Chapter 3Examination of selected annual reports
3.1The Senate Economics Legislation Committee (the committee) has selected the following annual reports for closer examination:
Department of the Treasury (Treasury);
Inspector-General of Taxation and Taxation Ombudsman 2020–21;
Inspector-General of Taxation and Taxation Ombudsman 2021–22;
Department of Industry, Science and Resources (DISR); and
National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).
3.2The committee has chosen to include the annual report of the Inspector-General of Taxation and Taxation Ombudsman (IGT) 2020–21 as it was not tabled in the Senate during the reporting dates for the report on annual reports of 2022.
3.3The IGT annual report for 2020–21 was received by the Minister on 1 September 2022 and tabled on 26 September 2022.
Department of the Treasury
3.4The 2021–22 annual report of the Treasury was tabled in Parliament on 21 November 2022.
3.5The Secretary, Dr Steven Kennedy PSM, provided an overview of the Treasury’s activities and achievements for the 2021-22 reporting period. Dr Kennedy emphasised the domestic and global economic shifts’ impacts on the Australian economy during post-pandemic recovery, including Russia’s invasion of Ukraine, supply chain pressures from China’s zero COVID-19 policies, and residual pressures placed on the economy from congestion in supply chains and increased demand for goods from the pandemic.
3.6The Secretary also highlighted the current impacts of an unexpected inflation surge that began in 2021 and has continued to grow throughout 2022.
Performance reporting
3.7A commonwealth entities performance criteria and reporting consist of three documents:
Portfolio Budget Statements (PBS) state the Outcome/s, Purpose and Programs for Commonwealth entities which inform its performance and criteria;
Corporate Plan 2021–22 sets out the Commonwealth entities purpose/s and individual performance criterion noting the activities it will undertake and intended results; and
Annual Performance Statement which contained reporting and analysis on the Commonwealth entities actual performance results, in light of its forecasts.
3.8Treasury’s purpose statement in its Corporate Plan for 2021–22 aligned with its Outcome Statements in the annual report. The key purpose being to ‘provide advice to the Government and implement policies and programs to achieve strong and sustainable economic and fiscal outcomes for Australians’.
3.9Treasury emphasised that this year was a transitional year as they have matured their performance frameworks. Treasury’s annual performance statements and performance framework are being audited as part of an Australian National Audit Office (ANAO) annual performance statements audit program.
3.10Overall, Treasury achieved the majority of its deliverables. Treasury listed seven activities and 12 performance measures to determine their achievements—Two performance measures achieved an established baseline, eight performance measures were achieved, substantially achieved, or partially achieved, with two performance measures not achieved.
3.11The performance measures eight and nine, sitting in Activity 5—Administer Treasury’s regulator functions—were not achieved:
Performance measure eight—Percentage of key stakeholders agree that regulator activities are responsive to the environment and builds trust; and
Performance measure nine—Percentage of key stakeholders agree that regulatory activities are risk based and data driven.
3.12Both performance measures had listed targets of 70 per cent agreement based on a survey of key stakeholders. However, these targets were not achieved.
3.13Indeed, Treasury only achieved an effectiveness result of 42 per cent for performance measure eight. In their analysis, Treasury emphasised their willingness to:
…increase transparency and build trust in the foreign investment regulatory process. This includes establishing procedures to improve transparency with government stakeholders and investors, and to provide a basis for better education about the role of compliance in the foreign investment review framework.
3.14Performance measure nine achieved an effectiveness result of 32 per cent for the Foreign Investment Review Framework and an effectiveness result of 25 per cent for the Payment Times Reporting Scheme.
3.15Treasury noted that a contributing factor to not achieving the target was that The Payment Times Reporting Scheme regulatory powers did not come into effect until 1 January 2022, in accordance with section 37 of the Payment Times Reporting Act 2020.
3.16Treasury outlined significant changes to the Foreign Investment Review Framework since the temporary implementation of the zero-dollar threshold as being an additional factor for not achieving a successful target. Proactive steps were implemented to achieve the targets to improve development of risk-based and data driven activities, including:
Proactive campaigns used to systematically analyse data sources to identify suspected risks of non-compliance;
Education campaigns using targeted email communications to prompt investor compliance;
Risk-focused methods including implementation of an ‘audit outcome recording tool’ to better inform our risk monitoring and assurance activities.
Financial reporting
3.17As outlined in Chapter 2, Treasury’s financial result in 2021–22 was an operating deficit of $0.3 million, excluding depreciation, amortisation, changes in asset revaluation reserves and leasing adjustments. Treasury highlighted its deficit as being the result of a ‘reclassification of cloud-based software projects to operating expenditure, including prior year work-in-progress balances, partly offset by employee provision revaluations due to changes in Australia bon rates and other provision parameters’.
3.18This follows and operating surplus of $5.9 million in 2020–21 reporting period.
Inspector-General of Taxation and Taxation OmbudsmanAnnual report 2021–22
3.19The 2021–22 annual report of the Inspector-General of Taxation and Taxation Ombudsman (IGT) was tabled in the Senate on 21 November 2022.
3.20The IGT Ombudsman, Ms Karen Payne, highlighted IGT’s key focus for the reporting period was to ‘support taxpayers and the community during the transition out of the pandemic.’ The focus of the IGT for the period included engaging in approximately 45 per cent more resource-intensive dispute investigations surrounding taxpayers expecting payments from the Australian Taxation Office (ATO).
3.21Investigations concerning ATO’s processing of taxpayer lodgements, particularly taxpayer amendment requests made up a further 18 per cent of the IGT’s investigations.
3.22Disputes around superannuation also contributed to a main area of the IGT’s resource-focused efforts, primarily concerning employee notifications of unpaid superannuation contributions and the release of superannuation—the release of superannuation under the First Home Super Save Scheme or applications for compassionate release.
Performance reporting
3.23The IGT has noted in Part 2—Performance Report section of the annual report that it has updated terminology to better align with the Australian Standard and to better describe the underlying activities and shifts in their work mix.
3.24The IGT’s key purpose remains the same as the previous reporting period. This reporting period noted an overall successful result against the key performance measures. There was one difference in expected results compared to the 2020–21 performance measures.
Key performance measures 1.3—Percentage of dispute investigations on hand and received that were finalised in the Financial Year
3.25Reporting for the 2021–22 financial year indicated a reduction in the percentage of finalised dispute investigations from 83 per cent in 2020–21 to 75 per cent in 2021–22. The IGT attributes this reduction to the ongoing complex dispute investigations still ongoing as at the end of the reporting period.
3.26The IGT also emphasised that:
…cases are becoming more complex as evidenced by an increase in the average duration and number of interactions per case. IGTO officers also pursued better outcomes in appropriate investigations which naturally took longer to finalise.
Financial reporting
3.27The IGT ended the financial year with an attributable surplus of $90, 852, compared to the previous year’s surplus of $151,689. The major cause of the surplus for this reporting period was the combination of favourable and unfavourable outcomes both in the employee benefits and total comprehensive loss line items.
Department of Industry, Science and Resources
3.28The 2021–22 annual report of the Department of Industry, Science and Resources (DISR) was tabled in the Senate on 21 November 2022.
3.29Ms Meghan Quinn PSM, newly appointed Secretary for DISR, highlighted in her transmittal letter that Machinery of Government moved the responsibility for climate change and energy functions were transitioned to a new entity, the Department of Climate Change, Energy, the Environment and Water (DCCEEW).
3.30Ms Quinn emphasised the support DISR provided to the previous government’s response to several challenges of the reporting period, including the ongoing impact of COVID-19 and international events that disrupted important supply chains.
Performance reporting
3.31DISR’s purpose statement in its Corporate Plan for 2021–22 aligned with its Outcome Statements in the annual report and highlighted that its vision is to support productivity and economic growth, and job creation for all Australians.
3.32DISR emphasised the implementation of a more mature performance management framework in the reporting period. Overall, 20 of 28 performance measures were assessed as met, six partially met, and 2 measures not able to be reported on.
3.33Noting the overall success of the performance outcomes, the two measures that were assessed as ‘not able to be reported on’ were:
Performance measure 5—Investment leveraged through portfolio manufacturing initiatives—the focus being on Industry growth and manufacturing. As these measures encompassed the new initiative of the Modern Manufacturing Strategy, there was not a complete historical dataset to compare a year-on-year increase. As such, DISR was not able to report a result against this measure.
Performance measure 10—Develop and implement flexible approaches in the regulation of Australia’s space activities. Given the sector is in the early stages of development, DISR stated that baseline targets through stakeholder feedback were not appropriate at present. DISR therefore did not report a result against this measure in the reporting period.
Financial reporting
3.34DISR recorded a surplus of $39.4 million in the 2021–22 reporting period, excluding depreciation and amortisation and the impacts of the Australian Accounting Standards Board (AASB) Standard 16 Leases accounting adjustments. This reflects a significant surplus increased from the 2020–21 surplus of $9.7 million and is attributed largely to delays in implementation of various budget measures.
3.35With the exclusions included, DISR’s financial reporting reflects a net loss of $9.2 million. DISR states that this was due to the introduction of the net cash appropriation arrangements where appropriation for depreciation and amortisation expenses ceased. Entities will now receive a separate capital budget provided through equity appropriations.
National Offshore Petroleum Safety and Environmental Management Authority
3.36NOPSEMA’s 2021–22 annual report was tabled in the Senate out of session on 20 October 2022, and in the House of Representatives on 25 October 2022.
3.37The Chief Executive Officer, Mr Stuart Smith, highlighted NOPSEMA’s ongoing adjustments and support to the oil and gas sector during the continued COVID-19 pandemic restrictions. Mr Smith also noted that this financial reporting year saw an increased focus on engagement with First Nations peoples, including NOPSEMA’s launch of their Reconciliation Action Plan (RAP).
Performance reporting
3.38NOPSEMA’s purpose statement in its Corporate Plan for 2021–22 aligned with its Outcome Statements in the annual report. The key vision and purpose being ‘a protected offshore workforce and environment, to assure the protection of lives and the environment.’
3.39NOPSEMA’s three performance indicators, and outlined in its Corporate Plan were:
Principle 1: Risk-based and data driven—Key Performance Indicator (KPI) one to four;
Principle 2: Collaboration and engagement—KPI five to eight; and
Principle 3: Continuous improvement and building trust—KPI nine to 13.
3.40NOPSEMA outlined in its annual report that all except three KPI’s met the 100 per cent target set out in the Corporate Plan. The of the KPI are included in Principle 1 are considered to have been ‘substantially met’. NOPSEMA noted that all three KPI’s had lower targets in the previous reporting periods.
Financial reporting
3.41NOPSEMA recorded a surplus of $5.4 million for the 2021–22 reporting period. Total revenues received were $42.7 million, encompassing $40.4 million from levies and fees, $1.5 million from government appropriations, and $0.8 million in other revenue streams.
3.42The appropriations received from the government were to support the establishment of regulatory functions and the Digital Transformation Plan.
3.43NOPSEMA is anticipating a deficit of $3.1 million for the 2022–23 reporting period due to increased costs required to fulfil its usual and expanding regulatory functions.
Senator Jess Walsh
Chair
Labor Senator for Victoria