?

The Hon. C.C. FOX: The contract management plan could not be finalised until such time as the performance benchmarks were agreed to. Obviously, given that the reporting occurs in quarterly increments, it was important to ensure that we had the right information, and that took a couple of quarters to manage. As I previously advised, as minister I may reallocate demerit points among the performance indicators to better reflect performance management priorities once in any consecutive 12-month period. I hope that answers your question, member for Bragg.

Ms CHAPMAN: I suppose it is better late than never. We have benchmarks now and, as I understand it, everyone knows what they are and what their obligation is. Can you tell us what the benchmarks are and, if you cannot today, will you take that on notice and provide those?

The Hon. C.C. FOX: I will take that on notice.

Ms CHAPMAN: Also, page 1172 refers to a demerit point system applying under the bus contracts. How many demerit points have been applied to each bus contractor since the new contracts commenced?

The Hon. C.C. FOX: I will take that on notice.

Ms CHAPMAN: The bus contracts have been rewritten. What was the cost of that?

The Hon. C.C. FOX: There would be a cost attached to that. It is probably worth pointing out that the contracts in their entirety were not rewritten: they were amended. We will get the nature of that cost back to you.

Ms CHAPMAN: At page 1173 the Auditor has identified that the department may have problems following up errors and discrepancies involving lost moneys as a result of cancelling the bus depot audits. Why were the audits to check the integrity, completeness and accuracy of revenue data, sales adjustments and cash collections in respect of bus tickets stopped in October last year?

The Hon. C.C. FOX: At the time of those audits, bus depots were being transferred individually to the new revenue accounting system. DPTI staff and bus service contractor personnel at each depot worked closely during this transition period, spending significant time at each depot independently scrutinising and investigating the performance of the new system, including the processes that were put in place by contractors. Given that this high level of security exceeded the level of review that would have been undertaken by regular audit of the revenue accounting system, audits have been placed on hold to avoid unnecessary duplication of effort.

The new revenue accounting system has more built-in controls, a greater wealth of data and is more robust as a consequence. New procedures have now been put in place in consultation with DPTI's internal audit section to allow for formal bus depot audits to recommence in 2013.

The CHAIR: The time allowed for the examination of the Auditor-General's Report in relation to the Minister for Transport Services has expired. The committee has concluded the examination of ministers on matters contained in the Auditor-General's Report.

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