COMMONWEALTH GRANTS COMMISSION Annual Report 2002-03 CANBERRA Oc Australian Government 2003 ISSN 1322-7521 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without written permission from the Australian Government, available from AusInfo. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Government Information Access, GPO Box 84, Canberra ACT 2601. This document does not necessarily conform to Australian Government style. A copy of this annual report can be obtained by visiting the Commission’s web site at http://www.cgc.gov.au/cgc_annual_report.htm Contact Officer Enquires about this report should be directed to: Mr Owen Rodda Director Administrative Support Services Commonwealth Grants Commission Cypress Court 5 Torrens Street BRADDON ACT 2612 Telephone: (02) 6229 8825 Facsimile: (02) 6229 8821 Email: [email protected] Commonwealth Grants Commission Chairman Alan G Morris Cypress Court 5 Torrens Street Braddon ACT 2612 Tel: (02) 6229 8811 Fax: (02) 6229 8809 Internet: www.cgc.gov.au Email: [email protected] TABLE OF CONTENTS Page OVERVIEW 1 Major outcomes and Commission performance — 2002-03 1 The financial results for 2002-03 1 The outlook for 2003-04 2 CHAPTER 1 THE COMMISSION AND ITS WORK 3 The Commission and its divisions 3 Organisational arrangements 4 Outcome groups 4 CHAPTER 2 PERFORMANCE OF THE COMMISSION IN 2002-03 6 Outcome — Fiscal Equalisation 6 2003 Update of State revenue sharing relativities 7 2004 Review of methods used to calculate relativities 10 Report on Jervis Bay Territory 11 Quality assurance 11 Resources 12 Information dissemination 12 Financial results 13 The Commission’s performance and social justice 13 CHAPTER 3 MANAGEMENT AND ACCOUNTABILITY 14 Corporate governance 14 The Commission and its employees 14 Relationship with the Department of Finance and Administration 14 Corporate plan 14 Risk management and fraud control 15 Reporting structures and responsibilities 15 Organisational chart 16 Committees 17 Internal and external scrutiny and compliance 18 Managing and developing human resources 19 Certified agreement 21 Australian workplace agreements 21 Training and development strategies 22 Other resource management matters 24 Purchasing 24 Asset management 24 Advertising and market research 24 Use of consultants 24 i Ecologically sustainable development and environmental performance 25 Competitive tendering and contracting 25 Discretionary grants 26 Contact officer 26 Postal address 26 Internet address 26 ATTACHMENT A: COMMONWEALTH GRANTS COMMISSION ACT 1973 27 ATTACHMENT B: UPDATE OF STATE REVENUE SHARING RELATIVITIES, 2003 UPDATE, TERMS OF REFERENCE 43 ATTACHMENT C: REVIEW OF GENERAL REVENUE GRANT RELATIVITIES, 2004 TERMS OF REFERENCE 46 ATTACHMENT D: INQUIRY INTO THE FINANCING OF WORKS AND SERVICES IN THE JERVIS BAY TERRITORY, TERMS OF REFERENCE 48 ATTACHMENT E: INFORMATION DISSEMINATION 51 Reports 51 Working papers 52 Discussion Papers 52 Papers presented to conferences and seminars 54 Visitors to the Commission 54 Compliance with Senate Orders 54 ATTACHMENT F: MISSION STATEMENT AND STRATEGIC PLAN 55 ATTACHMENT G: FREEDOM OF INFORMATION ACT 1982 SECTION 8 STATEMENT 57 ATTACHMENT H: OCCUPATIONAL HEALTH AND SAFETY 60 ATTACHMENT I: CONSULTANTS ENGAGED DURING 2002-03 62 ATTACHMENT J: COMMONWEALTH DISABILITY STRATEGY 64 ATTACHMENT K: FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003 65 GLOSSARY 98 INDEX 100 ii OVERVIEW Major outcomes and Commission performance — 2002-03 1. In terms of the outcome reporting framework applied in the 2002-03 Budget, the Commission had only one outcome during 2002-03 — fiscal equalisation. Its achievements during the year were as follows. (i) The Report on State Revenue Sharing Relativities, 2003 Update was completed and presented to the Minister. Its recommendations were considered at the Ministerial Council for Commonwealth-State Financial Relations in March 2003 and used in the distribution of GST revenue and health care grants to the States and Territories in 2003-04. (ii) The Commission continued work associated with the review of the methods of calculating the relativities used to distribute GST and health care funding to the States — the report on this task is due in February 2004. (iii) The Report on Jervis Bay Territory was completed and presented to the Minister on 31 July 2002. That inquiry examined the costs of providing Australian standard levels of State and local government- type services to the residents of the Jervis Bay Territory. The financial results for 2002-03 2. The Commission’s financial results for 2002-03 are summarised below. Outcome 2002-03 2002-03 Variance Allocation Expenses $m $m $m Fiscal equalisation 5.385 5.669 (0.284) Total 5.385 5.669 (0.284) 1 Overview 3. Expenses during 2002-03 on the fiscal equalisation outcome were higher than the allocation due to essential research and consultation tasks arising from the latter stages of the major review. These led to higher staffing requirements, accumulating increases such as the Comcover premium and higher overall administration costs. 4. The Commission’s expenditure pattern has a cyclical nature over a five year period. However, current funding is on a straight line basis. In years prior to 2002-03 the Commission has produced operating surpluses. However, 2002-03 and 2003-04 are the high point in the review. This resulted in an operating deficit for 2002-03 and a further operating deficit is also likely for 2003-04. There are sufficient cash reserves to meet commitments as they fall due. 5. To address the funding issues and prevent losses in subsequent years, an input base review will be completed in 2003-04. Discussions with the Department of Finance and Administration are continuing in this regard. The outlook for 2003-04 6. In February 2004, the Commission will report on its major review of the methods applied in the distribution of GST revenue and health care grants to the States - the 2004 Review. 7. The Commission’s budget is being placed under extreme pressure by the essential tasks associated with completing that review, including the need to meet the demands of the States for high quality research across a wide range of issues and greater disclosure and major cost increases in superannuation and insurance. 2 CHAPTER 1 THE COMMISSION AND ITS WORK 1. The Commission is a statutory authority operating under the Commonwealth Grants Commission Act 19731. It is an advisory body that responds to terms of reference from the Minister for Finance and Administration. Terms of reference for inquiries relating to the finances of the States2 are decided after discussions between the Australian Government and the States, conducted largely through their Treasuries. Terms of reference for other inquiries are developed by relevant Australian Government agencies. 2. The Commission’s main function is to recommend the share each State should receive of the pool of goods and services tax revenue and health care grants made available by the Australian Government. These recommendations are considered at meetings of the Ministerial Council for Commonwealth-State Financial Relations. 3. From time to time, the Commission has also reported on the finances of Australia’s Territories (including the non-self governing Territories), on local government matters and the financing of services for Indigenous people. The Commission and its divisions 4. The members of the Commission during 2002-03 were: Chairman (part-time): Mr Alan Morris, until 30 June 2004. Members (part-time): Mr Len Early, PSM, until 24 August 2004. Mrs Hylda Rolfe, until 24 November 2004. Prof Ken Wiltshire, AO, until 31 March 2004. Prof Ross Williams, until 31 March 2006. 5. Under the Commission’s legislation, inquiries are to be undertaken by a division of the Commission. The Chairman has the power to determine which members 1 Provided at Attachment A. 2 In this report, the word State(s) includes the Australian Capital Territory and the Northern Territory, unless the content indicates otherwise. 3 Chapter 1 form each division. A division must consist of the Chairman and not less than two other members. There were two divisions during 2002-03: State Finances division The Chairman plus Mr Early, Mrs Rolfe, Prof Wiltshire and Prof Williams. Jervis Bay Inquiry division The Chairman plus Mr Early and Mrs Rolfe. Organisational arrangements 6. Commission employees are engaged under the provisions of the Public Service Act 1999, with the Secretary having overall responsibility as the chief executive. 7. Mr Bob Searle, Secretary of the Commission, retired in March 2003. Bob had been with the Commission in various capacities over many years and Secretary since 1993. The Commission acknowledges the very significant contributions Mr Searle made to the work of the Commission over this time and particularly during his time as Secretary. 8. Mr Malcolm Nicholas was subsequently appointed acting Secretary. The position will be filled on a substantive basis following the completion of the 2004 Review. 9. During 2002-03, there were two branches, each headed by an Assistant Secretary. They were: (i) the Expenditure Analysis Branch; and (ii) the Revenue, Budgets and Information Technology Branch. A separate administrative support section reported direct to the Secretary. For some projects, employees worked in small teams with representatives from several sections and, where appropriate, across branches. 10. The average staffing