Skip to content

Part 3: Management and Accountability (continued)

External scrutiny

Audit

The Audit Committee met six times in 2009-10. Its work included reviewing the Treasury’s financial statements and a range of internal and external audit reports.

The Audit Committee’s Financial Statements sub-committee met three times. The subcommittee comprises members from the Treasury, the ANAO, the Treasury’s internal audit service provider and the external representative of the Treasury Audit Committee. The subcommittee monitors production of the financial statements and helps resolve issues.

The Treasury engaged KPMG to develop the 2010-11 internal audit program. KPMG helps the Audit Committee to continuously improve audit services by regularly reviewing the audit program and scrutinising internal audit recommendations, as well as relevant ANAO reviews.

Internal audits

The Treasury completed eight internal audits/reviews during 2009-10.

Financial delegations framework

This review assessed the Treasury’s current financial delegations framework, incorporating amendments made to the Financial Management and Accountability Act 1997 (FMA Act). The Treasury has agreed to implement two business improvement recommendations to ensure the effective management and application of the financial delegations framework.

IT change, problem and incident management

This review examined the control framework in place at the Treasury for the management of IT changes, problems and incidents, and compliance with the Treasury’s procedures. The Treasury has agreed to implement three recommendations to improve compliance.

New federal payment arrangements

This review conducted a risk assessment of the new arrangements for Commonwealth payments to the States and Territories. The review identified relevant key risks and controls and made four recommendations for improvement, which the Treasury has agreed to implement.

End user computing – development of criticality criteria

This review built on a 2008-09 review that assessed the Treasury’s approach in controlling the development, maintenance and use of end user computing solutions. The review helped to determine criteria for Treasury Quantitative Modeling and Analysis Applications and made a number of recommendations, which the Treasury has agreed to implement.

Guarantee Scheme for Large Deposits and Wholesale Funding

This review assessed the Treasury’s compliance with the requirements of the FMA Act and the department’s risk management policy with respect to the scheme. The Treasury agreed to implement four recommendations to improve the management of risks associated with the scheme.

Payroll function

This review examined the controls and business processes in place to manage the payroll function. The Treasury has agreed to implement three recommendations to enhance system controls and improve staff compliance with departmental policies.

Payroll payments

This review assessed the effectiveness and accuracy of the Treasury’s new payroll payment system and provided assurance that controls and processes implemented by the Treasury were operating as intended. The Treasury has agreed to implement four business improvement recommendations to improve the administration of payroll payments.

Internal budgeting processes

This review assessed the Treasury’s internal budgeting processes against better practice principles for developing and updating internal budgets issued by the ANAO. The Treasury has agreed to implement three recommendations to further improve budgeting practices in the department.

Australian National Audit Office reports

In 2009-10, the ANAO conducted one performance audit that related to the Treasury’s operations.

Audit Report No. 1: Representations to the Department of the Treasury in Relation to Motor Dealer Financing Arrangements

The ANAO conducted an audit of representations to the Treasury regarding automotive finance arrangements for car dealers. The audit examined and reported on:

  • representations to the Treasury since October 2008 from all sources regarding automotive finance arrangements for car dealers, including any made in relation to John Grant Motors;
  • the nature of these representations;
  • the manner in which officials responded to the representations, applying relevant standards and procedures; and
  • any related administrative matters that came to attention.
  • The audit identified a number of policy implementation shortcomings, but did not make any recommendations to the Treasury, as the ANAO did not examine whether these shortcomings were isolated or more widespread. However, the Treasury has reviewed its practices more broadly in light of the matters raised in the report.

Other audit reports

Other ANAO reports relevant to the Treasury in 2009-10 were:
Report No. 6 Senate Order for Departmental and Agency Contracts (Calendar Year 2008 Compliance)
Report No. 8 The Australian Taxation Office’s Implementation of the Change Program: a strategic overview
Report No. 17 Audits of the Financial Statements of Australian Government Entities for the Period Ended 30 June 2009
Report No. 20 The National Broadband Network Request for Proposal Process
Report No. 26 Administration of Climate Change Programs
Report No. 27 Coordination and Reporting of Australia’s Climate Change Measures
Report No. 33 Building the Education Revolution – Primary Schools for the 21st Century
Report No. 34 The Management and use of Double Taxation Agreement Information Collected through Automatic Exchange
Report No. 35 Administration of the Superannuation Co-contribution Scheme
Report No. 41 Effective Crossagency Agreements
Report No. 44 Administration of the Tax Obligations of Non-residents
Report No. 50 Interim Phase of the Audit of Financial Statements of Major General Government Sector Agencies for the year ending 30 June 2010

The Audit Committee follows ANAO better practice guidelines by actively reviewing relevant matters raised in audit reports, and overseeing followup action. Details of audit reports are available at www.anao.gov.au.

Parliamentary committees

In 2009-10 officials from the Treasury appeared before the following Parliamentary Committees:

  • 14 July 2009 – Senate Standing Committee on Community Affairs, Inquiry into the Fairer Private Health Insurance Incentive Bills and the Health Insurance Amendment (Extended Medicare Safety Net) Bill 2009
  • 15 July 2009 – Joint Committee on Corporations and Financial Services, Agribusiness managed investment schemes
  • 27 July 2009 – Senate Economics References Committee, Employee share schemes
  • 5 August 2009 – Senate Economics Legislation Committee, Renewable Energy (Electricity) Amendment
    Bill 2009
  • 18 August 2009 – Senate Economics References Committee, Bank funding guarantees
  • 21 August 2009 – Senate Economics Legislation Committee, National Consumer Credit Protection Bill 2009
  • 21 August – Senate Economics Legislation Committee, Trade Practices Amendment (Australian Consumer Law) Bill 2009
  • 25 August 2009 – Senate Economics Legislation Committee, Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009
  • 28 August 2009 – Joint Committee on Corporations and Financial Services, Financial products and services in Australia
  • 7 September 2009 – Joint Standing Committee on Treaties, Treaties tabled on 20 August 2009
  • 10 September 2009 – House of Representatives Standing Committee on Employment and Workplace Relations, Pay equity and increasing female participation in the workforce
  • 14 September 2009 – Joint Standing Committee on Treaties, Treaties tabled on 20 August 2009
  • 18 September 2009 – Senate Economics References Committee, GROCERYchoice website
  • 25 September 2009 – Senate Economics Legislation Committee, Trade Practices Amendment (Guaranteed Lowest Prices – Blacktown Amendment) Bill 2009
  • 1 October 2009 – Senate Select Committee on the National Broadband Network, Implications of the proposed National Broadband Network
  • 9 October 2009 – Senate Economics References Committee, Government economic stimulus initiatives
  • 22 October 2009 – Senate Economics Legislation Committee, Estimates (Supplementary Budget Estimates)
  • 27 October 2009 – Senate Legal and Constitutional References Committee, Access to justice
  • 9 November 2009 – Senate Economics Legislation Committee, Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009
  • 14 December 2009 – Senate Select Committee on Fuel and Energy, Issues relating to the fuel and energy industry
  • 1 February 2010 – Joint Standing Committee on Treaties, Treaties tabled on 25 November 2009
  • 5 February 2010 – Senate Economics Legislation Committee, Trade Practices Amendment (Infrastructure Access) Bill 2009
  • 10 February 2010 – Senate Economics Legislation Committee, Estimates (Additional Estimates)
  • 25 February 2010 – Senate Economics Legislation Committee, Tax Laws Amendment (Confidentiality of Taxpayer Information) Bill 2009
  • 3 March 2010 – Senate Economics Legislation Committee, Tax Laws Amendment (2010 Measures No. 1) Bill 2010
  • 12 March 2010 – Senate Economics References Committee, Role of liquidators and administrators
  • 7 April 2010 – Senate Select Committee on Fuel and Energy, Issues relating to the fuel and energy industry
  • 9 April 2010 – Senate Economics Legislation Committee, Trade Practices Amendment (Material Lessening of Competition – Richmond Amendment) Bill 2009
  • 27 and 30 April 2010 – Senate Economics Legislation Committee, Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010
  • 30 April 2010 – Senate Economics Legislation Committee, Tax Laws Amendment (2010 Measures No. 2) Bill 2010
  • 10 May 2010 – Senate Economics References Committee, Access of small business to finance
  • 10 May 2010 – Joint Standing Committee on Treaties, Treaties tabled on 9, 10, 16 and 29 March 2010
  • 20 May 2010 – Senate Economics Legislation Committee, Tax Laws Amendment (Research and Development) Bill 2010
  • 27 May and 1, 2, and 3 June 2010 – Senate Economics Legislation Committee, Estimates (Budget Estimates)
  • 7 June 2010 – Senate Select Committee on Agricultural and Related Industries, Food production in Australia
  • 9 June 2010 – Senate Economics Legislation Committee, Competition and Consumer Legislation Amendment Bill 2010
  • 17 June 2010 – Senate Rural and Regional Affairs and Transport Legislation Committee, Customs Tariff Amendment (Aviation Fuel) Bill 2010; Excise Tariff Amendment (Aviation Fuel) Bill 2010
  • 21 June 2010 – Joint Standing Committee on Treaties, Treaties tabled on 12 May 2010
  • 29 June 2010 – Senate Economics Legislation Committee, Tax Laws Amendment (Public Benefit Test) Bill 2010
  • 29 June 2010 – Joint Standing Committee on Treaties, Treaties tabled on 15 and 16 June 2010
  • 29 June 2010 – Joint Standing Committee on Treaties, Treaties tabled on 21, 22 and 24 June 2010

Fraud prevention and control

In 2009-10, one case of fraud was referred to the Australian Federal Police for investigation. This investigation is continuing. The investigation into the fraud that was reported in 2008-09 has not yet been completed.

The Treasury’s Fraud Control Plan complies with the Commonwealth Fraud Control Guidelines issued under regulation 19 of the Financial Management and Accountability Regulations 1997.

The Treasury has appropriate fraud control, prevention, detection, investigation and reporting standards in place; and collects and reports annual fraud control data.

Ombudsman comments, court decisions and administrative tribunal decisions

Ombudsman comments

During 2009-10 the Ombudsman received seven approaches about the Treasury. Of these: three were not investigated by the Ombudsman; one was ongoing at 30 June 2010; one case was closed on the basis that the Treasury had not acted inappropriately; and two were closed with a comment that, while the Treasury referred the matter to another agency, it would have been good administration for the Treasury to have replied to the correspondence received.

In addition, the Ombudsman closed two approaches made in 2008-09. In these cases, the Ombudsman recorded an administrative deficiency against the Treasury on the basis of procedural deficiency for one case and, in the other case, on the basis of inadequate advice, explanation or reasons.

Courts and proceedings

Trade Practices Act – Access to Services – Fortescue Metals Group Ltd

On 13 June 2006, Fortescue Metals Group applied to the Australian Competition Tribunal for a review of the former Treasurer’s deemed decision under Part IIIA of the Trade Practices Act 1974 not to declare BHP Billiton as the operator of the Mt Newman rail line.

On 18 December 2006, in proceedings initially instigated separately by BHP Billiton and Fortescue Metals Group, the Federal Court ruled that BHP Billiton’s Mt Newman and Goldsworthy rail lines may be subject to declaration applications under Part IIIA, as they do not represent ‘use of a production process’. On 12 January 2007, BHP Billiton lodged an appeal against the Federal Court decision to the full court of the Federal Court. The appeal was heard in late April 2007 and the full Federal Court dismissed the appeal on 5 October 2007. On 7 March 2008, the High Court heard and allowed an application by BHP Billiton for special leave to appeal the full Federal Court’s decision. On 24 September 2008, the High Court upheld the full Federal Court decision that the Mt Newman and Goldsworthy railway lines were not the ‘use of a production process’ and therefore not exempt from declaration under Part IIIA.

In November 2007 and January 2008, a subsidiary of Fortescue Metals Group, the Pilbara Infrastructure Pty Ltd, lodged three further applications for railway services in the Pilbara region of Western Australia. These railway services included the Hamersley and Robe River lines operated by Rio Tinto, and the Goldsworthy line operated by BHP Billiton. In October 2008, the Treasurer declared each of the Hamersley, Goldsworthy and Robe River railway services for 20 years. BHP Billiton and Rio Tinto subsequently applied to the Australian Competition Tribunal for a review of those declaration decisions. A review of the Hamersley, Goldsworthy and Robe River railway services declaration decisions was conducted in conjunction with the review of the Mt Newman decision. The Australian Competition Tribunal handed down its decision on thes
e matters on 30 June 2010. The Tribunal decided to:

  • affirm the former Treasurer’s deemed decision not to declare the Mt Newman railway;
  • vary the Treasurer’s decision to declare the Robe railway, reducing the period of declaration from 20 to 10 years;
  • set aside the Treasurer’s decision to declare the Hamersley railway; and
  • affirm (unvaried) the Treasurer’s decision to declare the Goldsworthy railway.
Trade Practices Act – Ministerial Consent under section 5 of the Trade Practices Act – Cathay Pacific Airways Limited (Cathay) and the Minister for Competition Policy and Consumer Affairs

On 2 December 2008, the Minister for Competition Policy and Consumer Affairs provided consent under section 5 of the Trade Practices Act to Auskay International Manufacturing and Trade Pty Ltd (Auskay). This enabled Auskay to bring a civil action under the anticompetitive conduct provisions of the Trade Practices Act against a number of airlines (including Cathay), in respect of conduct that occurred overseas.

On 24 December 2008, Cathay applied to the Federal Court for a judicial review of the decision pursuant to section 5 of the Administrative Decisions (Judicial Review) Act 1977.

On 28 May 2010, the proceedings against the Minister were dismissed by the Federal Court, with costs.

Income Tax Assessment Act 1997 – Deductions Against Income From Youth Allowance – Commissioner of Taxation v Anstis

Symone Anstis claimed a deduction for $920 of work-related self-education expenses which she incurred while receiving Youth Allowance as a university student. The ATO denied the deduction in keeping with the view expressed in its Income Tax Ruling TR 98/9, that education expenses are not deductible against various Commonwealth educational assistance schemes.

Ms Anstis appealed against the decision in the Administrative Appeals Tribunal, which upheld the decision of the ATO. Ms Anstis appealed again to the Federal Court. On 1 April 2009, Ryan J held in Symone Anstis v Federal Commissioner of Taxation that Ms Anstis was entitled to a tax deduction for her education expenses.

The Commissioner appealed, and on 4 November 2009, the full Federal Court upheld the decision of Ryan J.

On 23 April 2010, the High Court granted the Commissioner special leave to appeal against the decision of the Full Federal Court. A hearing took place on 29 July 2010.

The High Court is expected to decide the appeal later in 2010. Until this matter is resolved, the ATO will continue to apply the view set out in TR 98/9.

Administrative appeals tribunal

Freedom of information – Michael Evans on behalf of the Sydney Morning Herald and the Department of the Treasury

An application was made to the Administrative Appeals Tribunal for a review of a decision by the Treasury not to release information in response to a request under the Freedom of Information Act for documents relating to correspondence between Macquarie Group and the Treasury concerning the state of global financial markets. The main issues in the case are whether the documents to which access has been refused are exempt under a number of exemptions of the

Freedom of Information Act 1982. The case has not yet been heard.