Annual reports of departments

1.1        The annual reports of the following departments for the financial year 2015–16, were referred to the committee for examination and report:

• Attorney-General's Department; and
• Department of Immigration and Border Protection.

Attorney-General's Department

Tabling of report

1.2        The 2015–16 annual report was tabled in the Senate on 11 October 2016. The report was available to senators for the Supplementary Budget Estimates 2016–17 hearings on 17 and 18 October 2016, and 12 December 2016.

Secretary's review

1.3        In his review for 2015–16, the secretary of the department, Mr Chris Moraitis PSM, focused on program and policy delivery in the areas of law and justice, national security, and emergency management.[1]

1.4        Other key areas of work for the reporting period included: the consolidation of the Australian Government Solicitor (AGS) into the department; improving the   efficiency of the judicial system; supporting the Defence Abuse Response Taskforce and Royal Commissions; the implementation of data retention obligations; a data-breach notification scheme; the National Facial Biometric Matching Capability; a national domestic violence order scheme; supporting the National Ice Taskforce; and reforming national disaster relief and recovery arrangements.[2]

1.5        The review also reported that in its first stakeholder survey, the department 'performed well on all measures, including overall performance, staff expertise and effectiveness, relationships and leadership and delivering quality results'.[3]

1.6        The secretary's outlook for 2016–17 outlined a continued role in 'achieving a just and secure society for all Australians'[4] through policy delivery, an effective justice system, national responses to crime and emergency management, and the rights, freedoms and responsibilities of a free society.[5]

Changes to the portfolio structure

1.7        A number of changes were made to the structure of agencies within the portfolio during, and immediately following, the reporting period.

1.8        On 1 July 2015, the Migration Review Tribunal and Refugee Review Tribunal, and the Social Security Appeals Tribunal were amalgamated into the Administrative Appeals Tribunal, and the AGS was consolidated into the Attorney-General's Department.[6]

1.9        On 1 July 2016, the Australian Crime Commission and CrimTrac merged to form the Australian Criminal Intelligence Commission, and the Federal Court of Australia, Family Court of Australia, and the Federal Circuit Court of Australia merged to form a single administrative entity.[7]

1.10      Additionally, in September 2015 the Ministry for the Arts moved from the Attorney-General's Department to the Department of Communications and the Arts under a machinery-of-government change.[8]

Performance reporting

1.11      The Attorney-General's Department made significant changes to its performance measures and key performance indicators (KPIs) in the 2015–16 reporting period.

1.12      The series of KPIs outlined in the Portfolio Budget Statement (PBS) for 2015–16[9] under each strategic priority are not reflected in the Corporate Plan[10] published in August of the same year, and no explanation for the discrepancy is provided in that document. Furthermore, there was no mention of a change to KPIs in the Portfolio Additional Estimates Statements (PAES) 2015–16 in February 2016, although changes to deliverables are outlined following the transfer of the Arts outcome to the Department of Communications.[11]

1.13      The committee identified that the only clear information about the change to KPIs for the department was given in the PBS for 2016–17 in May 2016, where the following explanation was provided, along with tables comparing old and new KPIs in 2015–16 and KPIs for 2016–17:

In 2015–16, the department implemented a new performance framework in line with the requirements of the Public Governance, Performance and Accountability Act 2013, detailed in the department’s Corporate Plan 2015–16. The performance criteria from that framework will be adopted as the performance criteria for programs from 2016–17.

In its 2015–16 annual report, the department will report against both the key performance indicators in the 2015–16 Portfolio Budget Statements and the performance framework in the corporate plan. The results against the performance framework will be reported in the department’s annual performance statement and will be used as baseline results against which future targets will be set.[12]

1.14      The KPIs presented and analysed in the department's annual report for 2015–16 therefore reflect the new KPIs detailed in the Corporate Plan and the PBS for 2016–17.

1.15      The department has introduced a new structure for performance reporting, applying four high-level KPIs (Community impact; Effectiveness in achieving objectives; Efficiency in meeting goals; Professionalism, skills and commitment) to each of the seven strategic priorities across the department.[13] Further detail on these strategic priorities and KPIs is provided in the Corporate Plan.[14]

1.16      While the committee is pleased to see that the department has improved the specificity of its KPIs, it continues to hold concerns about the lack of quantitative measures to assess the effectiveness of the department. The committee wishes to reiterate the best practice for the development of KPIs as outlined in the Australian National Audit Office's (ANAO) Development and Implementation of Key Performance Indicators to Support the Outcomes and Programs Framework:

The tendency for entities to rely on qualitative KPIs reduces their ability to measure the results of program activities over time. A mix of effectiveness KPIs, that place greater emphasis on quantitative KPIs and targets, would provide a more measureable basis for performance assessment.  Targets, in particular, should be used more often to express quantifiable performance levels to be attained at a future date. By enabling a more direct assessment of performance, the greater use of targets would assist to clarify and simplify the process of performance monitoring.[15]

1.17      However, the committee recognises the difficulty in using quantitative KPI targets to assess the effectiveness of departmental programs that involve policy development and commends the department for its introduction of stakeholder surveys to assess performance against targets of this nature.

1.18      The committee also notes that the PBS for 2016–17 set the target for all KPIs as 'to equal or better 2015–16 results' and hopes that this target will encourage quantitative comparison of performance information in future reports, where applicable.

1.19      The department met its KPIs for 2015–16, however two KPIs were not reported on in detail due to lack of a comprehensive measure (Strategic Priority 2, KPI 1: Community impact – community satisfaction with and awareness of national security strategies)[16] and a lack of data for the reporting year (Strategic Priority 6, KPI 1: Community impact – death and total asset loss from emergency events excluding road crashes).[17]

1.20      A large amount of performance information for reporting period was informed by the stakeholder survey.[18] Stakeholders surveyed included other federal agencies, state and territory agencies, professional and representative bodies, and community organisations.[19] A high level of satisfaction was reported across all strategic priorities, with results of 86 to 97 per cent satisfaction with Effectiveness in achieving objectives and 86 to 98 per cent satisfaction with Professionalism, skills and commitment.

Financial performance

1.21      In a departure from previous annual reports, the secretary's review did not include a summary of financial results. There was also no substantive discussion of financial results in the body of the report, and only minimal explanatory notes in the financial statements at Part 4.[20]

1.22      The PGPA Rule requires that 'a discussion and analysis of the entity's financial performance' be included in annual reports.[21] The committee provides further commentary on this at paragraph 1.30 below.

1.23      The department reported a departmental operating deficit of $14.275 million for 2015–16. This deficit compares to an operating deficit of $14.593 million in 2014–15, and is an $8.496 million improvement from the deficit of $21.118 million anticipated in the PAES. The 2015–16 result partly reflects the department’s depreciation and amortisation expense of $27.248 million, which is not funded by the Government. 

1.24      The committee notes that administered expenses for 2015–16 were $854.651 million, compared to $1,275.811 million in 2014–15.  Payments to Commonwealth corporate entities were $265.673 million, compared with $471.068 million in 2014–15.  The reduction in both amounts mostly reflects the transfer of the Classification, Copyright and Arts and Cultural Development programs and functions to the Department of Communications and the Arts from 1 November 2015. 

1.25      The two Royal Commissions that operated during 2015–16 incurred expenses that required funding of $89.292 million, which was less than the budgeted funding requirement of $90.771 million. 

Management of human resources

1.26      Changes to reporting requirements under the PGPA Act and PGPA Rule now require more detailed statistics on an entity's employees, including classification level, full-time/part-time status, gender, location, and number who identify as Indigenous. The committee notes that the department failed to include information about the location of staff, which is mandated in section 17AG(4)(a) of the PGPA Rule.

New reporting guidelines and list of requirements

1.27      The committee notes that while the Attorney-General's Department has largely followed the new reporting requirements under the PGPA Act, the department's 'list of requirements' is of concern.

1.28      Section 17AJ(d) of the PGPA Rule requires that a list of requirements, as set out in Appendix F of the Rule, is included in entities’ annual reports as an 'aid of access' to enable readers to locate specific information in a straightforward manner. Section 17AJ(d) also requires other aids of access, including table of contents, index, glossary of abbreviations and acronyms, and website and contact details for the agency, in all reports.

1.29      There appear to be major discrepancies between the PGPA Rule references provided in the department's list[22] and the list of requirements included in all compilations of the Rule since 13 May 2016.[23] The committee is unable to identify which, if any, compilation of the PGPA Rule the department is referencing in its list. Additionally, the description text has been substantially changed for a number of requirements.

1.30      For example, the committee notes that the department's list changed the requirement 'a discussion and analysis of the entity's financial performance' to the simplified 'entity's financial performance'. The committee is particularly concerned about this change to the description, which obscures the requirement for discussion and analysis, and disguises the department's omission of any such discussion or analysis from its report.

1.31      The committee strongly recommends that in future reports the department use the list of requirements provided in the PGPA Rule without making amendments to references or descriptions.

Conclusion

1.32      The committee would like to draw attention to its comments on following reporting guidelines and encourages closer compliance in future annual reports.

1.33      Despite the omissions noted above, the committee considers the report to be 'apparently satisfactory'.

Department of Immigration and Border Protection

Tabling of report

1.34      The 2015–16 annual report was tabled in the Senate on 10 October 2016. The report was available to senators for the Supplementary Budget Estimates 2016–17 hearing on 17 October 2016.

Corrigendum

1.35      At the Supplementary Budget Estimates 2016–17 hearing on 17 October 2016, Senator the Hon Kim Carr asked questions about discrepancies between the report on financial performance in the text of the annual report and the financial statements.[24] Mr Steven Groves, Acting Deputy Secretary, Corporate, and Chief Operating Officer, explained that the tables in the financial resources summary did not include depreciation and that a corrigendum was in the process of being prepared.[25] He also clarified that there were no errors in the financial statements.[26]

1.36      A corrigendum to the report on financial performance was published online by the department on 17 October 2016.[27]

1.37      As there were no errors in the financial statements, the department has not tabled the corrigendum in either the House of Representatives or the Senate.

Secretary's review and Commissioner's review

1.38      This is the first annual report for the new Department of Immigration and Border Protection, following amalgamation between the department and Australian Customs and Border Protection Service and the formation of the Australian Border Force (ABF) within the department on 1 July 2015.

1.39      Both the Secretary of the Department of Immigration and Border Protection, Mr Michael Pezzullo, and the Commissioner of the Australian Border Force, Mr Roman Quaedvlieg APM, provided reviews for the annual report.

1.40      Mr Pezzullo's review focused on the continued mission and purpose of the department to 'protect Australia's border and manage the movement of people and goods across it' and on the changes to the department since 1 July 2015. Key areas highlighted included: the administrative relationship between the Secretary (administration and policy) and the Commissioner (operational activities); training and development for the new integrated staff; new corporate, policy and operational strategy documents; enhanced collaboration with domestic, regional and global partners; the establishment of the Border Intelligence Fusion Centre to support real-time operational decision-making; updates on visa programs; and financial performance.[28]

1.41      Mr Quaedvlieg's review covered the formation of the ABF and its role as Australia's customs service. Points of discussion included: training for ABF uniformed and non-uniformed officers; the role of ABF in whole-of-government law enforcement; operational successes in areas of organised crime, illicit drugs and counter-terrorism, including visa cancellations on character grounds; immigration compliance and enforcement, including targeting organised visa fraud, illegal work and the exploitation of foreign workers in Australia; maintaining the sovereignty of Australia's maritime border through Operation Sovereign Borders; the implementation of the Australian Trusted Trader program; the rollout of 'SmartGate' technology at international airports; and the management of immigration detention facilities.[29]

Performance reporting

1.42      The annual report for 2015–16 provides comprehensive reporting on performance in accordance with the requirements of the PGPA Act and PGPA Rule.

1.43      Performance reporting is displayed in a clear format and footnotes throughout provide information about the source of each criterion, including page references from the PBS and/or Corporate Plan, distinction between deliverables and KPIs, and relevant outcome and/or program information.

1.44      Qualitative deliverables and KPIs are listed with a Result displayed as Met/Not met as applicable, and with explanatory text evaluating the result.

1.45      Quantitative deliverables and KPIs are reported in tables with separate columns for 2014–15 Actual [figure], 2015–16 Target [figure, for KPIs only], 2015–16 Actual [figure], and Result displayed as Met/Not met as applicable. There is limited-to-no explanatory text evaluating individual quantitative criteria.

1.46      The committee congratulates the department on the overall high standard of performance reporting in this annual report.

1.47      However, the committee notes that while the department met a substantial proportion of its KPIs, a number were not met across the following functions:

1. Function 1 (Facilitation and enforcement of trade and customs): air and sea cargo inspections, examinations and reports;[30] processing of customs broker licenses; tariff classification, valuation and rules of origin advices; and international vessel movements and reported vessel arrivals;[31]
2. Function 2 (Facilitation and enforcement of travel): management of goods and services moving across borders in according with service standards; rate of passenger and crew arrivals refused immigration clearance at airports and seaports;[32] timely resolution of immigration status breaches for non-citizens in the community;[33] timely processing of passengers in inwards queue at airports and seaports;[34] and percentage of high-risk vessels subject to targeted operational responses;[35]
3. Function 3 (Delivery of visitor, temporary resident, migration and citizenship programs): visa applications finalised within applicable service standards; and citizenship conferral applications decided within service standards; [36]
4. Function 5 (Offshore maritime security): aerial surveillance; station and steaming days for the Ashmore vessel; patrol days for the Marine Unit; and apprehension and processing of illegal foreign fisher and fishing vessels;[37] and
5. Function 6 (Revenue collection): target revenue associated with passenger movements; drawbacks delivered according to service standards; and target duty concessions from schemes other than the tariff concessions system.[38]

1.48      The failure of the department to meet the criteria listed above was raised at the Supplementary Budget Estimates hearing on 17 October 2016 by Senator the Hon Kim Carr.[39] The Senator then provided a written question on notice (QoN) detailing 10 of the areas of failure and seeking further explanation from the department. An answer was received by the committee on 2 December 2016, QoN SE16-107.[40]

1.49      In its response to Senator Carr, the department provided a comprehensive attachment detailing the reasons for failure in each instance.[41] The department acknowledged that 'its ability to meet specified targets may be impacted by a range of environmental factors within, or outside of, its control', and outlined where variances were in acceptable ranges, where failed targets could cause negative impacts, and where exceeded targets in other areas caused run-on effects.[42]  

1.50      The committee considers that the information provided in the answer to QoN SE16-107 would have provided meaningful detail to the performance reporting in the annual report. The committee therefore recommends more detailed explanation where the department fails to meet performance criteria, particularly quantitative criteria, in future reports.

Financial performance

1.51      In considering the financial performance of the department, the committee referred to both the annual report, and the corrigendum published online and comments made at the Supplementary Budget Estimates hearing on 17 October 2016.

1.52      The total departmental expenses for 2015–16 were $2986.1 million, $139.3 million higher than in 2014–15. The department had budgeted $2868.3 million for departmental expenses for the period.[43] The total administered expenses in the same period were $2307.0 million, $236.7 million lower than in 2014–15, and the department had budgeted $2551.5 million.[44]

1.53      There was a reported $12.4 million increase in departmental assets since 30 June 2015, with total assets now equal to $1882.2 million at 30 June 2016. Total administered assets were equal to $1965.6 million on 30 June 2016. The 2015–16 reporting period also saw a decrease in total liabilities: departmental liabilities decreased by $10.1 million to $737.5 million, mainly due to a decrease in salaries and wages payable; and administered liabilities decreased by $34.0 million to $279.2 million. The department's net asset position at 30 June 2016 was therefore $1144.7 million, an increase of $22.5 million from 30 June 2015. [45]

1.54      The overall operating result for 2015–16 was a deficit of $21.7 million, due to an increase in depreciation and amortisation expenses, attributed to changes in government bond rates. The depreciation and amortisation expenses for 2015–16 were $277.5 million, an increase from $109.9 million in 2014–15. The department stated in both the annual report and in the estimates hearing that, had it not been for this increased expense, the department would have 'finished the year on budget'.[46]

Correction of previous errors

1.55      Two errors made in the Australian Customs and Border Protective Service (ACBPS) annual report for 2014–15 were corrected in the department's report for 2015–16.[47]

1.56      A correction adjusted the number of fishers apprehended and processed from 25 to 34[48] and did not change the result of the KPI for 2014–15 being unmet.[49]

1.57      However, there was a significant correction regarding the number of undeclared handguns detected at the border. The ACBPS annual report for 2014–15 reported that the number had 'increased by almost 60 percent',[50] however the actual result was a decrease of approximately 73 percent in 2014–15, with 13 handguns detected in 2014–15 compared with 49 detected in 2013–14.[51] The reason for this error was not stated.

Information required by other legislation

1.58      The annual report also includes information required by other legislation, including: compliance with the Work Health and Safety Act (Cth) 2011;[52] compliance with the Environment Protection and Biodiversity Act 1999;[53] and a brief report on the Office of the Migration Agents Registration Authority, as required under the Migration Act 1958.[54]

1.59      The committee found that for the purpose of the annual report, the department met the reporting requirements of the above Acts.

Conclusion

1.60      The committee found the annual report to be 'apparently satisfactory'.

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