Legislature vs executive: auditor-general's independence trumped by budget secrecy

By Stephen Easton

May 30, 2018

This year, budget secrecy trumped the independence of Commonwealth auditor-general Grant Hehir, and the deputy chair of the parliamentary committee that backs him up is not pleased.

Hehir wanted to inform the bipartisan Joint Committee of Public Accounts and Audit that his proposed budget had been significantly reduced in an unusual last-minute change, but was told only Treasurer Scott Morrison could give him permission. Morrison told him to keep quiet, citing budget secrecy.

The committee’s deputy chair Julian Hill feels this bypassed the role of the JCPAA, as a mechanism by which the legislative arm of government keeps watch on the executive. In this case, it has a role in guarding the auditor-general’s independence as an officer of the parliament by reviewing the proposed budget for the Australian National Audit Office and making a formal statement regarding its adequacy.

“I think what’s transpired, by way of the Treasury gagging the auditor-general, is completely inappropriate,” the Labor MP told The Mandarin.

“To date, there’s been no explanation given, or apology, or indication even that the Treasurer, or the executive of the government, even understand the distinction – which may seem arcane to some, but it is important.”

Grant Hehir

The result: the committee told parliament it endorsed the future ANAO allocations, then found out on budget day it was working from old numbers that did not match the appropriation bills. The difference is a reduction of $690,000 in 2018-19 and $920,000 over the forward estimates.

This is not the first indication that the current government employs a much stricter interpretation of budget secrecy rules than has been the practice for governments past. This year, News Corp reported Senator Penny Wong had been pulled up by security for breaching the rules, by taking some papers to her office 30 minutes early to help prepare the opposition’s reply.

Shadow treasurer Chris Bowen said she did this “as she was entitled to do, as every member of the opposition has done as long as anybody can remember” and claimed this year was “the first time” Treasury staff had ever stopped the opposition from taking papers out of the lock-up.

For the record

Hill says both he and the JCPAA chair, Coalition Senator Dean Smith, believe this is an important matter and he expects the committee will discuss it further before it next meets on June 20.

In the deputy chair’s view, “Senator Smith is a proper parliamentarian in these matters and will approach the task, as he does, with an open mind” — and Hill is also giving Scott Morrison the benefit of the doubt, at least to some extent.

“In all these situations in life, there’s two possible explanations, to be black-and-white: conspiracy theory or stuff-up,” he said.

“The conspiracy theory is that the gagging, combined with an unexplained budget cut, is another whack at an independent scrutiny agency. …

“The more benign version is a stuff-up, where some bonehead dalek in Finance or Treasury or the Treasurer’s office simply doesn’t understand the distinction [between officers of the parliament and the executive].”

Hill says he leans more toward the latter explanation. It seems extremely unlikely the Treasurer would accept either narrative as presented, but the first question is whether there was an intention to keep the committee in the dark, or just a particularly strict interpretation of the rules.

Julian Hill

This year’s funding aside, the issue is a minor clash between the legislature and the executive. The question — whether budget secrecy rules are supposed to break the line of communication between the auditor-general and the JCPAA — does not seem to have come up before.

Last Monday, Hill rose to correct his previous statement to the House of Representative, saying the committee endorsed Hehir’s proposed budget, and inform his fellows MPs that he might have unintentionally misled them because the committee was kept in the dark:

“This is an extraordinary situation,” he said. “I’m not aware of any precedent and it requires explanation.”

Last week in Senate estimates, the auditor-general updated the Finance and Public Administration committee in his opening statement.

“As is usually the case, the JCPAA prior to the budget asked me to provide it with a budget submission so it could carry out its responsibilities,” Hehir began. “I provided this to the JCPAA earlier this year.”

It is certainly not usually the case, however, that after the budget comes down, the ANAO is left with a significantly different funding plan to what was indicated in the draft estimates provided to the JCPAA.

Hehir said the reduction was significant and, though he could still probably get all the work done, he might have to ask permission from the Minister for Finance to dip into “accumulated prior-year appropriations” if he was to cover any shortfall.

“I think there are commonly small changes that happen between when the submissions are put in and the final — just variations relating to parameter variations, et cetera,” the auditor told Senator Jenny McAllister, who asked if he had ever heard of this happening in the past.

“I’m not aware of an occasion where there has been a significant change to the budget – which I consider this one to be – in those times, but I don’t know whether there has been. There hasn’t been in my time in the office.”

Senator Smith, without mentioning he chairs the JCPAA, led Hehir and ANAO executives to agree in estimates that the reduction was a saving, rather than a cut, because it was part of a measure described in the budget thus:

“The Government has also established whole-of-government coordinated procurement arrangements for leasing and property services that will deliver a more efficient and commercial approach by aggregating the Commonwealth’s demand, and ensuring consistent service levels.”

Overall, this was expected to return a total of $105.3 million to the budget from 2017-2022 across various agencies.

Hill doesn’t accept that as a clear enough explanation and suspects the revised budget will have an appreciable effect on the ANAO’s capability. He still prefers to call it a cut, roughly equal to the cost of two performance audits, with the possibility of extra funding only at the Finance Minister’s discretion.

“This is a significant sum for a small agency already required to absorb the efficiency dividend,” the opposition MP said last Monday, as he informed parliament of his irritation at how things have transpired.

“In terms of the practical impact of this, I am advised that, due to statutory obligations to prioritise financial audits and certain mandatory functions, in effect, this means a cut of funding available for performance audits.”

The executive vs the legislature

In estimates, Smith diplomatically observed that from the perspective of his party-room colleagues in the government, budget secrecy is easier to enforce if it applies to all funded agencies and offices without question, and asked if Hehir had ever heard of any exemptions to the rule.

“I’m not aware of that, and that’s probably an issue more for the Treasury and the Treasurer than for us,” the auditor-general replied.

“Our situation isn’t quite the same as that of any other agency in that we don’t have a minister oversighting us; we have a parliamentary committee oversighting us. It is slightly different in that respect. I would think it’s a matter for the committee, with the government, to consider whether or not this arrangement is appropriate.”

Dean Smith

Without making any reference to his role as chair of that very joint committee, Smith added one more observation: “It gives rise to a very interesting predicament for you, Mr Hehir. There’s no doubt about that.”

The Labor MPs both made similar observations about Hehir’s role in the matter.

“Members may feel aggrieved to hear that the auditor-general as an officer of the parliament felt obliged to follow the Treasurer’s direction rather than meet what I see as the spirit and intent of the transparency framework in relation to the ANAO’s resourcing,” Hill said in his speech to parliament.

“I am in no way critical of the Auditor-General’s judgement, as he was placed in a terribly difficult — impossible — position, and it is important to record that.”

Hill went on to reiterate that he felt Hehir’s decision to keep mum at the Treasurer’s request was “reasonable” and added that the auditor-general had not lobbied for more funding or asked him to make the statement.

The deputy chair hopes the committee will now try to “retrace what’s happened and to figure out whether we need to stop it happening again” because in his view, the issue is bigger than this year’s budget. It is a legislative and even a constitutional quandary:

“As an officer of this parliament, section 8(4) of the Auditor-General Act provides that the auditor-general ‘has complete discretion in the performance or exercise of his or her functions or powers’. Yet he was prevented by the Treasurer from exercising his office as he requested for the stated reason of the budget operating rules.

“The advice I have received is that it is unclear whether he is legally bound by those secret rules. It could be argued that, as a non-corporate Commonwealth entity, he is so bound by the PGPA Act. Suggestions for strengthening the process of resourcing the ANAO were considered by the JCPAA in 2010. The situation appears then to have not been thought possible.”

The Mandarin has contacted the Department of Treasury and the Treasurer’s office and offered to publish any response to Hill’s criticisms.

About the author
Inline Feedbacks
View all comments

The essential resource for effective
public sector professionals