3.1
The Senate Economics Legislation Committee has selected the annual reports of the committee’s two portfolio departments, and two non-corporate Commonwealth entities for closer examination:
Department of the Treasury;
Australian Securities and Investments Commission;
Australian Prudential Regulation Authority; and
Department of Industry, Science, Energy and Resources.
Department of the Treasury
3.2
The 2020-21 annual report of the Department of the Treasury (Treasury) was tabled in Parliament on 20 October 2021.
3.3
The Secretary, Dr Steven Kennedy PSM, highlighted activities that Treasury undertook in 2020-21, including a key focus on the support given in response to the ongoing COVID-19 pandemic.
3.4
Treasury implemented several COVID-19 response measures. These measures included:
the Small and Medium Enterprise Guarantee; and
the Coronavirus Supplement.
3.5
The Secretary also highlighted the major initiatives designed and implemented by Treasury.
[T]emporary full expensing and loss carry back for businesses, personal income tax cuts and significant changes to Australia’s insolvency system. Treasury developed a new fiscal strategy that ties the government’s fiscal approach to economic recovery, which has attracted global interest.
3.6
Treasury received additional functions in 2020–21 following a Machinery of Government change. The Small and Family Business Division (SFBD), the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and the Infrastructure and Project Financing Agency (IPFA) moved to the Treasury Portfolio.
Performance reporting
3.7
A Commonwealth entities performance criteria and reporting consists of three documents:
Portfolio Budget Statements (PBS) state the Outcome/s, Purpose and Programs for Commonwealth entities which inform its performance and criteria;
Corporate Plan 2020-21 sets out the Commonwealth entities purpose/s and individual performance criterion noting the activities it will undertake and intended results; and
Annual Performance Statement which contained reporting and analysis on the Commonwealth entities actual performance results, in light of its forecasts.
3.8
Treasury’s purpose statement mirrored its 2019-20 statement and remained largely consistent with its outcome statement—'[t]o support and implement informed decisions on policies for the good of the Australian people, consistent with achieving strong, sustainable economic growth and fiscal settings’.
3.9
Treasury’s Corporate Plan 2020-21 gave context to priorities by emphasising the following points:
COVID-19—A once in a century shock;
sharp deterioration in the domestic and global outlook and an uncertain recovery pathway and timeframe; and
lingering impacts on confidence, investment and employment.
3.10
Treasury outlined its performance measures in the Corporate Plan 2020-21 to carry out its purpose statement initiatives:
delivery of economic priorities;
foreign investment regulation;
international financial institutions;
the states and territories.
3.11
Each of the key priorities included performance criteria. Some of the key priorities had multiple activities to achieve the priority, whilst others only had one.
3.12
Treasury reported in its Annual Report 2020–21 that it achieved all performance targets outlined in the Corporate Plan 2020–21.
3.13
Treasury’s involvement in the COVID-19 government response was entwined in every performance target, including providing advice and analysis to government, and rolling out several economic support strategies both domestically and internationally.
Financial reporting
3.14
In 2020–21, Treasury’s financial result was an operating surplus of $5.9million, excluding depreciation, amortisation, changes in asset revaluation reserves and leasing adjustments. Treasury explained its surplus by stating that ‘the result was driven by recruitment delays and employee provision revaluations due to changes in Australian bond rates and other provision parameters.’ This follows an operating surplus of $3.6 million in 2019–20 reporting period.
Australian Securities and Investments Commission
3.15
The 2020–21 annual report of the Australian Securities and Investments Commission (ASIC) was tabled in the House of Representatives on
19 October 2021 and in the Senate on 18 November 2021.
3.16
The Chair, Mr Joseph Longo, emphasised ASIC’s contributions to the
COVID-19 pandemic recovery in 2020–21, including adjusting strategic priorities and providing several concessions and targeted interventions to assist businesses and consumers.
3.17
The Chair also highlighted the action taken by ASIC following the Thom Review.
As at 30 June 2021, ASIC had implemented a number of the recommendations of the Thom Review directed at ASIC through a program of change designed to deliver long-term improvement to ASIC’s risk and compliance practices and capabilities. ASIC completed its implementation of the recommendations of the Thom Review in
August 2021.
Performance reporting
3.18
ASIC’s Corporate Plan 2020-21 and Annual Report 2020-21 both stated the same purpose statement—'[A] fair, strong and efficient financial system for all Australians.’ The vision statement is then supported by four listed outcomes:
change behaviours to drive good consumer and investor outcomes;
act against misconduct to maintain trust and integrity in the financial system;
promote strong and innovative development of the financial system; and
help Australians be in control of their financial lives.
3.19
The regulatory tools included in the Annual report included:
3.20
ASIC outlined the results of each implementation of the regulatory tools, giving detailed explanation as to their success and providing statistics and case studies against each.
3.21
ASIC included an additional chapter in its annual report, highlighting sector achievements. ASIC’s explanation of the chapter inclusion is ‘to help industry participants understand the regulatory effort ASIC expended in each sector we regulate, this chapter highlights the activities and outcomes achieved in each sector this financial year’.
3.22
Overall, ASIC appear to have achieved all their stated targets in a combination between the outcomes and regulatory tools, as well as their additional sector achievements.
3.23
On 1 July 2019, ASIC moved out of the Australian Public Sector (APS). The Treasury Laws Amendment (Enhancing ASIC's Capabilities) Act 2018 amended the ASIC Act to remove the requirement for ASIC to engage employees under the Public Services Act 1999 (Public Service Act). Instead, it engaged employees under section 120 of the ASIC Act. The changes were a result of the 2016 government response to the 2015 ASIC Capability Review recommendation that ASIC no longer engage employees under the Public Service Act. The changes aligned ASIC with APRA and the RBA. ASIC noted that the changes are designed to allow it to provide greater flexibility in the way it employs its people and provides an ability to compete for higher skilled private sector individuals, so that it has the right capabilities to deliver improved outcomes for all Australians.
3.24
Due to this explanation not being included in the 2020–21 Annual Report, it was challenging to confirm the reasons why ASIC was not required to report on PGPA Rule 2014 17AG(4)(b). The committee would recommend this explanation be included in the Annual Reporting each year as explanation against why this rule is no longer mandatory, as they are still classified as a non-corporate government entity.
Financial reporting
3.25
In 2020–21, ASIC’s financial result was a reduction in its deficit listed in the previous year’s financial reporting of over $68 million. The contributing factor was an increased appropriation of $34 million received through the Enforcement Special Account (ESA), as well as an increase in its own revenue stream.
3.26
ASIC’s increase in its own revenue was contributed to ‘reimbursement of operating and capital expenditure incurred by ASIC on government programs funded directly by other Australian Government entities.’
Australian Prudential Regulation Authority
3.27
The 2020–21 annual report of the APRA was tabled in the House of Representatives on 21 October 2021 and in the Senate on 22 November 2021.
3.28
The Chair, Mr Wayne Byres, emphasised the challenging year faced by the Australian community, especially in the financial sector due to the COVID-19 pandemic. In response to the pandemic, APRA implemented additional concessions and regulatory guidance to the financial sector, including for example measures to extend temporary capital treatment for bank loans with repayment deferrals.
3.29
Mr Byres also highlighted the completion of long-term projects that ‘strengthened the regulatory frameworks, enhanced financial sector accountability and addressed emerging risks’.
Performance reporting
3.30
APRA’s annual report and corporate plan are both derived from its founding legislation. The statement for each differs slightly but the main purpose for both is:
[APRA’s] purpose is to ensure Australian’s financial interests are protected and the financial system is stable, competitive, and efficient.
3.31
APRA listed both long-term strategic objectives, and narrowed its short-term priorities to three key objectives:
reinforcing the safety and soundness of APRA-regulated institutions;
fostering their operational resilience during a period of significant disruption; and
enhancing contingency plans to address the increasing risk of failure of one or more APRA-regulated institutions.
3.32
APRA outlined the performance of each objective against the Corporate Plan’s Key Performance Indicators (KPIs) in order to demonstrate their achievement over the reporting period.
3.33
Generally, APRA seem to have achieved its performance objectives, and provided concise explanation against the overall outcome as well as the individual KPIs.
3.34
APRA stating that the success of the Australian financial system remaining sound during the 2020–21 reporting period was attributed to APRA’s successful performance, and that APRA continued to perform its role in supporting households and businesses and ‘acting as a shock absorber for the rest of the economy’.
Financial reporting
3.35
APRA experienced a reduction in expenditure, totalling $196.4 million, against its original budget of $205.4 million, due to the deferral of certain activities for the reporting period, and an increase in the government’s 10-year bond yield which impacted the valuation of staff leave provisions.
3.36
APRA’s income was lower than budgeted, due to cost recovery activities, lower licensing, and other associated fees, as well as under-collecting of Financial Institutions Supervisory Levies occurring from lower-than-expected June 2020 quarter asset growth in the superannuation industry.
Department of Industry, Science, Energy and Resources
3.37
The 2020–21 annual report of DISER was tabled in the House of Representatives on 19 October 2021 and out of session to the Senate on
1 October 2021.
3.38
Mr David Fredericks PSM, Secretary of DISER, was brief in his review, and highlighted how the success and strength of the department and broader portfolio have played in driving productivity and economic growth in Australia, especially given the impacts of COVID-19.
Performance reporting
3.39
In DISER’s Corporate Plan 2020–21, the vision statement of ‘[s]upporting economic growth and job creation for all Australian’s’ aligns with the Annual Report 2020–21.
3.40
There are three outcome areas within DISER’s portfolio, and they have aligned four broad purposes to bring together the programs and activities administered throughout the year. In total, there are 20 performance measures listed against each purpose.
3.41
DISER stated that it achieved 19 out of its 20 performance measures, citing incomplete data at the time of reporting for the last performance measure to be confirmed as achieved.
Financial reporting
3.42
DISER reported a surplus of $9.7million in 2020–21, excluding depreciation, amortisation and the Australian Accounting Standards Board (AASB) 16 Leases accounting adjustments. This is in stark comparison to the previous reporting period which recorded a loss of
$7million for 2019–20.
3.43
When the exclusions are included, DISER reported a loss of $31.5million for 2020–21. DISER reflects that this was due to ‘the introduction of the net cash appropriation arrangements where appropriation for depreciation and amortisation expenses ceased. Entities now receive a separate capital budget provided through equity appropriations.’ This figure shows an improvement on the previous years reporting of a loss of $37.1 million, noting the same parameters as the explanation of the recorded loss.
Senator Paul Scarr
Chair
Liberal Senator for Queensland