Bills Digest no. 91 2008–09
Auditor-General Amendment Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Date introduced: 3 December 2008
House: Senate
Portfolio: Department of Prime Minister and Cabinet
Commencement: The Act commences
on Royal Assent
Links: The relevant links to the Bill, Explanatory Memorandum
and second reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills have been passed they can
be found at ComLaw, which is at http://www.comlaw.gov.au/.
To amend the Auditor-General
Act 1997 (the 1997 Act) to allow for the distribution of reports or
extracts of reports to any person who the Auditor-General considers has a
special interest in the report and incorporate certain amendments recommended
by the Joint Committee on Public Accounts and Audit in relation to the
disclosure of confidential information in public reports.
Reports 331 and 346 of the Joint Committee on Public Accounts
formed the basis of the 1997 Act. The Committee conducted a comprehensive
inquiry in 1988 into the operations of the Auditor-General and produced a
report entitled The Auditor-General: Ally of the People and Parliament. According
to the second reading speech of the Minister of Finance at the time, Mr Fahey,
the Committee recommended profound changes to the Auditor-General’s operations,
including that the Audit Act 1901 be replaced with more modern
legislation.[1]
The Auditor-General Bill 1996 was one of a package of
Bills to replace the Audit Act 1901. The other Bills comprising the
package of reforms were the Financial Management and Accountability Bill 1996,
Commonwealth Authorities and Companies Bill 1996 and the Audit (Transitional
and Miscellaneous) Amendment Bill 1996. The Auditor-General Act 1997 was
the central plank of these reforms. The Minister for Finance, Mr Fahey stated
the objectives of the legislation at the time:
The Auditor-General Bill 1996 is designed to achieve a number
of related purposes: foremost the re-establishment of the Office of the
Auditor-General of the Commonwealth of Australia, but in a way that both
symbolically and practically strengthens the functional independence of the
office beyond that available under current laws. The bill declares the
Auditor-General to be an ‘independent officer of the parliament’, as an
expression of the primary and unique relationship which the office has with the
parliament. In keeping with the government’s publicly stated commitment to
confer genuine functional independence on the Auditor-General, a range of
statutory safeguards are included in the bill to prevent inappropriate
influence being exerted on the Auditor-General by either the executive or the
parliament.[2]
In 2001, the Joint Committee
on Public Accounts and Audit reviewed the Auditor-General Act and the
Committee’s report
386 made five recommendations. The Government responded to Recommendations 2, 3, 4 and 5 on 19 September 2002. The Government response
agreed to Recommendations 2, 4 and 5 and in part to Recommendation 3 which is
discussed later. This Bill incorporates the Government response in relation to Recommendations
2-5.
According to the Explanatory
Memorandum, the Bill has no financial impact.
Schedule
1–Amendments relating to reporting requirements
Item 5 inserts paragraph 15(2)(c) and provides that
the Auditor-General must give the Chief Executive of an agency which is subject
to an audit a copy of the performance audit report. Section 15 relates to
agencies established under the Financial
Management and Accountability Act 1997[3].
Item 6 proposed subsection 15(2A) provides that the
Auditor-General may give a copy of the report or an extract of it to any person
or body, including a Minister, who the Auditor-General considers has a special
interest in its content. A provision in relation to Commonwealth authorities is
found in item 9, proposed subsection 16(5) and to Commonwealth
companies in item 12, proposed subsection 17(4A).
Item 8 proposed paragraph 16(4)(c) provides that the
Auditor-General must give a copy of a performance audit report to a Commonwealth
authority[4] or a subsidiary of the authority for which the audit was conducted. Item 11,
proposed paragraph 17(4)(c) provides for a similar provision in relation to
a company or a subsidiary of a company for which an audit has been conducted.
Item 14 proposed paragraphs 18(2)(c) to (g) expands the list of agencies and persons to whom copies of performance audit
reports must be given provided that they comply with certain conditions and
that the report relates to the operations of that agency. Currently the section
requires that the Auditor-General to table copies of the audit report in each
House and to give a copy to the Finance Minister. The Bill proposes that copies
be given to each responsible Minister, the chief executive of an agency,
Commonwealth authority or Commonwealth company, or if it relates to the
operations of a person, a copy to that person.
Item 15 proposed subsection 18(3) repeals and
substitutes the existing provision to broaden the Auditor-General’s discretion
in relation to whom he/she may give a copy of the report. Currently the
Auditor-General may give a copy of a general performance audit report to any
other Minister whom the Auditor-General considers has a special interest in the
report. It is proposed to broaden that discretion to include any other person
or body who the Auditor-General considers has a special interest in the report
or the content of an extract of it.
Section 19 deals with the obligation of the Auditor-General
to provide proposed (that is, draft) audit reports to the organisation that is
the subject of them to enable the relevant organisation to respond in writing
to the proposed report within 28 days. Those written comments must be
considered before the preparation of the final report.
Item 16 proposed subsection 19(2) repeals and
substitutes the existing provisions. In the case of a Commonwealth Authority or
its subsidiary, the proposed report must be given to an officer of that
Authority: in the case of a Commonwealth company, it must be given to a
director or senior manager of that company. Item 17 proposed subsection
19(3) amends the existing provision to provide that the Auditor-General may
provide a copy of a proposed report or an extract of it to any person who the
Auditor-General considers to have a special interest in the report. The
Committee suggested that the Auditor-General must give a copy or copy of
an extract to a person with a special interest in the report.[5] However the Bill has retained the discretion in the Auditor-General to ‘may
give a copy’ to any person whom he considers has a special interest in the
report. This is consistent with items 6, 9, 12 and 15. Item 20 proposed
subsection 19(5) provides that the Auditor-General must include all written
comments in the final written report. This accords with the Government response
in relation to the Committee’s Recommendation 3 that agency comments provided
to the Auditor-General should be included in full in the final report but not
in summary documents as the Committee recommended.
The question whether working papers and draft reports
attract parliamentary privilege also arose in the Committee’s deliberations.
The summary of the issue, including the view of the Australian Government
Solicitor at that time, is attached in Appendix A. In recommendation 1 of its
report, the committee ‘suggested’ that:
the Privileges Committees of both the Senate and the House of
Representatives examine whether Australian National Audit Office draft reports
and extracts of draft reports attract Parliamentary privilege, and if they do
not, should they attract Parliamentary privilege.
It is unclear what, if any, action has occurred in relation
to this issue. The government did not respond to this recommendation when it
issued its response to the other 4 recommendations of the Committee.
Section 36(3) of the Auditor-General Act 1997 protects information contained in proposed reports by stating that anyone
receiving a copy of a proposed report must not disclose any of the information
in the report except with the consent of the Auditor-General. This offence
attracts a maximum penalty of 2 years imprisonment.
Item 21 proposed section 23A provides a legislative
basis for a current practice of the ANAO, according to the Explanatory
Memorandum, of providing information to third parties for comment in assisting
the auditor to resolve inaccuracies or misunderstandings prior to the final
report being prepared.[6]
Item 22 proposed subsection 36(2A) provides that
subsection 36(1) of the Auditor-General Act 1997 does not prevent the
disclosure of information under section 23A provided it is in accordance with
that section. Subsection 36(1) provides that a person must not disclose
information obtained during the course of performing an Auditor-General
function except when performing those functions or for the purpose of any Act
that gives functions to the Auditor-General. Proposed subsection 36(2B) provides that a person commits an offence if the information is disclosed in
accordance with section 23A but the person to whom it is disclosed was not
performing an Auditor-General function and that person subsequently discloses
the information. The penalty is imprisonment for 2 years. Proposed
subsection 36(2C) provides that subsection 36(2B) does not apply if the
Auditor-General has consented to the use or disclosure. A defendant bears an
evidential burden under section 13.3(3) of the Criminal Code. Evidential burden
is defined in section 13.3(6) of the Criminal Code as meaning the ‘burden of
adducing or pointing to evidence that suggests a reasonable possibility that
the matter exists or does not exist.’ The question of whether an evidential
burden has been discharged or not is one of law (section 13.3(5) of the
Criminal Code).
Item 25 proposed 37(4) amends the existing provision
in line with the Committee’s recommendation that the words ‘If the
Auditor-General decides to omit’ “suggests that the final determination whether
to include sensitive information in a report rests with the Auditor-General.”[7] During the 2001 inquiry, the ANAO raised concerns about the inconsistency
between subparagraph 37(1)(b) and subsection 37(4). Subparagraph 37(1)(b) of
the Auditor-General Act 1997 provides that the Auditor-General must not
include information in a public report if the Attorney-General has issued a
certificate stating that disclosure of the information would be contrary to the
public interest for any of the reasons set out in subsection 37(2).[8] The Committee agreed with the suggestion of the Auditor-General that subsection
37(4) be amended to reflect the intentions expressed in the Explanatory
Memorandum[9] to the 1996 Bill and the Committee agreed with that proposition.
The Committee considers that the original intention of
section 37(1)(b), as expressed in the EM should be confirmed through amendment
to section 37(4). The Auditor-General supports this amendment.[10]
The Committee recognised that as the Attorney-General is
part of the executive government and one of the roles of the Auditor-General is
review the activities of executive government, the Attorney-General may have a
conflict of interest when he/she determines that certain information should be
restricted from public access under subparagraph 37(1)(b).
In view of this, the Committee examined the constraints that
apply to the Attorney-General.
4.16 The Committee received advice from the Australian
Government Solicitor which indicated that the Attorney-General’s Certificate was
subject to review under the Administrative Decisions (Judicial Review)
Act 1977. However, the Auditor-General stated that this processes would be
‘unduly bureaucratic’. The Auditor-General concluded:
…it would be a very brave Attorney-General and government if
an Auditor-General put a fairly persuasive case in the public interest and we
could not get satisfactory resolution. 9
4.17 The Auditor-General and DoFA noted that there are other mechanisms
to question the appropriateness of the Attorney-General in issuing a
certificate to prevent the Auditor-General from reporting. The Auditor-General
stated:
What
the Auditor-General would do would be to simply say in the report that
this element had been excised on the basis of a decision made by the
Attorney-General. Then the Attorney-General would be subject to questioning in the
House.
4.18 Similarly, DoFA stated:
…the Auditor-General still has the
right to advise parliament that in fact parts of his report or parts of the information
have actually been deleted for reasons that by the Attorney-General has. The
Attorney-General is then accountable to parliament directly for that decision making
process.
However, the Committee ultimately noted and recommended:
4.19 The Auditor-General proposed that section 37(4) of the
Act be amended to reflect the intentions expressed in the Explanatory
Memorandum. The Committee agrees with this position.
4.21 The Committee notes that there are several
accountability mechanisms to ensure that the Attorney-General’s certificate is subject
to scrutiny. These include the:
- Attorney-General’s certificate being
subject to the Administrative Decisions (Judicial Review) Act 1977;
- Attorney-General being subject to
questions in Parliament; and
- the risk of public dissent if the Auditor-General put
forth a strong case for reporting certain information, and the Attorney-General
restricted publication.
4.22 In view of this, the Committee considers that the
original intention of section 37(1)(b), as expressed in the EM, should be
confirmed through amendment to section 37(4). The Auditor-General supports this
amendment.
Item 26 proposed subsection 37(5) repeals and
substitutes the existing provision to remove the word “decides” so as to make
clear the Auditor-General has no discretion to omit information when the
Attorney-General has issued a certificate. It also tidies up the drafting of
the provision.
Item 28 proposed subsection 45(4) provides that the
Independent Auditor may give a copy or an extract from the report to any other
Minister who in his/her opinion has a special interest in the report. The role
of the Independent Auditor under the Auditor-General Act is to carry out
auditing of the financial statements and carry out performance audits of the
ANAO.
Item 29 provides for the general application of Schedule
1 amendments, other than items 21 and 22, to apply to reports and proposed
reports completed on or after the commencement of this Schedule regardless of
when the work started. Item 30 provides items 21 and 22, which
relate to the use or disclosure of information, apply on or after commencement.
The Committee commented as follows:
This inquiry revealed that there is some uncertainty as to
whether Parliamentary privilege applies to Auditor-General working papers and
draft reports. Recent advice from the Solicitor-General and the AGS suggested that
it would be proper to proceed on the basis that Parliamentary privilege applies
to draft reports and working papers for the purpose of preparing audit reports.
The AGS stated that ‘unless and until a court decides to the contrary, the
Auditor-General could properly argue that the creation of working papers and
the preparation of draft reports are part of proceedings in Parliament.[11]
The AGS commented in its advice that:
-
‘the actual tabling of a performance audit report or financial
statements audit report in Parliament is part of ‘proceedings in Parliament’
and attracts the protection of Parliamentary privilege. The Auditor-General and
ANAO officers would not be found liable in respect of statements contained in
the tabled report;
-
the
extent to which the protection of Parliamentary privilege extends,
and how it extends, to earlier steps in the performance audit or financial
statements audit process is less certain. Where a step in the audit process is
not protected by Parliamentary privilege, there is scope for that step to be
challenged in court and to give rise to legal liability;
-
although
the position is not clear, unless and until a court decides to the contrary,
the Auditor-General could properly argue that the creation of working papers
and the preparation of draft reports are part of ‘proceedings in Parliament’,
thereby attracting the protection of Parliamentary privilege, with the result
that the Auditor-General and ANAO officers could not be found liable in respect
of statements contained in those draft reports and statements;
-
however,
because the extent to which the protection afforded by Parliamentary privilege
applies to steps earlier than the tabling of reports is unclear, and how that
protection extends to those steps is also unclear, it would be prudent for the
Auditor-General and ANAO officers to proceed on the basis that their conduct of
a performance or financial statements audit is capable of being challenged and
of giving rise to legal liability’.
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2784.
Moira Coombs
4 February 2009
Bills Digest Service
Parliamentary Library
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