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Public Governance, Performance and Accountability Bill 2013

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2010-2011-2012-2013

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

Public Governance, Performance and Accountability Bill 2013

 

 

 

 

 

 

REPLACEMENT

Explanatory Memorandum

 

 

 

 

 

 

(Circulated with the authority of the

Minister for Finance and Deregulation,

Senator the Hon Penny Wong)

 

 

 

 

 

 

 

 

 

 

 



TABLE OF CONTENTS

 

Table of abbreviations and common terms . iv

GENERAL OUTLINE . 1

Financial Impact Statement 1

Statement of Compatibility with Human Rights . 2

The PGPA Bill in a context of reform .. 2

Issues to address in the existing Commonwealth Financial Framework . 3

Consultation . 5

Key elements of the PGPA Bill 5

Government as a whole . 5

Independence of entities . 6

Uniform duties . 7

Public resources . 7

Planning and evaluation . 7

Risk management and earned autonomy . 8

Cooperation and partnering . 9

Accountability . 9

Penalties and sanctions . 9

Simplification . 10

Rules .. 10

Consequential amendments . 10

NOTES ON CLAUSES . 11

Chapter 1—Introduction . 11

Part 1-1—Introduction . 11

Division 1—Preliminary . 11

Division 2—Objects of this Act 12

Division 3—Guide to this Act 13

Part 1-2—Definitions . 14

Division 1—Guide to this Part 14

Division 2—The Dictionary . 14

Chapter 2—Commonwealth entities and the Commonwealth . 16

Part 2-1—Core provisions for this Chapter 16

Division 1—Guide to this Part 16

Division 2—Core provisions for this Chapter 16

Part 2-2—Accountable authorities and officials . 18

Division 1—Guide to this Part 18

Division 2—Accountable authorities . 18

Subdivision A—General duties of accountable authorities . 18

Subdivision B—Rules about general duties of accountable authorities . 22

Subdivision C—Application of government policy . 22

Subdivision D—Special provisions applying to accountable authorities of non-corporate Commonwealth entities   23

Division 3—Officials . 24

Subdivision A—General duties of officials . 24

Subdivision B—Provisions relating to general duties of officials . 27

Subdivision C—Officials to whom the Public Service Act applies . 29

Part 2-3—Planning, performance and accountability . 29

Division 1—Guide to this Part 29

Division 2—Planning and budgeting . 29

Division 3—Performance of Commonwealth entities . 32

Division 4—Financial reporting and auditing for Commonwealth entities . 33

Division 5—Audit committee for Commonwealth entities . 35

Division 6—Annual report for Commonwealth entities . 35

Division 7—Whole-of-government financial reporting . 36

Part 2-4—Use and management of public resources . 37

Division 1—Guide to this Part 37

Division 2—Funding and expenditure . 37

Division 3—Banking . 38

Division 4—Borrowing . 39

Division 5—Investment 40

Division 6—Indemnities, guarantees, warranties and insurance . 41

Division 7—Waivers, set-offs and act of grace payments . 42

Division 8—Special provisions applying to Ministers and certain officials . 43

Subdivision A—Gifts of relevant property . 43

Subdivision B—Liability of Ministers and certain officials for unauthorised gifts and loss . 43

Division 9—Special provisions applying to Ministers only . 44

Part 2-5—Appropriations . 46

Division 1—Guide to this Part 46

Division 2—Appropriations relating to non-corporate Commonwealth entities and the Commonwealth   46

Division 3—Special accounts . 47

Part 2-6—Cooperating with other jurisdictions . 48

Division 1—Guide to this Part 49

Division 2—Cooperating with other jurisdictions . 49

Part 2-7—Companies, subsidiaries and new corporate Commonwealth entities . 49

Division 1—Guide to this Part 49

Division 2—Companies and subsidiaries . 50

Subdivision A—The Commonwealth’s involvement in companies . 50

Subdivision B—Subsidiaries of corporate Commonwealth entities . 50

Division 3—New corporate Commonwealth entities . 51

Chapter 3—Commonwealth companies . 52

Part 3-1—General 52

Division 1—Guide to this Part 52

Division 2—Core provisions for this Chapter 52

Division 3—Special requirements for wholly-owned Commonwealth companies . 53

Part 3-2—Planning and accountability . 55

Division 1—Guide to this Part 55

Division 2—Planning and budgeting . 55

Division 3—Reporting and accountability . 56

Chapter 4—Rules and delegations . 58

Part 4-1—The rules . 58

Division 1—Guide to this Part 58

Division 2—The rules . 58

Part 4-2—Delegations . 61

Division 1—Guide to this Part 61

Division 2—Delegations . 61

 

 

 



 

Table of abbreviations and common terms

Abbreviation or common term

Full term or description

ABC

Australian Broadcasting Corporation

ABC Act

Australian Broadcasting Corporation Act 1983

ADI

authorised deposit-taking institution

ANAO

Australian National Audit Office

APS

Australian Public Service

Auditor-General Act

Auditor-General Act 1997

CAC Act

Commonwealth Authorities and Companies Act 1997

CAC Regulations

Commonwealth Authorities and Companies Regulations 1997

CFAR

Commonwealth Financial Accountability Review

Commonwealth entity

An entity as defined under clause 10 of the PGPA Bill

Corporations Act

Corporations Act 2001

CRF

The Consolidated Revenue Fund established by section 81 of the Constitution

Criminal Code

Criminal Code Act 1995

FFLA Bill

Financial Framework Legislation Amendment Bill

Finance Minister

The Minister who will administer the Public Governance, Performance and Accountability Act 2013

FMA Act

Financial Management and Accountability Act 1997

FMA Regulations

Financial Management and Accountability Regulations 1997

FMO

Finance Minister’s Orders

GBE

government business enterprise

GGS

General Government Sector

GST

Goods and Services Tax

JCPAA

Joint Committee of Public Accounts and Audit

LI Act

Legislative Instruments Act 2003

PGPA Bill

Public Governance, Performance and Accountability Bill 2013

PS Act

Public Service Act 1999

RBA

Reserve Bank of Australia

RB Act

Reserve Bank Act 1959

rules

The rules made under clause 101 of the PGPA Bill

SBS

Special Broadcasting Service Corporation

SBS Act

Special Broadcasting Service Act 1991



Public Governance, Performance and Accountability Bill 2013

GENERAL OUTLINE



1.              The Public Governance, Performance and Accountability Bill 2013 (PGPA Bill)provides a strong foundation for a modern, streamlined and adaptable Commonwealth public sector that can meet Australia’s changing needs. If enacted, it will form the legislative basis for an integrated system that promotes high standards of governance, performance and public accountability.

2.              The PGPA Bill consolidates within one piece of legislation the governance, performance and accountability requirements for the Commonwealth. It would replace the current model for Commonwealth financial management established under two Acts: the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC Act).

3.              The Bill sets out a regulatory framework for the Commonwealth and relevant entities, which are called ‘Commonwealth entities’. These include Departments of State, executive agencies and statutory authorities established by Parliament. For Commonwealth companies, the drafting of the Bill takes into account the fact that the primary regulatory framework that applies to them is the Corporations Act 2001 (Corporations Act).

4.              Rather than prescribing detailed requirements, the PGPA Bill establishes a core set of obligations that apply to all Commonwealth entities. Under this simplified financial framework, entities will have the flexibility and incentives to adopt appropriate systems and processes that help them to achieve diverse policy and statutory objectives efficiently and effectively. They will also be held to high standards of accountability through a more explicit framework for monitoring and evaluating performance.

5.              The PGPA Bill is a fundamental part of broader reforms to be introduced through the comprehensive Commonwealth Financial Accountability Review (CFAR), which began in December 2010.

Financial Impact Statement

6.              While the impact is difficult to quantify, simplifying regulatory requirements can contribute to improved efficiency and productivity in government operations. Most of the contributors in the CFAR process supported this premise.

7.              Contributors in the CFAR consultations provided considerable feedback about the transactional and compliance-focused nature of the FMA Act. Many commented on the adverse impact this can have on the cost profile and performance of a Commonwealth entity. The approach under the FMA Act contrasted unfavourably with the principles-based approach in the CAC Act.

8.              Several Commonwealth entities have been transferred from the CAC Act to the FMA Act over the past few years. A common theme from their feedback is that there is no noticeable improvement in performance from the additional burden of operating under the FMA Act. For example, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission commented on the time and resources involved in changing their financial processes and systems as a result of switching to the FMA Act, with no gains in transparency or performance.

9.              Commonwealth entities and Commonwealth companies have provided positive feedback about the reforms to the Commonwealth’s financial framework that are contained in the PGPA Bill.

10.          The PGPA Bill includes a number of provisions on special or standing appropriations. These provisions continue special appropriations that are currently in the FMA Act (and the Audit Act 1901 before that), such as for refunds of money. Continuing these special appropriations from the FMA Act has no additional financial impact.

Statement of Compatibility with Human Rights

11.          The Bill, if enacted, will not affect any of the applicable rights or freedoms outlined in the Human Rights (Parliamentary Scrutiny) Act 2011 , such as those in the International Covenant on Civil and Political Rights.

12.          The Bill does not propose any offences or penalties that limit any human rights.

13.          The Bill is therefore compatible with the human rights and freedoms recognised or declared in the international instruments listed in subsection 3(1) of the Human Rights (Parliamentary Scrutiny) Act 2011 .

The PGPA Bill in a context of reform

14.          To meet fiscal and service challenges into the future, all governments will need to consider, often fundamentally, how public services are delivered and outcomes are measured. The financial framework should support a productive and innovative public sector that can adapt to increasing community demands and changing circumstances, while retaining robust systems of management and accountability.

15.          CFAR’s objective is to improve performance, accountability, risk management and service delivery across government. A more effective financial framework will help support a modern, adaptable and forward-looking public sector.

16.          The CFAR process had broad input from across all levels of government, the private and not-for-profit sectors and academe. It identified opportunities for reform to remove red tape in the public sector, enhance the public sector’s potential for innovation, improve the performance of the public sector in meeting the government’s goals, gain the best value for money spent on any particular purpose, promote high standards of stewardship and accountability, and enhance transparency.

17.          The proposed reforms are based on four guiding principles:

·        Government should operate as a coherent whole.

·        A uniform set of duties should apply to all resources handled by Commonwealth entities.

·        Performance of the public sector is more than financial.

·        Engaging with risk is a necessary step in improving performance.

18.          While the CFAR reforms emphasise improving strategic coherence and coordination in the Commonwealth, allowing individual entities to have an appropriate level of operational independence is an underlying theme.

19.          The PGPA Bill is the cornerstone of a broad, integrated package of reforms to the Commonwealth’s financial framework. Taken together, the reforms seek to deliver long-lasting benefits, including:

·        improved quality of information to Parliament to support its constitutional role in relation to Commonwealth expenditure;

·        a more mature approach to risk across the Commonwealth;

·          improved productivity and performance of the Commonwealth public sector with accompanying benefits for a broad range of stakeholders; and

·          reduced red tape within the Commonwealth and for partners who contribute to delivering Australian Government programs and services, including grant recipients.

20.          The 2010 declaration of open government strives to enable government entities and their officials to be more innovative and more responsive to input and feedback, while maintaining the high ethical and professional standards expected. Likewise the inclusion of Australia as a member of Open Government Partnership supports transparent, effective and accountable governments — with institutions that empower citizens and are responsive to their aspirations is entirely consistent with the principles of this Bill.

21.          The PGPA Bill will create a financial framework where entities have the flexibility and incentives to adopt appropriate systems and processes that help them to achieve diverse policy and statutory objectives efficiently and effectively. The Bill will underpin other aims in reducing red tape, simplification, and encouraging joint ventures with partners both within and external to Government, all of which have policy relevance and are directly linked to the open Government agenda.

22.          It will take several years to implement the reforms and integrate them fully into the practices and processes of Commonwealth entities and Commonwealth companies. Gradual introduction of the reforms will ensure that they are appropriately tested and refined in light of experience.

Issues to address in the existing Commonwealth Financial Framework

23.          The Commonwealth’s financial framework provides rules for the governance of Commonwealth entities and Commonwealth companies and for the proper management and use of public resources. The framework supports the government in meeting its obligations and responsibilities to the public and the Parliament. It is an important feature of an accountable and transparent public sector and guides the daily work of Commonwealth entities and Commonwealth companies, office holders and employees.

24.          The current framework is primarily based on two Acts, the FMA Act and the CAC Act. Those Acts outline the roles and responsibilities of people who make decisions about the management and use of public resources.

25.          The FMA and CAC Acts were a significant improvement on the financial management framework provided by the Audit Act 1901 , which was highly prescriptive, rules-bound and focused on controls. Both Acts contain many sound provisions, and have provided a firm basis for the financial aspects of government operations since they commenced on 1 January 1998.

26.          Despite these strengths, both pieces of legislation have been regularly amended since their introduction to maintain their serviceability and to respond to emerging issues. This incremental approach to legislative reform has been effective in addressing isolated issues as they have emerged. But it has added complexity to the financial framework’s administration and may also have contributed to its fragmentation.

27.          The current financial framework is not broken, but it does creak at times. It can be improved so as to reduce unnecessary complexity, enhance the operations and efficiency of the Commonwealth and clarify the accountabilities of the entities, companies and individuals who operate within the Commonwealth.

28.          Under the current framework, the classification of Commonwealth entities as either FMA Act agencies or CAC Act bodies turns on the notion of ‘ownership’ of funds. According to the Explanatory Memorandum accompanying the FMA Bill in 1996:

This Bill is concerned with the regulatory/accounting/accountability framework for dealing with and managing the money and property of the Commonwealth. Its scope covers the underlying principles that are to govern the activities of persons in organisations that, financially, are agents of the Commonwealth—that is, Departments; those Statutory Authorities whose enabling legislation does not give them legal ownership of money or property separately from the Commonwealth; and any body, organisation or group of persons prescribed as an Agency on the basis of its dealing with and managing public money or public property on behalf of the Commonwealth.

29.          In comparison, the original intent of the CAC Bill was to provide financial reporting and ethical and auditing provisions for corporate public authorities whose enabling legislation gives them ‘ownership’ of their operating funds and assets.

30.          The distinction between entities under the FMA Act and entities under the CAC Act is overstated, and confuses operational independence with ownership. The money and property held by CAC Act entities are still public resources in the sense that they should be properly managed. The public interest in these resources is further underlined by the fact that the Auditor-General audits these entities on behalf of the Parliament.

31.          The two-Act model has offered a governance choice between a single chief executive (FMA Act) or a board of directors (CAC Act). This choice between two basic governance models does not fit neatly, however, with the administrative and legal diversity that now exists among Commonwealth entities.

32.          To illustrate the complexity that has become commonplace under current arrangements, 13 bodies corporate are classified as, or are contained within, FMA Act agencies, although they have legal powers (including financial powers which are not exercised) distinct from the Commonwealth.

33.          Other issues with the current legislative structure include:

·          The FMA Act does not have a logical flow and has a largely transactional focus.

·          Some provisions are complicated to implement and have led to processes with significant regulatory costs. These costs may have become disproportional to the materiality of the issues they seek to address. This is likely to have become the case in relation to drawing rights and FMA Regulation 9.

·          The CAC Act fails to recognise that many CAC Act bodies:

­    receive all or most of their funding from the Parliament through the appropriations process, as do all FMA Act agencies; and

­    are classified in the General Government Sector (GGS), which is the same statistical classification for all FMA Act agencies.

·          While the independence of CAC Act bodies is often mentioned as a reason for establishing a body under that Act, some FMA Act agencies are very independent from government. For example, the Australian Federal Police, the Australian Security and Intelligence Organisation and the Australian National Audit Office (ANAO) are all FMA Act agencies with significant statutory independence.

·          The way employment arrangements interact with governance arrangements is not clear enough, particularly in relation to the duties of employees.

·          There is a strong focus on financial accountability, but this is not matched by a corresponding focus on the achievement of objectives or the quality of performance monitoring and evaluation.

·          There is a strong focus on entities in their own right, but less of a whole-of-government perspective. For example, the duty of a director to act in the best interests of their Commonwealth authority (paragraph 23(1)(a) of the CAC Act) means that they may not always consider how their decision might affect the wider Commonwealth.

 

Consultation

34.          CFAR was announced by the Minister for Finance and Deregulation on 8 December 2010, as part of the government’s Better Government agenda. The review consulted widely on potential areas of reform. This included the public release of a discussion paper on 29 March 2012 and a position paper on 23 November 2012.

35.          The position paper attracted more than 60 submissions from within government and from interested stakeholders, including other jurisdictions and the private and not-for-profit sectors. Consultations were held across Australia with state and territory governments, businesses, the private and not-for-profit sectors, and academe. The Joint Committee of Public Accounts and Audit (JCPAA), the Senate Standing Committee on Finance and Public Administration and the ANAO were also consulted.

36.          The PGPA Bill has been developed with strong involvement and input from Commonwealth entities and companies. The Bill reflects a balanced and considered approach to the issues raised by entities, including explicit reference to required consequential amendments to preserve the statutory independence of certain entities. Commonwealth entities have provided positive feedback that the Bill will reduce their compliance burden. The rules that will be made under the Bill will also be developed in close consultation with Commonwealth entities and companies. A number of them have flagged their interest in being involved in working groups to develop draft provisions.

Key elements of the PGPA Bill

Government as a whole

37.          The PGPA Bill provides a coherent approach to the governance, performance and accountability of the Commonwealth, at the level of primary law. It also provides the opportunity to align the financial framework with the enabling legislation of many Commonwealth entities. This second goal will be continued through consequential amendments to be made once the Bill has been passed.

38.          The enabling legislation of several Commonwealth entities specifies that they or their office holders have functions or roles that are to be exercised with a high degree of independence from the executive government. The Auditor-General Act 1997 , the Reserve Bank Act 1959 (RB Act), the Australian Broadcasting Corporation Act 1983 (ABC Act) and the Special Broadcasting Service Act 1991 (SBS Act) contain such provisions. The PGPA Bill gives proper recognition to these arrangements.

39.          However, some exceptions will need to be made to accommodate special circumstances or particular mandates contained in enabling legislation. For example, the Bill exempts the High Court of Australia and the Future Fund Board of Guardians (though not the Future Fund Management Agency) from its ambit, noting their enabling legislation and particular roles.

40.          The categorisation of Commonwealth bodies under the PGPA Bill is based on their legal character as set out in their enabling legislation. This is a departure from the FMA Act and CAC Acts, which define entities based on how they hold their funds.

41.          The PGPA Bill creates two primary categories of Commonwealth body: ‘Commonwealth entities’ and ‘Commonwealth companies’. The category of Commonwealth entities has two sub-categories, ‘non-corporate Commonwealth entities’ (which are not bodies corporate and are therefore part of the Commonwealth) and ‘corporate Commonwealth entities’ (which are legally separate from the Commonwealth but are not Commonwealth companies). Non-corporate Commonwealth entities are subject to greater financial controls than corporate Commonwealth entities, since they are legally part of the Commonwealth. A Commonwealth company is a Corporations Act company that the Commonwealth controls.

42.          Several themes and requirements in the Bill apply to all Commonwealth entities. One is that entities must keep Ministers and the Parliament informed of their activities through regular and ad hoc reporting, such as corporate plans and annual reports. Another is that the Commonwealth Auditor-General is designated as the auditor of all Commonwealth entities, which continues the existing legislative arrangements. A third is that accountable authorities and officials have a uniform set of duties relating to how they perform their roles, especially when they manage and handle public resources.

43.          The roles and responsibilities of the Finance Minister in overseeing the financial framework, governance and the use and management of public resources, as outlined in the PGPA Bill, also help to bring together the single scheme. These are currently sprinkled through the FMA Act, the CAC Act, and the Regulations and Finance Minister’s Orders made under those two pieces of legislation. The Bill specifies the areas in which, and in some parts the extent to which, the Finance Minister can make rules. This is a significant advance in terms of clarity and transparency, compared to the FMA and CAC Acts.

44.          The Bill also outlines the responsibilities of all Ministers when they approve proposed expenditure proposals. The responsibilities of Ministers are currently specified under the FMA Act.

Independence of entities

45.          The Bill does not alter the operational independence of entities as set out in their enabling legislation. It is for the Parliament to set out the relationship between an entity and the government; it is not for general resource management legislation to do this. For example, some entities have decision-making powers that have been deliberately quarantined from executive government influence. The Bill will not impinge on these arrangements.

46.          To give an example, the ABC is exempt from several provisions in the CAC Act and, with a few exceptions, is not subject to direction by the government (subsection 8(1) of the ABC Act). Various provisions in the SBS Act (sections 11, 12 and 13) maintain the independence and integrity of SBS in relation to the content and scheduling of programs. Other arrangements go to the independence of the boards of the ABC and SBS and appointment of their managing directors. For example, the ABC has its own charter

(section 6 of the ABC Act) and its board has a statutory obligation to maintain the independence and integrity of the ABC (subsection 8(1) of the ABC Act). Similar provisions are in paragraph 10(1)(a) of the SBS Act.

47.          To ensure independence is not compromised, consequential amendments to relevant enabling legislation of entities will be made. The drafting and consultation of these amendments must be completed by July 2014. Amendments to the ABC Act and the SBS Act, and other relevant Acts, will be put to the Parliament before the commencement of the relevant provisions of the PGPA Bill, to preserve existing arrangements under enabling legislation, such as independence.

Uniform duties

48.          Whether resources are provided by the Parliament, generated by commercial operations or cost-recovered activities, or provided through donations and bequests, those resources have been entrusted to the custody of a Commonwealth entity. The governance and funding arrangements of a Commonwealth entity do not change the inherently public nature of the resources entrusted to their care.

49.          The PGPA Bill introduces a uniform set of duties relating to Commonwealth entities. Some of the duties apply specifically to accountable authorities because they govern and set the overall strategic direction of their entities. The rest of the duties apply to all officials of a Commonwealth entity, reflecting the obligations of all to act responsibly in carrying out their duties, including in relation to public resources.

50.          The duties of officials are based on the fiduciary duties in the Corporations Act. Aligning duties in this way may help to create consistency across the public, private and not-for-profit sectors. It may also help directors who serve in multiple sectors to be clearer about their responsibilities and obligations.

51.          A number of the duties imposed on officials also align with requirements under the Code of Conduct set out in the Public Service Act 1999 (PS Act). The duties in the PGPA Bill sit alongside the PS Act duties, so a breach of the general duties in the Bill can be the basis of action under the PS Act, including termination of employment.

Public resources

52.          The PGPA Bill clarifies the concept of public resources by introducing a single definition that applies to all money and all property held by Commonwealth entities. This will eliminate any perceived advantage or disadvantage in terms of public accountability arising from the different classification of entities that occurs under the existing framework.

Planning and evaluation

53.          The key dimensions of resource management (the cycle of planning, budgeting, implementing, evaluating and being held accountable) are not well reflected in the FMA and CAC Acts. The PGPA Bill, and future elements of the CFAR reforms, will link the key elements of resource management so that there is a clear cycle of planning, measuring, evaluating and reporting of results to the Parliament, Ministers and the public.

54.          The PGPA Bill does this by:

·          explicitly recognising the high-level stages of the resource management cycle;

·          recognising the value of clearly articulating key priorities and objectives;

·          requiring every Commonwealth entity and Commonwealth company to develop a corporate plan;

·          introducing a framework for measuring and assessing performance, including requiring effective monitoring and evaluation; and

·          maintaining the rigorous audit arrangements that are currently in place.

55.          Under the current framework, the information that is most readily available from Commonwealth entities and Commonwealth companies is financial in nature. But financial information, by itself, does not show whether publicly funded programs and activities are achieving their objectives and outcomes.  Measuring performance in the public sector also requires adequate and relevant non-financial information.

56.          The PGPA Bill addresses the current imbalance between financial and non-financial performance information by placing obligations on officials for the quality and reliability of performance information. The benefits of this approach include:

·          fostering a strong focus on performance management and reporting; and

·          achieving a clear line of sight between the information in appropriation Bills, corporate plans, Portfolio Budget Statements and annual reports. Entities will need to define, structure and explain their purposes and achievements to create a clear read across these documents.  

57.          To support officials, the Department of Finance and Deregulation will play a stronger role in encouraging a more systematic approach to performance monitoring and evaluation. It is hoped that as performance information improves, so too will the value it can bring to strategic policy deliberations.



Risk management and earned autonomy

58.          Risk management is a fundamental feature of modern management. An appetite for prudent risk-taking is crucial for improving productivity and innovation in the public sector.

59.          Public sector managers deal with risk every day. However, risk management is not covered in the FMA Act or the CAC Act, and the Commonwealth does not have an overarching risk management framework. In this, the Commonwealth public sector lags behind other sectors.

60.          The PGPA Bill improves the Commonwealth’s focus on risk. First, it places a duty on accountable authorities to ensure that their entities have appropriate systems of risk oversight and management.

61.          Second, the Bill provides the foundations for a system of earned autonomy for Commonwealth entities. The Bill gives the Finance Minister the power to prescribe matters or make different provisions for particular Commonwealth entities or classes of entities. This model will see a targeted and risk-based approach taken to financial framework regulation. An entity’s risk profile and performance will determine how much oversight and regulation it is subject to.

62.          The model for earned autonomy will draw on the better practice principles for regulators identified by the Productivity Commission, which include:

·          streamlined reporting requirements;

·          risk-based monitoring and enforcement;

·          a graduated response to regulatory and compliance breaches and performance deficiencies; and

·          clear and timely communication. [1]

63.          While the Bill introduces the concept of earned autonomy, to develop a comprehensive model is likely to take quite some time.  This system will be put in place through the rules to the Bill. The rules will allow regulatory approaches to be tailored to individual entities based on clear risk metrics. The rules will be developed in close consultation with Commonwealth entities. This means that the rules do not need to be in place by 1 July 2014 for the legislation to commence.

Cooperation and partnering

64.          The PGPA Bill seeks to encourage greater cooperation between Commonwealth entities themselves, and between Commonwealth entities and their partners, including states and territories and the private and not-for-profit sectors.

65.          Contributors in the CFAR consultations consistently spoke about the unnecessary compliance burdens that government places on outsiders. This is at a time when the public policy problems faced by governments often require solutions that span different jurisdictions or sectors of the economy. The FMA and CAC Acts were not necessarily set up to deal with such arrangements.

66.          The PGPA Bill places an obligation on accountable authorities to encourage officials within their entities to cooperate with partners, and to consider how compliance burdens affect their partners. These positive duties are not designed to force entities to cooperate with others, but they do send a message that cooperation needs to be seriously considered, and that the financial framework will not impede effective partnering.

Accountability

67.          The PGPA Bill strengthens and simplifies accountability across Commonwealth entities. It places a greater emphasis on performance monitoring, evaluation and reporting. It also provides greater clarification in relation to annual reporting. The requirements for annual reporting under the current framework can be inconsistent because they come from different pieces of legislation. The Bill gives the JCPAA an enhanced role in approving the proposed annual report requirements for all Commonwealth entities, not just those whose annual reports are provided under the PS Act.

Penalties and sanctions

68.          With one exception, the PGPA Bill does not contain specific penalties and sanctions. This is to avoid duplicating provisions that already exist under other legislation or legal arrangements. For example, employment arrangements (including for public servants) usually include a range of sanctions, while criminal conduct is covered by the Criminal Code Act or other criminal laws. This approach stands in contrast to the FMA Act, which contains criminal penalties, and the CAC Act, which contains both civil and criminal penalties.

69.          The one exception is a provision allowing for the removal of a member of an accountable authority of a corporate Commonwealth entity for failing to comply with their duties as an official. This provision is intended to be used only if the scope of a corporate entity’s enabling legislation is inadequate to address a breach of the duties outlined in the Bill.

70.          For the sake of clarity, the PGPA Bill states that the finance law that is put in place under the Bill is an applicable Australian law for the purposes of the PS Act. This means that if an official employed under the PS Act contravenes the finance law, the official may be subject to sanctions under the PS Act, such as termination of employment.

Simplification

71.          The PGPA Bill seeks to remove or modify undue and unnecessary regulation or administrative requirements. Under the broader CFAR reforms, compliance requirements will focus on areas of high risk, without prescribing procedures that are better addressed through internal controls. This will mean that some current detailed requirements, especially the prescriptive process-related requirements under the FMA Act, will not be part of the core obligations imposed on entities.

72.          The framework will require the periodic review of reporting obligations to ensure they continue to meet their objectives efficiently and effectively. The broader CFAR reforms will look for other ways to streamline financial reporting requirements for Commonwealth entities. One option is to introduce tiered or differential financial reporting arrangements that are tailored to relevant entities. Again, stakeholders, including the Auditor-General and the Parliament, will be consulted to ensure that the new arrangements do not compromise transparency and accountability.

Rules

73.          The PGPA Bill sets out the fundamental elements of a coherent financial framework for all Commonwealth entities. It will be underpinned by detailed rules issued by the Finance Minister. This is no different to the current FMA Act and CAC Act, under which Regulations have been made and Finance Minister’s Orders issued to clarify the requirements of, or give detail to, the primary legislation. Rules will be issued that modify the framework requirements for a small number of entities (such as intelligence, security and law enforcement agencies).

74.          The rules will be disallowable instruments, which means that they must be tabled in both Houses of Parliament. They will be developed in consultation with Commonwealth entities. The JCPAA will also play an important role in developing and approving the rules.

Consequential amendments

75.          Importantly, the enabling legislation of all statutory authorities, like the Reserve Bank of Australia (RBA), the ABC and SBS, will be updated through consequential amendments so that their existing exemptions from specific financial framework requirements can continue to apply.



 

NOTES ON CLAUSES

Chapter 1 Introduction



Part 1-1
Introduction

           

Division 1—Preliminary

Clause 1: Short title

76.          Clause 1 provides for the Bill, once enacted, to be cited as the Public Governance, Performance and Accountability Act 2013 .

Clause 2: Commencement

77.          Clause 2 sets out when the Bill’s provisions commence.

78.          Clauses 1 to 5 will commence on 1 July 2013.

79.          The remainder of the provisions (the substantive provisions of the Bill) will commence on a date to be fixed by proclamation. If no proclamation is made before 1 July 2014, the substantive provisions will commence on 1 July 2014. There are several reasons for extending the period for proclamation:

·          The Bill introduces a new financial framework for the Commonwealth, which will affect around 195 entities and 300,000 individuals. Everyone will need time to understand the implications of the new framework. Experience from the reforms in 1997, when the FMA and CAC Acts were introduced, showed that implementing a change of this scale requires a structured and disciplined approach, including sufficient support and training. The delayed implementation will help to minimise risks.

·          The Bill is principles-based. Detail will be included in rules where appropriate. This is consistent with the FMA and CAC Acts, where much of the detail is in subsidiary legislation including Regulations and Finance Minister’s Orders. The delayed commencement date will allow time for the rules to be developed in collaboration with entities across the Commonwealth. This process will ensure that the rules are effective and do not impose an unnecessary regulatory burden on entities.

·          A separate Bill with transitional and consequential amendments is being developed. Both Bills will need to commence on the same date to avoid unexpected consequences and to make sure there are no governance and accountability gaps between the old and new financial frameworks.

Clause 3: This Act binds the Crown

80.          Clause 3 provides that the Bill binds the Crown in right of the Commonwealth.

Clause 4: This Act extends to things outside Australia

81.          Clause 4 provides that the Bill applies to things both inside and outside Australia. This recognises that the Commonwealth and its entities often operate beyond Australia.

 

Division 2—Objects of this Act

Clause 5: Objects of this Act

82.          Clause 5 sets out the objects of the Bill. The objects summarise the goals of the Bill, including the overarching imperative that government should act as a unified whole.

83.          The first object is to establish a coherent system of governance and accountability across Commonwealth entities. The existing system under the FMA Act and CAC Act lacks coherence:

·        Entities can be placed under the FMA Act or the CAC Act for reasons that are unconnected to ensuring the most appropriate governance structure. This has resulted in entities being under a legal and financial framework that does not suit the kinds of activities or roles they perform. This can lead to inefficiency and unclear lines of accountability.

·        The obligations of leaders of Commonwealth entities are significantly different between the FMA Act (where a single chief executive governs) and the CAC Act (where generally a board governs). An FMA Act chief executive generally has one key duty—to promote the proper use of Commonwealth resources. Chief executives who are the heads of departments or PS Act agencies are also bound by the Code of Conduct in the PS Act. In addition, the Public Service Amendment Act 2013 clarified the roles and responsibilities of secretaries of departments.

·        On the other hand, directors under the CAC Act (and officers and employees in particular circumstances) have a range of duties. These duties are consistent with those imposed under the Corporations Act. The difference in duties between the leaders of FMA Act agencies and CAC Act entities goes against the view that the Australian Government operates as a single organisation.

84.          The Bill addresses these issues by:

·        establishing a uniform set of duties for accountable authorities;

·        establishing a uniform set of duties for all officials;

·        establishing a comprehensive and uniform reporting framework for all Commonwealth entities; and

·        clarifying the Finance Minister’s role in relation to the financial framework.

85.          The second object is to establish a performance framework for all Commonwealth entities. This is the first time that the importance of performance has been explicitly recognised in Commonwealth legislation. While legislation, of itself, will not guarantee effective performance, it can help create momentum for change and translate strategic direction into action. The rules will outline standards for the quality of performance information, and for performance monitoring, evaluation and reporting.

86.          To date, the main focus in the Commonwealth’s financial framework legislation has been on financial reporting and accountability. However, performance of the public sector is more than financial. A clear structure for measuring and evaluating performance will help show whether performance is improving within an entity and across the Commonwealth more broadly.

87.          The third object is to require Commonwealth entities to:

·        meet high standards of governance—good governance provides the foundation for high performance and community confidence in the public sector. Good governance is grounded in accountability, transparency, leadership, integrity and stewardship and in responsiveness to the needs and aspirations of citizens. The governance arrangements for entities should clearly spell out the roles, responsibilities and accountabilities of leaders and officials;

·        meet high standards of performance—performance management helps government prioritise policies and programs and decide where to allocate resources. A strong performance reporting system will show the Parliament and the public whether resources are being used effectively and efficiently. Accountable authorities play an important role in developing performance criteria for their entities and ensuring the adequacy of performance information;

·        meet high standards of accountability—ensuring responsible decision-making and having effective accountability arrangements are essential for managing public resources. All Commonwealth entities must account for their activities and performance;

·        provide meaningful information to the Parliament—performance information is crucial to assessing whether policy goals are being achieved. It also shows how effectively the public sector has performed. The quality of information is more important than the quantity. The Parliament needs performance information that shows it how Commonwealth entities are performing;

·        ensure that public resources are used and managed properly—the notion of ‘taxpayer funds’ cuts a broad sweep. The money and property used and managed by Commonwealth entities are public resources. These resources are entrusted to entities by the Parliament on behalf of the Australian people to provide desired public goods and services, to an appropriate standard; and

·        cooperate with others to achieve common objectives—Commonwealth entities do not operate in a vacuum. Some government objectives can only be achieved if entities cooperate and partner with others, both inside and outside government. Explicitly acknowledging the need to cooperate in the legislation is designed to encourage a culture of building relationships, not just managing contracts.

88.          The fourth object is to require Commonwealth companies to meet high standards of accountability. The main regulatory framework for Commonwealth companies is the Corporations Act. However, they are still public companies and are expected to meet higher standards of accountability than a private company. The provisions for Commonwealth companies give effect to this.



Division 3—Guide to this Act

Clause 6: Guide to this Act

89.     Clause 6 briefly describes the Bill’s structure and explains where major issues are covered.

 

Part 1-2—Definitions



Division 1—Guide to this Part

Clause 7: Guide to this Part

90.          Clause 7 explains that Part 1-2 is the Dictionary for the Bill.

 

Division 2—The Dictionary

Clause 8: The Dictionary

91.          Clause 8 defines terms that appear in the Bill. Key definitions are explained below.

bank

92.          A bank within Australia is defined as an authorised deposit-taking institution (ADI) or the RBA. Restricting the definition to ADIs and the RBA ensures that the Commonwealth and corporate Commonwealth entities only use banks that have a proper regulatory framework. The RBA is specifically included because it is not an ADI within the meaning of the Banking Act 1959 .

93.          The definition of ‘bank’ also includes a person who carries on the business of banking outside Australia. This is necessary because some Commonwealth entities operate beyond Australia, such as the Department of Foreign Affairs and Trade.

Department of State

94.          Department of State generally has same meaning as in section 64 of the Constitution. However, the Bill expands the definition so that it includes other bodies, organisations or groups of persons that are prescribed in relation to a specific Department of State. This mechanism may be used to clarify if a certain body, organisation or group of persons forms part of a Department of State.

95.          The definition excludes any part of a Department of State that is a listed body. This reflects the intention that a listed body is to be regarded, for the purposes of the Bill, as a separate entity.

enabling legislation

96.          The enabling legislation for a Commonwealth entity is the legislation that sets up the body, including its governance structure, powers and functions and its relationship with its Minister. Under the definition, enabling legislation may be primary or subsidiary legislation. Not all Commonwealth entities have enabling legislation.

governing body

97.          A governing body is the principal decision-making structure of a corporate Commonwealth entity. Ordinarily, the governing body is the board of directors (however described) established in an entity’s enabling legislation. However, not all corporate Commonwealth entities are established with a traditional board structure. For example, a commission may have members who undertake day-to-day management as well as set the strategic direction of the entity. In these cases, if the members collectively to govern the entity, they will constitute the governing body.

government business enterprise

98.          A government business enterprise (GBE) is any Commonwealth entity or Commonwealth company prescribed by the rules. This definition is the same as the definition under the CAC Act. Commonwealth entities or companies that exhibit commercial behaviours with strong entrepreneurial expertise in their governance are candidates for GBE status.

99.          This approach reflects a view that being a GBE is not just about the goods or services the organisation provides or the sector it operates in—it is also about how it conducts its business. It is possible that, over time, the number of organisations classified as GBEs will increase.

proper

100.      ‘Proper’ is defined in relation to the use and management of public resources and means efficient, effective, economical and ethical. This definition is similar to the definition used in section 44 of the FMA Act, except in one important aspect—it does not include the phrase ‘not inconsistent with the policies of the Commonwealth’.

101.      ‘Proper use and management’ recognises that the public resources Commonwealth entities use and manage are, in a broad sense, not theirs. They belong to the people of Australia and are provided to entities so that they can do things for the people of Australia.

102.      The term ‘use’ means the spending of relevant money, the commitment of appropriations, and the application of public resources generally to achieve a public purpose. The term ‘management’ is broader and encompasses the decisions, systems and controls around the custody and use of, and accountability for, public resources.



public resources  

103.      The term ‘public resources’ brings together the definition of ‘relevant money’ and ‘relevant property’ with the addition of ‘appropriations’.  This definition is designed to capture all possible matters that concern resources.

relevant money

104.      The term ‘relevant money’ appears in several provisions of the Bill. It is an important concept given that millions of Commonwealth transactions involve the payment and receipt of relevant money. Relevant money is money that the Commonwealth or a corporate Commonwealth entity holds as cash or in a bank account.

105.      This single definition covers money that is currently classified as public money under the FMA Act and money that CAC Act entities hold on their own account (subsection 7(3) of the CAC Act). Defining relevant money so that it covers all Commonwealth entities will help to:

·        ensure that government acts as a coherent whole, rather than a group of distinct entities; and

·        clarify that all money held by Commonwealth entities is subject to the same obligations, no matter who holds it or how it is held.

106.      The definition is intended to clarify what is or is not relevant money, and avoids the uncertainty and technical problems associated with the definition of ‘public money’ in the FMA Act.

relevant property

107.      ‘Relevant property’ is property owned or held by the Commonwealth or a corporate Commonwealth entity. This definition is all-encompassing like the definition of relevant money. It covers physical, real and personal property, like buildings, vehicles and equipment. It also covers intellectual property, and choses in action such as bonds, debentures and securities, except as covered by other legislation.

108.      The Bill will operate alongside other legislation dealing with property, such as for real property under the Lands Acquisition Act 1989 . It will also operate consistently with the guidance in the Australian Government Intellectual Property Manual . If necessary, the application of the Bill to specific types of property will be clarified through the rules.

responsible Minister

109.      A responsible Minister is the Minister to whom a Commonwealth entity reports. The main source for this information is the Administrative Arrangements Order. The rules can prescribe the responsible Minister in cases where it is unclear, such as when two Ministers hold equal shares in a Commonwealth company.

Chapter 2—Commonwealth entities and the Commonwealth



Part 2-1—Core provisions for this Chapter

 

Division 1—Guide to this Part

Clause 9: Guide to this Part

110.      Clause 9 summarises Part 2-1 of the Bill.

Division 2—Core provisions for this Chapter

Clause 10: Commonwealth entities

111.      Clause 10 defines ‘Commonwealth entity’ to mean a Department of State, a Parliamentary Department or a listed entity (which will encompass most prescribed agencies under the FMA Act). Bodies corporate encompass ‘Commonwealth authorities’ under the CAC Act as well as the bodies corporate that currently operate under the FMA Act.

112.      Importantly, Commonwealth companies are not Commonwealth entities for the purposes of the Bill. Commonwealth companies are governed by Chapter 3 of the Bill. This means, for example, that the duties imposed on accountable authorities and officials in Part 2-2 do not apply to Commonwealth companies. Rather, directors and officers of Commonwealth companies are subject to the duties in the Corporations Act.

113.      The term ‘listed entity’ is defined in clause 8. It includes a body, person, group of persons or organisation (or any combination of these) that is prescribed by the rules, but does not include a body corporate. So whether something is a ‘listed entity’ will depend on whether it is prescribed. A listed entity might be something that, if it were not listed, would form part of another non-corporate Commonwealth entity. For example, the Australian Office of Financial Management would be part of the Department of the Treasury if it were not a listed entity.

114.      Two entities are not Commonwealth entities for the purposes of the Bill and will be exempt from the Bill’s operation. The exemption of the High Court of Australia, which is explicitly referred to in the Constitution and covered by the High Court of Australia Act 1979 , recognises the Court’s constitutional position. The Future Fund Board of Guardians, established by section 34 of the Future Fund Act 2006 , is excluded because that Act imposes comprehensive duties on the board members and sanctions for breaches of those duties.

115.      The statutory independence of other entities will also be recognised. As in the current system, exemptions from provisions of the Bill will be reflected in an entity’s enabling legislation. Consequential amendments that continue the existing exemptions will be presented to the Parliament before 30 June 2014.

Clause 11: Types of Commonwealth entities

116.      Commonwealth entities are divided into those that are bodies corporate and those that are not. A corporate Commonwealth entity has a separate legal personality and can act on its own behalf in exercising certain legal rights such as entering into contracts and owning property. Non-corporate Commonwealth entities have no separate legal existence from the Commonwealth.

117.      Some provisions of the Bill treat the two types of Commonwealth entities differently because of their different legal status. Examples include the provisions relating to appropriations, banking, investments and the use of indemnities.

Clause 12: Accountable authorities

118.      An accountable authority for a Commonwealth entity is generally the person or group of persons that has responsibility for, and control over, the entity’s operations. The Bill confers responsibilities and powers on these people for financial management and reporting matters.

119.      The term ‘accountable authority’ encompasses both chief executives under the FMA Act and governing bodies under the CAC Act.

120.      There can only be one accountable authority for each Commonwealth entity, unless the entity’s enabling legislation provides otherwise and sets out how the PGPA Bill will apply.

121.      Importantly, a listed entity or body corporate can have either a single person or a group of persons as its accountable authority. This is more flexible than existing arrangements, where the determining factor is whether the entity is governed by the FMA Act or the CAC Act.

122.      For Departments of State and Parliamentary Departments, the accountable authority will be the secretary of the department. For listed entities, the rules will prescribe who the accountable authority is. Generally, identifying the accountable authority of a corporate Commonwealth entity will be straightforward. However, in cases where it is unclear, the rules can prescribe the accountable authority.

Clause 13: Officials

123.      Officials are the individuals who are in, or who form part of, a Commonwealth entity. This definition encompasses officers, directors, members (such as members of a commission), employees and statutory office holders. It also includes members of a governing board. Subparagraph 13(3)(a)(i) clarifies that a member of an accountable authority is an official.

124.      Certain individuals are excluded from the definition to recognise certain unique arrangements across the Commonwealth.  Members of the Payments Systems Board in the RBA will not be officials for the purposes of the Bill, but will be subject to the general duties of officials in clauses 25-29.

125.      Ministers are not officials for the purposes of the Bill. Nevertheless, some provisions in the Bill apply to Ministers when they are performing certain functions, such as approving proposed expenditure of public resources (see clause 71).

126.      Judges are excluded and will not be subject to the requirements in the Bill. Nor is the Bill intended to apply to registrars performing judicial functions. They can be excluded through the rules in accordance with paragraph 13(b)(iv). Similarly, the rules can be used to modify certain requirements (for example, keeping Ministers informed about the activities of the entity, and preparing corporate plans) to ensure that they do not impinge on judicial and similar activities of courts and tribunals. Modifications will also apply to other statutory entities as appropriate.

127.      Consultants and independent contractors are generally excluded from being officials and will not, therefore, be subject to the duties imposed on officials by the Bill.

128.      The general exclusion of contractors from the definition means that accountable authorities will need to effectively manage contractual requirements. The rules provide a mechanism to include contractors as officials. This mechanism is expected to be used in limited circumstances, such as when there is evidence that an entity is not effectively managing contracts. This is consistent with the concept of earned autonomy described at clause 101.

129.      The rules can both include and exclude an individual (or a class of individuals) from the definition.

 

Part 2-2—Accountable authorities and officials



Division 1—Guide to this Part

Clause 14: Guide to this Part

130.      Clause 14 summarises Part 2-2 of the Bill.



Division 2—Accountable authorities



Subdivision A—General duties of accountable authorities

Clause 15: Duty to govern the Commonwealth entity

131.      Clause 15 places requirements on an accountable authority for how it governs a Commonwealth entity. Under subclause 15(1), the accountable authority must:

·            promote the proper use and management of public resources for which it is responsible;

·            promote the achievement of the purposes of the entity; and

·            promote the financial sustainability of the entity.

132.      Promoting the proper use and proper management of public resources is a fundamental duty of accountable authorities. To fulfil this duty an accountable authority may need to, among other things, establish decision-making processes for the use of resources (for example, a process of approvals for the expenditure of relevant money), oversee line areas responsible for projects and programs, and address the inappropriate use of resources by individuals in the entity.

133.      The ‘purposes’ of a Commonwealth entity includes its objectives, functions or role. For an entity established by statute, the purposes will generally correspond to the entity’s statutory objectives and functions. For a non-statutory entity, such as a Department of State, they will be the objectives identified in the corporate plan, which should align with any government statement of key priorities and objectives (see clause 35). The Administrative Arrangements Order would also be relevant.

134.      Effective governance also involves medium-term and long-term planning and managing risks, obligations and opportunities. Consultations throughout the CFAR process indicated that the existing financial framework offers few incentives for entities to demonstrate good financial management. It provides little encouragement for them to take extra steps to make more efficient and effective use of public resources over the longer term. Long-term planning also does not easily fit with the annual budget process.

135.      The use of the term ‘financial sustainability’ in paragraph 15(1)(c) recognises the importance of medium- to long-term planning and budgeting. It clarifies the expectation that accountable authorities will manage their entities in a way that promotes the entities’ financial sustainability. This duty is complemented by other elements of the Bill, such as the emphasis on corporate planning, which is designed to enhance financial and strategic planning.

136.      Subclause 15(2) requires an accountable authority, when making decisions for the purposes of subclause 15(1), to consider how those decisions will affect public resources generally. This requirement is tied to the theme of government acting as a coherent whole. Potential benefits include more effective partnerships and sharing better ways of working with other Commonwealth entities individually and collectively, which is a broader consideration than simply making decisions solely in the best interest of the individual Commonwealth entity.  This requirement is consistent with recent changes to the PS Act that strengthen the role of secretaries in providing stewardship across the public service (section 57(1)(c)). [2]

137.      For non-corporate Commonwealth entities, the duty in clause 15 is affected by clause 21, which provides that the accountable authority of a non-corporate Commonwealth entity must govern the entity in accordance with paragraph 15(1)(a) in a way that is not inconsistent with the policies of the Australian Government. This recognises the obligations of chief executives of FMA Act agencies under section 44 of the FMA Act.

Clause 16: Duty to establish and maintain systems relating to risk and control

138.      A more productive, innovative and efficient public sector will require a different approach to managing risks. Appropriate risk-taking and innovation are consistent with careful and proper use and management of public resources.

139.      Clause 16 places an explicit responsibility on an accountable authority to establish and maintain a system of risk oversight and management. At a minimum, entities need to have policies and business processes for identifying, measuring, managing and reporting material risks.

140.      Complementing sound risk management practices is an effective system of internal controls. The controls should be commensurate with the level of risk. Internal controls will be needed to deal with issues such as approving the use of public resources, recording the commitment of public resources and ensuring compliance with the finance law.

141.      Note 1 to clause 16 gives an example of a measure for ensuring that officials comply with the finance law: the creation of employment arrangements that recognise the importance of compliance.

142.      Note 2 to clause 16 recognises that, even when a consultant or independent contractor is not an official of an entity, an accountable authority has a duty to implement measures aimed at ensuring they comply with the finance law. One way to do this would be to apply the finance law through the arrangement governing the relationship.

Clause 17: Duty to encourage cooperation with others

143.      Collaboration between Commonwealth entities, with other levels of government, and with the private and not-for-profit sectors, is critical to the achievement of the government’s priorities and national goals. A diversity of views and expertise is essential for developing policies and plans to deal with complex challenges.

144.      Clause 17 places a positive duty on an accountable authority to cooperate with others to achieve common objectives, where practicable. This duty recognises that Commonwealth entities do not operate in isolation. They often cannot achieve their objectives without working with other stakeholders.

145.      The word ‘others’ should be interpreted broadly. It includes other Commonwealth entities, other jurisdictions, and other public and private bodies and organisations including in the not-for-profit sector.

146.      The phrase ‘achieve common objectives’ establishes the scope of cooperation expected. The clause aims to encourage cooperation, where practicable. It would be counter-productive to require cooperation between organisations that are working towards completely different goals. However, there are likely to be circumstances where one organisation places a greater priority on an objective than the other.

147.      It is also clear that some entities’ statutory functions may make cooperation difficult or even unlawful in particular circumstances. Examples include the RBA when setting monetary policy and the ABC and SBS when determining editorial content. The duty must therefore be read in light of specific limitations in enabling legislation. Requirements in legislation such as the Privacy Act 1988 and in arrangements that involve commercial confidentiality may also place limits on cooperation.

Clause 18: Duty in relation to requirements imposed on others

148.      Clause 18 places a positive duty on an accountable authority to ensure that the compliance, reporting and other obligations imposed on others in relation to the use or management of public resources must take into account the risks associated with that use or management. This clause aims to encourage accountable authorities to think carefully about the administrative requirements they impose on other parties.

149.      The scope of the term ‘others’ is the same as under clause 17.

150.      Commonwealth entities provide resources to others when they procure goods and services and make grants. The duty requires accountable authorities to assess the risks in relation to the resources and then place proportionate obligations on recipients. For example, a grantee with a proven record for delivery may not need to report as often as one with less experience.

151.      Compliance and reporting requirements should focus on areas of high risk. They should also be appropriately placed. Shifting the compliance burden onto others, especially external service providers, may shift responsibilities away from where they are most effectively assessed and managed. Simplifying regulatory requirements can contribute to improved productivity.

152.      Over time it is expected that fulfilling this duty will make Commonwealth entities more responsive when dealing with third parties and reduce the compliance burden for third parties. However, for Commonwealth entities that play a regulatory role, this duty must be read subject to their enabling legislation.

Clause 19: Duty to keep responsible Minister and Finance Minister informed

153.      Clause 19 generally reflects the substance of section 44A of the FMA Act and sections 15 and 16 of the CAC Act.

154.      Clause 19(1) requires the accountable authority of a Commonwealth entity to:

·          keep the responsible Minister informed about the activities of the entity and its subsidiaries;

·          give the responsible Minister and the Finance Minister any reports, documents and information they require on the activities of an entity or subsidiary;

·          notify the responsible Minister of any significant decisions or significant issues that have affected the entity or its subsidiaries; and

·          give the responsible Minister reasonable notice of a significant issue that may affect the entity or its subsidiaries.

155.      These requirements to keep the Finance Minister informed are consistent with those existing under the CAC Act. They are intended to provide the Finance Minister with sufficient information to discharge his or her duties given the greater emphasis on performance monitoring and evaluation in this Bill.

156.      ‘Activities’ of an entity replaces ‘operations’ used in the FMA Act and CAC Act. However, there is no intention to extend the scope of the duty from what it has been under the FMA Act or CAC Act. ‘Activities’ and ‘operations’ have the same meaning and accountable authorities are expected to keep their responsible Minister informed of the same things that they do currently. The change in wording reflects that ‘activities’ is used in other clauses of the Bill and it is desirable to have consistency in the Bill.

157.      The terms ‘reports’, ‘documents’ and ‘information’ are meant to be interpreted broadly, in accordance with the notion of responsible government. Ministers need to know what is happening in their portfolios since they will be held accountable in Parliament. The terms are intended to encompass the underlying information, data and assumptions that a Commonwealth entity uses to produce final reports, such as estimates numbers. The Finance Minister, as the Minister responsible for managing and reporting Commonwealth spending at a whole-of-government level, requires all relevant information to perform their role.

158.      The rules will provide further context for determining whether a decision or issue is ‘significant’. As a guide, the interpretation of the term will be similar to its use in sections 15 and 40 of the CAC Act. Generally, whether a decision or issue is ‘significant’ will depend on:  

·          materiality—the importance of the decision or issue relative to the entity’s size and functions;

·          the risks involved—that is, whether the decision or issue is likely to be politically sensitive, whether there would be contingent liabilities that could affect the Commonwealth’s balance sheet, and whether the decision or issue might affect the entity’s financial sustainability; and

·          the novelty of the decision or issue for the entity—that is, whether the entity has previous experience with the decision or issue.

159.      Forming, or participating in forming, a business (including a company, trust, partnership, unincorporated joint venture, incorporated association or similar arrangement) is likely to be a significant decision or issue. Changing the nature of the entity’s involvement with a business and acquiring or disposing of a business unit may also be significant events.

160.      Subclause 19(2) states that for a court or tribunal, the information they must provide is restricted to administrative matters and does not include information of a judicial nature.

161.      Subclause 19(3) allows the relevant Minister to determine the timeframe for receiving reports requested under clause 19(1). An accountable authority can request an extension if it needs more time.

 

Subdivision B—Rules about general duties of accountable authorities

Clause 20: Rules about general duties of accountable authorities

162.      This clause allows the rules to specify how an accountable authority is to fulfil its duties under clauses 15 to 19. For example, in relation to paragraph 15(1)(a), the rules may prescribe thresholds for forward commitments.



Subdivision C—Application of government policy

Clause 21: Non-corporate Commonwealth entities

163.      Clause 21 operates in conjunction with paragraph 15(1)(a). It places a duty on the accountable authority of a non-corporate Commonwealth entity to promote the proper use and management of public resources in a way that is not inconsistent with the policies of the Australian Government. This clause is similar in effect to section 44 of the FMA Act, when read with paragraph 15(1)(a).

Clause 22: Corporate Commonwealth entities

164.      Clause 22 allows the Finance Minister to issue a legislative instrument in the form of a government policy order specifying a policy of the Australian Government that is to apply to one or more corporate Commonwealth entities.

165.      The approach under clause 22 is similar to the approach taken under section 48A of the CAC Act. The instrument would specify the policy and the entities it applies to, since some policies may not apply universally.

166.      However, the approach differs from that in the CAC Act in one respect. Instead of each portfolio Minister consulting with entities in their portfolio, the Minister responsible for the policy will consult with all relevant corporate entities.

167.      Before making a policy order, the Finance Minister must be satisfied that the Minister responsible for the policy has consulted with the relevant corporate Commonwealth entities. This recognises the separate legal status that corporate Commonwealth entities have.

168.      Some Commonwealth entities have specific exemptions from complying with government policies (these include the ABC, the Australian National University and SBS). These exemptions will continue under the Bill.

169.      Subclause 22(3) requires an accountable authority to ensure that its Commonwealth entity and the entity’s subsidiaries comply with government policy orders. This clause is similar to section 28 of the CAC Act. An accountable authority only has to ensure compliance to the extent that a government policy order applies to the entity. If, for example, an entity has been given an exemption from certain parts of a government policy order, the accountable authority would not need to ensure compliance with those parts.

170.      An instrument made under clause 22 is not subject to disallowance.

 

Subdivision D—Special provisions applying to accountable authorities of non-corporate Commonwealth entities

Clause 23: Power in relation to arrangements

171.      Clause 23 makes it clear that the accountable authority of a non-corporate Commonwealth entity can enter into, vary and administer arrangements relating to its affairs on behalf of the Commonwealth. Non-corporate Commonwealth entities are part of the Commonwealth for legal purposes. The actions they take are legally taken by the Commonwealth.

172.      ‘Arrangements’ is defined broadly to cover contracts and other instruments between private parties that create rights and obligations. ‘Administer’ includes to make payments pursuant to an arrangement. Clause 23 has the same effect as subsection 44(1A) of the

FMA Act.

173.      The notion that an accountable authority can enter into arrangements ‘in relation to the affairs of the entity’ is intended to be interpreted broadly.

174.      This clause applies only to non-corporate Commonwealth entities because Commonwealth entities that are bodies corporate are normally given the power to enter into contracts through their enabling legislation or by virtue of their separate legal nature. 

175.      This provision does not limit any other source of power to enter into contracts or other arrangements.

Clause 24: Power to establish advisory boards

176.      Clause 24 provides that an accountable authority of a non-corporate Commonwealth entity may establish an advisory board to assist in governing the entity. Non-corporate Commonwealth entities usually have a single person as their accountable authority. However, some of these entities, especially Departments of State, are among the most operationally and functionally diverse in the Commonwealth public sector.

177.      An advisory board could provide a diverse range of skills and experience that accountable authorities could draw on. The board could include members from outside the entity and even the public sector. Its role would be to support the work of and provide strategic advice to the accountable authority.

178.      An advisory board could be established in a temporary or permanent capacity. It would not dilute the capacity of the accountable authority to direct the operations of the entity. Nor would it affect the accountable authority’s ultimate accountability for the performance of the entity.

 

Division 3—Officials



Subdivision A—General duties of officials

179.      Clauses 25 to 29 impose duties on officials.

180.      These duties are modelled (with some modifications) on the duties imposed on officers by the CAC Act, which themselves are modelled on the provisions in the Corporations Act.

181.      A major difference between the Bill and the CAC and Corporations Acts is that the Bill does not distinguish between ‘officers’ (that is, directors and senior managers) and officials and employees. The duties in clauses 25 - 29 of the Bill apply to all officials.

182.      Under both the FMA Act and the CAC Act, duties are typically placed on leaders, such as chief executives and directors, or on senior management. Only a couple of the obligations are placed directly on employees under the CAC Act. Generally, employees are subject to the duties imposed on leaders through a trickle down of delegations and authorisations, through internal controls, or through employment frameworks. These links were not always clear to people, particularly those unfamiliar with the financial framework. Placing duties directly on all officials aims to resolve this issue.

183.      The duties in the Bill are similar to some of the requirements in the Code of Conduct under the PS Act.

184.      The Bill provides a complementary framework of duties for people who are bound by the PS Act. The responsibilities of chief executives (including secretaries), officials and employees under the FMA and CAC Acts and the APS Code of Conduct have existed side by side since the passage of the PS Act in 1999.

185.      However, the PS Act only covers around half of the officials in the Commonwealth public sector that use and manage public resources. For example, the PS Act does not cover approximately 57,000 members of the Australian Defence Force and nearly 80 per cent of statutory authorities under the CAC Act. Placing duties on all officials who are in, or form part of, Commonwealth entities is a key guiding principle of the Bill.

186.      People who not covered by the PS Act may have other complementary duties under other legislation, such as the Corporations Act or a statutory body’s enabling legislation. For example, officers and employees of Aboriginal Hostels Limited are subject to duties under the Corporations Act and the PS Act.

187.      As a general principle, officials in the public sector should not be held to a lower standard of account than employees of publicly listed companies. If anything, they should be held to a higher standard, since taxpayers have no choice about being ‘shareholders’ of public sector entities.

188.      Basing duties on concepts understood across the public and other sectors will help the cause of government joining with other sectors and in recruiting directors for government bodies. Directors will be able to draw on the knowledge and experience they gained in the private sector and apply it to their government role, which will facilitate more efficient and effective corporate governance in public sector entities. It can also create an overarching culture and environment of best practice corporate governance.

189.      An official who fails to comply with the duties in Subdivision A may be subject to sanctions under their employment arrangement (including, where relevant, the PS Act). Clause 32 clarifies how the duties in the Bill interact with other legislation that applies to public servants. Where the circumstances of the breach are particularly egregious, it is possible that a breach of the criminal law may also have occurred. In that case, prosecution under relevant provisions of the Criminal Code Act 1995 , or other relevant criminal law, may be possible and appropriate.

190.      Issues dealt with in the CAC Act that have not been included specifically in the Bill may be covered under the rules, including making a business judgment (section 22(2)), reliance on information provided by others (section 27D), responsibility for actions of delegates (section 27E), rules around dealing with material personal interests (sections 27F to 27K), access to information rights (section 27L) and indemnity insurance (section 27N).

Clause 25: Duty of care and diligence

191.      Clause 25 places a duty of care and diligence on officials when exercising powers or discharging duties. This duty is similar to both the Code of Conduct in subsection 13(2) of the PS Act and subsection 23(1) of the CAC Act. However, there are two differences:

·          The APS Code of Conduct implies, rather than specifies, a particular standard of care and diligence. Clause 25, on the other hand, specifies that an official must have a standard of care equivalent to that of a reasonable person in the official’s position.

·          The CAC Act duty applies only to directors and senior managers of Commonwealth authorities, whereas clause 25 applies to all officials.

192.      In deciding whether an official has discharged their duty, the decision-maker must consider the Commonwealth entity’s specific circumstances, the official’s position and the individual responsibilities of the official.

193.      It is intended that rules made under subclause 25(2) will deal with the exercise of business judgment and reliance on advice when making decisions.

Clause 26: Duty to act in good faith and for proper purpose

194.      Clause 26 places a duty on officials to exercise their powers and functions and discharge their duties in good faith and for a proper purpose. This clause is similar to subsection 24(1) of the CAC Act.

195.      Generally, an official will act in good faith if they act honestly.

196.      A power granted to, or duty imposed on, an official of a Commonwealth entity (either by the Bill or other legislation) must be used or discharged for a proper purpose. This means that officials are generally required to use their powers in connection with the functions of the entity. Whether a power was used for a proper purpose will be a question of fact. If there is no relationship between the use of power and the functions and objectives of the entity, it would be hard to establish that the power was used properly.

197.      To determine whether a power was used for an improper purpose, it would be appropriate to consider the subjective reasons of the responsible official for their actions, taking into account all the materials which genuinely shed light on their state of mind.

Clause 27: Duty in relation to use of position

198.      Clause 27 places a duty on an official not to use their position improperly to gain an advantage or cause a detriment. The clause is similar to subsection 24(1) of the CAC Act and the Code of Conduct at paragraph 13(10)(b) of the PS Act (which uses the words ‘the employee’s duties, status, power or authority’, instead of ‘position’). The term ‘position’ is used broadly. It could include a permanent or temporary work assignment, the powers or functions that have been delegated to an individual, or the general status that is associated with an official in a senior management role.

199.      The term ‘advantage’ has a wide meaning. It includes both financial advantages and non-financial advantages, such as providing favourable treatment to a person during a tender or recruitment process.

200.      The concept of causing detriment to an entity, the Commonwealth or another person recognises that an official may misuse their position either positively or negatively. Like advantage, ‘detriment’ is given a wide interpretation.

201.      Detriment can be to any person (compare the equivalent duty in the Corporations Act (paragraph 182(1)(b)), which only prohibits detriment to the corporation). This duty recognises that a public official has a broad ethical responsibility that extends beyond their entity to the Commonwealth or to any other person.

Clause 28: Duty in relation to use of information

202.      Clause 28 places a duty on an official not to use information obtained improperly as an official to gain an advantage or cause a detriment. The clause is similar to subsection 26(1) of the CAC Act and the Code of Conduct at paragraph 13(10)(a) of the PS Act (which uses the words ‘inside information’, instead of ‘information’). ‘Improper use’ is intended to include the unauthorised disclosure of information. ‘Information’ is used broadly and includes written and oral material, data and advice communicated to, or acquired by, the official.

203.      The term ‘advantage’ has a wide meaning. It includes both financial advantages and non-financial advantages, such as providing extra information to a person during a tender or recruitment process.

204.      The concept of causing detriment to an entity, the Commonwealth or another person recognises that an official may misuse information in different ways. Like ‘advantage’, ‘detriment’ should be given a wide interpretation.

Clause 29: Duty to disclose interests

205.      Clause 29 places a duty on an official to disclose material personal interests relating to the affairs of the entity. This recognises that the entity has been entrusted with public resources.

206.      It is fundamental to good governance that material personal interests are raised and dealt with effectively. Failure to do so can undermine confidence and trust in the Commonwealth entity concerned and potentially the whole Commonwealth. The public rightfully expects that decisions about how public resources are used will be made in the public interest, and not for other reasons, such as personal gain.

207.      The duty is not absolute—it only applies to material personal interests. What constitutes a material personal interest relating to the affairs of the entity will depend on the particular facts, but is not confined to financial or similar interests.

208.      The phrase ‘relating to the affairs of the entity’ should be read broadly. For example, it includes activities of the entity that involve collaboration with other entities inside or outside government.

209.      Subclause 29(2) allows the rules to define a number of procedural aspects concerning disclosure, such as:

·        the circumstances where disclosure of a conflict is not required. This might include, for example, where a material personal interest has been previously disclosed;

·        the manner of disclosure, including:

-           to whom disclosure must be made (for example, a member of a governing body may have to disclose the conflict to the responsible Minister and other members);

-           how disclosure must be made (for example, verbally or in writing); and

-           when disclosure must be made (for example, as soon as practicable after a material personal interest arises); and

·        the consequences of disclosing a material personal interest. This could include the official excusing themselves from discussion of the matter, or requiring a different official to make a decision on the matter.

Subdivision B—Provisions relating to general duties of officials

Clause 30: Termination of appointment for contravening general duties of officials

210.      Clause 30 provides that the person who appoints a member of an accountable authority (an ‘appointer’) of a corporate Commonwealth entity can terminate the appointment if the member has contravened one of the general duties on officials (that is, clauses 25 to 29). Effectively, this provision applies to directors, or equivalent officials, who are members of the governing body of a corporate Commonwealth entity.

211.      As the civil penalties regime that applies to directors under the CAC Act has not been continued under this Bill, the power to terminate an appointment becomes the key sanction against members of accountable authorities who breach their duties under the Bill (recognising that the Criminal Code or other criminal laws may be relevant if there has been a criminal act).

212.      The duty applies only to members of the governing body of a corporate Commonwealth entity because the situation of a member is different from that of an employee, who might be subject to administrative sanctions under employment law if they breach a duty under the Bill.

213.      The enabling legislation of corporate Commonwealth entities can also include termination provisions. For example, the Future Fund Act 2006 allows the Finance Minister and Treasurer to terminate the appointment of a member of the Future Fund Board of Guardians if the member contravenes duties similar to those under the Bill. However, these provisions are not uniform. Clause 30 introduces a consistent termination provision for all corporate Commonwealth entities, and a consistent scheme where employment law can be used to deal with people who breach their duties.

214.      For members of accountable authorities appointed under other legislation, the termination clause will be available in addition to any termination clause in that legislation.

215.      Subclause 30(6) ensures that the termination provision in clause 30 will continue to be available, even if the legislation enabling the employment arrangement says it excludes the operation of other termination arrangements.

216.      The power of termination is not to be used lightly. There must be clear evidence establishing a contravention before an appointer can dismiss a member.

217.      Safeguards to avoid a misuse of this provision include:

·        requiring the termination power to be exercised by a person who is in the same position as the appointer. It would be inappropriate to separate appointment and removal powers, particularly when someone outside the Commonwealth appoints a member, and could lead to perceptions of interference if the power of termination were to be conferred on a Minister in the absence of a power of appointment;

·        requiring a written notice setting out the reasons for the termination, which would include the information the appointer relied upon. This recognises the need to give due regard to procedural fairness when exercising this power (subclause 30(3));

·        requiring the notice to be tabled in Parliament, since any use of this provision is likely to be of special interest to the Parliament (subclause 30(4));

·        allowing the rules to prescribe requirements about the power of termination, which could include when and how the power can be exercised (paragraph 30(1)(d)); and

·        specifying that decisions to terminate will be reviewable under the Administrative Decisions (Judicial Review) Act 1977 , including in relation to whether the rules of natural justice were followed.

218.      The rules can specify certain appointments that cannot be terminated under clause 30. This could include appointments where there are heightened sensitivities towards the independence of members or for ex officio members, such as a managing director, whose removal from an accountable authority would conflict with enabling legislation that puts the member on the board.

219.      The clause does not apply if there is no appointer, such as with respect to members of land councils established under the Aboriginal Land Rights (Northern Territory) Act 1976 . Members of land councils are elected by their communities.

Clause 31: Interaction between Subdivision A and other laws

220.      Clause 31 clarifies the relationship between the general law, statutory duties in enabling legislation and the general duties under the Bill. The duties imposed by the Bill apply in addition to:

·            the general law regarding the duties and liabilities placed on a person because of their position or employment. For example, under the general law, employees have duties to serve their employer in good faith and not to disclose confidential information, which would overlap with the duties in clauses 26 and 28;

·            the general law regarding conflicts of interest. For example, directors have an equitable duty to avoid conflicts of interest; and

·            other statutory duties restricting material personal interests and holding an office or property where there are conflicts of duties or interests.

221.      Clause 31 reflects the fact that laws about the management of organisations do not exist in a vacuum.

 

Subdivision C—Officials to whom the Public Service Act applies

Clause 32: Officials to whom the Public Service Act applies

222.      Clause 32 and note 1 to the clause make clear that a breach of the finance law can be the basis for action under the PS Act against an official employed under that Act.

223.       Note 2 to clause 32 recognises that the employment arrangements of official employed under arrangements other than those provided by the PS Act may include requirements to comply with the finance law, including with the duties in the Bill.

 

Part 2-3—Planning, performance and accountability



Division 1—Guide to this Part

Clause 33: Guide to this Part

224.      Clause 33 summarises Part 2-3 of the Bill.

 

Division 2—Planning and budgeting

Clause 34: Key priorities and objectives of the Australian Government

225.      One of the main ways the government communicates its priorities to the Parliament and the public is through the periodic release of statements and strategies. A clear and shared understanding of the government’s priorities and strategic direction is fundamental to a high-performing public sector.

226.      Clause 34 refers to the Australian Government’s ability to and practice of periodically releasing such statements. It does not prescribe the manner, timing or form of such statements, which are properly a decision of the government of the day.

227.      The government already releases a number of statements, both at budget time and at other times in the parliamentary cycle. Statements under this provision may not go into great detail about the government’s intentions. However, the provision is intended to refer to statements that give enough detail to provide an understanding of the government’s intentions for the short to medium term.

228.      Accountable authorities of Commonwealth entities can use these statements to align their strategic and operational plans with broader government objectives—where this is appropriate and not inconsistent with an entity’s mandate as defined in its enabling legislation.

229.      Statements under this provision will be used at the planning stage. They will help shift the focus of performance management from the entity level to whole-of-government priorities and objectives. Achievement of the relevant priorities and objectives will be supported by the corporate plan of each Commonwealth entity and, beneath that corporate plan, an operational plan that sets out how the corporate plan will be implemented. This helps to provide a coherent framework for planning in the Commonwealth.

Clause 35: Corporate plan for Commonwealth entities

230.      Clause 35 requires each Commonwealth entity to prepare a corporate plan in accordance with the rules and provide it to the responsible Minister and Finance Minister.

231.      The corporate plan is the primary planning document of an entity. It sets out the entity’s objectives and strategies and the outcomes it hopes to achieve in the coming year. The plan should also explain how the entity will use its resources to achieve the relevant priorities of government. As a statement of planned performance, an entity’s corporate plan is closely linked to its Portfolio Budget Statement and annual report. The rules will ensure that information already published in other planning documents, such as Portfolio Budget Statements, is not duplicated.

232.      Many Commonwealth entities already produce some form of corporate plan. For example, GBEs are currently required under sections 17 and 42 of the CAC Act to produce a corporate plan, and some statutory authorities are required to produce a corporate plan by their enabling legislation. Some Commonwealth entities already undertake corporate planning as part of better practice.

233.      The Bill introduces a uniform requirement on Commonwealth entities to prepare a corporate plan. This is a key part of the strategy for improving performance across the Commonwealth. It will promote rigorous and transparent resource management planning across the Commonwealth. The content of a corporate plan will vary depending on the type of Commonwealth entity. However, most plans will include:

·          the objectives to be pursued by the entity;

·          the strategies of the entity to achieve its purposes;

·          forecast revenue and expenses;

·          assumptions about the entity’s business environment, including risks; and

·          non-financial performance targets.

234.      Subclause 35(3) requires a Commonwealth entity’s corporate plan to explain how the entity’s activities will contribute to achieving the key priorities and objectives set out in an Australian Government statement issued under clause 34 (if a statement has been published). The extent to which a Commonwealth entity is able to undertake activities to achieve the key priorities and objectives of the Australian Government will depend on its own functions and powers.

235.      The obligation in subclause 35(3) applies only where (and to the extent that) the purposes of the Commonwealth entity relate to the priorities and objectives set out in a statement made under clause 34. This means that if there is no relationship between an entity’s purposes and the priorities and objectives set out in a government statement, the entity can ignore that statement when developing its corporate plan.

236.      Moreover, subclause 35(4) makes it clear that if a Commonwealth entity has enabling legislation, its corporate plan will need to comply with subclause 35(3) only to the extent that compliance is not inconsistent with its own legislation. Primacy is given to enabling legislation. The enabling legislation of some entities may need to be amended to provide an exception to the requirement in subclause 35(3). For example, the requirement should not impinge on the statutory independence of entities like the RBA, SBS, the ABC, the Australian National University and the Federal Court of Australia.

237.      The rules will allow for the modification of the required content of corporate plans where they might contain sensitive information.  For example, a statement of corporate intent, which is intended to be an integral part of the corporate plan for GBEs, is not required to include commercially sensitive information.

Clause 36: Budget estimates for Commonwealth entities

238.      This Bill is concerned with the preparation of estimates at the level of individual Commonwealth entities, which forms the fundamental building blocks of the Commonwealth Budget. It operates alongside the Charter of Budget Honesty Act 1998 , which regulates Budget processes at a whole-of-government level. Under the current framework, FMA and CAC Act entities prepare their estimates differently. FMA regulation 22D requires estimates in a form required by the Finance Chief Executive (that is, the Secretary of the Department of Finance and Deregulation). Section 14 of the CAC Act requires estimates in a form required by the Finance Minister.

239.      Subclause 36(1) places the responsibility for preparing an entity’s budget estimates on the accountable authority of the Commonwealth entity. Budget estimates are required for each reporting period to support the Australian Government’s budget processes. The Finance Minister may also require updated estimates at other times during the year (for example, to assist in preparing the Mid-Year Economic and Fiscal Outlook), and for key budget deliberations of the Expenditure Review Committee. These budget estimates must be given to the Finance Secretary in accordance with their directions.

240.      The Finance Secretary can issue written directions about how entities are to prepare budget estimates. The accountable authority must ensure that its entity’s estimates fairly present the entity’s estimated financial activities. This will provide the government and Parliament with appropriate comfort that estimates are accurate.

241.      The Finance Secretary can require accompanying information on an entity’s estimates. This could include the underlying assumptions and costing models used by an entity.

242.      The Finance Secretary’s directions are not legislative instruments. They are administrative in character and do not fall within the definition of a legislative instrument for the purposes of section 5 of the Legislative Instruments Act 2003 (LI Act).

243.      Consistent with existing practice, the enabling legislation of some public financial corporations (such as the RBA) and public non-financial corporations will be amended to continue their exemption from preparing budget estimates. The RBA does, however, provide earnings estimates to the Commonwealth for the Commonwealth’s budgeting purposes.

244.      The RB Act will be amended to provide that clause 36 does not apply to the RBA. The new provision will be similar to subsection 7A(1) of the RB Act, which exempts the RBA from compliance with section 14 of the CAC Act (dealing with budget estimates).

 

Division 3—Performance of Commonwealth entities

Clause 37: Records about performance of Commonwealth entities

245.      Clause 37 requires an accountable authority to keep records that properly record the Commonwealth entity’s performance. The model being implemented by clause 37 mirrors the approach for producing financial statements.

246.      Appropriately managed records are an important component of an entity’s governance, resourcing and information management arrangements. Records will need to be maintained in a manner so they can be proven to be genuine, accurate and trustworthy. They must be complete and unaltered, findable and reasonable. The rules will provide standards for managing records,  drawing from accounting standards as appropriate.

247.      This requirement recognises the inherent value of quality performance information in strategic decision-making and resource allocation.

Clause 38: Measuring and assessing performance of Commonwealth entities

248.      Clause 38 requires an accountable authority to measure and assess how well the Commonwealth entity has performed in achieving its objectives and purposes. This is a key component in the resource management framework established by the Bill. It begins with strengthening strategic planning and then links planning to the measurement, assessment and reporting of performance.

249.      Requirements for measuring performance will be detailed in the rules. The focus will be on enhancing the quality and integration of performance information required by government and the Parliament to assess actual against planned results. The rules may also mandate particular requirements that are currently voluntary, consistent with the concept of earned autonomy. For example, the Expenditure Review Principles could be mandated for entities whose evaluations are consistently deficient.

250.      The standard for measuring and assessing performance needs to be sufficient to enable the accountable authority to produce the statement required under clause 39.

Clause 39: Annual performance statements for Commonwealth entities

251.      Clause 39 requires an accountable authority to prepare annual statements on the entity’s performance in achieving its purposes. The statements must be prepared in accordance with the rules and provided to the responsible Minister and the Finance Minister.

252.      Standards and rules for reporting under the FMA Act and the CAC Act currently focus on financial reporting. However, public sector performance is not just about money—it is also about what was achieved with that money. The requirement for performance statements aims to balance the requirement for entities to prepare financial and non-financial information. It focuses attention on improving the quality and reliability of performance information across the Commonwealth public sector.

253.      Performance statements will be part of an integrated annual report that brings together information about an entity’s strategy, governance and financial and non-financial performance. A copy of the statements will need to be included in an entity’s annual report when it is tabled in Parliament.  An integrated annual report is an important way to strengthen accountability, along with improving the consistency of reporting requirements and achieving a clearer line of sight between reporting documents.

Clause 40: Audit of annual performance statements for Commonwealth entities

254.      Clause 40 allows the responsible Minister or the Finance Minister to request the Auditor-General to examine and report on an entity’s annual performance statements. The Auditor-General could consider whether the statements meet the rules, and whether the metrics used in assessing performance are relevant. This provision complements the Auditor-General’s existing mandate to undertake performance audits and to audit the performance indicators of entities.

255.      Importantly, legislating for performance is only a first step in cultural change. Fully embedding performance management across Commonwealth entities will require systemic changes.

256.      Subclause 40(3) ensures accountability and transparency to Parliament by requiring that a report by the Auditor-General on an entity’s annual performance statement be tabled in Parliament as soon as possible after receipt.

 

Division 4—Financial reporting and auditing for Commonwealth entities

Clause 41: Accounts and records for Commonwealth entities

257.      Clause 41 is a combination of the requirements in section 48 of the FMA Act and section 20 of the CAC Act. It requires Commonwealth entities to have accurate and up-to-date accounts and records of their financial transactions. This is a basic accountability requirement since all other financial reporting duties in the framework depend on these records.

258.      Subclause 41(1) is derived from subsection 20(1) of the CAC Act. It places a duty on the accountable authority of a Commonwealth entity to ensure that proper accounts and records are kept of the entity’s transactions and financial position. The word ‘kept’ refers to both preparing and retaining these records.

259.      Subclause 41(2) requires the records to be kept in a form that meets the requirements in the rules and facilitates the preparation of annual financial statements and audit reports.

260.      Subclause 41(3) entitles the Finance Minister to access any accounts and records kept in accordance with this clause. This ensures that there is appropriate accountability to the government for financial information. It also assists the Finance Minister in fulfilling their responsibilities for whole-of-government financial reporting.

Clause 42: Annual financial statements for Commonwealth entities

261.      Clause 42 derives from section 49 of the FMA Act and clause 2 of Schedule 1 to the CAC Act. Preparing annual financial statements in accordance with consistent rules makes it easier for Ministers and Parliament to compare the financial position and performance of entities across the Commonwealth. It also supports the consolidation of individual entity statements into whole-of-government annual financial statements.

262.      Subclause 42(2) requires the accountable authority of a Commonwealth entity to prepare financial statements in accordance with accounting standards and any rules issued by the Finance Minister. In the Bill, accounting standards means the standards issued by the Australian Accounting Standards Board, as in force or applicable from time to time. The statements must present fairly the entity’s financial position, financial performance and cash flows.

263.      Specifying the accounting standards as the standards for financial reporting strengthens accountability because those standards are determined independently. The Auditor-General has a role in supporting independent accounting standards.

264.      The note to subclause 42(2) states that an accountable authority must add information to make the financial statements present fairly the entity’s financial position, financial performance and cash flows if they do not already do so.

Clause 43: Audit of annual financial statements for Commonwealth entities

265.      Clause 43 generally has the same effect as subsections 57(1) to (3) and 57(7) of the FMA Act and clause 3 of Schedule 1 to the CAC Act, which deal with the Auditor-General’s audit of the annual financial statements of Commonwealth authorities.

266.      The main difference between clause 43 and the FMA Act and CAC Act provisions is that under subclause 43(2), the Auditor-General is required to state whether, in the Auditor-General’s opinion, the financial statements comply with the accounting standards and any other requirements in the rules.

Clause 44: Audit of subsidiary’s financial statements

267.      Clause 44 generally has the same effect as section 12 of the CAC Act. The main difference is that it strengthens the Auditor-General’s mandate. Under subclause 44(3) a subsidiary’s financial statements must be audited by the Auditor-General unless the subsidiary is incorporated or formed in a place outside Australia and either:

·          under the law applying to the subsidiary in that place, the Auditor-General cannot be appointed as auditor of the subsidiary; or

·          in the Auditor-General’s opinion, it is impracticable or unreasonable for the Auditor-General to audit, or to be required to audit, the statements.

268.      Section 12 of the CAC Act states that the directors of a parent company must do whatever is necessary to ensure that the Auditor-General audits the financial statements of a subsidiary. However, section 12 also states that the financial statements of a subsidiary do not have to be audited by the Auditor-General if one of the situations in subclause 44(3) of the PGPA Bill applies. This could lead to the mistaken impression that it is up to the directors to decide whether one of the exemptions applies. Subclause 44(3) clarifies that it is for the Auditor-General to decide whether or not to audit a subsidiary’s financial statements.

269.      Subclause 44(1) specifies when the provision applies; it is the same as subsection 12(5) of the CAC Act.

 

Division 5—Audit committee for Commonwealth entities

Clause 45: Audit committee for Commonwealth entities

270.      An effective audit committee contributes to strong audit and governance arrangements. Audit committees have become an integral part of risk and compliance management for all Commonwealth entities.

271.      Clause 45 requires a Commonwealth entity to have an audit committee that is constituted in accordance with the rules. This clause replicates the requirements in section 46 of the FMA Act and section 32 of the CAC Act.

272.      The requirements for how an audit committee is to be constituted will be set out in the rules, as is the practice under the FMA and CAC Acts. The expectation is that the rules will specify similar requirements to those in the FMA Regulations and CAC Regulations. They will ensure that an audit committee has sufficient external expertise to provide independent advice to the accountable authority.

273.      Nothing in the Bill or rules will prohibit one audit committee servicing two or more Commonwealth entities. There may be advantages for certain entities in sharing an audit committee, especially small entities. Establishing a joint audit committee would be at the discretion of the relevant accountable authorities.

 

Division 6—Annual report for Commonwealth entities

Clause 46: Annual report for Commonwealth entities

274.      The framework established by the Bill requires a close link between annual reports and corporate plans to allow a comparison of expected and actual performance.

275.      Current annual reporting requirements are distributed across various pieces of legislation and policy. Most FMA Act entities report in accordance with the requirements under the PS Act. For Commonwealth authorities governed by the CAC Act, the annual reporting requirements are in that Act.

276.      Clause 46 provides an opportunity to develop an integrated and consistent set of annual report requirements for all Commonwealth entities. Placing the requirements in the Bill ensures that obligations to plan for resource use and report on how effectively those resources have been applied are contained in the same legislation.  

Clause 46 also standardises the reporting deadline for all Commonwealth entities as the end of the fourth month after the end of a reporting period (or end of a further period under the Acts Interpretation Act 1901 ). This makes 31 October the deadline for entities whose reporting period ends on 30 June. This is consistent with existing deadlines for FMA Act agencies [3] and a slight extension of the existing deadline for CAC Act authorities. [4]   The deadline is slightly longer then the three months given to ASX listed entities for annual reporting, which reflects the greater amount of non-financial information that Commonwealth entities are required to report to their Minister and the Parliament.

277.      Subclause 46(4) preserves the role of the JCPAA under the PS Act in approving annual report requirements.

 

Division 7—Whole-of-government financial reporting

Clause 47: Monthly financial reports

278.      Clause 47 is the same as section 54 of the FMA Act. It requires the Finance Minister to publish monthly financial reports in a form consistent with the budget estimates, as soon as practicable after the end of each month.

279.      Monthly reporting is an integral part of the budgeting and reporting cycle. It provides the government and the public with information about how the budget is tracking against the budget estimates and against spending in the previous financial year. Reports can profile the government’s position on a range of measures, including the underlying cash balance, fiscal balance and financial outcomes against estimated revenue and expenses.

280.      The requirement to release monthly financial reports as soon as practicable after the end of each month is consistent with the Australian Government’s commitment to the International Monetary Fund (IMF) Special Data Dissemination Standards. Under those standards monthly financial reports are generally released by the end of the following month with the exception of the June and July reports, which the IMF has given Australia special dispensation to release before 31 October each year.

Clause 48: Annual consolidated financial statements

281.      Clause 48 is generally the same as section 55 of the FMA Act. It requires the Finance Minister to prepare a set of annual consolidated financial statements and provide them to the Auditor-General as soon as practicable.

282.      The consolidated financial statements present the financial position, financial performance and cash flows of the Australian Government for the financial year and complement the final budget outcome compiled under the Charter of Budget Honesty Act 1998 .

283.      Consistent with current practice, the annual consolidated financial statements will comprise the whole-of-government financial statements and the general government sector financial statements required by AASB 1049 Whole of Government and General Government Sector Financial Reporting .

284.      Monthly reports and annual financial statements are essential accountability mechanisms. They provide an overview of the Australian Government’s financial position and performance to the Parliament and the public. In addition to allowing appropriate scrutiny of the Commonwealth, up-to-date financial reports assist the government in its financial planning.

285.      Clause 48 differs from section 55 of the FMA Act in an important respect. It specifically requires the consolidated financial statements to be prepared in accordance with the accounting standards, which, as noted earlier, are independently set. This brings an additional level of external accountability to the statements. Under the FMA Act, the FMA Regulations determine the standards for preparing the consolidated financial statements.

Clause 49: Audit of annual consolidated financial statements

286.      Clause 49 has the same effect as section 56 of the FMA Act. It requires the Auditor-General to audit the whole-of-government annual financial statements. Once the audit is complete the Auditor-General must give a report to the Finance Minister who must table it in the Parliament along with the financial statements.

Part 2-4—Use and management of public resources

 

Division 1—Guide to this Part

Clause 50: Guide to this Part

287.      Clause 50 summarises Part 2-4 of the Bill.

Division 2—Funding and expenditure

Clause 51: Making amounts appropriated available to Commonwealth entities

288.      This clause provides the Finance Minister with certain powers over the management of the Commonwealth’s cash holdings, effectively as the chief financial officer of the Commonwealth, on behalf of the executive government in its stewardship for the Parliament and the people.

289.      This provision is consistent with the authority of the Finance Minister under the FMA Act and the enabling legislation of many corporate Commonwealth entities including CAC Act bodies. [5] Subclause 51(1) gives the Finance Minister a discretionary power to make appropriated money available in such amounts and at such times as the Finance Minister considers appropriate.

290.      Under the FMA Act, the Finance Minister controls the expenditure of appropriated money by FMA Act agencies, because the Minister controls the issue of drawing rights, without which no person can lawfully make a payment of public money (see FMA Act sections 26 and 27). Continuing to provide the Finance Minister with the power to insert a step between the appropriation of money by Parliament, and the distribution of cash amounts to Commonwealth entities for expenditure, retains a suitable level of control over expenditure. It also allows the Finance Minister to manage the Commonwealth’s cash position (for example, by establishing a schedule of releases of cash to Commonwealth entities).

291.      Subclause 51(2) places a restriction on the Finance Minister’s discretion under subclause 51(1). Paragraph 51(2)(a) provides that the Finance Minister must make an appropriated amount available if a law requires payment of the amount. This recognises that some payments of money are legally required to be made (such as for social security payments). In these cases, the appropriated amount must be released to satisfy the payment.

292.      Paragraph 51(2)(a) is constrained by paragraph 51(2)(b), which provides that the Finance Minister must be satisfied that an appropriation is available which will provide authority for the payment. This is a constitutional requirement. Amounts cannot be expended from the Consolidated Revenue Fund (CRF) without, at least, an appropriation to support the expenditure.

293.      This clause applies to Commonwealth entities that administer an appropriation of any type (annual appropriation, special appropriation and special account).

294.      Many corporate Commonwealth bodies have similar provisions in their enabling legislation. Those provisions will be removed through consequential amendments. Having a general provision in the Bill makes appropriation arrangements more consistent across the Commonwealth and simplifies the requirements.

Clause 52: Commitment and expenditure of relevant money

295.      Clause 52 allows for rules to be made about the commitment and expenditure of relevant money by the Commonwealth or a Commonwealth entity generally. In particular, the rules may detail arrangements to ensure that relevant money is not expended from the CRF without a valid appropriation.

 

Division 3—Banking

Clause 53: Banking by the Commonwealth

296.      Clause 53 provides the Finance Minister with powers relating to Commonwealth banking. By implication, no other person may exercise these powers, unless expressly authorised by legislation. This is consistent with arrangements under the FMA Act.

297.      Subclause 53(1) gives the Finance Minister the power to enter into agreements with banks relating to the Commonwealth’s banking business. Consistent with the existing financial framework, it is intended that this power will be delegated to the accountable authorities of non-corporate Commonwealth entities.

298.      An overdraft drawing is not a formal overdraft facility that would be covered by subclause 56(2).  An overdraft drawing would generally occur when a debit transaction for an amount greater than the balance of the account is debited to that bank account and the transaction is honoured by the bank.  This causes the account to go into a negative debit balance.

299.      Subclause 53(3) requires the Finance Minister to open and maintain a central bank account with the RBA. This provision reflects longstanding administrative practice.

300.      The Bill does not make prescriptive requirements about banking by the Commonwealth. The rules will cover any specific requirements.

Clause 54: Banking by corporate Commonwealth entities

301.      Clause 54 allows the rules to set banking requirements for corporate Commonwealth entities. This provides more flexibility than subsection 18(2) of the CAC Act, which simply states that a Commonwealth authority must pay all money received into a bank account.

Clause 55: Banking of relevant money by Ministers and officials

302.      Clause 55 generally has the same effect as section 10 of the FMA Act. It is also covers subsection 18(2) of the CAC Act. The clause requires Ministers or officials of all Commonwealth entities to bank relevant money promptly, and in accordance with any requirements prescribed by the rules.

303.      Banking relevant money ensures that there is efficient cash management and an effective audit trail when money has been received. The rules are expected to be minimal to ensure that entities have flexibility in banking arrangements.

304.      The RBA will be excluded from the operation of this clause, consistent with its current situation.

 

Division 4—Borrowing

Clause 56: Borrowing by the Commonwealth

305.      Clause 56 covers the same matters as sections 37 and 38 of the FMA Act. Subclause 56(1) places a clear limit on when the Commonwealth can borrow—it can only do so if expressly authorised by an Act. There are several Acts that authorise Commonwealth borrowing, including the Commonwealth Inscribed Stock Act 1911 .

306.      Subclause 56(2) authorises the Finance Minister to enter into an agreement to borrow money in accordance with the rules. The agreement must require the amount borrowed to be repaid by the Commonwealth within 90 days. This subclause replaces subsections 38(1) and (2) of the FMA Act. It will allow the Finance Minister to enter into agreements to borrow money to make short-term advances to the Commonwealth and to provide credit to the Commonwealth, such as through agreements for credit cards.  An agreement entered into under subclause 56(2) is only intended to cover credit card and charge card facilities and urgent or unforeseen short-term short falls in the Commonwealth’s cash flow requirements.  This power to borrow in no way changes the Commonwealth’s current monetary policy to fund the Commonwealth’s debt through the issuing of securities.

307.      Consistent with the requirements under the FMA Act, the rules will specify particular types of permitted borrowing, and the Finance Minister will be able to delegate powers in relation to particular types of permitted borrowing. The borrowing can be from any person, although the rules may prescribe limits on the type of person (for example, a bank) from whom particular types of borrowing may be made. In each case, the agreement must provide that amounts borrowed must be repaid within 90 days.

Clause 57: Borrowing by corporate Commonwealth entities

308.      Clause 57 clarifies the capacity of corporate Commonwealth entities to borrow, which was unclear in the past. Any borrowing by a corporate Commonwealth entity must be expressly authorised by an Act (see, for example, section 61 of the Australian Postal Corporation Act 1989 ), or authorised by the Finance Minister, or authorised by the rules.

309.      Giving the Finance Minister the power to authorise borrowings will allow the Finance Minister to exercise judgment about borrowing proposals by corporate Commonwealth entities. The rules will also be able to prescribe circumstances in which corporate Commonwealth entities may borrow if the entity’s enabling legislation is silent on the subject. Borrowing entered into in such circumstances will be authorised by the rules in compliance with paragraph 57(c). It is expected that the rules will provide that all corporate Commonwealth entities can borrow through credit cards and credit vouchers. Under the CAC Act, Commonwealth authorities were given this power in 2008.

310.      This provision does not affect the Finance Minister’s powers under other legislation to approve borrowing by certain statutory authorities (see, for example, section 70B of the ABC Act).

 

Division 5—Investment

Clause 58: Investment by the Commonwealth

311.      Clause 58 is generally the same as section 39 of the FMA Act. It authorises the Finance Minister and the Treasurer to invest relevant money on behalf of the Commonwealth. By implication, no other person may invest on behalf of the Commonwealth, unless expressly authorised by legislation. The types of instruments that can be used for investments are generally limited, which reflects the fact that the Commonwealth has a higher duty to look after the money entrusted to it by the people of Australia.

312.      In relation to subparagraph 58(8)(a)(i), a deposit with a bank is money lodged with a bank at call or at term, such as an ordinary savings account or a term deposit. A certificate of deposit is a negotiable bearer debt security, issued at a discount to the face value. The following investments do not constitute ‘a deposit with a bank’:

·          medium term notes and fixed or floating rate notes;

·          money market trusts/cash management trusts; and

·          bills of exchange. [6]

313.      Paragraph 58(8)(b) provides that the Treasurer can invest in debt instruments guaranteed by foreign governments, debt instruments issued or guaranteed by financial institutions whose members consist of foreign countries, and debt instruments denominated in Australian currency. The Finance Minister cannot invest in such instruments.

314.      In the past, the Finance Minister has only delegated investment powers outside of the Department of Finance and Deregulation when there has been a clear business need to do so (for example, in relation to moneys that stand to the credit of certain special accounts).

315.      Subclause 58(5) is slightly different from subsection 39(5) of the FMA Act. The words ‘Upon realisation of an investment’ have been removed from the start of the subclause. This ensures that any proceeds of the investment of an amount debited from a special account will be credited to the special account when they are received.

Clause 59: Investment by corporate Commonwealth entities

316.      Clause 59 has the same effect as subsections 18(3) and (4) and section 19 of the CAC Act. It gives corporate Commonwealth entities the power to invest in certain instruments. They can only invest money that is ‘not immediately required for the purposes of the entity’. This phrase is equivalent to the concept of surplus money in the CAC Act.

317.      The types of authorised investments are effectively those that the Finance Minister and Treasurer can invest in under paragraph 59(8)(a). Subparagraph 58(1)(b)(i) makes clear (in contrast to subsection 18(3) of the CAC Act) that deposits with a bank include a deposit evidenced by a certificate of deposit. Other investments may be authorised by the Finance Minister, as has occurred under the CAC Act. Subparagraph 59(1)(b)(iv) provides a direct power in relation to GBEs for investment, subject to a requirement that the money is invested in a manner consistent with sound commercial practice, which is the same arrangement as under paragraph 19(3)(d) of the CAC Act.

318.      Subclauses 59(2) and (3) are similar to subsection 18(4) of the CAC Act. They generally exclude contracts for investments under subclause 59(1) from the spending limits that apply to various corporate Commonwealth entities. Spending limits in enabling legislation usually stop a corporate Commonwealth entity from entering into a contract above a certain threshold (for example, $1 million) without the approval of someone else, like a Minister. Requiring corporate Commonwealth entities, including GBEs, to seek approval every time they want to enter into a contract could create practical difficulties, given that such contracts can be short-term and frequent.

319.      In managing the cash rate and foreign currency reserve, the RBA engages in a range of activities, including trading in securities and other instruments to achieve its policy objectives. Nothing in the Bill should constrain the RBA’s activities or decision-making in these areas. Accordingly, the RB Act will be amended to provide that clause 59 does not apply to the RBA. The new provision will be similar to subsection 7A(1) of the RB Act, which exempts the RBA from section 18 of the CAC Act.

320.      The current enabling legislation of some corporate entities exempts them from the investment restrictions under the CAC Act. One example is section 195G of the Aboriginal and Torres Strait Islander Act 2005 in relation to the Indigenous Land Council. Consequential amendments will need to be made to continue these exemptions.

 

Division 6—Indemnities, guarantees, warranties and insurance

Clause 60: Indemnities, guarantees or warranties by the Commonwealth

321.      Clause 60 authorises the Finance Minister to provide an indemnity, guarantee or warranty on behalf of the Commonwealth in accordance with the rules. By implication, no other person may grant an indemnity, guarantee or warranty on behalf of the Commonwealth, unless expressly authorised by legislation. This clause clarifies the role of the Finance Minister in relation to contingent liabilities, which up until now has been mainly based on policy and practice (although FMA Regulation 11 does have rules about entering into loan guarantees).

322.      It is important and timely to recognise the Finance Minister’s role in relation to indemnities, guarantees and warranties, given that they can place significant obligations on the Commonwealth. Indemnities, guarantees and warranties have a legitimate role to play in facilitating government business. However, the Commonwealth’s longstanding policy is that a contingent liability should only be accepted if the expected benefits, financial or otherwise, are sufficient to outweigh the level and cost of the risk the Commonwealth would be assuming.

Clause 61: Indemnities, guarantees or warranties by corporate Commonwealth entities

323.      Clause 61 enables the rules to prescribe requirements about the granting of indemnities, guarantees or warranties by corporate Commonwealth entities. This clause does not have an equivalent in the CAC Act. It will provide a mechanism for the Commonwealth to ensure that contingent liabilities are being effectively managed across corporate Commonwealth entities, although the rules applying to corporate Commonwealth entities will be limited and apply in certain circumstances only. However, it is intended that rules made under this clause will replicate section 27M of the CAC Act.

Clause 62: Insurance obtained by corporate Commonwealth entities

324.      Clause 62 permits the rules to deal with the obtaining of insurance by corporate Commonwealth entities. This will enable an entity to insure its officers against liabilities they may incur. The rules made under this clause will, at a minimum, replicate section 27N of the CAC Act.

 

Division 7—Waivers, set-offs and act of grace payments

Clause 63: Waiver of amounts owing to the Commonwealth

325.      Clause 63 gives the Finance Minister the power to waive or otherwise deal with amounts owed to the Commonwealth. This clause generally replicates section 34 of the FMA Act. By implication, no other person may exercise these powers on behalf of the Commonwealth, unless expressly authorised to do so by legislation.

326.      A waiver extinguishes an amount owed to the Commonwealth. This means that the amount owing is forgiven and the Commonwealth cannot pursue it if the debtor’s financial circumstances later improve.

327.      The waiver power is given exclusively to the Finance Minister because of the nature of the power—that is, because using the power extinguishes any legal right the Commonwealth may have had to the debt. The Finance Minister may make rules under clause 103(c) dealing with the recovery or write-off of amounts owing to the Commonwealth (for example, setting out the circumstances in which it may be appropriate to cease actions to recover such debts). A write-off differs from a waiver in that the debt continues to exist even though it has been written off.

Clause 64: Setting off amounts owed to, and by, the Commonwealth

328.      Clause 64 has the same effect as section 35 of the FMA Act. It permits the Finance Minister, on behalf of the Commonwealth, to exercise a discretion to ‘set off’ amounts owed to the Commonwealth with amounts payable to the Commonwealth. By implication, no other person may exercise these powers on behalf of the Commonwealth, unless expressly authorised to do so by legislation.

329.      Subclause 64(1) applies when a person (including a company or other entity) owes an amount to the Commonwealth, and the Commonwealth also owes an amount to that same person. The Finance Minister may reduce the amount the Commonwealth owes to the person (possibly to nil) by applying the amount the person owes to the Commonwealth against the amount owed by the Commonwealth (that is, by ‘setting off’ the two amounts against each other).

330.      Subclause 64(2) provides that an amount cannot be set off against a payment if a law of the Commonwealth provides that the payment:

·          is inalienable or ‘absolutely inalienable’ (see, for example, section 1061EK of the Social Security Act 1991 , which provides that an advance social security payment is ‘absolutely inalienable’); or

·          cannot be assigned by the recipient to another person (see, for example, section 126B of the First Home Saver Accounts Act 2008 , which states that payments from a First Home Saver Account cannot be assigned).

331.      A legislative set-off mechanism that applies at a whole-of-government level means that the Commonwealth will not need to rely on common law rules for set-offs in specific cases.

Clause 65: Act of grace payments by the Commonwealth

332.      Clause 65 gives the Finance Minister the power to make act of grace payments in accordance with the rules. Commonwealth financial legislation has included a mechanism to provide act of grace payments since 1979. Act of grace payments are one of a number of discretionary payments the Commonwealth can make.

333.      Clause 65 is a simplified version of section 33 of the FMA Act. Clause 65 provides the Finance Minister with discretion to authorise one or more payments and, although it is not expressly stated in the clause, will continue to enable the Finance Minister to authorise periodic payments to a person (which is currently expressly permitted under paragraph 33(1)(b) of the FMA Act).

334.      Subclause 65(2) requires that an authorisation under subclause 65(1) must be in writing and comply with any requirements in the rules. The requirement for written authorisation is new; it has been introduced to improve accountability.

 

Division 8—Special provisions applying to Ministers and certain officials

Subdivision A—Gifts of relevant property

Clause 66: Gifts of relevant property

335.      Clause 66 generally has the same effect as section 43 of the FMA Act regarding gifts. The clause sets limits on when officials of non-corporate Commonwealth entities or Ministers can give gifts.

336.      It would ordinarily be difficult to reconcile an official fulfilling their duties in clauses 25 to 29 with the giving of gifts. Situations where it may be appropriate to give a gift include in the context of protocol requirements or where the Commonwealth is disposing of surplus relevant property. Therefore, limitations on when gifts can be made are appropriate.

337.      This clause does not apply to officials of corporate Commonwealth entities. Nevertheless, these officials must still consider whether making a gift of relevant property would be compatible with fulfilling their duties.

 

Subdivision B—Liability of Ministers and certain officials for unauthorised gifts and loss

Clause 67: Liability for unauthorised gifts of relevant property

338.      If an official of a non-corporate Commonwealth entity or a Minister makes a gift of relevant property that is not in accordance with the requirements of clause 66 and any rules, clause 67 requires them to pay the Commonwealth an amount equal to the value of the relevant property.

Clause 68: Liability for loss—custody

339.      Clause 68 is a combination of sections 15 (relating to liability for loss of relevant money) and 42 (relating to liability for loss of relevant property) of the FMA Act. It effectively makes an official of a non-corporate Commonwealth entity or a Minister liable if they lose relevant money or public resources that was in their custody at the time of the loss.

340.      The term ‘loss’ includes a loss of relevant money or a loss of value to relevant property caused by damage or destruction. An official or Minister has a defence if they take reasonable steps to avoid the loss. ‘Reasonable steps’ will depend on the circumstances, but considerations could include the amount of money or value of property, the cost of avoiding the loss and the cost-effectiveness of any recovery action.

341.      Subclause 68(3) states that a person (including an official or a Minister) has nominal custody of relevant money if the money is held as cash, such as petty cash or money that has not yet been banked.

342.      Subclause 68(4) states that a person has nominal custody of relevant property if they have taken delivery of the property. This is qualified by the requirement that the person taking delivery of the property acknowledges in writing that they will take strict care of the property.

Clause 69: Liability for loss—misconduct

343.      Clause 69 makes an official of a non-corporate Commonwealth entity or a Minister personally liable for the loss of relevant money or property if they contributed to the loss through misconduct, or by a deliberate or serious disregard of reasonable standards of care.

344.      Subclause 69(2) provides that the Minister or official is liable to pay for the loss to the extent that their misconduct or disregard for reasonable standards of care caused or contributed to the loss.

Clause 70: Provisions relating to liability of Ministers and officials

345.      Clause 70 states that debts arising for loss of relevant money or property are recoverable through an action in a court of competent jurisdiction. This replicates subsection 42(5) of the FMA Act. Subclause 70(2) confirms that an official or Minister will be required to make payments under either subclause 68(1) or subclause 69(1)—they will not be required to pay for the same loss twice. Subclause 70(3) confirms that a liability for loss under subclause 68(1) or 69(1) continues even after the person ceases to be an official or a Minister.

 

Division 9—Special provisions applying to Ministers only

Clause 71: Approval of proposed expenditure by a Minister

346.      Clause 71 places a duty on Ministers not to approve a proposed expenditure of relevant money unless they are satisfied that it constitutes a proper use. It also requires the Minister to record the terms of approval in writing. This provision has been elevated into primary legislation and imposes duties on Ministers like those imposed by FMA regulations 9 and 12.

347.      Subclause 71(2) also incorporates the provisions of section 36 of the FMA Act in relation to presiding officers.

348.      A Minister must make reasonable inquiries to determine whether a proposed expenditure is a proper use of relevant money.

349.      A Minister should ordinarily not personally approve a proposed expenditure if they have a material personal interest in the subject matter of the expenditure. Subclause 71(3) ensures that there is an appropriate paper trail for accountability purposes, such as an audit by the Auditor-General.

350.      Most provisions in the Bill do not apply to Ministers, which is appropriate given their constitutional role and the ability for Parliament to hold them to account for their decisions. However, this provision is considered appropriate because rules for expenditure approval are fundamental to ensure good government, public interest, transparency and accountability.

Clause 72: Ministers to inform Parliament of certain events

351.      Clause 72 generally replicates section 39A of the FMA Act, which requires the responsible Minister to inform the Parliament of the Commonwealth’s or a prescribed entity’s involvement in a company. However, the scope of clause 72 is broader than section 39A to improve transparency.

352.      First, the clause requires a notice to be tabled in Parliament if the Commonwealth or a corporate Commonwealth entity is involved in one of the events listed in paragraphs 72(1)(a) to (e). This covers all Commonwealth entities, including corporate Commonwealth entities that may have extensive interests in other bodies. Under the FMA Act, section 39A is limited to the Commonwealth or bodies corporate under the FMA Act (of which there are only 13), which leaves a significant number of Commonwealth entities outside the scope of the section. Extending coverage to all Commonwealth entities will provide greater transparency and is consistent with the principle of government acting as a coherent whole.

353.      Second, under subclause 72(2), the rules can prescribe ‘relevant’ bodies for the purposes of clause 72 in addition to companies. This will allow the rules to require notices when the Commonwealth or a corporate Commonwealth entity gets involved in another business form, such as a trust, partnership or incorporated association. The number of these non-company forms across the government can be significant. For example, in 2009, 41 trusts were operated by the Commonwealth or Commonwealth entities. These business arrangements are often subject to limited oversight and including them under clause 72 will improve transparency.

354.      Events that could trigger the notice requirement include forming a company or relevant body, becoming a member of a company or relevant body, and buying or selling shares in a company.

355.      The word ‘company’ is used with its general meaning rather than specifically referring to Corporations Act companies. This means that it covers involvement in companies that are registered overseas.

356.      The provision has wide coverage, given the breadth of the Commonwealth’s and corporate Commonwealth entities’ involvement in companies or relevant bodies.

357.      Subclause 72(4) provides exceptions to the reporting requirements for authorised investments made by the Finance Minister or the Treasurer under clause 58, investments made by corporate Commonwealth entities under clause 59 and investments made under the Future Fund Act 2006 .  The rules can also exempt transactions of other entities that have a statutory investment function, such as the Commonwealth Superannuation Corporation.



 

 

Part 2-5—Appropriations

 

Division 1—Guide to this Part

Clause 73: Guide to this Part

358.      Clause 73 summarises Part 2-5 of the Bill.

Division 2—Appropriations relating to non-corporate Commonwealth entities and the Commonwealth

Clause 74: Receipts of amounts by non-corporate Commonwealth entities

359.      The provision seeks to merge and simplify sections 30 (repayments to the Commonwealth), 30A (appropriations to take account of recoverable GST) and 31 (retaining prescribed receipts) of the FMA Act. It will permit agencies to retain certain types of receipts by adding them to their most recent departmental item in an annual appropriation Act, or, where the rules prescribe, other types of appropriations, such as annual administered appropriations, non-operating appropriations, special appropriations or special accounts. This will provide flexibility for agencies to retain and utilise these receipts for their departmental and/or administered activities.

360.      Subclause 74(2) replicates subsection 32A(4) of the FMA Act. It clarifies the timing of these adjustments to appropriations. Adjustments to appropriations will only take effect when the receipt is recorded in the entity’s accounts and records and will require agencies to properly classify receipts of cash in their accounts so the correct appropriation is adjusted.

361.      Agencies should continue to comply with accounting standards governing the recognition of revenue and assets.

362.      Clause 74 will operate in conjunction with clause 76 when a non-corporate Commonwealth entity receives amounts of a kind prescribed by the rules. Notional payments from another non-corporate Commonwealth entity can be credited to an appropriation, in the same way as real payments (from entities external to the Commonwealth/Government).

Clause 75: Transfers of functions between non-corporate Commonwealth entities

363.      Clause 75 closely follows section 32 of the FMA Act in wording and effect. This clause relates to the administration of annual appropriations following machinery of government changes and other transfers of functions between agencies, for example, as determined through the Administrative Arrangements Order.

364.      However, the wording in subclause 75(4) differs from section 32(4) of the FMA Act so as to be consistent with the Statute Stocktake (Appropriations) Bill 2013 . It clarifies that the total amount appropriated in the year in which the determination is made or in a previous financial year cannot be increased through the operation of this provision.

365.      As specified in the revised explanatory memorandum for the Financial Framework Legislation Amendment Bill (No. 1) 2007 , which inserted section 32 into the FMA Act, clause 75 operates as a subordinate legislative instrument that has an effect on primary legislation (in this case not being this Bill but the relevant annual appropriation Acts).

Clause 76: Notional payments and receipts by non-corporate Commonwealth entities

366.      Clause 76 replicates section 6 of the FMA Act.

367.      The purpose of paragraph 76(a)(i) is to ensure that payments made within the Commonwealth by non-corporate Commonwealth entities are treated as if they are ‘real’/actual payments to entities outside of Government/the Commonwealth.

368.      Paragraph 76(a)(ii) provides for the treatment of notional payments between different parts/business areas of the same entity as  if they were ‘real’ payments.

369.      The note to the clause is intended to provide additional clarity about the operation of the clause.

Clause 77: Repayments by the Commonwealth

370.      This clause applies only to non-corporate Commonwealth entities.

371.      Clause 77 operates in a similar manner to section 28 of the FMA Act with one substantive modification. Subclause 77(c) is modified from the current paragraph 28(1)(c) of the FMA Act by including the requirement for the Finance Minister to be satisfied that, apart from this clause, there is no existing appropriation for the repayment.

372.      This will allow the Finance Minister to exercise control over the circumstances in which a non-corporate Commonwealth entity can use the special appropriation created by this clause to make a repayment, consistent with existing practice.

373.      Amounts which are ‘required or permitted’ to be repaid under this Bill are those where legislation or the general law requires or permits the amount to be repaid, for example, where a payment was made to the Commonwealth by mistake.

374.      The note to the clause provides examples of when amounts may be required or permitted to be repaid. The note at subclause 77(c) makes clear that this clause operates in conjunction with clause 76 of the Bill (Notional payments and receipts by non-corporate Commonwealth entities).

Division 3—Special accounts

Clause 78: Establishment of special accounts by the Finance Minister

375.      A special account is a mechanism that notionally sets aside an amount within the CRF to be expended for a particular purpose. The amount of expenditure against the special account is limited to the balance of that special account. A special account is like a ledger within the CRF where debits and credits are made as relevant money flows in and out of the CRF.

376.      There are two types of special account. One type is established by a determination made by the Finance Minister under the authority of this clause. The other type is established in another Act, recognised by clause 80 of the Bill.

377.      Clause 78 generally replicates and clarifies section 20 of the FMA Act with respect to giving the Finance Minister power to make determinations establishing, varying or revoking special accounts and governing their operation. However, the clause differs from section 20 in that:

·          Paragraph 78(1)(d) has been inserted to recognise the concept of ‘accountable authority’ contained in the Bill and to improve accountability and transparency requirements when compared to the current arrangements; and

·          The sunsetting provisions that were contained in subsection 20(6) of the FMA Act are not included in the Bill.  Determinations made under this clause will be subject to the sunsetting regime of the LI Act.

Clause 79: Disallowance of determinations relating to special accounts

378.      Clause 79 is a continuation and clarification of the arrangements in section 22 of the FMA Act.

379.      Clause 79 makes special account determinations made under subclauses 78(1) and 78(3) not subject to the normal disallowance provisions under the LI Act. Clause 79 gives each House of Parliament five sitting days to pass a motion disallowing a determination. However, a determination establishing a special account does not take effect until after the five sitting days have passed.

380.      The disallowance regime in clause 79 allows Parliament to consider whether the special account should be established, varied or revoked before the determination takes effect after the disallowance period has expired. This is in contrast to the LI Act arrangements, where legislative instruments, when tabled, become law and remain so unless disallowed.

381.      The arrangement seeks to strike a balance between the opportunity for parliamentary scrutiny of the government’s intentions and the need to not unduly delay the functional operations of financial administration.

382.      One further minor addition is paragraph 79(5)(b), which clarifies that a determination could be presented to the Parliament, not be disallowed within five sitting days and then commence at a later date. Under section 22 of the FMA Act, a determination commences immediately after five sitting days has expired. This change provides greater flexibility as the government may not wish a determination to have immediate effect.

Clause 80: Special accounts established by other Acts

383.      Clause 80 mostly replicates section 21 of the FMA Act, and recognises that a special account can be established by another Act of Parliament. Only non-corporate Commonwealth entities may administer special accounts established under an Act.

384.      This clause differs from the current section 21 of the FMA Act , in that:

·          note 3 to section 21 of the FMA Act has been deleted as this matter is now dealt with in subclause 80(4); and

·          subclause 80(3) of the Bill, which is similar to subsection 21(2) of the FMA Act, has been clarified in relation to transactions that may occur and should be reflected in accounts and records in relation to the special account.

385.      Subclause 80(4) of the Bill clarifies subsection 32A(1) of the FMA Act, in that an entity can, or should, treat the balance of the special account as having been increased, or decreased, in line with a relevant transaction.

 



 

Part 2-6—Cooperating with other jurisdictions

 

Division 1—Guide to this Part

Clause 81: Guide to this Part

386.      Clause 81 summarises Part 2-6 of the Bill.

 

Division 2—Cooperating with other jurisdictions

Clause 82: Sharing information with other jurisdictions

387.      Clause 82 allows the Commonwealth and State and Territories to be jointly involved in governing Commonwealth entities that are interjurisdictional. This clause replicates the general effect of section 43A of the FMA Act and section 33A of the CAC Act.

388.      Commonwealth entities are increasingly involving other jurisdictions in their governance structures. This can include giving other jurisdictions the power to appoint members of governing boards, requirements for the Commonwealth to consult with other jurisdictions, or joint funding of interjurisdictional bodies. Recent examples are the Australian Commission on Safety and Quality in Health Care and the National Health Performance Authority.

389.      Clause 82 allows a State or Territory Minister to request reports, documents and information from prescribed Commonwealth entities. The types of reports, documents and information they can ask for will be specified in the rules. However, it is expected that the rules will be broad to cover the activities of a prescribed entity. Access to information may be limited in certain situations. For example, a State or Territory Minister might only get access to funding information for their own jurisdiction, rather than for all jurisdictions.

Clause 83: Auditing by State and Territory Auditors-General

390.      Clause 83 is designed to facilitate the auditing role of a State or Territory Auditor-General. It applies in cases where the Commonwealth has provided money to the Auditor-General’s State or Territory, a body of the State or Territory or a body to which the State or Territory has also provided money.

391.      If Commonwealth money has been provided for an activity or purpose, this clause prohibits the Commonwealth from imposing any restrictions on a State or Territory Auditor-General auditing the use of money for that activity or purpose. This means that a body established by a Commonwealth law could be audited by a State or Territory Auditor-General if the body has received money from the State or Territory.

 

Part 2-7—Companies, subsidiaries and new corporate Commonwealth entities

 

Division 1—Guide to this Part

Clause 84: Guide to this Part

392.      Clause 84 summarises Part 2-7 of the Bill.



Division 2—Companies and subsidiaries

 

Subdivision A—The Commonwealth’s involvement in companies

Clause 85: The Commonwealth’s involvement in companies

393.      Clause 85 has the same effect as section 39B of the FMA Act. It authorises the Finance Minister, on behalf of the Commonwealth, to form and participate in forming companies. As the Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 2) 2013 (currently before the Parliament) that introduced section 39B states:

The Commonwealth has always believed and still believes that it may, without legislative authority, form or participate in the formation of a company and acquire shares in or become a member of a company to carry out activities within a head of legislative power. However, in the interests of abundant caution following the High Court’s decision in Williams v Commonwealth [2012] HCA 23 (which involved argument about the outer limits of Commonwealth executive power), the proposed amendments are designed to put beyond any argument the capacity of the Executive Government to form or participate in the formation of companies. [7]

394.      Clause 85 has been simplified by not structuring the provision as a savings power that can be used in the absence of any other power. The clause simply gives the Finance Minister a power to form a company on behalf of the Commonwealth. Nevertheless, this power is in addition to any other power that the Commonwealth may have, such as under executive power granted under the Constitution.

395.      The Finance Minister’s power under this clause can only be delegated to the Finance Secretary.

 

Subdivision B—Subsidiaries of corporate Commonwealth entities

Clause 86: Subsidiaries of corporate Commonwealth entities

396.      Clause 86 requires an accountable authority of a corporate Commonwealth entity to ensure that none of its subsidiaries do anything that the entity itself cannot do. This clause mirrors section 29 of the CAC Act.

397.      Corporate Commonwealth entities are given specific limited powers and functions by the Parliament (as set out in enabling legislation). A subsidiary is subject to the same limitations as its parent. A corporate Commonwealth entity cannot establish a subsidiary that can do things that the entity cannot do. This clause requires the accountable authority of a corporate Commonwealth entity to ensure that its subsidiaries are aware of this limitation, and act in accordance with it.

398.      This principle is particularly important when a Commonwealth entity sets up a company under the Corporations Act or a joint venture with other parties. The accountable authority must be clear in dealing with business partners about the limitations on the subsidiary’s powers.

399.      This clause must be read subject to any specific provisions in other legislation that permit a subsidiary to do things that its parent cannot do.

 

Division 3—New corporate Commonwealth entities

Clause 87: Establishing new corporate Commonwealth entities

400.      Clause 87 provides a power to create statutory bodies corporate, which are not companies, by rules made under the Bill.

401.      New bodies corporate are usually established by an Act of Parliament, as in the case of corporate Commonwealth entities, or under an Act of Parliament, which is the case for companies.

402.      This clause provides a more efficient option for establishing and abolishing new bodies corporate. Importantly, this power does not extend to entities established by other mechanisms. That is, it cannot be used to wind up a company or abolish an entity that has been established by legislation.

403.      The rules can set out the purpose and governance structure of the new body. The range of matters that can be covered is broad and includes the powers and functions of the body corporate and details about the composition of the governing body and the responsible Minister.

404.      Bodies under clause 87 will be corporate Commonwealth entities for the purposes of the PGPA Bill, because they will be ‘bodies corporate established by a law of the Commonwealth’. Their governing bodies will therefore be subject to the duties and obligations applying to accountable authorities, and their employees will be officials.

405.      The rationale for including clause 87 is that establishing a new statutory authority by an Act of Parliament can be time-consuming and can constrain the government’s ability to respond effectively to changes in its operating environment. Without a mechanism like

clause 87, the quickest way to establish a new corporate entity is to establish a company under the Corporations Act. However, this approach has several disadvantages:

·          A company structure may not be appropriate for the functions the organisation performs, which can lead to inefficient or ineffective outcomes.

·          The functions listed in a company constitution will not constrain the directors in the same way that statutory functions can be constrained.

·          A Minister giving directions to a company may be viewed as a shadow director for the purposes of the Corporations Act.

·          Companies are generally not subject to the accountability and transparency arrangements that apply to most Commonwealth bodies. This includes requirements under the Bill and also more broadly, like those under the Freedom of Information Act 1982 .

406.      Importantly, the power under clause 87 gives the Parliament more control over the creation of such bodies than it has under the Corporations Act, because the Parliament can disallow the legislative instrument creating the body. The government would then have to either introduce primary legislation or wait six months to introduce the legislative instrument again.

407.      Paragraph 87(j) provides that other legislative frameworks, such as the Freedom of Information Act 1982 and the Archives Act 1983 , can be applied to bodies corporate created under clause 87. This will ensure that appropriate public sector transparency and accountability requirements are maintained. When the Finance Minister proposes to set up a body corporate under clause 87, they will consult with appropriate Ministers to ensure such frameworks apply.

408.      The power under clause 87 is not unique. A similar power exists under the Primary Industries and Energy Research and Development Act 1989 to create statutory authorities for research and development purposes.

409.      The power under clause 87 is limited to bodies corporate. Non-bodies corporate (that is, entities that are legally part of the Commonwealth) can be created as executive agencies under the PS Act if the government desires.  The types of bodies corporate that may not be suitable for creation under clause 87 may include those exercising regulatory powers.

Chapter 3—Commonwealth companies

 

Part 3-1—General

 

Division 1—Guide to this Part

Clause 88: Guide to this Part

410.      Clause 88 summarises Part 3-1 of the Bill.

Division 2— Core provisions for this Chapter

Clause 89: Commonwealth companies

411.      The Corporations Act is the primary regulatory framework for Commonwealth companies, and the preceding provisions of the Bill generally do not apply to them. [8] Chapter 3 of the Bill sets out requirements that Commonwealth companies have to comply with in addition to the requirements of the Corporations Act in order to meet the required standard of public sector accountability.

412.      Clause 89 is based on subsections 34(1) to (1C) of the CAC Act. It defines when a company is a Commonwealth company by determining whether the Commonwealth controls a company. The three tests for ‘control’ under subclause 89(2) are similar to the tests the Corporations Act uses to determine whether a body corporate is a subsidiary of another body corporate. [9]

413.      The first test is clarified by subclauses 89(3) and (4). It covers the situation where, for example, the Commonwealth is not a member of a company, but has the power to appoint and remove a majority of its directors. The second test is a traditional general law test of control and the third test applies when the Commonwealth holds a majority of shares in a company. These tests of control are not the same as determining control for the purposes of consolidated financial statements.

414.      The definition excludes a company that is a subsidiary of a Commonwealth company, of a corporate Commonwealth entity or of the Future Fund Board of Guardians.

415.      When the definition was inserted into the CAC Act in 2008 (replacing an out-of-date definition), several companies that had been outside the scope of the CAC Act were brought within its scope (because of the way their constitutions had been drafted). This is not expected to happen with the Bill since the definition is the same as under the CAC Act.

Clause 90: Wholly-owned Commonwealth companies

416.      The definition of ‘wholly-owned Commonwealth company’ is identical to the definition in subsection 34(2) of the CAC Act. For the sake of clarity, the clause states that if a company limited by guarantee falls under the definition of ‘Commonwealth company’, it is automatically a wholly-owned Commonwealth company, despite the fact that a company limited by guarantee does not technically have any ‘owners’.

Division 3—Special requirements for wholly-owned Commonwealth companies

Clause 91: Duty to keep the responsible Minister and Finance Minister informed

417.      Clause 91 generally reflects the substance of sections 40 and 41 of the CAC Act.

418.      Clause 91(1) requires the directors of a Commonwealth company to:

·          keep the responsible Minister informed about the activities of the company and its subsidiaries;

·          give the responsible Minister and the Finance Minister any reports, documents and information they require on the activities of a company or subsidiary;

·          notify the responsible Minister of any significant decisions or significant issues that have affected the company or its subsidiaries; and

·          give the responsible Minister reasonable notice of a significant issue that may affect the company or its subsidiaries.

419.      ‘Activities’ of a company replaces ‘operations’ used in the CAC Act. However, there is no intention to extend the scope of the duty from what it has been under the CAC Act. ‘Activities’ and ‘operations’ have the same meaning and directors are expected to keep their responsible Minister informed of the same things that they do currently. The change in wording reflects that ‘activities’ is used in other clauses of the Bill and it is desirable to have consistency in the Bill.

420.      The terms ‘reports’, ‘documents’ and ‘information’ are meant to be interpreted broadly, in accordance with the notion of responsible government. Ministers need to know what is happening in their portfolios since they will be held accountable in Parliament. The terms are intended to encompass the underlying information, data and assumptions that a Commonwealth company uses to produce final reports, such as estimates numbers. The Finance Minister, as the Minister responsible for managing and reporting Commonwealth spending at a whole-of-government level, requires all relevant information to perform their role.

421.      The rules will provide further context for determining whether a decision or issue is ‘significant’. As a guide, the interpretation of the term will be similar to its use in sections 15 and 40 of the CAC Act. Generally, whether a decision or issue is ‘significant’ will depend on:

·          materiality—the importance of the decision or issue relative to the company’s size and functions;

·          the risks involved—that is, whether the decision or issue is likely to be politically sensitive, whether there would be contingent liabilities that could affect the Commonwealth’s balance sheet, and whether the decision or issue might affect the company’s financial sustainability; and

·            the novelty of the decision or issue for the company—that is, whether the company has previous experience with the decision or issue.

422.      Forming, or participating in forming, a business (including a company, trust, partnership, unincorporated joint venture, incorporated association or similar arrangement) is likely to be a significant decision or issue. Changing the nature of the company’s involvement with a business and acquiring or disposing of a business unit may also be significant events.

423.      Subclause 91(3) allows the relevant Minister to determine the timeframe for receiving reports requested under clause 91(1). Directors can request an extension if they need more time.

Clause 92: Audit committee

424.      Clause 92 replicates section 44 of the CAC Act. It requires a Commonwealth company to have an audit committee. Details about how the committee is constituted and its functions will be prescribed in the rules.

Clause 93: Application of government policy

425.      Clause 93 is similar to clause 22. It deals with the way government policy is applied to wholly-owned Commonwealth companies. The clause allows the Finance Minister to issue a legislative instrument in the form of a government policy order specifying a policy of the Australian Government that is to apply to one or more wholly-owned Commonwealth companies.

426.      The approach under clause 93 is similar to the approach taken under section 48A of the CAC Act. The instrument would specify the policy and the companies it apples to, since some policies may not apply universally. However, the approach differs in one respect. Instead of the portfolio Minister consulting with entities in their portfolio, the Minister responsible for the policy will do the consulting.

427.      Before making a policy order, the Finance Minister must be satisfied that the Minister responsible for the policy has consulted with each company to which the policy will apply. This recognises the separate legal status of these companies.

428.      Subclause 93(3) requires the directors of a wholly-owned Commonwealth company to ensure that the company and its subsidiaries comply with government policy orders. This clause is similar to section 43 of the CAC Act. The directors only have to ensure compliance to the extent that a government policy order applies to the company. If, for example, a company has been given an exemption from certain parts of the policy, the directors would not need to ensure compliance with those parts.

429.      Because policies are matters for the government, instruments made under clause 93 are not subject to disallowance.

 

 

Part 3-2—Planning and accountability

 

Division 1—Guide to this Part

Clause 94: Guide to this Part

430.      Clause 94 summarises Part 3-2 of the Bill.

 

Division 2—Planning and budgeting

Clause 95: Corporate plan for Commonwealth companies

431.      Clause 95 requires each Commonwealth company to prepare a corporate plan in accordance with the rules and provide it to the responsible Minister and Finance Minister.

432.      The corporate plan is the primary planning document of a company. It sets out the company’s objectives and strategies and the outcomes it hopes to achieve in the coming year. The plan should also explain how company will use its resources to achieve the relevant priorities of government.

433.      Wholly-owned Commonwealth companies that are GBEs are already required to produce a corporate plan under section 42 of the CAC Act. The Bill extends the requirement to all Commonwealth companies. The content of a corporate plan will vary depending on the type of Commonwealth company. However, most plans will include:

·            the objectives to be pursued by the company;

·            the strategies of the company to achieve the objectives;

·            forecast revenue and expenses;

·            assumptions about the company’s business environment, including risks; and

·            non-financial performance targets.

434.      Subclause 95(3) requires a Commonwealth company’s corporate plan to explain how the company’s activities will contribute to achieving the key priorities and objectives set out in an Australian Government statement issued under clause 34 (if a statement has been published). This provision will help ensure that there is a link between the work of individual companies and work at a whole-of-government level.

435.      The rules will allow sensitive information to be removed from a corporate plan before it is published (but after it has gone to the responsible Minister or the Finance Minister). This is similar to the current arrangement for GBEs, which publish a statement of corporate intent that excludes commercially sensitive information.

Clause 96: Budget estimates for wholly-owned Commonwealth companies

436.      Estimates are a critical part of planning at an entity and whole-of-government level. They form the fundamental building blocks of the Commonwealth Budget. Clause 96 replicates the effect of section 39 of the CAC Act.

437.      Subclause 96(1) places the responsibility for preparing a wholly-owned Commonwealth company’s budget estimates on the directors of the company. Budget estimates are required for each reporting period as the basis for preparing the annual Budget. The Finance Minister may also require updated estimates at other times during the year (for example, to assist in preparing the Mid-Year Economic and Fiscal Outlook). These budget estimates must be given to the Finance Secretary in accordance with any directions of the Secretary.

438.      The budget estimates must fairly present the estimated financial impacts of the company’s activities.

439.      The Finance Secretary can issue written directions about how companies are to prepare their budget estimates. The Finance Secretary can require accompanying information on a company’s estimates, such as underlying assumptions and costing models.

440.      The Finance Secretary’s directions are not legislative instruments. They are administrative in character and do not fall within the definition of a legislative instrument for the purposes of section 5 of the LI Act.

441.      As with existing practice, some wholly-owned Commonwealth companies will not be required to prepare budget estimates. Generally, the requirement applies only to companies in the general government sector given their ability to affect the whole-of-government financial position. It is unlikely that public financial corporations and public non-financial corporations will need to prepare estimates, since they are self-funding and do not receive appropriations in the Budget. However, whole-of-government financial statements, such as those for the Budget, would continue to contain information on public non-financial corporations. GBEs will also typically be exempted from this requirement.

 

Division 3—Reporting and accountability

Clause 97: Annual reports for Commonwealth companies

442.      Clause 97 retains the annual reporting obligations of Commonwealth companies set out in section 36 of the CAC Act. Clause 97 requires a Commonwealth company to give the responsible Minister a copy of the annual report required under the Corporations Act. [10] The annual reporting requirements for companies are set out in Part 2M of the Corporations Act.

443.      To ensure a consistent level of reporting and accountability by Commonwealth companies, subclause 97(1) treats all Commonwealth companies as public companies for the purposes of the Bill. This means that all Commonwealth companies must give their financial statements, directors’ report and auditor’s report (collectively, the ‘annual report’) to their responsible Minister. This provision overrides the Corporations Act, which does not require some proprietary companies to prepare annual reports. [11]

444.      Paragraph 97(1)(b) is equivalent to paragraph 36(1)(c) of the CAC Act. It allows the rules to require an annual report for a wholly-owned Commonwealth company to include additional information to that required under the Corporations Act. The public sector often has specific issues that need to be reported on, which this paragraph will allow. This could include how the company has performed compared to its corporate plan, or government policy orders with which the company must comply.

445.      Subclause 97(2) sets the deadlines for providing the annual report to the responsible Minister. This provision treats all Commonwealth companies like public companies for the purposes of reporting to the Minister. [12] The Minister does, however, have the power to extend the deadline under subsection 34C(5) of the Acts Interpretation Act 1901 .

446.      Subsection 97(5) requires the responsible Minister to table the annual report in Parliament:

·          as soon as practicable after receiving the documents if the company is a wholly-owned Commonwealth company; or

·          as soon as practicable after receiving the documents if the company is not required to hold an annual general meeting (for example, a proprietary non-wholly-owned Commonwealth company); or

·          as soon as practicable after the annual general meeting in all other cases (for example, a public non-wholly-owned Commonwealth company).

Clause 98: Auditor of Commonwealth companies

447.      Clause 98 replicates section 35 of the CAC Act. While the Auditor-General is to be the auditor for each Commonwealth company, this clause recognises that a company is free to choose its auditor under the Corporations Act. However, if the Auditor-General is not the company’s auditor, the auditor must give a report on the company’s financial statements to the Auditor-General.

448.      The Auditor-General will also continue to be the auditor of subsidiaries of Commonwealth companies.

Clause 99: Audit of subsidiary’s financial statements

449.      Clause 99 generally has the same effect as section 37 of the CAC Act. The main difference that it strengthens the Auditor-General’s mandate. The clause makes it clear that the Auditor-General’s mandate to audit financial statements extends to subsidiaries of Commonwealth companies.

450.      Section 37 of the CAC Act states that the directors of a parent company are required to do whatever is necessary to ensure the Auditor-General audits the financial statements of a subsidiary, unless one of the situations in subclause 99(3) applied. This could lead to the mistaken impression that it is up to the directors to decide whether an exemption applies. The note to the clause makes it clear that the Auditor-General must do an audit of the financial statements of a subsidiary in addition to any audit done by the subsidiary’s auditor, except in specified circumstances.

 

Chapter 4—Rules and delegations

 

Part 4-1—The rules

 

Division 1—Guide to this Part

Clause 100: Guide to this Part

451.      Clause 100 summarises Part 4-1 of the Bill.



Division 2—The rules

Clause 101: The rules

452.      The Bill sets out the fundamental elements of a coherent financial framework that applies to all Commonwealth entities. The primary legislation contains the main principles and requirements and will be supported by rules.

453.      The rules made by the Finance Minister under the Bill will replace a range of instruments under the current legislation, including the FMA Regulations, CAC Regulations and Finance Minister’s Orders. They will be used to prescribe the requirements and procedures necessary to give effect to the governance, performance and accountability matters covered by the Bill. Importantly, the Bill does not unnecessarily push requirements from the primary legislation into the rules. Most issues for which rules can be made are already contained in the subsidiary legislation of the FMA and CAC Acts.

454.      Using rules, rather than regulations, as the form of legislative instrument is consistent with current drafting practice. The Office of Parliamentary Counsel reserves the use of regulations to a limited range of matters that are more appropriately dealt with in regulations made by the Governor-General than in an instrument made by some other person. Matters in this category include offence provisions, powers of arrest or detention, entry provisions and search or seizure provisions. The rules will be legislative instruments subject to disallowance by Parliament and will sunset under the provisions of the LI Act.

455.      Allowing for all subordinate matters to be contained in a single set of rules, rather than spread over a range of instruments, will assist with access to the law. This, and the appropriate division of material between the Bill and the rules, is consistent with the government’s Clearer Commonwealth Law initiatives.

456.      Subclause 101(2) allows the Finance Minister to tailor rules in specific circumstances. The capacity will operationalise the earned autonomy model, which is a key underpinning enhancement to the Commonwealth’s financial framework in order to reduce the compliance burden and improve performance. Under the earned autonomy, the nature and extent of regulatory intervention will be based on an entity’s risk profile and performance. This allows for a more nuanced approach than applying blanket requirements across all Commonwealth entities.

457.      When proposing rules, the Finance Minister will consult with Commonwealth entities and companies. As the rules are disallowable, Parliament will also play a key role in framing the earned autonomy model so there is an appropriate balance between performance and accountability.

Clause 102: Rules relating to the Commonwealth and Commonwealth entities

458.      Various provisions throughout the Bill set out the matters on which rules can be made. The rules will provide the detailed, technical guidance to support the nuanced application of the framework’s requirements.

459.      The terms of clause 102 (especially subclause 102(a) regarding proper use of public resources and subclause 102(b) regarding proper accountability for the use and management of public resources) are intended to have broad interpretation. The CFAR reforms are aimed at reducing red tape, and giving entities greater operational independence.

460.      The capacity to provide greater operational independence is based on the risk management approach of earned autonomy—there would be escalating regulation and prescription for higher risk or lower performing entities. The scope of the rules for Commonwealth entities may extend to matters covered by the current FMA Regulations and policies of the Commonwealth, and may indeed be more rigorous in some areas.

Clause 103: Rules relating to the Commonwealth and non-corporate Commonwealth entities

461.      Clause 103 is a list of additional matters relating to the Commonwealth and non-corporate Commonwealth entities that the Finance Minister may make rules about.

462.      Subclauses 103(a) and (b) allow rules to regulate the acquisition, management and divestment of relevant property. For non-corporate Commonwealth entities, this means relevant property they hold on behalf of the Commonwealth. Rules made under this subclause will work in conjunction with rules in relation to gifts of relevant property (clause 66) and liability for losses (clauses 67 to 70).

463.      Subclause 103(c) deals with rules for the recovery of debts and amounts owing by the accountable authority of a non-corporate Commonwealth entity. The rules can set out, for example, which accountable authority is responsible for the recovery of particular amounts owed to the Commonwealth, and the circumstances when debts or amounts owing can be written off. Rules made under this subclause will work in conjunction with rules in relation to waiver and set off of amounts owed to and by the Commonwealth under clauses 63 and 64.

464.      Subclause 103(d) allows the rules to treat a part of a non-corporate Commonwealth entity as a separate entity for some purposes. Part of an entity could be subject to separate reporting and auditing requirements to provide additional transparency and accountability. For example, the Therapeutic Goods Administration will be part of the Department of Health and Ageing (with the Secretary of that department as the accountable authority), but it could be treated as a separate entity for the purposes of reporting and auditing by rules made under this provision.

465.      Subclause 103(e) allows the rules to specify what will happen for reporting and auditing purposes when a non-corporate Commonwealth entity ceases to exist or its functions are transferred to another entity, such as following machinery of government changes. This could include specifying which remaining accountable authority is responsible for preparing financial statements for the former entity.

466.      Rules made under subclauses 103(d) and (e) will work in conjunction with rules for annual performance statements, accounts and records, financial statements and annual reports.

467.      Subclause 103(f) relates to the Finance Minister’s power to authorise payment of amounts owed by the Commonwealth to a person at the time of their death. For example, the rules could provide that payments can be made while probate is still pending.

Clause 104: Rules modifying the application of this Act

468.      Clause 104 allows the Finance Minister to make rules modifying the application of the Bill to certain Commonwealth entities and Commonwealth companies.

469.      In the case of intelligence, security or law enforcement agencies, there may be circumstances, such as in relation to sensitive operational activities, where disclosing financial and performance information to the extent required by the Bill would be contrary to the Commonwealth’s security interests. The rules may exempt these agencies from the requirements of the Bill or vary the provisions they have to meet. This provision is equivalent to section 58 of the FMA Act.

470.      Modifications may also be necessary in the case of the Commonwealth Superannuation Corporation (CSC) so as not to interfere with its specific obligations as the corporate trustee of the Australian Government’s main civilian and military superannuation schemes under a range of Commonwealth legislation, including the Governance of Australian Government Superannuation Schemes Act 2011 , several Commonwealth Superannuation Acts and the prudential framework for superannuation in the Superannuation Industry (Supervision) Act 1993 . For example, clause 72 could be modified to exempt the CSC from advising the Parliament of its involvement in companies, given that it undertakes regular share acquisitions.

471.      Subclause 104(3) allows the rules to modify the Bill for parts of a Commonwealth entity that are an intelligence and security agency, but not a separate Commonwealth entity. There are parts of the Department of Defence that are in this category.

Clause 105: Rules in relation to other CRF money

472.      Subclause 105(1) allows the rules to specify requirements for other CRF money.

473.      Subclause 105(2) defines ‘other CRF money’ as money that forms part of the CRF recognised by section 81 of the Constitution other than:

·          relevant money, which is defined in the Bill; or

·          any other money that is of a kind prescribed by the rules.

474.      Subclause 105(3) provides a special appropriation for expenditure of other CRF money by a person other than the Commonwealth or a Commonwealth entity if:

·          the expenditure is in accordance with the rules (made under subclause 105(1)); and

·          the Finance Minister is satisfied that the expenditure is not authorised by another appropriation.

475.      This provision is in the Bill to provide constitutional certainty for certain situations that may arise in relation to money that is not relevant money but may nevertheless be money forming part of the CRF. The rules will clarify the operation of this provision and identify with particular requirements in relation to particular instances relating to other CRF money. However, situations that may be prescribed may be similar to the example below.

476.      Sometimes a person other than the Commonwealth (or an official of a non-corporate Commonwealth entity) may hold and spend money that is part of the CRF. This situation would arise if a person was acting as an agent of the Commonwealth and collecting money payable to the Commonwealth and making payments from that money.

477.      For example, if an auction house is selling surplus assets on behalf of the Commonwealth, receives the proceeds of the sales and then takes its agreed commission, the auction house might be holding and spending money that forms part of the CRF.

478.      When such people are acting for and on behalf of the Commonwealth any money they receive in that capacity and spend, an appropriation may be required to support that spending. This is necessary because of section 83 of the Constitution, which provides: ‘No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.’

479.      The special appropriation in subclause 105(3) provides that an ‘appropriation made by law’ is subject to the requirements in paragraphs 105(3)(a) and (b).

 

Part 4-2—Delegations

Division 1—Guide to this Part

Clause 106: Guide to this Part

480.      Clause 106 summarises Part 4-2 of the Bill.

 

Division 2—Delegations

Clause 107: Finance Minister

481.      Under clause 107, the Finance Minister can generally delegate their powers to an official of a non-corporate Commonwealth entity. However, there are a number of powers that cannot be delegated at all:

·          paragraph 57(b) (Borrowing by corporate Commonwealth entities);

·          subclauses 71(1) and (3) (Minister to record approval of decision to spend relevant money)—because the Minister, including the Finance Minister as relevant, has personally approved the expenditure, they should personally record it;

·          subclause 72(1) (Minister to inform Parliament of certain events)—since a Minister has overall responsibility for what happens in their portfolio, they need to be the one to inform Parliament;

·          subclause 78 (Establishment of special accounts by the Finance Minister)—given that a special account establishes an appropriation to draw money from the CRF, it would be inappropriate for someone other than the Finance Minister, who is directly responsible to the Parliament, to make a special account determination; and

·          clause 101 (The rules)—a general power to make subsidiary legislation should not be delegated without a clear rationale.

482.      In addition, some powers can only be delegated to the Finance Secretary (noting that such powers may be subdelegated by the Finance Secretary in accordance with clause 107):

·          clause 75 (Transfer of functions)—this would allow the Finance Secretary to make determinations on the transfer of appropriations following machinery of government changes; and

·          clauses 85 (Commonwealth’s involvement in companies) and 87 (establishing new corporate Commonwealth entities)—this would allow the Finance Secretary to form companies or other bodies corporate under the Bill. It is expected that such a delegation would only operate when the Finance Minister is unable to exercise the power (for example, while overseas).

483.      Compared to the equivalent section in the FMA Act (section 62), the scope of clause 107 is narrower. Delegations to establish special accounts can no longer be made and powers to make determinations following transfers of functions can only be delegated to the Finance Secretary.

Clause 108: Treasurer

484.      Clause 108 replicates section 62A of the FMA Act. It allows the Treasurer to delegate their investment powers to certain ‘eligible delegates’. These will be officials in the Department of the Treasury or a listed entity prescribed in the rules. The rules may prescribe the Australian Office of Financial Management, which makes investments under delegation from the Treasurer.

485.      Certain functions the Treasurer exercises in their capacity as a Minister generally cannot be delegated:

·          subclauses 71(1) and (3) (Minister to record approval of decision to spend relevant money)—since the Treasurer has personally approved the expenditure, they should personally record it; and

·          subclause 72(1) (Minister to inform Parliament of certain events)—given a Minister’s have overall responsibility for what happens in their portfolio, they should be the one to inform Parliament.

Clause 109: Finance Secretary

486.      Clause 109 allows the Finance Secretary to delegate the powers, functions or duties conferred on the Finance Secretary (either from the Finance Minister or directly through the Bill or rules) to an official in the Department of Finance and Deregulation. This is in addition to the delegation by the Finance Minister to the Finance Secretary as an accountable authority for the purposes of the Bill. The powers, functions and duties that can be delegated are those conferred directly on the Finance Secretary and those delegated to the Finance Secretary by the Finance Minister under subclause 107(1).

487.      However, subclause 107(3) allows the Finance Minister to delegate to the Finance Secretary the power to transfer functions between non-corporate Commonwealth entities (clause 75), the power to form companies (clause 85) and the power to establish new corporate Commonwealth entities (clause 87). The Finance Secretary can only subdelegate to an official in the Department of Finance and Deregulation the power to transfer functions. The other two powers listed in subclause 107(3) cannot be subdelegated.

488.      Clause 109 also allows the Finance Secretary to give written directions to a delegate about how a delegation made under this clause can be exercised.

Clause 110: Accountable authority

489.      Clause 110 generally has the same effect as section 53 of the FMA Act. It permits the accountable authority of a non-corporate Commonwealth entity to:

·          delegate its powers, functions or duties under the Bill (including powers, functions and duties delegated to the accountable authority by the Finance Minister) to an official of the entity, including delegating this power to delegate (which differs from section 53 of the FMA Act);

·          give written directions to a delegate about how a delegation is to be exercised if the accountable authority delegates its own powers and functions; and

·          give written directions to a subdelegate about how a delegation from the Finance Minister is to be exercised as long as the directions are not inconsistent with any written directions of the Finance Minister.

490.      The accountable authority of a corporate Commonwealth entity does not need a statutory provision to delegate its powers. The legislation establishing a corporate Commonwealth entity will ordinarily provide for delegation of powers. The enabling legislation of corporate Commonwealth entities will be reviewed and amended to ensure that all entities have an appropriate arrangement for delegation of powers in place. If necessary, amendments will be made as part of the consequential amendments Bill.

 

 




[1] Productivity Commission, Identifying and Evaluating Regulatory Reforms , Research Report, Canberra, 2011, p. xv.

[2] Section 57(1)(c) of the PS Act commences on 1 July 2013.

 

[3] Department of the Prime Minister and Cabinet, Requirements for Annual Reports for Departments, Executive Agencies and FMA Act Agencies , 2012, p. 2.

[4] Under section 9 of the CAC Act, the deadline is the 15th day of the fourth month after the end of the financial year.

[5] For example, section 67 of the ABC Act.

[6] However, these investments may be authorised separately by the rules.

[7] Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 2) 2013 at paragraph 21.

[8] Provisions relating to whole-of-government reporting and consolidated financial statements and general machinery provisions will apply to a Commonwealth company.

[9] Corporations Act, sections 46 and 47.

[10] Commonwealth companies also have normal lodgement requirements with the Australian Securities and Investments Commission under section 319 of the Corporations Act.

[11] Corporations Act, section 292.

[12] Corporations Act, section 315.