9 September 2016

The Hon Brendan O’Connor MP

Shadow Minister for Employment and Workplace Relations

Parliament House

CANBERRA ACT 2600

Dear Mr O’Connor

Parakeelia’s provision of ‘Feedback’ software to Liberal Party Members of Parliament

I am writing in response to your letter of 15 June 2016 requesting that I investigate the appropriateness of arrangements concerning the Liberal Party of Australia entity Parakeelia Pty Ltd. Your interest was in taxpayer funded reimbursements of related payments and financial transfers between Parakeelia and the Liberal Party, including whether Parakeelia has donated the profits from Feedback software to the Liberal Party.

My office has conducted a limited scope assurance review, not an audit, focused on electoral and parliamentary entitlement obligations, and financial transactions between Parakeelia and the Liberal Party. The review was limited to analysis of publicly available information, key documents and advice provided by the Australian Electoral Commission and the Department of Finance, and advice and financial information provided by Parakeelia.

In conducting the review, no evidence was provided to the Australian National Audit Office (ANAO) that the arrangements contravene electoral and parliamentary entitlement frameworks or that Parakeelia donated any profits from the sale of Feedback software to the Liberal Party. Further, the financial transactions reported to the Australian Electoral Commission between Parakeelia and the Liberal Party indicated a net cost to the Liberal Party from 2000–01 to 2014–15.

Background

Parakeelia is a registered Australian proprietary company that is wholly owned by the Liberal Party. Currently the company has three directors and there are 100 shares all of which are held in trust for members of the Liberal Party.

Parakeelia’s sole purpose is to develop, run and maintain the database software ‘Feedback’. The Feedback software enables parliamentarians to develop profiles of their constituents, using a range of information including electoral roll information, and to generate tailored communications to constituents. Most Federal Liberal Party parliamentarians subscribe annually to the Feedback software. In 2015 the average charge was some $2500, although charges for individual parliamentarians varied.

Electoral obligations

The Commonwealth Electoral Act 1918 requires that a range of individuals and organisations, including all registered political parties and their associated entities, lodge annual or election period financial disclosure returns with the Australian Electoral Commission. The returns must provide, among other things, the total value of receipts from a particular person or organisation, details of amounts received above the disclosure threshold for the financial year ($13 200 for 2016–17), and the total value of payments. While the Australian Electoral Commission advised that it is often problematic to determine whether payments are donations or payments for services received, the reporting entity must classify receipts above the threshold as ‘donations’ or ‘other’. The returns are made available for public inspection—returns from 1998–99 onwards are published on the Australian Electoral Commission’s website.

The Australian Electoral Commission considers that the Liberal Party and Parakeelia have complied with the disclosure scheme requirements. The Australian Electoral Commission’s website shows that both entities have lodged annual disclosure returns since 1998–99. The Australian Electoral Commission also advised that it: had conducted a compliance review of Parakeelia’s 2013–14 annual return, which was found to have adhered to disclosure requirements; and is overall satisfied with Parakeelia’s disclosure reporting.

The Commonwealth Electoral Act 1918 also contains provisions that regulate the permitted uses that can lawfully be made of information from the Electoral Roll. The Australian Electoral Commission considers that Parakeelia’s use of the Electoral Roll as part of the Feedback software is according to the permitted uses, and has legal advice supporting this view. The Australian Electoral Commission advised the ANAO that no information had emerged that would require it to review Parakeelia’s activities under the Commonwealth Electoral Act 1918.

Parliamentary entitlement obligations

Under the parliamentary entitlements framework, parliamentarians may claim reimbursement from their office budget entitlement for the costs of specific software, servicing, back-up and training. While there is no dollar limit on the amount that may be reimbursed, when seeking reimbursement parliamentarians must provide the Department of Finance with a tax invoice and receipt of expenditure. Parliamentarians may only use the office budget entitlement to purchase software that has been nominated by the relevant parliamentary party—the purpose of the restricted supplier policy was to prevent a proliferation of software packages within the various parties. Parakeelia is the nominated supplier for Federal Liberal Party parliamentarians.

In seeking reimbursement for specific software, servicing, back-up and training, there is no requirement for parliamentarians to use the software for parliamentary business, as distinct from party business. In any event, the Department of Finance advised that parliamentary business is interpreted broadly and includes activities associated with parliamentarians seeking re-election. Similarly, the parliamentary entitlements framework does not require the Department of Finance to check the value for money aspects of an entitlement, as there is no explicit value for money requirement on parliamentarians.

The Department of Finance advised the ANAO that reimbursements for the purchase of Feedback software have been made to parliamentarians according to established processes, and that no information had emerged that would require it to review those reimbursements.

I note that the report of a review of parliamentary entitlements has recently been released. The report proposes that, as part of a principles-based system, parliamentarians should consider whether their work expenditure represents an efficient, effective and ethical use of public resources. The Government is yet to respond to the review.

Financial transactions between Parakeelia and the Liberal Party

Disclosure amounts recorded in annual returns lodged with the Australian Electoral Commission by Parakeelia and the Liberal Party between 2000–01 and 2014–15 indicate net payments from the Liberal Party to Parakeelia.

An examination of Parakeelia’s audited financial accounts from 2009–10 to 2014–15 showed that the revenue from providing Feedback software to Federal Coalition Party parliamentarians represented approximately one-third of Parakeelia’s annual average revenue of around $850 000, with the other main sources being Australian state parliamentarians and export income. There were also subsidies from the Liberal Party to Parakeelia of some $620 000 over the period.

Over the period examined, the profits of the company were equivalent to the subsidies paid by the Liberal Party. The ANAO therefore concluded that the company would not have generated profits over the period without the subsidies paid by the Liberal Party.

The ANAO’s analysis of Parakeelia’s financial transactions from 2009–10 to 2014–15 has not identified any donations to the Liberal Party. However, there were a number of payments between the two parties over that time. In particular, there were three types of payments from Parakeelia to the Liberal Party (or on behalf of the Liberal Party):

reimbursement of costs incurred by Parakeelia in providing Feedback software that were initially paid by the Liberal Party;

payments by Parakeelia for office accommodation used by the Liberal Party, which was reimbursed by the Liberal Party; and

transfers from Parakeelia to the Liberal Party for cash flow purposes, which were reimbursed by the Liberal Party.

Since 2013–14, Parakeelia has made payments to the Liberal Party to reimburse the cost of staff employed by the Liberal Party to perform Feedback programming and training services for Parakeelia. These expenses were previously contracted to a third party, but were brought in-house from 2013–14 after Parakeelia considered that the contracting arrangement became untenable. The ANAO’s review of these charges did not identify any evidence that payments were: not for the recovery of costs incurred; or unreasonable charges for services provided to Parakeelia.

In 2012–13 and 2013–14, Parakeelia made payments for office accommodation used by the Liberal Party for campaign purposes, which were reimbursed at cost by the Liberal Party. In February 2012, Parakeelia transferred an amount to the Liberal Party that was repaid the next month. Parakeelia advised that the transfer was for cash flow purposes.

I trust this information is of assistance. As this matter has been of interest to the wider community, I intend to place our correspondence on the ANAO’s website in the next day or so.

Yours sincerely

Grant Hehir