Victoria’s outdated Audit Act needs urgent attention


John Doyle, Des Pearson, Wayne Cameron and Ches Baragwanath

The following piece was written by four auditors-general of Victoria: John Doyle, who presently holds the position, and his three immediate predecessors, Des Pearson, Wayne Cameron and Ches Baragwanath. Their message is clear: legislative changes must be made so that governments can be kept accountable for their spending.

(Des Pearson AO, former Auditor-General of Western Australia (1991-2006) and Victoria (2001-2012) is a member of ART)

A vigilant, independent integrity system is critically important for Victorians; it promotes trust and enables them to hold their governments to account. This is why the work of the Auditor-General is so vital.

Over the 160 years that the role of Auditor-General has existed, Victorians have been able to draw on independent assessments of whether their dollars are being spent appropriately. The current legislation to enable Auditors-General to make those assessments is the Audit Act 1994.

This Act is now seriously out of date and is failing to keep pace with contemporary trends in public service delivery. Other Australian jurisdictions have amended their audit legislation in recent years to meet the challenge of government service delivery arrangements and to allow the Auditor-General to test properly whether the programs of government are operating economically, efficiently and effectively.

For more than six years now, that has been the message highlighted by the current and two former Auditors-General.

A key, but by no means only reason why Victoria’s audit legislation must change is the proliferating multi-billion dollar projects jointly delivered by the public and private sectors.

Commonly referred to as Public Private Partnerships (PPPs), and worth about $17.7 billion in capital costs expressed in present value terms, the Auditor-General cannot fully audit taxpayers’ money being spent on these projects. Well-known examples of PPPs include the East West Link, commissioned by the current government for an estimated cost of between $6 billion and $8 billion in Stage One; and the desalination plant, which was commissioned by the previous government and had a value at net present cost of $5.7 billion at September 2009.

The state’s 2013-14 Annual Financial Report sets out total expenditure commitments to external parties, including PPP liabilities, of about $55 billion, of which about $8.8 billion will occur during 2014-15.

Our concern is not with the model of delivery itself, but the ability to test and report on whether public money is being spent appropriately and effectively.

There are 21 public-private partnership projects operating or being built in Victoria and a further four under procurement. As the number (and dollar amount) of these projects increases, the ability of the Auditor-General to have confidence in and report to Parliament on overall government spending and programs is being steadily undermined.

To be clear, this does not mean the Auditor-General should become the appointed financial auditor of every company that does business with government, and in no cases where Auditors-General have received these powers in Australia has this ever occurred. What is key is that audit staff must be able to access information and review performance related to all publicly-funded services.

A full rewrite of the Act is absolutely necessary to restore and make the most of the role of the Auditor-General. Now that both the government and the opposition have publicly agreed about the need for changes to the Act, we, the four most recent Auditors-General of Victoria, are seeking their commitment that this will be a priority of the 58th Parliament.

Key changes required include:

Follow-the-dollar: the top reform priority is follow-the-dollar powers, to allow auditing of all activities funded by Parliament.

This means being able to access all relevant information from third parties, rather than only from public servants and agency employees.

These powers must be unambiguous and unfettered by approval processes or by being treated as last resort measures. Any limitations on the Auditor-General’s ability to access documents, persons or premises, including any involvement by Parliamentary Committees in audit operations approvals should be opposed. The work of the office is increasingly subjected to oversight and Committee requirements, which directly contravene the independence of the Auditor-General enshrined in the Constitution Act 1975.

Conducting audits: A smooth and effective consultation process with Parliament and government agencies is key to making sure the most important issues are identified and investigated at the most appropriate time. Current consultation requirements are onerous and delay the conduct and completion of audits.

The Auditor-General needs the operational agility to respond to requests of both Parliament and the community and to be able to undertake audits without the rigidities in the current Audit Act.

Sharing information with other integrity bodies and tabling: The Audit Act’s current secrecy provisions limit the Auditor-General from sharing information with other independent integrity organisations, such as the Independent Broad-based Anti-Corruption Commission and the Victorian Ombudsman.

Information sharing is vital for collaborative integrity work and Auditors-General should have the discretion to share information with these third parties and others.

There has been much media and public attention in recent years on the need to focus on corruption in the State. The result was the formation of the Independent Broad-based Anti-corruption Commission. A second key arm of integrity is the Ombudsman, looking after issues of fairness for individual Victorians.

As the third arm of this integrity group, the Auditor-General’s role is to look at whole systems of government delivery. What levels of waste are there across the public sector? How well are government programs being delivered? Are they efficient, effective and value for money? Where are the examples of better practice? Is there mal-administration?

After years of unnecessary delay there is now a gathering threat to the ability of the Auditor-General to undertake the depth of investigation required to make appropriate conclusions about public spending and government programs.

We need contemporary audit legislation, early in the term of the new government, so that Victorians get an integrity system that works, and Parliament’s (and thus the citizen’s) right to know is fully strengthened.

John Doyle is Victoria’s auditor-general; Des Pearson was auditor-general (2006-12), Wayne Cameron (1999-2006) and Ches Baragwanath (1988-99).

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