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Shipton's tax bill under scrutiny

The Australian National Audit Office (ANAO) has answered questions in regards to the remuneration of ASIC chair James Shipton and former deputy chair Daniel Crennan.

At the parliamentary joint committee on corporations and financial services, chair of the committee Senator James Paterson asked auditor general Grant Hehir about the relocation expenses ASIC paid Shipton and Crennan, and about Shipton's tax bill.

Shipton had an agreement that ASIC would pay for his tax advice as part of his remuneration. There were three procurements of tax advice from KPMG made by ASIC. These appear to have each been for Shipton to receive personal tax advice.

Each procurement had a value of $25,000, bringing the total tax bill for Shipton to $75,000.

Hehir acknowledged issues of governance over the procurement of tax advice within ASIC. It was not clear why ASIC procured the tax advice rather than Shipton procuring it himself and then being reimbursed by ASIC.

Paterson pointed out that following the ANAO raising the issue with ASIC, the regulator made more files available to the ANAO. This included documents in relation to the tax advice from KPMG.

"They were making payments to the chair flowing from an initial agreement when the chair was appointed to provide taxation advice. Our concerns around that were that the initial advice was for a much lower figure..." Hehir said.

"The original decision to undertake the procurement was for $9000."

When KPMG was approached to provide the advice and quoted $9000, that amount was under the threshold at which ASIC would have to apply greater scrutiny to the issue or source quotes from other firms.

Subsequently though, costs went far above that - to $75,000. And, it wasn't clear why KPMG received three separate procurements adding up to that $75,000 amount.

The ANAO also hasn't seen any documented evidence that the services were provided for three procurements of $25,000 each.

"When invoices came in for [the tax advice] we didn't see documentary evidence for the approval of the services provided. The approval was probably done by the head of HR," Hehir said.

"That's where you get the issue where the person doing the approvals is subordinate to the person requesting the approvals."

Hehir said that the ANAO's scrutiny of remuneration within ASIC was not unusual but what was unusual, he admitted, was drawing the discrepancies to the attention of Treasury rather than to the accountable authority (that is because ASIC is the accountable authority). In five years with the ANAO, this was the first time Hehir had written a letter to a minister on such a matter.

He added that one of the issues that should be addressed in the fallout of the ASIC scandal should be that these kinds of remuneration issues should be made completely clear at the point of recruitment, rather than left hanging for later.

Liberal MP Jason Falinski asked about the legal advice ASIC sought in the year between the ANAO first raising the issue and next raising the issue. He wondered whether the legal advice would have informed ASIC that there was wrongdoing. Hehir said this was not a question the ANAO could answer.

ASIC will have to provide details about that legal advice this afternoon when it fronts the committee.

Professor Graeme Samuel, formerly chair of the ACCC, was questioned by the committee following the ANAO. He addressed whether the remuneration issues were a cultural or structural problem.

Samuel said when he was at the ACCC very few commissioners lived in Canberra, he himself would transfer to Canberra to attend meetings. But, he stressed that the costs of travel and accommodation were absolutely clear with the administrative tribunal.

"It's a risk not only of doing something improper but it's the test that goes to the fundamental culture of an organisation - how would it look if this matter was exposed?" he said.

Liberal MP Celia Hammond asked Samuel: "Creating cultural change within an organisation is very difficult, isn't it?"

"No," Samuel said.

He pointed to Matt Comyn's transformation of the culture at the Commonwealth Bank as being an example of cultural change happening quickly, thanks to a zero-tolerance policy.

"Anyone who says [cultural change] takes 10 years is probably a consultant who wants a 10-year contract," Samuel said.

Samuel doesn't believe in the use of corporate consultants, he said if an organisation has the right culture they shouldn't need to spend money on expensive consultants for things like remuneration.

Unfortunately, Samuel revealed, he has witnessed several instances that prove that there are deep cultural issues within government regulatory bodies.

For example, Samuel said he saw the chair of a regulator (which he did not name) at the Australian Open as a guest of a corporate. The corporate in question was at that time under scrutiny from that very regulator.

He also said one individual at an unnamed regulator was featured on the Australian Financial Review 'Power List' and highlighted as being one of the most powerful people in corporate Australia. Samuel later saw this individual's resume, and it mentioned the 'Power List' accolade.

Samuel pointed out that celebrating notoriety in the media or power within corporate Australia is not necessarily a productive culture for the corporate regulator to have.

Read more: ASICANAOKPMGACCCAustralian National Audit OfficeCanberracorporate AustraliaDaniel CrennanJames ShiptonAustralian OpenCommonwealth BankGrant HehirLiberal MP Celia HammondLiberal MP Jason FalinskiMatt ComynProfessor Graeme SamuelSenator James Paterson
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