The Senate Order for Departmental and Agency Contracts (Financial Year 2002-2003 Compliance)
This report relates to the fifth audit of Financial Management and Accountability Act 1997 (FMA Act) agencies' compliance with the Senate Order for Departmental and Agency Contracts, (the Senate Order) to list, on the Internet, contract details for the Financial Year 2002-2003 reporting period. The audit was conducted in accordance with the Senate Order request for the Auditor - General to undertake twice - yearly examinations of agency contracts listed on the Internet, and to report whether there had been any inappropriate use of confidentiality provisions. The objectives of the audit were to assess agency performance in relation to compiling the Internet listings required by the Senate Order and the appropriateness of the use of confidentiality of provisions in Commonwealth contracts.
This report relates to the fifth audit of Financial Management and Accountability Act 1997 (FMA Act) agencies' compliance with the Senate Order for Departmental and Agency Contracts, (the Senate Order) to list, on the Internet, contract details for the Financial Year 2002–2003 reporting period.
The audit was conducted in accordance with the Senate Order request for the Auditor¬General to undertake twice-yearly examinations of agency contracts listed on the Internet, and to report whether there had been any inappropriate use of confidentiality provisions.
The objectives of the audit were to assess agency performance in relation to compiling the Internet listings required by the Senate Order and the appropriateness of the use of confidentiality provisions in Commonwealth contracts.
Audit scope and focus
The audit involved a desktop review of all FMA Act agencies to enable the ANAO to report on the information provided on the Internet. In addition, the ANAO selected six agencies for more detailed review of the processes used to make the Internet listings and of the use of confidentiality provisions in contracts.
The six agencies selected for detailed review in this audit were the:
- Australian Industrial Registry (AIR);
- Australian Taxation Office (ATO);
- Department of Communications, Information Technology and the Arts (DCITA);
- Department of the Environment and Heritage (DEH);
- Federal Court of Australia (Federal Court); and
- National Office for the Information Economy (NOIE).
The focus of the audit in relation to confidentiality was on the commercial information that could be reasonably protected as confidential information.1 The ANAO recognised, however, that agencies might have reported confidentiality for other reasons, for example, because it was information with a national security classification and/or personal information.
The ANAO found that, by the time the audit was completed, 78 FMA Act agencies2 had either placed a list of contracts on their websites, or did not have any contracts that fell within the scope of the Senate Order and, as a result, were not required to list details of contracts on the Internet. The majority of lists generally complied with the requirements of the Senate Order, although there was scope for agencies to improve the presentation of the lists and to ensure that all details required of the Senate Order listing had been met.
In relation to the six agencies subject to detailed audit, all had placed a list of contracts on their website by the due date. For five agencies, the ANAO concluded that the processes used to compile the Internet listing were generally likely to lead to the lists being complete in terms of the number of contracts listed. The sixth agency's list was unlikely to be complete because procurement policies and procedures, which had been the responsibility of the portfolio department, were transferred to the agency at the time the contract list had to be prepared. As such, at the time of the audit, the agency's processes for complying with the Senate Order requirements were still being developed.
Six of the selected agencies had revised, or were in the process of revising, elements of their general contracting practices, policy guidance, tender documentation and contract templates to reflect the changes to government policy. These changes, amongst other things, require both parties to a contract to agree what information, if any, should be protected as confidential prior to the contract being entered into. However, as identified in previous ANAO audits of the Senate Order, the understanding of how to implement these changes was not uniform across, or within, agencies.
The ANAO obtained little assurance that, at the contract negotiation stage, agency staff and contractors had discussed the implications of the Commonwealth's accountability environment on the treatment of confidential information. The ANAO found that, in all agencies, the determination of what information should be protected as confidential was made at the time the contract was placed on the Internet listing instead of when the contract was being entered into. As a result, the reasons that a contract was listed as containing confidential information were based on the views of the staff compiling the list and often did not reflect the information that was in the contract.
The ANAO reviewed 30 contracts that were listed, or should have been listed, on the Internet as containing confidential provisions to determine whether they had been listed appropriately. As all contracts had been entered into recently, agencies would have had time to put in place changes to contracting policies and procedures to meet the requirements of the new accountability environment. Also, the majority of contracts had been entered into after agencies had been provided with formal guidance on how to enter into appropriate commitments to maintain confidentiality of commercial information in the context of procurement processes.
The ANAO considered that only five (17 per cent) of the contracts contained information that was likely to satisfy the criteria for protection as confidential information.
In previous audits, the percentage of contracts that the ANAO considered had been appropriately listed ranged from 15 to 38 per cent. In previous audits, the ANAO also recognised that agencies had difficulty in changing procedures to implement the new accountability framework. This was largely because formal Department of Finance and Administration guidance on how to determine the confidentiality of contractors' commercial information had not been available at the time the contracts had been negotiated.
However, in this audit, the majority of contracts selected for review had been entered into after the Finance guidance had been issued. As a result, the ANAO considers that a larger percentage of contracts should have been appropriately listed as containing confidential information.
The results from this audit highlight the need for all agencies to continually review their policies on the new accountability framework so that they accord with the Government policy of the time. In addition, agencies should make sure that the policies are known, and acted upon, at all levels within the agency. This reinforces the need for an on-going effective awareness raising regime.
Comments from the audited agencies
The comments provided by each of the audited agencies in response to the audit report are shown in Appendix 6.
1 The actual wording of the Senate Order does not specifically refer to commercial information. However, the basis for the original Senate Motion and the holding of the Senate FPA Committee's inquiry was the Senate's concern that information was being withheld from the Parliament for reasons of commercial confidentiality.
2 During the Senate Order reporting period, there were 81 FMA Act agencies that could be audited. Details of the other three agencies are provided in Chapter 2 of the report. On 1 July 2003, five new agencies were established so that by the time the audit started in September 2003, there were 86 FMA Act agencies.