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Annual Report 2014–15

Volume 1, Part 3 : Governance and Accountability

Chapter 9
Corporate Governance

Senior management committees and their roles

Defence operates seven senior committees and one board, each playing an important role in the governance and management of the organisation. Each body has an advisory role, with the chair (or chairs) exercising executive authority.

Figure 9.1: Senior management committees, as at 30 June 2015

Defence Committee

The Defence Committee considers the most significant policy and management issues and drives whole-of-Defence performance through the enterprise management framework, including the corporate planning process. It meets monthly.

The committee is chaired jointly by the Secretary and the Chief of the Defence Force (CDF). Group Heads and Service Chiefs are standing members. Other participants are co-opted as required.

Secretary and Chief of the Defence Force Advisory Committee

The Secretary and Chief of the Defence Force Advisory Committee is the senior committee for the week-to-week management of Defence. It is the default committee for business that requires the attention of the Secretary and the CDF, providing direction and acting as a decision-making body.

The committee is chaired jointly by the Secretary and the CDF. Other participants are co-opted as required.

Defence Civilian Committee

The Defence Civilian Committee was established to focus on matters affecting the Defence APS workforce, especially development and training needs, gender, and employment of Indigenous Australians and people with disability.

The committee is chaired by the Secretary. It consists of Group Heads, the Vice Chief of the Defence Force (VCDF), and two division heads and one branch head on a rotational basis.

Defence Capability and Investment Committee

The Defence Capability and Investment Committee ensures that resourcing, including capital investment and operating costs, is consistent with Defence’s strategic priorities and resourcing strategy. Its role includes examining the overall shape of capability and the balance of resource allocation within the Defence Capability Plan, force structure and disposition, through-life costs and whole-of-life affordability.

The committee is supported by the subordinate Defence Capability Committee, which looks at individual projects as well as preliminary programming of the major capital budget. As a general principle, the Defence Capability and Investment Committee will only consider items that cannot be resolved by the lower-level committees.

The committee is chaired by the Secretary. It consists of the CDF, the VCDF, the Associate Secretary, the Service Chiefs, the Chief of the Capability Development Group, the Chief Executive Officer DMO, the Deputy Secretary Strategy and the First Assistant Secretary Capability Investment and Resources.

Defence Audit and Risk Committee

The Defence Audit and Risk Committee is a central element of governance in Defence. It provides independent advice on governance within Defence to the Secretary and the CDF.

The committee’s roles and responsibilities are to review governance and assurance frameworks, including risk management, the internal controls framework, compliance, accountability and audit. A major element of its role is to assist Defence in building effective risk management practices and to advise the Secretary and the CDF on the appropriate limits to Defence’s risk exposure. The committee’s charter has been reviewed in light of the Public Governance, Performance and Accountability Act 2013, which took effect on 1 July 2014.

The committee’s membership comprises up to four senior private sector members (one position is currently vacant), the Associate Secretary and the VCDF. Collectively, these members have significant experience in financial management, governance and risk management in both operational and non-operational contexts.

Chiefs of Service Committee

The Chiefs of Service Committee provides military advice to the CDF to assist in the command of the Australian Defence Force (ADF) and in providing military advice to the Government.

The committee is chaired by the CDF. It consists of the Secretary, the VCDF, the Service Chiefs, the Deputy Secretaries for Strategy and Defence People, the Commander Australian Defence College, the Chief of the Capability Development Group and the Chief of Joint Operations.

Strategic Command Group

The Strategic Command Group is the primary advisory forum that supports the CDF’s role as Commander of the ADF. The Strategic Command Group also serves as an important forum for providing key members of the Defence Senior Leadership with situational awareness of ADF operations, critical incidents and other strategic matters. The CDF uses the Strategic Command Group to issue direction and guidance on ADF matters and to coordinate the ADF response to major critical incidents.

The committee is chaired by the CDF. It consists of the Secretary, the VCDF, the Service Chiefs, the Chief of Joint Operations and the Deputy Secretaries for Strategy and Intelligence and Security.

Gender Equality Advisory Board

The Gender Equality Advisory Board is a direction-setting and advisory body for driving and shaping the strategic direction of the Secretary’s and the CDF’s gender equality priorities within the broader Defence cultural reform agenda. The board considers the most significant gender equality issues applicable to the Defence workforce, and monitors and evaluates whole-of-Defence performance in addressing these matters.

The Secretary and the CDF use the board’s collective gathering to incorporate community perspectives on how to make Defence a more inclusive organisation and one that proactively aligns its values and accepted behaviour with evolving community standards.

The board comprises members from the public and private sectors and is jointly chaired by the Secretary and the CDF.

Public Governance, Performance
and Accountability Act 2013

On 1 July 2014, the Public Governance, Performance and Accountability Act 2013 (PGPA Act) replaced the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997. The PGPA Act established a system of governance and accountability for public resources, with an emphasis on planning, performance and reporting.

The PGPA Act sets out the main principles and requirements of the Commonwealth Resource Management Framework. The framework includes the PGPA Rule 2014, the Commonwealth Procurement Rules and the Commonwealth Grants Rules and Guidelines. These instruments establish the requirements and procedures necessary to give effect to the governance, performance and accountability measures covered by the Act. Defence complies with the provisions of the PGPA Act and Rule and other instruments relating to financial management through the Accountable Authority Instructions issued by the Secretary and associated departmental guidance.

In 2014–15, the Chief Finance Officer Group arranged for the promulgation of the new financial delegations, Accountable Authority Instructions and associated financial guidance required under the PGPA Act.

Fraud and ethics

In accordance with the Commonwealth Fraud Control Framework 2014, Defence continues to meet its mandatory obligations to prevent, detect and deal with fraud. Defence has a comprehensive fraud control programme established through the Defence Fraud Control Plan No. 11. Underpinning the plan is a rigorous fraud risk assessment programme focusing on the enterprise-wide vulnerabilities and risk factors within Defence’s diverse operating environments.

The ethics and fraud awareness programme continues to be an integral part of Defence’s fraud control programme. It comprises face-to-face or e-learning courses, as well as newsletters and an intranet site for information and advice. It is mandatory for staff to participate in the programme at least every two years. In 2014–15, more than 66,000 Defence and DMO personnel completed this programme.

In 2014–15, there were 262 fraud investigations registered within Defence and DMO and 242 investigations completed (some of those completed were registered in previous years). Approximately 21 per cent of completed investigations resulted in criminal, disciplinary or administrative action. Of these, approximately 58 per cent related to disciplinary action under the Defence Force Discipline Act 1982.

In 2014–15, the determined fraud loss for completed investigations was $0.48 million, while monies recovered were just over $0.16 million. Table 9.1 shows detected fraud over the past five financial years, averaging approximately $1.02 million a year within a range of $0.4 million to $1.7 million.

Table 9.1: Determined fraud losses and recoveries, 2010–11 to 2014–15

2010–11

2011–12

2012–13

2013–14

2014–15

Loss

$916,419

$1,102,979

$835,685

$1,770,422

$480,937

Recovery

$422,691

$493,210

$393,902

$133,457

$161,693

Audit

Audit Branch provides assurance to the Secretary and the CDF that controls designed to manage Defence’s major risks are in place and are operating in an efficient and effective manner. Audit Branch also assists Defence senior managers in improving the business performance of their organisations.

Audit Branch provided internal audit services in accordance with the audit work programme. The programme is endorsed by the Defence Audit and Risk Committee and approved by the Secretary and the CDF. The programme is developed in consultation with Group Heads and Service Chiefs. It is designed to address areas of high-level risk or activities with potential control deficiencies that could lead to significant financial loss.

Audit Branch also monitors and reports to the Defence Audit and Risk Committee, the Defence Committee and the Minister for Defence on the status of the implementation of recommendations from Audit Branch and the Australian National Audit Office (ANAO).

In 2014–15, Audit Branch issued 23 audit reports and completed eight management-directed tasks. In addition, the ANAO completed six performance audits on Defence, and one cross-portfolio audit involving Defence, to which Audit Branch provided direct support.

Public Interest Disclosure Scheme

The high number of public interest disclosures allocated to the Defence Public Interest Disclosure (PID) Scheme (which replaced the successful Defence Whistleblower Scheme on 15 January 2014) during this reporting period continues to demonstrate a strong reporting culture within the organisation. The scheme facilitates and encourages reports of suspected wrongdoing; provides support and protection to disclosers; and ensures that suspected wrongdoing is investigated where appropriate.

Defence continues to work closely with the Commonwealth Ombudsman for public interest disclosure reporting purposes, and to ensure continuing improvement in the implementation of the Public Interest Disclosure Act 2013 within the organisation and, more broadly, within the Commonwealth public sector.

Since the Defence PID Scheme began operations, 471 public interest disclosures have been allocated to Defence: 390 in 2014–15 and 181 in 2013–14.

Report of the Inspector-General Australian Defence Force

The position of Inspector-General of the Australian Defence Force (IGADF) is established under section 110B of the Defence Act 1903. The IGADF provides the CDF with a mechanism for internal audit and review of the military justice system independent of the chain of command and an avenue by which failures in the military justice system may be examined and remedied.

The functions of the Office of the IGADF include oversight of the military justice system, internal audits of military justice arrangements in Defence Force units, ships and establishments; the conduct of inquiries into or investigations of matters concerning the military justice system, including inquiries or investigations into the professional conduct of Service Police; the provision of advice on matters concerning the military justice system, including making recommendations for improvement; and the promotion of military justice values across the Defence Force.

During the reporting period the IGADF also became responsible for a number of additional functions, including the investigation of service-related deaths and select incidents, the conduct of independent reviews of ADF redresses of grievance referred to a Service Chief for final decision, and the responsibility to inquire into or investigate any matter concerning the Defence Force if directed to do so by the Minister for Defence or the CDF.

In addition, the reporting requirements for the IGADF changed. The IGADF is required to prepare and give to the Minister for Defence, for tabling in Parliament, a report on the operations of the Office of the IGADF at the end of each financial year. Previously, the requirement was for the IGADF to give a report to the CDF. These changes are intended to enhance the independence and powers of the IGADF and enable improvements to be made to the investigation of service-related deaths and redress of grievance practice.

During the reporting period the operating tempo in the Office of the IGADF increased significantly, particularly in light of the addition of new functions. There was an increase in the number of submissions received for investigation or inquiry, while there was a slight decrease in the number of military justice performance audits completed into the military justice arrangements of ADF units, ships and establishments.

During the reporting period the IGADF received 62 inquiry submissions, an increase of approximately 3 per cent on the previous year. In recent years the trend has been that submissions disclose issues of greater complexity than in previous years and this trend continued in 2014–15, when the IGADF resolved 56 submissions by way of inquiry, assessment or review.

In addition to these submissions, the IGADF reviewed 34 Service Police professional standards matters. Of these, 25 became the subject of IGADF investigations and seven were referred back to Service Police for further action. Of the 25 matters investigated by the IGADF, three complaints were substantiated and 19 matters were still being investigated at the end of the reporting period.

The IGADF conducted 46 ADF military justice unit audits, representing approximately 10 per cent of all auditable ADF units. In one of those units, potential material deficiencies were identified. In all, a total of 1,336 recommendations and suggestions to improve military justice arrangements, practices and procedures were made during 2014–15. The overwhelming majority of the recommendations and suggestions related to minor compliance or procedural issues.

During the conduct of military justice unit audits, 2,525 ADF personnel participated in focus group discussions. This raised the total number of focus group participants to 27,287 since the pilot programme began in 2004. Focus group survey outcomes in 2014–15 indicate a stronger endorsement and confidence in the military justice system and the chain of command to take action to resolve military justice problems. There remains strong evidence to indicate that incremental cultural change under the Pathway to Change: Evolving Defence Culture programme continued to occur within the ADF during the reporting period.

Select incident review

The Inspector-General ADF established the Directorate of Select Incident Review to conduct and manage the assessment of, and subsequent inquiries into, deaths in service (including those occurring on operations) and other select incidents following transfer of these responsibilities from the former CDF Commissions of Inquiry Cell.

After notification of a death from the member’s parent Service, the IGADF assesses each case to inform advice to the CDF as to whether the death appears to have arisen out of, or in the course of, the member’s service. These assessments and any inquiry by the IGADF are conducted independently of the chain of command, with the findings and recommendations reported to the CDF. The Defence (Inquiry) Regulations 1985 oblige the CDF to appoint a commission of inquiry into any such case, unless the Minister for Defence specifies in writing that the circumstances do not require it. Under recent amendments to the Defence Act, the responsibility for deciding whether an inquiry into a death in service should take place, and, if so, what form the inquiry should take, was transferred to the IGADF.

In 2014–15, the IGADF initiated 30 preliminary assessments into deaths in service of ADF members. Of this number, nine have been completed and 21 remain in progress. The IGADF has appointed six inquiries into ADF member deaths. Two inquiries were completed and referred to the CDF for action. They are the inquiry into the death of a soldier on operations in Afghanistan in July 2014 and the inquiry into the death of a soldier in New Zealand while conducting mountain and cold weather training, also in July 2014. The four remaining inquiries are nearing completion.

One legacy inquiry from the previous arrangements remains ongoing. The CDF appointed an inquiry officer on 24 June 2014 to examine an artillery ammunition incident at Shoalwater Bay on 18 March 2014. The inquiry was still being finalised as at 30 June 2015—the issues that have been uncovered are complex and involve various aspects of the commercial support and storage chain for artillery ammunition.

During the reporting period, no new commissions of inquiry were appointed. A part-heard inquiry into the single-vehicle roll-over accident at Holsworthy Military Area on 8 October 2012 has been adjourned while criminal prosecution of the driver takes place.

Military redress of grievance

Three hundred and ninety-two new applications for redress of grievance were received in 2014–15, a slight decrease on the previous year (Figure 9.2). Four hundred and twenty-five applications received during the current and previous reporting periods were finalised at unit level. Of those, 297 (70 per cent) were not granted, were withdrawn or were not reviewable; the remainder were granted or partly granted. The main areas of complaint are still termination of service decisions, career management issues, and conditions of service entitlements.

A proportion of members who are dissatisfied with the redress decision of their commanding officer refer their complaint to their Service Chief or to the CDF for further review. On average, one-third of redress of grievance applicants exercise this entitlement. Under the new arrangements that commenced in July 2014, an independent review of the grievance is now conducted by the IGADF and a brief furnished to the CDF or Service Chief for final decision.

When a redress of grievance is referred to the CDF or a Service Chief, priority is allocated based on the nature of the complaint. Referrals contesting termination of service decisions continue to account for a significant proportion (28 per cent) of referred complaints. These cases are given the highest priority.

Figure 9.2: Applications for military redress of grievance received and finalised, 2012–13 to 2014–15

Training related to military justice

Over the reporting period, the Office of the IGADF provided inquiry officer and other military justice–related training to 2,902 ADF members, either through face-to-face courses and seminars or through e-learning modules. Twenty-five members attended an advanced inquiry officer course, 1,694 undertook inquiry officer training, 616 completed the complaints handling instruction course and a further 415 completed the quick assessment instruction course. The remaining 152 members undertook the administrative sanctions instruction course.