LEGISLATIVE ASSEMBLY OF THE NORTHERN TERRITORY PUBLIC ACCOUNTS COMMITTEE REPORT OF THE INQUIRY INTO THE ACCURACY OF THE BUDGET DATA PUBLISHED IN THE 2001-02 BUDGET PAPERS WITH RESPECT TO BOTH THE ESTIMATED OUTCOME FOR 2000-01 AND THE BUDGET FOR 2001-02 REPORT NUMBER 38 MAY 2002 LEGISLATIVE ASSEMBLY OF THE NORTHERN TERRITORY PUBLIC ACCOUNTS COMMITTEE REPORT OF THE INQUIRY INTO THE ACCURACY OF THE BUDGET DATA PUBLISHED IN THE 2001-02 BUDGET PAPERS WITH RESPECT TO BOTH THE ESTIMATED OUTCOME FOR 2000-01 AND THE BUDGET FOR 2001-02 REPORT NUMBER 38 MAY 2002 Legislative Assembly of the Northern Territory PUBLIC ACCOUNTS COMMITTEE GPO Box 3721 Darwin NT 0801 Level 3, Parliament House Telephone: (08) 8946 1438 Mitchell Street Facsimile: (08) 8981 6158 Darwin NT 0800 Email: [email protected] COMMITTEE SECRETARIAT Mr Terry Hanley Secretary Mrs Jane Large Specialist Financial Advisor Mrs Roseline Vogeli Research Assistant ii Committee Members The Members of the Public Accounts Committee at the time of tabling the report were: Dr Chris Burns, MLA Appointed 16 October 2001 Australian Labor Party Elected Chairman 23 October 2001 Member for Johnston. First elected 18 August 2001 Deputy Chairman of Committees Other Committees: Privileges; Standing Orders; Substance Abuse Mr S Dunham, MLA Appointed 18 October 2001 Country Liberal Party Member for Drysdale. First elected 30 August 1997 Shadow Minister for Health, Family and Children's Services; Essential Services; Senior Territorian Other Committee: House Mr Len Kiely, MLA Appointed 16 October 2001 Australian Labor Party Member for Sanderson. First elected 18 August 2001 Deputy Chairman of Committees Other Committees: Subordinate Legislation and Publications; Legal and Constitutional Affairs Dr Richard Lim, MLA Appointed 18 October 2001 Country Liberal Party Member for Greatorex. First elected 4 June 1994 Deputy Chairman of Committees Shadow Minister for Central Australia, Regional Development, Housing and Local Government, Corporate and Information Services, Ethnic Affairs Other Committees: Standing Orders; Substance Abuse Mr Elliot McAdam, MLA Appointed 16 October 2001 Australian Labor Party Member for Barkly. First elected 18 August 2001 Government Whip Other Committees: Substance Abuse Mr Gerry Wood, MLA Appointed 16 October 2001 Independent Member for Nelson. First elected 18 August 2001 Chairman of Committees Other Committee: Substance Abuse iii iv TABLE OF CONTENTS Page No. Committee Members iii Chairman's Foreword ix Northern Territory Public Accounts Committee xi Establishment of the Committee xi Duties of the Committee xi Inquiry's Terms of Reference xiv Memorandum, dated 27 September 2001, re Territory Health Services xvii Budget 2001-02, from Mr P. Bartholomew, Chief Executive Officer, Territory Health Services to Minister for Health, Family and Children's Services Territory Health Services Audit Trails xviii Chapter 1: Introduction and Inquiry Methodology 1 Responses from Agencies 2 Department of Lands Planning and Environment – 2 2001-02 Land Sales Receipts Territory Health Services – 2000-01 Outlays 2 Department of Education – 2000-01 Outlays 3 NT Police, Fire and Emergency Services – 3 2000-01 Outlays NT Treasury 3 Department of Local Government 3 Department of the Legislative Assembly 3 Correctional Services 4 NT Employment and Training 4 Office of Aboriginal Development 4 Territory Housing 4 Department of Corporate and Information Services 4 Treasurer's Financial Report 2000-01 4 Chapter 2: Department of Education 5 (Now incorporated in the Department of Employment, Education and Training) Introduction 5 Reduction of $6.0m to the Estimated Outlays 2000-01 5 Carry-over of 2000-01 Allocation into 2001-02 8 Supplementation of the Agency's Budget in 2000-01 and 9 2001-02 Funding and Details of the LATIS Program 10 Funding to Non-Government Schools 10 Committee's Comments 10 v Page No. Chapter 3: Northern Territory Police, Fire and Emergency Services 13 Introduction 13 The $2.0m Realignment of 2000-01 Estimate and its Effect on the Agency 13 The Financial Management Processes in NTPFES 14 2000-01 Carry-over of Allocation 14 Committee's Comments 15 Chapter 4: Territory Health Services 17 (Now incorporated in the Department of Health and Community Services) Introduction 17 $8.0m Realignment in the Territory Health Services' the 2000-01 Budget 18 The Mini Budget 2001-02 25 Committee's Comments 25 Chapter 5: Northern Territory Treasury 29 Introduction 29 Realignment of the 2000-01 Budget Figures as Presented in 2001-02 Budget Papers 30 Proposed Sale of NT Fleet 39 Unrealistic Low Allowance for Growth in Previous Budgets 40 Conditions of Service Trust 41 Funding for the AustralAsia Railway Corporation 42 Overall Effect on Net Debt for the Northern Territory 42 Mini Budget – Pegging of Domestic Tariff for Power Consumers 43 Mini budget – Collapse of HIH 43 Committee's Comments 43 Chapter 6: Department of Corporate and Information Services 47 Introduction 47 Outsourcing Desktop and Local Area Network Support Services 47 Evaluation of Outsourcing Outcomes 48 Realignment of Estimates and Carry-over of Allocation 49 Committee's Comments 49 Chapter 7: Department of Lands, Planning and Environment 51 (Now incorporated in the Department of Infrastructure, Planning and Environment) Introduction 51 Sale of Government Land Methodology and Process 51 Receipts from the Sale of Land in 2001-02 52 NT Land Corporation 53 'Gifting' of Land 53 Committee's Comments 53 vi Page No. Chapter 8: Findings and Recommendations 55 Department of Education, NT Police, Fire and Emergency Services, Territory Health Services: Realignment of 2000-01 Estimates as Included in the 2001-02 Budget Papers 55 Mr Mike Reed, MLA 61 Mr Stephen Dunham, MLA 61 Mr Chris Lugg 62 Sale of NT Fleet 63 Conditions of Service Trust 63 Original Budget Under-estimation of Final Consumption Expenditure 64 Funding of for AustralAsia Railway 65 2001-01 Mini Budget 65 Information Technology Management Services: Outsourcing Desktop and Local Area Network Support Services 65 Department of Infrastructure, Planning and Development: 2001-02 Land Sales Receipts 65 Agency's Responsibilities 66 Conflict of Interest within Parliamentary Committees 66 Concluding Comments and Recommendations 67 Recommendation 1 – Improve Budget Documentation 68 Recommendation 2 – Improve Budgeting Culture 68 Recommendation 3 – Establish an Estimates Committee 68 Recommendation 4 – Agency Record-keeping 68 Recommendation 5 – Adequate Evaluation 69 Recommendation 6 – Estimates of Land Sales 69 Recommendation 7 – Review of Conflict of Interest in Committee 69 vii APPENDICES Page No. Appendix 1: Letter from Commissioner B.C. Bates, NT Police to Dr C. Burns, MLA, Chairman, dated 12 November 2001 73 Appendix 2: Emails from Joanne Schilling, A/Assistant Secretary, Business and Operational Support, Territory Health Services, dated 30 May and 1 June 2001 75 Appendix 3: Memorandum from Joanne Schilling, A/Assistant Secretary, Business and Operational Support, Territory Health Services to the Minister, dated 13 July 2001 77 Appendix 4: NT Treasury's Summary of Agency Outlays for 2000-01 79 Appendix 5: 8DDD FM Morning Program, 26 October 2001, Fred McCue interviewing Chief Minister Clare Martin, MLA and Mr Mike Reed, MLA 81 Appendix 6: Letter from Ms S. Butterworth, CEO, Department of Corporate and Information Services to Dr C. Burns, MLA, Chairman, dated 9 November 2001 97 Appendix 7: Letter from Mr J. Pinney, Secretary, Department of Lands, Planning and Environment to Dr C. Burns, MLA, dated 12 November 2001 99 Appendix 8: Report by Professor Percy Allen, AM 103 Appendix 9: Letter from Dr C. Burns, MLA, Chairman to Mr S. Dunham, MLA, dated 31 October 2001 113 Appendix 10: Letter from S. Dunham, MLA to Dr C. Burns, MLA, Chairman, dated 16 November 2001 115 Appendix 11: Censure Debate – Parliamentary Record, 25 October 2001 117 Appendix 12: List of Tabled Papers 137 Appendix 13: List of Public Hearings 139 Appendix 14: List of Transcripts of Public Hearings 141 Appendix 15: List of Media Releases 143 viii CHAIRMAN'S FOREWORD This Inquiry is the first major, public inquiry carried out by the Northern Territory Public Accounts Committee for a considerable time. It results from serious allegations made in a memorandum from the Chief Executive Officer of Territory Health Services, Mr Paul Bartholomew, to the incoming Minister for Health, Family and Children's Services, the Honourable Ms Jane Aagaard in September 2001. These allegations related to the veracity and accuracy of Budget data presented by the former Treasurer Mr Mike Reed to Parliament and the people of the Northern Territory in May 2001. Mr Batholomew specifically alleged that the estimated expenditure of Territory Health Services for 2000-01 was artificially reduced so as to show an increased expenditure equivalent to the CPI in 2001-2002. He also alleged that he informed his then Minister, Mr Stephen Dunham of this 'proposed deception'. After receiving Terms of Reference for the Inquiry on 25 October 2001, the Public Accounts Committee then proceeded to gather evidence over the next 6 months including: S Written responses from 35 agencies; S Written submissions from 5 agencies relating to matters arising from the above responses from agencies; and S A total of 10 public hearings which included a total of 32 hours of verbal evidence and 486 pages of transcripts (see Transcripts of Public Hearings Volume). In the public hearings the Committee heard evidence given by the CEOs and Finance Officers of six agencies, three Ministers of the former Government and the current Minister for Health and Community Services. These public hearings also represented a first for the Northern Territory Parliament in that the media were allowed access to record them. Apart from the Department of Health and Community Services, the Committee also heard evidence that there had been similar reductions in the Budget estimates of the Department of Employment, Education and Training and the Northern Territory Police, Fire and Emergency Services. After careful consideration of the evidence, the Committee has published its Findings and Recommendations within this Report.