Overview

Introduction

1.1      This is the Senate Economics Legislation Committee's (the committee) second and final report on annual reports for 2016. It provides an overview of the committee's examination of annual reports for the 2014–15 final year tabled after 31 October 2015 and after the publication of the committee's first report on annual reports in 2016.

Terms of reference

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

1. examine each annual report referred to it and report to the Senate whether the report is apparently satisfactory;
2. 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;
3. investigate and report to the Senate on any lateness in the presentation of annual reports;
4. in considering an annual report, take into account any relevant remarks about the report made in debate in the Senate;
5. if the committee so determines, consider annual reports of departments and budget-related agencies in conjunction with examination of estimates;
6. 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;
7. draw to the attention of the Senate any significant matters relating to the operations and performance of the bodies furnishing the annual reports; and
8. 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 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      As part of the 2015–16 Budget on 11 May 2015, the Government announced that IIF Investments Pty Ltd will cease to exist. IIF Investments Pty Limited's 2015–16 report, to be included in next year's examination of annual reports, will be the agency's final report.

1.6      In addition, following the Machinery of Government changes arising from the Administrative Arrangements Order (AAO) dated 19 July 2016, the Snowy Hydro Limited was transferred from the Industry, Innovation and Science Portfolio to the Environment and Energy Portfolio. Northern Australia Infrastructure Facility, which is currently under the Department of Industry, Innovation and Science, will publish its annual reports from 2016–17 onwards.

Role of annual reports

1.7      Annual reports place a great deal of information about government departments and agencies on the public record in relation to the performance, activities, management and financial position of the reporting body. The Requirements for Annual Reports for Departments, Executive Agencies and Other Non-corporate Commonwealth Entities (Requirements for Annual Reports), prepared by the Department of the Prime Minister and Cabinet (PM&C) states '[t]he primary purpose of annual reports of departments is accountability, particularly to the Parliament.'[3] 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.

1.8      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. As highlighted in the Requirements for Annual Reports released by the 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.[4]

...

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.[5]

Annual reporting requirements

1.9      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.

1.10         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.

1.11         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;[6] 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.[7]

1.12      In its report on the development of the Commonwealth performance framework, the Joint Committee of Public Accounts and Audit (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'.[8]

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

Requirements for Annual Report for 2014–15 reports

1.14      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.[9]

1.15      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).[10]

Reports referred to the committee

1.16         The first Report on Annual Reports was tabled earlier this year on 2 March 2016.

1.17         Under Standing Order 25(20)(f), the committee is required to report on the annual reports of departments and agencies tabled by 30 April each year by the tenth sitting day after 30 June of that year. This year that date is 12 October 2016. This Report on Annual Reports also examines annual reports that were tabled after 30 April 2016 but before this report's tabling.

1.18         The committee would also like to include a correction to information contained in the first report; following the abolition of the Corporations and Markets Advisory Committee (CAMAC) in the May 2014 Budget, CAMAC's 2013–14 annual report was its final, and not as suggested 2014–15.[11]

1.19         The following annual report was referred to the committee for consideration:

Other bodies (non-statutory)

1.20         Foreign Investment Review Board, tabled on 18 April 2016 (presented out of session on 12 April 2016). (There is no legislative requirement to table the report.)

1.21         Comments on this report are contained in chapter 2.

Additional reports referred to the committee

1.22         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 since the first report was tabled in March 2016:

• Particulars of proposed expenditure in respect of the year ending on 30 June 2017 [Appropriation Bill (No. 1) 2016–2017];
• Particulars of certain proposed expenditure in respect of the year ending on 30 June 2017 [Appropriation Bill (No. 2) 2016–2017]; and
• Final Budget Outcome 2015–16—Report by the Treasurer and the Minister for Finance, dated September 2016.
• Australian Taxation Office:
  • Super Co-contributions Quarterly Report—for the period 1 January 2016 to 31 March 2016—Section 54 of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003; and
  • Low Income Superannuation Contributions Quarterly Report—for the period 1 January 2016 to 31 March 2016—Section 12 of the Superannuation Government Co-contribution for Low Income Earners) Act 2003.
• Productivity Commission:
  • Inquiry Report No. 77—Migrant intake into Australia, dated 13 April 2016.

General comments on the annual reports

'Apparently satisfactory'

1.23      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.

1.24      The annual report examined by the committee in this report was found to be of a satisfactory standard, adequately describing the functions, activities, performance and financial position of the agency. The committee finds the examined annual report to be 'apparently satisfactory'.

1.25      Even so, the committee considers that some aspects of the agency's annual report could be improved by an adherence to the Requirements for Annual Reports.

External scrutiny and accountability

1.26      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:

1. 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
2. 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).[12]

1.27      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

1.28      Standing Order 25(20)(c) requires the committee to report to the Senate on the late presentation of annual reports. Although there is no legislative requirement for the Foreign Investment Review Board to produce an annual report, the committee notes it is the Government's policy that annual reports be tabled by 31 October each year. It is also best practice to table annual reports prior to Supplementary Budget Estimates hearings to allow senators sufficient time to examine an agency's performance.

Departments and PGPA Act entities

1.29      To ensure compliance with the PGPA Act,[13] 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.[14] In 2015, hearings for the committee's portfolios commenced on 21 October.

1.30      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.[15]

Other entities

1.31      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.

Compliance indices or lists of requirements

1.32      The inclusion of a compliance index or a list of requirements in annual reports is mandatory for all departments and agencies under the PGPA Act as it was under the previous FMA Act, and as spelled out in the Prime Minister and Cabinet's guidelines contained in Requirements for Annual Reports. 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.

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