Introduction


Introduction

1.1        This is the Senate Finance and Public Administration Committee's (the committee) first report on annual reports for 2009. It provides an overview of the committee's examination of annual reports for the 2007–08 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 committee has responsibility for the oversight of the following portfolios:

  • Parliament;[1]

  • Prime Minister and Cabinet (including Climate Change);

  • Finance and Deregulation; and

  • Human Services.

1.4        There have been no changes to these portfolios as they relate to the production of annual reports since the committee's last report on annual reports, No. 2 of 2008.

1.5        Appendices 1–4 provide the relevant extracts of the Administrative Arrangements Order relating to the Prime Minister and Cabinet, Finance and Deregulation and Human Services portfolios and the Department of Climate Change, respectively.

Annual reports referred

1.6        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 2008 to 31 October 2008.

1.7        During this period the annual reports of four departments of state, two Parliamentary departments, twelve statutory agencies, one executive agency, two other agencies under the Financial Management and Accountability Act 1997  (FMA Act), one Commonwealth authority and three Commonwealth companies were received.

Method of assessment

1.8        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:

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

  2. 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.[2]

1.9        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).

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

1.11      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 2008, issued by the Department of Prime Minister and Cabinet (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.[3]

1.12      The principles underlying the annual report requirements issued by PM&C are as follows:

The content of annual reports should:

  1. be consistent with the purposes of annual reports – in particular, annual reports should be written in plain English and provide sufficient information and analysis for the Parliament to make a fully informed judgement on departmental performance;

  2. align with the overall accountability framework;

  3. reflect the harmonisation, as far as practicable, of reporting regimes within government (including PBSs and PAESs) and between the government and non-government sectors; and

  4. merit reporting – the relative benefits and costs of reporting should be considered.[4]

1.13      For bodies reporting under the CAC Act, compliance with the Commonwealth Authorities and Companies (Report of Operations) Orders 2008 was considered.[5]

Reports examined

1.14      In 2008, the last sitting week of the Senate before October 31 was from 13 October until 16 October. It was not possible to table reports in the Senate after this date as Supplementary Budget Estimates hearings were then held from 20 October until 23 October, with no subsequent sitting days for the rest of October. Several reports were thus not tabled before 31 October 2008 in the Senate, but were tabled before that date in the House of Representatives. These reports are considered by the committee to have been tabled within the time limit for this report.

1.15      The following 25 reports for the financial year 2007–08 were tabled in the Senate, or the House of Representatives, or presented 'out of session' to the President of the Senate by 31 October 2008 and referred to the committee:

Departments of State

  • Department of Climate Change Report for the Period 3 December 2007–­­30 June 2008—pursuant to section 63 of the Public Services Act 1999;

  • Department of Finance and Deregulation Annual Report 2007–08—pursuant to section 63 of the Public Services Act 1999;

  • Department of Human Services Annual Report 2007–08—pursuant to section 63 of the Public Service Act 1999; and

  • Department of the Prime Minister & Cabinet Annual Report 2007–08—pursuant to section 63 of the Public Service Act 1999.

Departments of Parliament

  • Department of Parliamentary Services—Annual Report and Financial Statements 2007–08—pursuant to paragraph 65(1)(c) of the Parliamentary Service Act 1999 and subsection 65(3) of the Parliamentary Services Act 1999; and

  • Department of the Senate—Annual Report for 2007–08—pursuant to section 65 of the Parliamentary Service Act 1999.

Other prescribed agencies under the FMA Act

  • Australian Electoral Commission—Annual Report 2007–08—pursuant to section 17 of the Commonwealth Electoral Act 1918;

  • Australian Institute of Family Studies—Annual Report 2007–08—pursuant to section 114LC of the Family Law Act 1975;

  • Australian National Audit Office—Annual Report 2007–08—pursuant to section 28 of the Auditor-General Act 1997;

  • Australian Public Service Commission—Annual Report 2007–08, Incorporating the Annual Report of the Merit Protection Commissioner —pursuant to section 44 and section 51 of the Public Service Act 1999;

  • Australian Reward Investment Alliance—Annual Report 2007–08—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 2007–08—pursuant to subsection 40(1) of the Commonwealth Services Delivery Agency Act 1997;

  • Commissioner for Superannuation—Annual Report 2007–08—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 2007–08—pursuant to subsections 19(1) and 19F(3) of the Ombudsman Act 1976;

  • Future Fund Management Agency—Annual Report 2007–08—pursuant to section 81 of the Future Fund Act 2006;

  • Inspector-General of Intelligence and Security—Annual Report 2007–08— pursuant to section 35 of the Inspector-General of Intelligence and Security Act 1986;

  • Medicare Australia—Annual Report 2007–08—pursuant to subsection 70(1) of the Public Service Act 1999;

  • National Archives of Australia and National Archives of Australia Advisory Council—Annual Report 2007–08—pursuant to section 70 of the Public Service Act 1999;

  • Office of the Official Secretary to the Governor-General—Annual Report 2007–08—pursuant to subsection 19(1) of the Governor-General Act 1974;

  • Office of the Privacy Commissioner—Annual Report 2007–08— pursuant to section 97 of the Privacy Act 1988; and

  • Office of the Renewable Energy Regulator—Financial Annual Report 2007–08— pursuant to section 63 of the Public Service Act 1999.

Commonwealth authorities/companies

  • Australian Hearing—Annual Report 2007–08—pursuant to section 9 of the Commonwealth Authorities and Companies Act 1997;

  • Health Services Australia Ltd—Annual Report 2007–08—pursuant to section 36 of the Commonwealth Authorities and Companies Act 1997;

  • National Australia Day Council—Annual Report 2007–08—pursuant to subsection 36(4) of the Commonwealth Authorities and Companies Act 1997; and

  • Medibank Private Limited—Annual Report 2007–08—pursuant to sections 9 and 36 of the Commonwealth Authorities and Companies Act 1997.

Reports not examined

1.16      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 2008 to 2011;

  • Health Services Australia Limited (HSA Group)–Statement of Corporate Intent 2008 to 2011;

  • Medibank Private Limited–Statement of Corporate Intent 2009 to 2011;

  • Renewable Energy (Electricity) Act 2000–Report for 2007 on the Operation of the Act; and

  • Parliamentary Service Commissioner—Report for 2007–08—pursuant to subsection 42(1) of the Parliamentary Service Act 1999.

Reports held over

1.17      The following reports were tabled in the Senate after 31 October 2008. These reports will be examined in the committee's second report on Annual Reports due to be presented to the Senate in September 2009.

  • Albury-Wodonga Development Corporation Report for 2007–08 (received 5 November 2008);

  • ASC Pty Ltd Report of 2007–08 (received 3 December 2008);

  • Australian Industry Development Corporation Report of 2007–08 (received 4 February 2009);

  • Australian Political Exchange Council – Report for 2006–07 (received 22 December 2008);

  • Australian Public Service Commission—State of the Service Report (received 2 December 2008);

  • Australian River Co. Ltd. Report for 1 December 2006–30 November 2007 (received 25 November 2008);

  • Department of Finance and Deregulation – Issues from the Advance to the Finance Minister as a Final Charge for the Year (received 11 November 2008); and

  • Members of Parliament (Staff) Act 1984 – Report for 2007–08 (received 23 December 2008).

Non-reporting bodies

1.18      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.

1.19      The committee continues to approach this in two ways. First, the committee examined the Administrative Arrangements Order (updated 1 July 2008) for the list of legislation administered by portfolio ministers and consequently, departments and agencies.

1.20      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.[6] Based on the above checks, the committee considers it has received all reports that it is required to receive.

Timeliness

1.21      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. Commonwealth companies reporting under the CAC Act are required to provide an annual report to the responsible Minister four months after the end of the company's financial year.[7] For example, where the authority's financial year ends on 30 June, the report must be furnished to the Minister by 31 October. It appears all annual reports submitted by Commonwealth companies in the committee's portfolio areas fulfilled this requirement.

1.22      The committee does note however, that even where companies submitted reports to the relevant Minister within the time limit, there is often a significant delay before the report is tabled in the Parliament. For instance, in the case of the Australian River Co. Ltd, the report was received by the Minister on 8 September 2008, but was not tabled until 25 November 2008. The CAC Act specifies the following:

If the Commonwealth company is a wholly-owned Commonwealth company, or is not required to hold an annual general meeting, the responsible Minister must table the documents in each House of the Parliament as soon as practicable after receiving them. In all other cases, the Minister must table the documents in each House of the Parliament as soon as practicable after the annual general meeting of the company.[8]

Recommendation 1

1.23     The committee recommends that Ministers ensure that annual reports are tabled in the Parliament as soon as is practicable after receipt of reports from agencies.

1.24      Concerns regarding the matter of timeliness have been discussed previously by the committee. The committee noted that most agencies finalised their reports sufficiently far in advance to allow for tabling in both Houses prior to the 31 October deadline. For reasons mentioned above, eight reports, though tabled in the House of Representatives on time, were not able to be tabled in the Senate until after 31 October.

1.25      Annual reports play an integral part in the scrutiny of Government activity. It is common practice for Senators to use the reports to assist in the examination of the performance and financial positions 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, and preferably before supplementary estimates hearings.

1.26      Where a department or agency cannot meet its deadline for reporting, it must apply to the relevant minister for an extension.[9] 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 not aware of any extensions granted for this period.

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

  • submitted to minister;

  • received by the minister;

  • tabled in the Senate or presented to the President or a temporary chair of committees; and

  • tabling date in the House of Representatives, where applicable.

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

Assessment of reports

1.29      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.

1.30      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.

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

Senate debate

1.32      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)'.[10] Annual reports fall into this category of government documents.

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

Selected agencies and reports

Department of Climate Change

1.34      The Department of Climate Change (Climate Change) was established on 3 December, 2007. As such, the 2007-08 Annual Report is the first published by Climate Change. For this reason, the committee has chosen to comment on this report.

1.35      Overall, Climate Change is to be commended for a Report that has made every effort to be accessible to the average reader. Evidence of this includes comprehensive explanatory notes for the financial statements, logical structure along outcome lines, and the inclusion of overviews of programs of interest. The committee found that the annual report for 2007–08 fulfilled the requirements outlined in the PM&C Guidelines.

1.36      The committee commends the annual report as an introduction to the Department of Climate Change for members of the public. The report includes helpful explanatory notes to assist reader comprehension, and for this reason serves as a good example of what departments should aim for, not only in a first annual report, but for any.

Accessibility

1.37      The report begins with an introduction and guide that explains how the Department has handled reporting given the difficulties of having been established in the middle of a financial year. The committee notes that the Department has followed the PM&C Guidelines for reporting changes made to the machinery of government during a reporting period.

1.38      Throughout the report, the Department appears to have adopted a plain English approach, avoiding overly bureaucratic and complicated language. This has been an issue in the past for some departments, and the committee continues to encourage the use of simple language in annual reports.

1.39      The Department has made an effort to include explanatory notes with each section. Though this leads to repetition, it enables most sections of the report to be read independently, making it more accessible to readers who only have time to read sections of interest.

1.40      The report includes single-page overviews of programs of current interest such as the Carbon Pollution Reduction Scheme and the National Greenhouse and Energy Reporting Scheme that serve as a good introduction to the activities of the Department.

Structure of report

1.41      The Department's budget outputs have been used to structure the annual report along thematic lines. The Department of Climate Change's three outputs are:

  • reducing Australia's greenhouse gas emissions;

  • adapting to the impacts of climate change we cannot avoid; and

  • helping to shape a global solution.

1.42      By structuring the report along the lines of the outputs, the annual report is more readily comparable with Portfolio Budget Statements, thus enhancing accountability. This is a key requirement of the PM&C Guidelines.

1.43      The various programs and work-groups of the Department are linked directly to outputs. This is particularly useful for the Senate estimates process, as it enables Senators to establish under which outputs they should direct questioning. Committees have often commented on the problems associated with departments or agencies which have vaguely worded outcomes and a lack of explanatory documentation.

1.44      Overall, the Department has produced a sound and readable first report. The committee does note however, that some of the PM&C requirements were unable to be met due to the recent establishment of the Department.  For instance, Climate Change currently operates under the Department of Environment, Water, Heritage and the Art's Fraud and Risk Management policies and practices and is yet to establish its own. The Department has undertaken to develop its own Fraud Control Plan in the first quarter of 2008–09 and the committee awaits an assessment of this and other developments in next year's annual report.

General comments (various agencies)

Compliance Index

1.45      About half of the annual reports reviewed for this period include a compliance index, indicating page references for each requirement listed in the Requirement for Annual Reports. The committee supports the inclusion of a compliance index in annual reports as this shows that the department or agency is aware of the current PM&C Guidelines and that they have taken those guidelines into account in the construction of the annual report.

1.46      The inclusion of a compliance index also allows readers to establish whether the report is in accordance with the guidelines. However, the committee notes that there is a tendency for agencies which include a compliance index to omit guidelines that are not applicable. For instance, one of the guidelines asks for any information on judicial decisions and decisions of administrative tribunals. Some agencies neglected to provide information to fulfil this guideline, presumably on the basis that they were not party to any judicial or tribunal decisions. However, for the sake of accuracy and completeness, the agency should conclusively state that it was not involved in any of these decisions.

Recommendation 2

1.47     The committee recommends that all departments and agencies include a compliance index in future annual reports.

Certification of compliance with Commonwealth Fraud Control Guidelines

1.48      The PM&C Guidelines state that agency heads are required to certify that their agency complies with the Commonwealth Fraud Control Guidelines. In practice, many annual reports simply included a statement that they were in compliance with the guidelines, and do not include certification by the agency heads themselves. This approach is not in compliance with the Commonwealth Fraud Control Guidelines themselves:

Chief Executive Officers (CEOs) are responsible, under section 44 of the FMA Act, for promoting efficient, effective and ethical use of Commonwealth resources. Section 45 of the FMA Act requires CEOs to implement a fraud control plan for their agency. CEOs have principal responsibility for fraud control within their agencies and for complying with the Commonwealth Fraud Control Guidelines. This includes:

...certifying, in their agency’s annual reports to their Minister or Presiding Officer, that they are satisfied that:

  • fraud risk assessments and fraud control plans have been prepared that comply with the Commonwealth Fraud Control Guidelines;

  • appropriate fraud prevention, detection, investigation and reporting procedures and processes are in place; and

  • annual fraud data has been collected and reported that complies with the Commonwealth Fraud Control Guidelines.[11]

1.49      Though it could perhaps be considered ambiguous as to whether this requires actual certification by the agency head in an annual report, the committee commends the approach of agencies such as the Commissioner for Superannuation, who included a signed statement by the CEO certifying fraud control initiatives.

Recommendation 3

1.50     The committee recommends that agencies adhere to the Commonwealth Fraud Control Guidelines by including a signed statement by the CEO or agency head certifying that they are satisfied that their agency is in compliance with the guidelines.

Accountability for outcomes and outputs in annual reports

1.51      The central function of an annual report is to provide accountability and an essential factor in this is the ease with which the Portfolio Budget Statements and the annual report can be compared. The PM&C Guidelines state that:

(1) Annual Reports and Portfolio Budget Statements (PBSs) are the principal formal accountability mechanisms between government and departments and from departments through (or on behalf of) government to the Parliament. Annual reports are reports from departmental secretaries to the portfolio minister, for tabling in the Parliament. PBSs are authorised by ministers for use by the Parliament in the consideration of the Budget.

(2) PBSs set out performance targets for departmental outputs and contributions to outcomes when funds are appropriated, and annual reports report on achievement. PBSs and annual reports provide the Government and the Parliament with detailed information about the actual performance of departments and forecasts of future needs and expectations. The 'clear read' between PBSs and annual reports is an essential part of the accountability system that compares budgeted targets and figures to those actually achieved, and places a strong emphasis on compatibility between the two documents regarding budget and performance information.[12]

1.52      The broad nature of outputs and outcomes remains a problem for agencies and departments as they seek to align annual reporting with Portfolio Budget Statements in accordance with PM&C Guidelines. An example of this is Centrelink, which was singled out for attention in this committee's report, Annual Reports (No. 1 of 2008). That report stated that:

Centrelink's lack of a detailed outcome and output structure may also explain why its annual report is at times difficult to navigate. 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 this should be avoided.

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.[13]

1.53      For agencies with vague or 'catch-all' outcomes, it can be very difficult to structure the annual report in a way that provides a coherent performance review and reports against the outputs at the same time. For this reason, the committee continues to encourage the improvement of agency outcomes and outputs so that they become more targeted and specific. The committee notes the Government's proposals in relation to outcomes made in Operation Sunlight – Enhancing Budget Transparency.[14]

Adherence to PM&C requirements by CAC Act bodies

1.54      The PM&C Guidelines apply to government departments, executive agencies, and FMA Act bodies. Companies and authorities listed under the Commonwealth Authorities and Companies Act 1997 have different reporting requirements, with content specified in the Corporations Act 2001.

1.55      Nevertheless, the committee considers that CAC Act bodies should take into account the PM&C Guidelines where possible. The committee commends the Health Services Australia Group, which voluntarily adhered to the PM&C Guidelines in its Annual Report 2007–08.

Recommendation 4

1.56     The committee recommends that Commonwealth Authorities and Companies Act 1997 bodies consider adhering to the Requirements for Annual Reports issued by the Department of Prime Minister and Cabinet.

 

Senator Helen Polley
Chair

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