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 NCA’s 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 Authority’s 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 giving“priority 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 the“general 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 Authority’s 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 Australia’s 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 NCA’s 2000-2001 annual report the PJC commented in some detail on the usefulness of the Authority’s performance measures. One example is the PJC’s 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 operations”²¹. 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 location”²³. The Authority was able to repay this loan quickly, partly because the relocation in Melbourne “did not cost us as much as we first envisaged”²⁴. 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 NCA’s 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 facility”²⁶. 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 AFP’s 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 Government’s 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 Commissioner’s Directions 1999. All APS employees, including the Senior Executive Service (SES), are required by the Commissioner’s 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 Authority’s 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 Commissioner’s 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 Authority’s (ACC’s) effectiveness against each the strategies in the Portfolio Budget Statements.

2.39 The PJC appreciates the difficulties in reporting against many of the Authority’s 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 PJC’s 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.