ESTIMATES COMMITTEE – Wednesday 12 June 2019 The Estimates Committee convened at 8.00 am. CHIEF MINISTER GUNNER’S PORTFOLIOS AUDITOR-GENERAL’S OFFICE Madam CHAIR: Good morning and welcome to today’s Estimates Committee hearings. I acknowledge we gather this morning on the land of the Larrakia people and pay my respects to elders past, present and emerging. I welcome you, Chief Minister, and invite you to introduce the officers accompanying you. Mr GUNNER: I am here this morning with Julie Crisp, the Auditor-General of the Northern Territory. Madam CHAIR: Thank you, Chief Minister. I will invite you to make a brief opening statement. I will then call for questions relating to the statement. The committee will then consider any whole-of-government budget and fiscal strategy-related questions before moving on output-specific questions and finally non output- specific questions budget-related questions. I will invite the shadow minister to ask their questions first followed by committee members. Finally, other participating members may ask questions. The committee has agreed that other members may join in on a line of questioning pursued by a shadow minister rather than waiting till the end for a shadow’s questioning on that output. Chief Minister, do you wish to make an opening statement regarding the Auditor-General’s office? Mr GUNNER: As by convention, I am happy for the Auditor-General to make the statement and for the Auditor-General to take the questions. Ms CRISP: Good morning and thank you, Madam Chair. The Office of the Auditor-General is a statutory office established by the Legislative Assembly in the Audit Act. The role of the Auditor-General can be viewed as a safeguard intended to maintain the financial integrity of the Northern Territory’s parliamentary system of government. The Auditor-General audits public accounts and other accounts taking in to account recognised professional standards and practices. It carries out audits that it has been directed to do by the minister, conducts audits of performance management system, conducts audits of public sector entities including whole-of-government accounts being the Treasurer’s Annual Financial Statement. It also has responsibility for reviewing information referred pursuant to the Public Information Act and reports to the Legislative Assembly on the audits mentioned above. The office’s cost recovery model endorsed by government in the 2015–16 budget process enables the office to recover costs from other statutory entities outside of the public account. During the year we undertook 136 new audits and reviews. It is consistent with what we undertook in the prior year through the audit office following machinery of government changes, which saw a reduction in the number of audits required and the number of agencies, but not a reduction in the level of work required. We also undertake a range of data analytics activities designed to inform accountable officers. Over the year to date, we have undertaken 40 of those for 17 government agencies where we have looked into salaries, consulting and legal expenditure, gifts and benefits expenditure and grants and subsidies. Of the 136 audits that we commenced, 109 have been completed by 31 May. I think we have eight left. We anticipate that they will all be completed prior to the 30 June. The office is likely to end the year with a small surplus. I would like to put on record my thanks to the personnel in the office. Many of you know there are only four staff in the office; they do an amazing job. They are dedicated and have worked exceptionally well as a high- performing and supportive team. My thanks to them. You would also be aware that we outsource 95% of the audit work we do to seven firms around town and there are 150 audit personnel who are involved from those firms in the audits of the Northern Territory public sector. My thanks to those partners and staff. I am happy to take any questions. 1 ESTIMATES COMMITTEE – Wednesday 12 June 2019 Madam CHAIR: Thank you, Auditor-General. Are there any questions relating to the statement? Mr HIGGINS: Thank you. I too appreciate the work that gets done in the lead-up to the estimates and thank all the staff involved. From the opening statement, you said the number of audits was reduced, but I notice in the actual expenditure that the authorised auditor fees increased from roughly $2m to $3m in the last year. I know in the statement you also said that did not mean the amount of work had decreased. Could you explain please? Ms CRISP: The level of work that we undertake through the audit program, as far as the number of agencies, reduced. We used to have 33 government agencies but with the machinery of government changes that brought that down to 20-odd agencies. Obviously the level of transactions is still the same, it is just delivered through a smaller number of agencies. What we also see is that sometimes there are technical challenges with some audits. Some are more technical than others and that requires a higher level of staff. We pay a higher hourly rate for the more senior or qualified technical expertise. We do see an increase there. We operate under a triannual contract with the authorised auditors. This is the second calendar year of that and it has an increment factor, the contract value goes up as well with CPI. Some of the more technical areas relate to the utilities entities. Whilst the costs have gone up with those entities, we also recover those costs directly back from the entities. As far as appropriation, that has not increased as a result. Mr HIGGINS: I am still grappling with it. Where we are returning the costs from some of those external bodies there is a difference of $1m, a 50% variance, in the appropriation. Not in the appropriation—the amount we spent. It went from $2.096m to $3.001m. If that does not reflect work that we have back from those other agencies, how much are we expecting back or how would you offset that? Ms CRISP: The original budget for 2018–19 had just under $2.7m in appropriation and what we recovered back from statutory entities was $1.8m. Mr HIGGINS: A lot of that would then be the difference between the $2m and the $3m. Obviously it does not go into expenditure, it goes into the revenue side and then Treasury takes it. Ms CRISP: No. Treasury leaves us alone. Bless Treasury. What we recover back in direct costs, we do not charge any incremental charge to those entities. So what we pay the authorised auditors, we recover back directly. The $1.8m is offset: in one side, out the other. The appropriation is spent on the compliance audits, performance management system audits and also covers the office salaries which are around $700 000. Mr GUNNER: Hopefully Treasury were not listening there, Gary, and taking policy notes about taking a little tithe on the AG’s office. Mr HIGGINS: I would take every opportunity to get stuck into Treasury. Basically what you are saying, if I am interpreting it right, is that your appropriation for this is $2m, knowing that you are going to get $1m back from those statutory authorities. Is that putting it in simple terms? Ms CRISP: The appropriation is closer to $3m and, yes, we get about $1.8m back. Mr HIGGINS: The efficiency dividend—how is that going to affect your agency? Have you been exempt? When we talk about staffing numbers… Ms CRISP: We are not exempt from the efficiency dividend. The impact going into the 2019–20 budget sees a reduction through efficiencies of $9000. Over the longer term, through forward estimates, it lands at about $22 000 so it is the equivalent of one audit. It just means we have to be more efficient in delivering the audit program. Mr HIGGINS: We are not going to chop someone’s leg off and end up with 3.875 of a person. Ms CRISP: Not quite the cost of a kidney. We have not seen a reduction in staff and in fairness, do not expect to. We have not been asked to reduce staffing numbers. We would be going from four to who knows what if we were. Madam CHAIR: Any other questions on the opening statement? Thank you. 2 ESTIMATES COMMITTEE – Wednesday 12 June 2019 Agency-Related Whole-of-Government Questions on Budget and Fiscal Strategy Madam CHAIR: The committee will consider the estimates of proposed expenditure contained in the Appropriation Bill 2019–20 as they relate to the Auditor-General’s Office. Are there any agency-related whole- of-government questions on budget and fiscal strategy? That concludes consideration of agency-related whole-of-government questions on budget and fiscal strategy. Mr WOOD: Can I ask a general question of Chief Minister? Have you considered reappointing the Auditor- General for another term? Mr GUNNER: No. I am not sure when her term expires. Mr WOOD: I just thought I would take the chance to put in a reference. Madam CHAIR: Perhaps you can ask that under staffing or corporate and governance? Mr GUNNER: I have to say, I have not considered it. The consideration is what I have not had. Mr WOOD: I thought I would get in early and say I think the Auditor-General has done a fantastic job and I hope you would reappoint. Mr GUNNER: It was a good prompting, Gerry. OUTPUT GROUP 1.0 – AUDITS AND REVIEWS Output 1.1 – Audits and Reviews Madam CHAIR: We will now move on to consider Output Group 1.0, Audits and Reviews; Output 1.1, Audits and Reviews.