CHAPTER TWO
ISSUES ARISING FROM THE 2001-2002 ANNUAL
REPORT
Timeliness
2.1 Section 61 of the National Crime Authority Act 1984 stated that the Authority
shall, as soon as practicable after each 30 June, prepare a report of its operations
during the year. In stating that the report must be prepared as soon as practicable
after 30 June, the Act acknowledges the lengthy process which the Authority must
undertake to ensure all members of the Inter-Governmental Committee (IGC) sign off
on the annual report before it is tabled in Federal Parliament. However, it remains
government policy that all annual reports should be tabled by 31 October.1
2.2 The PJC notes that the previous annual report for 2000-2001 was not sent to
the Minister until 9 November 2001. It was tabled in both Houses on
23 March 2002. At the time, the former Chair of the Authority indicated that every
effort would be made to have the next annual report completed and delivered as soon
as possible.
2.3 The 2001-2002 annual report was first sent to the Minister for Justice and
Customs on 17 September 2002 before it was further distributed to members of the
Inter-Governmental Committee on the National Crime Authority. Although the report
was sent to IGC ministers in November 2002, the last of the IGC ministers comments
was not received until February 2003.2 The report, together with a letter from the
Minister for Justice and Customs dated 24 April 2003, was tabled in the House of
Representatives of 27 May 2003 and in the Senate on 16 June 2003.
2.4 The data in the current report was up to 23 months old before it was tabled.
The PJC has previously stated that it views the annual report as:
a report to the Parliament which outlines the state of the criminal
environment, and reports on the impact of legislation on that environment. It
also provides accountability for the expenditure of public money. The
impact of such a document is considerably diluted when the data is up to 21
months old. The opportunity for organisations to receive meaningful
feedback in order to make improvements in both reporting and performance
is also reduced significantly.3
2.5 The subject of timely reporting has been raised at a number of hearings and
reports by both this PJC and its predecessors. Various reasons for the delays have
been offered but, in the life of this PJC, the consultation period with the IGC is clearly
identifiable as a major factor in the delay.
2.6 In its last report, the PJC noted the inherent difficulties in administering the
consultation process with the IGC but indicated that the process should be better
managed.4 The PJC acknowledges its report was not available for the preparation of
the NCAs 2001-2002 Annual Report. The management of the consultation procedure
was further explored during the inquiry on this report.
2.7 The PJC is concerned about the reasons offered for the delays in IGC
members responding. Examples identified for delay in relation to the 2001-2002
report include:
• a change of IGC ministers in some states during the consultation period; and
• the mislaying of reports by the various IGC ministers.5
2.8 During an Estimates hearing in late 2002, the Authority stated that one of the
States was in a caretaker mode and unable to sign off on the annual report until the
election was finalised.6 The PJC understands that the principles observed by
governments in caretaker mode relate to the initiation of policy decisions that may
commit an incoming government, to making significant appointments or entering into
major contracts.7 It does not believe that signing off or commenting on an annual
report constitutes a disregard for any of the principles applicable to the caretaker
period. Accordingly, the PJC believes that this is an unacceptable reason for delay.
2.9 The PJC notes that there is no statutory requirement specifying either a
deadline for the presentation of the annual report or a period in which the IGC
members must respond to the consultation process. It could be argued that the lack of
this statutory requirement may contribute to the delay in IGC members signing off.
2.10 The PJC puts the new ACC on notice about the need for timeliness of its
annual reports and reiterates the comments made in its last report on the 2000-2001
annual report concerning managing the consultation process with the IGC members.
Business Planning and Performance Monitoring
2.11 It does not appear that the Authoritys business plan was finalised during the
reporting period. The Future Directions statement published in May 2000 continued
to provide the operating framework for the Authority during the period. The report
states that the Authority developed and piloted a new business planning and reporting
framework. However, further details were not provided.
2.12 The apparent lack of progress on the business plan appears to result from the
climate of uncertainty existing within the Authority during the reporting period. The
Authority had been refining a new outcome and outputs framework to better reflect
the operational priorities of the Authority. However, the report noted that the
endorsement of a new framework was postponed with the decision to abolish the
Authority and create the ACC.8
2.13 During the period, KPMG was commissioned to undertake a pricing and
funding review of the Authority. Issues identified in the KPMG report have either
been completed or absorbed into the integration and development plan of the ACC.9
2.14 The PJC notes the importance of an overarching framework or business plan
to guide decision making within the Authority and its successor organisation, the
ACC. A business plan is important to ensure that an organisation is not givingpriority to the urgent rather than the important.10 The ACC is mindful of these
concerns and gave an undertaking to the PJC to finalise a business plan for the ACC
by the end of September 2003.11
Compliance with Reporting Requirements
2.15 The ACC indicated that it has picked up on two or three of the priorities of
the former NCA, in terms of established criminal networks, money laundering and
South-East Asian crime, yet using a different methodology from that employed by
the Authority.12 For example, the lessons learned on the Swordfish National Task
Force have culminated in the Midas determination, which will cover both fraud and
tax avoidance.
2.16 The Authority reported satisfactorily on most of the matters required by
subsection 61 (2) of the Act. However, paragraph 61 (2) (d) requires a report on thegeneral nature and extent of any information furnished by the Chair during that year
to a law enforcement agency. The report indicates that 513 formal disseminations of
information were made in the reporting period to both Australian and overseas
agencies. Apart from identifying the work of the Australian Taxation Office as being
supported by many of these disseminations and that the feedback was positive there
was no further information provided.13 It is arguable that this information fulfills the
spirit of the statutory requirement placed on the Authority and it certainly does not
provide any real sense of the significance of this work to law enforcement in
Australia.
2.17 A more useful report would have been provided if some additional
information had been included. For example, the report could have included an
indication of the nature of the information (whether it related to money laundering or
tax avoidance) which was provided to other agencies. The PJC suggests this would
better fulfil the requirement placed on the Authority by paragraph 61 (2) (d) of the
Act.
2.18 The Authority satisfied the reporting requirements issued by the Department
of Prime Minister and Cabinet in June 2002.
2.19 The Authority reported against the effectiveness indicators that are contained
within the Portfolio Budget Statements. In 2001-2002, these indicators are:
• Stakeholder feedback on usefulness of intelligence product during the year,
the Authority, in addition to the 513 formal disseminations of information to
other agencies in Australia and overseas, also produced a number of joint
intelligence products. The Authority notes that law enforcement clients are not
very forthcoming providing positive feedback, however the Authoritys strategic
assessments on Outlaw Motorcycle Gangs and money laundering were
recognised as providing penetrating new insight in these areas; 14
• Progress on uniformity of laws across Australia the Authority contributed to
a number of forums which address reform issues of mutual interest, and to the Proceeds of Crime Bill 2002 and the Proceeds of Crime (Consequential
Amendments and Transitional Provisions) Bill 2002, both of which bring
Commonwealth legislation into line with that of the States;15
• Increase in deterrence and detectability of organised crime the Authority
reports that it achieved results across all priority areas and provides adequate
summaries of key operational results achieved in the reporting period;16
• Members involved in task forces and the level of participation in joint
activities the Authority reports that it coordinates five national task forces on:
South-East Asian organised crime (Blade), money laundering and revenue fraud
(Swordfish), established criminal networks (Freshnet), Outlaw Motorcycle
Gangs (Panzer) and Italo-Australian organised crime (Cerberus). 18 Australian
law enforcement agencies are involved in these task forces; 17
• Initiatives to enhance coordinated action the Authority improved
coordination activity by enhancing the content on secure ABCI networks,
developing a new range of intelligence products, driving completion of
intelligence assessments across agencies, facilitating joint agency intelligence
projects, providing input into a national intelligence collection framework and
co-ordinating case study material to underpin reform;18
• Significance of the networks disrupted the report provides details of several
operations in which significant drug-related international and national networks
were disrupted and/or dismantled. Some examples include: Operation Affcot
which dismantled the Australian end of a network importing ecstasy, resulting in
Australias largest seizure of 150.4 kg of ecstasy; a protracted NCA surveillance
known as Operation Djura which ended in the arrest of an overseas principal
whose operation imported 123.5 kg of ecstasy; the dismantling of two heroin
distribution networks in Sydney and Melbourne through Operation Wollombi;
disruption of a network importing 120 kg of cocaine with the arrest of two senior
Established Criminal Networks figures through Operation Swiftlet; and the
disruption of an abalone poaching network in Tasmania through Operation
Oakum.19
• Extent of disruption - during the reporting period, 413 charges were laid
against 276 persons, a decrease from the 425 charges laid against 359 persons
during 2000-2001. Court proceedings against 84 persons were finalised during
the year, with 79 of these found guilty. In 2000-2001, there were court
proceedings against 117 persons, with 103 persons found guilty. The Authority
states that they had a strong focus on the organised criminal structures behind
nationally significant criminal activity, leading to fewer arrests, charges and
seizures;20
2.20 In its report on the NCAs 2000-2001 annual report the PJC commented in
some detail on the usefulness of the Authoritys performance measures. One example
is the PJCs comments on the performance indicator relating to the significance of the
disruption of networks. Not only is it difficult to measure and report on, the impact of
the disruption to the network on organised crime is not clear. The PJC is aware that
these comments were not available to the Authority when the 2001-2002 report was
prepared. The PJC was informed that the implementation of the KPMG review
includes all of the corporate governance and other issues relative to managing
operations21. The PJC therefore expects that its concerns regarding the performance
measures will be addressed in the first annual report for the ACC.
Financial Statements and Expenditure
2.21 The Authority received an additional $7 million appropriation during the
reporting period. The Authority received a total of $60 014 073, including
$58 947 000 from Government. Total expenses from ordinary activities (excluding
borrowing expenses) was $55 182 266. Borrowing expenses were $120 782.
2.22 This left a net operating surplus of $4 711 025. This compared well with the
$3 million deficit incurred in 2000-01.
2.23 The Authority informed the PJC that the operating surplus resulted from the
inability of all scheduled work to be undertaken due to the period of transition to the
ACC. Most of the surplus is tied funding and was carried over to the next reporting
period. Budget Estimates hearings confirm that $4.5 million was carried over into the
next reporting period. $1.5 million would contribute to establishing Authority
capability on cybercrime and $3 million was carried over for a special covert
operation called Sagan, which was funded for two years.22
2.24 In addition, staff losses during the transition period resulted in under spending
$3 086 033 on employee expenses. The Authority did not recruit at normal levels
during this period. Further, 14 senior staff were lost either through resignation or
transfer. The PJC notes that the Authority endeavoured to minimise the impact of staff
departures in the following reporting period by introducing retention bonuses for staff
staying beyond the ACC transition period. The PJC will give careful consideration to
this aspect of the transition when examining the annual report for the 2001-2002
period.
2.25 During the reporting period, the Authority took out a loan for $3 million,
some of which was used to help finance part of the move to the Melbourne
location23. The Authority was able to repay this loan quickly, partly because the relocation
in Melbourne did not cost us as much as we first envisaged24. The interest
charge incurred was $90 480. According to a Budget Estimates hearing, the Authority
absorbed the costs of the re-location, but not to the detriment of its operations at the
time. Activity during the transitional period allowed the Authority to accommodate
the debt from its own cash reserves.25
2.26 As it is not a usual practice for Commonwealth bodies to borrow funds, the
PJC sought additional information on the NCAs loans in the reporting period. The $3
million loan was from the Australian Federal Police (AFP) and was made up of two
amounts for different projects. The terms of the loans were similar.
2.27 One loan of $1.5 million was to partially fund the purchase of the Magenta
telecommunications interception facility26. The AFP and the NCA had an agreement
to use a single supplier in the simultaneous upgrade of telecommunications
interception facilities. The simultaneous upgrade offered benefits to both
organisations. The timing of the initial payment coincided with that of another
substantial capital expenditure the co-location with the AFP in Melbourne. The
NCA borrowed to ensure they could meet the initial payment.27
2.28 The second amount, also of $1.5 million, was to fund the Melbourne colocation.
There was initially an expectation that the Department of Finance and
Administration (DoFA) would provide loan funds for the co-location. However, the
amount was to fund the infrastructure costs alone. The NCA was expected to fund the
make good and removal costs. The AFP loan was to fund the difference between the
DoFA loan and the cost. The NCA had to absorb an Act of Grace payment of $0.5
million in the same reporting period.28
2.29 The DoFA loan did not eventuate as discussions had not progressed to the
level of ministerial approval at the point where a relocation decision was made 29 and
as the Authority had the capacity to absorb the expenditure, there did not seem to be
any point in pursuing the loan with Finance.30
2.30 The PJC is concerned that the NCA incurred a cost of $90,000 on these loans.
It is also concerned about the statutory basis of the loans. It notes that the AFP and the
NCA have a strategic alliance and the loan from the AFP is arguably within the terms
of the AFPs outcome statement.
2.31 Evidence on the Act of Grace payment made during the reporting period was
taken in camera. The PJC was satisfied with the circumstances of that payment.
Resources
2.32 The PJC recognises the need for the Authority and the ACC to attract good
people to its workforce, and the need to reward appropriate performance. The
Governments Workplace Relations policy is geared towards offering Commonwealth
agencies the flexibility to set their own working conditions and to negotiate individual
remuneration packages with their own staff. Notwithstanding this policy, the PJC is
keen to ensure that the ACC finds the right balance between the rewarding of
performance and corporate transparency.
2.33 The PJC is aware that individual performance accountability is a key
requirement of the Public Service Commissioners Directions 1999. All APS
employees, including the Senior Executive Service (SES), are required by the
Commissioners Directions to have a fair and open performance management system
which guides salary movement and provides a clear statement of performance
expectations. It would appear from the Authoritys annual report that the SES staff
did not participate in a formal performance assessment scheme during the reporting
period, and that all SES staff received an automatic salary increase of six per cent
during the period.31
2.34 The PJC impresses upon the ACC the importance of adhering to the
Commissioners Directions in the new organisation, and advises that compliance with
these Directions will be monitored in future.
Legal Developments
2.35 The National Crime Authority Legislation Amendment Act 2001 (Cwlth) came
into force in October 2001. It provided for the appointment of hearing officers,
provision for the Commonwealth Ombudsman to deal with complaints against the
Authority, repeal of the privilege against self-incrimination at special, coercive
hearings and an increase in some penalties for offences under the Act. The Authority
states that the removal of the privilege against self-incrimination as a reason to refuse
to answer questions and produce documents at Authority hearings enabled the
Authority to more effectively meet its objectives. The Authority states that the
amendments have broken the code of silence perpetuated by the previous legislative
scheme and revealed significant corruption, revenue fraud and other serious organised
criminal activity that would otherwise have gone without prosecution.32
2.36 The PJC notes that there was a slight increase in the number of investigative
hearings from the previous year (131 to 176 hearings), but notes that there was a
decrease in the number of convictions obtained (82 down from 101 convictions). The
PJC notes that it may be too early to see the benefits of the 2001 amendments in
conviction rates.
2.37 The Measures to Combat Serious and Organised Crime Act 2001 (Cwlth) came in to force in October 2001. The legislation expanded the scope of the
Commonwealth legislative regime for controlled operations and introduced provisions
dealing with the use of assumed identities. The amendments also expanded the scope
for the use of listening devices.
General comments on the report
2.38 It appears that there are no serious errors or omissions in the report. However,
there is room for improvement in reporting against the Effectiveness and Performance
Measures as set out in the Portfolio Budget Statements. The required information was
provided in this report. A useful tool for future reports could be a simple table which
summarises the detailed information in Chapters Two and Three and indicates the
Authoritys (ACCs) effectiveness against each the strategies in the Portfolio Budget
Statements.
2.39 The PJC appreciates the difficulties in reporting against many of the
Authoritys activities, particularly as information may prejudice the operation of law
enforcement agencies, or the fair trial of a person who has been or may be charged
with an offence. An overarching business plan for the organisation would greatly
assist in assuring the PJC that the Authority, and now the ACC, is meeting
performance targets, as well as providing a framework for the efficient allocation of
resources.
2.40 The PJC notes that, at the time the Authority wrote the 2001-2002 annual
report, it did not have access to the comments provided by the PJC on the 2000-2001
annual report. Accordingly, the Authority was unable to benefit from some of the
PJCs comments on the last report. As a consequence many of the comments made in
by the PJC in the Examination of the Annual Report for 2000-2001 of the National
Crime Authority remain relevant for this annual report.
2.41 Finally, the Authority appears to have acted in a fiscally responsible manner
during the final full financial year of its existence. Overall, the Authority appears to be
operationally and fiscally sound in the lead up to the creation of the ACC.
The Hon Bruce Baird, MP
Chairman
Footnotes
[1] Department of Prime Minister and Cabinet 2002, Requirements for Annual Reports for
Departments, Executive Agencies and FMA Act Bodies, Department of Prime Minister and
Cabinet, Canberra, viewed 28 July 2002, <http://www.dpmc.gov.au> .
[2] Committee Hansard, 11 August 2003, Canberra, p 2.
[3] Parliamentary Joint Committee on the National Crime Authority 2002, Examination of the
Annual Report for 2000-2001 of the National Crime Authority, Canberra, p 8.
[4] Parliamentary Joint Committee on the National Crime Authority 2002, Examination of the
Annual Report for 2000-2001 of the National Crime Authority, Canberra, p 8.
[5] Committee Hansard, 11 August 2003, Canberra, p 2.
[6] Senate Legal and Constitutional Legislation Committee, (SLCLC), Committee Hansard
Consideration of Supplementary Estimates, 20 November 2002, Canberra, p 121.
[7] Department of Prime Minister and Cabinet, Guidance on Caretaker Conventions, dated
September 2001, p 2.
[8] National Crime Authority, Annual Report 2001-2002, NCA, Canberra, 2002, p 15.
[9] Committee Hansard, 11 August 2003, Canberra, p 5.
[10] Committee Hansard, 11 August 2003, Canberra, p 6.
[11] Committee Hansard, 11 August 2003, Canberra, p 7.
[12] Committee Hansard, 11 August 2003, Canberra, pp 3-4.
[13] NCA 2002, p 25.
[14] NCA 2002, pp 23-24.
[15] NCA 2002, p 32.
[16] NCA 2002, pp 36-50.
[17] NCA 2002, p 34.
[18] NCA 2002, p 35.
[19] NCA 2002, pp 37-47.
[20] NCA 2002, pp 51-55.
[21] Committee Hansard, 11 August 2003, Canberra, p 5.
[22] Senate Legal and Constitutional Legislation Committee (SLCLC) Committee Hansard,
Consideration of Budget Estimates, 27 May 2003, Canberra, pp 210-213.
[23] Committee Hansard, 11 August 2003, Canberra, p 13.
[24] Committee Hansard, 11 August 2003, Canberra, p 13.
[25] SLCLC 2003, p 228.
[26] Answers to Questions taken on Notice from 11 August hearing, dated 3 September 2003.
[27] NCA Annual Report 2001-2002 - Further Detail, dated 29 September 2003.
[28] NCA Annual Report 2001-2002 Further Detail, dated 29 September 2003.
[29] SLCLC 2002, p 120
[30] SLCLC, 2003, p 228.
[31] NCA 2002, p 71.
[32] NCA 2002, p 31.
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