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Legislative Assembly for the ACT: 1999 Week 7 Hansard (30 June) . . Page.. 1783 ..

MS CARNELL (continuing):

from the borrower. The same view can be taken for Bruce Stadium. Mr Speaker, I can give any number of examples of situations like that done by all governments in this Territory.

Cabinet decided that, until private sector funding had been secured, the Bruce project should continue using loan moneys advanced by the Government. It was Cabinet's intention that those loans would be repaid once private financing had been successfully negotiated. That brings me to a crucial and critical issue. In making these decisions, Cabinet proceeded on the understanding and advice that the loans to be made by government were within its legal capacity. In fact, Richard Tracey, QC, found that Cabinet did have the power to authorise such loans under section 38 of the Financial Management Act. So, Mr Speaker, it is very important to say that Cabinet did have the legal capacity to make that decision.

Having made that decision, it then fell to the Office of Financial Management within the Chief Minister's Department to make the necessary financial arrangements. To implement Cabinet's decision, OFM created a loan facility with its Central Financing Unit, which then provided a series of loans to finance the continuing construction of the stadium. A total of $9.7m was advanced in seven transactions during 1997-98. A further $14.3m was advanced in 12 transactions during 1998-99. These loans were advanced on terms which included an obligation to pay interest as well as repayment of the principal.

The loans were arranged by the CFU in accordance with procedures which it was accustomed to using for many years. So, this was not a one-off situation, as those opposite would like to indicate, Mr Speaker. Officers of the Central Financing Unit followed the practice that they had become accustomed to under the previous Audit Act, which, of course, was in place under the previous Government, for loan transactions. They used similar documentation, similar repayment and interest terms, and similar authorisation processes. Throughout, officers described these transactions as loans in the same way as they were described when the old Audit Act applied.

Mr Speaker, section 38 is the only provision in the Financial Management Act under which loans can be made by government, just as section 86 was the sole authority for loans under the old Audit Act. This is where the mistake occurred. Under the Financial Management Act, unlike the Audit Act, a guideline should have been issued to allow for additional investments under section 38. Mr Speaker, this guideline was not issued. Clearly, the establishment of appropriate guidelines at the commencement of the Financial Management Act would have provided a lawful basis for all of the investment transactions. However, the changed procedural obligations were not complied with, which rendered a number of transactions, including the Bruce Stadium loans, invalid. So, Mr Speaker, this is about a guideline that was not issued. The extent of the problem was not uncovered until the practices of the CFU were subjected to a careful legal analysis later on.

Mr Speaker, let us be clear: A mistake was made. It was made by staff of the Office of Financial Management, who did not recognise the need to issue guidelines to meet the requirements of section 38 of the Financial Management Act. The mistake happened because staff were following the practices in place under the old Audit Act, which required only the simple approval of the Treasurer to authorise an investment.

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