CASA Annual Report 2003 04 Part 3: Corporate report
New corporate governance arrangements
As part of its aviation reform agenda, the Government sought more direct oversight of CASA’s regulation of aviation safety. Major corporate governance changes were introduced in the Civil Aviation Amendment Act 2003, which became law on 21 October 2003. These changes:
- abolished the CASA Board, but retained CASA as an independent statutory authority
- designated the Director of Aviation Safety as chief executive officer, responsible for managing CASA under the Minister
- gave the Minister stronger and more direct control over CASA’s governance and accountability.
During the period of this report, the responsible Minister was the Hon. John Anderson MP, Deputy Prime Minister, who has held the post of Minister for Transport and Regional Services since 21 October 1998.
Under the new corporate governance arrangements, the Director of Aviation Safety (the CEO) is directly responsible to the Minister for CASA’s management. Under the Civil Aviation Act, as amended, the Minister may require CASA to act in accordance with directions or notifications about:
- the way its functions are performed and powers are exercised (section 12)
- strategic directions (section 12A)
- supplying documents and information to specified nominees (section 12B)
- reporting (section 12D).
Section 12C of the Act also provides the Minister with the power to enter into an agreement with the Director (CEO) about the performance of CASA’s functions and the exercise of CASA’s powers. The Director (CEO) must take all reasonable steps to comply with the terms of an agreement.
In order to ensure regulatory independence, directions from the Minister about the performance of CASA’s regulatory function can only be of a general nature. This restriction also applies to notices under section 12A and an agreement under section 12C.
There were no statutory directions or notifications under sections 12, 12A, 12B or 12D in 2003–04. CASA submitted a draft agreement under section 12C to the Minister in June 2004.
In this, its final year, the CASA Board operated from 1 July 2003 to 21 October 2003 when the new corporate governance arrangements came into effect.
During that period, the Board continued to fulfil its statutory responsibilities under the Civil Aviation Act 1988 and the Commonwealth Authorities and Companies Act 1997. With the new corporate governance arrangements pending, the Board focused particularly on assuring that all was in order for commencement of the new structure.
The composition of the Board was:
Mr Edward Anson, AM (to 20.10.03)
Mr James Kimpton, AM (to 30.9.03)
Mr Neil Smith, AM, MBE (01.10.03 to 20.10.03)
Mr Neil Smith, AM, MBE (to 30.09.03)
Mr Mick Toller (to 08.08.03)
Mr Bruce Gemmell (09.08.03 to 20.10.03)
Mr Peter Yuile (01.10.03 to 20.10.03)
There were six Board meetings. All Board members attended each of the meetings they were eligible to attend. Further details about the terms of appointment, qualifications and experience of the former Board members are provided in Appendix 1.
Mr Mick Toller ceased as Director of Aviation Safety on 8 August 2003. Mr Bruce Gemmell acted as Director of Aviation Safety from 9 August to 30 November 2003.
Mr Bruce Byron, AM began a five-year term as Director of Aviation Safety and chief executive officer on 1 December 2003. Mr Byron is also the sole director of CASA for the purposes of the Commonwealth Authorities and Companies Act 1997.
Under the new corporate governance arrangements the role of the Director/CEO effectively combines the responsibilities of the former Director and the former Board to include:
- managing CASA’s day-to-day operations
- deciding the objectives, strategies and policies to be followed by CASA
- ensuring that CASA works within the broad framework of the Government’s policies and priorities
- ensuring that CASA performs its functions in a proper, efficient and effective manner.
As required by the Commonwealth Authorities and Companies Act 1997, CASA maintained an audit committee throughout 2003–04 to support effective corporate governance. The committee comprised:
James Kimpton (to 30 September 2003)
Neil Smith (1 October 2003 to 20 October 2003; 21 October 2003 to April 2004)
Barbara Yeoh (April 2004 to present)
Edward Anson (to 20 October 2003)
Neil Smith (to 30 September 2003)
Rob Collins (21 October to 30 November 2003)
Karen Nagle (21 October 2003 to April 2004)
Peter Yuile (21 October 2003 to April 2004)
Martin Dolan (April 2004 to present)
Bruce Gemmell (1 December 2003 to April 2004)
Michael Lewis (April 2004 to present)
The changes in membership over the course of the year reflected the changes in CASA’s corporate governance arrangements. See Appendix 1 for details of the qualifications and experience of Audit and Risk Committee members.
There were seven meetings of the Audit and Risk Committee during 2003–04. All members were present at each of the meetings they were eligible to attend.
The committee operates under a charter, which was revised during the year to take account of the new corporate governance arrangements. The committee, as constituted since April 2004, has an independent chairperson. It reports to the CEO and has direct access to internal and external auditors, the Chief Financial Controller, the CASA Risk Manager, General Counsel and senior management.
The committee assists in assuring compliance with CASA’s obligations under the Civil Aviation Act, the Commonwealth Authorities and Companies Act and other applicable legislation, regulations and codes of practice and conduct. It is also specifically charged with overseeing the risk management function.
During the year, the committee:
- provided a forum for communication between the Board/CEO and CASA’s internal and external auditors
- provided guidance on the effective management of risk
- advised the Board/CEO on aspects of internal and external audit, accounting procedures, systems, controls, and financial reporting
- promoted accurate, quality and timely disclosures of financial and other information to the Board/CEO and other key stakeholders, such as the Minister
- examined internal audit reports.
Significant matters before the committee during the year included due diligence reporting to the Minister in the period leading up to the abolition of the Board, and handover/takeover arrangements between the three people who occupied the position of Director of Aviation Safety.
The CEO’s responsibilities call for a practicable balance between leadership and operational involvement. In February 2004, CASA adopted the management structure set out in Figure 12.
This arrangement allows the CEO to focus on strategic direction, policy setting and CASA’s relationship with stakeholders, while maintaining the necessary oversight of operations and ultimate financial control. Key features of the arrangement are:
- devolution of day-to-day overall management responsibilities to the Chief Operating Officer
- creation of a support structure for the CEO, with strategic research, planning, communications and operational analysis capabilities that are independent of line management
- direct reporting to the CEO on all risk and audit matters
- direct reporting to the CEO on legal matters relating to governance, conformity with the Civil Aviation Act, the Commonwealth Authorities and Companies Act and other legislation or government guidelines
- direct reporting of the Chief Financial Controller to the CEO through the Chief Operating Officer.
Decision making and reporting
During the year CASA replaced the previous committee system with a layered decision-making process: the CEO makes key strategic decisions, the Chief Operating Officer makes key operational decisions, and senior managers make decisions relevant to their areas.
A robust communication and information sharing system and a disciplined approach to reporting maintains a chain of accountability within CASA to the CEO and from the CEO to the Minister.
The CEO provides a written monthly report to the Minister on CASA’s operational performance. In addition, the CEO has a face-to-face meeting with the Minister at least every two months so there is a structured opportunity to allow both parties to raise and discuss issues. There were three such meetings in the period to 30 June 2004.
In line with Minister’s desire to develop and maintain a whole-of-portfolio perspective on aviation issues, the Secretary of DOTARS receives a copy of CASA’s monthly reports and is present at the CEO’s regular meetings with the Minister.
As well as day-to-day contact, there are two scheduled monthly meetings between the CEO and Chief Operating Officer. One is an all-day informal meeting to discuss issues: at the other, the Chief Operating Officer formally reports to the CEO on all delegated operational responsibilities, CEO decisions are made and minutes are kept. There were five formal CEO meetings in 2003–04, beginning in February.
In turn, the Chief Operating Officer has a scheduled formal monthly meeting at which senior managers propose matters for decision by the Chief Operating Officer. Three times a month the senior management group meets to share information.
A substantive establishment review of CASA was begun in March 2004 by the CEO and the Chief Operating Officer. The purpose of the review is to gain a solid understanding of all aspects of CASA’s business to ensure resources are cost-effectively allocated and structured across the organisation. It is expected that the review will continue until the end of 2005.