Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

The Auditor-General Amendment Bill 2011 implements various recommendations contained in report 419 of the Joint Committee of Public Accounts and Audit. The recommendations follow an extensive inquiry into the Auditor-General Act 1997. The bill to implement the recommendations from the report was originally introduced into the House by the member for Lyne and chair of the committee, Mr Rob Oakeshott, on 28 February 2011. On 12 September 2011, the member for Petrie and the deputy chair of the committee, Ms Yvette D'Ath, moved amendments to the bill that were agreed to be the House of Representatives.

The amendments to the act that would be made by this bill will ensure that the Auditor-General has the tools to respond to today's auditing challenges. The most important change to flow from the implementation of the JCPAA recommendations will result in the Auditor-General having the power to follow the money. That is, in certain circumstances the Auditor-General would be able to undertake audits of Commonwealth partners, private sector and state and/or territory entities that receive Australian government funds to implement an Australian government program. These amendments will address the glaring gap in accountability identified by the JCPAA. The Auditor-General's powers are limited at present to an assessment of the way that Australian government bodies implement government programs. This means that the Auditor-General is unable to express the extent to which individuals or entities that receive Australian government funds to implement programs or deliver services on behalf of the government achieve the purpose for which funds were provided. The amendments implement the unanimous recommendation of the JCPAA report that the Auditor-General be given the authority to undertake audits of Commonwealth partners whether they are state or territory entities or other individuals, or indeed other bodies. The bill contains appropriate restrictions on the extent of these powers, particularly in relation to state and territory entities. For example, the Auditor-General will be able to assess the operations of a state or territory entity only after a request by the JCPAA or the responsible minister. The assessment will be only to the extent that they relate to achieving the purpose for which funds were provided. The government therefore anticipates that the Auditor-General's new powers will be used quite sparingly.

With one exception, the bill implements the recommendations of the JCPAA report as intended by the JCPAA. That exception relates to the performance-auditing arrangements for government business enterprises. The Auditor-General Act currently provides that GBEs can be audited by the Auditor-General only at the request of the JCPAA, the minister responsible for the GBE or the finance minister. The JCPAA report recommends that the act should be amended to give the Auditor-General the authority to initiate audits of GBEs. Successive governments have taken the view that the Auditor-General should not have the ability to audit GBEs of his own motion. GBEs, as we all know, are subject to competitive pressure and disciplines that do not apply to other Commonwealth bodies. For that reason, to the greatest extent possible they should be subject to the same audit arrangements as their competitors. The government considers that audits of GBEs should be requested by the parliament in response to genuine public interest concerns about aspects of their operations. They should not be an incidental part of an annual work program. The JCPAA, which comprises members from across the political spectrum and can and does conduct hearings in private, is the appropriate body to consider whether a particular GBE should be audited. Accordingly, the bill would allow the JCPAA alone to request an audit of a GBE by the Auditor-General. As is currently the case, the Auditor-General could ask the JCPAA to request an audit of a particular GBE.

The remaining amendments would make relatively minor changes to clarify the way that the act operates. They would, for example, provide clear authority for the Auditor-General to undertake assurance reviews and audits of performance indicators. These are currently carried out as audits by agreement under section 20 of the act. The amendments will also clarify the Auditor-General's powers to require the production of documents that are the subject of legal professional privilege.

Before making a few supplementary remarks, I would like to thank members of the JCPAA for their report. I would also like to thank the member for Lyne, who originally introduced the bill, for his cooperation in the development of the government amendments. These amendments will ensure that the changes to the Auditor-General Act 1997 contained in this bill will operate as intended.

Just to bring those few remarks together, the Joint Committee of Public Accounts and Audit has conducted a full inquiry into aspects to modernise the Auditor-General Act. There has been a full and open report of that committee. Normally when committees make recommendations to government the government considers those within the time frame permitted and publishes a document tabled in both houses as to the government's attitudes to a particular set of recommendations. In this case the chair of the committee, consistent with the recommendations of that committee, introduced a bill into the House. The government worked with the sponsor, Mr Oakeshott, in the House to clarify the drafting and to make the drafting technically correct and consistent internally with the policy concepts that can be found in the particular act.

As I said, there are clear, major and substantive changes to the act concerning auditing of government business enterprises. The principal change is that the Auditor-General would have the power, on his own motion, to audit GBEs. The Auditor-General will no longer be required to consult with the minister or the JCPAA; he simply needs the approval of the JCPAA. Hence this maintains and increases the role of the JCPAA as the principal committee that regulates the behaviour of the Auditor-General and, indeed, from time to time is charged with the responsibility of updating and modernising that act.

As I said in my introductory report, government business enterprises are quite different from line departments of either a state or a territory or, indeed, a Commonwealth portfolio. You have only to look at the nature of GBEs—Medibank or the Rail Track Corporation or Australia Post. They themselves, of course, operate in the commercial sphere. They operate in a market economy. They have competitive pressures. But, most importantly, if one examines each of the acts that establish those bodies and regulate them, there are internal mechanisms for regular accounting provisions and, more importantly, regular auditing requirements in the act. In addition, each of those GBEs that I mentioned and the others that are pertinent to this debate are required regularly to report on their activity, behaviour and deliberations to the responsible minister.

In that context, the most important change in the bill before the chair flows from the implementation of the JCPAA recommendation that the Auditor-General will now have the power to follow the money trail. In certain circumstances, the Auditor-General would be able to undertake audits of Commonwealth partners—private sector and state and territory entities that receive Australian government funds to implement an Australian government program.

There are two final minor amendments that are worthy of note and that are addressed in the EM attached to this bill. Firstly, clear authority is provided for the Auditor-General to undertake assurance reviews and audits of performance indicators. That of course is a critical part of his work and on a regular basis both assurance reviews and audits are tabled in both houses of the parliament. Secondly, whilst I refer to the second amendment as minor it is an amendment of note because it clarifies that the Auditor-General's powers to require the production of documents that are the subject of legal professional privilege will not apply in this case. When line departments of the Commonwealth allocate, arguably, hundreds of millions of dollars, or indeed billions of dollars for, say, the construction of roads or bridges, or those sorts of massive infrastructure works that are increasingly undertaken in our major cities and regions, a lot of those funds are allocated to what are colloquially known as the prime contractors. They in turn subcontract a lot of the work down the line and, indeed, subcontractors establish a range of legal entities that receive funds for different aspects of the work and do the job. So the other provision contained in the bill as to legal professional privilege will, under appropriate circumstances, allow the Auditor-General to follow the money trail of those entities that are created as subsets of other corporate bodies to ensure that funds are properly expended for the purpose originally intended by the Commonwealth. I commend the bill to the chamber.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

The opposition have expressed a number of views with respect to the Auditor-General Amendment Bill 2011. The antecedent of this bill is the extravagant waste and misuse of taxpayers' money that occurred in this government's first term. I sat in the Finance and Public Administration Legislation Committee's estimates hearings when we heard the Auditor-General essentially say he was limited by the act and could not consider the profound waste that had occurred in some of the states and territories under the so-called Building the Education Revolution, where we know that billions of dollars of taxpayers' money was wasted in building halls that were unfit and overpriced, and are not used.

Senator McLucas interjecting—

The Auditor-General made it clear that he could not look into this, Senator McLucas. The Auditor-General said that his power was limited in determining how quickly the government could shovel the money out of the door—my words, not his. The act limited his powers. This created enormous public concern about the waste of billions and billions of dollars of government money, to say nothing of the waste with the home insulation debacle, which tragically ended in deaths. As I have said previously in this chamber, I can only imagine the outrage from the Labor Party if deaths in a workplace had occurred under a program under the previous coalition government—we would still be hearing about it today. But we heard nothing about it and, quite frankly, this government's waste of taxpayers' funds stands as an appalling example from the last 30 or 40 years of mismanagement and poorly designed programs. If you asked Australians, 'If you had a once-in-a-generation chance to invest $10 billion or $12 billion in our education system,' I can tell you the answer would not have been, 'The government's Building the Education Revolution.' They would not have wanted wrong-sized school halls, with some being badly built and many overpriced.

We know the Auditor-General has expressed concerns about the limits of his powers in chasing the money trail, particularly with the way this government has structured COAG agreements and the way the money gets sent through the states and territories. Our view is that that is primarily a product of the government's poorly designed programs, lack of oversight, poor implementation and lack of interest and concern—and indeed its lack of curiosity about efficient use of taxpayers' dollars.

This bill, as originally introduced, apart from one provision, had the coalition's support. Some coalition amendments will soon be circulated. The government have substantially changed the original private member's bill moved by the member for Lyne—the changes were substantial; they were not just technical. Our amendments take a different form, but they are aimed at achieving the same results, in essence, as put forward in the House. But we have taken into account the government's amended bill and we have accepted the structure of it, apart from these two provisions.

Our view is that the bill as amended by the government has significant costs. The ability of the Auditor-General to chase the money trail goes too far. The ability of the Auditor-General to peer into the private accounts of businesses and contractors is a profound concern. To put it simply, how does a subcontractor who might be indirectly in receipt of Commonwealth funds cope with a Commonwealth audit by the Auditor-General? This is a real concern. We have significant problems already with the aggregation of government contracts that make it difficult for small and medium business to participate in government contracts. I cannot imagine anything that would scare a small business more than the threat of an army of Canberra auditors coming into their business. We do not see a need for that provision to be instituted in this bill. Those businesses have little capacity to deal with a significant Commonwealth audit of that nature.

In our view, it would also subject them to a potential double audit. In the other place, the member for Mackellar, the shadow minister, noted that there are different purposes with public sector audits and with private sector audits. A public sector audit is limited in scope to whether the money has been spent efficiently, whether the program is designed efficiently and appropriately, and what the program's objectives are. In the private sector, as well as ensuring the accounts are correct, it is also important to note that auditors have a role in providing advice to a business. The threat of a Commonwealth audit of someone in indirect receipt of Commonwealth funds that might have gone through multiple sets of hands does not in any way relieve the business of the challenge that it would face in its normal audit, as it appropriately should. We see no reason to necessarily subject potentially a very small business that might have only a handful of employees, full-time or part-time, to an audit of that nature. That need has not been established. The real need is to exercise some oversight over these new COAG agreements and some oversight over state and territory governments, and potentially even local governments—those public sector bodies that are in receipt of Commonwealth funds, as increasingly happens under our federal arrangements.

Compliance costs are already a problem for small and medium businesses in this country. We have heard a great deal about the 220 regulations created for every single regulation that has been removed by this government. Its performance in complying with its own regulatory regime, with a number of regulatory impact statements, is poor. We have a 50- or 60-page regulatory impact statement on soccer goal posts, yet the government has exempted its own superannuation and mining taxes, and even the carbon tax, from regulatory impact assessment. We on this side find that bizarre.

It is also bizarre that the government simply does not understand the imposts that every little additional regulation places on the small and medium business sector. In particular, the threat of this may well make it significantly more difficult for small businesses to access government contracts. I do not think anyone would openly desire that and I know that on this side of the chamber we specifically oppose any measure along that line. The real problem here is that we have a government that has a careless attitude towards taxpayer funds. I do not see how subjecting a small business right at the end of the value chain is going to address the problem when we know a lot of the waste has been passed from Commonwealth department to department and then through to state governments. That is where there has been a lack of oversight. There is no demonstrated need for potentially every small and medium sized business being subjected to a Commonwealth audit.

We have also opposed the exception outlined by Senator Bishop relating to government business enterprises. I am not convinced by the arguments—I do not care how old they are—that government business enterprises should in some way be exempt from the ability of the Auditor-General to initiate an audit on his or her own volition. Leaving that power solely with the Joint Committee on Public Accounts and Audit effectively leaves that power in the hands of the government.

I do not buy the competitive neutrality argument that has been put by Senator Bishop, that we should not subject government business enterprises to something that private sector enterprises are not. That is because in the other part of this bill we see that private sector businesses, potentially small subcontractors, are subjected to the oversight of the Commonwealth Auditor-General. Why on earth should the Auditor-General be able to go and investigate the private accounts of a subcontractor on a school hall but not be able to investigate the accounts of a government business enterprise? It is a profound double standard. I do not care if the arguments have been used before, Senator Bishop. Circumstances change. We have privatised a lot of businesses. Quite frankly, government businesses use taxpayer capital whereas private sector businesses do not. If anything, my view is that government business enterprises should be prepared for a higher level of scrutiny precisely because they have had to call on the taxpayer to provide the capital for their development.

We will be moving amendments to reflect those two concerns. Our prime concern remains that the Commonwealth Auditor-General, as a large and effective organisation, needs to focus its resources on who the Commonwealth hands its money to. In this case, that money is primarily handed to the states and territories. When we look at the examples that have driven this reform, they are the waste that has occurred under this government and under the current Prime Minister before she was Prime Minister—particularly in the education and school halls phase, but also in the home insulation phase, although that was not her portfolio.

We do not want to create an extra layer of bureaucracy—a potential extra layer of compliance costs—and I put it to the government and cross benches that no argument has been put to justify potentially subjecting any small business that could be putting solar panels on a roof through a government program or subcontracting on a school hall to the might of the Auditor-General when we have had billions of dollars wasted in the first step from this chamber—it goes necessarily from Commonwealth to state and territory before it gets to the final point. That risk is not justified by any case that has been put. Similarly, there is absolutely no case for government business enterprises effectively being given a lower level of audit. They use taxpayer funds as capital and have done so over many years. We will move amendments to that effect and I understand that, if they have not already been circulated, they will be very soon.

Lee Rhiannon (NSW, Australian Greens) Share this | Link to this | Hansard source

The Greens support the Auditor-General Amendment Bill 2011, which will provide for the Auditor-General to conduct a performance audit to assess the performance of state and territory bodies that receive Commonwealth funding to deliver specified outcomes. This is a most important piece of legislation. It will enhance the democratic process because it brings greater transparency and accountability to how government programs are implemented. When there is greater openness about how government bodies work, the public can then have greater involvement in the workings of government. I congratulate all members of the Joint Committee of Public Accounts and Audit and, in particular, its chair Mr Rob Oakeshott. I was fortunate to be a member of the New South Wales parliament when Mr Oakeshott was also a member, and have always found that his work is very thorough and he is very committed to his own constituents and the people of this country.

The current act that covers the Auditor-General means that the Auditor-General can assess only the Commonwealth's administration of funding, not the use to which the funds have been put by the state or territory governments. Other senators have set out how the amendments in the bill will impact on the Auditor-General's office. I will provide some examples of how these amendments will play out. If we go back to the committee report, which is essentially where this bill comes from, it used the example of the Building the Education Revolution. That was a program the Greens supported as part of the stimulus package. As well as providing stimulus, the program also provided much-needed infrastructure to schools throughout the country. The previous speaker, Senator Ryan, once again railed against this program. But those comments only serve to show how out of touch he is with what is going on in communities. Yes, there were some problems with that program, as there are with many large-scale programs. But, from my experience of going to many schools and speaking in many communities, most people out there cannot believe their luck—that they have ended up with school halls and other infrastructure that they thought they would never have the chance of obtaining. It is making a real difference to education outcomes.

The Building the Education Revolution program was subject both to an audit by the Auditor-General and to an independent review by Brad Orgill. Both reports found that the program was a success. The Auditor-General has made the point that his audit could only concern itself with the administration of the program by the Department of Education, Employment and Workplace Relations and not with the performance of the state and territory authorities in delivering the projects. This was a shortcoming.

With this bill enacted, we will be able to 'follow the money trail'. Those words have been used by many other speakers and it certainly sums up the essence of the changes to the act. It seems perfectly appropriate that the Commonwealth Auditor-General should be able to follow the money on such programs to ensure Commonwealth funds are being used for the purpose for which they were provided, whether it is the Building the Education Revolution, other stimulus programs, assistance for rebuilding after the floods, private providers picking up public money for vocational education training—an issue that I have been pursuing lately—or any other Commonwealth funds being provided for a whole range of purposes.

The contracting out of services should not result in the loss of government accountability. This particularly applies when it comes to private contractors. I am very pleased that the bill makes a significant amendment to allow the Auditor-General to audit the performance of contractors who receive money to deliver Commonwealth projects or services. As the committee report notes, the Commonwealth government is increasingly outsourcing the delivery of government programs and services. This outsourcing can potentially lead to a loss of government accountability if the performance of private contractors cannot be subject to audit. It was a unanimous finding of the committee, and a point on which there was general agreement in the evidence, that the Auditor-General should have the power to examine the expenditure of public funds when government enters into commercial arrangements for the provision of services. The head of the Defence Materiel Organisation submitted to the inquiry that the Auditor-General should have greater authority to examine the financial and performance outcomes associated with Commonwealth expenditure, including the authority to conduct company audits. Once this bill is enacted, the Auditor-General will have that authority.

In summary, the Auditor-General is one of our most important democratic institutions, providing accountability for the use of taxpayers' money and the general financial integrity of the Commonwealth government. This bill will make an important contribution, I believe, to improving this work. I did note that Senator Ryan spoke of amendments that he will shortly be circulating. We will certainly give those close attention but we are concerned—and I am happy to put this on the record—that the coalition could be up to more mischief here. Considering how thorough the work done by the committee was, leading to the recommendations which have been adopted in this bill, you again have to suspect what the coalition is up to.

Matt Thistlethwaite (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Auditor-General Amendment Bill 2011. The bill seeks to amend the Auditor-General Act to implement various recommendations of report 419, tabled in December 2010, of the Joint Committee of Public Accounts and Audit. The bill seeks to extend the Auditor-General's mandate to undertake performance audits of private sector providers and state government agencies in certain circumstances and to undertake a specific audit program of a sample of agency performance indicators. The bill will allow the Auditor-General to conduct, in certain circumstances, assurance reviews with the same powers and access to information and premises as applies to performance and financial audits.

Assurance reviews are undertaken by agreement with a client, either at the request of the client or in response to a request from stakeholders, including ministers, the Joint Committee on Public Accounts and Audit and other parliamentary committees. The terms of the review are negotiated directly with the client. The Auditor-General's existing powers in relation to the conduct of performance and financial audits by arrangement are outlined in section 20 of the act. The Joint Committee of Public Accounts and Audit recommended extending the Auditor-General's existing powers to include the conduct of assurance reviews. This will ensure greater confidence that the Auditor-General can carry out such reviews without having to negotiate terms, breadth and access to information directly with the client.

The bill also provides clarity with respect to claims of legal professional privilege for information or documents—ensuring that such claims do not override the Auditor-General's information-gathering powers. In doing so, the bill makes it clear that the information or documents do not cease being the subject of legal professional privilege if produced in response to a direction by the Auditor-General. The Australian National Audit Office has noted that agencies have, directly or indirectly, obtained legal advice which claims that certain documents are protected by legal professional privilege and therefore cannot be produced. In evidence to the Joint Committee of Public Accounts and Audit, the Auditor-General noted that, despite these difficulties, the Audit Office has never been refused access to such information. By clarifying the situation, however, this amendment will improve the efficiency of the audit process by removing the time-consuming process of having to negotiate the provision of privileged documents. The bill also clarifies that the Auditor-General is able to audit any Commonwealth controlled entity, including Commonwealth controlled companies and their subsidiaries. This is by far the most significant amendment in this bill. This will allow the Auditor-General to follow the money and audit parties of government contracts and agreements. This means that private sector and state and/or territory entities that receive Australian government funds to implement Australian government programs will come within the definition of those to be audited. Under the current arrangements, the Auditor-General can access the records and information of such external parties, but only when assessing the performance of the relevant agency, not when directly assessing the performance of an external party. This means that the Auditor-General is unable to access the extent to which the external parties that receive the government funds achieve the purpose for which those funds were provided. This bill gives that authority to the Auditor-General, along with the authority to undertake audits of those Commonwealth partners.

The bill contains appropriate restrictions and protections on the extent of these powers, particularly in relation to state and territory entities, and the government anticipates that they will be used sparingly. For example, the Auditor-General will be able to assess the operations of a state or territory entity only after a request has been made by the Joint Committee of Public Accounts and Audit, or by the responsible minister, and only to the extent that those operations relate to achieving the purpose for which the funds were provided.

The amendments to the bill implement those recommendations of the Joint Committee of Public Accounts and Audit report that require legislation, with one exception. That exception relates to the performance-auditing arrangements for government business enterprises. The Auditor-General Act currently provides that government business enterprises can only be audited by the Auditor-General at the request of the Joint Committee of Public Accounts and Audit, the minister responsible for the government business enterprise or the finance minister. The Joint Committee of Public Accounts and Audit report recommended that the act should be amended to give the Auditor-General the broad authority to initiate audits of government business enterprises.

Successive governments have taken the view that the Auditor-General should not have the ability to audit government business enterprises of their own motion. Government business enterprises are subject to competitive pressures and disciplines that do not apply to other Commonwealth bodies, and to the greatest extent possible they should be subject to the same audit arrangements as their competitors. The government considers that audits of government business enterprises should be requested by the parliament in response to general public interest concerns about aspects of their operations, rather than as an incidental part of an annual work program. The Joint Committee of Public Accounts and Audit, which comprises members from across the political spectrum and can conduct hearings in private, is the appropriate body to consider whether a particular government business enterprise should be audited.

The House of Representatives agreed to the amendments which now form part of the bill before the Senate. Accordingly, the Auditor-General Amendment Bill would allow only the Joint Committee of Public Accounts and Audit to request an audit of a government business enterprise by the Auditor-General and, as is currently the case, the Auditor-General could ask the Joint Committee of Public Accounts and Audit to request an audit for a particular government business enterprise. The measures contained in the bill will ensure that the Auditor-General has the tools to respond to today's audit challenges. The government supports the bill before the Senate. We see it as an appropriate response to that important report of the Joint Committee of Public Accounts and Audit, and I commend the bill to the Senate.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

( The coalition well understands why the member for Lyne has initiated the Auditor-General Amendment Bill 2011. The member for Lyne is part of and supports a government that has a devastating track record of waste and mismanagement. Clearly the member for Lyne is embarrassed that he is part of such a government, because he knows that the failures of the Gillard-Brown government are also his failures. The waste and mismanagement that has been inflicted on the Australian people by this incompetent Labor-Green government is also his responsibility, so he is trying to do what he thinks he can do to somehow find a way to put some additional checks and balances into the system. I well understand his motivations, and they are laudable, though I would urge the member for Lyne to reflect on whether there might be a more effective way for him to ensure that Australians can benefit from better government, because this government cannot be helped. This government will never become a good government, even with any additional checks and balances and red tape that might be put into place through legislation like this.

The main purpose of the Auditor-General Amendment Bill 2011 is to extend the powers of the Auditor-General to audit not only government entities and agencies but also contracting third parties. As my good friend and colleague Senator Ryan has told the chamber, the coalition supports the intent of this legislation, though in its current form we cannot support this bill without a number of amendments which Senator Ryan has circulated on behalf of the coalition. Firstly, this bill creates an increase in the regulatory burden on Australian business. As I look at the activities of this high-spending, high-taxing, high-red-tape government, I remember this quote from former US President Ronald Reagan, who said about government's view of the economy:

If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

That is the economic policy of the Gillard-Brown Labor government. If it moves, they will tax it. If it keeps moving, they will find ways to regulate it. And, if it stops moving, Kim Il Carr, Senator Carr, will come in and say, 'Let's subsidise it.' That is the way the government goes about things. That is what the carbon tax is all about: 'Let's tax the hell out of Australian business. Let's really make it hard for them to make a quid. Let's work as hard as we can as a government to make Australian businesses less competitive than higher-emitting businesses in China and other places around the world. Then let's put in some more regulation. Then, when businesses get in trouble, let's subsidise them.' This is just ridiculous.

This Labor government is a high-taxing, high-regulating government, even though in the lead-up to the last election it promised us new and refreshed rigour in deregulation. For every new regulation, they were going to abolish one. I think that is what they said. Senator Ryan, is that right? Is my recollection correct?

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

Two hundred and twenty to one!

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

There you go. They even have a Minister for Finance and Deregulation, but the track record of the government has been nothing short of atrocious on that front. The level of additional red tape imposed on businesses across Australia under this government is unprecedented.

This bill would require any private sector supplier to any government agency to be prepared to undergo a full investigation by the Auditor-General at any time. It is our view that this would place an unnecessary added cost and compliance burden on businesses across Australia. Under Labor over the last four years, we have already seen the greatest growth of government in our lives. That includes the Whitlam era. This government is worse than the Whitlam government when it comes to increasing the size of government and its reach into people's lives.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

They're proud of that!

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

As Senator Ryan says, this government is proud of it. But I know that people across Australia are sick of it. People across Australia are sick of this government wanting to increase its reach into their lives and make their lives more difficult. If supported, this bill would just further increase that burden of red tape for any business doing work with the government. The ever-expanding reporting requirements and compliance burdens for many hundreds of thousands of small and mid-tier businesses are becoming a major cost, impacting on the profitability of these businesses and in many cases threatening the very survival of particular businesses. There have been literally thousands of new regulations in the last four years. There has to be a point where we stop this flood of red tape and start to turn the flood back.

This government's whole rationale is to make decisions on behalf of others in the community. In the case of this bill, it is making decisions on behalf of not only other government instrumentalities but also the many hundreds of thousands of small businesses that this legislation would extend to. We have heard from Senator Bishop, who is part of this high-taxing, high-regulating, 'Let's subsidise them when they're failing because of our high taxes and regulations' government. Senator Bishop has said that the government is going to support this legislation, so we know that this government supports further regulation, when it has been promising us deregulation.

There is no doubt that this legislation would create a very significant impediment to many of the smaller and mid-tier businesses doing business with the government. I am sure that this is not the intent of the bill. I am sure that is not what the member for Lyne was seeking to achieve. He just wanted to improve the checks and balances on a bad government. He is embarrassed by being associated with this bad government and he thinks that, if we give some more powers to the Auditor-General, they will be able to do the job that he is not able to do. The member for Lyne actually has it in his power to improve government in Australia without adding significant additional red tape for hundreds of thousands of businesses across Australia. I really and truly think that the member for Lyne should reflect on that. He could actually achieve both better government and less red tape for small business. If we had better government, there would be no need for this legislation which would strangle more small businesses in additional red tape.

I know that members in the other place do not really pay that much attention to what happens in this chamber, particularly these days.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

They should!

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I agree with Senator Xenophon—they should. But these days the Senate has become very boring. These days in this chamber the government has got the numbers. What happens from time to time is that the Greens—playing to the gallery, playing a bit of theatre—will jump up and down and say, 'We don't like this,' or 'We think this is bad,' or 'The mining tax should be expanded,' or 'We think we should do this and that,' but at the end of the day they will turn around and have their tummy tickled by Julia Gillard and on they will go. They will vote for it. They even vote for the gag these days.

Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

Senator Cormann; I remind you that when you are referring to Ms Gillard it is 'Prime Minister Gillard' or 'Ms Gillard'.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Thank you, Madam Acting Deputy President. These days the Greens jump up and down and pretend that they have some level of disagreement with the government on things, but ultimately they will just vote along. They even vote along for the gag. In the last two days I have things seen things that I thought I would never see. Senator Bob Brown yesterday voted for a gag which prevented him from explaining his new-found support for the gag. Senator Brown yesterday voted to gag debate so that the Senate could not require him to explain why he all of a sudden supported the gag. This morning the Greens voted against Senator Hanson-Young explaining herself to this chamber. As much as I think it is regrettable, I understand why people look at our chamber less these days.

But, Senator Xenophon, I have to say when it was you and Senator Fielding on the crossbench this was a much more interesting chamber, because in those days the Senate could make a decision on the merits of an argument. When the government came up with something that was demonstrably bad policy, the Senate would be able to stop the bad government in its tracks. These days, if a bad government comes up with bad policy, the Greens will try and make it worse. In the past a bad government would come up with bad policy and Senator Xenophon and then Senator Fielding tried to make it better; these days a bad government comes up with bad policy and the Greens will do everything they can to make it worse. Having said all of that, I do hope that the member for Lyne—and somebody who is watching could bring it to his attention—will reflect on the power that he has to deliver better government to Australia without imposing significant additional red tape on businesses. That is a significant power he holds and indeed he should reflect on it.

With the level of scrutiny and intrusion that would come about with a study by the Auditor-General of business practices, many small and medium sized businesses will choose not to do business with government agencies as a consequence. Therefore, only the biggest companies with the resources available to prepare for and comply with an Auditor-General investigation are likely to be prepared to tender for contracts under these circumstances.

We know that the Labor Party likes big business. The Labor Party does not like small or middle sized businesses; the Labor Party only likes big business. Remember the way it negotiated, exclusively and in secret, the design of the mining tax? It went behind closed doors with the three biggest taxpayers around Australia, the three biggest mining businesses, excluding hundreds of thousands of small and mid-tier mining companies from the process. Remember how this government designed the tax exclusively and in secret with BHP, Rio and Xstrata. It designed the mining tax in a way that would make it harder for all the smaller and mid-tier guys to compete with the big guys. So we know that the Labor government is a big business government.

Senator Mark Bishop interjecting—

Maybe the reason Senator Bishop thinks this legislation is a good idea is that it will make it easier for big business to contract with the government. It will get rid of this pesky competition from small and mid-tier businesses, who will just give up because there is so much red tape involved that there is not a buck to be made. So maybe Senator Bishop and the Labor Party think this might help big business because it will get rid of some pesky competition, but of course that is not in the public interest. It is not in the national interest. This legislation will very quickly provide a significant impediment to many businesses in continuing to seek government business. This will particularly disadvantage small to medium sized businesses in Australia, denying them the opportunity to compete for government business.

With a reduction in competition for government business and the audit compliance burden for all tenderers, this legislation will lead to greater costs in the provision of government services. And who will have to pay for that? If you add red tape and reduce competition, you increase the cost. So you increase government spending and you increase the deficit further. What do you think our current Treasurer is going to come up with as a solution? I do not know, but chances are he will come up with yet another tax to line up behind the 19 new or increased taxes that we have had from this Treasurer over the last four years. This is what we are looking at. This is a government that just cannot manage its finances. It is trying to pile on more and more costs. It is trying to make it more and more expensive to do business with the government, and who ultimately pays the cost of that? It is, of course, the Australian taxpayer. The Australian taxpayer comes last in the government's considerations. That is the track record that we have seen over the last four years.

Many of the businesses that do choose to continue to tender for government work would face the prospect of an Auditor-General inquiry sometime in the future, and it would be a real prospect when you look at the myriad programs that have wasted thousands of millions of dollars in the last four years under this government. The programs that these businesses were in good faith seeking to do work for could well end up being the subject of an Auditor-General inquiry, given the record of this government and its total incompetence in terms of wasting public moneys and mismanaging so many programs.

As a consequence, many of these contractors will build into the tender price the increased cost to cover the potential audit requirements. So this is going to go across all of the contracts. All of these businesses are going to think, 'There's a chance that we might have to deal with an audit by the national Auditor-General as part of our contracting with the government, so we'd better make sure we price that into our contract.' The cost goes up again, and not just across the high-risk areas but across the board. On so many fronts, this is simply an addition to the existing reporting requirements. Also, this type of post-event auditing would be trying to chase any potential waste of taxpayers' money after the event, so well after the horse has bolted.

The proposition from the coalition for an office of due diligence is the way to go. My coalition colleague Senator Ryan will be moving amendments to remove the ability of the Auditor-General to audit private contractors which we believe will create an extra layer of bureaucracy for small business and will stop them bidding for government contracts. We cannot support this bill without this change. Furthermore, we will seek to reverse the government's amendment in the House of Representatives. The government amendment means that government business enterprises can now only be audited by the Auditor-General if approved by the Joint Committee of Public Accounts and Audit, effectively giving the government a veto over any audit of a government business enterprise. This is a direct attack on the independence of the Auditor-General. It crosses the line on accepted principles of the separation of powers. Unless the coalition's very sensible amendments removing the audit powers over private contractors are passed, we will oppose this bill.

I will sum up. The reason the member for Lyne felt compelled to put this legislation forward is that he, like us and like people across Australia, has witnessed a bad, incompetent and wasteful government mismanaging the affairs of the nation over the last four years. Instead of reflecting on the fact that he is actually part of this government, that the failures of this government are also his failures, instead of reflecting on how he can ensure that Australians can benefit from better government into the future, his backdoor solution increases red tape and increases costs for businesses across Australia. That is not the way to go. He has gone for a solution that is actually not going to achieve a proper resolution without excessive additional costs to be carried by business and taxpayers across Australia.

I urge senators in the chamber not to support this bill unless the amendments to be moved by Senator Ryan are successfully carried, because the amendments to be moved by Senator Ryan will ensure that small and medium sized businesses will continue to tender for business with government, that we will have appropriate levels of competition in the tendering for government contracts and that costs are kept at the lowest possible level. You want to have appropriate competitive tensions when there is government tendering for various services and contracts. That is the way to do it. That is, of course, the way a coalition government would do it.

It is time to ensure that we have better government. It is time to ensure that the waste and the mismanagement is stopped. It is time to ensure that taxpayers get value for money. But this legislation in its current form is not the way to do it. So I would very strongly urge all senators to vote against this bill unless the amendments that are going to be moved by Senator Ryan on behalf of the coalition are successfully carried.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I am grateful for Senator Cormann's comments about the Senate being a more interesting place. I am not sure that it was actually.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I thought it was. We did some great things.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Well, I always find the Senate interesting, Senator Cormann. I will just indicate that, as I understand Senator Cormann's position, the coalition will be supporting the second reading stage of this bill, which I think is a good thing. I think Senator Ryan is nodding. I hope I am not verballing him.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

Not opposing.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Not opposing the bill. It is a bit like the government on the palm oil bill. We can obviously explore the amendments from Senator Ryan, and I would be grateful if I could have an opportunity to speak to Senator Ryan before this bill progresses further. I imagine we will not be going too far in the committee stage.

I support the second reading of this bill, which is based on the recommendations of the Joint Standing Committee of Public Accounts and Audit and which will improve the scope of the Auditor-General. As a member of the South Australian parliament on the Legislative Council I thought it was important to improve the scope of the role of the state Auditor-General to look at issues of efficacy and the effectiveness of government programs to ensure not just that money was spent as it was meant to be spent but that the money spent delivered good outcomes. A classic example of that were drug rehabilitation programs. These are issues that I previously raised in my time as a member of the South Australian state parliament.

I think that, ultimately, where taxpayer dollars are being spent, it is vital that the money can be tracked. I believe it is crucial that there is appropriate scrutiny of Commonwealth agencies, Commonwealth authorities and government business enterprises. I believe it is fundamental that these bodies are held accountable for their operations and that the Auditor-General has the power to conduct assurance reviews as needed to ensure they are complying with standards.

For instance, the government's National Broadband Network is being rolled out to the tune of some $40-plus billion dollars. I am on the committee looking into that as a participating member. Having come back from a meeting this morning, I believe that this bill would enhance the powers of the Auditor-General to add an extra layer of scrutiny to that project. This bill will enable the Auditor-General to audit NBN Co., a government business enterprise, in all aspects of the rollout and the operations of the company. I think that is a good thing.

Furthermore, we see regular examples of inefficient Defence procurement spending and problems with Defence contracting. I recently participated in a Senate inquiry into that where we heard evidence from the Defence Materiel Organisation. I think that if this would enhance the powers of the Auditor-General to sort out the billions of dollars being spent there and whether it is being spent effectively in the defence of our nation that would be a good thing. This bill will enable the Auditor-General to explore all aspects of contracting in this agency, which will ultimately lead to better value for money and therefore better use of taxpayer dollars.

I acknowledge the opposition's concerns with this bill. They obviously can be explored in the committee stage. I look forward to having a discussion with Senator Ryan in relation to that. Whilst we may agree to disagree on a number of issues, I do respect the intellectual rigour which he brings to issues. I think that is very important in a debate in this place.

I also think that if money is being spent, whether internally or by way of a contractor, it needs to be monitored and the agency needs to be held accountable. An example of where things have gone wrong is the Home Insulation Program, which the opposition criticised with, I think, some real justification. I believe this bill will enable the Auditor-General in such circumstances to follow the money trail and to follow a whole range of issues which the Auditor-General does not have the power to do at present. I would have thought, for that reason alone, we would have learned from the lessons of the past that it is important to give the Auditor-General additional powers. I note the opposition's argument that this will place a burden on contractors, but I do not believe there is a reason for them not to be scrutinised when taxpayer dollars are being spent. There might be peripheral issues in relation to the processes involved and unnecessary red tape, but I think the principle that contractors be accountable is a good one, particularly given the role of governments in terms of outsourcing. It is something that the coalition government did. I think there ought to be that level of scrutiny.

I support the second reading of this bill. I look forward to further debate in relation to it. I think that this is a bill that will advance the interests of taxpayers by having greater levels of scrutiny and I commend the member for Lyne for introducing in the other place these much needed reforms. I genuinely look forward to the committee stage of this bill and to discussing this matter further with Senator Ryan.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

I thank all honourable senators for their contributions to the debate on the Auditor-General Amendment Bill 2011. I just want to make a few comments in response and also make some general comments that go to the amendments that have been circulated by the opposition. Probably when we go to the committee stage, I will adopt those comments again. The background to this bill is well known and well understood, as shown by the contributions here today. There has been a full committee inquiry by the Joint Committee of Public Accounts and Audit and the report of that committee has been tabled. Customarily, the government considers reports and recommendations of committees and, if it accepts those recommendations and they require a legislative response, brings forward amendments to the relevant bills at the appropriate time. In this case the chairman of the committee, an Independent from New South Wales, Mr Oakeshott, the member for Lyne, took things in hand and had the Clerk of the House draft legislation he thought appropriate to give effect to the recommendations of the JCPAA. The government indicated its general support for that proposition but became involved in the drafting because it wanted to make the necessary amendments that would come before both chambers precise, exact and internally consistent with the current policy prescriptions in the act. The principal purpose of the amendments before the chair have been identified by all speakers. The Auditor-General will no longer be required to consult with the minister or JCPAA, it will simply need the approval of the JCPAA to go about business as authorised under the act.

I have closely listened to the comments senators have made concerning the money trail, the role of subcontractors and the role of private sector entities. For reasons that will become quite clear, the government is committed to extension of the powers of the Auditor-General to examine non-Commonwealth entities, whether they be state or private sector. The government is also committed to maintaining its position of following the money in the audit trail. I will put some advice on the record as to what the position of the Auditor-General is in respect of both of those proposals.

Senator Ryan in his comments significantly addressed the role of private sector entities in terms of the auditing process, more particularly small and medium sized businesses, and put the view quite forcefully that it was inappropriate for government to be auditing those private sector entities. He reflected on amendments that were put in the House and defeated. I note that the amendments that have been circulated in this place in substance are almost the same as the amendments that were previously moved and defeated in the House. Although the wording of those amendments is significantly different, the purpose behind the amendments in both places is the same.

In respect of those amendments I put on the record that the JCPAA in its deliberations recognised that there is an increasing use of contractors to implement government programs and services. The committee acknowledged that this practice has benefits for service delivery. The committee was also concerned it had the potential to undermine ministerial responsibility and parliamentary oversight. The committee wanted to see more accountability in this area and wanted the Auditor-General to have the power to audit external entities, including contractors delivering government programs and government services. The government response to the committee report supports this proposal and the bill currently before the chair gives effect to that recommendation.

I do note Senator Cormann's comments and Senator Ryan's comments about a possible increase in the regulatory burden that this might impose on small business. The bill does contain appropriate restrictions on the extent of these powers. More importantly, the purpose of the audit will be limited to an assessment of how the operations of the private sector entity contributed to achieving the purpose for which it received Australian government funds. So it is not a frolic on its own by the Auditor-General; it is not able to cavalierly go and investigate near and far. The audit is limited to an assessment of how the operations of the private sector entity contributed to achieving the purpose for which it received Australian government funds.

The Auditor-General's primary client is the Commonwealth parliament. We say it is entirely appropriate that the parliament be able to assure itself that public funds provided to private sector entities have been spent on the purpose for which they have been provided. Really, when one thinks about the proposition, it is absurd in this day and age, where the Commonwealth government is increasingly covering off shortfalls, shortcomings and deficiencies in state government provision of services, particularly in terms of infrastructure, construction and the like, that if billions of dollars are allocated via Commonwealth interests to state agencies or state departments and then on funded to private sector interests to carry out the work they contract to do, the money trail cannot be followed and audits cannot be conducted by the Commonwealth to ensure that the money that was allocated for purpose A is spent only on purpose A. Accordingly, I do not consider that the amendments to the bill that have been circulated by the opposition present an excessive regulatory burden on small businesses. Nor should they be regarded as an impediment to businesses seeking work delivering Commonwealth activities. On that basis, when the matters do come before the committee stage for decision, the government's position will be maintained.

Finally, in response to comments raised on this argument about independent contractors, subcontractors or private sector entities contracting for the receipt of Commonwealth funds to deliver work for Commonwealth purpose, I can advise that the Auditor-General expects to use the power to audit private sector entities only when the performance of a contractor would be significant in the context of the delivery of a government program. The Auditor-General has advised the Commonwealth that it would be very unlikely that this would ever be the case for a small business. The concerns or fears that have been raised by the opposition in their contributions to the second reading debate, and referred to somewhat obliquely in passing by Senator Xenophon, are directly addressed in the comments of the Auditor-General that it would be very unlikely that this would ever be the case for a small business. With those concluding remarks, I commend the bill to the chamber.

Question agreed to.

Bill read a second time.