Chapter 1 - Introduction

[1]        Journals of the Senate, No.14-10 November 2016, p. 4.

[2]        Australian National Audit Office, Defence's Management of Credit and other Transaction Cards, ANAO Report No. 33 2015-16 Performance Audit. (ANAO Report, 2016)

Chapter 2 - Background

[1]        Department of Defence, Mission, http://www.defence.gov.au/AboutUs.asp, accessed 27 April 2017.

[2]        ANAO Report, 2016

[3]        Department of Defence, 2016 Defence White Paper, 2016, pp.17-18.

[4]        The Department of Defence submission to the inquiry noted actual expenditure in 2015-16 of $31,523 billion. The Defence Portfolio Budget Statement 2016-17 advises that the workforce strength consists of an estimated 59,209 in the ADF which is due to grow to 62,400, and a civilian workforce of approximately 18,440.

[5]        Department of Defence, 2016 Defence White Paper, 2016, p. 31.

[6]        ANAO Report, 2016, p. 13.

[7]        Australian National Audit Office, Defence Reform Program Management and Outcomes, Department of Defence, Report No. 16, 2001-2001, Performance Audit, 2001

[8]        Mark Thomson, ASPI, Defence Reform: The Australian Experience, presentation to the Atlantic Council Workshop on Comparative Defence Reform, 21 June 2013, Ottawa, Canada.

[9]        See Appendix 4 for an explanation of the key roles and responsibilities established by the PGPA 2013, as advised by the Commonwealth Resource Management Framework.

[10]      PGPA 2013, s. 15. 

[11]      PGPA 2013, s. 28.

[12]      Department of Finance, Commonwealth Risk Management Policy, 1 July 2014.

[13]      PGPA 2013, s.35, s.37, s.38, s.39, s.40 and s.46.

[14]      ANAO Report, 2016.

[15]      Department of Finance, Supplementary Response to Questions on Notice, 29 March 2017, Q1.

[16]      Department of Finance: Resources Management Guide No 416, Facilitating Supplier Payment Through Payment Card, November 2016, which outlines Commonwealth policy on payment cards as the preferred method to pay suppliers for eligible payments valued below $10,000. The policy is intended to facilitate timely payment to suppliers, assist their cash flow and reduce costs to business in supplying to the Commonwealth.

[17]      ANAO Report 2016, p.15.

[18]      ANAO Report, 2016, p. 7.

[19]      ANAO Report, 2016, pp. 9-10.

[20]      ANAO Report 2016, pp. 7-10.

Chapter 3 - Key issues

[1]        Department of Finance, Response to Questions on Notice arising from the hearing on 7 March 2017, Q1.

[2]        ANAO Report 2016, p 33, paras 3.1-3.5: The ANAO notes that this data is sourced from the credit company who supply it to the Department of Finance and advises that because the data is based on merchant category codes, aggregated and reported by the credit card company, caution is needed with interpretation.

[3]        Category 7997: Clubs, Country Clubs Membership (Athletics, Recreation, Sports), Private Golf Courses, Entertainment.

[4]        ANAO Report, 2016, p.18, para 2.7 -2.10.

[5]        Department of Defence, Submission 1, Attachment E: the two new merchant codes blocked related to gambling and dating/escort agencies.

[6]        Department of Defence, Submission 1, Attachment E.

[7]        Mr David Spouse, First Assistant Secretary Financial Services, Department of Defence, Committee Hansard, Thursday 6 April 2017, p3.

[8]        ANAO Report, 2016.

[9]        ANAO Report, 2016, p.33.

[10]      2009 Defence Fraud Control Plan, ANAO Report, 2016, p.21.

[11]      See ANAO Report, 2016, Appendix 6, p.73.

[12]      Committee Hansard, 6 April 2017, p.24.

[13]      ANAO Report, 2016, p. 41, para 3.29-3.30.

[14]      ANAO Report, 2016, p. 41, para 3.28-3.32.

[15]      Dr Tom Clarke, First Assistant Secretary, Audit and Fraud Control, Department of Defence, Committee Hansard, 6 April 2017, p. 19.

[16]      Mr David Spouse, First Assistant Secretary Financial Services, Department of Defence, Committee Hansard, 6 April 2017, p. 19.

[17]      Mr David Spouse, First Assistant Secretary Financial Services Department of Defence, Committee Hansard, 6 April 2017, p. 20.

[18]      This reflects the historical devolution of administrative responsibilities to the individual to secure administrative efficiencies under the 'shared services' model, arising, at a Commonwealth level, from the Financial Management Accountabilities Act 1997, and specifically, for Defence, under the 1996 Defence Efficiency Review and subsequent Defence Reform Program, as noted at Chapter 2.

[19]      Mr David Spouse, First Assistant Secretary Financial Services Department of Defence, Committee Hansard, 6 April 2017, p. 21.

[20]      Mr David Spouse, First Assistant Secretary Financial Services Department of Defence, Committee Hansard, 6 April 2017, p. 21.

[21]      Mr David Spouse, First Assistant Secretary Financial Services Department of Defence, Committee Hansard, 6 April 2017, p. 21.

[22]      Senator Gallacher, Committee Chair, Committee Hansard, 6 April 2017, p. 23.

[23]      Mr David Spouse, First Assistant Secretary Financial Services Department of Defence, Committee Hansard, 6 April 2017, p. 24.

[24]      Department of Defence, Submission 1, see also Committee Hansard 6 April 2017, p. 4.

[25]      These are listed in Appendix 5 of the ANAO report, and include: cash withdrawals of various amounts without evidence of prior approval or supporting receipts; instances where amounts were repaid when ANAO requested supporting documentation; travel allowances withdrawn on the purchase card; cash withdrawn or invoices paid before delegate approval was obtained; CMS expense summary reports not signed by the cardholder or CMS supervisor; and risks such as the co-location of cards and their PINs, which were subsequently stolen and cash accessed; cash withdrawn and receipts claimed to have been stolen.

[26]      Committee Hansard, 6 April 201, p. 5.

[27]      ANAO Report, 2016, p40.

[28]      Mr David Spouse, First Assistant Secretary, Financial Services, Department of Defence, Committee Hansard, 6 April 2017, p. 5.

[29]      Mr David Spouse, First Assistant Secretary, Financial Services, Department of Defence, Committee Hansard, 6 April 2017, p. 5.

[30]      Committee Hansard, 6 April 2017, p. 6.

[31]      Senator Gallacher, Committee Chair, Committee Hansard, 6 April 2017, p. 6.

[32]      Committee Hansard, 6 April 2017, p. 6.

[33]      Mrs Meryl Clarke, Assistant Secretary, Fraud Control, Department of Defence, Committee Hansard, 6 April 2017, p. 7.

[34]      Mrs Meryl Clarke, Assistant Secretary, Fraud Control, Department of Defence, Committee Hansard, 6 April 2017, p. 7.

[35]      Communication between the Secretariat and Dr Rowland (ANAO) in response to Questions on Notice inquiries, 12 April 2017.

[36]      See ANAO Report, 2016, Appendix 3, which advises: No.8 All credit cards are to be validated by a CMS Supervisor; and No 9: CMS Supervisors are deterred by the Group CFOs (or their delegate). These provisions were removed from the Governance Framework submitted in Submission 1, Department of Defence, Attachment B.

[37]      Communication between the Secretariat and Dr Rowland (ANAO) in response to Questions on Notice inquiries, 12 April 2017; it is understood that this control was removed as a result of Belcher Red Tape review. Defence is yet to respond to Questions on Notice on this matter.

[38]      Submission 1 Department of Defence, Attachment C: Enterprise Wide Risk Defence Credit Card Fraud Risk Assessment, Row 2.2.

[39]      The Fraud Risk Assessment schedules the control changes to take effect from 15 October 2016.

[40]      Department of Defence, Submission 1, Attachment G: Credit Card and Defence Financial Risk Controls Framework Work Plan, dated 12 October 2016, p5.

[41]      Mr David Spouse, First Assistant Secretary Financial Services, Department of Defence, Committee Hansard, 6 April 2017, p. 11.

[42]      Ms Diamond, Acting Chief Finance Officer, Department of  Defence, Committee Hansard, 6 April 2017, p.11.

[43]      Senator Gallacher, Committee Chair, Committee Hansard, 6 April 2017, p. 11.

[44]      Ms Diamond, Acting Chief Finance Officer, Department of  Defence, Committee Hansard, 6 April 2017, p. 12.

[45]      Senator Gallacher, Committee Chair, Committee Hansard, 6 April 2017, p. 13.

[46]      Mr Spouse, First Assistant Secretary Financial Services, Department of Defence, Committee Hansard, 6 April 2017, pp 15-16.

[47]      Cabcharge Fast cards are considered a credit card, as is the E-ticket, although the latter is technically a voucher but is recognised as credit by Defence’s Accountable Authority Instructions. ANAO Report, 2016, p.40.

[48]      ANAO Report, 2016, p. 42.

[49]      Although it cautions against optimism, suggesting this may reflect seasonal low point in activity. ANAO Report, 2016, p.52

[50]      Department of Finance, Resource Management Guide No.001, Commonwealth Resource Management Framework Companion, 2015, p.5.

[51]      Department of Finance, Resource Management Guide No.001, Commonwealth Resource Management Framework Companion, 2015, p. 33, para.190.

[52]      ANAO Report, 2016, p7; see also Appendix 3: New arrangements for credit card governance in Defence, p66, January 2016; and see also Department of Defence Submission 1, Attachment B Department of Defence Credit Card Governance January 2016

[53]      ANAO Report, 2016, p. 7.

[54]       Department of Finance, Commonwealth Resource Management Framework Companion, 2015, p.6, para 8.

[55]       Department of Finance, Commonwealth Resource Management Framework Companion, 2015, p.5, para.5.

[56]      These referred particularly to the use of E-tickets, such as high use of select taxis, multiple expensive fares and 'small hours' travel, See ANAO report 2016, p51; and a series of payments on purchase cards for traffic infringements, ANAO Report, 2016, p. 38. 

[57]      Australian Payments Clearing Association, Australian Payments Fraud: Details and Data, 2016.

[58]      Russell G Smith, Penny Jorna, Australian Institute of Criminology, Statistical Report 01: Fraud against the Commonwealth: Report to Government, 2014.

[59]      The committee was advised by the Military Justice Directorate that six convictions had been reported to Parliament in 2016 – see Brig. Woodward, Director, Military Prosecutions, Department of Defence, Committee Hansard, 6 April 2017, p.28; ANAO advised Defence reported 5 cases to Parliament [House of Representatives, Questions in Writing, Department of Defence: Instances of Fraud or Theft (Question No. 1771) 2 February 2016],  in 2014-2015 using the Defence Travel Card, ANAO Report, 2016, p. 30.

[60]      The strategies included the introduction of the blocks on merchant categories; inactive card cancellation; and actively monitoring card credit limits, and in some cases, lowering 'default' card limits.

[61]      Mr David Spouse, First Assistant Secretary Financial Services, Department of Defence, Committee Hansard, 6 April 2017, p. 2.

[62]      Department of Defence, First Principles Review: Creating One Defence, 2015, p.13.

[63]      Department of Defence, First Principles Review: Creating One Defence, 2015, p.50.

Appendix 4 - Relevant Excerpts from the Public Governance Performance and Accountability Act 2013

[1]        See https://www.legislation.gov.au/Details/C2016C00414 at www.legislation.gov.au

[2]        Resource Management Guide No.200

[3]        See http://www.finance.gov.au/publications/elearning/resource-management/crm-module1/a001_module_1_4.2._accountable_authorities.html

[4]        Australian Government, Department of Finance, Resource Management Guide No.001, Commonwealth Resource Management Framework Companion, November 2015, p23

[5]        Australian Government, Department of Finance, Resource Management Guide No.001, Commonwealth Resource Management Framework Companion, November 2015, p48-49

[6]        Section 25-29 describes a Commonwealth official’s duties and responsibilities as follows: s25: a duty of care and diligence; s26: a duty to act honestly in good faith and for a proper purpose; s27: a duty in relation use of position; s28: a duty in relation to use of information; and s29: a duty to disclose interests

[7]        Australian Government, Department of Finance, Resource Management Guide No.001, Commonwealth Resource Management Framework Companion, November 2015, p3 and PART 2 for more details.

[8]        Australian Government, Department of Finance, Resource Management Guide No.001, Commonwealth Resource Management Framework Companion, November 2015, p48-49