Western Australia's Auditor General, Des Pearson, has released a highly critical report of payouts to former executives of energy utility Western Power.
Western Australia's Auditor General, Des Pearson, has released a highly critical report of payouts to former executives of energy utility Western Power.
In his second Public Sector Performance Report, tabled in Parliament today, Mr Pearson found that while the Western Power board acted within its powers, payments to three former executives had 'significantly exceeded' the provisions of their written contracts, resulting in overly generous payments.
Former Western Power managing director Tony Iannello was paid $1.02 million when the company was split into four parts in January this year, having been employed for only nine months before the split.
Another two executives received payouts totaling $660,000.
Mr Pearson found that the Western Power board justified the payouts by pointing to the approval by the Minister for Energy, Francis Logan, of an additional $570,000 for Mr Iannello - to cover the wages he would otherwise have earned for the 65 weeks remaining on his contract.
According to Mr Pearson, the view of the board was that there was no variation in the contracts but that the payments were a fulfillment of the 'written and unwritten conditions' of the contracts.
Once the first payout was made, the board considered there was an 'ethical imperative' for another, and that the treatment of the third executive was based on 'existing custom and practice'.
However, Mr Pearson also found that the payouts were made without adequate consultation with the Minister.
Mr Logan issued a statement soon after the report was delivered, welcoming the findings of the Auditor General and saying he would work to improve the relationship between Government and corporatised entities.
"It (is) now important for us to ensure that each new entity (of the former Western Power) adopt sound business practices to avoid a repeat of this situation.
"I will raise these matters in my regular discussions with the chief executive officers and chairmen of each of the corporations as a priority."
Opposition energy spokesman John Day said the Minister and his predecessor, Premier Alan Carpenter, should be held accountable.
"Western Power did communicate their intentions to both Ministers for Energy ... and the responsibility belongs to them," Mr Day said in a statement.
"They have failed in their duty to the public by approving the payment to Mr Iannello and in acquiescing to the other payments by not acting when they were able to do so."
The full text of a statement from the Auditor General is pasted below:
Auditor General Des Pearson's much-anticipated probe into the Western Power redundancy payments reveals that whilst the Board acted within its powers, the provisions of the written executive contracts were "significantly exceeded" and this resulted in more generous payments than the contracts provided for.
Mr Pearson's findings are detailed in his Second Public Sector Performance Report, tabled in Parliament today, which also contains one performance examination (Informing the Public: Providing Information on the Timeliness of Services), and a follow-up examination of the report Setting Fees - Extent of Cost Recovery tabled in September 2004.
In examining the circumstances surrounding the Western Power executive payouts Mr Pearson covers the areas of accountability, communication, records, and contracts - providing specific examples.
Issues raised include:
- During the final audit of Western Power requests for information took too long to resolve and the responses often lacked clarity and generated more questions, thus failing the test of openness that should exist between auditee and auditor.
- The Board and Executive of Western Power considered that adequate communication with the Minister existed throughout the break-up of Western Power - Mr Pearson did not find adequate evidence to support this view.
- Western Power records in relation to the terminations examined were not complete, with much of the rationale for decisions taken not recorded.
- Audit had previously raised with Western Power the poor quality of its records in relation to an executive termination payout - it was of concern that similar issues arose again so soon.
- There were variations or extensions made to the existing contracts that had the effect of increasing the termination payment to the executives concerned. When the Board decided the level of the payout, in each case the option exercised significantly exceeded the written contract provisions and records do not detail any consideration of alternatives.
- Western Power's justification for the approach it adopted was that as the Minister had approved a redundancy payment for one executive there was an "ethical imperative" for another, and that the treatment of the third executive was based on "existing custom and practice".
- The view of the Board members is that there was no variation in the contracts but that the payments were actually a fulfilment of the "written and unwritten conditions" of the contracts.
The Follow-up of the September 2004 report Setting Fees - Extent of Cost Recovery also included a review of the fee setting policies and practices at six more agencies.
Findings included:
- The departments (Planning and Infrastructure and Consumer and Employment Protection) that were significantly over recovering fees in 2004 have reduced them by between 18 per cent and 50 per cent, whilst the Metropolitan Cemeteries Board has not reduced the over recovering fee and is unlikely to do so.
- Of the six agencies reviewed, only the Department of the Attorney General's probate fees significantly over recovered costs (by almost 200 per cent) with no clear justification available for this level of over recovery.
- Agencies are now required to certify to the Department of Treasury and Finance that their fee setting practices are materially accurate and the fees reasonably reflect costs, however DTF does not test the reliability of these certifications as part of its oversight role.
The Performance Examination Informing the Public: Providing Information on the Timeliness of Services reviewed the quality of timeliness information publicly provided by seven agencies for a sample of nine key services: police, fire, ambulances, water, electricity, buses, metropolitan and country trains, and taxis.
Findings included:
- For the services reviewed, the Western Australian public is generally well served in terms of the quality of timeliness information provided to them compared to other Australian states.
- The agencies reviewed could improve the usefulness of the timeliness information by:
o providing the range of times it takes to deliver services
o identifying times and localities where performance differs
o explaining how targets are set and the reasons for not meeting them
