HELGEBY, Dr Stein, Deputy Secretary, Governance and Resource Management Group, Department of Finance and Deregulation

SOTIROPOULOS, Mr George, Assistant Secretary, Governance, Department of Finance and Deregulation

SUUR, Mr Lembit, First Assistant Secretary, Financial Framework, Department of Finance and Deregulation

TUNE, Mr David John, Secretary, Department of Finance and Deregulation

Committee met at 11:43

CHAIR ( Mr Oakeshott ): Before the hearing commences, I ask that a committee member moves that the proceedings of today's public hearing be permitted to be broadcast.

Senator MARK BISHOP: So moved.

CHAIR: There being no objection, it is so carried. I declare open today's public hearing on the Public Governance, Performance and Accountability Bill 2013. The bill was referred to this committee, the Joint Committee of Public Accounts and Audit, by the House of Representatives Selection Committee last Thursday, 16 May. As witnesses will be aware, the committee has formed a sectional committee of five members to consider the bill. Noting the small number of sitting weeks remaining before the election, the committee plans to make an initial report in a relatively short time frame, so we appreciate everyone coming together at short notice. I also note that two senators are appearing via teleconference, Senator Ruston and Senator Smith.

I welcome representatives of the Department of Finance and Deregulation. Although the committee does not require you to give evidence under oath, I advise you that these hearings are formal proceedings of the parliament and warrant the same respect as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today attracts parliamentary privilege. Given the relatively large number of witnesses appearing before us today, I ask on behalf of the committee that statements and comments by witnesses be kept as relevant and succinct as possible. Before we proceed to questions, do any of the witnesses wish to make a brief opening statement to the committee?

Mr Tune : Thank you for the opportunity to appear before you today. We have provided a reasonably detailed submission to the committee—it runs through a whole lot of things that we have been doing. As you are probably aware, this is the culmination, at least from our point of view, of 30 months of development and widespread consultation. The submission itself lists, I think in one of the attachments, the people we have consulted and the process we have gone through with issues papers, position papers and so forth. So a huge amount of thinking has gone into the development of this bill, and a huge amount of consultation as well, under the process that we have called the Commonwealth financial accountability review, which has been conducted in the Department of Finance and Deregulation. The consultation that we have done has been across the public sector, who are obviously the users of the pieces of legislation that we have now and would be the users of the combined act. We have consulted with academics, we have consulted with state and territory officials, we have consulted with the private sector and we have also consulted with the not-for-profit sector on many occasions.

The objective of the bill, of course, is to replace the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997 with a single act, known as the Public Governance, Performance and Accountability Bill 2013 as it stands at the moment. That would become a single act. Our consultations suggest that there is quite strong support for the changes to the current arrangements. In the submission we have set down as we see them the deficiencies of the current framework that have emerged from those consultations. I will run some of those briefly, not all of them: chiefly, the impact that the current arrangements is having on efficiency and productivity inside the public sector; and the deficiency in the current arrangements whereby they do not do sufficiently well in encouraging cooperation across agencies, whether they are CAC Act agencies or FMA Act agencies, but also, more importantly perhaps, across levels of government and 'joined-up government', which is a constant theme of the way governments operate in Australia—and around the world, for that matter. The third thing I would highlight is that the current framework does not properly address risk, and I will say a bit more about that in a moment. Next, the current binary choice—you are either in the CAC Act or in the FMA Act—does not reflect the operational diversity of the Commonwealth. In fact, what we have at the moment is a mishmash of arrangements and I think it is probably fair to say that there is a lack of coherence about whether a new agency is allocated to the FMA Act or the CAC Act, so it is not clear what is going on. There is also a lack of coherence in the accountability arrangements under the current acts.

Lastly and, in fact, incredibly importantly, the current framework does not give sufficient emphasis to measuring and monitoring entity performance and doing so in a transparent way. The bill sets down specific provisions to enable that to occur, which is one of the key things that we can do that will actually lead to better performance inside the public sector and more transparency around the public sector, demonstrating to parliament and the general public its performance.

The legislation is based around four key principles which I think are probably worth emphasising. So the performance of the public sector is more than financial, being principle 1. Most of the arrangements at the moment are very much focused on the financial side of things. We think there is more to it than that particularly around how it relates to the processes of government, and performance in particular. Secondly, engaging with risk is a necessary step in improving performance. Thirdly, the government should operate as a coherent whole. Fourthly, uniform duties should apply to all officials responsible for using and managing public resources. Having said that, the bill nonetheless is evolutionary in nature. I do not think we would call it revolutionary. We think it is an evolutionary change. Many provisions reflect existing provisions in the two acts or build on existing provisions. In fact, 80 of the 110 provisions in the bill fall into this category. However, there are also new provisions and in particular they relate to those things that I mentioned as being the deficiencies and the things that we are trying to fix up in the new bill particularly relating to performance and management, to risk and to cooperation. These are areas not just we have identified as being deficiencies. They have also been identified by this committee in its own right and, I think, by the ANAO but I am sure Mr McPhee will have things to say about that.

Senator MARK BISHOP: What were they? Performance, management, risk and—?

Mr Tune : Performance, management, risk and cooperation. Without going into the details perhaps I can highlight three things that I think might be issues that you may wish to speak about. Firstly, there seem to be some concerns raised about the lack of visibility of the rules. What we have been doing with this bill is trying to get the principles right. Once we had the principles right and once parliament was happy with those principles then the detail that sits below that, the rules, could then be developed. I suppose a principles based approach to legislation is the way that at least parliamentary drafters prefer to go these days, so we have been very much conscious of that particular issue. But there is this big issue about the need to have the rules in place and I will say a bit about that. The idea here is that if the parliament were to pass this bill we would then spend a period of time developing those rules. At the moment the existing acts have one provision that sets down the capacity to make rules. What we have tried to do is be quite specific in the bill as to the areas where it will be permissible to make rules, so we are trying to define the areas we will be going into and making rules. So the idea is the rules give meaning and depth to the principles on which the bill is based.

The rules will prescribe how provisions of the bill will be discharged by officials and entities. As I said, areas in which the rules could be made are clearly stated in the bill and, as the explanatory memorandum to the bill notes, there will be a rigorous process for developing the rules including an important role for the JCPAA as set down quite explicitly in the explanatory memorandum. Lastly, the rules will also be disallowable instruments so there is an opportunity, as we move through to the development of those rules, for them to come back to the parliament for due consideration.

The other provision we have put in there, to ensure that we do this in an ordered way, is the provision that the operational provisions will not commence until 1 July 2014. That is our aim. It is actually the date of proclamation but we are hoping we can get it done by 1 July 2014. So in essence if the bill were to be passed there would be a year of further development. It would be a year of extensive consultation with the same sets of agencies, entities and individuals that we have been consulting to date and, as I said, including the JCPAA as we move through that.

The second point I might just make, in terms of the overview points, is that the bill has no effect on the independence of entities. The independence of entities is set down and determined by an entity's enabling legislation, as agreed by the parliament, and is not set down by the financial framework legislation. This has been an issue with a number of the agencies that we have been consulting with over time, and I think a number of those are going to be here today. The reforms give primacy to enabling legislation. With the ANAO it is the Audit Act, and that sets up their independence and it is not affected by this legislation. Where entities currently enjoy exemptions from the framework they will continue to do so under this bill. The key one there to note is the High Court, which is not covered under the existing legislation and would not be covered under this legislation either. The end result of that is that the independence of entities such as the ANAO, the Australian Federal Police, the Reserve Bank, the ABC and the SBS, among many others, will not be affected by this bill.

The third point I make—without going on too long—is that the bill incorporates the capacity to implement the concept of earned autonomy, which has been covered off at various stages in the consultation process, and we have been developing the concept in our mind. Basically, it is a regime of escalating regulation. Rather than have a one-size-fits-all approach to the oversight and regulation of entities, the idea is that that oversight and regulation will be tailored according to an entity's risk profile and demonstrated performance. The bill allows the finance minister to vary requirements for specific entities or types of entities on a broad range of financial reporting and accountability matters beyond the core obligations.

To conclude, our view is that there is a strong momentum for reform that has built up over several years. Clarifying the requirements relating to risk performance and cooperation in particular would deliver very positive benefits. They are not new issues, I will admit. They have been around for a while, but the evidence suggests that progress is not as good as it could be under the existing framework. So those three key objectives that I set down are key things that we think can be improved quite substantially through the passage of the bill. As expectations of government and the role of government continue to increase and change over time, we think all of that can have a positive impact on efficiency inside the public sector, on effectiveness inside the public sector and also on productivity inside the public sector. Thank you, I will leave it at that.

Senator MARK BISHOP: I want to go through two or three of the issues that Mr Tune raised in his opening comments and then address half a dozen of the key principles in the bill. Firstly, you were making some points concerning getting the principles in the bill correct first and then developing the rules over a period of time, and you talked about the importance of doing so. Just so I have it clear, are those rules what we traditionally call regulations?

Mr Tune : That is correct.

Senator MARK BISHOP: They are effectively delegated legislation that will be created and then put through both houses. It has been a recurring theme of late at the Scrutiny of Bills Committee and at other forums I have been involved in that this process of not containing the bulk of the matters sought to be achieved in a bill and then creating another mechanism to do so—that is regulations or a set of rules, even if disallowable—becomes a vehicle for lack of full exposure to an examination by parliament at the outset point, and there has been some critical commentary to that effect. What is your response to that criticism? It seems to have some veracity, if I can say that?

Mr Tune : I can accept that can be a concern. I think in this instance the way we have tried to address the concern is to be right up front and say that the government is making a commitment, in effect, that it will be consulting with the JCPAA in particular as it developed the rules. We are not going to take the rules through and rush them through. They will be developed, as I said, in consultation with all the interested parties. Using this committee in particular as the key committee that looks at these particular issues and that commitment we have made to bring everything back through the committee, I think, gives the parliament the opportunity to have its say. That is the way we intend to address it.

Senator MARK BISHOP: In discussions I have had with your officials, I think they informed us that there are 196 or 197 agencies or departments under the two existing acts, which are going to be amalgamated into one act. Is it proposed that in due course we have 197 different sets of regulations that are worked through the committee and proclaimed in due course that address issues of financial management and performance of each of those agencies?

Mr Tune : No, it is not, but I might ask others to explain the detail.

Dr Helgeby : I could perhaps add a little bit of context as a way of coming at that question. As the secretary said, it is not the intention to have 197 sets of rules.

Senator MARK BISHOP: Or even any number that is greater than half a dozen or 10.

Dr Helgeby : So what we are really talking about is the relationship between a bill or an act and the things that people do. There are a number of levels that go to further articulating that. One is the level of rules and regulations, and there are regulations at the moment in relation to the FMA and CAC. Coming out of those, and in some ways embedded in them, are a whole bunch of what you might call policies, procedures, guidelines or rules, et cetera, some of which have the legal status of rules—some of which do not—and go to the things that people actually do in the public sector. This includes undertaking procurements, paying grants, using credit cards, having banking arrangements and providing financial reports—people do all of these different things.

This bill, if passed, does not in itself really do anything around procurement and how procurement is undertaken other than create a question about how we connect the bill with the arrangements that we have in place around procurement. The bill will not change anything around the conduct of the public sector. If that conduct is such that it has been established so that there is a whole-of-government approach to procurement, a whole-of-government approach to grants or a whole-of-government approach to financial reporting then those things remain in place. Our task really is to find rules or to use the rules to connect the things that government has put in place, which have evolved over a period of time, with the principal bill itself.

When we are thinking about the absence of rules this time around, it is not in a context of having to reinvent a lot of things. It is in the context of finding the right way to connect things in place now, in terms of how people conduct their business, to the bill itself. That is why there would not be 197 sets of rules or regulations—there would not be one for each entity. To the extent that governments and parliaments actually want procurement or grants to be conducted in a particular way, the regulations would stay in place until they are changed. Our question then is: how do we actually make them work within the different legal construct that is new?

Senator SMITH: I have a number of different sorts of questions, so I will just dive in. Perhaps we could start with the treatment of officials, which, I think, is dealt with in section 30 of the proposed bill. I am just curious to understand how, under the proposed arrangements, a termination of senior appointments to departments would operate, and whether or not they would operate in theory and in practice.

Mr Suur : It is expected that they would operate in both theory and practice. These termination provisions sit alongside the termination provisions in the enabling legislation of various statutory bodies. The termination provisions in clause 30 are designed to relate to directors of Commonwealth entities, and the termination provisions allow an appointment to be terminated in the same way in which it was made. So, for example, if the Governor-General appoints somebody to a position, and that person breaches their duties as a director, then the Governor-General would terminate. If the minister makes an appointment then the minister would terminate. If somebody else makes the appointment then that other person would terminate.

Senator SMITH: Okay. Given that, do you accept that terminations could carry political consequences for ministers?

Mr Suur : They may. These termination provisions replace criminal provisions and civil provisions in the current CAC Act. The current CAC Act regime allows for imprisonment, it allows for fines to be imposed on people who breach their duties and, of course, unspoken is the ability to terminate people under enabling legislation. So we have done away with the regime of fines and civil penalties, largely because they have never been successfully used and the advice that we have been given from the Attorney-General's Department is that the Criminal Code is sufficient to deal with criminal provisions and that, in legislation like this, it is better to have arrangements that do not go to criminal provisions but go to other things. We thought the employment relationship is the best way for matters of misbehaviour and failure to meet duties to be dealt with, and that is universal. That is for everybody, whether they are a director, an ordinary employee or an official who has been appointed in some Commonwealth entity. If they do not meet their duties or they do not properly manage public resources, that issue is dealt with between them and their employer as a matter of their employment.

Senator SMITH: Given that and given the expectation that we are dealing with very senior appointments across the bureaucracy, and given that with those senior appointments any change in those employment relationships is likely to attract some political attention or political consequences, how relevant or appropriate is this given that it is probably unlikely that ministers will use these powers under section 30 of the bill as it is proposed?

Mr Suur : In relation to Public Service Act employees or appointments—that would be secretaries of departments and agency heads—clause 32 deals with them. It says that, where somebody is employed under the Public Service Act, the provisions of the Public Service Act apply. They are provisions that are already in place. In relation to others, it is a supplementary power, if you like, to do this. It is true that, when it comes to very senior appointments, these sorts of things may be controversial, but it is expected that this would only occur in very rare circumstances because, by and large, people who are appointed to senior roles in the Commonwealth government are people of standing, reputation and diligence who discharge their duties properly.

Senator SMITH: So you do not expect proposed section 30 in the bill to be utilised very frequently—or you expect it to be utilised on rare occasions.

Mr Suur : The issues that go to the duties come up rarely in the Commonwealth, to be honest.

Senator SMITH: So what is the impetus or the reasoning for proposed section 30 in this bill if, when we are looking to the future, you expect it to be utilised rarely? What has happened in the past that gives rise to the need for this?

Mr Suur : This arrangement is an enforcement regime, if you like, in relation to duties. It is an alternative to that currently contained in the CAC Act, which, as I said, includes civil penalties and criminal penalties. So this, if you like, replaces that regime.

Senator SMITH: I am trying to understand the motivation for this particular proposed section. Are you able to share with me what numbers of senior appointment terminations have taken place over the last three to five years?

Mr Suur : We will have to take that on notice.

Senator SMITH: Okay. If you could take that on notice, that would be great. Chair, I might just move on to another question.

CHAIR: Yes. We have five minutes. I am conscious of Anne, and I have a couple of questions myself.

Senator SMITH: It strikes me that, under the proposal, there is an increased scope of authority being given to the finance minister specifically. Is that a fair reading of the proposals?

Dr Helgeby : Are you talking about a specific clause?

Senator SMITH: Paragraph 19 of the bill talks about the finance minister being able to obtain reports, documents and other information in relation to activities as the minister requires. But under section 44A of the FMA Act the minister's ability to obtain information is restricted to financial affairs of the agency.

Mr Suur : That is correct. But in sections 15 and 16 of the CAC Act the finance minister may receive all information—in other words, financial and other information.

Senator SMITH: So this is not an expansion of the authority of the finance minister, it is consistent with arrangements that currently exist?

Dr Helgeby : Correct.

Mr Tune : For CAC Act agencies.

Mr Suur : In relation to CAC Act agencies. And there has been a tweak in relation to agencies that currently fall under the Financial Management and Accountability Act. But, if you like, in treating the Commonwealth as a whole, and in trying to bring together the rules that in some places are slightly different in relation to FMA Act agencies and CAC Act agencies, we have made policy decisions in consultation with other—

Senator SMITH: Is it envisaged that this proposed bill would expand the scope of the authority of the finance minister, or would it maintain the current scope?

Mr Tune : For current CAC Act, no, it is the same. For FMA Act agencies, at the moment, it is restricted to requests for financial information. Because of the nature of this bill—it is not just about financial management; it is also about performance, risk-taking and so forth—there is an expansion of the minister's powers in relation to those things for FMA Act agencies only. That will not overtake the role of agencies, departments, providing advice to their own minister about these things and being accountable to parliament for that, but it does provide for the finance minister to also have a role in those things.

Senator SMITH: The explanatory memorandum discusses the role of our committee in 'playing an important role in the development and approval of the rules'. How do you see that actually working? How does that work in practice? Would every rule or set of rules be brought before the joint committee?

Mr Suur : Certainly for the first set of rules—in other words, the rules that would need to be made before 1 July 2014 to operationalise this act as a scheme—if the committee is so inclined it would be our intention to bring all of those rules to the committee for the committee to look at. After that point, it is a matter to discuss with the committee what sorts of operating protocols might be put in place to determine what sorts of changes and what sorts of new rules are brought to the committee. But we are very conscious that the rules and the legislation combined represent the legislative scheme, and we are keen to have the committee involved in the whole of those—

Senator SMITH: But how many rules are you expecting to arise from the principal? If the legislation is passed, how many rules do you expect there to be?

Mr Sotiropoulos : Under the existing arrangements, under the FMA Act there are about 56 regulations currently in place, and under the CAC Act there are about 18. Given that in the bill itself many provisions replicate what is in the existing provisions of the framework, a rough order of magnitude would be that in the order of 50 to 60 rules would comprise the initial set of rules required to operationalise the arrangements.

Senator SMITH: In the initial set? How many subsequent sets do you expect?

Mr Sotiropoulos : I guess that would be your initial set, so that would comprise things like requirements around audit committees and key definitions on things like grants and procurement. In subsequent sets, we would anticipate introducing rules around the notion of earned autonomy, which the secretary mentioned earlier. This is going to take a number of years to work through to develop a scheme that is objectively based and is transparent, so we would envisage that that would come after the initial set of rules.

Senator SMITH: With all due respect, are you expecting an infinite set of rules?

Mr Sotiropoulos : No, not at all.

Senator SMITH: Can you put a time line or a time frame around the end point of the subsequent sets of rules being drafted and then approved?

Mr Sotiropoulos : Our intention is to have the initial set of rules in place by 1 July 2014.

Senator SMITH: That point has been well made.

Mr Sotiropoulos : The rules in relation to earned autonomy will probably take another year to develop and fully implement, because it is quite a different approach. We are moving from a one-size-fits-all regulatory framework to a very nuanced approach that is based on the risk maturity of entities. Just gathering the information on which to form that sort of assessment will take time.

Senator SMITH: Just so that I can visualise this, when we talk about the rules, are we talking about one page? Are we talking about 10 pages? Are we talking about 100 pages?

Mr Suur : Many of the rules run to no more than a page. We have a mocked-up rule—we tested what they would look like—in relation to audit committees, and that is about a page in length. Some of the ones that Dr Helgeby referred to earlier on, for example, like those that relate to procurement and those that relate to making grants, are longer. They can run to 10 pages or even more. So it depends on the content. But the point is that, combined, they constitute the scheme—and they do already. We have managed to reduce 161 clauses in the FMA and the CAC acts to 110 clauses in this new bill and to introduce some new concepts into the new bill as well. But, as Mr Sotiropoulos said, sitting behind the existing legislation are a wide range of separate rules that constitute the scheme as a whole, and that would still be the case. The Commonwealth is a big and complex entity, and, try as we might to make the rule set clearer and to reduce it in volume, there is a limit to what you can do.

Senator SMITH: Are you expecting that any of the rules will be brought before this parliament—

Mr Tune : No.

Senator SMITH: or brought before this committee between now and September?

Mr Tune : No, I would not have thought so.

Senator SMITH: Just continuing with that particular point then, the current government—

CHAIR: Do you want to make this—

Senator SMITH: This is my last question, Chair—

CHAIR: Okay, thanks.

Senator SMITH: if, of course, other senators would let me continue. My last question is this. The current government has a 'one regulation in, one regulation out' deregulation policy at the moment. Can you explain how the prospect of the initial set of rules and subsequent set of rules aligns with that and what regulations you expect to come out of the system?

Mr Sotiropoulos : As I advised a little earlier and Mr Suur also expanded on, in terms of the bill itself, we reduced the number of provisions between the FMA and CAC acts to this bill from 161 to 80. There are an additional 30 clauses which are new in this bill which go to drafting and a few other things, which are outlined in our submission. If we took a similar approach to the regulations, where we have somewhere in the order of 75 regulations and then a few finance minister's orders as well that sit on top of that, by order of magnitude you could envisage that that would be reduced by a reasonable proportion.

One reason is that there is a bit of duplication between the two acts at the moment. Take, for example, the audit committee regulation that Mr Suur mentioned earlier, there is one that sits in the FMA Act and there is one that sits in the CAC ACT. That would be reduced from two to one under this arrangement, so there would be a reduction in regulations.

Senator SMITH: So you are confident that there will be no increase in regulation as a result of this proposal?

Mr Sotiropoulos : I would not say I am confident, simply because there are new requirements being imposed in this legislation around performance and cooperation. So, for example, if we needed to provide a rule around the quality of performance information or the standard required of performance reporting to be provided to parliament that would be an additional rule compared to current arrangements because there is no such regulation currently in place.

Senator SMITH: But are you sure that there will be a neutral outcome?

Mr Suur : I am reasonably confident that there will be, and that indeed there will be a reduction in number. There might be an increase in coverage of subject matter, but the number of rules will reduce, just as the number of provisions in primary legislation have reduced.

Senator SMITH: Are you confident that you will be able to quantify that? By the time we get to the end of the initial set of rules, are you confident that you will be able to say, 'Here's a set of rules that have made these rules redundant or have created other rules'?

Mr Tune : We will be able to do that, yes.

Senator RUSTON: I have a couple of quick questions and then another one that I am more than happy to put on notice. In relation to the urgency of this legislation, the question has got to be—if you could just give us a very brief outline on this—do you believe there will be any serious consequences if the parliament does not pursue this legislation in the current term?

Dr Helgeby : The key issue here is that any significant reform or modernisation of the framework is one that will take a substantial period of time. It has taken 30 months to get to this stage with another 12 months to get to the completion of the regulations and then beyond that there will still be things that we will keep improving. Essentially the longer it takes to settle this level, which is the level of principle and direction, the longer we live with and the government lives with the costs that are embedded in the current arrangements. It really is a question about how long parliament and government want to wait before some of the benefits can be realised. Leaving it longer increases the risk that it will actually complicate the problem because we will need to introduce further financial framework legislative amendment bills.

Senator RUSTON: You yourself on 12 February said that this was a question for the government. Given the very short time frame between now and the election and the only a couple of parliamentary sitting weeks left, the likelihood of what you have just said you would have to say would be very minimal in that particular time frame, wouldn't you?

Dr Helgeby : We have actually slowed down our suggestions to government for immediate change in the financial framework in light of this piece of work. If we are not to progress this piece of work, we think we would have to elevate and bring forward some of the short-term fixes and interim solutions to problems as they arise.

Senator RUSTON: Even in the time frame we are referring to between July and September you would be seeking to do that?

Dr Helgeby : Between July and September clearly there is a caretaker period. But the problems that governments face continue to emerge. They emerge sometimes on a daily or weekly basis. Our advice would need to be continued to government over that time frame about what to do in those circumstances.

Mr Tune : Can I just add to that answer. There is a year's worth of work to pull the rules together. If the bill was not passed by 30 June this year, with a hoped-for commencement date of 1 July 2014, then—even if the bill was reintroduced, say, straight after an election—you would not start until July 2015. So we are losing time. We would basically lose a year if—

Senator RUSTON: Without wasting any time, because I know time is short, I would just be really keen for you to give us some specific examples—take it on notice—of what you believe, outside of the 12 months thing you have just mentioned, the specific consequences would be if this bill was not passed.

I will quickly move on to section 44, 'Promoting proper use of Commonwealth resources'. In the bill, it says:

proper use means efficient, effective, economical and ethical use that is not inconsistent with the policies of the Commonwealth.

Could you give me a two-second explanation of exactly what that means.

Dr Helgeby : I think your reference to section 44, if I am not wrong, is a reference to the existing Financial Management and Accountability Act. Section 44 in the bill is concerned with audit of subsidiaries.

Senator RUSTON: Okay, sorry—section 44 of the FMA Act. Are we continuing to propose that that particular piece of nomenclature is used in the new act?

Dr Helgeby : Yes, in the 'Dictionary', as it is called, in the new bill, we actually define 'proper'. It is on page 12 of the bill. It defines 'proper' as follows:

proper, when used in relation to the use or management of public 22 resources, means efficient, effective, economical and ethical.

So we are pulling that definition straight out of the existing section 44 by putting it into the 'Definitions' section, so that it is not simply a single clause in the bill; it is actually something that overrides any use of the word 'proper' in this legislation. And we introduce 'not inconsistent with government policy'—

Mr Sotiropoulos : I think that where Dr Helgeby was going was: clause 21 of the bill then introduces the issue of 'not inconsistent with the policies of the Australian government', and links that back to clause 15(1)(a), which is about promoting the proper use and management of public resources. So, in effect, the combination of the definition of 'proper' and clause 21 gives the same effect as section 44 of the FMA Act.

Mr Suur : For non-corporate Commonwealth entities. That is for mainstream government.

Senator RUSTON: So who would be ultimately responsible for ensuring that that part of the act was enforced? Is that your role?

Mr Suur : The head of an agency would be responsible for ensuring that that happened within their organisation.

Senator RUSTON: What about the head of the agency? Is there any question in relation to the head of the agency in terms of enforcement of that?

Mr Suur : They would be accountable to their minister, to the secretary of the Prime Minister's department and the Public Service Commissioner.

Senator RUSTON: So there is no role for the Department of Finance and Deregulation in that?

Dr Helgeby : That is correct.

Senator RUSTON: Thank you very much. I will put the other questions on notice, Chair.

CHAIR: Okay; thanks. I have purposely let this go through to 12.30; I hope everyone is okay with that. I have a lovely two minutes just to get my point across! In the time frame given, we, as a committee, quite obviously are not going to be able to get in amongst the weeds too much and go clause by clause, even though it sounds like a few are trying, in an honourable way, from the questions you have received.

Realistically, though, in the reporting time frame we have, I think we will report more at that higher end, and on some of the principles involved, even though we will give consideration to some of the issues raised around, 'Is there enough meat on the bones for us, as a parliament, to have confidence to progress?' I think that is going to be a very real question for the committee. So, if it is about those higher-order principles, I want to just go back and clarify some points on a bit of a money trail, if you like. So: taxpayers' money goes in; and our role, as an oversight body, is to make sure it comes out with as much oversight as possible, to get full value and full efficiency for spend—as I hope is the desire of all involved.

This one piece of proposed legislation will capture the 86 bodies under the CAC Act and the 110 agencies under the FMA Act. That is all a noble cause for risk management, and I fully accept the arguments about operational diversity and trying to modernise those 196 agencies and bodies in their ability to deliver. The oversight question I have, though, is about everything else where the money goes out. With respect to agreements with state governments: how does this process align and have a relationship with oversight arrangements sought, and quite often still not there, in agreements reached with state governments and entity-to-entity across jurisdictions? That would be my first question.

The other goes to the issue of everything outside those two funding channels that the High Court has identified in the chaplaincy case—so, states or pieces of legislation. Eighteen months ago we had to rush through an emergency piece of legislation for, I think, 400 grants programs. How are we going to deal with that, and what is the relationship with that in trying to get the best corporate governance possible? My question also goes to anything I may have missed that is not covered by those 196 bodies and agencies that I think you are directly focused on. But our job is all-of-government, all-of-taxpayers' dollars. Can you give an assurance to us as a committee that you are thinking about that and the oversight responsibilities to get full efficiency of money in everything else in and around taxpayers' dollars coming in and going out?

Mr Tune : If I could answer very broadly—and others may want to add to this: everything is covered, to give you that assurance. This is actually a slightly wider definition of everything being covered, because we have moved away from what we call 'public money' to 'public resources'—so we pick up a whole set of things that we as public servants, or other people in agencies, deal with. It may be revenue income from charges and fees—most of that is covered already; or it may be money that is donated to a cause that is then utilised by officials to spend on a public cause. So we have broadened the definition, in effect, to try and ensure we are getting all sources of revenue, and the spending of that revenue, into the net.

On the issue of the link, as the money flows through Commonwealth-state arrangements in particular: no, the bill does not change that in any substantive way, other than that we have encompassed this concept of partnering, of cooperation, which I spoke about at the outset. Whilst that is not explicit in saying that it follows the money trail through, it does put a responsibility on Commonwealth officials to actually work with other agencies and jurisdictions, and work with those outside the public sector altogether, to try and ensure that the objectives we are trying to achieve—economical, efficient, effective use of public resources—flow through there. But the mechanism for doing that is really set down in the National Partnership Agreements that exist with the states. They exist with the powers that the Auditor-General has to follow the money in his audits and so forth, which is a more recent power. So they are both complementary to what we are doing here, and in essence are consistent with it. Others may to add to that.

Dr Helgeby : Senator, if I could just add: from the moment—

CHAIR: Certainly not a senator!

Dr Helgeby : Sorry, Chair!

CHAIR: I've been called many things, but don't go that way!

Dr Helgeby : My apologies. From the moment the money comes under the control, or into the bank account, of any one of these entities that we are talking about here, it is subject to this bill to the moment it leaves—to the moment it has clearly left and is in the hands of someone else. So, if you like, there is an end-to-end control throughout that whole period. Other arrangements still operate within that—so, the audit act and the audit provisions operate within that; and the Commonwealth-state federal relations act continues. All of the rule sets around reporting, all of the rule sets around procurement and grants et cetera would be updated to continue that. It is under the full suite of controls that are there. We have added something in the particular case of those entities where the Commonwealth and the states are players. In particular what we have added there is an ability for state and territory auditors-general to come in and have a look themselves. The Auditor-General has a follow-the-money power, which is not abrogated by any of what is in here.

CHAIR: I am conscious that we need to move through our program, but I will make a pitch on three fronts. One is that in our relationship as the committee that works with the Auditor-General as the independent arm of the parliament, it has become patently clear with many reports that there is a problem with the processes around grants. Can you, in your rules and through this process, have recognition of that, because report after report seems to come to us raising concerns about the processes in grant administration.

The second is remote governance considerations. I would particularly direct you to some work done by former senator Fred Chaney and Desert Knowledge Australia. I think they have done some excellent work in raising some issues around how public sector governance is not computing with remote area governance, and some of those issues of conflict where both seem to point the finger at each other and no-one progresses as a consequence. I flag that for consideration when you are in the rule stage.

The third is the submission that we have received from Peter Achterstraat, who, on behalf of auditors-general across the country, has provided some advice around issues of accountability gaps and accountability overlaps and where consideration for oversight can be built early into the processes to make sure that we all get what we want, which is best delivery of services at lowest cost. We might move on after that, but please give them consideration.

Mr Suur : If I could I respond to that.

CHAIR: Yes.

Mr Suur : I will speak to each of those. The first is that from 1 June this year the updated Commonwealth Grant Guidelines will be issued. Those grant guidelines seek to pick up many of the issues that the ANAO has identified in its various audits over the last few years and, indeed, the issues that we have discussed in this committee over the course of the last 12 months. We are very conscious of the issues in grants administration in the Commonwealth, and we are doing what we can to make sure that the rule set and the policy settings help to overcome the sorts of issues that you are averting to.

In relation to remote governance, we have had conversations with various Indigenous bodies, including in places like Alice Springs, to understand the frustrations and the complications that the current framework brings to their operations. It is our intention to continue that dialogue, because, to be fair, many of those issues are particular and unique and nuanced, and they deserve special attention.

In relation to your third point, we, in this process, have engaged with state governments and we have dealt with all of the auditors-general across Australia—the state auditors-general, with the exception of the auditor-general in South Australia. We have had numerous conversations with Mr Achterstraat, who has shared his views with us. That dialogue has been part of what we have sought to do in this scheme, and the issues that the states have in joining up to the Commonwealth for the theme through this piece of legislation and through the subsequent policy changes that we hope to look at in this process.

CHAIR: Thank you for attending the first session and assisting us. It would be greatly appreciated if you could provide the answers to the questions on notice to us by the end of next Tuesday so that we can meet the fairly tight time frame that we have all set each other. We will now be meeting with a range of organisations and individuals who have had an interest in the legislation that is before us. It would assist the committee if one or two from Finance could stay at the table throughout the afternoon, when space allows, to give us the opportunity to have a bit of roundtable response to some of the issues that are raised; I will leave it up to you to work out who it will be.

Mr Tune : I have delegated my senior staff here to be available.

CHAIR: The joys of being the boss! I fully understand.