Introduction

1.1 Measurement is integral to any well-functioning and productive economy, and plays a critical role in domestic law and international treaties for trade, commerce and consumer protection. Following a decision of the Council of Australian Governments to transfer trade measurement responsibilities from the states and territories, national trade measurement commenced on 1 July 2010. Trade measurement refers to all transactions in which the price of the commodities or goods is based on measurement of quantity or quality. The primary purpose of Australia’s trade measurement system is to ensure that the pricing of traded goods is based on accurate measurement. Trade measurement covers both business-to-business transactions and business-to-consumer transactions. Australia’s trade measurement transactions are estimated to be worth more than $750 billion each year.

1.2 The Department of Industry, Science and Resources (DISR), through the National Measurement Institute (NMI)¹, administers Australia’s trade measurement laws. It is responsible for ensuring that businesses and individuals comply with the rules and regulations so that there is accurate and reliable measurement in trade. As part of this responsibility, DISR, through its NMI function, undertakes trade measurement compliance activities that include:

• conducting trader audits;
• testing measuring instruments in use for trade;
• testing pre-packaged goods;
• monitoring trading practices through trial purchases; and
• conducting enforcement activities where non-compliance has been identified.

1.3 DISR reported that in 2021–22 the NMI had:

• conducted 3131 trader audits (compared to 7600 in 2019–20 and 4842 in 2020–21);
• tested 7118 measuring instruments (compared to 13,588 in 2019–20 and 14,049 in 2020–21); and
• inspected 17,360 lines of packaged goods (compared to 78,290 in 2019–20 and 25,990 in 2020–21).²

1.4 DISR reports the NMI as having more than 350 staff, of which 76 are estimated by DISR to work in trade measurement.³ The NMI has offices located around Australia with its head office located in Sydney (see Figure 1.1).

Figure 1.1: National Measurement Institute office and laboratory locations

Note: The red dots identify Measurement Standards laboratory locations.

Source: Department of Industry, Science and Resources.

Rationale for undertaking the audit

1.5 The activities of the department, through its NMI function of trade measurement, impact on everyday life. The department has regulatory responsibility to ensure that the pricing of traded goods, based on quantity or quality, is based on accurate measurement. This audit provides assurance to the Parliament over the effectiveness of DISR’s administration of trade measurement.

Audit approach

Audit objective, criteria and scope

1.6 The objective of the audit was to examine whether compliance with trade measurement in Australia is being effectively administered.

1.7 To form a conclusion against this objective, the following high-level criteria were applied.

• Have sound governance arrangements been established to support trade measurement compliance activities?
• Is there an effective approach to trade measurement compliance activities?

1.8 The scope of the audit covered the period from 1 July 2019 until 30 June 2022. In relation to examining the adoption of a risk-based approach to regulation, the audit focussed on the two programs where DISR has documented approach to assessing compliance risk, being the concentrated national audit and compliance confidence programs. Concentrated national audit programs focus on targeted industry sectors over a specific time period to assess compliance with trade measurement legislation. Under the compliance confidence programs, DISR targets a selection of traders and industry groups found to be non-compliant in previous years.

Audit methodology

1.9 The audit methodology included:

• reviewing and analysing relevant departmental records;
• reviewing and analysing relevant data in the Trade Measurement Activity Recording System (TMARS) relating to trade measurement compliance activities⁴;
• collecting and reviewing email accounts;
• examination of a sample of trader audits and enforcement actions;
• meetings with key staff; and
• observing the conduct of trade measurement compliance activities by departmental officers in four states and territories, and site visits to two NMI offices.

1.10 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $458,000.

1.11 The team members for this audit were Tiffany Tang, Nicole McNee, Tracey Bremner and Brian Boyd.

2.1 Procedures and guidance are important to ensure the delivery of policy, including regulation, is consistent with achieving intended outcomes. The ANAO examined whether DISR had appropriate policies, procedures and guidance in place to support the administration of trade measurement compliance activities.

2.2 Best practice regulators take a risk-based approach to compliance activities and are informed by data, evidence and intelligence. Regulators that assess the risk of non-compliance are better positioned to focus limited resources on areas of greatest impact.⁵ The ANAO examined DISR’s approach to assessing the risk of regulatory non-compliance and the extent to which the results informed the targeting of its trader audit activities.

Are appropriate policies, procedures and guidance in place?

2.3 The primary objective of trade measurement compliance activities is to assess whether traders are complying with their obligations under trade measurement laws.⁶ DISR officers who are appointed as trade measurement inspectors are responsible for conducting trader audits to monitor trader compliance.⁷ Inspectors may undertake different activities during a trader audit including:

• testing measuring instruments;
• checking pre-packaged articles⁸;
• checking trading practices⁹; and
• conducting ‘secret shopper’ trial purchases.

2.4 Trader audits may be conducted as part of a trade measurement compliance program, or in response to a complaint or enquiry from a consumer.¹⁰

Appointment of trade measurement inspectors

2.5 Under section 18MA of the National Measurement Act 1960, the Secretary may by instrument in writing, appoint a person as a trade measurement inspector if that person has the prescribed qualifications, knowledge or experience and falls under one of the following categories:

• an APS employee in the department;
• an employee (whether or not an APS employee) of a Commonwealth authority;
• the holder of an office established by or under a law of the Commonwealth.

2.6 The people eligible to be appointed as trade measurement inspectors are limited to Commonwealth employees due to the search and entry powers conferred upon them. A person that has not been appointed by written instrument as a trade measurement inspector is unable to legally undertake monitoring and enforcement activities under the legislation, such as to enter and search business premises, inspect business vehicles, seize certain things, require answers to questions and issue non-compliance notices.¹¹

2.7 The Secretary of DISR signed an instrument in May 2017 delegating functions and powers under the National Measurement Act 1960, including the power to appoint trade measurement inspectors. In a report of October 2019, a legal firm engaged by DISR recommended that this instrument be amended to rectify a number of identified risks. The instrument had not been amended as at June 2023, notwithstanding the legal advice or that the holder of the position of Secretary had changed twice since 2017 (in February 2020 and again in August 2022). The Australian Government Solicitor advises that ‘it is clearly good administrative practice to provide new office-holders with the opportunity to reconsider arrangements for delegated decision-making and issue new instruments of delegation’.¹²

2.8 A further shortcoming in the department’s approach was that all copies of the legal advice were marked ‘draft’. Not finalising draft legal advice¹³ is not a sound reason for entities to not action the advice.¹⁴

2.9 As at 31 December 2022, DISR did not have a policy or procedure in place relating to the appointment of trade measurement inspectors.¹⁵ The ANAO observed that written instruments of appointment for trade measurement inspectors were not appropriately filed within DISR’s systems for all relevant individuals. Between 1 July 2019 and 30 June 2022, a total of 16,590 trader audits were recorded as having been completed by 60 individual inspectors in TMARS.¹⁶ Of those 60 individuals:

• 40 (67 per cent) had instruments of appointment filed within DISR’s systems¹⁷;
  • 12 were appropriately appointed as a trade measurement inspector under an instrument prior to completing their first trader audit; and
  • 28 were appointed after already having completed their first trader audit (the maximum time taken between the first trader audit being completed and the instrument being signed was 5.8 years, with the average being 9.8 months);
• 13 (22 per cent) had scans of the hard copy instruments of appointment subsequently filed within DISR’s systems after the ANAO requested further information (all inspectors had been appropriately appointed prior to completing their first trader audit)¹⁸; and
• seven (12 per cent) did not have evidence of a valid appointment.

2.10 In aggregate, 1399 of the 16,590 trader audits undertaken between 1 July 2019 and 30 June 2022 were conducted by a person that either had not yet been appointed (67 audits)¹⁹ or there is no record of them having ever been appointed (1332 audits). Of those 1399 trader audits, 456 or 33 per cent resulted in a ‘Failed’ audit result. In June 2023, DISR advised the ANAO that it ‘considers it cannot take valid enforcement actions where the audit was conducted by a person not appointed, or not yet appointed, under the legislation.’

2.11 In December 2022, DISR moved to having a single instrument of appointment in the form of a Schedule that lists all departmental staff appointed as trade measurement inspectors, rather than having separate certificates issued to each individual as the appointment instrument. The new instrument does not of itself mean that persons undertaking monitoring and compliance activities have been appointed before undertaking this work. For example, based on TMARS data the ANAO identified seven audits conducted after the new instrument was introduced which had an unappointed officer listed as the ‘Inspector’ within TMARS, and no appointed officer listed as assisting. In July 2023, DISR provided the ANAO with records that indicated TMARS had not recorded that four of those seven audits had been conducted under the supervision of a person that had been appointed.

Policies and procedures

2.15 In response to the ANAO’s request for an inventory of the National Measurement Institute’s (NMI) documents, DISR provided in June and July 2022 three spreadsheets that comprised the document lists. The document lists were separated into: documents directly related to trade measurement activities; and other overarching documents related to the legal metrology framework.²⁰ In total, there were 184 documents listed as being in effect and 263 with a status of ‘Potential’.²¹

2.16 DISR’s internal records management policy requires that the NMI use Content Manager (the department’s record keeping system) to store and access documents and digital information.²² Of the 184 current documents, 77 were identified by DISR as being ‘directly related to trade measurement activities’. These 77 documents were filed across five different folders/containers within Content Manager. The effective dates of the documents spanned over a period of more than 10 years, with the oldest document having been last revised in February 2012 and the newest document being approved in June 2022.²³

2.17 The ANAO’s examination of DISR’s policies and procedures identified instances where documents were confusing and incomplete (see Appendix 3 for further details and examples). The ANAO also identified gaps in the available guidance material and some areas where the documents could be improved.

• There is an absence of TMARS-specific guidance which outlines how inspectors are to record information related to trader audits within TMARS and the level of detail required (see paragraphs 3.41–3.42 and 3.74–3.76 for further details on the inconsistencies observed by the ANAO in how information is input into TMARS and the level of detail recorded against trader audits).
• There is no policy or guidance relating to the management of hard copy inspector notebooks and non-compliance notices by DISR officers (see paragraph 3.43 for further details on missing notebooks and notices). In June 2023, DISR advised the ANAO that:

As of 20 April 2023, several actions were taken to improve guidance and processes for management of hardcopy inspector notebooks including: all inspector notebooks being recorded in TMARs as an asset, LMB Procedure 8.18 ‘Updating asset details in TMARS’ has been updated to include guidance regarding inspector notebook management and a new Inspector Handbook known as Draft LMB Procedure ‘Inspection and investigation’ is in draft format and will include guidance relating to storage of inspector notebooks.

• The ANAO’s analysis was that the process of recording all issued notebooks in TMARS as an asset was completed on 21 June 2023. LMB Procedure 8.18 (approved on 10 February 2023) does not include reference to inspector notebooks²⁴ and does not include guidance regarding the management or storage of those notebooks by inspectors. Further, draft LMB Procedure – Inspection and Investigation does not include any reference to the storage of inspector notebooks.

2.18 The ANAO also observed that existing policies and procedures were not being updated in a timely manner (see Table A.1 in Appendix 3 for examples). It is important to maintain the currency of all supporting documentation, including metadata, to enable robust data management and analysis. This will also ensure the implementation of legislative or policy/procedural changes is consistent with achieving intended outcomes. To obtain an indication on the currency of the 77 policies and procedures related to trade measurement activities, the ANAO examined the time lapsed since the documents were last approved/reviewed, as at 30 June 2022. For this analysis, the ANAO did not include: 12 documents that were plans for specific programs undertaken in 2021–22 and one document which did not have an approved/reviewed/effective date. Of the remaining 64 documents, 17 (27 per cent) had been approved or reviewed more than five years ago (see Figure 2.1).²⁵

Figure 2.1: Time lapsed since documents last approved/reviewed as at 30 June 2022

Note: This analysis did not include 13 documents: 12 were plans for specific programs undertaken in 2021–22 and one did not have an approved/reviewed/effective date.

In July 2022, DISR advised the ANAO that one of the documents in the ‘8 to 9 years’ category had been made obsolete.

Source: ANAO analysis of departmental records.

Internal audit findings

2.19 At a cost of $64,000, Nous Group was contracted to conduct an internal audit of the NMI’s trade measurement regulatory performance. The report was completed in April 2018. It found that:

LMB has many policies and procedures that cover a range of processes, including policies on enforcement actions and investigation procedures. However, many are scattered across LMB’s IT infrastructure and most have not been reviewed for a while. A few stakeholders observed that some policies and procedures were not used, and others were out of date. One stakeholder considered that some staff don’t know where to find relevant documents.

This issue was identified a year ago, and a project was initiated to gather them in one directory and review them periodically. This project will make every instruction, policy, and procedure available in one location sorted by Branch. There will also be an ongoing review process for policies and procedures so that they are all updated on a regular basis, based on consultation with the original author of the document.

2.20 Two related internal audit recommendations were that the NMI:

1. Consolidate policies and procedures following the review.

2. Make a designated person or team responsible for updating policies and procedures in line with performance insights.

2.21 Following an internal review in 2019 of the LMB structure, the NMI commenced the LMB Structure Pilot in March 2020 which transferred responsibility to the Policy Unit for ‘Facilitating the development and maintenance of non-technical documentation on behalf of LMB’. In February 2023, the NMI provided the following information about the LMB document management project:

• The Policy Unit began a stocktake of documents currently used or identify for use within LMB. These documents were found in various states of approval and locations. As of 3 February 2023 nearly 1700 documents have been identified in the LMB Document Register.²⁶
• The stocktake identified the potential need for the review or creation of 300 - 350 critical LMB documents (policies, plans and procedures).
• On 1 October 2020 LMB introduced a new document management system for critical LMB documents not covered by other quality systems. The laboratory and training functions within LMB are already subject to separate quality systems that include their critical documents.
• As of 3 February 2023, 67% (40/61) of the old LMB documents have been updated, merged or archived. In the same period 142 new LMB documents were approved and another 57 are currently under development.
• The new document management system outlines the responsibility of the (currently 13) document owners. The Policy Unit meets with the document owners approximately every 6 weeks and have provided weekly updates to the LMB General Manager.

Managing and maintaining records

2.22 Many of the documents relating to the administration of trade measurement activities were not created and/or maintained within Content Manager but in network drives.²⁷ For example, in respect of records relating to investigations and compliance, as at 28 September 2022, 3025 records were saved across 422 sub-folders within the NTM Group shared drive. There was no equivalent or similarly titled container/folder within Content Manager. The closest was a container/folder called ‘Compliance enforcement’ with four records saved in one sub-folder.

2.23 There were also instances where records relating to trade measurement compliance activities (including changes/updates to procedures and processes, decisions on enforcement actions and reporting on program progress) were not maintained in DISR’s record management system (Content Manager), but were only available in officer email accounts or business systems (such as TMARS). Due in part to the insufficiencies of the files, the ANAO obtained extracts of 106 email accounts to inform this audit.

2.24 Paragraphs 3 and 4 of Appendix 3 provide further details on DISR’s management of Commonwealth records.

Is the regulatory approach informed by an assessment of compliance risk?

2.29 DISR has documented that its administration of legal metrology regulatory compliance will be informed by an assessment of compliance risk. Its published National Compliance Policy and annual National Compliance Plans, for example, state that:

• ‘We use a risk-based approach when … targeting compliance activities’; and
• ‘We measure risk in terms of the harm and likelihood of regulatory non-compliance.’

Internal audit findings and responses

2.30 An internal audit of the NMI’s legal metrology activities was completed in December 2015 by NERA Economic Consulting at a cost of $267,106. The ‘overarching findings’ included that:

while the NMI has a risk framework for legal metrology, it is unsophisticated. It does not articulate the risks of non-compliance (i.e. what harm or detriment is being experienced, by whom) and does not appear to be proportionate to risk. The NMI currently focuses its compliance activities on ensuring the accuracy of measurement rather than focusing on minimising harm. The current risk framework has also been ineffectual in directing the compliance and enforcement activities to areas of high non-compliance and delivering a nationally consistent approach to legal metrology …

[the internal audit] anticipates that introducing a risk-based approach to regulation will require a significant program of change within the Legal Metrology Branch that will impact every facet of its operations and will require a strong change agent to drive these reforms.

2.31 Three related internal audit recommendations were that the NMI:

• publish a strategic plan to communicate how it intends to deliver on the Government’s objectives and report on its performance on a regular basis; [and]
• reform its compliance and enforcement policy to align with the principles of a risk-based approach to regulation; [then]
• reset its approach to targeted inspections, its enforcement thresholds, and its education/communication activities to reflect a risk-based approach to regulation.

2.32 DISR recorded that implementation of the above three recommendations was ‘Complete’ by the milestone date of 30 June 2017, with a delivery confidence of ‘High’, based largely on the provision of three documents. The ANAO’s analysis is that these documents did not implement the internal audit recommendations, as follows.

• 2017–18 National Compliance Plan — Plans are produced annually. The ANAO compared the 2017–18 plan with two that preceded the 2015 internal audit report. It did not differ from the previous plans in a manner that would implement the recommendations or address the related findings.
• 2017 National Compliance Policy — The three-page 2017 policy replaced an 11-page 2011 policy. The 2017 policy did not differ in a manner that would implement the recommendations or address the related findings.
• 2017 Non-Compliance and Enforcement Protocol — The six-page 2017 document replaced a 14-page 2014 document and was not applicable to the ‘targeted inspections’ or ‘education/communication activities’ components of the recommendation.

2.33 DISR also recorded against one of the above recommendations that ‘NMI has changed its approach to inspections and now uses data from [TMARS] to inform risk-based targeting’. The ANAO’s analysis of this assertion is that it has not yet been effectively and demonstrably delivered, for the reasons set out in the remainder of this Chapter.

2.34 A methodology and proposed data sets for assessing compliance risk at the industry-level were outlined in a Trade Measurement Risk Based Monitoring Program Evaluation Principles (‘risk principles’) document dated February 2017. While DISR did not reference this document when tracking implementation of the December 2015 recommendations, it had the following related purpose.

The [internal audit of December 2015] considered NMI’s focus on regulating for accuracy rather than regulating to prevent harm or negative impact is not a best practice approach to regulation. This document details a strategy for identifying future risk based monitoring programs focussed on minimising harm rather than regulating for measurement accuracy …

The purpose of this document is to provide a three stage strategy to implement by July 2018 a sophisticated risk based framework for trade measurement monitoring (inspection) programs with a primary focus on minimising harm.

2.35 The risk principles document explained that an industry risk assessment ‘should be undertaken for the previous 1, 2 and 5 calendar years, to identify the ten industries with the greatest potential risk or harm to the Australian community’. The explanation did not extend beyond this to the development of the annual National Compliance Plans, and the methodology did not extend to assessing risk at the trader-level.

2.36 An internal audit completed by KPMG in May 2020 recommended that NMI ‘Formalise and document the methodology used for the collation of Annual Program Plans, including the considerations staff should use in the selection of traders’. For context, the internal audit report outlined:

It is important that the department has documented a defendable approach to support the integrity of the selection process for both annual programs and traders …

[The] selection of programs and traders may not have been targeting the areas of highest risk as the methodology for compiling the annual planning and trader selection has not been clearly defined, which may have resulted in staff undertaking inspections of low risk programs and traders.

2.37 NMI was advised that ‘To close this recommendation, Internal Audit will need to see the methodology that has been produced during the development of the 2021/22 Annual Program Plans — this should include consideration staff need to use in the selection of traders’. The due date to provide the methodology was originally 31 March 2021, which was then extended to 30 June 2021. The recommendation was closed on the basis of NMI providing a risk principles document dated 30 June 2021.

2.38 The risk principles document of June 2021 was largely identical to the risk principles document of February 2017. The methodology was not, therefore, ‘produced during the development of the 2021/22 Annual Program Plans’ and it did not include ‘considerations staff need to use in the selection of traders’. The minor differences in the wording of the June 2021 version included that: the three stage strategy was written in the past tense; the target implementation date of ‘July 2018’ for Stage 3 was deleted; and the words ‘Stage 3’ were deleted from the heading ‘Future Data Sets to be considered for use in Stage 3’. The 10 data sets listed under that heading were not yet in active use as at 31 March 2023 (see paragraph 2.43).

Assessing compliance risk at the industry-level

2.39 In response to ANAO requests for its industry-level risk assessments and methodology, DISR provided in August 2022 (and again in October 2022) a copy of the risk principles document dated June 2021 and three spreadsheets produced in November 2021 that comprised the ‘industry risk assessment 1, 3 and 5 years’. The difference between the spreadsheets was the time span of the data used, being 1 July 2016–4 November 2021, 1 July 2018–4 November 2021 and 1 July 2020–4 November 2021.

2.40 There were 43 market sectors (or trader types) listed in the spreadsheets, which were a sub-set of the 59 sectors listed in TMARS. DISR did not document why it chose to leave some of the sectors out of the risk assessment, such as the ‘Manufacturer – Food’ sector for which more trader audits were completed during 1 July 2018–4 November 2021 than 70 per cent of the sectors in the spreadsheets.

2.41 The spreadsheets ranked the 43 market sectors in order of relative risk according to a numerical ‘risk factor’ calculated for each. The lower the rank, the higher the potential harm and likelihood of regulatory non-compliance.

2.42 The ANAO identified shortcomings with the basis on which the risk factor was calculated. These reduced the reliability of the rankings and the extent to which risk was being measured in terms of the harm of regulatory non-compliance, and not just the likelihood. The December 2015 internal audit had found that NMI’s risk framework did not focus on minimising harm (see paragraph 2.30).

2.43 The risk principles document stated that the calculation of the risk factor for each sector would be based on ‘a minimum of 12 different data sets’. The spreadsheets presented 19 different data sets, however 12 of these had no impact on the ranking of sectors. For example, 10 of the data sets had no impact because a risk rating of ‘1’ (minor) was hard-keyed against every sector. That is, there was no data in the 10 data sets. These 10 data sets were indicators of the relative level of harm that may result from non-compliance and required data external to TMARS to populate.

2.44 One of the seven data sets that did impact the ranking of sectors sought to measure the harm or detriment of regulatory non-compliance through the ‘projected annual community detriment based on initial visits’. In reference to this measure, the risk principles document had stated: ‘At present the available community detriment data is insufficient to reliably use this data as part of the total risk evaluation’. The data set was unreliable because the population of traders in TMARS may not represent the population in the community and because the financial detriment data in TMARS contained errors.²⁸ For example, following a Major Supermarkets Audit conducted in 2020 under which 195 non-compliance notices were issued, DISR identified that ‘In the majority of instances of non-compliance (customer detriment), no financial detriment estimation was recorded, and in the cases where a figure was included there was no consistency in the way the figure was determined’. Failure to complete the financial detriment fields in TMARS was the most frequent error picked up in the data quality reports until May 2021, at which time the fields were removed from the data quality script which meant that the errors were no longer reported. The fields still appear in the department’s Data Quality Management Processes document (last updated 27 May 2022) as though they are captured in the reporting.

2.45 Additional information on the risk assessment spreadsheets and their key shortcomings is in Appendix 4 (paragraphs 2–3 and Table A.3).

2.46 In June 2023, DISR advised the ANAO that:

Data driven risk-assessment processes are a key component used when selecting target trader sectors. However, DISR also uses additional qualitative, anecdotal and workforce information to inform the selection of target trader sectors. These additional factors include stakeholder feedback, trade measurement inspector feedback, consumer sentiment (e.g. cost of living pressures), consideration of broader government priorities (e.g. consumer protection or regulatory burden) and operational constraints ensuring the efficient use of a finite inspector workforce. DISR acknowledges that the current published and internal information does not articulate that the data-driven risk assessment processes is supplemented by other information.

Targeting compliance activities at the industry-level

2.47 The use of assessed risk is most relevant to the targeting of trader audit activities under the ‘concentrated national audit’ and ‘compliance confidence’ programs.²⁹ It was not evident to the ANAO from the records examined how DISR used the risk assessments as a ‘key component’ when selecting industries for targeting through these programs. DISR advised the ANAO in June 2023 that:

Industries targeted under the compliance confidence program are determined with reference to the previous year’s targeted industries and not the “Industry risk assessment spreadsheet”. The compliance confidence program focuses on industries or trader types that have previously been non-compliant or subject to an enforcement action to determine if there is a long-term change in compliance levels through the intervention of DISR compliance activities. …

Each year DISR refresh their 1, 3 and 5 year risk assessments that are used to determine industries to target for the forward financial year. The 1 July–4 Nov 2021 ranking would only have been used to help determine target industries for the 2022–23 financial year.

Concentrated national audit program

2.48 The ANAO requested copies of the ‘1, 3 and 5 year risk assessments’ that DISR used to determine industries to target through its concentrated national audit program in each of 2019–20, 2020–21 and 2021–22. DISR was unable to provide a set of ‘1, 3 and 5 year risk assessments’ for any of these years, which was contrary to DISR’s assertions of June 2023 and to the process outlined in its risk principles documents of February 2017 and June 2021 (see paragraph 2.35).

2.49 DISR was able to provide the ANAO six spreadsheets in June 2023:

• two spreadsheets covering the same unspecified period for its 2019–20 planning;
• one spreadsheet covering one unspecified period for its 2020–21 planning; and
• three spreadsheets covering two specified periods (being 1 July 2016–30 June 2020 and 1 July 2017–30 June 2020) for its 2021–22 planning.

2.50 The ANAO examined the extent to which DISR’s selection of industries, or trader types, for targeting was consistent with the results of its industry risk assessments. For the purpose of this analysis, the ANAO considered the four National Compliance Plans from 2019–20 and used the nine industry risk assessments provided by DISR (being the three spreadsheets provided in 2022 and the six spreadsheets subsequently provided in June 2023).

2.51 The ANAO’s analysis indicated there was a weak alignment between a trader type’s assessed risk and its selection for targeting under the concentrated national audit program. Of note:

• DISR had assessed three-quarters of the trader types it selected for the program as having an above average risk.
• The one-quarter DISR selected with a below average risk included ‘licensed premises’, ‘poultry retail’ and ‘smallgoods’.
• Those DISR did not select for targeting in any of the four years under any program, despite rating them as comparatively high risk, included ‘mining and resources’, ‘recycling’ and ‘small business – food’ (which had the highest risk rating in seven of the nine spreadsheets examined).

2.52 The ANAO’s analysis covered both the risk rankings and the risk factors assigned by DISR. The analysis of the risk rankings included identifying the number of trader types assigned to each of the 43 possible ranks in each of the nine spreadsheets (DISR ranked trader types in declining order of risk from one to 43, assigning those with the same risk to the same rank). The number of trader types at each ranking that DISR selected for its concentrated national audit programs, compared with those it chose not to select for either its concentrated national audit or compliance confidence programs, is presented in Figure 2.2.³⁰

Figure 2.2: Risk ranking of trader types selected for targeting under the concentrated national audit program

Source: ANAO analysis of nine risk assessments provided by DISR and four National Compliance Plans from 2019–20.

2.53 In July 2022, DISR briefed the Minister for Industry and Science on its National Compliance Plan for 2022–23 and listed the three sectors chosen for its national concentrated audit program: fruit and vegetable retailers; meat, fish and poultry retailers; and delicatessens and smallgoods retailers. The Minister asked, ‘why are these three being targeted?’ and DISR responded in August 2022 as follows.

NMI takes a risk-based approach to selecting market segments for targeted compliance activities. In relation to historical compliance data, the three target market segments above have been subject to previous audit programs undertaken between 2017 and 2021.

• Previous compliance programs found high instances of non-compliance during initial and follow up audits, including significant non-compliance (significant non-compliance is when there is a detriment to a customer such as a shortfall in the product advertised).
• High numbers of enforcement actions were issued to the three market segments following previous audit programs.

2.54 DISR’s advice to the Minister was not supported by the departmental data, nor was the basis on which the market segments were selected otherwise evident from the records. Delicatessen and smallgoods retailers had not been targeted between 2017 and 2021. Further, the data DISR extracted to inform its response to the Minister contained no enforcement actions for poultry, delicatessen or smallgoods retailers. In terms of risk, DISR had ranked smallgoods retailers at a relatively low 37th out of the 43 sectors it assessed. DISR advised the ANAO in June 2023:

DISR acknowledges the information provided to the Minister implied high instances of non-compliance actions for poultry, delicatessen and smallgoods retailers which was incorrect. DISR will work with the Minister’s office to clarify the advice provided.

2.55 In August 2023, DISR advised the ANAO that ‘The Acting Head of Division, National Measurement Institute has raised this issue with the Minister’s Office’, and provided evidence to the ANAO that it had done so.

Compliance confidence program

2.56 The ANAO examined the extent to which DISR’s selection of industries, or trader types, for targeting through its compliance confidence program in each of the three years from 2020–21 had an above average level of non-compliance and enforcement actions the previous year. (The 2019–20 National Compliance Plan had not specified industries for this program type.)

2.57 The ANAO’s analysis indicated a moderate alignment. Of the trader types DISR selected for the compliance confidence program, three-quarters had above average non-compliance and most had an above average number of warning letters and/or infringement notices issued.

Taking a risk-based approach at the trader-level

2.58 DISR introduced the use of trader-level risk assessments to inform trader selection in its 2022–23 ‘Tare It’ program.³¹ The program consisted of three one-week national concentrated audits, with each audit focussing on a different retail sector. The first concentrated audit was undertaken the week commencing 17 October 2022 and focussed on fruit and vegetable retailers.

2.59 DISR provided the ANAO with the trader-level risk assessment spreadsheet produced for the fruit and vegetable retail sector and outlined the assessment methodology in an email. The spreadsheet listed 2152 traders and calculated a numerical risk factor for each, drawing on 10 data sets. Each trader had been manually assigned a risk category on a four-point qualitative scale according to their relative risk factor. Trade measurement inspectors were provided a list of traders for their region and advised that ‘inspections should prioritise traders with the highest risk category (Very High to Low)’.³²

2.60 A challenge with the approach is factoring in the assessment and selection of new traders for inspection. The spreadsheet was populated with the traders and trader audit data from TMARS. If a trader had not been visited previously, so was a ‘new trader’, then it was assessed as having a ‘Very High’ risk against two of the data sets. The impact was largely offset by it also being assessed as having a ‘Minor’ risk against the other eight data sets in the spreadsheet. The result was that all new traders were assigned the risk category ‘Medium’, which was the second lowest priority for inspection. This result is at odds with inspector guidance for other compliance programs that included ‘new traders’ in the list of priorities for trader selection. Further, TMARS does not contain a complete list of all traders within a given sector nationally.

3.1 Regulators have a responsibility to give confidence to Parliament, the Government and the community that regulated entities are complying with their statutory obligations and that appropriate enforcement action is taken when a regulated entity fails to meet its obligations. To assess whether there is an effective approach to trade measurement compliance activities, the ANAO examined whether:

• industry compliance is appropriately monitored;
• identified non-compliance is acted upon; and
• the regulatory approach is regularly reviewed and, where appropriate, updated.

Is industry compliance appropriately monitored?

Note a: In June 2023, DISR’s advice to the ANAO in relation to the appointment of trade measurement inspectors was that ‘a trader audit involves a Trade Measurement Inspector exercising their powers under the National Measurement Act 1960 and is conventionally associated with physically visiting the trader’. The department also advised the ANAO that its database (that records the conduct of trader audits) includes inspection types that ‘did not exercise regulatory powers, such as desktop or online research of traders or a new trader program that did not involve site visits’. See further information at paragraph 3.6.

3.2 DISR’s trade measurement compliance activities are directed towards assessing whether traders are complying with their obligations under trade measurement laws. Compliance activities include trader audits which may be conducted as part of a trade measurement compliance program.

Performance against targets

3.3 Each year DISR publishes a National Compliance Plan on its website. The plan outlines the compliance programs and the compliance targets for the year ahead in relation to its inspection activities, including the number of trader audits to be completed.

3.4 As shown in Figure 3.1, the reduction that has occurred in the level of trader audit activity reflects both a plan to conduct fewer audits as well as a failure to deliver the planned number of audits.

• The largest reduction in the number of planned audits occurred between 2017–18 and 2018–19, when the department reduced its target by more than 30 per cent from 11,500 to 8000. The target was increased to 10,000 for each of 2019–20 and 2020–21 before being reduced again to 8000 for 2021–22.
• There has been an overall decline in the total number of trader audits conducted from 2017–18 to 2021–22 (a decrease of 67 per cent). The performance target has not been met once over the five-year period with 39 per cent of the target being achieved in 2021–22. In aggregate across the five years, the department conducted 32,792 (69 per cent) of the 47,500 audits it planned to conduct meaning there were 14,708 fewer audits than the department had identified as required to provide an appropriate level of compliance monitoring.

Figure 3.1: Target vs actual trader audits and proportion of non-compliance

Note: Where non-compliance is identified during a trader audit, a follow-up audit may be subsequently conducted to check whether the non-compliance has been corrected.

Source: ANAO analysis of DISR’s National Compliance Plans and National Compliance Reports.

3.5 The reduction in trader audit activity does not reflect improving levels of compliance. Across the five-year period, the level of non-compliance identified varied between 31 per cent and 35 per cent of the traders subject to an initial audit, and between 18 per cent and 27 per cent of follow-up audits also found non-compliance.

3.6 The ANAO’s analysis of the extent of trader audit activity is based on DISR’s National Compliance Reports and records of audits in the Trade Measurement Activity Recording System (TMARS).³³ In June 2023, the department advised the ANAO that ‘a trader audit involves a Trade Measurement Inspector exercising their powers under the National Measurement Act 1960 and is conventionally associated with physically visiting the trader’. The department also advised the ANAO that TMARS includes records of inspection types that ‘did not exercise regulatory powers, such as desktop or online research of traders or a new trader program that did not involve site visits’. Nonetheless, in its public reporting on its compliance activities, the department includes those inspection types as a trader audit. The ANAO also observed instances where those inspection types were recorded as having identified non-compliance and enforcement action taken in the form of non-compliance notices.³⁴ While TMARS includes fields to record trader audit information such as ‘Audit Type’ and ‘Program’, there is no separate field that identifies which inspection types should or should not be counted for reporting purposes.³⁵

3.7 There has also been a declining trend across DISR’s other trade measurement inspection activities. As shown in Figure 3.2, the department reduced its target for the number of measuring instruments to be tested by 23 per cent from 13,000 in 2017–18 to 10,000 in 2018–19 (despite the target having been achieved in 2017–18). This target of 10,000 was maintained for three years, and exceeded in each of those years, before being increased to 15,000 in 2021–22. DISR achieved 47 per cent of its target in 2021–22. Overall, there has been a decrease of 52 per cent in the number of measuring instruments tested between 2017–18 and 2021–22.

Figure 3.2: Target vs actual measuring instruments tested

Source: ANAO analysis of DISR’s National Compliance Plans and National Compliance Reports.

3.8 As shown in Figure 3.3, for pre-packaged article lines the largest reduction in the planned number of lines to be tested occurred between 2017–18 and 2018–19, when the department reduced its target by 29 per cent from 85,000 to 60,000. The target was increased to 70,000 from 2019–20 to 2021–22. There has been an overall decrease of 76 per cent in the number of pre-packaged article lines tested over the five years examined, with DISR achieving 37 per cent of its target in 2020–21 and 25 per cent in 2021–22.

Figure 3.3: Target vs actual pre-packaged article lines tested

Source: ANAO analysis of DISR’s National Compliance Plans and National Compliance Reports.

3.9 While DISR includes targets on the number of ‘secret shopper’ trial purchases to be conducted each year in its National Compliance Plans, it does not report on the total number achieved in its National Compliance Reports (see further detail of the shortcomings of DISR’s external reporting at paragraphs 3.68–3.72).³⁶

Resourcing

3.10 The performance targets for each inspection activity and compliance program are set by DISR based on the number of trade measurement inspectors available and an estimate of how many audits those inspectors can undertake.

3.11 The number of staff conducting trade measurement compliance activities, including trader audits, fluctuates throughout the year and some staff may have duties outside of trade measurement.³⁷

3.12 DISR provided the ANAO with data on the staffing profile of the Legal Metrology Branch (LMB) within the National Measurement Institute (NMI) from 2017–18 to 2021–22. As shown in Table 3.1, while the number of full-time equivalent (FTE) staff allocated to trade measurement compliance activities has declined by 24 per cent from 2017–18 to 2021–22, the number of audits conducted per FTE has decreased at a greater rate (57 per cent over the five-year period). DISR advised the ANAO that the reduction in staffing levels was not driven by a lack of available resources, but the inability to attract and retain staff.³⁸

Table 3.1: Ratio of staff to audits conducted each year

Source: ANAO analysis of departmental records.

3.13 In June 2023, DISR advised the ANAO that:

Table 3.1 currently details all staff assigned to Trade Measurement Services, which includes staff who undertake supporting duties and would not be solely tasked to field based activities. These staff include Regional Managers, Assistant Regional Managers, Trainers and Assessors. Additionally, some staff have been seconded from time to time to support other Legal Metrology Branch (LMB) operations or surge requests.³⁹

Impact of COVID-19 pandemic

3.14 DISR reported that compliance activities were impacted by the COVID-19 pandemic with trade measurement field audit activity largely suspended in mid-March 2020. At odds with the three stage return to the field for trade measurement inspectors that commenced in June 2020, with all jurisdictions (except for Victoria) commencing stage 3 field activities in November 2020⁴⁰, DISR continued to report that ‘trade measurement field audit activity was suspended or restricted for significant periods in many parts of the country’ during 2020–21 and 2021–22.

Monitoring compliance of targeted industries

3.15 The ANAO examined the extent to which the audits conducted aligned with the compliance programs as set out in the National Compliance Plans and whether the audits focussed on those industries identified as being higher-risk.

3.16 As shown in Table 3.2, DISR did not meet the target number of trader audits under its concentrated national audit and compliance confidence programs⁴¹, with 41 per cent achieved in 2021–22. In aggregate, the audits under these targeted programs represented 27 per cent of planned audits and constituted 33 per cent of actual trader audits conducted over the three-year period.⁴² That is, the shortfall in audits conducted under the targeted programs was broadly similar to the shortfall across the overall audit program.

Table 3.2: Target vs actual audits conducted under targeted programs

Source: ANAO analysis of departmental records.

Monitoring compliance at the trader-level

3.17 DISR introduced the use of trader-level risk assessments to inform trader selection in its 2022–23 ‘Tare It’ program (see paragraphs 2.58–2.60 for further details on DISR’s trader-level risk assessments).⁴³ The first concentrated audit was undertaken the week commencing 17 October 2022 and focussed on fruit and vegetable retailers. The program plan stated that the national target was for 500 trader audits to be conducted during that week. Based on TMARS data, this target was not met with 358 trader audits (72 per cent) being completed.

3.18 Trade measurement inspectors were provided a list of traders for their region and advised that ‘inspections should prioritise traders with the highest risk category (Very High to Low)’. No other advice was provided to inspectors as to what proportion of traders should be selected for audit under the different risk categories.

3.19 As shown in Table 3.3, 36 per cent of the audits conducted during the fruit and vegetable concentrated program was of traders who were not included in DISR’s risk assessment and as such not assigned a risk category. By number, this was followed by audits of traders who had been assessed as either High (equating to 69 traders or 19 per cent of the 354 audited) or Medium (equating to 67 traders or 19 per cent those audited) in terms of risk.

Table 3.3: Breakdown of traders and trader audits conducted by risk category during the October 2022 Fruit and Vegetable concentrated audit program

Note a: ‘N/A’ captures traders who were not listed in DISR’s trader-level risk assessment spreadsheet and hence not assigned a risk category.

Source: ANAO analysis of departmental records.

3.20 Noting that the majority of traders (70 per cent) fall within the ‘Medium’ and ‘Low’ risk categories (with those assessed as ‘Very High’ only constituting nine per cent of the total number of traders listed in the risk assessment), the ANAO considered the number of trader audits conducted proportional to the total number of traders in each risk category. As illustrated in Figure 3.4, 23 per cent of all traders assessed as being ‘Very High’ risk were audited, compared to seven per cent of those traders assessed as ‘Low’ being audited. The absence of targets on the level of compliance monitoring activity expected across each risk category makes it difficult to assess the department’s performance in adopting a risk-based approach to monitoring compliance.

Figure 3.4: Proportion of all traders audited in each risk category

Source: ANAO analysis of departmental records.

Tobacco Plain Packaging activities

3.21 Under a Memorandum of Understanding (MOU) with the Department of Health and Aged Care (Health), DISR officers undertake compliance and enforcement activities associated with the Tobacco Plain Packaging Act 2011 and the Tobacco Plain Packaging Regulations 2011.⁴⁴ Under this legislation, tobacco products must be packaged in a certain colour and not display branding, to reduce their appeal. Activities undertaken by DISR include:

• information visits – a proactive visit to a tobacco supplier to provide information and education on Tobacco Plain Packaging, which is initiated by DISR⁴⁵; and
• inspection or re-inspection – a compliance visit to a tobacco supplier, which is requested by Health based on a complaint, information or allegation.

3.22 DISR directs its officers to make Tobacco Plain Packaging (TPP) visits a priority over their trader audit activities to meet the MOU. The proportion of activity allocated to TPP visits has been increasing as total output has been decreasing. In 2021–22, there were 1024 TPP visits compared with 3131 trader audits. DISR also consistently exceeded the target number of DISR initiated TPP information visits, as illustrated in Figure 3.5.

Figure 3.5: Comparison of DISR’s performance against targets for trader audits and TPP visits

Note: By agreement between DISR and Health in 2020, a shortfall (due to COVID-19) in 2019–20 against the target for TPP information visits was added to the 2020–21 target. In total over these two financial years, DISR undertook 1021 visits against a target of 1000 visits (500 each year) set out in the MOU.

Source: ANAO analysis of departmental records.

3.23 Some of the TPP visits requested by Health result from allegations that a store is selling illicit tobacco.⁴⁶ DISR officers are required to report observations that extend well beyond the checking of plain packaging, such as from ‘surveillance’ of the storefront. This is inconsistent with the purpose of the legislation and advice to the Parliament that:

Tobacco plain packaging was established as a public health measure and as such, compliance and enforcement mechanisms in the Tobacco Plain Packaging Act 2011 (the TPP Act) are designed to ensure that people accessing tobacco products receive the full benefit of plain packaging as a health measure – they are not intended or designed to counter criminal behaviour. …

The purpose of the TPP Act is not to tackle illicit tobacco or criminal behaviour by organised groups or syndicates. The Department acknowledges the potential for cooperation with other agencies on illicit tobacco. When the Department suspects the sale of illicit tobacco occurring, information is provided to relevant agencies to appropriately deal with the criminal networks and elements who profit from illegal activity.⁴⁷

3.24 DISR officers have raised concerns internally about undertaking compliance checks that are based on illicit tobacco allegations and the risks to them associated with illegal activity. Officers have also reported incidents that occurred during TPP visits, which indicated they were at physical and/or psychological risk. Examples of instructions to officers, and concerns raised by officers, are in Table A.6 of Appendix 6.

3.25 The ANAO considers DISR’s response to officer concerns has been inadequate, given the seriousness of the matters raised and given its staff have no training in, or responsibility for, illicit tobacco matters and related criminality.

3.26 In June 2023, DISR advised the ANAO that:

DISR has developed a draft procedure… for inspectors to follow when undertaking TPP inspections. The draft procedure highlights the importance of safety of inspectors participating in the TPP inspection program.

Fuel Quality Standards activities

3.31 In early 2020, DISR became responsible for administering compliance with the Fuel Quality Standards Act 2000 and Fuel Quality Standards Regulations 2019. Following Machinery of Government changes in June 2022, the Department of Climate Change, Energy, the Environment and Water (DCCEEW) became the administering authority for this legislation. Under a Head Agreement between DISR and DCCEEW, DISR officers continue to undertake inspection and sampling activities under the legislation on behalf of DCCEEW.⁴⁸

3.32 DISR directs its officers to make Fuel Quality Standards activities a priority. DISR reported that 384 fuel quality audits were conducted in 2021–22, compared to 346 in 2020–21. Table 3.4 shows DISR’s performance against its performance targets, with DISR achieving 99 per cent of its target in 2021–22.

Table 3.4: Performance against targets for Fuel Quality Standards activities

Note a: In November 2021, DISR removed fuel screening from its Fuel Quality Monitoring Program as ‘compliance levels are now very high [and] the value that fuel screening can provide is limited. Removing fuel screening allows reallocation of resources towards fuel sampling activities’.

Note b: The target as originally published in the 2021–22 National Compliance Plan was 530 fuel samples submitted for analysis. This was increased to 600 following the removal of fuel screening.

Source: ANAO analysis of departmental records.

Is identified non-compliance acted upon?

3.33 When a regulated entity fails to meet compliance obligations, a regulator should assess the extent of the non-compliance and the potential for harm, and initiate proportionate action to address the risks posed.⁴⁹ DISR’s National Compliance Policy states that it will take a ‘risk-based approach when … determining the appropriate and proportionate regulatory response where non-compliance is identified’.

3.34 Under DISR’s enforcement and compliance policies, the first step following the identification of non-compliance during an audit involves the inspector issuing a non-compliance notice⁵⁰ and scheduling a follow-up audit (usually 28 days after the initial audit). A follow-up audit is to check whether the non-compliance has been corrected. If there is continued non-compliance, or the level of non-compliance initially detected results in more significant harm, the inspector (also known as the investigating officer) may recommend an escalated regulatory response to the Investigations and Compliance team for review and decision.⁵¹ DISR divides the escalated regulatory responses into three categories: low (warning letters); medium (compliance agreements or infringement notices⁵²); and high (injunctions, enforceable undertakings or prosecution). Figure 3.6 outlines the decision-making process for enforcement actions depending on the escalated regulatory response.⁵³ The ANAO’s analysis was that, while the documented process involved different individuals performing different roles, there have been instances where this was not the case in practice.⁵⁴ Specifically, in six (30 per cent) of the 20 enforcement actions sampled by the ANAO, DISR records indicated that one individual performed more than one role in relation to the same enforcement action (see Case study 1 in Appendix 7 for an example).

Figure 3.6: Processing of Enforcement Action (EA) flowchart

Source: National Measurement Institute, DISR.

Conduct of follow-up audits

3.35 Over the three-year period from 2019–20 to 2021–22 there were 4190 initial audits where non-compliance was identified. The most common enforcement response is for inspectors to provide advice to the trader, issue a non-compliance notice and conduct follow-up inspections to ensure non-compliance is rectified.⁵⁵ Inspector guidance says that follow-up audits should be scheduled 28 days after the initial non-compliance was identified. DISR records identified that a follow-up audit was to be conducted for 2352 (56 per cent) of those 4190 initial audits that had identified non-compliance.⁵⁶ Of those 2352 instances where a follow-up audit was to occur:

• 336 (14 per cent) were scheduled to be conducted in accordance with the 28-day target;
• 1779 (76 per cent) were scheduled to occur between 29 and 1444 days (nearly four years), and on average 5 months, after the initial audit was conducted; and
• 237 (10 per cent) did not have a scheduled date recorded.

3.36 As at 31 March 2023, 2021 (86 per cent) of the 2352 follow-up audits had been conducted.⁵⁷

3.37 It has been common for follow-up audits to not be conducted by the scheduled date. Of the 2977 follow-up audits recorded as having been completed between 2019–20 and 2021–22⁵⁸, 570 (19 per cent) did not have a scheduled date recorded in TMARS. Of the remaining 2407 follow-up audits:

• 544 (23 per cent) were completed on or before the scheduled date; and
• 1863 (77 per cent) were completed after the scheduled date, on average being 186 days (6 months) after the scheduled date and up to 2379 days (6.5 years) after the scheduled date.

3.38 As shown in Table 3.5, there has been a downward trend in the total number of follow-up audits conducted (decreasing by 54 per cent from 1195 in 2019–20 to 548 in 2021–22). The proportion of non-compliance identified for those audits increased from 21 per cent in 2019–20 to 26 per cent in 2020–21 before decreasing to 21 per cent in 2021–22. By comparison, the non-compliance rate for follow-up audits was 18 per cent in 2017–18 and 19 per cent in 2018–19.

Table 3.5: Number of follow-up audits conducted and proportion of non-compliance identified

Source: ANAO analysis of departmental records.

3.39 In relation to the results of those 2977 follow-up audits that have been undertaken between 2019–20 and 2021–22⁵⁹:

• 778 instruments were found to be non-compliant, including 302 instances of the instrument being inaccurate;
• 1298 lines of pre-packaged articles were non-compliant, including 516 lines having a shortfall and 718 having non-compliant labelling or measurement markings; and
• 291 failures of trading practices were found:
  • 168 trial purchases failed (of which 82 were due to shortfall offences); and
  • 123 did not meet other legislative requirements (such as not using a verified instrument, not taring and selling goods other than by a prescribed unit of measurement).

3.40 Where available, the ANAO analysed the notebooks and non-compliance notices provided by DISR in conjunction with the data in TMARS to assess whether the non-compliances identified in a sample of 20 trader audits had been addressed at the time of the follow-up audits.⁶⁰ Twelve of the 20 audits sampled by the ANAO had follow-up audits conducted.⁶¹ Of those 12 follow-ups:

• eight (67 per cent) had resolved the issues identified during the initial audit⁶²; and
• four (33 per cent) had not resolved the issues identified during the initial audit. However, two had ‘No Action’ recorded against the audit result and the other two were recorded as ‘Passed’. As a result, notwithstanding the follow-up audit had identified continuing non-compliance, no further enforcement action was taken.

Record keeping

3.41 The ANAO’s analysis of DISR’s enforcement activities was impeded by inconsistencies in the level of detail recorded, and documentation filed, in TMARS relating to trader audits. For instance, while non-compliance notice numbers were recorded in TMARS, none of the audits sampled by the ANAO had a copy of the non-compliance notice filed in the system. In December 2022, DISR advised the ANAO that:

• The unique non-compliance notice number is recorded in a required field in TMARS. The officer must enter this number in order for the record to be completed.⁶³
• After speaking to a couple of officers, the practice of uploading a copy of the notice may have been undertaken by certain regions depending on expectations of line management or specific requirements associated with concentrated audits. This practice may or may not have been adopted by different officers.
• Essentially the paper non-compliance form is the primary document where a copy is provided to the trader and the other copies are filed by the inspecting officer.
• We trialled the use of a digital non-compliance form earlier in 2022 with Coles and Woolworths. The TMARS enhancement project (as discussed today – which has just commenced) will include moving the digital non-compliance form into production.

3.42 The inconsistencies in record keeping and limited information meant it was difficult to assess whether non-compliance identified in initial audits had been addressed at the time of the follow-up audits.

3.43 In February 2023, the ANAO requested that copies of the relevant hard copy inspector notebook entries and non-compliance notices be provided for 33 trader audits.⁶⁴ The department was unable to locate the complete records for nine of the audits (27 per cent):

• for three, the relevant inspector notebook entry was not located;
• for five, a non-compliance notice was not located⁶⁵; and
• for one, neither the inspector notebook nor non-compliance notice was located.⁶⁶

Enforcement actions

3.46 As shown in Table 3.6, the most common escalated regulatory responses between 2019–20 and 2021–22 were warning letters and infringement notices. During that same period, there were four compliance agreements, four enforceable undertakings, two referrals to the Commonwealth Director of Public Prosecutions (CDPP) and one conviction.

Table 3.6: Enforcement actions

Note a: The CDPP decides whether to take forward a referral to prosecution.

Note b: The CDPP advised the ANAO in April 2023 that this matter was ‘referred for pre-brief advice on the preparation of briefs of evidence only. CDPP provided the advice to NMI on 21 August 2020… There were no subsequent brief referrals, nor prosecutions instituted, following the provision of the advice.’

Source: ANAO analysis of departmental records.

3.47 DISR has not reported accurately on the extent to which it has been referring matters for possible prosecution. DISR externally reported that three referrals had been made to the CDPP in 2020–21.⁶⁷ The CDPP advised the ANAO that one matter was referred in 2020–21. In relation to this matter:

• in April 2023 the CDPP advised the ANAO that, while a decision was made to commence a prosecution, in November 2022:

the accused company formally rejected the plea negotiation proposal on the basis of perceived problems in the way evidence was obtained during the investigation, which would affect its admissibility in a trial. CDPP reviewed the circumstances surrounding the investigation, including reviewing further documentation received from NMI that was not previously disclosed to CDPP nor the accused company. As a result, CDPP concluded that there were deficient cautions provided by the investigator to the director of the accused company which resulted in the improper gathering of evidence. … [In] January 2023, following consultation with NMI, CDPP made the decision to discontinue the prosecution.

• in June 2023, DISR advised the ANAO that:

DISR consulted with CDPP regarding shortcomings with the investigation and the following actions occurred:

• January 2023 – existing procedure NTM 9.5 Questioning Instructions reviewed and found to be insufficient.⁶⁸
• January 2023 – LMB Procedure 5.5 – Questioning Alleged Offenders was drafted…
• 3 February 2023 – CDPP consulted on draft procedure.
• 13 February 2023 – LMB Procedure 5.5 published
• 16 February 2023 – …debrief meeting held for inspectors involved and LMB Management…
• 7 March 2023 – LMB Procedure 5.5 released to the inspectorate and brief overview given at a meeting.
• Week commencing 13 March 2023 – Notebook inserts detailing caution and brief guidance circulated to inspectors…
• 30 May 2023 – Training session presented to inspectors on lessons learnt and new procedure…

DISR will review the effectiveness of the updated procedure and training no later than 31 May 2024.

3.48 ANAO analysis of DISR’s timeliness in actioning warning letters and infringement notices during the three years examined found that:

• Of the 270 warning letters issued, one did not have the date of the investigating officer’s recommendation recorded in TMARS and as such it was not possible to calculate the time taken to issue the letter. The remaining 269 warning letters were issued on average 53 days after this action was recommended, with the maximum time taken being 395 days or just over one year (153 or 57 per cent of these warning letters were issued within 43 days as required under DISR’s current procedures which were introduced in May 2022).
• The 131 infringement notices were issued on average 84 days (nearly three months) after the recommendation, with the time taken ranging from 12 to 316 days (21 or 16 per cent of infringement notices were issued within 34 calendar days as required by the department’s current procedures).

3.49 Due to data quality issues, including the inconsistency of information recorded in TMARS, the ANAO was unable to assess the timeliness of substantive enforcement actions.

3.50 The ANAO examined a sample of 20 enforcement actions.⁶⁹ Of the 20 enforcement actions:

• nine (45 per cent) resulted in a warning letter being issued with the warning letter being issued, on average, 74 days (more than two months) after this action was recommended (a range of nine days to 6.4 months);
• four (20 per cent) resulted in infringement notices (totalling $8400) with the time taken to issue the notices ranging from 78 days to 4.6 months;
• five (25 per cent) resulted in no further action being taken; and
• two (10 per cent) were still in progress as at March 2023, having been commenced between August 2020 and December 2021.

3.51 In June 2023, DISR advised the ANAO that:

performance indicators for issuing enforcement actions were not introduced until LMB Procedure 5.2 - Processing enforcement actions and regulatory outcomes was approved on 22 May 2022⁷⁰ … since the timeliness metrics were introduced 91% of warning letters have been issued within 43 days and 83% of infringement notices have been issued within 34 days.

Is the regulatory approach regularly reviewed, and where appropriate, updated?

Note a: See paragraph 3.6.

3.52 Structured monitoring and reporting assists in the oversight of entity performance and enhances accountability, including in the performance of regulatory functions. Appropriate reporting arrangements enable decision-makers to identify where plans and objectives are not being met and take action accordingly. In addition, external reporting provides the Parliament and the public with assurance that the entity’s regulatory approach is effective in achieving the desired outcomes.

Commonwealth performance framework reporting

3.53 The Commonwealth Performance Framework sets out requirements for performance reporting and the preparation of annual performance statements to promote accountability and transparency of entity performance. The Framework consists of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), the accompanying Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) and guidance issued by the Department of Finance. The Framework requires entities to: prepare and publish a corporate plan; specify performance measures and targets; and prepare statements about the annual performance of the entity in achieving its purposes, which are included in the entity’s annual report.

3.54 Against the strategic objective ‘Provide a trusted national system of measurement’, DISR specified three performance criteria with targets in its 2019–20 Corporate Plan. One of the three criteria related to its trade measurement compliance activities, being ‘Percentage of (trade measurement) trader audit target met’ with a 2019–20 target of ‘≥90%’.⁷¹ DISR reported a result of ‘112%’ in its 2019–20 Annual Report. DISR calculated this result using its internally reported data and the methodology outlined in Table 3.7, which factors in the various activities undertaken by inspectors during trader audits.

3.55 There was no comparable performance criterion for legal metrology in subsequent Corporate Plans⁷² or reporting of performance against trader audit targets in subsequent Annual Reports.

3.56 DISR continued to report internally against its trader audit targets. DISR did not achieve a result of ‘≥90%’ in 2020–21 or in 2021–22, as per Table 3.7.

Table 3.7: Annual performance against a target of ≥90 per cent

Note a: DISR became responsible for administering the Fuel Quality Standards Act 2000 in early 2020. Following Machinery of Government changes in June 2022, the Department of Climate Change, Energy, the Environment and Water (DCCEEW) became the administering authority for this Act. Under a Head Agreement between DISR and DCCEEW, DISR officers continue to undertake inspection and sampling activities on behalf of DCCEEW.

Note b: As per DISR’s methodology for calculating performance against its target of ≥90%, which was to add the percentages together then divide by the number of inspection activity categories.

Source: ANAO analysis of DISR’s internal Legal Metrology Branch Monthly Performance Reports.

Statements of expectations and of intent

3.57 An internal audit report of December 2015 recommended that ‘A statement of expectations should be provided to NMI to set out the Government’s policy objectives and priorities for legal metrology’. The report proposed that the Secretary issue the statement, that NMI issue a response and that these be published.

3.58 The Secretary issued a statement of expectations for NMI in June 2016. It focussed on ‘the initial phase of the transition programme to be implemented during 2016 and 2017’ and noted that ‘subsequent statements of expectation will be issued’. The Secretary’s statement included:

I expect NMI to establish effective performance measures and evaluation arrangements … I expect NMI to make effective use of the data that it collects through its regulatory activities by ensuring its information management systems and processes are fit for purpose and supported by an appropriately skilled workforce. Good information management practices will underpin evidence-based decision making in the areas of regulation and policy advice.

3.59 NMI signed a responding statement of intent in September 2016. DISR did not publish the statement of expectations or of intent.

3.60 The subsequent statement of expectations for NMI was issued to DISR five years later in September 2021 by the Minister for Industry, Science and Technology. This was triggered by an Australian Government decision of April 2021 for Ministers to issue or refresh Ministerial Statements of Expectations for the regulators within their portfolios. As outlined in Resource Management Guide 128: Regulator Performance, regulators are to:

• ‘integrate these Statements into performance reporting through their corporate plan and annual report’;
• respond with a Regulator Statement of Intent; and
• make the statements ‘publicly available on regulator websites or on transparency.gov.au as part of a corporate plan and/or annual report’.⁷³

3.61 There was a change of Minister (11 days later in September 2021 after the Statement of Expectations had been issued) prior to the Regulator Statement of Intent being due from, or provided by, DISR as the entity responsible for NMI. Statements of Expectations should be issued or refreshed if there is a change in Minister.⁷⁴ In February 2022, the Minister for Science and Technology issued a Statement of Expectations for NMI containing the same words as the previous version. These included that NMI: ‘apply a proportionate and risk-based approach to compliance and enforcement actions …; and take a proactive approach to continuously improving regulatory performance by embedding the regulator best practice principles’ (see paragraph 3.65).

3.62 A federal election was called in April 2022, prior to the responding Regulator Statement of Intent being either due or provided by DISR. There was a change of Minister on 1 June 2022. As at 24 May 2023, the Ministerial Statement of Expectations for NMI has not been published or refreshed or referenced in DISR’s Corporate Plans/Annual Reports, and there has been no responding Regulator Statement of Intent issued.

Regulator performance reporting

3.63 The regulator performance reporting requirements changed during the three years examined by the ANAO. The requirements for 2019–20 were as per the Regulator Performance Framework that had operated since 1 July 2015. The Framework contained six ‘outcomes-based key performance indicators (KPIs) to articulate the Government’s overarching expectations of regulator performance’.⁷⁵ DISR had established a set of nine measures of the NMI’s performance against the six KPIs, which were approved for use by the Minister in July 2015. As required, DISR published a report of its self-assessment of the NMI’s performance for 2019–20.⁷⁶ DISR had assessed itself as having ‘Met’ each of the nine measures and, by extension, the six KPIs.⁷⁷ ‘Met’ was the highest rating available, defined by DISR as ‘Strong performance against all aspects of the metric’.

3.64 Four measures of performance against two KPIs focussed on trade measurement compliance activities. The ANAO considers that these measures in combination with DISR’s assessment approach were not a sufficient basis for concluding that the related two KPIs had been met. A summary of the four measures, DISR’s reported assessment and the ANAO’s analysis is provided in Table 3.8.

Table 3.8: Regulator performance reporting on trade measurement compliance activities for 2019–20

Source: Extracts from, and ANAO analysis of, DISR’s Regulator Performance Framework Self-Assessment Report: National Measurement Institute 2019–20.

3.65 The Regulator Performance Framework was replaced by the Regulator Performance Guide. Instead of KPIs, it contained three principles of regulator best practice: ‘continuous improvement and building trust’; ‘risk based and data driven’; and ‘collaboration and engagement’. It outlined that ‘regulator performance reporting should be incorporated into an entity’s reporting processes (with a focus on the corporate plan and annual report – including annual performance statement), as required under the PGPA Act and PGPA Rule’.⁷⁸

3.66 To support the transition to the new requirements, entities could report on their 2020–21 performance by either continuing to use the previous process or by adopting the new requirements.⁷⁹ DISR ceased its regulator reporting. It did not continue to use the previous process by publishing a self-assessment report for 2020–21. It also did not adopt the new requirements, with the 2020–21 Corporate Plan and Annual Report instead representing a decline in DISR’s reporting on legal metrology (see paragraph 3.55).

3.67 The transition to the new requirements was extended with the release of the Resource Management Guide 128: Regulator Performance.⁸⁰ DISR did not use the previous process or adopt the new regulator reporting requirements for 2021–22.

Other reporting

3.68 DISR published a National Compliance Report on its trade measurement activities each year. These contained between 16 and 20 pages of information and outputs data, including on trader audits conducted, inspection activities undertaken, rates of non-compliance identified, and enforcement actions taken. The data tables extended from 2015–16, allowing readers to observe changes over time.

3.69 The National Compliance Reports did not report against the targets set out in the National Compliance Plans or against other performance measures. DISR advised the ANAO in June 2023 that:

For the 2023/2024 financial year, DISR will replace the previous National Compliance Plan with a Legal Metrology Strategic Plan that will incorporate all work undertaken within the Legal Metrology Branch (LMB) and include performance reporting. DISR will then utilise this strategic plan to make connections between branch operations and Divisional and Departmental plans.

3.70 The proposed Legal Metrology Strategic Plan was not in place, or in draft form, as at 29 June 2023.

3.71 An internal ‘Legal Metrology Branch Monthly Performance Report’ was circulated to Branch staff and the NMI Executive. The internal report contained more detail than the published reports, including performance to date against the National Compliance Plan targets (see Table 3.7).

3.72 In each of the three years examined, DISR’s Annual Report contained the number of trader audits conducted, measuring instruments tested and pre-packaged article lines tested. The Annual Report data was consistent with DISR’s internal monthly performance reports (and therefore with the data presented in Table 3.7). This data was usually lower than the published National Compliance Report data (and therefore than the data presented in Figure 3.1, Figure 3.2 and Figure 3.3). The reported figures varied by up to 17 per cent across reporting products, with an average difference of six per cent. The discrepancy in numbers were in small part due to the data for different reports being extracted from TMARS on different dates. A more significant factor was that different assumptions were used when generating the reports, as the following example illustrates.

• The National Compliance Report stated that 7118 measuring instruments were tested in 2021–22, and that ‘more than 85.1 per cent of instruments tested were found to be fully compliant with legislative requirements’. The figure of 7118 included 1039 visual examinations of measuring instruments that did not involve testing their performance. It could not be concluded from a visual examination that a measuring instrument was ‘fully compliant with legislative requirements’.
• The Annual Report stated that ‘almost 6,000’ measuring instruments were tested in 2021–22, which was a rounding-up of 5943. The primary reason for the Annual Report figure being 17 per cent lower was that it excluded the visual examination of instruments. (The Annual Report did not include compliance data.)

Data quality

3.73 Accurate, integrated and reliable information on regulated entities, activities and individuals supports regulators in assessing the risk of non‐compliance and the development of targeted compliance and enforcement strategies. It also forms data which can be used as intelligence in planning future compliance strategies.

3.74 There was no guidance on the processes to transpose/record information collected during a trader audit into TMARS.⁸¹ The ANAO observed errors and inconsistencies in the information entered into TMARS. In December 2022, DISR advised the ANAO that Data Quality Reports were previously run each month ‘but due to high overall compliance rates and generally low number of Data Quality issues, in recent times, have been running every 2–3 months’.⁸²

3.75 The ANAO undertook targeted testing to examine whether issues identified in Data Quality Reports were being resolved in a timely manner. The testing indicated that most data issues were not being resolved, as follows.

• In its Data Quality Report of 25 May 2022, DISR reported 446 data quality issues.
• ANAO testing identified that 69 of the 446 issues (15 per cent) had been fixed in TMARS by 21 December 2022.
• Of the 377 issues (85 per cent) that remained, the elapsed time between the applicable trader audit being completed and 21 December 2022 ranged from 212 to 538 days, and averaged 356 days.

3.76 The Data Quality Report does not pick up all issues and inconsistencies. For example, it does not identify the incorrect non-compliance notice number issues referred to in footnote 63 and, as mentioned in paragraph 2.44, the financial detriment fields were removed from the Data Quality Report.

3.78 In June 2023, DISR advised the ANAO that:

DISR agrees with this opportunity to improve.

DISR notes that during 2022 and 2023, a project has been undertaken to enhance TMARS to include capabilities for digital non-compliance forms. Digital non-compliance forms will go live on 1 July 2023 and will assist with improving the consistency of how non-compliance information is recorded.

Reporting on effectiveness

3.79 To facilitate a meaningful review of progress and achievement, entities should ensure they are monitoring, evaluating and reporting on their effectiveness at achieving their objectives. This was absent from DISR’s administration of legal metrology.

3.80 DISR’s targets and reporting did not extend to the effectiveness of its regulatory approach and progress towards achieving the desired regulatory outcomes. For example, the proportion of traders found to be compliant each year was not benchmarked against a desired rate of compliance. Reporting on the number of enforcement actions undertaken did not include a performance indicator or review of their effectiveness.

Appendix 1 Entity responses

Appendix 2 Improvements observed by the ANAO

1. The existence of independent external audit, and the accompanying potential for scrutiny improves performance. Improvements in administrative and management practices usually occur: in anticipation of ANAO audit activity; during an audit engagement; as interim findings are made; and/or after the audit has been completed and formal findings are communicated.

2. The Joint Committee of Public Accounts and Audit (JCPAA) has encouraged the ANAO to consider ways in which the ANAO could capture and describe some of these impacts. The ANAO’s 2021–22 Corporate Plan states that the ANAO’ s annual performance statements will provide a narrative that will consider, amongst other matters, analysis of key improvements made by entities during a performance audit process based on information included in tabled performance audit reports.

3. Performance audits involve close engagement between the ANAO and the audited entity as well as other stakeholders involved in the program or activity being audited. Throughout the audit engagement, the ANAO outlines to the entity the preliminary audit findings, conclusions and potential audit recommendations. This ensures that final recommendations are appropriately targeted and encourages entities to take early remedial action on any identified matters during the course of an audit. Remedial actions entities may take during the audit include:

• strengthening governance arrangements;
• introducing or revising policies, strategies, guidelines or administrative processes; and
• initiating reviews or investigations.

4. In this context, the below actions were observed by the ANAO during the course of the audit. It is not clear whether these actions and/or the timing of these actions were planned in response to proposed or actual audit activity. The ANAO has not sought to obtain assurance over the source of these actions or whether they have been appropriately implemented.

• In December 2022, DISR moved to having a single instrument of appointment in the form of a Schedule that lists all departmental staff appointed as trade measurement inspectors under the National Measurement Act 1960, rather than having separate certificates issued to each individual as the appointment instrument.
• A new procedure relating to LMB officer authorisations and appointments was approved on 3 February 2023.
• DISR developed a guide outlining the process related to enforceable undertakings and compliance agreements which was approved on 9 January 2023.
• DISR developed a new procedure relating to questioning alleged offenders which was approved on 13 February 2023.
• DISR is in the process of updating its procedures relating to the storing and managing of inspector notebooks, including a register of all notebooks that have been issued.

Appendix 3 Having appropriate policies, procedures and guidance

1. This appendix provides additional information on matters raised in Chapter 2, under ‘Are appropriate policies, procedures and guidance in place?’

2. Table A.1 provides examples of issues identified with DISR’s policies and procedures by the ANAO. The issue of having multiple overlapping documents is further illustrated in Table A.2.

Table A.1: Examples of issues identified by the ANAO

Note a: Two different approval dates are recorded within the document: p. 1 states ‘Date approved: 18 November 2021’ whereas the Document Control table on p. 13 states that the ‘Date Approved’ is 18 November 2020.

Note b: In the document lists provided by DISR to the ANAO, ‘TMARS User’s Manual’ is listed as a potential document.

Source: ANAO analysis of departmental records.

Table A.2: Approved policies on enforcement actions and investigation procedures

Note a: DISR advised the ANAO in July 2022 that this document had been made obsolete.

Source: ANAO analysis of departmental records.

Management of Commonwealth records

3. Section 24 of the Archives Act 1983 prohibits the alteration, damage, destruction or other disposal of Commonwealth records unless it is: required by law; done with the permission of the National Archives of Australia or in accordance with a practice or procedure approved by the Archives; or in accordance with a normal administrative practice that the Archives had not disapproved.

4. The ANAO observed instances where it appears that DISR has inappropriately altered, disposed of and/or destroyed Commonwealth records. For example:

• On 29 July 2019, a trade measurement inspector disclosed that they were unable to locate their previous NMI instrument non-compliance book:

I think it is possible that I have discarded it [NMI instrument non-compliance book] into the secure shredding bin that was provided to me by the security team when I moved office as I was asked to discard all sensitive material stored at the office prior to moving.

• On 11 September 2019, all trade measurement staff were directed by the relevant LMB Manager to cease the practice of ‘repurposing’ enforcement data within TMARS. Prior to this direction, trade measurement inspectors had reported merging multiple enforcement action cases into single cases as well as overwriting data. All trade measurement staff were informed that:

Repurposing of enforcement data is a breach of the Archives Act as the data entered in Enforcement Actions (EA) represents current Commonwealth records.

If you have been completing actions of this nature the practice is to cease forthwith.

• On 13 May 2020, a LMB officer suggested changing the status or repurposing active trader audits with a passed schedule date and no completion date:

I don’t think we are allowed to delete the audits but we can change the status or possibly repurpose the record. If the trader has not been visited and it fits with the current or future programs we can rebook the visit for a future date.

• On 19 May 2020, there was a directive to trade measurement staff that existing follow-up audits which were scheduled in TMARS but failed to be undertaken, should be repurposed and the record altered to ‘routine audits’ — this was to align with upcoming compliance programs.
• In May 2022, NMI staff could not locate an ex-inspector’s Tobacco Plain Packaging (TPP) non-compliance notice book. NMI staff concluded that the inspector likely shredded the original copy of a notice issued to a non-compliant TPP trader and that in response NMI would delay the disclosure of this breach to the Department of Health and Aged Care. It was recorded that:

We should not be shredding any notices etc regardless as they fall into the category where we must keep them for so many years. Its worse if the document has not been saved anywhere electronically.

…

My action will be to break this to [the Department of Health and Aged Care] when we have done something good and they are happy with us and maybe that might soften it.

Appendix 4 Taking a risk-based approach

1. This appendix provides additional information on matters raised in Chapter 2, under ‘Is the regulatory approach informed by an assessment of compliance risk?’

Industry risk assessment spreadsheet

2. Table A.3 provides additional detail on key issues identified with the industry risk assessment spreadsheets by the ANAO. These issues appear in all versions of the spreadsheet examined. The examples are drawn from the 1 July 2018–4 November 2021 (‘3 year’) version.

3. For context, the following explains how the spreadsheet calculates the risk rank for the 43 sectors (or trader types) and explains the terms used in the spreadsheet and in Table A.3.

• The spreadsheet calculates a ‘risk rank’ by ranking each sector in relative order from highest to lowest ‘risk factor’. Sectors with the same risk factor are assigned the same risk rank.
  • Small Business–Food had the highest risk factor of 117 and so was assigned a risk rank of 1.
  • Bakery Wholesale had the lowest risk factor of 41 and so was assigned a risk rank of 43.
• The spreadsheet calculates the risk factor for each sector by summing the product of a ‘risk rating’ multiplied by an ‘importance bias’ for 19 different ‘data sets’.
  • The importance bias for each data set is determined by DISR and is a single value within the range of 1 (minor importance) to 5 (very high importance).
  • The risk rating for each data set is determined using arbitrary limits set by DISR, which is usually a five-point scale from 1 (minor risk) to 5 (very high risk).
• An example of a data set is ‘Projected Annual Community Detriment based on initial visits’. The importance bias for this data set was 4 (‘high’). The risk rating for this data set ranged from 1 (being a projected community detriment of less than $20,000) to 5 (being a projected community detriment of greater than $1 million).
  • Small Business–Food had a projected community detriment of $1.8 million, which corresponds to a risk rating of 5. Therefore, the spreadsheet added 20 to that sector’s risk factor (being 5 multiplied by the importance factor of 4).
  • Bakery Wholesale had a projected community detriment of $18,898 and therefore the spreadsheet added 4 to that sector’s risk factor (being 1 multiplied by the importance factor of 4).

Table A.3: Key issues identified with the industry risk assessment spreadsheets

Source: ANAO analysis of DISR’s industry risk assessment spreadsheets.

Compliance programs

4. Table A.4 lists the different compliance programs outlined by DISR in the National Compliance Plans for 2019–20 to 2021–22.

Table A.4: Compliance Programs for 2019–20 to 2021–22

Source: DISR’s National Compliance Plans for 2019–20, 2020–21 and 2021–22.

Appendix 5 Monitoring industry compliance

1. This appendix provides additional information on matters raised in Chapter 3, under ‘Is industry compliance appropriately monitored?’

Impact of COVID-19 pandemic

2. Table A.5 provides further details on the three stage return to field activities for trade measurement inspectors.

Table A.5: COVID-19 return to field work

Note a: Stage 1 activities were ‘restricted to businesses of lowest risk, particularly outdoor locations such as fuel stations and weighbridges.’

Note b: Stage 3 had ‘no restrictions on business type, and resumes compliance monitoring across the full range of regulated trade.’

Source: DISR records.

3. As shown in Figure A.1, the number of trader audits conducted each month in 2021–22 were considerably lower than that done prior to March 2020 despite largely returning to business as usual.

Figure A.1: Trader audits completed per month

Source: ANAO analysis of DISR’s TMARS data.

Appendix 6 Tobacco Plain Packaging

1. Examples of the evidence underpinning the audit findings at paragraphs 3.23 to 3.24 on Tobacco Plain Packaging activities is provided in the table below. This includes examples of officers being directed to undertake compliance visits due to illicit tobacco allegations and being directed to make observations that extend beyond the checking of plain packaging. It also includes examples of safety concerns raised by officers and incidents reported by officers.

Table A.6: Extracts from records relating to Tobacco Plain Packaging (TPP) visits

Note a: In August 2023, Health advised the ANAO that ‘When issuing inspection requests to NMI, where possible, [Health] will provide the wording of the complaint alleged against the business. Noting the likelihood of illicit tobacco demonstrating non-compliance with tobacco product requirements of the TPP Act, this terminology often appears in complaints received by [Health] receives, and may be used interchangeably in some situations’.

Note b: In August 2023, Health advised the ANAO that ‘Observations recorded at each inspection hold great value, including those made before and after a visit, as this assists the Department to adequately:

• Build a historical record of visit experiences at each store to address potential WHS risks at future site visits;

• Form the most complete picture of store interactions and behaviours from the investment applied to undertaking any site visit; and

• Plan for executing search warrants should the need arise.’

Note c: In August 2023, Health advised the ANAO that ‘In line with consent provisions in the Regulatory Powers Act, [Health] instructs Authorised Officers in training that they must immediately leave the premises if consent to be in store is not given, or is withdrawn. When the occupier of a store places limitations on consent but does not deny consent for the authorised officer to be on premises, authorised officers are expected to have discussions with the occupier to ensure they are aware of the TPP legislation. Obtaining and recording business details is a standard part of this conversation practice, should consent permit’.

Source: ANAO analysis of, and extracts from, DISR’s records.

Appendix 7 Acting on identified non-compliance

1. This appendix provides additional information on matters raised in Chapter 3, under ‘Is identified non-compliance acted upon?’

Non-separation of duties

2. In six (30 per cent) of the 20 enforcement actions sampled, DISR records indicated that one individual held more than one role in relation to the same enforcement action (see Case study 1 for an example).

Note a: This was a concentrated national program that ran from 19–24 August 2019.

Note b: The five dispensers tested were found to be inaccurate to consumer disadvantage. This is a contravention of section 18GE of the National Measurement Act 1960.

Note c: The number of days between the Investigating Officer’s recommendation on 1 October 2019 and the infringement notice being issued on 22 January 2020 is 113 (equivalent to 3.7 months). This fell outside DISR’s internal KPI of 34 calendar days.

Enforcement actions

3. The ANAO observed instances where procedures were applied inconsistently and enforcement actions were not actioned in a timely manner (see Case study 2 for an example).

Note a: In June 2023, DISR advised the ANAO that: ‘DISR acknowledges that, for this case study, the Supervisor and NICO are the same person. This occurred just after the transition to the new pilot structure and changes to EA processing procedures had yet to be finalised.’

Note b: In June 2023, DISR advised the ANAO that: ‘on 23 April 2020 the enforcement action process was amended due to the impacts of COVID-19 and all infringement notice decisions had to be approved by the LMB General Manager (GM) with due regard given to the potential impact of COVID restrictions. This change in process had a direct impact on the timeliness of enforcement actions due to the introduction of GM approval processes.’

Compliance agreements

4. Compliance agreements are a non-legislative compliance mechanism cooperatively entered into by a non-compliant party (the trader) and the regulator (DISR). Between 1 July 2019 and 30 June 2022, DISR entered into four compliance agreements. As at March 2023:

• two had been completed with the traders being advised that DISR was satisfied that the trader had fulfilled the commitments under the agreements;
• one was closed by DISR prior to the end of the compliance agreement as the information requested had not been provided (see Case study 3); and
• one was initially closed by DISR one month prior to the agreement expiring as the trader had ‘failed to provide any evidence that shows it has met these commitments’ but appears to still be in progress within TMARS.⁸³

Enforceable undertakings

5. An enforceable undertaking is a promise given by a relevant entity (the trader) to a regulator (DISR) to take, or refrain from taking, certain actions and it is enforceable in court if breached. Between 1 July 2019 and 30 June 2022, DISR entered into four enforceable undertakings. As at 31 March 2023, two had been completed and two were still in progress.

6. In June 2023, DISR advised the ANAO that:

The use of co-operative agreements is a relatively new concept to the NMI. The NMI has been on a journey to develop the skills and knowledge required to negotiate, prepare and audit both enforceable undertakings and compliance agreements. Along the way there has been a lot of success and some failure. The practical experience and lessons learnt have led to the development of internal procedure LMB 5.7 – Guide to Enforceable Undertakings and Compliance Agreements published on 9 January 2023.

As each agreement is individually tailored the audit actions vary according to what is agreed between the NMI and the entity. So far the NMI has undertaken to audit each undertaking itself rather than contract this responsibility to a third party.

The audit actions may include:

• Initial informal meetings to discuss progress.
• Reporting requirements for the entity agreed and detailed in each undertaking – usually a report and accompanying evidence every 6 months is required.
• A desktop audit is conducted on every report/set of evidence submitted.
• Further contact is made if evidence supplied is lacking for each report.
• A meeting is undertaken to discuss each report and audit findings.
• Physical visits are also undertaken to check compliance at a site level.