Who audits the auditors?

Last week in estimates I questioned the actions of the Auditor-General and ANAO as to whether the Audit of the Leppington Triangle purchase was politically motivated, breaching the Public Service Act 1999 which requires public servants to act apolitically and not to disseminate or exploit government information without authorisation.

Of particular interest was whether or not the ANAO had interactions with Senators Wong or Watt leading up to the October 2020 Estimates hearing about the contents of the Audit report.

Furthermore, the Auditor-General has refused to hand over minutes of meetings between his staff and the staff in the Infrastructure Department about the purchase of Leppington Triangle.

Why does that matter? It’s because audits are all about transparency and the Auditor-General himself needs to practice what he preaches.

I have previously requested copies of correspondence between the two agencies during Senate Estimates and received the following response:

‘The audit office does not release specific items of audit evidence that were not included in the audit report as the public interest benefit in providing the audit evidence is outweighed by the potential for public interest harm.’

It’s worth noting that the audit itself was extremely misleading and shoddy for the following reasons:

•  The ANAO incorrectly placed the land into agricultural zoning when it was in an area zoned for Sydney’s second airport.
• The ANAO incorrectly applied the relevant accounting standard AASB13 paragraph 29 and 30 by not applying best use.
• The ANAO failed to refer to previous case law that has said that land being acquired by governments must be valued at best use regardless of intent.
• The ANAO appears not to have consulted staff from the federal Infrastructure Department.
• The ANAO appears not to have consulted the Australian Government Solicitor.
• The ANAO ignored the findings of a “Joint Study on Aviation Capacity in the Sydney Region”, which noted the costs of not building the Airport would cost $34 billion in foregone GDP and around 70,000 jobs.

Chamber Committee on 28/10/2022
Item: Finance and Public Administration Legislation Committee – 28/10/2022 – Estimates – PRIME MINISTER AND CABINET PORTFOLIO – Department of the Prime Minister and Cabinet

PART 1

CHAIR: Senator Rennick.

Senator RENNICK: My question is for Minister Wong. I’d like to raise the issue of the Leppington Triangle audit. As you know, the Auditor-General ended up with egg on his face by claiming that the land was worth $3 million when it was worth $30 million. I’ve asked the Auditor-General previously in estimates for copies of the work papers with regard to that audit. You will remember that well, because you spent two hours interrogating the infrastructure department in RRAT one morning—

Senator Wong: I think you probably think my memory is better than it actually is, Senator Rennick, but that’s fine!

Senator RENNICK: That’s fine. My concern is that the Auditor-General won’t release the work papers from that audit. Given that he was so far out and failed to apply the proper accounting standards, and in the name of transparency, I’d like to know what the Prime Minister will do about that. That’s No. 1. And No. 2 is that I’d like to know whether or not the Prime Minister has ever had a relationship with the Auditor-General, given that they were both Labor staffers going back to the late eighties?

Senator Wong: The first is that the Auditor-General is appearing, I think, a bit later, because we have—

Senator RENNICK: I accept that, but I—

Senator Wong: Please. Obviously, you can put these questions directly to the Auditor-General. You’ve made a number of assertions about the Auditor-General’s history and I don’t know if they’re true. I—

Senator RENNICK: Well, he’s an ex-Labor staffer from way back—

Senator Wong: Well, I don’t know that.

Senator RENNICK: Yes, well, he is.

Senator Wong: Well, until you said that it was never something that I’ve been aware of.

Senator RENNICK: It’s my understanding that he was with Stewart West—

Senator Wong: It’s unfortunate that you’re making the imputation that you are. It’s an independent statutory office. He was appointed by your—

Senator RENNICK: Yes, I’ve said that—

Senator Wong: So if there’s some imputation about his professionalism then I ask you to consider carefully whether that’s an appropriate assertion—

Senator RENNICK: It is, because I’ll quote AASB 13, the standard for fair value—

Senator Wong: Well, it—

Senator RENNICK: and paragraphs 27 and 29 say that you value land at best use.

Senator Wong: Okay—

Senator RENNICK: He didn’t do that in the audit and that became a big political issue, which you spent two hours prosecuting in RRAT, okay? So I’m just holding you to the same standard that you tried to hold the Morrison government to.

Senator Wong: Well, my recollection is that I went to—this was a couple of years ago now?

Senator RENNICK: Yes.

Senator Wong: Yes. I’ve asked a lot of questions over the years—

Senator RENNICK: No, I accept that.

Senator Wong: And I’ve asked questions about a purchase which, from memory, I think the secretary himself agreed there were concerns about. You’re now talking about the Auditor-General’s report—

Senator RENNICK: Yes, I have issues around the professionalism.

Senator Wong: Yes, sure. Well, I’m not in a position to have an argument with you about an accounting standard, but I’m sure that’s something you could put to the Audit Office.

Senator RENNICK: I have.

Senator Wong: So what’s the question to me?

Senator RENNICK: My issue is that he won’t release the work papers around that audit, and I want to know why he got the zoning wrong and why he valued it wrong.

Senator Wong: He’s an independent statutory officer. Whoever holds that office makes the judgement about their work and what is included or not included in public reports. It’s not a political question.

Senator RENNICK: How can the Australian people have confidence in the impartiality of the Auditor-General when he’s clearly got something wrong by a factor of 90 per cent and he fails to disclose work papers? It might be that they are an independent statutory body, but who are they accountable to? My understanding is that these guys are ultimately reportable to the Prime Minister’s Office. In the name of transparency—

Senator Wong: Did you just assert that they were—

Senator RENNICK: They are appointed by—

Senator Wong: They are appointed by the government of the day, which was your government. That’s one. Secondly, they are accountable to the parliament. From memory, is there not a joint committee that has oversight or with whom the Auditor-General engages? I think you made an assertion that he’s appointed by the Prime Minister’s Office. You ought to withdraw that. That’s not—

Senator RENNICK: I will withdraw it.

Senator Wong: Thank you.

Senator RENNICK: It was our Prime Minister’s office, but going forward it’s something that needs to be raised. I’m concerned about it.

Senator Wong: The Joint Committee of Public Accounts and Audit.

Senator RENNICK: The problem is I have difficulty getting committees up because we don’t have the numbers. So this is the only means I have to try and hold the Auditor-General to account. I could try and move a motion to try and get an inquiry into this, but I doubt that you would vote for it.

Senator Wong: You as an elected senator have the right to come to these estimates hearings and ask questions. As a minister, I can respond. You have the right to come and ask the Auditor-General about the issues you have raised. I’ll just make the point it’s an independent statutory office. It reports to the parliament. Auditor-General reports have been, at times, difficult for governments of both political persuasions. I have had to deal with difficult Auditor-General reports and I’m sure Senator Birmingham has had to. But that’s the role in the polity that this office plays. If you do not agree with the work he has done, you are entitled to put that to him. I assume you have done that at previous estimates.

Senator RENNICK: Yes, and he rejects it and I disagree with—

Senator Wong: He obviously doesn’t agree—

Senator RENNICK: And he doesn’t disclose the work papers. I don’t think that’s right in the interests of public disclosure. So, if I were to move a motion, would the Labor Party support an inquiry into the role of the Auditor-General?

Senator Wong: I don’t think you would get your colleagues to support you. Senator Birmingham is going to tell you that. Would I agree with an inquiry into an officer of an independent statutory body who is already subject to oversight by the parliament because you disagree with him? Probably not.

Senator RENNICK: It’s because he won’t disclose the work papers. It became a political issue of the day.

Senator Wong: It was a political issue, but what you are asking is: should the executive direct a statutory officer as to what they should provide to the Senate? It’s a bit difficult.

Senator RENNICK: That’s not what I am saying.

Senator Wong: I thought—

Senator RENNICK: I am not trying to have a go at you.

Senator Wong: No, but I thought that was what you are saying. You are asking: can you make sure he gives us his working papers? I thought that was—

Senator RENNICK: I want the parliament to support that the Auditor-General releases those working papers. The coalition do not have the numbers by themselves to get up an inquiry into this. I can have my colleagues support me, but—

CHAIR: You can have an inquiry in the oversight committee.

Senator Wong: I am happy for you to come and ask questions when he appears.

Senator RENNICK: But he won’t disclose the work papers.

Senator Wong: It might be useful for him to explain why.

CHAIR: Let’s just be clear. We have given the coalition a whole hour here, which means we have not allocated the coalition much time for the ANAO this afternoon as a result. If you want to explore that further—

Senator RENNICK: I’ll come back. I won’t get anywhere—but anyway; thanks…

PART 2:

CHAIR: I now give the call to Senator Rennick.

Senator RENNICK: My question is for the Auditor-General. According to a crikey.com.au article entitled ‘Where are 150-plus Hawke-Keating staffers?’, Grant Hehir—you—was listed as working for Stewart West, a Labor MP, from 1986 to 1989. Is that correct or not?

Mr Hehir : It sounds correct. I think the dates are correct, yes.

Senator RENNICK: Thank you. Did you disclose that when you applied for this role?

Mr Hehir : I don’t believe it was secret. I can’t recall whether it was on my application form. That was 30 or 35 years ago. In between that time and when I applied for this role, I had held senior executive positions and worked for governments in multiple jurisdictions at all levels, including in the role of Auditor-General of New South Wales.

Senator RENNICK: But you’d still consider it relevant to partiality? Most people, I think, would look at someone’s past career going right back to the start. I know that, when we go through preselection, we get vetted right back to our youth. You don’t think that you should have disclosed that?

Mr Hehir : What I’m saying is that I can’t recall whether I disclosed it or not at the time. It’s not something that I’d ever sought to hide.

Senator RENNICK: That’s fine. Talking about seeking to hide things, I asked for the work papers in regard to the Leppington Triangle. The Audit Office has declined to disclose those working papers. As Minister Wong herself said earlier on, the parliament is the supreme authority in terms of accountability. Can you please explain why you don’t think it’s appropriate for you to disclose those working papers on your determination of the value of the land at Leppington Triangle?

Mr Hehir : Maybe we should start with that latter point. As you are aware, we never, in any valuation, determined the value of the Leppington Triangle. The valuations that were referred to in the report were carried out largely by the department, not by the Audit Office. So we didn’t do a valuation. We reported on other people’s valuations, which is, of course, the appropriate thing to do, because, as you would be aware, under auditing standards it’s not appropriate to audit your own work, so it’s not an activity we undertook. So I’ll start from there.

We’ve had a longstanding position, which we’ve raised in various committees over a long period of time, that we don’t believe as an office that the disclosure of our working papers and evidence is in the public interest. I think our broadest exposition of that view of public interest was in the context of the select committee inquiry into sports grants, where the committee asked us to disclose our audit evidence with respect to the activities leading to those decisions. At that time, I wrote to Senator Chisholm, the chair of the committee, setting out the public interest reasons why we think it’s not in the public interest for us to disclose or release all of our audit evidence. I’m happy to provide that to the committee again if you would like, and I believe we’ve given similar responses with respect to questions that you’ve put on notice.

Senator RENNICK: Thank you. I do believe it’s in the public interest. It became a political item, both in estimates and in question time. Staffers had the Federal Police raid their homes over alleged improprieties over things like meetings in coffee shops. You may disagree with that, but, as Minister Wong said earlier on, parliament is the supreme authority when it comes to disclosure, and I think that it’s only appropriate that, if a senator would like to review those working papers, they’re entitled to review those working papers and form their own opinion. Whether you like it or not, you’ve got to be accountable to someone. I know you’re an independent authority, but you’re still accountable to parliament to a degree. In the name of transparency, you should release that, because it was public interest. It was $30 million of taxpayers’ money. They are entitled to know the process by which you audited that, because it’s very important that the public have confidence in the audits that you do and the processes that you follow. You yourself are an auditor, so the question is: who audits the auditors? Of course, the answer to that is parliament. So I don’t see how you have the right to withhold information that the parliament has the right to scrutinise on behalf of the Australian people.

Mr Hehir : We are accountable to parliament. In the case of the audit you’re speaking about, the Joint Committee of Public Accounts and Audit has undertaken an inquiry into that audit report as part of Report 492 Governance in the stewardship of public resources, which was tabled in April this year. With respect to that particular audit, I’ll read you what the committee said:

The Committee finds that Infrastructure did not demonstrate effective conduct of its activities relating to the Leppington Triangle transaction, consistent with the PGPA Act and PS Act. The Committee concurs with the findings of Auditor-General’s Report 9 (2020-21) and the Sententia review that the department ‘did not exercise appropriate due diligence’ in its land acquisition and aspects of its operations ‘fell short of ethical standards’. It also agrees that the department ‘did not undertake all reasonable steps to determine what a suitable cost would be for the Government to acquire the property, to demonstrate that the price paid for the property represented an efficient, effective, economical and ethical use of public funds’—

Senator RENNICK: Well, that report’s wrong, because it contravenes AASB 13, paragraphs 27 to 29.

Senator Wong: You can put that to him. I would just make the point that, as I understand what has occurred here—and I wasn’t engaged in the JCPAA process—the views you’ve put have been considered and not accepted by the committee.

Senator RENNICK: Well, are they qualified accountants? Are these people qualified accountants?

Senator Wong: So you’re right, but not the Auditor-General or the committee?

Senator RENNICK: I’m referring to the accounting standard. Best use is best use. It’s there in black and white. You don’t need to be a rocket scientist. But yet again—

Senator Wong: If you want to put the accounting standard to the Auditor-General, you’re entitled to it, and he’ll answer as he sees fit.

Senator RENNICK: Exactly. Those procedures weren’t employed. It’s also evaluation standards, as well, and it also comes to sending federal police around to staff who had done nothing wrong. Can I say yet again, Mr Hehir, that you’re now referring to your opinion in that work. Did this committee look at your work papers or not? Did they have unfettered access to all of your work papers? Yes or no?

Mr Hehir: We made a submission to the committee which addressed the issues that you’ve raised, and the submission is available on the committee’s website.

Senator RENNICK: Sorry to interrupt you. Did they have access to all of your correspondence, all the minutes of your meetings and all the conversations that took place between your staff, department staff and other political operatives? Was that made available to the committee—all of it?

Mr Hehir : The committee didn’t request those things. If they had requested our audit evidence, our position would have been the same one we’ve sent it in the past. At the end of the day, you’re right: we are accountable to the parliament.

Senator RENNICK: That’s right, and, as you’ve just said, you haven’t provided all of the work papers to the parliament. I’m now asking for all work papers so that I can review all the work papers to look at what processes were followed. I don’t see why I don’t have a right as an elected representative to get access to that data.

Mr Hehir : As I said at the beginning of this, it’s my view that providing the totality of audit evidence isn’t in the public interest. I’ve expressed the view to parliament on a number of occasions and to committees who have been undertaking inquiries, and that’s generally been accepted by those committees.

Senator RENNICK: I accept that it’s been generally accepted, but in this case it hasn’t been.

Mr Hehir : I’m expressing that view again now.

Senator RENNICK: Yes. That’s your view. No-one is auditing your view. In someone else’s view—me, an elected representative—I would like to see further data so that we can assess that information, based on the fact that whoever came up with this conclusion clearly didn’t follow AASB—

CHAIR: Senator Rennick, we’re about to close.

Senator RENNICK: Okay; just one more question. There was another report recently released, after the election, where you criticised the Morrison government for not rolling out the vaccines fast enough. Did you have a biochemist or anyone that was specialised in vaccine management to form that opinion?

Mr Hehir: What that audit report says is that the department of health, in the rollout of the vaccines, did not meet the performance targets that the government asked it to meet.

CHAIR: Thank you, Auditor-General.