Introduction

1.1 This is the Senate Finance and Public Administration Committee's (the committee) first report on annual reports for 2008. It provides an overview of the committee's examination of annual reports for the 2006–07 financial year. Copies of this and other committee reports can be obtained from the Senate Table Office, the committee secretariat or online at: www.aph.gov.au/senate_fpa.

Terms of reference

1.2 Under Senate Standing Order 25(20) the annual reports of departments and agencies stand referred to committees in accordance with the allocation of departments and agencies in a resolution of the Senate. Each committee is required 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.

Allocated portfolios

1.3 The Senate last amended the continuing order relating to the allocation of departments and agencies to committees on 12 February 2008.[1] In accordance with that resolution, the committee has responsibility for the oversight of the following portfolios:

Parliament;[2]
Prime Minister and Cabinet (including Climate Change);
Finance and Deregulation; and
Human Services.

1.4 Two of these portfolios, Prime Minister and Cabinet (PM&C) and Finance and Deregulation (Finance), have undergone structural reorganisation since the committee's last report on annual reports. The following changes, as they relate to the production of annual reports, were made to the PM&C portfolio as a result of the Administrative Arrangements Order of 3 December 2007.[3] The:

Department of Climate Change was established as a separate department of state situated within the PM&C portfolio;
Office of the Renewable Energy Regulator was transferred to the Department of Climate Change from the former Environment and Water Resources portfolio;
Australian Institute of Family Studies was transferred to the PM&C portfolio from the Families, Housing, Community Services and Indigenous Affairs portfolio; and
Office of the Privacy Commissioner was transferred to the PM&C portfolio from the Attorney-General's portfolio.

1.5 The annual reports of the three latter organisations have been referred to the committee for consideration and are discussed below. The committee expects to receive an annual report from the Department of Climate Change for the 2007–08 period and will examine it in due course.

1.6 The following changes, as they relate to the production of annual reports, were made to the Finance portfolio as a result of the Administrative Arrangements Order of 3 December 2007 and 25 January 2008.[4] The:

National Archives of Australia was transferred to the Finance portfolio from the former Communications, Information Technology and the Arts portfolio; and
Commonwealth Grants Commission was transferred from the Finance portfolio to the Treasury portfolio.

1.7 The annual report of the National Archives of Australia has been referred to the committee for consideration and is discussed below.

1.8 Appendices 1–4 provide the relevant extracts of the Administrative Arrangements Order relating to PM&C, Finance, the Department of Human Services and the Department of Climate Change, respectively.

Annual reports referred

1.9 In accordance with Senate Standing Order 25(20)(f) this report must examine the annual reports presented to the Senate, under the portfolios in which the committee has oversight, for the period between 1 May 2007 to 31 October 2007.

1.10 During this period two annual reports of departments of state, two annual reports of Parliamentary departments, twelve annual reports of statutory agencies and/or authorities, and five reports of Commonwealth companies were received.

Method of assessment

1.11 Annual reports, together with the estimates process, provide a mechanism for parliamentary (and public) scrutiny of the operations of government. As the official Commonwealth guidelines state:

The primary purpose of annual reports of departments is accountability, in particular to the Parliament.
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.[5]

1.12 To meet the Parliament's accountability requirements, annual reports 'should provide sufficient information and analysis for the Parliament to make a fully informed judgement on departmental performance'.[6] To this end, there are guidelines, outlined below, which mandate what information must be included in the report and how the information should be presented.

1.13 Senate Standing Order 25(20) requires that the committee examine reports referred to it to determine whether they are timely and 'apparently satisfactory'. In forming its assessment, the committee considered whether the reports comply with the relevant legislation and guidelines for the preparation of annual reports. The principal Acts which apply to departments, statutory agencies and authorities, and Commonwealth companies are:

Public Service Act 1999;
Parliamentary Service Act 1999;
Financial Management and Accountability Act 1997 (FMA Act); and
Commonwealth Authorities and Companies Act 1997 (CAC Act).

1.14 Statutory authorities report under their respective enabling legislation, for example, the Australian Electoral Commission reports under section 17 of the Commonwealth Electoral Act 1918.

1.15 The committee also assessed whether reports comply with the Requirements for Annual Reports: for Departments, Executive Agencies and FMA Act Bodies (the PM&C Guidelines), June 2007, issued by PM&C with the approval of the Joint Committee of Public Accounts and Audit. This is the authoritative source outlining the requirements for preparing and presenting annual reports.[7]

1.16 For bodies reporting under the CAC Act, compliance with the Commonwealth Authorities and Companies (Report of Operations) Orders 2005 was considered.[8]

Reports examined

1.17 As a result of the changes to the Administrative Arrangements Order, the committee considered a number of annual reports for the first time. These reports are identified below with an asterisk.

1.18 Two 2005–06 annual reports were tabled after the cut off date (30 April 20 07) for examination in the committee's previous Annual reports (No. 2 of 2007). These are:

Australian Political Exchange Council—Report for 2005–06;[9] and
Australian River Company Ltd—Report for the period 1 December 2005 to 30 November 2006—as pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997. The reason for the delay in tabling this report is discussed later in this chapter.

1.19 The PM&C 2006–07 annual report, which is considered in this report, was presented out of session on 19 November 2007.

1.20 The following 21 reports for the financial year 2006–07 were tabled or presented 'out of session' to the President of the Senate by 31 October 2007 and referred to the committee:

Departments of State[10]

Department of Finance and Administration Annual report 2006–07—pursuant to section 63 of the Public Services Act 1999
Department of Human Services Annual report 2006–07—pursuant to subsection 63(2) of the Public Service Act 1999

Departments of Parliament

Department of Parliamentary Services—Annual report and Financial Statements 2006–07—pursuant to paragraph 65(1)(c) of the Parliamentary Service Act 1999 and subsection 65(3) of the Parliamentary Services Act 1999
Department of the Senate—Report for 2006–07—pursuant to section 65 of the Parliamentary Service Act 1999

Statutory agencies or authorities[11]

Australian Electoral Commission—Annual report 2006–07—pursuant to section 17 of the Commonwealth Electoral Act 1918
Australian National Audit Office—Annual report 2006–07—pursuant to section 28 of the Auditor-General Act 1997
Australian Reward Investment Alliance—Annual report 2006–07—Section 162 of the Superannuation Act 1976, section 28 of the Superannuation Act 1990 and section 26 of the Superannuation Act 2005
Centrelink—Annual report 2006–07—pursuant to subsection 40(1) of the Commonwealth Services Delivery Agency Act 1997
Commissioner for Superannuation—Annual report 2006–07—pursuant to section 162 of the Superannuation Act 1976 and section 21 of the Papua New Guinea (Staffing Assistance) Act 1973
Commonwealth Ombudsman—Annual report 2006–07—pursuant to sections 19(1) and 19F(3) of the Ombudsman Act 1976
Future Fund—Annual report 2006–07—pursuant to section 81 of the Future Fund Act 2006
Medicare Australia—Annual report 2006–07—pursuant to section 70(1) of the Public Service Act 1999
National Archives of Australia* and National Archives of Australia Advisory Council—Annual report 2006–07—pursuant to section 70 of the Public Service Act 1999
Office of the Official Secretary to the Governor-General—Annual report 2006–07—pursuant to section 19(1) of the Governor-General Act 1974
Office of the Privacy Commissioner*—Annual report 2006–07— pursuant to section 97 of the Privacy Act 1988
Office of the Renewable Energy Regulator*—Annual report 2006–07— pursuant to section 63 of the Public Service Act 1999

Commonwealth companies

ASC Pty Ltd Annual report 2006–07—pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997
Australian Hearing—Annual report 2006–07—pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997
Health Services Australia Group—Annual report 2006–07—pursuant to section 36 of the Commonwealth Authorities and Companies Act 1997
National Australia Day Council—annual report 2006–07—pursuant to subsection 36(4) of the Commonwealth Authorities and Companies Act 1997
Medibank Private Limited—annual report 2006–07—pursuant to Sections 9 and 36 of the Commonwealth Authorities and Companies Act 1997

Reports not examined

1.21 The committee is not obliged to report on Acts, statements of corporate intent, surveys, corporate plans or errata. The following documents were referred to the committee but not examined:

ASC Pty Ltd—Statement of corporate intent 2007–10
Health Services Australia Ltd (HSA Group)—Statement of corporate intent 2007–10
Members of Parliament (Staff) Act 1984—Report for 2006–07 on consultants engaged
Office of the Renewable Energy Regulator—Increasing Australia's renewable energy generation—Annual Report 2006
Parliamentary Service Commissioner—Report for 2006–07—pursuant to subsection 42(1) of the Parliamentary Service Act 1999

Reports held over

1.22 The following reports were tabled in the Senate after 31 October 2007. Apart from the report from PM&C, these reports will be examined in the committee's second report on annual reports due to be presented to the Senate in September 2008.

Albury-Wodonga Development Corporation (received 29 January 2008)
Australian Industry Development Corporation (received 29 January 2008)
Australian Institute of Family Studies (received 12 November 2007)
Australian Public Service Commission—State of the Service Report (received 10 December 2008)
Australian Public Service Commissioner (received 26 November 2008)
Department of the Prime Minister and Cabinet (received 19 November 2008)
Inspector-General of Intelligence and Security (received 20 November 2008)

Non-reporting bodies

1.23 Standing Order 25(20)(h) requires that the committee inquire into, and report on, any bodies which do not present annual reports to the Senate but should present such reports.

1.24 The committee continues to approach this in two ways. First, the committee examined the Administrative Arrangements Order (dated 25 January 2008) for the list of legislation administered by portfolio ministers and consequently, departments and agencies.

1.25 Second, the committee consulted Finance's listing of Australian Government Bodies. The list identifies the agencies that are required to report and the Acts under which they report.[12]

1.26 Based on the above checks, the committee is not aware of any bodies that have neglected to furnish a report for presentation to the Parliament.

Timeliness

1.27 Most reports are required to be tabled in Parliament by 31 October each year unless another date is specified, for example, in an agency's legislation, charter and/or terms of reference. Organisations reporting under the CAC Act are required to provide an annual report to the responsible Minister by the 15^th day of the 4^th month after the authority's financial year.[13] For example, where the authority's financial year ends on 30 June, the report must be furnished to the Minister by 15 October. It appears that four Commonwealth companies did not fulfil this requirement:

Albury-Wodonga Development Corporation
Australian Industry Development Corporation
Australian River Company Limited
Telstra Sale Company Ltd

1.28 The committee notes that a number of agencies examined in this report are required to table a report 'as soon as practicable after 30 June'.[14] However, two of the reports did not meet their prescribed deadlines. They are listed here in order of receipt:

Australian Institute of Family Studies
Inspector-General of Intelligence and Security

1.29 Concerns regarding the matter of timeliness have been previously discussed by the committee. The committee was pleased to note that unlike the experience of the most recent report (No. 2 of 2007), many agencies finalised their reports sufficiently far in advance to allow for tabling in both Houses prior to the 31 October deadline. Departments and agencies are reminded to table annual reports in both chambers prior to the supplementary estimates hearings (which in 2008 will take place during the week of 20 October) to allow adequate time for their review prior to the hearings.

1.30 Where a department or agency cannot meet its deadline for reporting, it must apply to the minister for an extension.[15] Where an extension is granted, the minister must table in Parliament a copy of the application together with a statement specifying the length of the extension and the reasons for granting the extension. The committee is aware of one extension sought for this reporting period:

Australian Public Service Commissioner (notification of delay received 23 November 2007).

1.31 The application from the Australian Public Service Commission stated that the reason for the extension was that it has not been possible for the Commission to obtain ministerial clearance. The Commission's draft annual report was provided to the then Minister Assisting the Prime Minister for the Public Service on 6 September 2007. On 31 October the Commissioner applied for an extension which was agreed to by the then Minister on 22 November 2007. The report was subsequently tabled out of session on 26 November 2007.

1.32 During the Additional Estimates hearings on 18 February 2008, PM&C officials indicated that the department had complied with the requirement to seek an extension and explain the reasons for the late tabling of its annual report. Although it appears that an application for extension has not been received by the Senate, officials told the committee that the reason for the delay was that 'further information was sought'.[16] The report which was received by the Prime Minister on 5 November 2008 was presented out of sitting on 19 November 2008. As noted above, despite the tabling of the PM&C report after 31 October 2007, the committee intends to discuss its contents in this report.

1.33 For each report referred to it, the committee recorded the following dates:

submitted to minister;
received by the minister; and
tabled in the Senate or presented to the President or a temporary chair of committees.

1.34 Appendix 5 shows these key dates (where available).

Assessment of Reports

1.35 In determining whether a report was satisfactory, the committee applied the PM&C Guidelines. In particular, to assess whether the reports adequately met reporting requirements, they were assessed against the checklist at Attachment F in the guidelines.

1.36 Where applicable, the committee paid particular attention to agencies reporting against outcomes as set down in their respective Portfolio Budget Statements and Portfolio Additional Estimates Statements. The committee notes that the majority of agencies report performance against outcome structures as set out in these documents.

1.37 The committee has found that all reports are 'apparently satisfactory'. However, certain aspects of several reports the committee scrutinised could be improved. These matters are discussed under the heading 'Selected Agencies'. The committee notes that all financial statements included in the reports received an unqualified report from the Auditor-General.

Senate debate

1.38 Few annual reports are debated in the Senate, but many remain on the Senate Notice Paper for future consideration. The committee notes procedural changes adopted by the Senate on 11 May 2004 on the recommendation of the Procedure Committee: namely, that 'government documents tabled on any day of the week are to be carried over for consideration each day until they appear on the list for consideration under General Business on Thursday (Standing Order 61)'.[17] Annual reports fall into this category of government documents.

1.39 The committee is not aware of any Senate debates relating to the reports examined.

1.40 Annual reports are also often used by senators during estimates hearings. It is common practice for senators to use the reports to assist the examination of ministers and their officials in relation to the financial position and operations of departments and agencies. This is a key reason why departments and agencies should take care to ensure that annual reports are available on time.

Correspondence

1.41 In its second report on annual reports of 2007 the committee recommended that the Australian Accounting Standards Board amend Australian accounting standard AASB 124 so that it includes a requirement for Commonwealth companies to disclose in their annual reports, the number of directors and the number of senior executives that fall within $10 000 income bands.[18]

1.42 On 11 October 2007 the Chairman of the Australian Accounting Standards Board, Mr David Boymal wrote to the committee explaining that 'the AASB has a project on its long term work program to develop a Standard on key management personnel disclosures for not-for-profit public sector entities. Based on the Committee's Recommendation 3, I will put to my Board that the project be expanded to cover for-profit public sector entities as well.'[19] Mr Boymal's letter is attached at Appendix 6. The committee understands that an issues paper, outlining the state of play across Australia with reference to the United Kingdom and Canada, will be considered by board later in the year.

Correction

1.43 The committee wishes to acknowledge an error printed in its previous report: Annual reports (No. 2 of 2007). Appendix 1 on page 20 incorrectly states that the Office of the Official Secretary to the Governor-General tabled its report in the House of Representatives on 2 November 2007. In actual fact its report was tabled in the House of Representative on 31 October 2007.

Selected agencies and reports

Department of the Prime Minister and Cabinet

1.44 The department's annual report has no major shortcomings. All mandatory requirements of the PM&C Guidelines were addressed. The department has provided a thorough report which presents the symmetry between its internal structure and outputs in a clear manner. The report also provides a helpful compliance index to assist examination of the department's performance.

Advertising

1.45 The annual report discloses government advertising costs of $281.3 million in 2006–07 of which $196.4 million was spent on campaign advertising.[20]

1.46 Reported expenditure on advertising covers only media placement costs, that is, the amount spent on buying media time and space to place the advertisements. Associated costs related to market research and evaluation, public relations, design, production, publication and distribution are not reflected in the $281.3 million spend. While not a specific requirement of the current reporting framework, the provision of such additional information would improve the transparency of advertising costs and strengthen overall government accountability to Parliament in accordance with the principles underlying annual report requirements.[21]

1.47 Without comprehensive information on estimated costs and expenditure on government advertising provided in the standard annual reporting framework, Senate estimates hearings and questions on notice have become the primary means of obtaining such details.[22] Recourse to such methods inevitably leads to lengthy delays which hinder the Senate's efforts to monitor the government's advertising activities.

1.48 In December 2005, the Finance and Public Administration References Committee made a number of recommendations in its report on Government advertising and accountability, which would address this information gap.[23]

1.49 As the level of government advertising has continued to rapidly increase over the past two years, the committee is of the view that the principle behind the References Committee's 2005 recommendations relating to annual reports remains valid (see slightly updated recommendations in Appendix 7). Accordingly the committee makes the following recommendation.

Recommendation 1

1.50 The committee recommends that the government implement the committee's updated 2005 recommendations regarding the publication of an annual report on government advertising expenditure (Recommendations 10 to 12).

1.51 To complement this recommendation, the committee also recommends, as its References Committee did in 2005, that the government also comply with the short-term reporting requirements detailed in the Senate Order on Agency advertising and public information projects (see Appendix 8).[24] This Senate resolution requires the tabling, within 5 sitting days of project approval, of a detailed statement for each advertising or public information project where the cost of the project is estimated or contracted to be $100 000 or more.[25]

Recommendation 2

1.52 The committee recommends that the government comply with the Senate Order relating to agency advertising and public information projects of 29 October 2003.

Discretionary Grants

1.53 Very basic information on two discretionary grants is provided in the report on pages 52 and 78 respectively. The Research Support for Counter Terrorism Grant Programme, for which there are 30 current research projects, was provided $2.1 million in grant funding in 2006–07. The second grant of $96 500 was provided to the Australiana Fund. There is no additional information on the PM&C website to supplement this limited information.

1.54 An 11 January request for further information via the online feedback service was met on 28 February. On that date, a PM&C official noted that information about the Australiana Fund was 'public knowledge' and as the grant was for a single recipient, didn't need to be detailed in the report. In addition, the department had received a waiver on disclosure of grant recipients from the then Department of Finance and Administration in regard to the Counter Terrorism Grant Programme due to the sensitive nature of the scientific research conducted under the programme. The PM&C Guidelines state that a list of grant recipients is required to be available, 'for example, in an appendix to the report, on request or through the Internet.'[26] The committee expects that in future reports, if sensitive information is withheld, an explanation to that effect be provided in a footnote.

Performance Pay

1.55 The ongoing reliance on performance pay or performance bonuses is noteworthy. Whereas in previous years where there was a gradual rise in the number of staff awarded performance pay, in 2006–07, an additional 72 staff were awarded performance pay. This led to a dramatic rise in performance payments from $1 172 448 in 2005–06 provided to 173 staff to $1 498 833 to 245 staff in 2006–07. The organising of various APEC meetings may have contributed to the dramatic increase given that the Taskforce included 124 Senior Executive Service (SES) and Executive Level staff.[27]

1.56 Nevertheless, the question remains as to whether reliance on performance pay as opposed to other performance incentives and forms of recognition, including access to specific skill development, is the best means of maintaining a professional, impartial and motivated public service.[28]

Readability

1.57 At times, the use of bureaucratic language at the expense of plain English and lengthy sentences, complicate meaning and make the report cumbersome to read. For example:

COAG also agreed to a consistent national approach to the economic regulation of nationally-significant infrastructure, including specific measures to enhance regulatory outcomes for nationally significant ports and rail networks and the streamlining of third-party access regimes.[29]

1.58 The PM&C Guidelines emphasise that annual reports serve to inform the Parliament and other stakeholders, including the general public, about the performance of departments in relation to services provided.[30] In order to most effectively fulfil this function, annual reports should be written in plain English.[31]

Consistency

1.59 There were occasional unexplained inconsistencies in reported statistics. One case in point is staffing levels for the APEC Taskforce. The report states that the Taskforce comprises 212 staff but also notes that the Taskforce's Technology Branch provides support to 'about 250' Taskforce personnel in Sydney and 'about 50' such personnel in Canberra.[32] On other occasions the committee has received information that the Taskforce comprised 215 personnel[33] and 222 personnel.[34] Changes in staff numbers are to be expected. However, the over-estimation of the Taskforce's membership is unusual given the clear statistics which demonstrate that on three separate occasions, the Taskforce's total staffing was not more than 222.

1.60 Similarly, differences in personnel numbers are not explained in regard to the SES. The total number of Senior Executives is listed at one point as 41 and elsewhere as 50 and 52.[35] These apparent inconsistencies are not explained.

1.61 Other statistical discrepancies include the number of information activities discussed by the Ministerial Committee on Government Communications. On page 75, the report notes that 'over 47' information activities were discussed in 2006–07. However, on page 76, the figure is 40 while on page 77, the figure is 47.

1.62 The committee expects that in future reports, the department will either properly explain why discrepancies exist or ensure that there is internal consistency throughout the report.

Analysis

1.63 The report was largely descriptive with little analysis of departmental progress towards outcomes. Yet, the PM&C Guidelines state that reports should provide 'sufficient information and analysis' to enable a fully informed judgement on departmental performance.[36]

1.64 For future reports the committee encourages the department to provide more analysis and information on its overall progress towards achieving its outcomes. Similarly, a greater understanding of the holistic performance of the department would be achieved if more focus were given to analysing significant developments that have impacted on operations or financial results.

1.65 A greater balance between analysis and descriptive information will make for a clearer and more effective document in future.

Centrelink

1.66 The committee's examination of Centrelink's Annual Report 2006–07 found that although some information provided was satisfactory: including the chapter titled 'Corporate Overview', several key chapters failed to adequately assess the performance of Centrelink's activities in line with the requirements of the PM&C Guidelines.

1.67 The committee also found that Centrelink's current outcome and output structure is broad in nature, making it difficult to link this information to the agency's management systems and organisational structure.

Corporate overview

1.68 The PM&C Guidelines specify that each annual report of an agency must provide an overview that includes a description of its role and functions, organisational structure and outcome and output structure.[37]

1.69 Centrelink satisfactorily provided this information in a chapter titled 'Corporate Overview'. The language used is simple, and clear headings combined with concise narrative allow the reader to quickly understand: Centrelink's position within the Human Services portfolio; the responsible Minister; a brief history of the agency's enabling legislation; funding arrangements; outcome and output structure; and general functions.[38]

Report on performance

1.70 Whilst the chapter 'corporate overview' is clear and accessible, the overall structure and content of subsequent chapters, which are devoted to reviewing agency performance, are difficult to navigate, and at times provide few details of the outcomes achieved.

1.71 The PM&C Guidelines state that an annual report must include 'a review of how the [agency] has performed...to the efficiency of the [agency's] outputs...[39] According to the guidelines 'descriptions of processes and activities should be avoided. Rather reporting should be aimed at providing an assessment of how far the agency has progressed towards outcomes'. The reporting of this information is to be based on 'actual results against the specific performance standards for the outcomes and outputs set out in the PBS/PAES'.[40]

1.72 Within this context a problem arises that whilst some valuable reviews of the agency's performance are provided they are hard to locate, and the majority of the performance reviews are made up of descriptions of processes and activities.

1.73 For example in chapter 3 of the annual report 'Building confidence in Centrelink' the Minister for Human Services' Statement of Expectations is listed and followed by summaries of activities against each of the 10 points. Much of the information provided is descriptive, for example:

Centrelink aims to build confidence in the way it conducts its business through achievement of the Key Performance Indicators of policy and resolving audit findings within specified timeframes.[41]

1.74 Although the description goes on to guide the reader to 'information' about audits conducted by the Australian National Audit Office (ANAO), all that is found is a list of audits conducted throughout the 2006–07 reporting period.[42] The description fails to demonstrate how Centrelink has resolved the ANAO's various findings, and furthermore, how this has contributed towards achieving Centrelink's outcomes.

1.75 Further evidence of a lack of detail is found under a subheading titled 'Achievement of policy department and agency Key Performance Indicators'. In most instances little information is given to explain how Key Performance Indicators (KPIs) are measured, or why the agency failed to meet a KPI, or percentage of KPIs. For example in its 'business partnership' with the former Department of Employment and Workplace Relations' (DEWR) the report states:

Of the 12 KPIs Centrelink achieved all except KPI 3.2: Fraud and Compliance Activity.[43]

1.76 Although there is reference to further details of Centrelink's services provided to the DEWR,[44] the information provided is incomplete. As a result the annual report does not explain why KPI 3.2 was not achieved, the implications of it not being achieved, and what remedial action is planned. The committee expects that Centrelink will address these shortcomings in future reports.

Outcome and output structure

1.77 Centrelink currently has an outcome and output structure (one of each) that is broad in nature. This current structure appears impractical because it is problematic to connect Centrelink's singularly stated output (see below) with its actual delivery of up to 119 services and other agreements.[45] The outcome/output structure reads:

Outcome 1–Access to government services that effectively support: self-sufficiency through participation in employment, education, training and the community; families and people in need; [and] the integrity of government outlays in these areas.

Output 1.1–Effective and efficient delivery of government services.[46]

1.78 The reason for the need to adopt carefully crafted outcomes and outputs is explained in the Department of Finance and Deregulations guidelines: The Outcomes and Outputs Framework.[47] These guidelines state that output groups serve a purpose to 'generate the impacts on outcomes that give rise to crucial effectiveness indicators'. The guidelines also state that output groups should be 'specified so that the agency's organisational structure and management systems can be mapped to its outputs'.[48]

1.79 Because Centrelink relies on only one output it is not possible to easily 'map' its organisational structure and management systems. A more beneficial and transparent mapping would be possible if the current single output was expanded to several 'output groups' followed by connected and more detailed outputs.

1.80 An example of an agency that provides a comprehensive outcome and output structure is Finance. Finance's outcome structure is separated into four outcomes in total. For ease of reference in the example below, only outcome one is citied.

Outcome 1 – Sustainable Government Finances

Output Group 1.1 – Budget

Output 1.1.1 Budget Advice

Output Group 1.2 – Financial Management

Output 1.2.1 – Financial Framework

Output 1.2.2 – Financial Reporting

Output 1.2.3 – Public Sector Superannuation Advice

Output 1.2.4 – Office of Evaluation and Audit (Indigenous Programs)

Output 1.2.5 – Deregulation and Regulatory Reform[49]

1.81 Although Finance's activities are entirely different to Centrelink's, Finance's detailed outcome and output structure make it is easy to map out its organisational structure and management systems.

1.82 Centrelink's lack of a detailed outcome and output structure may also explain why its annual report is at times difficult to navigate (see the section report on performance above). There is a risk that without the clear guidance of a comprehensive outcome and output structure, an assessment of progress towards achieving outcomes can be replaced by descriptions of process and activities. As stated in the PM&C Guidelines (and discussed in paragraph 1.71 above) this should be avoided.

1.83 The committee expresses concern about the difficulty in linking Centrelink's broadly devised, single outcome and output structure, with its organisational structure and the production of a clear and accessible annual report.

Recommendation 3

1.84 The committee recommends that Centrelink review its current outcome and output structure with a view to their modification to better reflect the comprehensive nature of Centrelink's operations and functions.

Australian River Company

1.85 The Australian River Company Limited (ARCo) is classified as a Commonwealth company, that is 'a company limited by shares, incorporated under the Corporations Act 2001 (Corporations Act), and in which the Commonwealth has a controlling interest for the purposes of the Commonwealth Authorities and Companies Act 1997' (CAC Act).[50]

Winding-down

1.86 The committee notes that since 2002 it has been the government's intention for ARCo to be wound down, however no details are provided regarding the progress towards fulfilling the government's request:

On 3 May 2002, the Parliamentary Secretary to the Minister for Finance & Administration wrote to the Australian River Co. Limited and stated that the company should manage the remaining operations of the consolidated entity with a view to winding down the consolidated entity at the earliest opportunity on a commercially supportable basis, including the pursuit of any sale opportunities.

At the date of this report the [ARCo] Board and the Shareholder [the government] are considering a variety of options...and have not finalised their deliberations on these matters.[51]

1.87 This exact phrase 'are considering a variety of options...and have not finalised their deliberations on these matters' has been used in ARCo's annual reports between 2002–2006.[52] This suggests that the deliberations have not progress very far, if at all, over the past five years. If this is the case, the committee finds this entirely unacceptable.

1.88 Considering that this has been an ongoing issue for the company since 2002, the committee would like an explanation regarding what issues have prevented the completion of the deliberations and when ARCo expects the deliberations to sell the company will be finalised.

1.89 The committee would also like an explanation as to the reasons why it has not been possible to wind up the company on a commercially supportable basis since May 2002.

Recommendation 4

1.90 The committee recommends that the Australian River Company Limited provide the committee (on a confidential basis if necessary) with a written explanation as to:

what issues have prevented the completion of the deliberations;
when the Australian River Company expects the deliberations to sell the company will be finalised; and
why it has not been possible to wind up the company on a commercially supportable basis since May 2002.

Timeliness

1.91 The ARCo annual report (1 December 2005 to 30 November 2006) was received by the then Minister for Finance and Administration on 30 March 2007 and subsequently tabled in the House of Representative on 10 May 2007. It was later tabled in the Senate on 12 June 2007, more than six months after the end of ARCo's annual reporting period.[53]

1.92 It appears that ARCo has not complied with the legislative reporting requirement under section 9 of the CAC Act, to provide the Minister with its report on the '15th day of the 4th month after the end of the financial year', that is by 15 March.

1.93 Section 36 of CAC Act specifically requires the Minister responsible for a 'wholly-owned' Commonwealth company to '...table the [annual report] in each House of the Parliament as soon as practicable after receiving [it]'. The committee notes the delay of almost three months from when the Minister received the annual report (30 March 2007) until when it was tabled in the Senate.

1.94 The committee is concerned by the five week delay between tabling in the House of Representatives (10 May 2007) and the Senate (12 June 2007).[54] Although 12 June was the first Senate sitting day after 10 May, the committee sees no reason why the report could not have been tabled out of session, as soon as 11 May, under Standing Order 166. In its last report on annual reports the committee raised concerns about the practice of annual reports being tabled in the Senate on a later date than the House of Representatives.[55]

1.95 The delay in tabling meant that Senators were unable to assess ARCo's annual report prior to the Budget Estimates hearings in May 2007. In the committee's view this does not represent best practice in the transparency and accountability of government operations.

1.96 The committee is concerned about the ongoing practice by ARCo of tabling its annual reports late in the Senate. The committee observes that ARCo's annual reports between 2002–2006 were also tabled in the Senate in June of the subsequent year.

Lack of information

1.97 There is a general lack of detailed information provided in ARCo's annual report. The information provided in the report is at times vague, and does very little to fulfil ARCo's reporting obligations under the Corporations Act.[56] For example, ARCo's principal activities were briefly described as:

to continue as the owner and head charterer of two vessels which, are subject to various charter/sub-charter arrangements between Australian River Co. Limited and a third party.[57]

1.98 ARCo's annual report goes on to provide some further 'general information' about its principal activities:

The ongoing remaining operations of the consolidated entity include:

charter of the bulk vessels, "River Boyne" and "River Embly" to Queensland Alumina Limited on a yearly renewable basis; and
management of residual sale, legal and insurance matters.[58]

1.99 For readers who are unfamiliar with the activities and operations of shipping companies, this limited information raises many unanswered questions. These include:

what is involved in the principal activities of being an 'owner and charterer of two vessels'?
what activities take place in managing 'various charter/sub-charter arrangements' between [ARCo] and a third party'?
is the maintenance of the vessels part of ARCo's business operations? and
what services do the leased vessels actually provide?

1.100 In the interests of transparency and accountability in government operations, answers to these basic questions should be able to be determined from the information provided in ARCo's annual report.

1.101 Similar difficulties are also encountered in the section describing ARCo's review of operations. The only information that is provided in the director's report is a single sentence that states:

The operating result for the year reflects the positive nature of the consolidated entity's activities in respect of the two vessel leases, and interest earned on cash and investments.[59]

1.102 Nowhere in ARCo's annual report are further details provided which review in narrative form: the performance of the company's leases; the performance of interest earned on cash; and the performance of investments. This lack of clarity belies the importance of transparently disclosing government activities to the Parliament, and more broadly, publishing information for consumption in the public domain.

Recommendation 5

1.103 The committee recommends that the Australian River Company Limited provide a comprehensive description of its principal activities in all future annual reports.

Conflicts of interest

1.104 The committee is concerned about several potential or perceived conflict of interests in ARCo's staffing and contractual arrangements.

1.105 For example the committee notes that the Company Secretary of ARCo also holds the same position with a shipping company named ANL Group. ARCo states that its 'finance and secretarial functions have been outsourced to ANL Container Line Pty Ltd', which presumably is a subsidiary of ANL Group.[60] No information is provided which clarifies the basis for awarding the contract for services and whether it was in the best interests of the company. This creates a perception of a potential conflict of interest.

1.106 The committee would like an explanation from ARCo about what measures were taken to ensure that there was no real or perceived conflict of interest in the appointment of the Secretary, when the person taking up the position was already, and presumably continues to be Secretary of a company with established links to ARCo.

1.107 Furthermore, the committee is concerned about another potential conflict of interest that is also not clearly explained in ARCo's annual report. The report discloses the relationship between a Director of ARCo and the provision of 'advisory services' paid to a private company of which the Director is a shareholder:

Transactions with Director–related entity

A director, Mr I B Morison is a shareholder and director of Acton Corporate Partners Pty Limited who provide advisory and other services on normal commercial terms to the company. Fees paid to Acton Corporate Partners Pty Limited amounted to $4, 375 (2005: $10,657).[61]

1.108 Although the disclosure of this information is valuable, and the fees involved are relatively small and smaller than the previous year (2005), the committee would like an explanation regarding the basis upon which ARCo made the decision to pay for the services of a company in which an ACRo Director is a shareholder and director.

Recommendation 6

1.109 The committee recommends that the Australian River Company Limited provide the committee with an explanation as to:

what measures were taken to ensure that there was no real or perceived conflict of interest in the appointment of the Secretary; and
the basis upon which the Australian River Company Limited made the decision to pay for the services of a company in which an Australian River Company Limited Director is a shareholder and director.

Agency environmental performance reporting

1.110 As noted above, changes to the Administrative Arrangements Order in December 2007 led to the committee acquiring oversight of the newly established Department of Climate Change, situated under the PM&C portfolio. As a result, the committee has a far greater level of interest in this policy area and consequently sought to examine agency environmental performance reporting. Furthermore, this issue has been identified by the ANAO as an area of potential savings of approximately $10 million annually by government agencies if improvements primarily in energy and water conservation are made.[62]

1.111 The statutory requirement for all government agencies to report environmental outcomes are provided for under section 516A of the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act). It is a requirement that applies broadly across government departments and agencies, including those within the committee oversight.

1.112 Subsection 516A(6) of the EPBC Act stipulates that all annual reports must:

include a report on how the activities of, and the administration (if any) of legislation by, the reporter during the period accorded with the principles of ecologically sustainable development; and
identify how the outcomes (if any) specified for the reporter in an Appropriations Act relating to the period contribute to ecologically sustainable development; and
document the effect of the reporter's activities on the environment; and
identify any measures the reporter is taking to minimise the impact of activities by the reporter on the environment; and
identify the mechanisms (if any) for reviewing and increasing the effectiveness of those measures.[63]

1.113 Although there are several reporting requirements under subsection 516A(6) of the EPBC Act, the committee sought to focus solely on whether agencies adequately addressed paragraphs (c) and (d). This reporting requirement offers agencies a clear opportunity to state their effect on the environment and their efforts to minimise these impacts.

Adequate documentation

1.114 Several agencies adequately documented both their effect on the environment and their mitigation activities. The type of information provided by agencies that fully complied with the statutory requirement of reporting their impacts included: numerical data on the full range of environmental impacts, often with a comparison between previous reporting periods and progress towards reduction targets. This was in contrast to certain examples of the inadequate reporting which provided purely descriptive information.

1.115 For example, the Department of Parliamentary Services (DPS) presented in its annual report a clear account of its effect on the environment. DPS used a table (see Appendix 9) that details each specific type of environmental effect, as well as numerical targets and actual performance data for the 2006–07 reporting period. The information in this table is then clearly summarised using narrative form, for example:

Gas consumption

Gas consumption was more than 6% below the annual target. This was mainly due to the milder temperatures experienced in Autumn 2007.

Greenhouse gas emissions

Emissions were reduced to 24,147 tonnes CO₂e, which was 16% less than the target of 28,845 tonnes CO₂. In 2005–06, greenhouse gas emissions were 27,891 tonnes CO₂.[64]

1.116 Another example that follows a similar format to the DPS was produced by Australian Hearing. In its report an easily comprehensible chart is used to present electricity usage and CO₂emissions for the period 2000–01 to 2006–07.[65]

1.117 Although the committee commends Australian Hearing for providing this useful information, it notes that data on other environmental impacts including water usage and waste recycling were not included. It would be useful for this information to be provided in the agency's next annual report.

1.118 Centrelink stated that 'energy consumption data for 2006–07 is yet to be consolidated; however, Centrelink has reduced its total energy use by 4 per cent in 2005–06...an 11 per cent reduction since 2002–03'.[66] An up to date account of the variations in the numbers of Centrelink's vehicle fleet between 2005–06 and 2006–07 is presented in an easily readable table. Furthermore, information is provided that 90 per cent of the vehicle fleet is now covered by 'GreenFleet subscriptions'. No details are provided as to how this reduced Centrelink's overall CO₂emissions.[67]

1.119 The Australian Electoral Commission (AEC) stated that it reports its energy usage to the Australian Greenhouse Office but did not include this data in its report. Instead, it stated that it '...met the target of less than 10 000 megajoules per person per year in 2006–07'.[68] Whilst the AEC provides little information on environmental impacts, much of the AEC's documentation is focussed on environmental measures, further information is provided on mitigation measures:

Introducing a fully serviced facility for the collection of...[recyclable material]...in the first six months, twenty-four 240 litre bins of containers were collected for recycling;
Progressively replacing six-cylinder vehicles with four-cylinder vehicles, where there is a business case to do so–three vehicles were replaced in 2006–07.[69]

1.120 Medicare also provided useful information that was categorised into specific environmental effects. Although some of this information was incomplete,[70] the areas identified that included numerical data were: power usage, size of motor vehicle fleet; paper usage; water usage; and waste production.[71]

Inadequate documentation

1.121 By contrast with the better practice examples set out above, many agencies failed to supply adequate information. These agencies included: the Department of Finance and Deregulation; the Department of Human Services; the Commonwealth Ombudsman, the Future Fund, Australian Reward Investment Alliance (ARIA), ComSuper, the Office of the Official Secretary to the Governor-General, the Australian River Company, and the Australia Day Council.

1.122 A common feature in these reports is the lack of sufficient information and numerical data to be able to understand the agencies' actual effect on the environment. Generally these reports also use descriptive statements about adhering to certain aspects of ecologically sustainable development, but do not provide adequate information and numerical data to justify these claims.

1.123 For example the Commonwealth Ombudsman's annual report states:

During 2006–07 we reviewed the office's Environmental Management Policy and information material on the conservation of energy in the workplace, including the use of light, computer equipment, water management and organic recycling.[72]

1.124 Whilst this information is useful to determine what measures, including a review, took place, it does not inform the reader as to, how much, for example, CO₂ emissions or electricity usage occurred, and to what extent the identified measures reduced these impacts.

1.125 Finance also largely provided descriptive information about environmental programs rather than detailing specific effects on the environment. Although some numerical information was provided, including a 20 per cent increase in the use of ethanol fuel in the Comcar fleet over 2006–07, Finance stated that it 'monitors its average annual energy consumption and reports the outcome to the Australian Greenhouse Office through the whole-of-government Energy Data Gathering and Reporting programme'.[73] It is precisely this type of specific information, perhaps presented in summary form, that should be included in annual reports. This information would fulfil the requirement of the department to 'document the effect of the reporter's effect on the environment'.

1.126 Examples of agencies that made little effort to provide any useful information included: ARIA and the Future Fund Management Agency.[74] Typically these agencies only made fleeting references, and did not report their effects on the environment. For example ARIA stated that 'it makes every effort to minimise the environmental impact of its activities' without providing any substantive details to support this statement.[75]

Best practice reporting

1.127 The committee notes a recent performance audit by the ANAO, which reviewed environmental reporting by agencies under section 516A of the EPBC Act. The ANAO's report found that only 41 per cent of agencies had reported their effects on the environment, as opposed to 80 per cent of agencies that had reported their measures to minimise their effects on the environment.[76] A similar trend was apparent from the committee's examination of agency compliance in relation to paragraphs 516A(6)(c) and (d) of the EPBC Act.

1.128 In the interest of providing guidance to agencies that may not be aware of the level of detail required to fulfil their obligation under paragraphs 516A(6)(c) and (d) of the EPBC Act, the committee draws the attention of all agencies to two annual reports that are examples of best practice reporting.

1.129 As discussed above in paragraph 1.115 above, the DPS Annual Report 2006–07 details both its specific effects on the environment: and the measures it adopted to improve environmental performance. Appendix 9 in this report also demonstrates the easy-to-read table used by DPS, which presents numerical data relating to its 2006–07 environmental performance. DPS also states in its annual report that it produces an extensive, separate, annual environmental report: Environmental Performance Report for 2006–07. In its general annual report, DPS publishes an address linked to its web site where this report may be found.

1.130 Drawing on the positive comments and analysis outlined in the ANAO report: Cross Portfolio Audit of Green Office Procurement the committee also highlights, for the benefit of agencies, the Department of Health and Ageing (DHA) Annual Report 2006–07.[77] Similar to DPS, DHA provides numerical information combined with a comprehensive narrative discussion that demonstrates DHA's commitment to its statutory obligations under the EPBC Act, and more broadly to the positive aim of reducing its impact on the environment.

1.131 The two annual reports outlined above are outstanding examples because they quantify the results of their effects on the environment on a year by year basis, and also foreshadow current and future measures to improve environmental performance.[78]

Recommendation 7

1.132 The committee recommends that:

all agencies review the level of detail provided in their annual reports in order to fully comply with the reporting requirements under section 516A of the Environment Protection and Biodiversity Conservation Act 1999.
agencies, where appropriate, adopt the practice of reporting on environmental impacts and mitigation measures as outlined in the 2006–07 annual reports of the Department of Parliamentary Services and the Department of Health and Ageing.

Conclusion

1.133 The committee notes that whilst some government departments and agencies have clearly responded to the challenge of improving their environmental performance, and have reported the results of their efforts in annual reports, it appears that the majority of departments and agencies must designate a higher level of attention to reporting their environmental impacts and mitigation measures.

1.134 The committee strongly believes that it is only through agencies' recognition, and reporting of, their actual effects on the environment, that appropriate responses to adverse environmental impacts can take place.

Senator Helen Polley

Chair

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