Chapter 2


Chapter 2

Annual reports of non-statutory authorities and government companies

Defence portfolio

Defence Materiel Organisation

2.1        The annual report of the Defence Materiel Organisation (DMO) is contained in Defence's annual report. It was tabled in the House of Representatives and in the Senate on 30 October 2012.

2.2        The DMO is a prescribed agency under the Financial Management and Accountability Act 1997. This means that although the DMO remains inextricably linked to Defence, it is required to account directly to the Minister for Defence on its financial management. The annual report noted:

As a prescribed agency, the DMO utilises a purchaser-provider model, underpinned by service agreements, to deliver commercial, engineering/logistics and project management services in an accountable, outcome-focused and business-like manner.[1]

Review by the Chief Executive Officer

2.3        Mr Warren King, Chief Executive Officer, DMO, drew attention to the achievements gained through the formal Projects of Concern process. In 2011–2012, a further three projects were removed from the list, leaving six projects on the
watch-list. He reported that project schedule delays continued to be the greatest issue for both DMO and industry. Mr King noted that this represents 'billions of dollars of investment that might have been lost, through project cancellation, if those troubled projects had not been recovered.[2]

2.4        In his review of the year, Mr King stated that one the main areas of focus for DMO in 2011–12 was:

...to strengthen our accountability processes so that our customers and the Government better understand the status of our projects and success can be more accurately measured. This has been achieved through an increased focus on our internal Gate Reviews, the Project of Concern process and how we communicate with our ministers. This has helped us to respond more rapidly to our soldiers’ demands and has seen us deploy force insertion teams to key areas to improve equipment on the ground. These efforts have been recognised and I welcome the evidence tendered and comments made at parliamentary committee hearings on the ‘significant, qualitative and identifiable improvements’ that we have made.[3]

List of requirements

2.5        The committee notes that the Requirements for annual reports for departments, executive agencies and FMA Act bodies states:

The List of Requirements must be included as an appendix to the annual report. If an item specified in the checklist is not applicable to an agency, it should be reported as not applicable rather than omitted from the list. Agencies should include a column indicating the location of the information in the annual report.[4] 

2.6        The committee notes that unlike previous years when Defence and DMO annual reports have been produced as two separate volumes, this year the reports have been combined in a single volume. This has meant that the list of requirements has also been combined. The committee notes that combining the Defence and DMO lists creates ambiguity as the entries for Defence and DMO have not been clearly distinguished.

External Scrutiny

2.7        The Requirements for annual reports for departments, executive agencies and FMA Act bodies also states:

The annual report must provide information on the most significant developments in external scrutiny of the department and the department’s response, including particulars of:

(a) judicial decisions and decisions of administrative tribunals that have had, or may have, a significant impact on the operations of the department; and

(b) reports on the operations of the department by the Auditor General (other than the report on financial statements), a Parliamentary committee or the Commonwealth Ombudsman.[5]

2.8        The committee observes that the DMO annual report does not appear to provide information on external scrutiny. As noted above, the Defence and DMO annual reports have now been combined in the same volume. DMO's completion of the mandatory reporting requirement is unclear. External scrutiny is only covered in the Department of Defence section of the annual report and it is unclear if this is intended to also cover external scrutiny of the DMO.[6]

Summary

2.9        The committee finds that the DMO annual report adequately complies with the relevant requirements for the preparation of annual reports. The committee, however, would like to see DMO provide an explanation for the decision to incorporate its report in Defence's annual report. As noted above, in previous years the Defence and DMO annual reports have been produced as two separate volumes.

Australian War Memorial

2.10      The Australian War Memorial was established as a statutory authority under the Australian War Memorial Act 1980. The performance of the Memorial and the accountability of its council and management are subject to the Commonwealth Authorities and Companies Act 1997. The Memorial is also subject to other legislation that bears on its operation, and is accountable to the government through the Minister for Veterans' Affairs. The Council of the Australian War Memorial is responsible for the conduct and control of the activities of the Memorial. Its numerous functions and responsibilities include:

  • establishing the Memorial's strategic direction and vision;
  • approving the Memorial's goals and key objectives;
  • approving the annual budget and monitoring expenditure and reporting; and
  • ensuring that the Memorial has adequate financial resources to meet known and planned future resources.[7]

2.11      The Australian War Memorial's annual report 2011–2012 was tabled in the House of Representatives and in the Senate on 10 October 2012. Among the Memorial's most significant events during the reporting period was a visit by Prime Minister Julia Gillard to the Australian War Memorial on 16 April 2012 and her announcement of $27 million in capital injection for First World War galleries.[8] The report also noted the announcement in the 2012–13 Budget of the Government's increased general funding to the Memorial by $5.3 million, which will further assist with preparation for the Centenary of Anzac.[9]

2.12      On behalf of the Council, Rear Admiral Ken Doolan AO RAN (Ret’d), Chairman, acknowledged and recognised the long service of the retired Council Chairman, General Peter Cosgrove AC MC (Ret’d) and of Council member Mr Les Carlyon. Rear Admiral Doolan also congratulated and welcomed new Council members, Dr Allan Hawke AC, Mr Peter FitzSimons AM, and Major General Paul Stevens AO (Ret’d). Rear Admiral Doolan sincerely and warmly thanked Major General Steve Gower AO AO(Mil) (Ret'd), who completed his term as Director on 31 August 2012 after 16 dedicated years in the position. Rear Admiral Doolan stated:

His extraordinary stewardship and legacy will be long remembered and admired. The Memorial has been most fortunate to have benefitted from the dedication, initiative and resourcefulness of a man of such rare talent.[10]

2.13      On 23 August 2012, the Minister for Veterans’ Affairs announced the appointment of the Hon Dr Brendan Nelson as the new Director. Rear Admiral Doolan observed that the council 'looks forward to working with Dr Nelson as we head toward the very exciting, yet challenging, Centenary of ANZAC'.[11]

Summary

2.14      The committee finds that the Australian War Memorial's annual report to be 'apparently satisfactory' in complying with the relevant requirements for the preparation of annual reports.

ASC Pty Ltd

2.15      The ASC report for 2011–2012 was tabled in the House of Representatives and in the Senate on 31 October 2012. ASC is a proprietary company limited by shares registered under the Corporations Act 2001 and is subject to the CAC Act. On 11 June 2004, ASC was proclaimed as a Government Business Enterprise under the CAC Act.

Chairman's report

2.16      The Chairman, Vice Admiral Chris Ritchie AO RANR, noted that 2011–2012 financial year was 'one of significant achievement for the company and one that foreshadows promise for the years ahead'.[12] He recorded that a key outcome has been the finalisation and contract signature of the In Service Support Contract (ISSC), a new performance-based contract for the maintenance of the Collins Class submarines in partnership with DMO.[13]

2.17      Vice Admiral Ritchie announced that this report would be his last as Chairman of ASC. He stated:

I believe that the company is at an important and exciting time in its development, with significant changes in the management of the Collins Class maintenance program being put in pace and work on the AWD project gaining pace. Preparations are also well advanced to meet the challenges of the future submarine program.[14]

Collins Class submarine project

2.18      ASC carries out maintenance, upgrades and engineering activities for the Collins Class submarines. In 2011–2012, ASC commenced the transition from operating under a through life support agreement with DMO to the In Service Support Contract (ISSC). A number of transitional activities have been undertaken as part of this change. As a result, ASC will effectively become the provider for all Collins Class submarine maintenance requirements by the end of the transition period in 2013–14. Under the ISSC, the upkeep cycle will be reassessed and a progressive move to a two-year full-cycle docking will be undertaken.[15]

2.19      In July 2011, the government announced a review into the optimal commercial framework for the sustainment of the Collins Class submarine—the Coles Review. ASC has provided, and continues to provide, significant input to the Coles Review, resulting in a number of actions being taken to further improve availability and reduce cost.[16]

2.20      According to the report, during 2011–2012 maintenance activities on the submarines included:

  • one full cycle docking, with second full cycle docking 48 per cent complete in South Australia (ASC North). Planning has also commenced for an additional full cycle docking due to start in 2012–2013;
  • in Western Australia (ASC West), the successful completion of the intermediate docking of HMAS Dechaineux marked the shortest duration of intermediate docking yet; and
  • an unscheduled emergency docking to rectify damage to an Emergency Propulsion Unit.[17]

Hobart Class Destroyer project

2.21      ASC is the shipbuilder for the Hobart Class Air Warfare Destroyer (AWD) project. The report noted that the ASC is responsible for the construction of three AWDs at the company's Osborne shipyard in South Australia (ASC South).[18]

2.22      ASC reported that during the 2010–2011 period the pace of construction increased rapidly at the three shipyards across Australia including Forgacs (NSW), BAE Systems (VIC) and ASC (SA). During this period the construction workforce grew by more than 300 people in order to facilitate the increased construction work. The report identified the following milestones:

  • progress from construction of individual ship blocks to the block consolidation phase;
  • completion of a temporary blast and paint facility to double ASC's capacity.—at the end of the period eight blocks were successfully blasted and painted;
  • delivery of all Ship 1 blocks from BAE Systems—the ASC team restored the blocks to the required level of completion and quality;
  • installation of modular accommodation cabins into two blocks for Ship 1; and
  • commencement of installation of electrical equipment and cabling. [19]

Deep Blue Tech

2.23      Deep Blue Tech (DBT)—a wholly owned subsidiary of ASC—was established in 2007 as part of ASC's preparation for possible involvement in Australia's SEA 1000 Future Submarine project. During 2010–2011, DBT's goal was to build on earlier concepts and experience to conduct the A3 Future Submarine project. It continued to conduct research and develop capability to prepare for the next phase of the project.[20]

2.24      The report explained that in 2011–2012, the company had seen an increase in financial support. DPT's goal is 'to have the best submarine design expertise in Australia and have it ready for Government to use, should it desire'.[21] During the reporting period, the DBT increased its staff numbers, expanding from approximately 30 permanent staff to 60. Following discussion in 2011–2012, a cooperation agreement was signed with the Defence Science and Technology Organisation.[22]

Summary

2.25      The committee finds that the ASC annual report to be 'apparently satisfactory' in complying with the relevant reporting requirements for a non-statutory company.

CSC Annual report to Parliament 2011–12—MilitarySuper, and DFRB Scheme, DFRDB Scheme and DFSPB

2.26      From 1 July 2011, Commonwealth Superannuation Corporation (CSC) became responsible for the investment and management of the military and public sector superannuation schemes. The Chairman's report for both reports stated:

2011/12 was CSC’s first year as trustee of the Australian Government’s regulated Schemes for Australian Defence Force personnel and public sector employees. The implementation of the merger of the trustees of the military and public sector Schemes in accordance with the legislation passed by Parliament in June 2011 has been completed. A new Board was established to replace the previous DFRDB [Defence Force Retirement and Death Benefits] Authority, MSB [Military Superannuation and Benefits] Board and ARIA [Australian Reward Investment Alliance].[23]

2.27      As such, the CSC presented two separate reports detailing the performance of CSC functions and the administration of the Military Superannuation and Benefits Scheme (MilitarySuper); and the administration of the Defence Forces Retirement Benefits Scheme (DFRB Scheme), the Defence Force Retirement and Death Benefits Scheme (DFRDB Scheme) and the Defence Force (Superannuation) (Productivity Benefits) Scheme (DFSPB). Both annual reports were tabled in the Senate on 19 October 2012 and in the House of Representatives on 26 November 2012.[24]

2.28      The committee finds that the CSC annual reports for MilitarySuper, and DFRB Scheme, DFRDB Scheme and DFSPB adequately comply with reporting requirements for a Commonwealth authority. However, the committee notes the timeliness of the presentation of the reports.

Foreign Affairs and Trade portfolio

Australian Agency for International Development

2.29      The annual report of the Australian Agency for International Development (AusAID) for the financial year 2011–2012 was tabled in the House of Representatives and in the Senate on 29 October 2012.[25] AusAID is the Australian government agency responsible for managing Australia’s overseas aid program. AusAID is an executive agency within the Foreign Affairs and Trade portfolio and reports to the Minister for Foreign Affairs.

Director General's review

2.30      The Director General of AusAID, Mr Peter Baxter, stated:

2011–12 was a year of major change for AusAID and the Australian aid program. On 6 July 2011 the Government released its new aid policy, An effective aid program for Australia: making a real difference—delivering real results. The year that followed was dominated by the delivery of a series of major reforms and milestones connected to the policy’s implementation.[26]

An effective aid program for Australia

2.31      Mr Peter Baxter reports that the new aid policy An effective aid program for Australia:

...provides a framework to 2015–16, defining where Australia will provide aid, what we will focus on, and how we will deliver our assistance. More fundamentally, the new policy sets out a series of steps to improve the effectiveness of the aid program. The policy was released at the same time as, and responded to the findings of, the Independent Review of Aid Effectiveness—the first independent review of the Australian aid program in 15 years.[27]

2.32      Mr Baxter reported that as of 30 June 2012, AusAID implemented 31 of 38 recommendations made by the Independent Review of Aid Effectiveness. He also listed AusAID's implementation milestones which had been reached during the reporting period. Some of these achievements included:

  • developing a Transparency Charter;
  • conducting the first ever Australian Multilateral Assessment, released in March 2012;
  • developing and releasing eight new thematic strategies covering health, education, gender, food security, governance, infrastructure, water and sanitation, and humanitarian action;
  • developing a Civil Society Engagement Framework, released in June;
  • strengthening AusAID linkages with the private sector, the engine of economic growth and job creation, through a new Business Engagement Steering Committee that includes representatives from the Business Council of Australia, the Australian Chamber of Commerce and Industry and the Australian Industry Group;
  • revising the agency’s policy and guidance on program strategy development, and on performance management and evaluation;
  • completing a major organisational restructure which has positioned the agency to deliver an expanded and more effective aid program; and
  • launching the Comprehensive Aid Policy Framework, which was released by the Minister for Foreign Affairs, Senator the Hon Bob Carr, in May with the 2012–13 Budget.[28]
The year ahead

2.33      Mr Baxter identified some of the key tasks for AusAID in the year ahead, which include:

  • effectively managing the increased aid budget to Afghanistan and working closely with other agencies to manage Australia's transition out of Uruzgan Province;
  • moving to a new program of assistance under the Partnership for Development between Australia and the Solomon Islands;
  • Myanmar’s transition to democracy, which gives Australia new opportunities to make a greater impact in reducing poverty and building capacity in what is one of the world’s poorest countries; and
  • the need to further build AusAID's workplace culture and human resource capacity to ensure it has the right mix of skills and knowledge to deliver a larger and more effective aid program.

Australian National Audit Office audit

2.34      The Australian National Audit Office (ANAO) report for the AusAID stated:

The notes to AusAID’s 2010–11 financial statements referred to potential breaches of section 83 of the Constitution for payments made from special appropriations and special accounts, particularly in circumstances where the payments do not accord with conditions included in the relevant legislation.

During 2011–12, AusAID undertook a review to determine the risk of payments being made in breach of section 83 from the special appropriations and special accounts for which it is administratively responsible.

The risk assessment and subsequent analysis conducted up to 30 June 2012 identified 13 breaches of section 83 totalling $29 000 in relation to various payments made by ComSuper on behalf of AusAID under the Papua New Guinea (Staffing Assistance) Act 1973 (PNG Super Act). The breaches were confirmed in legal advice received by AusAID from the Australian Government Solicitor.[29]

Summary

2.35      The committee finds that the AusAID annual report adequately complies with all reporting requirements for an executive agency.

Australian Centre for International Agricultural Research

2.36      Australian Centre for International Agricultural Research's (ACIAR) governing legislation is the Australian Centre for International Agricultural Research Act 1982. The ACIAR annual report 2011–2012 was tabled in both the House of Representatives and in the Senate on 31 October 2012.

Commission Chair's and Chief Executive Officer's Review

2.37      The Commission Chair and Chief Executive Officer stated that:

ACIAR’s last external review (the Nairn Review) was 14 years ago. Given the magnitude of the changes in ACIAR’s operating environment, the Minister for Foreign Affairs, Senator Bob Carr, has commissioned an external review to examine the appropriateness, effectiveness and efficiency of ACIAR’s efforts, and to make recommendations for improvements. The review is not prompted by perceived problems, but intended to make a strong agency even better. It will be undertaken by Mr Bill Farmer (Chair), Professor Ron Duncan, Dr Wendy Jarvie and Mr Terry Enright.

In line with the broader aid program, ACIAR has grown in size over recent years, with an annual appropriation of approximately $100 million in
2012–13. The Australian Government has committed to increasing support for ACIAR. While this decision was based on the agency’s ‘impressive results, confirmed by independent evaluations’, the Government, Parliament and taxpayers need to be confident that current and further investments are targeted appropriately, effective in helping to overcome poverty, and used efficiently.[30]

Australian National Audit Office audit

2.38      The ANAO report for the ACIAR stated:

The 2010–11 auditor’s report on the financial statements of the Australian Centre for International Agricultural Research (ACIAR) referred to the notes to the financial statements that included a reference to a risk of a breach of section 83 of the Constitution in relation to payments from special accounts and special appropriations. ACIAR undertook to investigate this issue in 2011–12. A review undertaken by ACIAR in 2011–12 concluded that the risk of a section 83 breach was low and no breaches or potential breaches of section 83 were identified. As the ANAO agreed with this assessment, no reference to this matter was made in the auditor’s report on the 2011–12 financial statements.[31]

Summary

2.39      The committee finds that the ACIAR annual report adequately complies with all reporting requirements.

Other reports

2.40      Other portfolio authorities, agencies and/or companies which had their annual reports examined by the committee, but were not otherwise commented upon in this edition, include:

Defence portfolio

  • AAF Company (tabled 27 November 2012)
  • Army and Air Force Canteen Services (tabled 30 October 2012)
  • Australian Strategic Policy Institute (tabled 29 October 2012)
  • Defence Housing Australia (tabled 29 October 2012)
  • Royal Australian Air Force Welfare Recreational Company (tabled 29 October 2012)
  • Royal Australian Air Force Veterans' Residences Trust Fund (tabled 20 November 2012)
  • Royal Australian Navy Central Canteens Board (tabled 20 November 2012)
  • Services Trust Funds (tabled 1 November 2012)

Foreign Affairs portfolio

  • Australian Safeguards and Non-Proliferation Office (tabled 10 October 2012)

Trade portfolio

  • Australian Trade Commission (tabled 29 October 2012)
  • Export Finance and Insurance Corporation (tabled 29 October 2012, received out of session 25 October 2012)

Veterans' Affairs

  • Repatriation Medical Authority (tabled 31 October 2012)
  • Veterans' Review Board (tabled 30 October 2012)

2.41      The committee considers that all the annual reports of the above-mentioned organisations fully met their respective reporting requirements.

 

Senator the Hon Ursula Stephens
Chair

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