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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016



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ISSN 1328-8091

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BILLS DIGEST NO. 112, 2015-16 29 APRIL 2016

National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 Paula Pyburne Law and Bills Digest Section

Contents

History of the Bills ............................................................... 3

Purpose of the Bills .............................................................. 3

Background ......................................................................... 3

About the NDIS ........................................................................ 3

Current position .................................................................... 4

Future projections ................................................................. 4

Committee consideration .................................................... 4

Selection of Bills Committee.................................................... 4

Senate Standing Committee for the Scrutiny of Bills .............. 4

Statement of Compatibility with Human Rights .................... 4

Parliamentary Joint Committee on Human Rights .................. 5

Special Account Bill ............................................................. 5

Commencement ...................................................................... 5

Paying for the NDIS .................................................................. 5

What the Productivity Commission recommended ................ 5

What is a special account? ...................................................... 6

Policy position of non-government parties/independents ..... 6

Position of major interest groups ............................................ 6

Financial implications .............................................................. 6

Special appropriations ............................................................. 7

Key issues and provisions ........................................................ 7

Amendment Bill .................................................................. 8

Commencement ...................................................................... 8

Date introduced: 16 March 2016

House: House of Representatives

Portfolio: Social Services

Commencement: as set out in the body of this Bills Digest.

Links: The links to the Bills, their Explanatory Memoranda and second reading speeches can be found on the homepages for the National Disability Insurance Scheme Savings Fund Special Account Bill 2016 and the National Disability Insurance Scheme Amendment Bill 2016 or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

April 2016.

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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 2

Board of the Agency ................................................................ 8

Moves to replace the Board .................................................. 8

Interim measures ................................................................ 10

Productivity Commission view ............................................ 10

Stakeholder views ............................................................... 10

Proposal for legislative change .............................................. 11

Policy position of non-government parties ........................... 11

Australian Greens ................................................................ 11

Australian Labor Party ......................................................... 11

Position of major interest groups .......................................... 11

Financial implications ............................................................ 12

Key issues and provisions ...................................................... 12

Concluding comments ....................................................... 12

Appendix 1 ........................................................................ 14

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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 3

History of the Bills The Bills lapsed on prorogation of the Parliament on 15 April 2016. A new session of Parliament commenced on 18 April 2016. As no election was held between the two Parliamentary sessions, the Bills may be proceeded with in this new session at the stage they had previously reached, if the House of Representatives passes a resolution restoring them to the Notice Paper.1 This had not occurred at the date of publishing this Bills Digest.

Purpose of the Bills This Bills Digest discusses two Bills.

The purpose of the National Disability Insurance Scheme Savings Fund Special Account Bill 2016 (the Special Account Bill) is to establish the National Disability Insurance Scheme Savings Fund Special Account (the Special Account) which will be used to assist the Commonwealth to meet its funding obligations under the NDIS Act.

The purpose of the National Disability Insurance Scheme Amendment Bill 2016 (the Amendment Bill) is to amend the National Disability Insurance Scheme Act 20132 (NDIS Act) to increase the maximum number of Board members for the National Disability Insurance Scheme Launch Transition Agency (the Agency) from nine to 12. There are also changes to the quorum arrangements.

Background About the NDIS In 2009, in response to a campaign for national disability insurance, the Productivity Commission was asked to ‘examine a range of options and approaches, including international examples, for the provision of long-term care and support for people with severe or profound disability’.3

The Productivity Commission report found:

The current disability support system is underfunded, unfair, fragmented, and inefficient, and gives people with a disability little choice and no certainty of access to appropriate supports. The stresses on the system are growing, with rising costs for all governments. 4

In response to the Productivity Commission’s report and recommendations, the Council of Australian Governments (COAG) signed an Intergovernmental Agreement for the NDIS Launch on 7 December 2012.5

In 2013, the Commonwealth Government enacted the NDIS Act which:

• established the framework for the NDIS and the National Disability Insurance Scheme Launch Transition Agency (the Agency) and its Board. This enabled the NDIS to be launched, and the Agency to operate the launch, in five sites across Australia from July 2013

• sets out the objects and principles under which the NDIS is to operate, including ensuring that people with disability are supported to exercise choice and control over the care and support they receive, and giving effect in part to the United Nations Convention on the Rights of Persons with Disabilities6

• sets out the process for a person becoming a participant in the scheme, how participants develop a personal, goal-based plan with the Agency, and how reasonable and necessary supports will be assured to participants and

• provides that the Agency will be responsible for the provision of support to people with disability, their families and carers. This could include providing funding to individuals and organisations to help people with disability participate more fully in economic and social life.7

1. B Wright, ed., House of Representatives practice, sixth edn., Department of the House of Representatives, Canberra, September 2012, p. 399. 2. National Disability Insurance Scheme Act 2013. 3. Productivity Commission (PC), Disability care and support, http://www.pc.gov.au/inquiries/completed/disability-support/reportInquiry report, 54, 2 vols., PC, Canberra, 31 July 2011, p. v.

4. Ibid., vol. 1., p. 2. 5. National Disability Insurance Scheme (NDIS), ‘Intergovernmental agreements’, NDIS website. 6. Convention on the Rights of Persons with Disabilities, done in New York on 13 December 2006, opened for signature 30 March 2007, [2008] ATS 12 (entered into force for Australia 16 August 2008).

7. Revised Explanatory Memorandum, National Disability Insurance Scheme Bill 2013, p. i.

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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 4

The states and territories subsequently signed bilateral agreements with the Commonwealth detailing the operational and funding arrangements for the NDIS in each trial site. These agreements included matters such as the planned intake of participants and the balance of cash and in-kind contributions to the scheme.8

Current position The gradual roll out of the NDIS at specific sites in all states and territories has been ongoing since July 2013.9 In November 2015 Bruce Bonyhady, Chairman of the Agency, reported that the NDIS ‘is in eight sites and has more than 19,500 participants, with another site due to commence shortly in North Queensland, in Townsville, Palm Island and Charters Towers’.10

More recently, Mr Bonyhady reported:

… the NDIS is on time and on budget and client satisfaction is above 90 per cent …

On 1 July the NDIS will move from a trial to a fully fledged program in all States and Territories (except WA). This is after having been assessed and reassessed by each Government and their Treasuries. 11

Future projections Agreements for the full scheme roll out of the NDIS have been reached with New South Wales, Victoria, Queensland, South Australia, Tasmania, the Australian Capital Territory and the Northern Territory. On 28 April 2016, the Commonwealth Government announced the trial site in Western Australia would be extended by 12 months to 30 June 2017 to ensure people with disability continue to receive supports while a full scheme approach is finalised.12

Accordingly, the scheme will be available to all eligible residents in the Australian Capital Territory by July 2016, in New South Wales and South Australia by July 2018, and in Tasmania, Victoria, Queensland and the Northern Territory by July 2019.13 When it is fully operational in 2019 the Scheme will serve around 460,000 participants across Australia.14

The full scheme Heads of Agreement for each state and territory outline the parameters for transition to full scheme arrangements within specific timelines.15

Committee consideration Selection of Bills Committee At its meeting of 17 March 2016 the Selection of Bills Committee decided to defer consideration of the Bills to its next meeting.16

Senate Standing Committee for the Scrutiny of Bills At the time of writing this Bills Digest the Standing Committee for the Scrutiny of Bills had not commented on the Bills.

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth),17 the Government has assessed the Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.18

8. NDIS, ‘Intergovernmental agreements’, NDIS website. 9. NDIS, ‘Our sites’, NDIS website. 10. B Bonyhady (NDIA Chairman), The what? why? who? and market opportunities of the NDIS, Brisbane, speech to the Committee for Economic Development of Australia, 5 November 2015.

11. B Bonyhady (NDIA Chairman), Statement from NDIA Chairman, Bruce Bonyhady in response to the story in the Australian on 16 April, media release, NDIS website, 16 April 2016. 12. NDIS, ‘NDIS in Western Australia’, NDIS website. 13. NDIS, ‘Intergovernmental agreements’, NDIS website. 14. B Bonyhady, The what? why? who? and market opportunities of the NDIS, op. cit. 15. NDIS, ‘Intergovernmental agreements’, NDIS website. 16. Senate Standing Committee for Selection of Bills, Report, 4, 2016, 17 March 2016.

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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 5

Parliamentary Joint Committee on Human Rights At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not commented on the Bills.

Special Account Bill Commencement The provisions of the Special Account Bill commence on Royal Assent.

Paying for the NDIS When the NDIS Act was enacted it did ‘not include any provisions establishing a funding mechanism for the NDIS’.19

The Parliamentary Library’s Budget Review 2012-13 stated:

The NDIS will be a major and highly complex reform to the way in which disability care and support are funded. It is likely to have far-reaching effects throughout the disability services sector. The NDIS will also represent a significant new area of Commonwealth responsibility and expenditure. The estimated annual cost (nearly $14 billion) is around the same amount spent on the Disability Support Pension, more than the current annual cost of the Pharmaceutical Benefits Scheme ($10 billion), and not substantially less than the current annual cost of Medicare ($18 billion) …

… The question of how the NDIS will be funded (will there be an agreed formula entrenched in legislation?) is crucial in determining whether the longstanding problem of funding shortfalls will be adequately addressed. In the absence of an adequate and secure funding base, the NDIS would, in the long run, provide little advance on current arrangements.

20

What the Productivity Commission recommended The Productivity Commission recommended that the NDIS would:

… lock in tax revenue to meet its annual liabilities, without a yearly battle through the budget process to secure sufficient funding in competition with other government spending initiatives …. In effect, the NDIS will be funded by a mandatory annual insurance premium. 21

The Productivity Commission proposed, amongst other things, that the Australian Government specify in legislation a special account—the ‘national disability insurance fund’. It was proposed:

… the legislative provision would require the Australian Government to earmark funds according to the prescribed formula. The elements of this approach that ensure a stable revenue stream are its legislated basis and that the amount earmarked for the fund would not be an absolute amount of dollars, but act effectively as a rate applied to a growing income base. Without the latter, the amount of revenue would fall relative to the costs of the NDIS, and making up the shortfall would require new legislation—leaving too much scope for future governments to renege on a stable source of revenue. As much as possible, the formula should be as simple as possible and transparent.

22

17. Human Rights (Parliamentary Scrutiny) Act 2011. 18. The Statement of Compatibility with Human Rights can be found at the end of the Explanatory Memorandum to the National Disability Insurance Scheme Savings Fund Special Account Bill 2016 and at the end of the Explanatory Memorandum to the National Disability Insurance Scheme Amendment Bill 2016.

19. L Buckmaster and J Tomaras, National Disability Insurance Scheme Bill 2012, Bills Digest, 72, 2012-13, Parliamentary Library, Canberra, 11 February 2013, p. 18. 20. L Buckmaster, National Disability Insurance Scheme: Budget review 2012-13, Research paper series, 9, 2011-12, Parliamentary Library, Canberra, 2012, pp. 131-134. 21. PC, Disability care and support, http://www.pc.gov.au/inquiries/completed/disability-support/reportop. cit., vol. 2., p.

573.

22. Ibid., vol. 2., pp. 659-660.

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What is a special account? Under section 81 of the Constitution 23 all moneys raised or received by the Commonwealth form part of the Consolidated Revenue Fund (CRF). Furthermore, section 83 of the Constitution provides that no money may be drawn from the Treasury of the Commonwealth without a legal appropriation authority.24 The CRF in section 81 of the Constitution is synonymous with the Treasury in section 83.25

Under section 80 of the Public Governance, Performance and Accountability Act 2013 26 if an Act establishes a special account and identifies the purposes of the special account, then the CRF is appropriated for expenditure for those purposes, up to the balance for the time being of the special account.

A special account which has been established under an enactment, such as is proposed by the Special Account Bill, can only be varied, revoked or abolished with the amendment or repeal of the provision which establishes the Special Account in the enabling legislation.27

While Special Accounts can record amounts solely from Commonwealth appropriations, they can also record amounts from other sources as allowed by the terms of the Special Account’s establishing legislation. These funds can include indirect taxes or other imposts (for example, an industry levy), contributions by other governments, or discretionary contributions by members of the community. Amounts standing to the credit of Special Accounts may only be debited strictly in accordance with the Account’s purpose.28

Policy position of non-government parties/independents At the time of writing this Bills Digest, Labor had commented specifically on the funding of the NDIS and whether there was a budgetary short fall rather than on the establishment of a special account per se.29

Position of major interest groups At the time of writing this Bills Digest, stakeholder groups had not commented on the Special Account Bill.

Financial implications According to the Explanatory Memorandum for the Special Account Bill it:

… will have nil or negligible financial impact over the forward estimates. The special account would not increase the Commonwealth’s gross debt and would not have a negative impact on the Budget bottom line as the special account sits within the Consolidated Revenue Fund and there are no associated Public Debt Interest or management costs.

30

According to the Minister for Social Services, Christian Porter:

At full-scheme rollout, the bill for the NDIS will be $22 billion a year … The Commonwealth government will be committed to $11.3 billion worth of funding to the NDIS. Of that, $1.1 billion comes from existing Commonwealth funding, $3.3 billion from the Medicare levy and $1.9 billion from existing specialist disability services. That leaves a gap of $5 billion. We have created an account into which we will place identified savings to the tune of $5 billion over the next period of three years, to 2019.

31

23. Constitution. 24. Northern Suburbs General Cemetery Reserve Trust v Commonwealth (1993) 176 CLR 555, [1993] HCA 12. 25. Department of Finance and Administration, Guidelines for the management of special accounts, Financial Management Guidance no. 7, October 2003, p. 5.

26. Public Governance, Performance and Accountability Act 2013. 27. Department of Finance and Administration, Guidelines for the management of special accounts, op. cit., p. 17. 28. History of the development of special accounts is in C Lawson, ‘”Special Accounts” under the Constitution: amounts appropriated for designated purposes’, University of New South Wales Law Journal, 29(2), 2006, pp. 114-146.

29. J Macklin (Shadow Minister for Disability Reform and Shadow Minister for Families and Payments) and T Burke (Shadow Minister for Finance), Pickpocket Porter steals NDIS money, joint media release, 9 April 2016; J Macklin (Shadow Minister for Disability Reform and Shadow Minister for Families and Payments) and T Burke (Shadow Minister for Finance), Government must explain what it’s done with NDIS funds, joint media release, 18 April 2016.

30. Explanatory Memorandum, National Disability Insurance Scheme Savings Fund Special Account Bill 2016, p. 1. 31. C Porter, ‘Questions without notice: National Disability Insurance Scheme’, [Questioner: E Jones], House of Representatives, Debates, 17 March 2016, p. 3530.

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Special appropriations Speaking about the Special Account Bill, Minister for Social Services, Christian Porter, said that it will collect underspends and savings that will help meet the Commonwealth’s contribution to the NDIS from 2019-20. Once the fund is set up the government will ‘set aside specific, identified and protected savings… The fund will have an opening balance of $162.4 million, which was set aside in the 2015-16 Mid-Year Economic and Fiscal Outlook’.32

Key issues and provisions Clause 5 establishes the National Disability Insurance Scheme Savings Fund Special Account as a Special Account for the purposes of the Public Governance, Performance and Accountability Act.

The Minister for Social Services has said that there is:

… $5 billion worth of funding shortfalls from 2019-20 onwards. This Special Account is the mechanism for securing that funding shortfall …

The Special Account will allow the government, over future budgets, to identify savings from existing programs and set aside those savings to assist in meeting the Commonwealth’s future financial commitments to the NDIS. 33

Accordingly, clause 6 provides that the purposes of the Special Account are:

• to assist the Commonwealth to meet its funding obligations in relation to the NDIS Act

• to make payments to the National Disability Insurance Scheme Launch Transition Agency for the purposes of the Agency

• to reduce the balance of the Special Account (and, therefore, the available appropriation for the account) without making a real or notional payment.

The Explanatory Memorandum to the Special Account Bill provides that the credits to the Special Account may result from:

• underspends and net savings from the NDIS and other portfolio savings, as determined by the Minister for Social Services

• discretionary decisions by the Prime Minister or the Cabinet and

• decisions by the Prime Minister or the Cabinet about identified savings from other Commonwealth portfolios. 34

The effect of clauses 5 and 6 together is that the CRF is appropriated for expenditure only for those purposes outlined above, up to the balance for the time being of the Special Account.

As stated above, the Commonwealth is setting up the Special Account to meet an expected future funding shortfall. This is required because the Intergovernmental Agreement on the National Disability Insurance Scheme Launch states as follows:

Governments agree that managing unexpected costs is a critical issue. The Commonwealth agrees that it will fund any costs associated with high population numbers, higher per person care and support costs, 100 per cent of the Agency’s cash flow risk and any other risk sharing arrangements identified in Schedules A-E during the launch and transition to a full scheme …

35

Clause 7 of the Special Account Bill sets out the manner in which funds may be credited to the Special Account. It empowers the Minister to determine in writing that a specified amount is to be credited to the Special Account on a particular day or that a specified amount is to be credited in specified instalments on specified days. That determination is not a legislative instrument and so would not be a disallowable instrument under the

32. M Cormann (Minister for Finance) and C Porter (Minister for Social Services), New NDIS account to lock in funding, joint media release, 16 March 2016. 33. C Porter, ‘Second reading speech: National Disability Insurance Scheme Savings Fund Special Account Bill 2016’, House of Representatives, Debates, 16 March 2016, p. 3247; K Vickery, ‘NDIS faces "funding challenges"’, Daily Telegraph, 29 January 2016, p. 22. 34. Explanatory Memorandum, National Disability Insurance Scheme Savings Fund Special Account Bill 2016, p. 1. 35. Council of Australian Governments (COAG), ‘Intergovernmental Agreement on the National Disability Insurance Scheme Launch’, COAG

website, 7 December 2012, paragraph 28.

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Legislation Act 2003, and would not be required to be tabled in both Houses of the Parliament.36 Clause 8 of the Special Account Bill allows the Minister to delegate any or all of his, or her, powers under clause 7 to the Secretary of the Department or an SES employee, or acting SES employee, in the Department.

Under clause 9 the Minister must cause a review of the operation of the National Disability Insurance Scheme Savings Fund Special Account Act 2016 to be undertaken in the financial year ending on 30 June 2027. However there is no stated requirement that the report of the review be tabled in both Houses of the Parliament or that it be published.

Amendment Bill Commencement The operative provisions of the Amendment Bill commence on 1 July 2016.

Board of the Agency Part 2 of Chapter 6 of the NDIS Act establishes the Board of the Agency. Relevant to this Bills Digest membership of the Board is as follows:

• the Board comprises a Chair and eight others37

• Board members are appointed by the Minister, in writing, on a part-time basis38 for a period of no longer than three years39

• the Minister must be satisfied before appointing a person to the Board that he, or she, has skills, experience or knowledge in at least one of the following:

- the provision or use of disability services - the operation of insurance schemes, compensation schemes or schemes with long-term liabilities - financial management - corporate governance40 • in relation to the appointment of the Chair—the Minister must consult the states and territories41

• in relation to the appointment of a member other than the Chair—the Minister must both seek the support of all the states and territories for the appointment and be satisfied that the appointment is supported by the Commonwealth, states and territories.42 However, if 90 days have passed since the Minister sought that support and it is not known whether support is given, the Minister may appoint the person as a member of the Board.43

Moves to replace the Board The current members of the Board, including the Chair, were appointed from 1 July 2013 for three years. As a result, the term of each of their appointments ends on 30 June 2016. The NDIS Act does not explicitly provide for the reappointment of any member.

As early as July 2015 it was reported that the Government was ‘preparing to replace the board of the National Disability Insurance Scheme, sidelining the states and people with disability in favour of big business’.44

It appears that the Government had earlier commissioned KordaMentha ‘to review the board requirements’.45 Although the report of KordaMentha’s review has not been made public, according to the Australian Financial Review it states:

36. Legislation Act, section 3A. 37. National Disability Insurance Scheme Act, section 126. 38. National Disability Insurance Scheme Act, subsection 127(1). 39. National Disability Insurance Scheme Act, section 128. Section 33AA of the Acts Interpretation Act 1901 provides that a power to make an

appointment includes a power to reappoint. 40. National Disability Insurance Scheme Act, subsection 127(2). 41. National Disability Insurance Scheme Act, subsection 127(3). 42. National Disability Insurance Scheme Act, subsection 127(4). 43. National Disability Insurance Scheme Act, subsection 127(4A). 44. J Macklin (Shadow Minister for Disability Reform and Shadow Minister for Families and Payments), Abbott government moves to replaces

NDIS board, media release, 22 July 2015.

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… NDIA's board requires strong financial, operational and governance experience which should have been obtained in the very largest [government enterprises] and/or larger corporations, preferably with significant government/ regulated industry interaction … [and that] … the majority of the NDIA board members should have experience as a senior manager or CEO, as they have responsibilities as a communicator, decision maker, leader, manager and executor.

46

In the face of allegations that the Government moved to replace all of the Board members without first informing them of its intentions,47 the Assistant Minister for Social Services, Senator Mitch Fifield, clarified the process which was taken:

• 17 April 2015: consultations with jurisdictions were commenced with agreement by First Ministers at COAG to develop a process to ensure the next iteration of the board had the best skill set for the transition phase of the Scheme

• 24 April 2015: the agreement was discussed at the COAG Disability Reform Council (DRC) Ministerial Meeting

• 7 July 2015: Senator Fifield wrote to all Ministerial members of the DRC seeking their agreement to an appointments process that would include the engagement of a search firm

• 9 July 2015: the Department of Social Services, at the direction of Senator Fifield, outlined the proposed Board selection process to the Chair of the Board, which included providing a copy of the 7 July 2015 correspondence

• 17 July 2015: Senator Fifield wrote to the Chair providing further details of the Board selection process

• 29 July 2015: all jurisdictions had written to confirm their agreement to the process

• 2 September 2015: Senator Fifield wrote to DRC Ministerial members confirming the search firm had been engaged and advising that advertisements calling for expressions of interest would soon appear

• 3 September 2015: Board members were contacted by the National Disability Insurance Agency and the Department of Social Services and advised that expression of interest advertisements would appear in the press from the following day and that further advice on the process would be provided

• 4 September 2015: the Department of Social Services emailed a letter from Senator Fifield inviting interested Board members to take part in the process.48

A copy of the relevant advertisement is in Appendix 1 of this Bills Digest. Importantly, from the perspective of some stakeholders a difficulty arises because that advertisement does not include a reference to persons with disabilities.

The Commonwealth Government’s desire to replace the Board may have been, in part, due to concerns expressed by business leaders that the ‘National Disability Insurance Scheme faces a cost blowout of $3 billion a year when it is in full operation’.49 Business Council of Australia chief executive, Jennifer Westacott, highlighted three main areas of concern:

First, there is no clear and transparent spending envelope, to provide added impetus for cost discipline. This is particularly important in the early stages of a new government scheme that is being quickly rolled out.

Secondly, in such an underdeveloped market, we are also unlikely to see services delivered for best value. The NDIS itself has conceded that market capacity will need to increase significantly as providers transition to the new model.

45. L Tingle, ‘Fifield’s disabling governance foray’, The Australian Financial Review, 7 September 2015, p. 9. 46. Ibid.

47. Ibid.

48. M Fifield (Assistant Minister for Social Services), NDIS Board appointment process, media release, 7 September 2015. 49. R Morton, ‘NDIS facing $3bn blowout: Shepherd’, The Australian, 7 March 2016, p. 1.

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The third problem is that eligibility is still evolving, including major boundary issues with aged care and mental health. 50

Interim measures In order to ensure some continuity of the Board post 1 July 2016, Minister for Social Services, Christian Porter, announced on 4 March 2016 that he had ‘asked the Board Chair and three members to serve for a further six months after their current terms expire’.51 The remaining members were ‘invited to extend their terms for twelve months, taking them through to mid-2017’.52

Productivity Commission view The Productivity Commission was particularly concerned about the composition of the Board of the Agency. It recommended that a skill-based board should oversee the Agency.53

In making this recommendation, the Productivity Commission stated:

The NDIA would have responsibility for billions of dollars of annual expenditure, and process claims from hundreds of thousands of people. It would have to employ a diverse workforce to oversee its key functions (management and strategy, case management, assessment, quality oversight, actuarial services, financial and data management). It would have to coordinate supports for people in all parts of Australia. It would deal with hundreds of specialist providers and with scheme brokers. Any significant failures in governance by the NDIA in any of these areas would rebound on some of the most vulnerable Australians, on taxpayers, and ultimately could threaten the long-term sustainability of the NDIS.

Based on its experiences of governance in insurance and management, the Insurance Council of Australia (ICA) identified four significant sources of managerial risk for a scheme—ignorance, self-interest, ideology and political interference. It drew attention to the failure of some [compulsory third party] CTP schemes in the 1980s and early 1990s, where poor claims management, inadequate financial discipline, cost blow-outs and the vagaries of government interventions quickly led to a breakdown in governance and prevented the schemes from operating viably …

The overarching goal of the NDIA’s internal processes and external rules must be to avoid these risks and, instead, to encourage the hard-nosed, focused pursuit of the sustainable and cost-effective provision of support services for people with disability. 54

[emphasis added]

Stakeholder views The views from stakeholders about the composition of the Board are clear from the report by the Senate Standing Committee on Community Affairs (the Committee) into the originating NDIS Bill.55 Submissions to the Committee argued that the Board should play a role in reflecting the NDIS's mission to advance the rights of people with disabilities so that the list of skills and attributes of a Board member should include 'demonstrated knowledge of and commitment to disability rights'.56 In addition, it was submitted that the Board recruitment process should actively seek to identify people with disability who possess the skills, knowledge and lived experience required to be members of the NDIS Board.57

The Committee took the view that it is important that the Minister recruit talented people with disability to the Board. That being the case, it recommended that at least three members of the Board are people with

50. Ibid.

51. C Porter (Minister for Social Services), Expanded board to drive NDIS rollout, media release, 4 March 2016. 52. Ibid.

53. PC, Disability care and support, http://www.pc.gov.au/inquiries/completed/disability-support/reportop. cit., vol. 1., recommendation 9.2, p. 76. 54. Ibid., vol. 1., pp. 404-405. 55. The terms of reference, submissions to the Community Affairs Committee and the final report of the Committee are on the inquiry

homepage.

56. Senate Standing Committee on Community Affairs, National Disability Insurance Scheme Bill 2012 [provisions], Senate, Canberra, May 2013, paragraph 9.22, p. 138. 57. Ibid., paragraph 9.23.

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disability.58 Although it has been reported that ‘the current NDIA board consists of 8 members, two of whom have disabilities (including Deputy Chair, Rhonda Galbally) and two who have children with disability (including Chair, Bruce Bonyhady)’59 the recommendation of the Committee was not reflected in the NDIS Act.

Proposal for legislative change It is in the context of the transition to the full NDIS in 2019 and the consequential increase in its costs that the Commonwealth ‘won agreement from the states for the board of the NDIS to be expanded by three places’.60 However it has been reported that:

… In papers presented to a meeting of federal and state disability ministers on Friday, the federal government has put forward a detailed proposal to "simplify" the management of the scheme, which in fact would allow it to change key definitions of who is eligible for support, and to give directions to the agency that runs the scheme …

The proposal, which was opposed by all states and territories, would, for example, mean that in future the federal government could define—without consultation—who can be covered by the scheme, what can be included in participants' care plans, and what constitutes "reasonable and necessary support" … 61

The Bill puts into effect only the enlargement of the Board. It does not put in place any other change which would skew the existing balance set out in the bilateral agreements which have been negotiated between the Commonwealth and the various states and territories.

Policy position of non-government parties

Australian Greens Senator Siewert acknowledged in March 2016 that ‘speculation about aspects of the NDIS are understandably making people nervous about the future of the scheme’. She stated:

Any substantial reform package takes time to be fully and effectively implemented, the Federal Government needs to stay on course to ensure the NDIS is delivered as intended, they clearly have the support of the Australian community to do so. 62

Australian Labor Party Jenny Macklin, Shadow Minister for Disability Reform, stated in relation to the moves to seek new membership of the Board:

Currently, the Board of the NDIS, including the Chair, is made up nominees from each of the states, and is representative of people with disability.

To maintain the NDIS as a truly national scheme, the NDIS board must be reflective of the jurisdictions that are involved.

Above all, the NDIS Board must continue to include people with disability, the architects and beneficiaries of the NDIS. 63

Position of major interest groups The Australian Federation of Disability Organisations stated that it is:

… critical that we continue to have an independent Board leading the scheme who will protect the interest of people with disability and their families. Disability Australia supports the current system of state nominated

58. Ibid., recommendation 28, p. 140. 59. M Bagshaw, ‘A new NDIA board? A litmus test for the NDIS’, The Ablemovement, blog, 24 July 2015. 60. L Tingle, ‘Turnbull government moves to control NDIS’, The Australian Financial Review, 7 March 2016, p. 4. 61. Ibid.; C Porter (Minister for Social Services), Interview Fran Kelly, Radio National, NDIS governance, NDIS board appointments, transcript, 8

March 2016; General News, ‘Disability ministers oppose Porter’s proposal’, Sydney Morning Herald, 8 March 2016, p. 8. 62. R Siewert, NDIS too important to undermine: Greens, media release, 9 March 2016. 63. J Macklin (Shadow Minister for Disability Reform and Shadow Minister for Families and Payments) and B Shorten (Leader of the Opposition),

Abbott moves to replace NDIS board, joint media release, 4 September 2015.

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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 12

representatives in consultation with the Commonwealth. For the sake of the scheme it should sit in a neutral bi-partisan space with cooperation from both the state and federal governments.

We also think it’s critical that the Board continues, as it currently does, to include people with disability who also have the extensive governance experience required. 64 [emphasis added]

Financial implications According to the Explanatory Memorandum to the Amendment Bill, ‘the measure will cost $0.8 million over the forward estimates’.65

Key issues and provisions Item 1 of the Amendment Bill amends section 126 of the NDIS Act to increase the number of board members other than the Chair to ‘up to 11’ from the present membership of eight.

Currently subsection 138(1) of the NDIS Act provides that a quorum is constituted by five Board members. The exception, set out in subsection 138(2) of the NDIS Act is where a Board member is not to be present during the deliberations, or to take part in any decision. The subsection provides for the making of rules under section 29 of the Public Governance, Performance and Accountability Act 201366 in relation to a conflict of interest. However, no such rules have yet been made to date. Where such rules are made, the remaining members at the meeting constitute a quorum for the purpose of any deliberation or decision at that meeting with respect to that matter.

Item 2 of the Amendment Bill amends subsection 138(1) so that a quorum is constituted by a majority of the Board. Given the amendments in item 1 of the Amendment Bill there will be a quorum if just six of the 12 members are in attendance. This suggests that a tied vote is possible.

At common law, the Chair of a meeting does not have the power or right to exercise a casting vote if the voting is equal.67

Accordingly, for the chair to be able to exercise a casting vote, express power to do so must be given by the body’s rules or a relevant statute. In order to assist meetings to be able to arrive at decisions where voting is equally divided, it is usual for the rules of organisations expressly to provide that the chair of a meeting has a second or casting vote where there is an equality of votes.

68

It would be prudent for an additional amendment to address this circumstance. It is worth noting that section 248G of the Corporations Act 2001 (which is a replaceable rule69) provides that:

(1) A resolution of the directors must be passed by a majority of the votes cast by directors entitled to vote on the resolution.

(2) The chair has a casting vote if necessary in addition to any vote they have in their capacity as a director. 70

Concluding comments It is unfortunate that the Commonwealth Government’s decision to transition the membership of the Board to include persons with high level risk management skills was attended by confusion, misinformation and angst.

When the NDIS is fully operational in 2019 it will cost $22 billion a year, of which the Commonwealth government will pay $11.3 billion. As stated above, the Commonwealth agreed in the Intergovernmental Agreement on the National Disability Insurance Scheme Launch, that it will fund any costs associated with high

64. M Wright (Australian Federation of Disability Organisations CEO), People with disability organisations reject NDIS governance and cost blow out commentary as neither truthful nor helpful, media release, 7 March 2016. 65. Explanatory Memorandum, National Disability Insurance Scheme Amendment Bill 2016. 66. Public Governance, Performance and Accountability Act 2013. 67. Bishop of Chichester v Harward and Webber (1787) 1Term Rep 650, 1787 ER 1300. 68. AD Lang, Horsley’s meetings: procedure, law and practice, 7th edn., LexisNexis Butterworths, Sydney, 2015, p. 200. 69. A replaceable rule is a provision of the Corporations Act that governs the internal management of companies, but that can be displaced or

modified by a company’s constitution. Source: PJ Butt, Butterworths Concise Australian Legal Dictionary, 3rd edn., LexisNexis Butterworths, Sydney, 2004, p. 374, 70. Corporations Act 2001.

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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 13

population numbers, higher per person care and support costs, 100 per cent of the Agency’s cash flow risk and any other risk sharing arrangements during the launch and transition to a full scheme. This is an enormous and imprecisely quantified financial commitment. That being the case, it is not surprising that the Commonwealth has been seeking (and will probably need to continue to seek) greater control of the decisions which dictate how, and how much, money is spent. Underlying this action is the knowledge of the real risk that without the necessary financial controls the NDIS could become unsustainable. This much has been recognised, and warned against, by both the Productivity Commission and business leaders.

The tension arises because that need to make risk-based financial decisions may lead to outcomes which are contrary to the needs and expectations of persons with disability for whom the NDIS has promised so much. The difficulty for a Government of any political persuasion will be in finding a workable balance.

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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 14

Appendix 1 Below is the advertisement inviting applications for Board membership:71

71. Reprinted in X Smerdon, ‘Disability Sector Kept in the Dark on NDIS Shakeup’, Probono Australia, 4 September 2015.

An advertisement calling for applicants for the NDIA board

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National Disability Insurance Scheme Savings Fund Special Account Bill 2016 [and] National Disability Insurance Scheme Amendment Bill 2016 15

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