Third Public Sector Performance Report 2004

Report No 6 - September 2004

The Third Public Sector Performance Report for 2004 brings to notice issues associated with legislative compliance and financial management and control arising from two examinations.

Setting Fees - The Extent of Cost Recovery

Fees paid by the users of government goods and services are a vital source of government revenue. With thousands of fees raised across government, comprehensive government policy is essential to ensure a consistent and transparent approach when setting fees based on cost recovery principles.

However, we found that there is insufficient and fragmented policy direction and that this contributes to inappropriate fee setting decisions and limited disclosure of pricing policies. Consequently, accountability to Parliament and the wider community is reduced.

Issues arising from examination of 14 fees raising over $80 million per annum at six sampled agencies as well as of the Department of Treasury and Finance's (DTF) review role include:

• Revenue from four of the 14 fees sampled exceeded cost recovery by between 10 and 125 per cent.
• There was little meaningful disclosure by five of the six sampled agencies in their 2002-03 annual report about their pricing policies.
• Two agencies had not costed the audited services.
• Cross subsidisation was evident in the sampled fees at two agencies.
• Three of the agencies reported in their annual budget submissions that certain fees would recover 100 per cent of cost when the estimated recovery significantly exceeded cost.
• DTF analysts were keeping limited record of their review of agency fee submissions, thereby reducing transparency.
• DTF's oversight of agency fee setting decisions is focused on determining total agency revenue, establishing if agencies are achieving cost recovery (where appropriate) and reviewing proposals for new fees. Improving the information agencies are required to provide DTF would enable DTF to enhance its review of agency fee setting practices.

Recommendations arising from the examination included:

• Government with the assistance of DTF should consolidate and enhance the various policy and guidance documents to assist agencies, Government and Parliament to make and assess fee setting decisions.
• DTF should continue to improve the information agencies are required to provide and ensure that email correspondence is retained to evidence the review and advisory process.
• Agencies should:
  • cost their goods and services such that the substantive cost of each is known.
• accurately report the known extent of cost recovery to DTF in their annual fee submission.
• ensure their fees are appropriately set and reasonably relate to the cost of the good or service.
• provide meaningful disclosure of their pricing policies in their annual report.

Management of Western Australian Government Corporate Credit Cards

The Western Australian Corporate Credit Card provides agencies with opportunities to streamline their purchasing and payment practices as well as to improve cash management. In taking advantage of these opportunities, agencies need to ensure basic precautions are taken to prevent improper or unauthorised expenditure.

In 2003-04, expenditure through the Western Australian Corporate Card totalled approximately $92 million, a 67 per cent increase since 1998-99 when we reported on our last detailed examination of corporate card use.

We found that controls over the use of corporate cards were adequate and no unauthorised use of corporate cards was disclosed at the 10 agencies reviewed. However, we did find minor breaches of corporate card policies and guidelines. Breaches typically arose from failure to clearly state or justify the business nature of purchases.

Recommendations arising from the examination were that agencies should ensure that cardholders understand and comply with Corporate Card controls. This includes ensuring:

• the Corporate Card policy is up to date and cardholders are aware of it.
• all cardholders have signed a cardholder agreement.
• supporting documentation is submitted with the corporate card statements in a timely manner and expenditure is reviewed by supervisors.
• card usage is monitored and credit limits revised or cards cancelled where required.

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