Government Senators' Report
Conduct of the inquiry
1.1
The Australian Research Council Amendment Bill 2006 (the
bill) was introduced in the House of Representatives on 30 March 2006 to amend the Australian Research Council Act 2001 to implement changes to the
governance arrangements of the Australian Research Council (ARC). The
provisions of the bill were immediately referred to the committee for inquiry
and report by 10 May 2006. On
10 May the Senate agreed to an extension of time to report until 2 June 2006.
1.2
Notice of the inquiry was posted on the committee's
website and advertised in the Australian.
The committee also contacted individuals and organisations to notify them of
the inquiry and seek submissions. The committee received 7 submissions,
listed at Appendix 1. The committee conducted a public hearing in Melbourne
on Thursday, 4 May 2006. A
list of the witnesses who gave evidence is at Appendix 2.
Background
1.3
The bill amends the Australian
Research Council Act 2001. It implements changes to the governance
arrangements of the ARC following the Government's endorsement of the
recommendations of the Review
of Corporate Governance of Statutory Authorities and Office Holders conducted
by Mr John
Uhrig in 2003. The terms of reference for
the Uhrig review were based on the examination of statutory authorities'
structures for good governance, focusing on the relationships between statutory
authorities and the responsible minister, the parliament and the public,
including businesses.[1]
1.4
The review's findings prescribed the development of two
governance templates: first, a board template where responsibilities are not
solely accountable to the Commonwealth and where there are commercial interests
involving other stakeholders; second, an executive management template which
involves single line management.[2]
1.5
The Minister's second reading speech stated that the appropriate
governance arrangements for the ARC are to be modelled on the executive management
template.[3] The Minister also stated
that the ARC will remain a prescribed agency under the Financial Management and Accountability Act 1997, and a statutory
agency as announced in 2001 under the Government's Knowledge and Innovation policy.[4]
Purpose of the bill
1.6
The purpose of this bill is to amend sections of the ARC
Act which will result in the retirement of the ARC Board and the establishment
of new governance arrangements to clarify the functions of the Chief Executive
Officer. These amendments will remove the potential for confusion between the
responsibilities of the Board and the CEO and provide the CEO with full power
and responsibility for the ARC.[5]
1.7
The Government took this opportunity to increase the annual
funding cap by $572 million for research funding, due to the indexation
arrangements, as part of the Government's ten year commitment to science and innovation
under the program named Backing Australia's Ability. Also included in this bill is
the transfer of the Commercialisation Training Scheme to the Department of
Education, Science and Training (DEST), which will maximise the number of
research students who benefit from programs administered by the department.[6]
Revised governance arrangements and maintaining independence
1.8
One of the main issues of concern raised in submissions
was the ability of the ARC to maintain its independence from ministerial
direction with the retirement of the Board.
1.9
The ARC, under direction of the CEO, will maintain its
independence within the boundaries drawn up in its legislative framework, and
through other governance arrangements recommended by the Uhrig review. The
Government recognises the high integrity of the College
of Experts peer review process
through which research grants are recommended by the ARC. The bill (and
currently the Act) also minimises ministerial interference.
1.10
With the whole of government approach to governance
arrangements, the ARC has legislative obligations in performing its role as
outlined in the FMA Act and Public Service Act. The bill provides clearly
stated performance guidelines for the ARC and its CEO, ensuring a clear
delineation of roles. Under the executive management template, statutory
authorities are not required to maintain a board, especially those authorities
which perform largely non-regulatory or non commercial functions, and as such
would benefit from another form of governance. Given this, the ARC Board is to
be retired under the bill, providing the ARC with more streamlined governance
arrangements bringing it wholly in line with the framework that the Uhrig review
defined as most appropriate for PS Act and FMA Act agencies.
1.11
The role of the CEO is further clarified by the bill,
which does not allow the minister to direct the CEO 'to recommend that a
particular proposal should or should not be approved as deserving financial
assistance under Division 1 of Part 7'.[7]
1.12
The independence of the ARC to develop its strategic
planning process and initiation of research inquiries and priorities continues
under this bill. The strategic plan will continue to be a public document and published
on a rolling triennium. An advisory committee will be created to assist in this
process.[8]
1.13
In relation to the power of the Board to conduct
inquires into matters of research, DEST informed the committee that the Board
had not utilised this power since the introduction of the 2001 Act. The
Government, in retiring the Board, has removed this power because it is already
provided for in the PS Act. This does not preclude the CEO from initiating
inquiries.[9]
The roles of the minister and the CEO
1.14
The minister, as a representative of the Government,
has responsibilities in a governance role, and is accountable for the
performance of statutory authorities under Section 64 of the Constitution.
Ministers are responsible for the performance of their portfolios and have a
duty to execute and maintain the laws of the Commonwealth. But in stating this,
the minister is also accountable to the Government through the issue of
Administrative Orders by the Governor-General. These orders specify the
legislation to be administered by ministers. As such the minister is
responsible for the success of the authority and will be held to account by the
parliament.[10]
1.15
DEST informed the committee in its evidence that the
amendments do not change the power of the minister's decision-making role in
appointments to designated committees and the grant approval processes. The
amendments maintain the current arrangements under the Act.[11]
1.16
The CEO will be directly responsible to the minister
for the operations of the ARC and will not have the added responsibility of having
to report to the Board as well as the minister. DEST stated:
Moving from the current ARC arrangements to the executive
management template, as the previous minister announced last year, removed that
level of confusion wherein the CEO served two masters. He now reports directly
to the minister.[12]
1.17
DEST stated in its submission that the Act gives the
minister the power to direct the ARC or the ARC Board regarding its performance
and that these directions are to be tabled in each house of parliament within 15
sittings days and published in the ARC's annual report.[13] The transparency of the minister's
directions will still apply after the introduction of the bill and are to be
covered in the Statement of Expectations from the minister and the response
from the CEO in the Statement of Intent. The Statement of Expectations will be made
public.
1.18
With the removal of the Board, the role
of the CEO will take on a wider and more diverse level of activity. The CEO will
perform the following functions under the bill: administer the regimes of financial
assistance under the National Competitive Grants Programmes, Discovery, Linkage and Centres; make
recommendations to the minister on what proposals should be approved as
deserving of financial assistance; and provide advice to the minister on
research matters and any other functions conferred on the CEO by the ARC Act or
any other act.[14] To assist with the increased
workload the CEO will have the support of the ARC and the ability to delegate
functions to SES and EL2 level officers within the organisation.[15]
1.19
This bill also transfers from the Board
to the CEO the obligation to make funding rules and vary these rules with the
approval of the minister. The minister cannot approve funding applications
which have not been considered according to the approved funding rules. Only
those applications which have been through the assessment process for specific
ARC program can be approved for funding. In this process the CEO is required to
make recommendations to the minister about which funding proposals should and
should not be approved. Currently the minister is allowed to seek additional
advice from the ARC before making a decision to approve a funding proposal and
this will not change.[16]
Designated committees
1.20
As is currently the case, the minister will be able to
establish designated committees to assist in carrying out the functions of the
CEO. The minister will also be able to dissolve a designated committee at any
time. Under the bill there is no prescribed number of members needed to form a
committee, as with the old requirement of five members for each committee. This
is to enable the minister to establish advisory committees of whatever size he
or she believes is appropriate to deal with the matter. It will be the minister's
responsibility to approve the functions and membership of a designated
committee, based on advice from the CEO, and others, as the minister requires.
1.21
The Minister's second reading speech announced the
creation of an advisory committee to 'provide high-level, strategic advice' to
the ARC. This committee will act in an advisory capacity in support of the
CEO's strategic planning. The College
of Experts will be maintained as a
designated committee and will continue with its role in the ARC's peer review
process.[17]
Accountability
1.22
Government Senators note that under this bill the
current reporting mechanisms for the ARC remain in place, and ensure a high
level of transparency. The preparation of the annual report and strategic plan
will continue to demonstrate how the ARC supports the Government's commitment
to K&I policy. These are public documents, which enables the parliament and
the public to examine them.
1.23
Further accountability and transparency will be
maintained through the issuing of a Statement of Expectations by the minister. The
statement will ensure the ARC has a clear understanding of the Government's
expectations and the importance of linking this to the ARC's strategic
direction and performance in carrying out its duties. The statement will
include values central to the success of ARC, and also those concerning the
ARC's relationships with its stakeholders and the Department. The ARC will
outline how they propose to meet the Minister's expectations by replying with a
Statement of Intent.
1.24
The Uhrig review mentions that there should be a
'strong working relationship between the portfolio department and the statutory
authority'. DEST, in its submission, states that there will be a Memorandum of
Understanding between the ARC and the department.[18]
Conclusion
1.25
The Government acknowledges the concerns and issues
raised in evidence, but believes that implementing the recommendations of the
Uhrig review will not threaten the role that peer review plays in the ARC's
operations. This bill creates a simplified line of accountability between the minister
and the ARC creating stronger governance which will lead to enhanced
performance, consistent with the Government's interpretation of the Uhrig
review recommendations.
Recommendation
The committee recommends that the bill be passed.
Senator Judith Troeth
Chairman
Navigation: Previous Page | Contents | Next Page