Preface

Introduction

1.1 This is the Senate Economics Legislation Committee's (the committee) first report on annual reports for 2016 and provides an overview of the committee's examination of annual reports for the 2014–15 reporting period.

Terms of reference

1.2 Standing Order 25(20) relating to the consideration of annual reports by committee requires the committee to:

examine each annual report referred to it and report to the Senate whether the report is apparently satisfactory;
consider in more detail, and report to the Senate on, each annual report which is not apparently satisfactory, and on the other annual reports which it selects for more detailed consideration;
investigate and report to the Senate on any lateness in the presentation of annual reports;
in considering an annual report, take into account any relevant remarks about the report made in debate in the Senate;
if the committee so determines, consider annual reports of departments and budget-related agencies in conjunction with examination of estimates;
report on annual reports tabled by 31 October each year by the tenth sitting day of the following year, and on annual reports tabled by 30 April each year by the tenth sitting day after 30 June of that year;
draw to the attention of the Senate any significant matters relating to the operations and performance of the bodies furnishing the annual reports; and
report to the Senate each year whether there are any bodies which do not present annual reports to the Senate and which should present such reports.

1.3 The requirements apply to annual reports for the financial year ending on 30 June 2015.

Allocated portfolios

1.4 The committee's remit to examine the annual reports of the Industry, Innovation and Science Portfolio and the Treasury Portfolio was conferred by a resolution of the Senate. The Senate allocated departments and agencies to committees on 13 November 2013.[1] In accordance with that resolution, the committee has responsibility for the oversight of the following:

Industry, Innovation and Science Portfolio;[2] and
Treasury Portfolio.

1.5 Following the Machinery of Government changes arising from the Administrative Arrangements Order (AAO) dated 21 September 2015, national policy issues relating to the digital economy and the Australian Renewable Energy Agency (ARENA) were transferred from the Industry, Innovation and Science Portfolio to the Environment Portfolio. The Clean Energy Finance Corporation (CEFC) was transferred from the Treasury to the Environment Portfolio on 30 September 2015 in an amended AAO. As a result, the 2014–15 annual reports for ARENA and CEFC are not examined in this report.

Role of annual reports

1.6 Annual reports place a great deal of information about government departments and agencies on the public record. Accordingly, the tabling of annual reports is an important element of accountability to the Parliament, as the information provided in annual reports assists in the effective examination of the performance of departments and agencies, and the administration of government programs.

1.7 Together with Portfolio Budget Statements (PBS), Portfolio Additional Estimates Statements (PAES) and the Estimates process, annual reports are the primary mechanisms for scrutiny of the operations of government. Indeed, as highlighted in the Requirements for Annual Reports for Departments, Executive Agencies and Other Non-corporate Commonwealth Entities (Requirements for Annual Reports or PM&C guidelines) released by the Department of the Prime Minister and Cabinet (PM&C), and approved by the Joint Committee of Public Accounts and Audit (JCPAA) under subsections 63(2) and 70(2) of the Public Service Act 1999 (PS Act):

Annual reports serve to inform the Parliament (through the responsible Minister), other stakeholders, educational and research institutions, the media and the general public about the performance of departments in relation to services provided. Annual reports are a key reference document and a document for internal management. They form part of the historical record.[3]

...

Annual reports and PB Statements are the principal formal accountability mechanisms between government and departments and from departments through (or on behalf of) government to the Parliament.[4]

Annual reporting requirements

1.8 This is the first time departments and agencies are reporting under the Public Governance, Performance and Accountability Act 2013 (PGPA Act), which commenced on 1 July 2014. The PGPA Act consolidates the governance, performance and accountability requirements contained in the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC Act). It also establishes a performance reporting framework for all Commonwealth entities and companies.

1.9 Section 46 of the PGPA Act sets out the annual reporting requirements in relation to Commonwealth entities, including that annual reports must comply with any requirements prescribed by rules. Section 97 sets out the annual reporting requirements for Commonwealth companies.

1.10 However, as with 2013–14 annual reports, 2014–15 annual reports were prepared under the arrangements existing at 30 June 2014 as follows:

for non-corporate Commonwealth entities (departments, executive agencies and statutory agencies): the Public Service Act 1999, sections 63(2) and 70(2), and the Parliamentary Service Act 1999, section 65; other relevant enabling legislation for statutory bodies; and the Requirements for Annual Reports;
for corporate Commonwealth entities: the Commonwealth Authorities (Annual Reporting) Orders 2011 prescribe material that must be included in corporate entities' annual reports. These Orders continue to apply to 2014–15 annual reports under the PGPA (Consequential and Transitional Provisions) Rule;
for Commonwealth companies: the Commonwealth Companies (Annual Reporting) Orders 2011 prescribe material that must be included in corporate entities' annual reports. These Orders continue to apply to 2014–15 annual reports under the PGPA (Consequential and Transitional Provisions) Rule;[5] and
for non-statutory bodies: the guidelines are contained in the government response to the Senate Standing Committee on Finance and Public Administration Report on Non-Statutory bodies.[6]

1.11 In its report on the development of the Commonwealth performance framework, the JCPAA foreshadowed that in future years the annual report requirements 'will be replaced through the consolidation of all mandatory requirements into a rule made for the purposes of section 46 of the PGPA Act'.[7]

1.12 The enabling legislation of some agencies may require that agency to report on matters other than those included in the PM&C guidelines, or impose different reporting requirements. The committee's view is that such agencies, while bound by their enabling legislation, should also comply with the PM&C guidelines, to the extent that the requirements do not conflict.

Requirements for Annual Report for 2014–15 reports

1.13 The Requirements for Annual Reports were issued by the PM&C on 25 June 2015 and approved by the JCPAA. Two significant changes were made in relation to:

small business procurement – three requirements have been added to reflect the government's commitment to improve small business access to Commonwealth contracts; and
Indigenous employment – reporting on Indigenous employment has been added to the existing requirement to report on the management of human resources.[8]

1.14 While the Requirements for Annual Reports issued on 25 June 2015 apply to annual reports for 2014–15, it was noted that:

Significant revisions to the Requirements are anticipated for the 2015–16 financial year with the commencement of the performance reporting model under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).[9]

1.15 The tabling information is shown in Appendices 1 and 2 and changes to terminology from the FMA Act to the PGPA Act are contained in Appendix 3.

Reports referred to the committee

1.16 Under Standing Order 25(20)(f), the committee is required to report on the annual reports of departments and agencies tabled by 31 October each year by the tenth sitting day of the following year.[10] This year that date is 2 March 2016.[11] This Report on Annual Reports also examines annual reports that were tabled after 31 October 2015 but before this report's tabling.[12]

1.17 The following annual reports were referred to the committee for consideration:

Departments of State (also non-corporate Commonwealth entities)

Department of Industry, Innovation and Science [incorporating the reports of non-statutory non-corporate Commonwealth entities Geoscience Australia and IP Australia]; and
Department of the Treasury.

Non-corporate Commonwealth entities under the PGPA Act

Office of the Auditing and Assurance Standards Board (statutory agency);[13]
Office of the Australian Accounting Standards Board (statutory agency);[14]
Australian Bureau of Statistics (statutory agency);
Australian Charities and Not-for-profits Commission;
Australian Competition and Consumer Commission [incorporating the report of the Australian Energy Regulator] (statutory agency);
Australian Office of Financial Management (non-statutory agency);
Australian Prudential Regulation Authority (statutory agency);
Australian Securities and Investments Commission (statutory agency);[15]
Commissioner of Taxation (Australian Taxation Office) (statutory agency);
Commonwealth Grants Commission (statutory agency);
Inspector-General of Taxation (statutory agency);
National Competition Council (statutory agency);
Private Health Insurance Administration Council (statutory authority, transferred to APRA on 1 July 2015);
Productivity Commission (statutory agency); and
Royal Australian Mint (non-statutory agency).

Non-corporate Commonwealth entities not under the PGPA Act (statutory and non-statutory bodies)

Australian Statistics Advisory Council;
Companies Auditors and Liquidators Disciplinary Board (statutory body);[16]
Financial Reporting Council (statutory body);[17]
Superannuation Complaints Tribunal (statutory body);
Tax Practitioners Board (statutory body); and
Takeovers Panel (non-statutory body).[18]

Corporate Commonwealth entities under the PGPA Act

Australian Institute of Marine Science;
Australian Reinsurance Pool Corporation;
Australian Nuclear Science and Technology Organisation;[19]
Commonwealth Scientific and Industrial Research Organisation;
Corporations and Markets Advisory Committee (statutory agency);[20]
National Offshore Petroleum Safety and Environmental Management Authority (statutory agency); and
Reserve Bank of Australia.

Commonwealth companies established under the Corporations Act 2001

IIF Investments Pty Limited; and
Snowy Hydro Limited.

1.18 Comments on these individual reports are contained in chapter 1 for departments of state, and chapter 2 for non-corporate Commonwealth entities and corporate Commonwealth entities. Reports are listed in alphabetical order under each portfolio.

1.19 Some of the aforementioned reports which are within the Treasury portfolio are also subject to scrutiny by the Parliamentary Joint Committee on Corporations and Financial Services (PJC), established by Part 14 of the Australian Securities and Investments Commission Act 2001. Section 243 specifies the PJC's duties, which include:

(b) to examine each annual report that is prepared by a body established by this Act and of which a copy has been laid before a House, and to report to both Houses on matters that appear in, or arise out of, that annual report and to which, in the Parliamentary Committee's opinion, the Parliament's attention should be directed...

1.20 In fulfilment of the PJC committee's duties under subsection 243(b), the PJC reports on the following bodies.

Auditing and Assurance Standards Board;[21]
Australian Accounting Standards Board;[22]
Australian Securities and Investments Commission;
Companies Auditors and Liquidators Disciplinary Board;
Corporations and Markets Advisory Committee;
Financial Reporting Council;
Financial Reporting Panel;[23]
Office of the Australian Accounting Standards Board;[24]
Office of the Auditing and Assurance Standards Board;[25] and
Takeovers Panel.

Additional reports referred to the committee

1.21 As the committee is not obliged to report on Acts, statements of corporate intent, surveys, policy papers, budget documents, corporate plans or errata, the following documents were referred to the committee for information only:

Particulars of proposed additional expenditure in respect of the year ending on 30 June 2015 [Appropriation Bill (No. 3) 2015–2016];
Particulars of certain proposed additional expenditure in respect of the year ending on 30 June 2015 [Appropriation Bill (No. 4) 2015–2016];
Portfolio Additional Estimates Statements 2015–16—Treasury Portfolio;
Portfolio Additional Estimates Statements 2015–16—Industry, Innovation and Science Portfolio;
Mid-Year Economic and Fiscal Outlook (MYEFO) 2015–16;
Tax Expenditures Statement 2015;
Consolidated financial statements for the year ended 30 June 2015; and
Final Budget Outcome 2014–15—September 2015.
Australian Taxation Office:
- Super Co-contributions Quarterly Report—for the period 1 October 2015 to 31 December 2015—Section 54 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Low Income Superannuation Contributions Quarterly Report—for the period 1 October 2015 to 31 December 2015—Section 12 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Super Co-contributions Quarterly Report—for the period 1 July 2015 to 30 September 2015—Section 54 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Low Income Superannuation Contributions Quarterly Report—for the period 1 July 2015 to 30 September 2015—Section 12 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Super Co-contributions Quarterly Report—for the period 1 April 2015 to 30 June 2015 – Section 54 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Super Co-contributions Annual Statutory Report—1 July 2014 to 30 June 2015 – Section 54 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Low Income Superannuation Contributions Quarterly Report—for the period 1 April 2015 to 30 June 2015 – Section 12 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Low Income Superannuation Contributions Annual Report—1 July 2014 to 30 June 2015 – Section 12 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Super Co-contribution Quarterly Reports for the periods 1 July 2014 to 30 September 2014, 1 October 2014 to 31 December 2014 and 1 January 2015 to 31 March 2015—Section 54 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003;
- Low Income Superannuation Contributions Quarterly Reports for the periods 1 April 2014 to 30 June 2014, 1 July 2014 to 30 September 2014, 1 October 2014 to 31 December 2014, 1 January 2015 to 31 March 2015—Section 12 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003; and
- Low Income Superannuation Annual Report for the year 1 July 2013 to 30 June 2014—Section 12 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003.
Offshore Petroleum and Greenhouse Gas Storage Act 2006—
- National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA)—First operational review, dated September 2015 (tabled 16 September 2015);
- National Offshore Petroleum Titles Administrator (NOPTA)— First operational review, dated September 2015;
Australian Government Response to the 2015 Review of the National Offshore Petroleum Titles Administrator, December 2015—Section 695 of the Offshore Petroleum and Greenhouse Gas Storage Act 2006; and
Australian Government Response to the 2015 Operational Review of the National Offshore Petroleum Safety and Environmental Management Authority—December 2015—Section 695 of the Offshore Petroleum and Greenhouse Gas Storage Act 2006;
Productivity Commission:
- Report No. 75—Business set-up, transfer and closure, dated 30 September 2015;
- Report No. 76—Workplace relations framework, dated 30 November 2015 (Volumes 1 and 2).
Reserve Bank of Australia:
- Equity and diversity—Annual Report for 2014–15; and
- Payments System Board—Annual Report for 2014–15.

General comments on the annual reports

'Apparently satisfactory'

1.22 Under the terms of Standing Order 25(20)(a), the committee is required to report to the Senate whether reports are 'apparently satisfactory'. In making this assessment, the committee considers such aspects as compliance with relevant reporting guidelines.

1.23 The annual reports examined by the committee in this report were found to be of a satisfactory standard, adequately describing the functions, activities, performance and financial positions of the departments and agencies. The committee finds the examined annual reports to be 'apparently satisfactory'.

1.24 Even so, the committee considers that some aspects of agency annual reports could be improved by a closer adherence to the Requirements for the Annual Reports. For example, some annual reports should contain a discussion of external scrutiny and parliamentary accountability.

External scrutiny and accountability

1.25 It is required that annual reports:

...must provide information on the most significant developments in external scrutiny of the department and the department's response, including particulars of:

judicial decisions, decisions of administrative tribunals, and decisions by the Australian Information Commissioner, that have had, or may have, a significant impact on the operations of the department; and
reports on the operations of the department, including by the Auditor-General (other than the report on financial statements), a Parliamentary committee, the Commonwealth Ombudsman, or agency capability reviews (once released).[26]

1.26 Annual reports should be a primary reference document for parliamentarians and others looking for information about external scrutiny of government agencies. As noted, the primary purpose of annual reports is accountability to the Parliament—it is therefore important that details about external scrutiny are included in a clear manner in annual reports. Details on parliamentary scrutiny should be included in annual reports, including appearances at Senate estimates hearings (which are the subject of bi-annual reports to the Senate) and any evidence or submissions made to parliamentary inquiries. The reports should also note that they are subject to scrutiny by this and any other committee.

Timeliness

1.27 Standing Order 25(20)(c) requires the committee to report to the Senate on the late presentation of annual reports. The committee commends the departments and agencies discussed in this report for their timeliness.

Departments and PGPA Act entities

1.28 To ensure compliance with the PGPA Act,[27] subsection 4(1) of the PM&C Requirements for Annual Reports states that annual reports of departments and agencies must be provided to the responsible Minister by the 15^th day of the fourth month after the end of the reporting period. The responsible Minister must, in turn, present the report to each House of the Parliament on or before 31 October in the year in which the report is given. Furthermore, if Senate Supplementary Budget Estimates hearings are scheduled to occur prior to 31 October, it is best practice for annual reports to be tabled prior to those hearings.[28] In 2015, hearings for the committee's portfolios commenced on 21 October.

1.29 The provisions of subsections 34C(4)–(7) of the Acts Interpretation Act 1901 apply in relation to an application for extension of the period. An extension under the Acts Interpretation Act 1901 would need be sought only should a specified timeframe not be met. However, it remains the government's policy that all annual reports should be tabled by 31 October.[29]

Other entities

1.30 Entities reporting in accordance with their own legislation are often required to prepare for the relevant Minister their annual report 'as soon as is practicable' after the end of the particular period to which the reports relates. The committee draws attention to subsections 34C(2) and 34C(3) of the Acts Interpretation Act 1901, which stipulate that where no date for providing a report to a Minister is specified, the report should be presented no more than six months after the reporting period, and the Minister must provide the report to the Parliament within 15 days after the Minister receives it.

Reports received after 31 October date

1.31 The committee notes that this report includes the examination of several annual reports tabled after the 31 October date. See appendices 1 and 2 for more information.

1.32 Annual reports and other documents tabled in the Senate after 31 October and before the tabling of this report will be discussed in the committee's Annual reports (No. 2 of 2016).

Compliance indices or lists of requirements

1.33 The inclusion of a compliance index or a list of requirements in annual reports was mandatory for all departments and agencies under the previous FMA Act and now under the PGPA Act and as spelled out in the PM&C guidelines. The index preferably should include a nil return entry where the agency has nothing to report under an item. A compliance index is a useful feature of reports and assists the committee considerably in its assessments of the reports. It also assists agencies by clearly showing that their compliance obligations have been met. It can be particularly useful for agencies with reporting requirements under various Acts.

1.34 The committee commends the great majority of agencies for their inclusion of compliance indices in their 2014–15 annual reports. However, the committee also notes some annual reports did not include some mandatory reporting requirements, or could be improved with a more accessible layout and format. The committee also notes the importance of closely adhering to the most recently updated compliance index for easy reference of specific information. As the reporting requirements are updated each year, it is also important for agencies to use the most up-to-date reporting requirements in the preparation of annual reports.

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