Electricity Businesses Disposal Process in South Australia:
Arrangements for the Probity Audit and Other Matters: Some Audit Observations

Executive Summary

Part 1 – Introduction to the Issues

Introduction
General Comments Regarding the Basis for Forming the Audit Opinion
When is the Appointment of a Probity Auditor Necessary?
Substantive Statutory Responsibilities of the Auditor-General under the Disposal Act 6
Reliance by the Auditor-General on the Work of the Appointed Probity Auditor and Other Experts Engaged by or on Behalf of the Government
A Statement of General Principle Concerning Procedures of Government
The Form and Content of the Probity Audit Opinion by the Treasurer’s Appointed Probity Auditor
The Probity Audit Opinion by the Auditor-General

Part 2 – Overview of Current Disposal Process

Current Disposal Process
Disposal Process for ETSA Power Pty Ltd and ETSA Utilities Pty Ltd
Disposal of Remaining Entities

Part 3 – Matters Associated with the Appointment and Role of the Probity Auditor Appointed by the Treasurer

The Role of a Probity Auditor as Distinguished from the Role of a Probity Adviser
Appointment of the Initial Probity Auditor
Services Contracted to be Provided by the Initial Probity Auditor
Withdrawal of the Initial Probity Auditor
Management of Release of Initial Probity Auditor
Recent Developments Following Representations by the Auditor-General to the Treasurer
Appointment of the Second Probity Auditor
Services to be Provided by the Second Probity Auditor
Audit Observations with Respect to the Second Probity Auditor’s Contract 28
Certain Conclusions Regarding Arrangements Associated with Appointment of Probity Auditors
Recommendations Regarding Matters Associated with the Appointment and Role of Probity Auditors Appointed by the Treasurer

Part 4 – Audit Comment on Probity Principles and Issues Associated with Major Stages of the Sale/Lease Process

The Probity Plan 31
Important Stages of the Sale/Lease Process: Audit Comment on Adequacy of Contractual Arrangements for Appointed Probity Auditor
    Stage One – Appointment of Advisers
    Stage Two – Tender Strategy
    Stage Three – Cooperative Arrangements with the Electricity Businesses
    Stage Four – Due Diligence on the Electricity Businesses and the State of South Australia
    Stage Five – Information Memorandum and Verification Process
    Stage Six – Marketing Strategy
    Stage Seven – Tender Documentation and Evaluation Strategy
    Stage Eight – Sale Documentation
    Stage Nine – Buyer Due Diligence
    Stage Ten – Evaluation Process
    Stage Eleven – Probity Checks
    Stage Twelve – Negotiation with Bidders
    Stage Thirteen – Receipt and Opening of Best and Final

Part 5 – Governmental, Legislative and Other Matters Relating to the Role and Responsibilities of the Auditor-General Under the Disposal Act

Any Failure by Executive Government during the Sale/Lease Process to Act on Probity Concerns Raised by the Appointed Probity Auditor and/or the Auditor-General: What is the Parliamentary Expectation and is there an Expectation Gap?
Probity Concerns that Arise during the 1999-00 Parliamentary Christmas Recess: Section 22 (7) of the Disposal Act: A Possible Model to Ensure Transparency and Compliance with Probity Requirements
Summation of Conclusions Regarding Governmental Issues

Appendix

Appendix A – Section 22 of the Electricity Corporations (Restructuring and Disposal) Act 1999:
Auditor-General’s Report on Relevant Long Term Leases