Part 6: Conclusions and actions to be taken

Advertising expenditure incurred by the Parliamentary Service in the three months before the 2005 General Election.

6.1
This Part of the report:

presents my conclusions;
states certain actions that I require, under the Controller function, to be undertaken because of the breaches of appropriation that I have identified;
recommends certain measures be taken by the Service to ensure that the risk of further breaches of appropriation is addressed; and
considers a long-term solution.

Conclusions

6.2
My inquiry has established that significant breaches of the Party and Member Support appropriations administered by the Service occurred in the period from 16 June to 16 September 2005. The total value of the breaches I identified for the 2004-05 financial year was $443,462 (including GST) and the total value of the breaches I identified for the 2005-06 financial year was $730,136 (including GST). Overall, $1,173,598 of unlawful expenditure was incurred. The expenditure that I found was outside the scope of the appropriations related to a range of advertising, and was incurred on behalf of all but one of the parliamentary parties.

6.3
It is clear that an incorrect interpretation by the Service of the scope of these appropriations it administered coupled with processes for administering advertising expenditure that were designed on the basis of that incorrect understanding were significant factors in allowing such breaches to occur. These factors helped to create an environment in which the Service could not exercise the judgement required to ensure that expenditure was appropriately incurred. Indeed, the Service has acknowledged that some expenditure was incurred that would not have met even its own interpretation of the appropriations.

6.4
However, the failures on the part of the Service are not the only cause of the breaches in appropriation. The accountability framework for the administration of the Vote – which should involve separate but complementary roles for both the Service and the responsible Minister – has been confused, and lacks transparency. This is unacceptable.

6.5
In addition, I have found the nature and extent of electioneering advertising expenditure put through the Service by MPs and parliamentary parties disturbing. In this regard, party-generated advertising produced by Leaders’ offices was of most concern.

6.6
I am aware that inadequate guidance is available to MPs and parliamentary parties about what constitutes appropriate advertising, particularly in the pre-election period. But the guidance clearly prohibits electioneering. I find it hard to accept that, despite my 2005 Report and the message to be careful about advertising expenditure in the pre-election period, behaviour did not change.

6.7
It is in this context that I have issued a direction to the Minister responsible for Vote: Parliamentary Service.

Issue of direction to the Minister responsible for Vote: Parliamentary Service

6.8
I have directed the Speaker, as Minister responsible for Vote: Parliamentary Service, to report the breaches of appropriation identified in this report to the House. I issued the direction under section 65Z(1) of the Public Finance Act on 6 October 2006. The direction was effected by letter.

6.9
The direction applied to expenditure incurred in the 2005-06 financial year only, because under the Public Finance Act (as amended in 2004) the power for the Controller and Auditor-General to direct a responsible Minister to report appropriation breaches to the House took effect only from 1 July 2005.

6.10
The direction:

stated, consistent with section 65Z(1), that I had identified expenditure that was unlawful, in that it had been incurred for purposes outside the scope of the Party and Member Support appropriations; and
drew the responsible Minister’s attention to the procedural requirements under section 65Z(2) to (4) of the Public Finance Act, which state the required contents of the responsible Minister’s report to the House and the number of working days the Minister has to make that report.

6.11
I provided the Speaker with a copy of this report to give details of the expenditure.

6.12
Under section 65Z(2), the Minister’s report must set out the following details:

the nature and extent of any alleged breach of the appropriation or other authority that the Controller and Auditor-General has reason to believe has occurred;
the events that gave rise to the alleged breach; and
the remedial action taken or proposed to be taken to correct the breach and prevent its recurrence.

6.13
Under section 65Z(3), if the Minister is of the opinion that there has not been a breach, instead of outlining remedial action, the report must state:

that the Minister is of that opinion; and
the Minister's reasons for that opinion.

6.14
Under section 65Z(4), where the Controller and Auditor-General’s direction is made after the end of the financial year in which the expenditure was incurred, the Minister responsible for Vote: Parliamentary Service must comply with the direction either:

within 20 working days after receiving it; or
by ensuring that the required information is included in the report of expenses or capital expenditure incurred without appropriation that accompanies an Appropriation Bill seeking its validation.

6.15
Under section 65ZA of the Public Finance Act, if the Controller and Auditor-General has reason to believe that any money to be paid out of a Crown or departmental bank account may be applied for a purpose that is not lawful or consistent with an appropriation, the Controller and Auditor-General may direct the department concerned to stop payments out of that Crown or departmental bank account.

6.16
If measures are immediately introduced to address deficiencies in the Service’s practice (as discussed below), I do not think it will be necessary to issue such a direction to the Service.

6.17
It is not my role to comment on what further action, if any, should be taken about the expenditure that was outside the scope of the appropriations.

Recommendations to the Parliamentary Service

6.18
In my view, greater compliance with the Party and Member Support appropriations can only be achieved through improvements to accountability structures, and the systems, policies, procedures, and practices applying to advertising expenditure.

6.19
It is essential that the responsibilities of the Service in relation to the administration of Party and Member Support appropriations are fully supported, and clearly communicated to the parliamentary parties and MPs. The Service must be enabled to effectively fulfil its responsibilities as a department responsible for the prudent management of public resources. I recommend that the Service and the Minister responsible for Vote: Parliamentary Service address this matter.

6.20
I also recommend that the Service, in consultation with the Minister responsible for Vote: Parliamentary Service, take urgent measures to ensure that advertising expenditure incurred under the Party and Member Support appropriations is for a purpose within the scope of those appropriations. The measures should include:

Revising the guidance given to MPs on advertising, to provide clear instruction about what advertising costs can be incurred under the Party and Member Support appropriations. Such guidance should address all advertising media, and cover such matters as:
- content or branding that would be inconsistent with the purpose of the appropriations; and
- timing considerations – particularly in relation to the pre-election period.
Ensuring proposed advertising is checked (either by Service staff or some independent person) before expenditure is incurred to ensure that the proposed advertising is for a purpose within the scope of the Party and Member Support appropriations.
Improving systems and controls in relation to resources covered by the Members’ Communications appropriation, so that costs are clearly attributed to the parliamentary parties that use those resources.

6.21
Such improvements are well within the capability of the Service and should be implemented as a matter of urgency.

6.22
One parliamentary party has suggested that improvements could include promulgating examples to show what advertising is legitimate and what is not. It also suggested that information on spending transgressions should be passed on to other MPs and parliamentary parties, so that others can avoid replicating the same mistakes. I agree with these suggestions.

6.23
In my 2005 Report, I highlighted in Appendix 5 the practices used in Australia that, if applied here, could improve the administration of advertising expenditure. I recommend that the Service consider these practices as it seeks to improve its management in this area of expenditure.

6.24
As discussed in paragraph 4.48, I also expect the Service to establish a process for reviewing other expenditure on support services provided to MPs and parliamentary parties. Such a process may include seeking appropriate legal advice on the scope of the appropriations, and advice from my Office, to enable the Service to establish the nature of activities than can be funded within the scope of the appropriations it administers.

Long-term solution

6.25
The current framework for administering parliamentary advertising needs to be revised and strengthened, to provide a long-term solution that balances the need for a dialogue between elected representatives and the public with the need for prudent management of public money. This report has shown the significant issues that have arisen through the failure of the current framework.

6.26
In Part 5 of my 2005 Report, I outlined a possible new framework for parliamentary and government advertising and publicity. My 2005 Report proposed that:

a new framework be based on a single overarching set of principles;
complementary rules and standards apply to the Legislative and Executive branches of government;
certain office holders set the rules, while specific agencies implement them; and
the appropriations under which such activities are funded be clarified.

6.27
I strongly recommend that such an approach be considered, to help ensure that the events reflected in this report are avoided in the future.

6.28
I also note that a new review of Parliamentary Appropriations, as required under section 20 of the Parliamentary Service Act, has begun. The review, which must be undertaken at least once in the term of each Parliament, considers:

administrative and support services provided to the House and to MPs; and
funding entitlements for parliamentary purposes.

6.29
I invite the review team to consider the issues raised in this report, and how they can be addressed for the future.

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