Bills Digest No. 162, 2012–13

27 June 2013

Public Governance, Performance and Accountability Bill 2013

Daniel Weight, Economics Section

Nicholas Horne, Politics and Public Administration Section

Date introduced: 16 May 2013

House: House of Representatives

Portfolio: Finance and Deregulation

Commencement: Sections 1–5 commence on 1 July 2013. Sections 6–112 commence on a day to be fixed by Proclamation, or on 1 July 2014, whichever occurs first.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose of the Bill and underlying principles

The purpose of the Public Governance, Performance and Accountability Bill 2013 (the Bill) is to:

·         establish a single legislative framework for the governance, performance and accountability of Commonwealth entities in place of the current legislative framework constituted by the Financial Management and Accountability Act 1997 (Cth) (FMA Act)[1] and the Commonwealth Authorities and Companies Act 1997 (Cth) (CAC Act)[2]

·         establish new two basic categories of Commonwealth body—Commonwealth entities and Commonwealth companies—within the new framework

·         require high standards of governance, performance and accountability of Commonwealth entities, prescribe reporting requirements, and require entities to use and manage public resources properly and work cooperatively where practicable

·         require high standards of accountability of Commonwealth companies

·         prescribe accountable authorities for Commonwealth entities along with related duties and powers, and establish a new classification of officials of Commonwealth entities along with related duties

·         provide a framework for corporate planning, performance and financial reporting and audit of Commonwealth entities

·         require periodic Whole-of-Government financial reporting

·         provide a legislative framework for the authorisation of expenditure, and the management of that expenditure

·         provide for banking, borrowing, investment and the giving of guarantees and similar undertakings by the Commonwealth and certain Commonwealth entities

·         establish a general framework for discretionary payments by the Commonwealth and relief from debts payable to the Commonwealth

·         provide for the hypothecation of monies to specific purposes through the use of Special Accounts

·         allow for cooperative arrangements between Commonwealth entities and other jurisdictions

·         deal with circumstances where the Commonwealth is involved in general law companies as, for example, a shareholder.

The second reading speech to the Bill states that the Bill is based on four key principles:

·         ‘Government should operate as a coherent whole’

·         ‘public resources are public resources, and a common set of duties should apply to all resources handled by Commonwealth entities’

·         ‘performance of the public sector is more than financial’ and

·         ‘engaging with risk is a necessary step in improving performance’.[3]

Structure of the Bill

The Bill is divided into four chapters and 13 parts; each part (excepting the first) is prefaced by a guide.

·         Chapter 1 contains introductory provisions relating to commencement, the objects of the Bill, a guide to the Bill, and a dictionary (Parts 1–1 and 1–2)

·         Chapter 2 contains provisions dealing with:

–        Commonwealth entities and their accountable authorities and officials, and the planning, performance and accountability, and financial reporting of Commonwealth entities (Parts 2–1 to 2–3)

–        the use and management of public resources (including funding and expenditure, banking, borrowing, investment, indemnities), appropriations and special accounts, cooperation with other jurisdictions, Commonwealth involvement in companies, and corporate Commonwealth entities (Parts 2–4 to 2–7)

·         Chapter 3 contains provisions relating to Commonwealth companies including special requirements, planning, accountability, and reporting (Parts 3–1 and 3–2) and

·         Chapter 4 deals with rules and delegations (Parts 4–1 and 4–2).

It is important to note that the Bill sets out the essential structure and principles of the proposed framework, but does not prescribe further detail. The Explanatory Memorandum notes that regulatory detail will be contained in rules issued by the Finance Minister (provisions in Chapter 4 of the Bill would empower the Finance Minister to make such rules).[4] The Minister for Finance and Deregulation has stated that ‘the Government will consult widely on the development of the rules’ including consultation within and beyond government, opportunity for public comment, and consultation with the Joint Committee of Public Accounts and Audit (JCPAA).[5]

Background—the Commonwealth Financial Accountability Review

The Bill is the outcome of a government review of the Commonwealth financial framework—the Commonwealth Financial Accountability Review (CFAR). The CFAR, which commenced in late 2010, engaged in public consultation and issued a discussion paper (March 2012) followed by a position paper identifying possible reforms (November 2012).[6]

A key proposal advanced by the CFAR position paper was the replacement of the existing dual FMA Act/CAC Act framework with a single principles-based Act delineating ‘the fundamental elements of the financial framework’ in order to achieve greater simplicity, clarity, coherence and flexibility.[7]

The Explanatory Memorandum to the Bill states that while the existing financial framework ‘is not broken’, a number of issues have emerged which require attention including:[8]

·         both the FMA and CAC Acts have been regularly amended; this has ‘been effective in addressing isolated issues as they have emerged’ but has also ‘added complexity to the financial framework’s administration and may also have contributed to its fragmentation’

·         the ‘distinction between entities under the FMA Act and entities under the CAC Act is overstated, and confuses operational independence with ownership’

·         the ‘governance choice’ between agency chief executives and governing boards presented by the FMA Act/CAC Act framework ‘does not fit neatly … with the administrative and legal diversity that now exists among Commonwealth entities’

·         the legislation has ‘a strong focus on financial accountability’ but does not have a ‘corresponding focus on the achievement of objectives and purposes or the quality of performance monitoring and evaluation’ and

·         the emphasis is on entities with ‘less of a whole of Australian Government perspective’.[9]

The second reading speech to the Bill states that the FMA Act/CAC Act framework has ‘served the public sector well’, but also that:

…in the 15 years since the current financial framework commenced the demands on the public sector and the expectations of the community have changed significantly. We have seen our financial framework slip from world’s best practice over a decade ago to being adequate today. The deficiencies with the current framework will, over time, become an increasing drag on the performance of the public sector.[10]

The Explanatory Memorandum states that the Bill was ‘developed with strong involvement and input from Commonwealth entities and companies’.[11] The second reading speech to the Bill also indicates that the Bill is part of a wider reform program to be implemented ‘over several years to allow Commonwealth entities to fully integrate the new framework, and also to allow for appropriate testing and refinement’.[12]

Along with proposing a single Act, the CFAR position paper advanced a number of other legislative reform proposals including:

·         incorporating obligations for chief executives and directors regarding performance information

·         including accountability requirements for decision-makers regarding risk oversight and management and

·         clarifying the accountabilities and responsibilities of public officials in the wider governmental context beyond individual entities.[13]

The position paper stated that it was not ‘proposing a radical shift in public management’ but was ‘seeking to integrate the best of the current management practices and the identified priorities into a coherent whole’.[14]

Committee consideration

Joint Committee of Public Accounts and Audit

In May 2013 the House of Representatives Selection Committee referred the Bill to JCPAA to consider the following issues:

To ensure that combining the two Acts into a single Act does not impose additional and unnecessary reporting requirements on bodies subject to the Act and does not reduce transparency or remove important oversight where it is appropriate.[15]

In its June inquiry report the JCPAA considered various aspects of the Bill and concluded that the issues raised in its terms of reference are ‘satisfied’.[16] The Committee stated that it ‘strongly supports the broad intent of the CFAR process and objectives of the Bill’, but also noted concerns regarding the short timeframe of the Bill’s introduction and expressed the view that ‘issues for consideration are timing; the development of detailed rules; and ongoing consultation to assist agencies and other affected bodies through this change process’.[17] The Committee further stated that:

…the Committee does acknowledge that if the Bill is not passed during this Parliament, it is highly likely that commencement will be delayed until 1 July 2015. This will mean the Bill’s potentially significant benefits will also be delayed. If the Minister and the Parliament make the decision to pass the Bill now, it is critical that the undertakings made by Finance and the Minister are followed. Thorough public and parliamentary consultation must be completed before the rules are tabled in Parliament as disallowable instruments.[18]

The JCPAA recommended that ‘[t]he objectives of the Bill be supported, but the timing of its passage be a matter for the broader Parliament to determine’, and that the issues identified in the terms of reference for the inquiry ‘do not, at this stage look to be reasons for rejection of the Bill’.[19] The JCPAA made further recommendations including in relation to further consultation and the inclusion in the Bill of requirements for future evaluation of the new financial framework.[20]

The JCPAA report was not unanimous, with Coalition members dissenting from the majority report. In their dissenting report the Coalition members raised concerns regarding the short timeframe of the Bill, the need for further consultation, and due consideration of the rules. The Coalition members recommended that the ‘the Bill should not proceed without a further 6 months consultation period’ and outlined their requirements should the Bill be passed during the current Parliament.[21]

Senate Standing Committee for the Scrutiny of Bills

In its Alert Digest No. 6 of 2013, the Scrutiny of Bills Committee raised concerns about the general delegation of legislative power to the Finance Minister and, in particular, the ability of the Finance Minister to exempt agencies from the operation of the Bill. It also raised concerns about the standing appropriation in subclause 105(3).[22]

Parliamentary Joint Committee on Human Rights

In its consideration of the Bill the Parliamentary Joint Committee on Human Rights has concluded that the Bill ‘does not appear to give rise to human rights concerns’.[23]

Policy position of non-government parties/independents

The Opposition opposes the Bill.[24] As noted above, the Opposition has raised concerns regarding the Bill and has expressed the view that the Bill requires a further six-month consultation period.

Independent MP Robert Oakeshott, as Chair of the JCPAA, has indicated his stance on the Bill through the JCPAA inquiry report (see above).

Position of major interest groups

Australian National Audit Office

The Australian National Audit Office (ANAO) has expressed support for the ‘broad aims of CFAR’ and for a number of aspects of the Bill including the performance framework and entity financial statements and consolidated financial statements.[25] However, the ANAO has also expressed the view that ‘the Bill provides less obvious support for achieving reforms in other areas, particularly in the areas of joined-up government … and reducing red tape, including the compliance burden’.[26] The ANAO has also raised concerns regarding the Bill’s timeframe and consultation on its provisions:

The ANAO considers that the short timeframe in which the Bill has been prepared, and the fact that entities and other stakeholders have had little opportunity to provide comments on the Bill as tabled in the Parliament … increases the risk that the Bill may not adequately address the complexities involved in the governance and financial management of the Commonwealth as a whole, and individual entities.[27]

The Auditor-General has suggested separately that a further six months’ consultation on the provisions of the Bill would be desirable.[28] The ANAO has also noted that the content of the rules is unknown at this stage and that comprehensive consultation on the rules will be necessary.[29]

Australian Public Service Commission

The Public Service Commissioner has expressed strong support for the intent of the Bill and the goal of achieving greater simplicity.[30] However, the Commissioner has also indicated that he is ‘sympathetic to the Auditor-General’s view that it would have been preferable if the bill had been subject to a longer exposure process’, and has further stated that ‘[i]t is to be hoped that the associated draft rules will be made available for scrutiny at the earliest possible date’.[31]

Financial implications

The Explanatory Memorandum states that the provisions in the Bill relating to standing or special appropriations will have ‘no additional financial impact’.[32] The Explanatory Memorandum also states that:

While the impact is difficult to quantify, simplifying regulatory requirements can contribute to improved efficiency and productivity in government operations. Most of the contributors to the CFAR process supported this premise.[33]

Special appropriations

Part 2-5 of the Bill establishes a framework for the management of appropriations, however, does not itself appropriate monies.

The Bill contains five standing appropriations:

·         Clause 58 creates a standing appropriation with respect to authorised investments made by the Finance Minister or Treasurer

·         Clause 77 creates a standing appropriation for the purpose of paying refunds

·         Clauses 78 and 80 provide for a standing appropriation with respect to special accounts

·         Clause 105 provides a standing appropriation if:

–        money is expended by someone other than the Commonwealth or a Commonwealth entity and

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

While the standing appropriations provided at clauses 58, 77, 78, and 80 are consistent with existing provisions in the FMA Act, clause 105 provides for a broad source for appropriation which is enlivened whenever there is, in the view of the Finance Minister, no other appropriation available. The implications of this provision are discussed at ‘Standing appropriation avoids operation of section 83 of the Constitution’ below.

Statement of Compatibility with Human Rights

The Statement of Compatibility with Human Rights can be found at page 2 of the Explanatory Memorandum to the Bill. As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.

Constitutionally significant provisions

Commonwealth’s power to spend

In the recent decisions in Pape v Commissioner for Taxation (Tax Bonus Case)[34] and Williams v Commonwealth (School Chaplains Case),[35] the High Court has held, in effect, that:

·         Appropriation Acts did not authorise expenditure, they merely authorised the release of money from the CRF: a source of power authorising Commonwealth expenditure must be found in other parts of the Constitution[36] and

·         the executive power of the Commonwealth under section 61 of the Constitution did not generally extend to authorising Commonwealth expenditure outside an area of Commonwealth legislative power.[37]

The cumulative effect of these two decisions meant that some areas of previous Commonwealth expenditure, such as payment for school chaplains, were no longer consistent with the Constitution. Following the decision in Williams, the Parliament enacted section 32B of the FMA Act, which purports to authorise the making of commitments to spend public monies.[38] Section 32B provides:

If … apart from this subsection, the Commonwealth does not have power to make, vary or administer … [an item of expenditure] the Commonwealth has power to make, vary or administer [that item of expenditure].

The items of expenditure purportedly authorised are listed at schedule 1AA of the FMA Regulations. However, the validity of that provision has been questioned.[39]

Clause 71 generally replicates the existing requirement in the Financial Management and Accountability Regulations 1997 (FMA Regulations) 9 and 12. FMA Regulation 9 currently requires:

An approver [of expenditure] must not approve a spending proposal unless the approver is satisfied, after making reasonable inquiries, that giving effect to the spending proposal would be a proper use of Commonwealth resources…[40]

However, clause 71 will differ in that a Minister, not an official, must be satisfied that proposed expenditure would be a proper use of Commonwealth resources.

In Williams, the Commonwealth unsuccessfully argued that FMA Regulations 8 and 9, made under section 44 of the FMA Act, provided the necessary legislative authorisation for the Commonwealth’s expenditure. In rejecting that argument, the High Court suggested that FMA Act section 44 (and the regulations 8 and 9 made under it) was only directed to the efficient, effective and ethical use of the Commonwealth resources, not establishing a legislative power to enter into spending commitments.[41] The ‘proper use,’ as used in section 44 of the FMA Act, did not, it seems, extend to authorising the entry into contracts to make payments.[42]

The elevation of the existing FMA Regulation 9, in particular, to primary legislation, and the vesting of the approval power in Ministers, not officials, may be an attempt to provide a plenary contractual power for the Commonwealth in legislation; along the lines of the ‘Contracts Act’ discussed by the High Court in Williams.[43] No equivalent provision to the existing section 32B of the FMA Act is proposed in the Bill, and clause 71 would seem to provide the closest thing to a legislative power for the executive to enter into spending commitments such as those currently purportedly authorised by FMA Act section 32B.

In relation to clause 71, the original Explanatory Memorandum said:

Most provisions in this Bill do not apply to Ministers, which is appropriate given their constitutional role and the ability for Parliament to hold them directly to account for their decisions. However, this provision is considered appropriate given rules around expenditure approval are fundamental to ensure good government, public interest, transparency and accountability.[44]

Nothing in clause 71 requires, however, that any expenditure commitments be made public—lest require they be tabled in Parliament—so it is unclear how it was envisaged Parliament will hold Ministers accountable for their expenditure decisions.

Commonwealth’s power to form new corporate Commonwealth entities

Clause 87 purports to allow the Commonwealth to establish new bodies corporate. No restriction is placed upon the purposes for which bodies corporate may be established.

Under the Constitution, the Commonwealth’s power with respect to corporations is somewhat fragmented. Section 51(xx) of the Constitution confers legislative power on the Commonwealth in relation to:

…foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.[45]

This is often known as the ‘corporations power’; however, in NSW v Commonwealth (Incorporation Case) the High Court held that the reference to formed in section 51(xx) limited the Commonwealth’s legislative power to existing corporations; it did not confer on the Commonwealth legislative power to create new corporations.[46] Therefore the Commonwealth cannot legislate generally for the formation of corporations.

The Commonwealth, may, however, create bodies corporate to give effect to another purpose in relation to which it enjoys legislative power. In Australian National Airways Pty Ltd v Commonwealth (No 1) (Airlines Nationalisation Case) Latham CJ said:

It is true that the Commonwealth has no general power to create corporations, but when the Commonwealth Parliament exercises a legislative power it is for the Parliament, subject to any constitutional prohibition, to determine the means of securing an object which it is legitimate under the power for the Parliament to pursue. Thus the establishment of the Commonwealth Bank was a means of giving effect to an approved policy with respect to banking.[47]

Nothing in this Bill, however, limits the creation of new corporate Commonwealth entities to areas of Commonwealth power. On its face, clause 87 would purport to allow the Commonwealth to create a corporate Commonwealth entity that had the purpose of performing a function which the Commonwealth itself could not perform.

Prior to the decision in Williams, the Commonwealth relied upon the executive power to participate in corporations for various purposes. However, given the narrow reading of the executive power by the High Court in Williams, it may be the case that, if the Commonwealth now wishes to establish a body corporate it must enact legislation that is supported by a recognised legislative head of power within the Constitution. In response to Williams, the Government enacted the Financial Framework Legislation Amendment Act (No. 2) 2013,[48] inserted section 39B into the FMA Act, which purports to authorise the Commonwealth’s participation in companies.

Paragraphs 391-2 of the Revised Explanatory Memorandum to this Bill state:

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 Act (No. 2) 2013 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.

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.[49]

Compliance with sections 53 and 54 of the Constitution

Under the terms of the Constitution, activities that are part of the ordinary annual activities of the Government, and all other proposed (essentially new) activities must be provided for in separate appropriation bills. This is intended to allow the Senate to effectively scrutinise proposals for new expenditure.

Specifically, section 54 of the Constitution requires that there be a separate law appropriating funds for the ‘ordinary annual services of Government’, and requires that other matters must not be dealt with in that Bill.[50] This distinction, along with section 53 of the Constitution, means that the Senate may separately scrutinise any Appropriation Bill that is not for the ‘ordinary annual services of government’ and, if necessary, amend (subject to section 53 of the Constitution) the Bill.

What constitutes, however, the ‘ordinary annual services of the Government’ and the ‘other’ services of the Government is not defined in the Constitution. A working distinction between ordinary and other annual services was agreed in a ‘Compact’ between the Senate and the Government in 1965.[51] The substance of the Compact is reflected in the following 1977 resolution of the Senate:

1. To reaffirm its constitutional right to amend proposed laws appropriating revenue or moneys for expenditure on all matters not involving the ordinary annual services of the Government.

2. That appropriations for expenditure on:

(a) the construction of public works and buildings;

(b) the acquisition of sites and buildings;

(c) items of plant and equipment which are clearly definable as capital expenditure;

(d) grants to the States under Section 96 of the Constitution; and

(e) new policies not previously authorised by special legislation;

are not appropriations for the ordinary annual services of the government and that proposed laws for the appropriation of revenue or moneys for expenditure on the said matters shall be presented to the Senate in a separate Appropriation Bill subject to amendment by the Senate.[52]

In 1999 the Compact was altered to reflect the adoption of accrual accounting. The adjustments provided that:

(i) items regarded as equity injections and loans be regarded as not part of ordinary annual services

(ii) all appropriation items for continuing activities for which appropriations have been made in the past be regarded as part of ordinary annual services

(iii) all appropriations for existing asset replacement be regarded as provision for depreciation and part of ordinary annual services.[53]

Most recently, item 13 in the Agreement for a better parliament: parliamentary reform agreed between the Government and Mr Oakeshott and Mr Windsor noted the Compact and contained the following clause:

The Senate resolution on appropriation bills which contain matters which should have been the subject of separate legislation is noted.

To prevent this occurring, the parties and non-aligned Members agree to developing a mechanism to resolve this issue prior to the next appropriation bills being introduced.[54]

It is unclear whether any mechanism has, in fact, been implemented.

The Portfolio Budget Statements (PBSs) and other budget papers, however, have not typically disclosed a sufficient level of detail (such as a reconciliation) about those programs or items of expenditure that are part of the ordinary annual services of government, and those that are part of the other activities of government; meaning that the Senate has found it difficult to effectively scrutinise new government programs and expenditures.[55]

Clause 36 provides that there must be budget estimates for all Commonwealth entities.[56] The accountable authority of a Commonwealth entity, as defined in clauses 8 and 12, is responsible for the preparation of the budget estimates. Clause 96 creates a similar requirement with respect to wholly-owned Commonwealth companies. The proposed ‘budget estimates’ appear to be synonymous with the PBSs that are presented as interpretative material with Appropriation Bills.[57] If it was the case that the proposed budget estimates for Commonwealth entities were, or became, the PBSs, the clause would not appear to require sufficient detail to facilitate passage of the Bills through the Senate. Specifically, clause 36 does not require that entities’ budget estimates separately disclose any new activities; meaning that it would be almost impossible for the Senate to identify any new items of expenditure.

The current difficultly in identifying those programs or items of expenditure that are part of the ordinary annual services of government, and those that are not, might be resolved if, for example, clause 36(2) was amended to require that the budget estimates for a Commonwealth entity must also be prepared so as to separately identify individual programs or items of proposed expenditure that are part of the ordinary annual services of government—within the meaning of the Compact—and those that are part of the other proposed activities of the Commonwealth entity.

Standing appropriation avoids operation of section 83 of the Constitution

Section 83 of the Constitution provides that no money may be expended without an appropriation. Clause 105 provides for a standing appropriation for certain expenditure that is nominated by the rules, and in relation to which the Finance Minister is satisfied that there is no other available appropriation. The Revised Explanatory Memorandum states that this provision would be used in circumstances where an agent, such as an auctioneer, was acting on behalf of the Commonwealth.[58] However, the drafting of the provision is broad, and it would appear possible to use the provision to seek to ‘cure’ any inadvertent expenditure that did not have any other appropriation. Were this approach adopted, it would appear to undermine the operation of section 83 of the Constitution.

Key issues and provisions

The following aspects of the Bill are important to note:

·         the Minister for Finance and Deregulation has stated that the majority of the provisions in the Bill ‘mirror existing legislative arrangements’ in the FMA Act/CAC Act framework[59]

·         the Bill would not repeal the FMA Act or the CAC Act. The Department of Finance and Deregulation (DoFD) has indicated that repeal of these Acts will be effected by separate legislation[60]

·         the second reading speech to the Bill states that the measures in the Bill will not modify the statutory independence of existing Commonwealth bodies but ‘seeks to create a consistent resource management framework applicable to all Commonwealth entities’.[61] Elsewhere, the DoFD has stated that the Bill ‘does not impinge on entity independence’, ‘has no effect on the independence of entities’, and ‘does not affect the purposes for which entities have been established’[62]

·         consequential amendments to the legislation governing statutory authorities will be required in order to continue existing exemptions from FMA Act/CAC Act requirements. The Revised Explanatory Memorandum indicates that separate transitional and consequential amendments are being prepared for introduction prior to 1 July 2014 with a view to simultaneous commencement with the substantive provisions of the Bill[63]

·         the Government proposed amendments in the House that would require the Finance Minister to ensure there was an independent review of the operation of the Bill within three years of its commencement. Those amendments were adopted.

Introductory provisions

Chapter 1 of the Bill contains a range of introductory provisions including the objects of the Bill (clause 5), an overview and guide to the contents of the Bill (clause 6), and a dictionary of terms that are defined either in the dictionary or elsewhere in the Bill (clauses 7 and 8). Clause 5 sets out the objects of the Bill as follows:

·         to establish a coherent governance and accountability system, and a performance framework, across Commonwealth entities (paragraphs 5(a) and (b))

·         to require the Commonwealth and Commonwealth entities to meet high standards of governance, performance and accountability; provide meaningful information to Parliament and the public; use and manage public resources properly, and work cooperatively to achieve common objectives where practicable (paragraph 5(c)) and

·         to require Commonwealth companies to meet high standards of governance, performance, and accountability (paragraph 5(d), as amended by sheet BN274).

The ANAO has suggested that the drafting of clause 5 be revisited with a view to combining paragraphs 5(a) and (b) and clarifying the separate treatment of Commonwealth companies in paragraph 5(d). The ANAO has also queried whether requiring the Commonwealth to meet high standards of governance, performance and accountability in paragraph 5(c) is desirable and whether this would be better expressed in aspirational terms (for example using ‘promote’ or ‘pursue’).[64]

Commonwealth entities

Currently almost 200 Commonwealth bodies come within the FMA Act/CAC Act framework—110 bodies under the FMA Act and 86 bodies under the CAC Act.[65] The broad coverage of bodies by the two Acts is as follows:

·         FMA Act—Departments of State, Parliamentary Departments, and prescribed agencies (bodies, organisations or groups of persons prescribed by the regulations under the Act) and

·         CAC Act—Commonwealth authorities holding money on their own account, and Commonwealth companies (Corporations Act 2001 (Cth) companies controlled by the Commonwealth excluding companies that are subsidiaries of Commonwealth authorities or Commonwealth companies).[66]

The Bill proposes to replace this classification with two basic categories of Commonwealth body within the new framework: Commonwealth entities and Commonwealth companies. Chapter 2 of the Bill sets out the framework for Commonwealth entities—composition and classification; governance; officials; planning, performance and accountability; and use of public resources. Commonwealth companies are dealt with in Chapter 3 of the Bill (see below).

Under the provisions of the Bill Commonwealth entities would comprise Departments of State, Parliamentary Departments, listed entities, or bodies corporate established by Commonwealth law (subclause 10(1)).

·         Departments of State would include any body (excepting bodies corporate), organisation or group of persons prescribed by the rules in relation to a specified Department of State within the ordinary meaning of the term (clause 8).[67] Any part of a Department of State that was a listed entity would not be a Department of State for the purposes of the Bill

·         listed entities would be any body (excepting bodies corporate), person, group of persons, or organisation, or any combination of bodies (again excluding bodies corporate), persons, groups of persons, or organisations, as prescribed by the rules, whether or not part of a Department of State (clause 8). It is anticipated that the majority of prescribed agencies under the FMA Act would be listed entities under the new framework[68]

·         Commonwealth authorities currently under the CAC Act would be Commonwealth entities[69]

·         the High Court of Australia and the Future Fund Board of Guardians would not be Commonwealth entities and thus outside the operation of the Bill (subclause 10(2)). Currently the High Court does not come within the FMA Act, while the Chair of the Future Fund Board of Guardians is also the chief executive of the Future Fund Management Agency, which comes under the FMA Act.[70]

Commonwealth entities would be classified as either entities that are bodies corporate (corporate Commonwealth entities) or entities that are not bodies corporate (non-corporate Commonwealth entities) (clause 11). Corporate Commonwealth bodies are legally separate from the Commonwealth, whereas non-corporate Commonwealth bodies are not separate from the Commonwealth.

The Bill would distinguish between corporate Commonwealth entities established by a Commonwealth law (such as through specific enabling legislation), and Commonwealth bodies corporate established under a Commonwealth law (for example Commonwealth companies that are formed under the Corporations Act 2001 and are subject to Commonwealth control under the terms of that Act). Bodies corporate established by Commonwealth law would be Commonwealth entities, whereas bodies corporate established under Commonwealth law (such as Commonwealth companies) would not be Commonwealth entities (note to subclause 10(1)).

Exemption of certain entities from all or part of the Bill

Several agencies—either specifically or as a class—are, will, or may be exempted from all or part of the operation of the Bill. In addition to those specifically excluded by the Bill directly (paragraph 10(2)) some classes of entity may be excluded.

Clause 104 allows the Finance Minister to prescribe in the rules that all or part of the Bill does not apply to certain Commonwealth entities, or that the operation of the Bill is modified in some way. The entities or classes of entities that may be excluded from all or part of the operation of the Bill are defined at clause 104(2) as:

·         an intelligence and security agency of the Commonwealth

·         listed law enforcement agencies and

·         the Commonwealth Superannuation Corporation.

The Explanatory Memorandum advises that the Commonwealth Superannuation Corporation is governed by other legislation, including the Governance of Australian Government Superannuation Schemes Act 2011, and that some modification of the Bill’s application might be necessary under the rules.[71]

The Finance Minister’s power to exempt from the operation of the Bill, or modify its operation in relation to, security and intelligence agencies and prescribed law enforcement agencies is similar to the power that currently exists in section 58 of the FMA Act.

The dictionary of the Bill in clause 8 defines an intelligence or security agency as those agencies defined as such by 85ZL of the Crimes Act 1914. Section 85ZL of the Crimes Act 1914 currently defines an intelligence or security agency as:

·         the Australian Security Intelligence Organisation

·         the Australian Secret Intelligence Service

·         the Office of National Assessments

·         that part of the Defence Department known as the Defence Signals Directorate

·         that part of the Defence Department known as the Defence Intelligence Organisation or

·         that part of the Defence Department known as the Defence Imagery and Geospatial Organisation.[72]

Schedule 3 of the FMA Regulations currently prescribes all or part of the following law enforcement agencies for the purposes of section 58 of the FMA Act:[73]

·         Australian Commission for Law Enforcement Integrity

·         Australian Crime Commission and

·         Australian Federal Police.

The Explanatory Memorandum also advises that the Reserve Bank Act 1958 will be amended to exempt the RBA from the requirement in clause 36, which relates to the preparation of budget estimates.[74]

Accountable authorities of Commonwealth entities

The Bill proposes that each Commonwealth entity would have an accountable authority (subclause 12(1)). Accountable authorities would ‘generally [be] the person or group of persons that has responsibility for, and control over, the entity’s operations’.[75] Accountable authorities would include existing agency chief executives under the FMA Act (for example secretaries of Departments) and the governing bodies of CAC Act bodies (for example governing boards). Under the provisions of the Bill accountable authorities would be designated according to the type of Commonwealth entity as follows:

·         Departments of State and Parliamentary Departments—departmental secretaries

·         listed entities—the person or group of persons prescribed by the rules and

·         bodies corporate established by Commonwealth law—the governing body of the entity unless otherwise prescribed by the rules (subclause 12(2)).

The Bill would impose a range of duties on accountable authorities in relation to their Commonwealth entities in the areas of governance; risk management and internal control; co-operation; consideration of risk and administrative burdens in relation to others; and disclosure to ministers (these are detailed further below). Most of these duties are not wholly new, reflecting or resembling to some degree elements of existing legislative requirements for chief executives (for example departmental secretaries) and governing bodies. The rules would be able to prescribe matters relating to the discharge of these duties (clause 20).

Along with imposing duties, the Bill would also empower the accountable authorities of non-corporate Commonwealth entities to enter into arrangements (for example contractual arrangements) and establish advisory boards (detailed further below).

Accountable authorities’ duties

Governance

Accountable authorities would be required to govern entities in a way that promotes: the proper use and management of public resources for which authorities are responsible, the achievement of entities’ purposes, and entities’ financial sustainability (subclause 15(1)).

·         ‘proper’ would be defined as efficient, effective, economical, and ethical (clause 8)

·         ‘public resources’ would be defined as relevant money, relevant property, or appropriations (clause 8)

–        ‘relevant money’ would be defined as money standing to the credit of any bank account of the Commonwealth or a corporate Commonwealth entity, or money held by the Commonwealth or a corporate Commonwealth entity (clause 8)

–        ‘relevant property’ would be defined as property, other than relevant money, owned or held by the Commonwealth or a corporate Commonwealth entity, or any other thing prescribed by the rules (clause 8).

The ANAO has expressed the view that the proposed definitions of ‘relevant money’ and ‘relevant property’ do not communicate the ‘public character of the money and property brought within the scope of the financial framework’, and has suggested that ‘there would be benefit in defining both money and property in a manner that would signal the character of these resources and the care required in their management and use’, for example by using ‘public money’ and ‘public property’ or ‘accountable money’ and ‘accountable property’.[76]

Currently, under the FMA Act, agency chief executives must manage the affairs of their agencies in a way that promotes proper use of the Commonwealth resources for which they are responsible (section 44). The proposed definition of ‘proper’ in clause 8 of the Bill would reproduce the first part of the current definition of ‘proper use’ in section 44 of the FMA Act (‘efficient, effective, economical and ethical use that is not inconsistent with the policies of the Commonwealth’). In respect of departmental secretaries, paragraph 57(2)(a) of the Public Service Act 1999 (Cth) (as amended by the Public Service Amendment Act 2013[77]) (PS Act) provides that secretaries have a responsibility to manage the affairs of their departments efficiently, effectively, economically and ethically.

Accountable authorities of non-corporate Commonwealth entities would be also required to promote the proper use and management of public resources for which they are responsible in a way not inconsistent with the policies of the Australian Government (clause 21). This would incorporate the remainder of the definition of ‘proper use’ in section 44 of the FMA Act. Under paragraph 57(2)(g) of the PS Act (as amended) departmental secretaries have a responsibility to manage the affairs of their departments in a way that is not inconsistent with the policies of the Commonwealth.

In making decisions for the purposes of proper use and management of public resources, accountable authorities would need to take into account the effect on public resources generally (subclause 15(2)). In respect of departmental secretaries, paragraph 57(1)(c) of the PS Act (as amended) provides that secretaries have a stewardship role both within their departments and, collaboratively, across the Australian Public Service (APS).

The Finance Minister would be empowered to make orders (‘government policy orders’) specifying that Australian Government policies apply to corporate Commonwealth entities after consultation between entities and policy ministers (subclauses 22(1) and (2)); such orders would be legislative instruments but not subject to disallowance (subclause 22(4)). Accountable authorities of corporate entities would be required to ensure compliance with applicable orders in relation to their entities and any subsidiaries so far as practicable (subclause 22(3)). The proposed government policy order power is based on current requirements for directors of Commonwealth authorities and companies in sections 28 and 48A of the CAC Act.

Risk management and internal control

Accountable authorities would be required to establish and maintain appropriate systems of risk oversight and management and internal control for entities, including by implementing measures directed at ensuring officials of entities comply with the ‘finance law’, for example by way of a condition of employment with sanctions for contravening the condition (clause 16 and note 1 to clause 16). ‘Finance law’ would be defined in clause 8 as the Bill, the rules, instruments made under the Bill, or Appropriation Acts. Under paragraph 57(2)(c) of the PS Act (as amended), departmental secretaries have a responsibility to implement measures directed at ensuring that their departments comply with the law.

Measures directed at ensuring officials’ compliance with the finance law would not be required for officials of Commonwealth entities coming under the PS Act or the Parliamentary Service Act 1999 as subsection 13(4) of those Acts already require public service and parliamentary service employees to comply with all applicable Australian laws, which would include the finance law (note 1 to clause 16 and clause 32).

Co-operation

Accountable authorities would be required to encourage officials of Commonwealth entities to co-operate with others to achieve common objectives where practicable (clause 17). In respect of departmental secretaries, paragraphs 57(1)(b) and 57(2)(e) and (f) of the PS Act (as amended) provide, respectively, that secretaries have a managerial role of ensuring collaboration within their portfolios and across government to achieve outcomes, and a responsibility to maintain clear negotiated lines of communication within their portfolios and to engage with stakeholders.

Consideration of risk and administrative burdens in relation to others

Accountable authorities would be required, when imposing requirements on others in relation to the use and management of public resources for which authorities are responsible, to take into account the risks associated with that use or management and also the effects of imposing those requirements (clause 18).

Disclosure to ministers

Accountable authorities would be required to: keep responsible ministers informed of the activities of their entities and subsidiaries (paragraph 19(1)(a)); give responsible ministers, or the Finance Minister, any reports, documents and information in relation to the activities of entities/subsidiaries as required within the time limits set by the minister (paragraph 19(1)(b) and subclause 19(4)); notify responsible ministers as soon as practicable after accountable authorities make significant decisions in relation to their entities or subsidiaries (paragraph 19(1)(c)); give responsible ministers reasonable notice if authorities become aware of any significant issues that may affect their entities or subsidiaries (paragraph 19(1)(d)); and notify responsible ministers as soon as practicable after authorities become aware of any significant issues that have affected their entities or subsidiaries (paragraph 19(1)(e)).

·         ‘responsible minister’ would be the minister responsible for the entity unless otherwise prescribed by the rules (clause 8)

·         subsidiaries of Commonwealth entities would be defined as entities controlled by a corporate Commonwealth entity, with ‘entity’ and ‘control’ having the same meanings as in AASB 10: Consolidated Financial Statements relating to companies’ preparation of consolidated financial statements under the Corporations Act 2001 (clause 8).[78]

In the case of Commonwealth entities with their own enabling legislation, the requirements of subclause 19(1) would only apply to the extent where they were not inconsistent with compliance with such enabling legislation (subclause 19(4A)).

Clause 19 would be subject to any Commonwealth law prohibiting disclosure of particular information (subclause 19(4B)), and would not limit any other powers possessed by ministers to require information from Commonwealth entities (subclause 19(5)). In respect of courts or tribunals, the requirements of subclause 19(1) would only apply to activities, reports, documents, information or notifications about administrative matters (subclause 19(2)).

Subclauses 19(1), (4) and (5) combine elements of current requirements for agency chief executives in section 44A of the FMA Act and for directors of Commonwealth authorities in sections 15 and 16 of the CAC Act. As the ANAO has noted, the broad scope of the proposed requirements in paragraph 19(1)(b) would be an expansion of current requirements under subsection 44A(1).[79] Paragraph 57(2)(b) of the PS Act (as amended) requires departmental secretaries to advise their ministers about matters relating to their departments.

The rules would be empowered to prescribe matters to be taken into account in deciding whether a decision or issue is significant for the purposes of subclause 19(1). Currently, for Commonwealth authorities, section 15 of the CAC Act prescribes the significant decisions which require notification of the responsible minister.

Accountable authorities will also be required to keep sufficient records to allow Commonwealth entities to explain their performance (subclauses 37(1) and (2)). Subclause 37(3) creates an entitlement for the Finance Minister and the Minster responsible for the Commonwealth entity to obtain any records that are subject to subclauses 37(1) and (2): that is, records that explain the entity’s performance. Clause 41 is a similar record keeping provision to that proposed in clause 37, but relating to financial records. Subclause 41(3) (as amended by sheet BN274)—as subclause 37(3) does with respect to performance information—would provide that the Finance Minister and the responsible Minister are entitled, subject to anything in any other law, to full and free access to the accounts kept for the purposes of subclauses 41(1) and (2).

The Bill does not limit the purposes for which information can be sought by a Minister or the Finance Minister to that of ascertaining the performance of the agency. It would appear that information within the scope of the recordkeeping requirements could be requested for a collateral purpose. This may be an issue of concern, particularly for the Parliamentary departments.

Accountable authorities’ powers—entering into arrangements and establishing advisory boards

The Bill would empower accountable authorities of non-corporate Commonwealth entities to enter into arrangements on behalf of the Commonwealth (including contracts, agreements, deeds or understandings) in relation to entity affairs and to vary and administer such arrangements (clause 23). This would essentially reproduce current provisions in the FMA Act empowering agency chief executives to enter into arrangements in relation to the affairs of their agencies (subsection 44(1A)).

Accountable authorities of non-corporate entities would also be empowered to establish advisory boards to assist in entity governance; such boards could include individuals who were not entity officials (clause 24).

Officials of Commonwealth entities

The Bill proposes to create a new classification of ‘officials’ of Commonwealth entities for the purposes of the new framework. Each Commonwealth entity would have officials comprising individuals in, or forming part of, the entity (subclauses 13(1) and (2)). Officials would include accountable authorities and their members; officers, employees or members of entities; or individuals or individuals in a class prescribed by the rules (paragraph 13(3)(a)). Officials would not include ministers, judges, consultants and independent contractors (unless prescribed by the rules), and individuals or individuals in a class prescribed by the rules (paragraph 13(3)(b)).

The Explanatory Memorandum to the Bill states that the definition of ‘official’ ‘encompasses officers, directors, members (such as members of a commission), employees and statutory office holders’ as well as ‘members of a governing board’.[80] Many existing Commonwealth employees (for example employees of the Departments of State and Commonwealth authorities) would likely come within the new classification of officials of Commonwealth entities.[81] However, as the ANAO has recognised, paragraphs 13(3)(a) and (b)of the Bill provide a very wide power for the rules to include or exclude individuals, or whole classes of individuals, from the classification of officials and therefore from the scope of the new framework.[82] The ANAO has noted that ‘the extent of the potential exclusions allowable is significant.’[83]

Officials’ duties

The Bill would impose a range of duties on officials of Commonwealth entities as detailed below. The duties proposed for officials are not new. The Explanatory Memorandum to the Bill indicates that the proposed duties ‘are modelled (with some modifications) on the duties imposed on officers by the CAC Act’, although the duties in the Bill would apply to all officials of Commonwealth entities, not just senior personnel as is the case with some CAC Act duties.[84]

The Explanatory Memorandum also recognises that the proposed duties reflect some of the requirements of the APS Code of Conduct imposed by the PS Act on APS employees, agency heads and statutory office holders.[85] The Public Service Commissioner has expressed some regret over the complexity that will arise from there being two separate statements of duties for officials employed under the PS Act—those specified in the Bill and those already contained in the PS Act.[86] The JCPAA however concluded that this concern is less important than ‘the benefits of having a consistent set of financial management duties applied across all Commonwealth entities’.[87]

It is worth noting that employees of statutory bodies not employed under the PS Act may also be subject to duties as specified in their bodies’ establishing legislation.

Care and diligence

Officials would be required to exercise their powers, perform their functions, and discharge their duties with the degree of care and diligence that a reasonable person would exercise if the person was an official of a Commonwealth entity in the same circumstances and occupied the same position with the same responsibilities (subclause 25(1)). The rules would be empowered to prescribe circumstances in which the requirements of the duty of care and diligence would be taken to be met (subclause 25(2)).

This proposed duty is similar to a CAC Act civil requirement for officers of Commonwealth authorities to exercise care and diligence in the exercise of their powers and the discharge of their duties (subsection 22(1)). The duty would also reflect a Code of Conduct requirement for APS employees, under subsection 13(2) of the PS Act (as amended), to act with care and diligence in connection with APS employment.

Acting in good faith and for a proper purpose

Officials would be required to exercise their powers, perform their functions, and discharge their duties in good faith and for a proper purpose (clause 26). ‘Proper purpose’ is not defined, but the Explanatory Memorandum envisages that ‘officials [would] generally [be] required to use their powers in connection with the functions of the entity’.[88]

This proposed duty is similar to a CAC Act civil requirement for officers of Commonwealth authorities to exercise their powers and discharge their duties in good faith in the best interests of the authority and for a proper purpose (subsection 23(1)).

Improper use of position

Officials would have a duty to not improperly use their position to gain an advantage for themselves or for any other person or to cause detriment to their Commonwealth entity, the Commonwealth or any other person (clause 27).

This proposed duty is similar to a CAC Act obligation for officers or employees of Commonwealth authorities to not improperly use their position to gain advantage for themselves or for any other person or to cause detriment to their Commonwealth authority or another person (subsection 24(1)). The duty would also reflect a Code of Conduct prohibition against APS employees, under paragraph 13(10)(b) of the PS Act, making improper use of their duties, status, power or authority in order to gain, or seek to gain, a benefit or advantage for themselves or for any other person.

Use of information

Officials would have a duty to not improperly use information obtained due to their position to gain an advantage for themselves or for any other person or to cause detriment to their Commonwealth entity, the Commonwealth or any other person (clause 28). The Explanatory Memorandum states that ‘improper use’ is ‘intended to include the unauthorised disclosure of information’.[89]

This proposed duty is similar to a CAC Act obligation for individuals to not improperly use information obtained due to their current or past position as officers or employees of Commonwealth authorities to gain an advantage for themselves or for someone else or to cause detriment to their Commonwealth authority or another person (subsection 25(1)). The duty would also reflect a Code of Conduct prohibition against APS employees, under paragraph 13(10)(a) of the PS Act, making improper use of inside information in order to gain, or seek to gain, a benefit or advantage for themselves or for any other person.

Disclosure of interests

Officials having a material personal interest relating to the affairs of their Commonwealth entity would be required to disclose details of the interest (subclause 29(1)). ‘Material personal interest’ is not defined; the Explanatory Memorandum indicates that what constitutes a material personal interest will depend on circumstances ‘but is not confined to financial or similar interests’.[90]

The rules would be empowered to prescribe: circumstances in which the disclosure requirement would not apply; how and when an interest must be disclosed; and the consequences of disclosing an interest (for example non-participation at a meeting about a matter or a vote on the matter) (subclause 29(2)).

This proposed duty is similar to a CAC Act requirement for directors of Commonwealth authorities who have material personal interests in matters relating to the affairs of their authorities to disclose these interests to the other directors (subsection 27F(1)).[91] The duty would also reflect a Code of Conduct requirement for APS employees, under subsection 13(7) of the PS Act, to disclose any real or apparent conflict of interest in connection with APS employment.

Termination of appointment for contravention of the officials’ duties provisions—accountable authorities of corporate Commonwealth entities

The Bill would empower persons (‘appointers’) to terminate the appointments of accountable authorities or members of accountable authorities of corporate Commonwealth entities (‘appointees’) in cases of contravention of the officials’ duties provisions at clauses 25–29 (clause 30). Terminations of appointment could be carried out where:

·         the appointer held the position responsible for appointing the appointee (paragraph 30(1)(a))

·         the appointee contravened a duties provision (paragraph 30(1)(c)) and

·         the termination was in accordance with any requirements prescribed by the rules (paragraph 30(1)(d)).

Terminations of appointment would be effected by giving the appointee a signed written notice (subclause 30(2)); such notices would have to include a statement of reasons for the termination (subclause 30(3)) and would need to be tabled in the Parliament (subclause 30(4)).

The rules would be empowered to prescribe appointments which could not be terminated under the provisions of clause 30 (subclause 30(5)).

The Explanatory Memorandum anticipates that the termination provisions in clause 30 will constitute 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)’.[92]

Interaction between the officials’ duties provisions and other laws

The Bill would clarify that the officials’ duties provisions at clauses 25–29 do not limit:

·         Commonwealth laws or principles or rules of equity or common law relating to conflicts of interest or duties or liabilities of employees of Commonwealth entities and

·         any provisions in Commonwealth entities’ enabling legislation restricting officials from having material personal interests in matters, or holding offices or possessing property, that involve duties or interests which conflict with their duties or interests as officials (clause 31).

Statement of key Government priorities and objectives

The Bill creates a new power for the Australian Government to choose to publish a statement of key priorities and objectives (clause 34).

Establishment of new corporate Commonwealth entities, and Commonwealth involvement in general law companies

Clause 85 allows for the Commonwealth to form, or participate in the forming of, a Corporations Act company, and acquire shares in a Corporations Act company. The kinds of companies that the Commonwealth may be involved with may be prescribed by the rules.

Clause 87 purports to allow the Commonwealth to establish new bodies corporate outside of the Corporations Act. No restriction is placed upon the purposes for which new bodies corporate may be established. This is discussed further at ‘Commonwealth’s power to form new corporate Commonwealth entities’ above.

Clause 89 makes some partly-owned Commonwealth companies ‘Commonwealth companies’ for the purposes of the Bill. For a company in which the Commonwealth is involved to be a Corporations Act company, the Commonwealth must control that company; either through control of the board or as a substantial shareholder. Clause 90 makes any wholly-owned Commonwealth company a ‘Commonwealth company’ for the purpose of the Bill, apart from companies in relation to which the Commonwealth is the legal owner, but the equitable (beneficial) owner is not the Commonwealth. This would prevent companies that were partly held on trust for another person from being a wholly-owned Commonwealth company. Such companies would likely still be captured as a Commonwealth company by clause 89.

Wholly-owned Commonwealth companies must keep the relevant minister and Finance Minister informed of certain matters (clause 91).

Clause 93 allows the Finance Minister to make an order that a government policy applies to a wholly-owned Commonwealth company. As the statement of key priorities and objectives of the Australian Government proposed at clause 34 would only apply to Commonwealth entities as defined in clause 10, this clause would allow the Finance Minister to extend the application of that policy (and possibly other policies) to wholly-owned Commonwealth companies.

Clause 72 provides that a minister must inform the Parliament of changes in the Commonwealth’s, or a corporate Commonwealth entity’s, participation in a company or ‘relevant body’. Subclause 72(2) allows that the rules may define what a relevant body for the section is. This provision appears similar to section 39A of the FMA Act, however would differ for several reasons. Firstly, it would apply to all Commonwealth entities covered by the Bill, not just those that are currently covered by the FMA Act. Secondly, the Revised Explanatory Memorandum suggests that the rules will extend the operation of the provision to cover other non-corporate Commonwealth entities, such as trusts.[93]

Commitments of expenditure

Clause 52 allows for rules to be made about the commitment or expenditure of public monies. The Note in clause 52 suggests that one purpose of the rules would be ‘to ensure that, to the greatest extent practicable, relevant money that is within the CRF is not paid out without an appropriation.’

Clause 71(1) provides that a Minister must not approve a proposed expenditure unless the minister is satisfied that the expenditure would be a proper use of the money. Clause 71(3) provides that the minister must record in writing the terms of the approval for the expenditure. However, the written record of expenditure is not required to be tabled in Parliament or otherwise publicised. These provisions mirror the requirements of Regulation 9 and regulation 12 made under section 44 of the FMA Act, however, they will be in primary—not delegated—legislation, and the expenditure must now be approved by a minister. Clause 71(2) substitutes references to minister with presiding officer or officers (as the case may be) with respect to the Parliamentary departments.

These two provisions are discussed in more detail at ‘Commonwealth’s power to spend’ and ‘Compliance with sections 53 and 54 of the Constitution’ above.

Indemnities, guarantees, warranties and insurance

Clauses 60 and 61 establish, for the first time in primary legislation, a power for the Finance Minister to—on behalf of the Commonwealth—provide indemnities, guarantees and warranties. A more limited power currently exists in FMA Regulation 11. The power to issue indemnities, guarantees and warranties is able to be delegated to an officer (clauses 107 and 109).

Clause 62 allows the rules to also prescribe requirements relating to the obtaining of insurance.

Waivers, set-offs and act of grace payments

Clause 63 allows the Finance Minister, on behalf of the Commonwealth, to waive, or otherwise alter the terms of, any amount owing to the Commonwealth. It would appear implicit that any modification cannot be prejudicial to the person that owes the amount, or any other person apart from the Commonwealth. This provision mirrors the existing provision in section 34 of the FMA Act.

Clause 64 allows the Finance Minister to set off an amount owing by the Commonwealth to a person against another amount owed by the person to the Commonwealth. The overall effect of any set-off is that the amount that would be ultimately paid by the Commonwealth would be net of the amount owed to the Commonwealth. This provision mirrors the existing section 35 of the FMA Act.

Clause 65 provides an alternate formulation of the existing Finance Minister’s power to make a discretionary payment, or multiple payments, to a person under section 33 of the FMA Act. Circumstances where such payments might be made could include circumstances where there was a moral obligation on the Commonwealth to make a payment but no legal obligation, such as where an otherwise valid legal claim against the Commonwealth no longer existed due to the expiration of a limitation period. Such payments are sometimes known as ex gratia payments.

While the existing Finance Minister’s Orders require disclosure of act of grace payments and waivers in agencies annual reports, the existing level of disclosure merely requires the disclosure of number of cases and the aggregate amount of monies paid, or to be paid, by an agency against each outcome.[94] The ANAO, is its Report No. 35, 2003–04: Compensation Payments and Debt Relief in Special Circumstances,[95] recommended that the Government improve its reporting of discretionary payments and debt relief. Moreover, the ANAO recommended that agencies establish mechanisms to ensure that, where the circumstances of one claimant are likely to apply to other claimants, agencies put in place mechanisms to establish whether act of grace payments or waivers should be made or granted to other affected persons.[96]

Section 34A of the former Audit Act 1901 allowed for act of grace payments, but only where a payment was otherwise ‘not payable in pursuance of the law or under a legal liability’.[97] Currently, the Commonwealth’s Model Litigant Guidelines[98] require that the Commonwealth pay ‘legitimate claims without litigation, including making partial settlements of claims or interim payments, where it is clear that liability is at least as much as the amount to be paid’. Act of grace payments under section 33 of the FMA Act, and as proposed by clause 65 in the Bill, may be made irrespective of whether or not a valid legal claim may be made against the Commonwealth. This would appear to provide an alternate mechanism for the Commonwealth to resolve legal claims without admitting any liability or establishing any legal or administrative precedent.[99] Whether this is the intention of the clause could be resolved.

Liability for loss to the Commonwealth: ministers and officials

Clause 66 provides a lawful basis upon which a gift may be provided by a minister or official.

Clause 67 provides that the value of a loss to the Commonwealth arising from the unlawful gifting of Commonwealth property is a debt recoverable from the minister or official. Currently, section 43 of the FMA Act creates an offence of unauthorised gifting of public property by any minister or official, which carries a maximum penalty of seven years imprisonment. Clauses 66 and 67, however, impose upon a minister or official that unlawfully gifts Commonwealth property a debt to the value of that property. While the replacement of a criminal provision with a civil debt provision may appear to dilute the standard, the prosecution for a criminal offence is discretionary, and a conviction requires proof to the criminal standard. The approach proposed by clause 66 and 67 is more likely to be successfully utilised to recover the value of a loss to the Commonwealth.

Clause 68 provides that the value of any loss of property or money (including money yet to be banked) of the Commonwealth, when the loss occurred while the property or money was in the custody of a minister or official, is a debt recoverable from that minister or official, if the minister or official ‘did not take reasonable steps in the circumstances to prevent the loss.’[100] Section 15 of the FMA Act currently provides an equivalent provision to that proposed by clause 68.

Clause 69 provides that a loss to the Commonwealth of money or property arising from the misconduct, or by a serious or deliberate disregard for reasonable standards of care by a minister or official, is a debt to the Commonwealth to the extent that is just and equitable. That is, the minister or official is potentially not liable for the entire amount of any loss, but only that part which a court considers is appropriate to attribute to the minister or official as a debt due to the Commonwealth. Where a loss to the Commonwealth is significant, but it would not be just and equitable to attribute the whole amount of the loss to the minister or official, the provision would provide for what would essentially be a pecuniary penalty of civil fine. This provision does not appear to have an equivalent provision in the existing financial legislation.

Clause 70 prevents a loss to the Commonwealth being recovered twice.

Rules and rule making

Part 1 of Chapter 4 provides the substantive power for the Finance Minister to make rules. Any rules are to be legislative instruments (clause 101).

Clause 102 provides for a rule making power with respect to the Commonwealth and Commonwealth entities, and clause 103 provides for a rule making power for the Commonwealth and non-corporate Commonwealth entities. Clauses 22, 75, 79, and 93—which deal with government policy orders, transfers of appropriation between non-corporate Commonwealth entities, special accounts, and government policy orders with respect to wholly-owned Commonwealth companies respectively—are not subject to disallowance under section 42 of the Legislative Instruments Act 2003. The Finance Minister may make legislative instruments with retrospective effect in relation to the transfer of appropriation between non-corporate Commonwealth entities, despite section 12 of the Legislative Instruments Act that prohibits retrospective legislative instruments (paragraph 75(9)(b)).

Delegations

Most powers conferred upon Ministers or officials by the Bill are able to be delegated. Subclauses 107(1) and 108(1) provide for a general delegation of power for the Finance Minister and Treasurer respectively. The Treasurer may only, however, delegate to an officer at the EL2 level (or equivalent) or above (subclause 108(2)). There is no similar restriction on delegation by the Finance Minister.

The Finance Secretary and accountable authorities are also able to delegate some of their powers under the Bill: clauses 109 and 110. The Finance Secretary and accountable authorities may further delegate some of the functions that have been delegated to them by the Finance Minister to a second delegate (subclauses 109(4) and 110(5)). However, some powers, functions or duties of the Finance Minister may only be delegated to the Finance Secretary, or are not able to be delegated at all (subclauses 107(2) and (3) and paragraph 109(1)(b)).

Table 1 provides a summary of the limitations on delegation by the Finance Minister and Treasurer.

Table 1: Summary of limitations on delegation by Finance Minister and Treasurer

Substance of power, function, or duty

Degree of delegation permissible

Finance Minister

Power to authorise borrowings such as overdrafts and credit cards: paragraph 57(b)

Non-delegable

Finance Minister and Treasurer

Approval of, and recording the terms of, proposed expenditure: subclauses 71(1) and (3)

Non-delegable

Finance Minister and Treasurer

Duty to inform Parliament of dealings by the Commonwealth, or a corporate Commonwealth entity, in companies: clause 72.

Non-delegable

Finance Minister

Power to move appropriation following a transfer of functions: clause 75

Delegable to the Finance Secretary

Finance Minister

Establishment, modification, and closure of Special Accounts: clause 78

Non-delegable

Finance Minister

Power to form, or otherwise deal in the shares of, a company: clause 85

Delegable to the Finance Secretary

Finance Minister

Power to establish new corporate Commonwealth entities: clause 87

Delegable to the Finance Secretary

Finance Minister

Power to make rules: clause 101

Non-delegable

Table 2 provides a summary of the non-delegable powers, functions and duties of accountable authorities of non-corporate Commonwealth entities.

Table 2: Non-delegable powers, functions, and duties of accountable authorities

Substance of power, function, or duty

General duties of accountable authorities: Part 2-2, Division 2, Subdivision A

Duty to govern non-corporate Commonwealth entities in accordance with government policy: clause 21

Duty to prepare and provide to Finance Minister a corporate plan: clause 35

Duty to ensure the recording of, measurement and assessment of, and annual reporting of, performance of Commonwealth entities: clauses 37, 38 and 39

Duty to ensure the recording of financial information and the preparation of annual financial statements: clauses 41 and 42

The Auditor-General cannot delegate his or her duty under clause 43 to audit the financial statements of Commonwealth entities prepared under clause 82 (paragraph 110(2)((e)).

Other provisions

Management of finances and performance of entities, reporting, and audit

Corporate plan

Clause 35(1) requires that the all Commonwealth entities prepare a corporate plan, consistent with any rules. This requirement already applies to CAC Act bodies under section 17 and 42 of the CAC Act, but is not a legislative requirement for FMA Act bodies. Clause 95 creates a similar requirement with respect to wholly-owned Commonwealth companies.

Clause 35(2) requires that the plan be published. Clause 35(3) requires that, if a statement of key priorities and objectives is made under clause 34, the plan must set out how the entity will contribute to the key priorities and objectives. However, clause 35(4) provides that the requirement in clause 35(3) does not apply to the extent that compliance would be inconsistent with an agency’s enabling legislation. Clause 35(5) provides that plans must include any subsidiaries.

Financial reporting

Clause 42(1) provides that Commonwealth entities must prepare annual financial statements and provide those statements to the Auditor-General. Clause 42(2) requires those statements to be prepared in accordance with applicable accounting standards, and any requirements prescribed in the rules, and must fairly present the entity’s financial position, financial performance and cash flows. Clause 42(3) requires the annual financial statements to contain a statement by the accountable authority whether, in the opinion of the authority, the statements comply with anything required by clause 42(2).

Clause 42(4) requires that, for a Commonwealth entity that is a government business enterprise, the report must also state whether or not, in the opinion of the accountable authority, the entity is able to pay its debts as and when they fall due. Section 95A of the Corporations Act 2001 utilises the same test to work out whether a corporation is solvent, or not.

Auditing

Clauses 38 and 39 require that the accountable authority for a Commonwealth entity must measure the performance of the Commonwealth entity, and that an annual performance report must be prepared and included in the entity’s annual report that is tabled in Parliament. The annual reporting requirement would suggest that ‘performance’ is to be measured at least annually.

Clause 40 allows the responsible Minister or the Finance Minister to request that the Auditor-General examine an entity’s statement of performance. If the Auditor-General agrees, the Auditor-General must provide a copy of any report to the requesting Minister, who must then table that report in Parliament as soon as practicable.

Clause 43 requires that the Auditor-General must audit the annual financial statements of all Commonwealth entities. Clause 98 appoints-within the meaning of the Corporation Act-the Auditor-General as the auditor of wholly-owned Commonwealth companies. Clause 43(4) requires that the Auditor-General’s report must be included in the Commonwealth entity’s annual report.

Clause 44 requires that, if a Commonwealth entity that has a subsidiary, the subsidiary’s financial statements must be audited. Clause 44(3) requires that the Auditor-General audit any subsidiary’s financial statements, unless the subsidiary is incorporated or formed outside Australia, and if, in the Auditor-General’s opinion, it would be impractical for the Auditor-General to do so, or the Auditor-General would not be able to do so under the relevant foreign law. Clause 99 provides a similar arrangement with respect to subsidiaries of Commonwealth companies. Where a subsidiary is a Corporations Act company, it must be audited in accordance with the requirement of the Corporations Act (subclause 44(4)).

Clause 45 requires all Commonwealth entities to have an audit committee. Clause 92 provides an equivalent requirement with respect to wholly-owned Commonwealth companies.

Annual reports

Clause 46 would establish a common annual reporting requirement for all Commonwealth entities. Currently, annual reporting requirements are fragmented across various acts including the PS Act and the CAC Act. Any rules made with respect to annual reporting must be approved by the Joint Committee of Public Accounts and Audit: clause 46(4). Clause 97 requires that wholly-owned Commonwealth companies prepare an annual report.

Monthly and annual Whole-of-Government financial reporting

Clauses 48 and 49 require that the Finance Minister must prepare annual financial reports, and that the Auditor-General must audit those statements. These clauses largely replicate sections 55 and 56 of the FMA Act. Clause 47 requires that monthly whole-of-government financial reports must be prepared. This provision largely replicates section 54 of the FMA Act.

Appropriations

Deemed appropriations of agency receipts

Clause 74 provides a similar mechanism to that which currently exists under section 31 of the FMA Act in relation to certain receipts by non-corporate Commonwealth entities. Because section 81 of the Constitution makes all monies received on behalf of the Commonwealth automatically become part of the CRF, an agency cannot spend certain monies that it receives, such as user charges or FOI fees, without those monies firstly being appropriated from the CRF. Clause 74 would resolve this issue by allowing the rules to prescribe types or classes of amounts that might be received by an agency to be immediately credited to an appropriation; thereby making them available for expenditure by that agency. Agencies’ PBS’ currently aggregate the amounts expected to be received as ‘section 31’ FMA Act receipts.

Clause 75 allows for appropriations to be moved between non-corporate Commonwealth entities in certain circumstances. It generally replicates section 32 of the FMA Act.

Clause 76 deems certain interactions between non-corporate Commonwealth entities to be real payments for the purposes of the Bill. This deeming provision means that payments of monies made by one department to another department—which would not be a transaction because it involves a movement of funds within the one legal entity, the Commonwealth of Australia—to nonetheless be considered a payment for the purposes of the Bill. This provision replicates section 6 of the FMA Act.

Clause 77 provides a standing appropriation that allows the Finance Minister to refund monies. It is similar to the existing section 28 of the FMA Act.

Drawdown of appropriations

Clause 51 allows the Finance Minister to release monies that have been appropriated at times, and in such instalment, as the Minister considers appropriate. However, the Finance Minister does not have a discretion with respect to timing or instalments of payments where a law requires that a payment be made. This discretionary approach replaces the drawing rights approach to the periodic releases of appropriated monies to entities that currently exists in sections 26 and 27 of the FMA Act.

Banking, borrowing and investment

Banking

Subclause 53(3) requires that the Finance Minister must open and maintain a central bank account with the Reserve Bank of Australia. Subclause 53(1), however provides that the Finance Minister may open (additional) accounts with any bank. Bank is defined in the dictionary as an authorised deposit taking institution (ADI), the Reserve Bank of Australia, or a person who carries on the business of banking outside Australia.

Subclause 53(4) allows the rules to prescribe matters relating to banking by ‘the Commonwealth’, however clause 54, allows the rules to prescribe matter relating to ‘banking by corporate Commonwealth entities’. This suggests that banking by the Commonwealth under clause 53 is distinct from banking by corporate Commonwealth entities under clause 54.

Clause 55 requires that Ministers and officials must promptly bank relevant money. Relevant money is defined in the dictionary as, in effect, either money held by the Commonwealth or standing for the credit of the Commonwealth. Section 10 of the FMA ACT currently provides similar requirements, however that section also provides for an offence punishable by a penalty of imprisonment for two years. The offence in section 11 of the FMA Act, relating to paying monies into non-official accounts, is not replicated in the Bill.

Short term borrowing

Clauses 56(2) and (3) allow the Finance Minister to borrow for periods of up to 90 days from any person. This would, in effect, give the Commonwealth the capacity to settle accounts or trade credit, which would be a borrowing, within 90 days.

Investment

Clause 58, which allows— subject to certain limitations—the Finance Minister or Treasurer to invest, substantially replicates existing section 39 of the FMA Act. Clause 59, which allows corporate Commonwealth entities to invest in certain circumstances, substantially replicates the overall effect of subsections 18(3) and (4) and section 19 of the existing CAC Act.

Special Accounts

A special account is an amount of money that has been allocated to a purpose, but which remains in the CRF, and which may only be released from the CRF for that purpose. This is sometimes known as ‘hypothecation.’ Once monies are required, they would be appropriated through the standing appropriations in clauses 78 and 80.

Clause 78, which generally replicates section 20 of the FMA Act, allows for special accounts to be established by a determination of the Finance Minister. Clause 79 replicates the existing disallowance provisions for determinations in section 22 of the FMA Act, which reduce the period for disallowance to five sitting days. Clause 80 recognises that special accounts may be made by, or under, other Acts. This replicates section 21 of the FMA Act.

Cooperation with other jurisdictions

Clause 82 allows for the rules to prescribe require that agencies cooperate with other jurisdictions: states and territories. It appears to reflect the existing section 43A in the FMA Act, however, would extend to all Commonwealth entities, including those currently covered by the CAC Act.

Review of the Act

The House adopted amendments to the Bill that would require the Finance Minister to ensure that an independent review of the Act was undertaken within three years of it commencing operation (clauses 111 and 112 on sheet BN274).

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

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ISSN 1328-8091

[1].              Financial Management and Accountability Act 1997, accessed 26 June 2013.

[2].              Commonwealth Authorities and Companies Act 1997, accessed 26 June 2013.

[3].              D Bradbury (Assistant Treasurer and Minister Assisting for Deregulation), ‘Second reading speech: Public Governance, Performance and Accountability Bill 2013’, House of Representatives, Debates (proof), 16 May 2013, p. 10, accessed 24 June 2013.

[4].              Revised Explanatory Memorandum, Public Governance, Performance and Accountability Bill 2013, pp. 10–11, accessed 24 June 2013.

[5].              Minister for Finance and Deregulation, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, 28 May 2013, p. 2, accessed 24 June 2013.

[6].              Information on the CFAR, including the discussion paper and the position paper, can be found at the CFAR website, accessed 24 June 2013. The Explanatory Memorandum to the Bill notes that the CFAR received over 60 submissions in response to the position paper and that consultation was undertaken with ‘business, the third sector, state and territory governments and academe’ as well as ‘the Joint Committee of Public Accounts and Audit (JCPAA), the Senate Standing Committee on Finance and Public Administration and the ANAO’: Explanatory Memorandum, p. 5.

[7].              Department of Finance and Deregulation (DoFD), Sharpening the focus: a framework for improving Commonwealth performance, position paper, DoFD, Canberra, November 2012, pp. 10–12, accessed 24 June 2013.

[8].              Revised Explanatory Memorandum, Public Governance, Performance and Accountability Bill 2013, op. cit., p. 4.

[9].              Ibid., pp. 4–5.

[10].              D Bradbury (Assistant Treasurer and Minister Assisting for Deregulation), ‘Second reading speech: Public Governance, Performance and Accountability Bill 2013’, op. cit., p. 9.

[11].              Revised Explanatory Memorandum, op. cit., p. 5.

[12].              D Bradbury (Assistant Treasurer and Minister Assisting for Deregulation), ‘Second reading speech: Public Governance, Performance and Accountability Bill 2013’, op. cit., pp. 10–11.

[13].              DoFD, Sharpening the focus: a framework for improving Commonwealth performance, op. cit., pp. 5–7.

[14].              Ibid., p. 1.

[15].              House of Representatives Selection Committee, Report No. 80, House of Representatives, Canberra, 16 May 2013, p. 3, accessed 24 June 2013. In May 2013 also the Senate Selection of Bills Committee referred the Bill to the Senate Finance and Public Administration Legislation Committee (SFPALC) for inquiry, but in light of the JCPAA’s consideration of the Bill the SFPALC decided not to proceed with its own inquiry: see Senate Selection of Bills Committee, Report No. 5 of 2013, The Senate, Canberra, 16 May 2013, pp. 3, 8, accessed 26 June 2013; Senate Finance and Public Administration Legislation Committee (SFPALC), ‘Public Governance, Performance and Accountability Bill 2013: information about the inquiry’, SFPALC website, accessed 24 June 2013.

[16].              Joint Committee of Public Accounts and Audit (JCPAA), Report 438: advisory report on the Public Governance, Performance and Accountability Bill 2013, House of Representatives, Canberra, June 2013, p. iv, accessed 24 June 2013.

[17].              Ibid., pp. 51, iv.

[18].              Ibid., p. 51.

[19].              Ibid., pp. 51–52.

[20].              Ibid., pp. 52–54.

[21].              Coalition members, ‘Dissenting report—Coalition members’, House of Representatives, Inquiry into the Public Governance, Performance and Accountability Bill 2013, House of Representatives, Canberra, June 2013, p. 63, accessed 24 June 2013.

[22].              Senate Scrutiny of Bills Committee, Alert Digest No. 6 of 2013, 19 June 2013, pp. 62–66, accessed 26 June 2013.

[23].              Parliamentary Joint Committee on Human Rights, Seventh Report of 2013, The Senate, Canberra, June 2013, p. 36, accessed 24 June 2013.

[24].              A Robb (Shadow Minister for Finance, Deregulation and Debt Reduction), ‘Second reading speech: Public Governance, Performance and Accountability Bill 2013’, House of Representatives, Debates (proof), 17 June 2013, p. 28, accessed 24 June 2013.

[25].              Australian National Audit Office (ANAO), Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, 22 May 2013, pp. 2, 3, accessed 24 June 2013.

[26].              Ibid., p. 3.

[27].              Ibid., p. 4.

[28].              I McPhee (Commonwealth Auditor-General), Evidence to Senate Finance and Public Administration Legislation Committee, Committee Hansard (proof), 28 May 2013, p. 26, accessed 24 June 2013.

[29].              ANAO, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, op. cit., p. 4.

[30].              S Sedgwick (Public Service Commissioner), Evidence to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, 24 May 2013, p. 33, accessed 24 June 2013.

[31].              Australian Public Service Commission, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, 29 May 2013, p. 1, accessed 24 June 2013.

[32].              Revised Explanatory Memorandum, op. cit., p. 2.

[33].              Ibid., p. 1.

[34].              Pape v Commissioner for Taxation (2009) 238 CLR 1. See also [2009] HCA 23, accessed 24 June 2013.

[35].              Williams v Commonwealth (2012) 288 ALR 410. See also [2012] HCA 23, accessed 24 June 2013,

[36].              Pape v Commissioner for Taxation (2009) 238 CLR 1, op. cit.

[37].              Williams v Commonwealth (2012) 288 ALR 410, op. cit.

[38].              Financial Framework Legislation Amendment Act (No. 3) 2012, accessed 24 June 2013.

[39].              A Twomey, ‘Parliament's abject surrender to the Executive', Constitutional Critique, 27 June 2012, accessed 24 June 2013.

[40].              Financial Management and Accountability Regulations 1997, reg 9, accessed 24 June 2013.

[41].              Williams v Commonwealth (2012) 288 ALR 410, op. cit., per Gummow and Bell JJ, [102].

[42].              Williams v Commonwealth (2012) 288 ALR 410, op. cit., per Hayne J, [260].

[43].              Williams v Commonwealth (2012) 288 ALR 410, op. cit., per French CJ, [68].

[44].              Explanatory Memorandum, op. cit., pp. 46-47.

[45].              Constitution, accessed 26 June 2013.

[46].              New South Wales v Commonwealth (Incorporation Case) (1990) 169 CLR 482. See also [1990] HCA 2, viewed 24 June 2013,

[47].              Australian National Airways Pty Ltd v Commonwealth (No 1) (Airlines Nationalisation Case), (1945) 71 CLR 29 per Latham CJ, p. 58. See also [1945] HCA 41, accessed 24 June 2013.

[48].              Financial Framework Legislation Amendment Act (No. 2) 2013, accessed 26 June 2013.

[49].              Revised Explanatory Memorandum, p. 56, citation omitted.

[50].               Constitution, section 54: ‘The proposed law which appropriates revenue or moneys for the ordinary annual services of the Government shall deal only with such appropriation.’

[51].              See: JR Odgers, Odgers’ Australian Senate practice, twelfth edn, Department of the Senate, Canberra, 2008, chapter 13, accessed 24 June 2013.

[52].               A Missen, Senate, Debates, 17 February 1977, p. 184, accessed 24 June 2013.

[53].               Odgers’ Australian Senate practice, twelfth edn, op. cit.

[54].              Agreement for a better parliament: parliamentary reform, accessed 24 June 2013.

[55].              For a general discussion see: Clerk of the Senate, ‘Submission’ (both), Inquiry into transparency and accountability of Commonwealth public funding and expenditure, 27 June 2006 and 21 September 2006, accessed 24 June 2013,

[56].              However, the Explanatory Memorandum advises that the Reserve Bank Act 1958 will be amended to exempt the RBA from the requirement in clause 36, p. 33.

[57].              See: Appropriation Act (No. 1) 2012-2013, section 4, accessed 24 June 2013; Acts Interpretation Act 1901, paragraph 15AB(2)(g), accessed 24 June 2013.

[58].              Revised Explanatory Memorandum, op. cit., p. 60

[59].              Minister for Finance and Deregulation, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, op. cit.

[60].              DoFD, Supplementary submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, May 2013, p. 3, accessed 24 June 2013.

[61].              D Bradbury (Assistant Treasurer and Minister Assisting for Deregulation), ‘Second reading speech: Public Governance, Performance and Accountability Bill 2013’, op. cit., p. 10.

[62].              D Tune (Secretary, DoFD), Evidence to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, 24 May 2013, p. 2; DoFD, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, 22 May 2013, p. 29, accessed 24 June 2013.

[63].              Revised Explanatory Memorandum, op. cit., pp. 10–11, 17.

[64].              ANAO, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, op. cit., attachment p. 1.

[65].              A chart of FMA Act and CAC Act bodies can be found at the DoFD website, accessed 24 June 2013.

[66].              Under section 7 of the CAC Act Commonwealth authorities are bodies corporate that have been incorporated for a public purpose by primary legislation or by subordinate legislation and prescribed by the CAC Act regulations.

[67].              Under section 64 of the Australian Constitution Departments of State are established by the Governor-General in Council and administered by ministers. There are currently 19 Departments of State.

[68].              Revised Explanatory Memorandum, op. cit., p. 17.

[69].              Ibid.

[70].              The Revised Explanatory Memorandum states that the exclusion of the High Court and the Future Fund Board of Guardians from the framework is due, respectively, to the High Court’s existing constitutional and statutory position and the existing duties imposed on the Future Fund Board’s members by the Future Fund legislation: p. 17. The ANAO has noted that exclusion of the Future Fund Board of Guardians will ‘require consequential amendments to the Future Fund Act 2006 to preserve the Auditor-General’s mandate in relation to the audit of the Future Fund Management Agency’s annual financial statements’: ANAO, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, op. cit., attachment p. 3.

[71].              Revised Explanatory Memorandum, op. cit., p. 60.

[72].              Crimes Act 1914 (Cth), accessed 26 June 2013.

[73].              Financial Management and Accountability Regulations 1997, Schedule 3, accessed 24 June 2013.

[74].              Revised Explanatory Memorandum, op. cit., p. 32.

[75].              Ibid., p. 18.

[76].              ANAO, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, op. cit., attachment p. 2.

[77].              The operative provisions of the Public Service Amendment Act 2013 will commence on 1 July 2013.

[78].              Australian Accounting Standards Board, AASB 10: Consolidated Financial Statements, accessed 24 June 2013.

[79].              ANAO, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, op. cit., attachment p. 4.

[80].              Revised Explanatory Memorandum, op. cit., p. 18.

[81].              As at June 2012 the Commonwealth public sector comprised some 250,000 employees; as at December 2012 the Australian Public Service (a subset of the Commonwealth public sector) comprised 165,598 employees employed under the Public Service Act 1999: Australian Bureau of Statistics (ABS), ‘6248.0.55.002—Employment and earnings, public sector, Australia, 2011–12’, ABS website, 2012; Australian Public Service Commission (APSC), ‘Snapshots December 2012’, APSC website, 2013, accessed 24 June 2013. The ABS figure includes employees of ‘[a]ll departments, agencies and authorities created by, or reporting to, the Commonwealth Parliament’ (including employees of jointly-administered Commonwealth-state bodies), but excludes ‘members of the Australian permanent defence forces; employees of overseas embassies, consulates, et cetera; employees based outside Australia; employees on workers’ compensation who are not paid through the payroll; directors and office holders of public sector organisations who are not paid a salary’: ABS, ‘6248.0.55.002—Employment and earnings, public sector, Australia, 2011–12’, ibid. The APS figure does not include staff employed in Commonwealth-owned companies, statutory authorities, the Australian Defence Force, or staff in government business enterprises who are not employed under the Public Service Act 1999: APSC, ‘Snapshots December 2012’, ibid.

[82].              ANAO, Submission to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, op. cit., attachment pp. 2–3.

[83].              Ibid., p. 3.

[84].              Revised Explanatory Memorandum, op. cit., p. 25.

[85].              Ibid.

[86].              S Sedgwick (Public Service Commissioner), Evidence to Joint Committee of Public Accounts and Audit, Inquiry into the Public Governance, Performance and Accountability Bill 2013, op. cit., pp. 33–34.

[87].              JCPAA, Report 438: advisory report on the Public Governance, Performance and Accountability Bill 2013, op. cit., p. 47.

[88].              Revised Explanatory Memorandum, op. cit., p. 26.

[89].              Ibid., p. 27.

[90].              Ibid., p. 28.

[91].              Under subsection 27F(2) of the CAC Act such disclosure is not required in specified circumstances, for example, if the interest arises in relation to a director’s remuneration as a director.

[92].              Revised Explanatory Memorandum, op. cit., p. 28.

[93].              Revised Explanatory Memorandum, op. cit., p. 45.

[94].              DoFA, Finance Minister’s orders for financial reporting, paragraph 122.3, accessed 17 June 2013.

[95].              ANAO, Compensation payments and debt relief in special circumstances, Audit report, 35, 2003–04, 24 March 2004, p. 21, accessed 13 June 2013.

[96].              Ibid.

[97].              Audit Act 1901 (repealed) section 34A, emphasis added, accessed 13 June 2012.

[98].              Legal Services Directions 2005, Appendix B, paragraph (2)(b), accessed 13 June 2013.

[99].              For a discussion of these issues generally, see: Commonwealth Ombudsman, To compensate or not to compensate? Own motion investigation of Commonwealth arrangements for providing financial redress for maladministration, September 1999, accessed 13 June 2013.

[100].              Paragraph 68(1)(c).