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Thursday, 10 May 2007
Page: 5


Mr NAIRN (Special Minister of State) (9:20 AM) —I move:

That this bill be now read a second time.

The Financial Framework Legislation Amendment Bill (No. 1) 2007 primarily amends division 3 of part 4 of the Financial Management and Accountability Act 1997 (FMA Act). That division consists of five sections, each relating to an appropriation authority. The bill also contains a small number of consequential amendments to the Auditor-General Act 1997 and the Legislative Instruments Act 2003, and clarifies another matter in the FMA Act in relation to delegations.

Collectively, these amendments will help reduce red tape in Australian government administration, simplify the financial framework, and simplify the administration and management of appropriations.

The amendments are evidence of the ongoing, incremental improvements to the financial framework. This is the third Financial Framework Legislation Amendment Bill, with financial framework legislation amendment acts having been passed in 2005 and 2006. Each has evidenced ongoing monitoring and review, showing that incremental improvements to the financial framework continue on an ongoing basis. While this area is relatively technical, it is an important part of financial management accountability that the government takes seriously.

The amendments are primarily intended to clarify the operation of the FMA Act in relation to the management of appropriations. Division 3 of part 4 of the FMA Act is integral to the day-to-day operations of the Commonwealth. Section 32, for example, comes into play in relation to machinery of government changes. Its operation is of particular importance when functions are moved between agencies. The proposed amendments make it clear, through a finance minister’s determination, how the appropriation authority in question moves to the agency receiving the function.

Section 31, in relation to net appropriations, is being significantly streamlined. Currently the section can only be completely understood by reference to three documents: the FMA Act itself, the annual appropriation act in question, and the relevant ‘section 31 agreement’. Section 31, in its current form, requires the execution of individual agreements, of which there are currently over 80. While such agreements were obviously contemplated with the introduction of the FMA Act nearly 10 years ago, it is timely to review whether the current process remains the most efficient way of dealing with net appropriations. The proposed amendment, having a single point of reference in the regulations, reflects a more efficient way of achieving the same objective. The amendment would do away with the need for bilateral agreements, the administration of which was criticised by the Auditor-General in Audit Report No. 28 of 2005-06: Management of Net Appropriation Agreements. The amendment would instead allow for a regulation to be made, having the same effect, but allowing for a more standardised set of items capable of increasing an agency’s appropriation.

Importantly, the amendment will effectively improve parliamentary scrutiny. Where the current agreements made under section 31 are exempt from disallowance, the arrangements proposed under the amendment to section 31 would mean that the same effect is achieved, but by way of a regulation that is disallowable.

The phrasing of sections 28 and 30 currently appears similar, though the sections apply to quite distinct transactions. The proposed amendments, including to the headings of each of these sections, will clearly distinguish between the two. This will assist agencies in determining which section is relevant to a particular transaction. In short, the amendment to section 28 will clarify the status of repayments by the Commonwealth, while section 30 clarifies repayments to the Commonwealth. In addition, it will be made clearer that these sections can apply to payments between and within agencies.

Section 30A, addressing appropriations and GST, has been streamlined to remove duplicated wording. It has also been amended to clarify both the point at which the GST liability arises, and the point at which the adjustment to the appropriation takes place.

The amendments propose a new section 32A that clarifies that none of the adjustments referred to in fact take place until recorded in an agency’s accounts and records. This ensures that chief executives have full oversight and control over the appropriations for which they have responsibility, and that adjustments to appropriations do not happen automatically. It therefore gives relevant officials greater visibility of transactions they must account for. This new provision would also apply to special accounts under sections 20 and 21 of the FMA Act.

Section 53 would be amended to clarify chief executives’ role in issuing directions when delegating a power or function. The amendment would clarify that, in addition to the directions (if any) to which the chief executive is subject, he or she can issue further directions if he or she subdelegates the power in question.

Consequential amendments to the Auditor-General Act 1997 and the Legislative Instruments Act 2003 are required.

Section 52 of the Auditor-General Act 1997 currently relates to agreements made under section 31 of the FMA Act, and would, given the proposed amendments to section 31, no longer have scope to operate and therefore needs to be repealed. Section 52 provides the Auditor-General with the unique ability to consent to changes to a net appropriation agreement affecting the Australian National Audit Office. This protection would no longer be necessary once all such arrangements are moved to a regulation involving parliamentary oversight generally.

Sections 44 and 54 of the Legislative Instruments Act 2003 refer to instruments made under sections 31 and 32 of the FMA Act and, given the proposals for each of those sections relating to the use of a regulation or a determination by the finance minister, would become redundant and should be repealed. I commend the bill to the House.

Debate (on motion by Ms Plibersek) adjourned.