Tony Harris’s column from Tuesday’s Fin Review.
Don’t you feel sorry for chief executives board members in the private sector? The community and the regulators still expect that their signatures mean something. They can even be jailed for misleading the market.
By comparison, government ministers and public servants have it easy: there are no major consequences from attaching their signatures to misleading documents, especially financial documents.
Take the Commonwealth’s consolidated financial statements, the principal financial documents issued by the federal government. For accountability purposes, they are critical, more important than the federal budgets which concern government intentions for the year ahead rather than stewardship for the year passed.
Consolidated statements are meant to be prepared under accounting standards which apply to all reporting entities in Australia. And the law requires the Minister for Finance and Administration, Nick Minchin, to state whether his financial statements give a true and fair view of Commonwealth finances.
So you would expect that Minchin would adhere to accounting standards in order to meet the requirement of the law. After all, his own ministerial orders insist that public servants keep to accounting standards in the preparation of departmental financial statements.
But the senator is in a difficult position because, as we know, the Howard government does not wish to acknowledge any responsibility for the GST. So, does Minchin abide by the law or by the political needs of his government?
That is almost a silly question. The senator puts politics above the law.
In the last set of consolidated financial statements, Minchin coyly says “relevant accounting standards would suggest the gross amount of GST and associated payments to the states and territories be included in the Australian government’s consolidated financial statements”. (Emphasis has been added because there is nothing uncertain about the requirement.) But Minchin goes on to say that it is government policy to exclude them. So he gladly signs off his statements as true and fair, when he knows they are grossly misleading.
Minchin is not the only politician who place politics above propriety. In NSW, the newly appointed treasurer, Michael Costa, attested that the state’s accounts were true and fair when it was known that important assets and liabilities had been excluded from the audited accounts. The assets are missing because of measurement problems, although they could be worth around $7 billion.
The absent liability, which was accurately measured last year to be $2.4 billion, concerns the state’s bankrupted work cover scheme. It is omitted, and has been for many years, because the government does not want to admit responsibility for a scheme it established and oversees.
Costa is following a rich tradition. A former NSW treasurer, Michael Egan declined to recognise that the Sydney Harbour Tunnel is a government asset. He was aware that classifying the tunnel as government owned could cause a taxation liability. (The NSW government had indemnified the tunnel’s developers from taxation losses should the Australian Taxation Office declare it to be a state asset.) So Egan and his public servants were prepared to risk his reputation.
ACT government representatives have also happy to attach their signatures to financial statements which they knew were wrong. For the 2004-05 year, recently retired territory treasurer, Ted Quinlan, departed from accounting standards he had previously adopted, against the advice of the auditor-general. Had he kept to the standards he would have had to report a deficit of $188 million; instead he delivered a $26 million surplus. Breaking accounting standards did not stop Quinlan from reporting that the 2004-05 statements “fairly reflected the financial operations of the Territory.”
Quinlan justified his action by using a circular argument: it matched the approach he adopted in the budget and it avoided volatility. Accountants in the private sector would like to have the same easy luxury but the Australian Securities and Investment Commission would object.
Your word might no longer be your bond, and a handshake might have no value, but ASIC still thinks that signatures ought to mean something.