Public Service Amendment (Payments in Special Circumstances) Bill 2011
INTRODUCTION
1.1
The Public Service Amendment (Payments in Special Circumstances) Bill
2011 (the bill) was introduced into the Senate on 12 May 2011 by Senator Nick
Xenophon. On 7 July 2011, the Senate, on the recommendation of the Selection of
Bills Committee, referred the bill to the Finance and Public Administration
Legislation Committee for inquiry and report by 16 August 2011. In undertaking
the inquiry, the committee was requested to consider:
1. The
lack of proper compensation scheme for claimants who have been disadvantaged as
a result of administrative errors by Government agencies not included under the
Scheme for Compensation for Detriment caused by Defective Administration (CDDA)
2. The
recommendations of the Commonwealth Ombudsman in the Ombudsman's Report No 4 of
2010 in relation to discretionary payments of compensation
3. The
losses caused to claimants because of administrative errors within Government
agencies not covered by the CDDA scheme
4. The
limited ability for claimants to seek compensation if the Government agency in
question is not covered by the CDDA scheme
5. The
limitations of discretionary payments in the Public Service Act 1999.[1]
Conduct of the inquiry
1.2
The committee advertised the inquiry on the Internet and in The Australian
and invited submissions from interested organisations and individuals. The
committee received six public submissions and one confidential
submission. The list of public submissions received is at appendix 1.
Submissions can be accessed through the committee's website at: https://www.aph.gov.au/senate/committee/fapa_ctte/index.htm.
1.3
The committee agreed not to hold a public hearing for this inquiry.
THE BILL
1.4
The bill proposes to repeal subsection 73(4) of the Public Service
Act 1999 (Public Service Act).
1.5
Section 73 of the Public Service Act provides for payments in special
circumstances. A minister may authorise a payment in special circumstances
which relate to, or arise out of:
- the payee's employment by the Commonwealth; or
- another person's employment by the Commonwealth.
1.6
Payments may be made as a lump sum or periodic. The minister may
authorise the payment even though the payments would not otherwise be
authorised by law or required to meet a legal liability. No authorisation can
be made for a payment/s in excess of a total of $100,000. Conditions may be
attached to the payment and any breach of the conditions could result in the
recovery by the Commonwealth of the payment/s.
1.7
A note under section 73 makes clear that payments under the section must
be made from money appropriated by the Parliament. Generally, a payment can be
debited against an agency's annual appropriation, providing that it relates to
some matter that has arisen in the course of its administration.
BACKGROUND
1.8
In March 2010, the Commonwealth Ombudsman reported on discretionary
payments by Comcare and the Department of Finance and Deregulation.[2]
The report was the result of an investigation into two separate complaints
about errors that had been made by Comcare in the calculation of workers
compensation payments. In each case, the errors resulted in underpayments that
were not discovered for 10 years (the case of Ms A) and 13 years (in the case
of Mr B).
1.9
On detecting its errors, Comcare paid each of the complainants the
amounts they should have originally received. In addition, both complainants
requested further compensation in recognition that, due to Comcare's error,
they had been deprived of the benefit of the money for a number of years. The
Ombudsman's investigation confirmed that Comcare had made errors in the calculation
of payments.[3]
1.10
The Ombudsman's report noted that generally, when a person suffers a
quantifiable loss arising from the defective administration of an Australian
Government agency, they can make a claim for compensation under the Scheme for
Detriment Caused by Defective Administration (CDDA scheme). CDDA scheme
payments are made where there is a moral obligation to pay compensation rather
than any legal liability arising under the general law.[4]
The Department of Finance and Deregulation (Finance) noted that:
Compensation is payable only where an applicant is found to
have suffered detriment as a direct cause of the defective administration.
There is no financial ceiling on payments, which are generally approved on the
basis that there is a moral, rather than legal, obligation to the claimant.[5]
1.11
Finance is responsible for development of the guidelines for the CDDA scheme.
If a payment is made under the CDDA scheme, the agency against which the claim
is made is responsible for making the payment out of its appropriation. The
CDDA scheme applies only to Financial Management and Accountability Act 1997
(FMA Act) agencies.
1.12
Comcare is not a FMA Act agency; it is a Commonwealth Authority under
the Commonwealth Authorities and Companies Act 1997 (CAC Act). As such,
no claim can be made under the CDDA scheme for matters in relation to Comcare.
Similarly, the CDDA scheme is not available to individuals who are seeking compensation
for defective administration on the part of contracted service providers or
state, territory or local government agencies providing a service on behalf of
a Commonwealth Government agency.
1.13
As access to the CDDA scheme was closed to Mr B, he was referred to
Finance to request an act of grace payment under section 33 of the FMA Act. Mr
B's request for an act of grace payment was declined. The Ombudsman noted that
an act of grace payment is 'generally not available' in relation to the actions
of an agency established under the CAC Act. The Ombudsman went on to observe
that, while there are exceptions to the rule, 'act of grace payments are not
intended to cover financial losses suffered as the direct result of defective
administration by a CAC agency'. The Ombudsman concluded:
For this reason, it became apparent in Mr B's case that
Finance was not in a position to deal with a number of the claims made in his requests
for additional compensation, particularly relating to Comcare's errors in
administration.[6]
1.14
The Ombudsman noted that in its response to the investigation, Comcare
indicated that it did not consider the incidental powers it commonly relies
upon to resolve administrative matters would allow it to compensate a person
for a loss that could be characterised as a loss of interest on money owed. Further,
the payment of interest is already contemplated by the Safety,
Rehabilitation and Compensation Act 2011 (SRC Act) in a defined set of
circumstances and therefore the existence of an express provision relating to
the payment of interest limits its capacity to make discretionary payments to
people like Ms A and Mr B.[7]
1.15
The Ombudsman concluded that the claimants should have been able to rely
on Comcare's administrative processes detecting fundamental errors in its
calculations within a reasonable time period. However, there is currently no
direct means for people who have suffered a financial loss due to Comcare's
defective administration to have their claims for compensation considered. The
Ombudsman considered that, while there were difficulties in settling Ms A's and
Mr B's claims for compensation, Comcare should find a way to compensate each of
them.
1.16
To address the difficulties faced in seeking compensation, the Ombudsman
recommended that Comcare and Finance develop a proposal for establishing a scheme,
similar to the CDDA scheme, whereby people adversely affected by poor administration
of the SRC Act can seek compensation. Finance supported this recommendation and
proposed that it prepare a submission to the Deputy Prime Minister seeking a direction
to allow determining authorities under the SRC Act to develop and implement a
scheme similar to the CDDA scheme. Such a scheme would allow determining
authorities like Comcare to deal with claims for compensation arising from
defective administration.[8]
1.17
In relation to the compensation payments sought by Ms A and Mr B,
Comcare arranged for Ms A to be compensated via her original employer. In the case
of Mr B, Comcare sought actuarial advice regarding the loss suffered and
compensated him under section 73 of the Public Service Act to the full amount
available under that section, that is $100,000.[9]
In addition, Comcare indicated that it would deal with any shortfall in
compensation through the proposed compensation scheme.[10]
1.18
Issues arising from access to compensation were also addressed by the Senate
Legal and Constitutional Affairs References Committee report on the inquiry
into the review of Commonwealth compensation payments tabled in December 2010.[11]
The Legal and Constitutional Affairs Committee considered the administration
and effectiveness of other mechanisms that enable governments to make
discretionary payments or to waive the payment of debts, including act of grace
and ex gratia payments; and the CDDA. The Legal and Constitutional Affairs Committee
concluded that the CDDA scheme provides a useful mechanism for addressing harm caused
by defective administration; however, it had not 'kept pace' with changes in
Commonwealth public administration. In particular, the committee commented that
the application of the CDDA scheme to FMA Act agencies only appears to create
anomalous outcomes: if a person suffers loss or damage due to defective
administration, appropriate restitution should be available regardless of
whether the loss or damage was caused by a FMA Act agency, a CAC Act body or a
third party contracted to provide a Commonwealth service. The Legal and
Constitutional Affairs Committee recommended that Finance investigate the
extension, in appropriate circumstances, of the CDDA scheme to CAC Act agencies
and to third party providers performing functions or providing services on
behalf of the Commonwealth.[12]
ISSUES
1.19
Submitters commented on both the proposed amendment to section 73 and the
mechanism to address claims for compensation arising from defective
administration by agencies not covered by the CDDA scheme.
Section 73 payments
1.20
As noted above, the proposed amendment to the Public Service Act would
remove the $100,000 limit on payments for special circumstances. The Community
and Public Sector Union (CPSU) welcomed the proposal. The CPSU noted that the
amount of $100,000 in subsection 73(4) had not been increased since 1999 and
therefore, in relative terms, the maximum payment available has decreased over
time.[13]
1.21
Mr Barry Crush, who sought compensation from Comcare for defective
administration, commented on the removal of the limit:
By removing the $100,000 cap on discretionary payments I
believe that myself and others who have been denied compensation through no
fault of their own, will finally be able to avail themselves of a mechanism
equipped to provide more realistic and individually appropriate compensation.[14]
1.22
However, other submitters did not agree with the proposed amendment. The
Australian Public Service Commission (APSC) commented that rather than removing
the limit, consideration could be given to increasing the limit and/or
introducing a mechanism for automatic adjustment of the limit.
1.23
The APSC noted that the amount available under section 73 had remained
unchanged since 1999. The APSC explained that the restriction was intended to
ensure that where an amount might exceed $100,000 it would have to be referred
for decision by the Minister for Finance and Deregulation under the general
arrangements for act of grace payments by the Commonwealth. This reflected the
then requirement for act of grace payments above $100,000 to be subject to a
report by an Advisory Committee before the Finance Minister could authorise
such an amount under section 33 of the FMA Act. The APSC noted that a
report by the Advisory Committee now applies to amounts over $250,000.[15]
1.24
According to the APSC's understanding, the section 73 payment mechanism
is used rarely. The APSC also provided the committee with information on the
intended uses of section 73 as set out in the Explanatory Memorandum to the
Public Service Bill 1999:
- the reimbursement of legal costs incurred by APS employees in the
course of, or in connection with, their employment;
- payments in lieu of entitlements lost as a result of incorrect
advice;
- the settlement of unfair termination claims; or
- the payment of compensation following a recommendation of the (former)
Merit Protection and Review Agency.[16]
1.25
The APSC explained that it did not support the removal of the limit on
payment in section 73 as:
...the Parliament specifically legislated for a ceiling in
the interests of providing an appropriate level of accountability and
centralised oversight for any larger payments (through the act of grace payment
mechanisms under s.33 of the FMA Act), while providing the Public Service
Minister (and by delegation, Agency Heads) with a reasonable capacity to make
payments relating to circumstances arising out of a person's Commonwealth
employment.[17]
1.26
The APSC saw it as 'prudent' that payments made under section 73 remain
subject to a greater level of accountability where they involve large amounts
of public money. However, as already noted, the APSC considered that the limit
could be increased by tying the amount available under section 73 to the amount
available under the FMA Act, hence restoring the link to the FMA Act ceiling.
The APSC further commented that it will give consideration to amending the
Public Service Act in this way as part of the amendments currently being
drafted to reflect the Blueprint for the Reform of Australian Government
Administration.[18]
1.27
Comcare also commented on the proposed amendment to section 73 and noted
that it is 'an important section in the context of discretionary government
payments'. Comcare agreed that it would be reasonable to review the level of
the section 73 limit, however, Comcare suggested that as a proxy for defective
administration under the SRC Act it is an imperfect mechanism. In this regard,
Comcare pointed to the following issues:
- there are some practical and legal constraints when considering
compensation for defective administration using section 73, in particular, the
requirement for there to be a nexus with employment; and
- Comcare administers claims under the SRC Act for all workers employed
by Commonwealth departments and most Commonwealth authorities and the ACT
Government, providing safety, rehabilitation and compensation services.
Self-insurers, licensed by the Safety, Rehabilitation and Compensation
Commission (SRCC), provide the same services to their employees. However, only
APS employees have access to payments under section 73, thus ACT employees and
employees of other non-APS statutory authorities would not have access to this
mechanism. Section 73 also does not go any way towards addressing defective
claims administered by a self insurer under the SRC Act.[19]
1.28
Comcare concluded that:
It is Comcare's view that for the purposes of equity and
fairness, any CDDA options available to claimants under the SRC Act should be
available to all claimants, not just APS employees.
Comcare notes that whether section 73 of the PS Act is used
as a proxy CDDA scheme or not, the original purpose of this section, i.e. to
compensate for special circumstances that arise connected with Commonwealth
employment still remains. Given that the quantum of the maximum payable under
this section has not been increased since its inception, it would seem reasonable
to review the amount. [20]
1.29
Finance also commented on the proposed amendment to section 73 and
stated that 'it would be inappropriate to completely remove the threshold of $100,000'.
Finance went on to note that while the Public Service Act and Parliamentary
Service Act 1999 have a financial limit of $100,000, the FMA Act has
increased its authorisation limit to $250,000 before the consideration of an
Advisory Committee report. Finance stated that it 'considers there is a need
for consistency in the financial limitations that exist in the discretionary
compensation mechanisms'.[21]
Claims for compensation arising
from actions of agencies not covered by the CDDA scheme
1.30
While welcoming the amendment proposed in the bill, the Commonwealth
Ombudsman noted that it will not fully address current inequities in
compensation across different agency types. The Ombudsman submitted that more
comprehensive work needs to be done to establish CDDA-type schemes to address
defective administration by non-FMA Act agencies, contracted government service
providers and state, territory and local government authorities which provide
services on behalf of Commonwealth Government agencies.[22]
1.31
Mr Barry Crush commented:
I believe that in my particular case, very serious
administrative errors were made by Comcare, for which I am currently unable to
seek appropriate compensation, due to the fact that Comcare is not included
under the Scheme for Compensation for Detriment caused by Defective
Administration.[23]
1.32
Mr Crush provided information on the significant impact of the defective
administration on his financial position and personal life. Mr Crush added that
if a CDDA-type scheme were established, its objectives should reflect the
objectives of the CDDA scheme 'in order to achieve a just outcome in terms of
compensation'.[24]
1.33
Comcare also commented that there is only a limited ability to seek
compensation if the government agency involved is not covered by the CDDA scheme.
Comcare stated that apart from section 73 payments, the only existing option
for payment of interest on the delay of payment of compensation is contained in
section 26 of the SRC Act in respect of the payment of permanent impairment. Section
26 of the SRC Act provides that where a compensation payment for a permanent impairment
is delayed over 30 days, interest is payable. Comcare went on to state that there
are some limitations in the use of this provision, for example, this section
applies only to compensation for permanent impairment and interest is not
payable where Comcare has been requested to reconsider the determination or
where the matter has been appealed to the Administrative Appeals Tribunal.
1.34
Comcare considered that interest is not sufficient to cover the broader
set of economic losses that might be covered in a CDDA scheme. Comcare concluded
that:
...the only way of being able to 'put things right' where
defective administration occurs, so that the process is open, accountable and transparent,
and applicable to all claims managed under the SRC Act, will involve
legislative amendment.[25]
1.35
Comcare commented on the Ombudsman's recommendation in relation to the
introduction of a CDDA-style scheme and stated that it 'continues to work with
Finance and DEEWR [Department of Education, Employment and Workplace Relations]
to develop a proposal addressing this recommendation'. Comcare suggested that
the following plan could be implemented:
- Step 1: Amendment to the SRC Act, specifically section 69 of the
SRC Act that sets out Comcare's functions. This section should be amended to
confer on Comcare an additional function authorising it to provide compensation
to claimants for financial detriment caused by defective administration.
- Step 2: The Minister for Education, Employment and Workplace
Relations issue directions and guidelines to the whole of the Comcare
jurisdiction in applying the CDDA requirements.[26]
1.36
Finance also commented on the possible avenues for compensation available
to CAC Act bodies. Finance noted that there may be mechanisms for CAC Act
bodies under their enabling legislation, the CAC Act and the Corporations
Act 2001. Finance stated that:
CAC Act bodies are different from other Commonwealth entities
in that they are legally and financially separate from the Commonwealth and
their directors and officers are subject to a range of directors' duties.
Both the Corporations Act 2001 and the CAC Act include
penalties for misconduct. It would be inappropriate for appropriations and taxpayers
to fund administrative errors by CAC Act bodies, including Government Business
Enterprises.[27]
1.37
Finance concluded that it is unnecessary and inappropriate to expand the
scope of the CDDA scheme to encompass bodies that are financially and legally
separate from the Commonwealth and stated:
Finance considers that a compensation payment under the CDDA
Scheme for a non-FMA agency for reasons purely relating to the administrative
actions of the agency could be considered to be circumventing the intention of
Parliament. The CDDA Scheme is not available to Comcare and there may be
alternative avenues available to CAC Act bodies that would allow for
individuals to be compensated.[28]
1.38
Finance indicated that it has been consulting with Comcare and the DEEWR
in implementing the recommendations in the Ombudsman's Report.[29]
Conclusion
1.39
The lack of adequate compensation arrangements for non-CDDA scheme agencies
has come under scrutiny by the Commonwealth Ombudsman and the Senate Legal and
Constitutional Affairs References Committee. The committee notes the
conclusions of Senate Legal and Constitutional Affairs References Committee
that the present arrangements do not reflect current Commonwealth public administration
and do not provide adequate mechanisms for addressing financial loss arising
from defective administration by non-FMA Act government agencies.
1.40
The committee is supportive of these conclusions. However, the committee
does not consider that the removal of the limit contained in subsection 73(4)
of the Public Service Act is warranted. Rather, the committee supports the
alignment of the amount contained in section 73 with the authorisation limit of
$250,000 for act of grace payments under the Financial Management and
Accountability Act 1997.
Recommendation 1
1.41 The committee recommends that the Public Service Amendment (Payments in
Special Circumstances) Bill 2011 be amended as follows:
Schedule 1, page 3 (lines 4 and 5),
omit item 1, substitute:
1. Subsection
73(4)
Omit "$100,000",
substitute "$250,000".
1.42
In addition, the committee notes that the $100,000 limit is also
contained in the Parliamentary Service Act 1999. As a matter of equity,
the committee considers that consideration should also be given to amending the
Parliamentary Service Act to increase the limit in line with the FMA Act.
Recommendation 2
1.43 The committee recommends that subsection 66(4) of the Parliamentary
Service Act 1999 be amended to increase the limit of payments available in
special circumstances to $250,000.
1.44
In relation to the development of a CDDA-type scheme to address
defective administration in non-FMA Act Commonwealth Government agencies, the
committee considers that it is important that claims for defective administration
are treated in an equitable manner across public sector agencies. The committee
therefore considers that the consultations taking place among the Department of
Finance and Deregulation, Comcare and the Department of Education, Employment
and Workplace Relations to implement the recommendations of the Commonwealth
Ombudsman be concluded as a matter of priority.
Recommendation 3
1.45 The committee recommends that the consultations taking place among the
Department of Finance and Deregulation, Comcare and the Department of
Education, Employment and Workplace Relations to implement recommendation 1
contained in the Commonwealth Ombudsman's Report No. 4 of 2010 be concluded as
a matter of priority.
Senator Helen Polley
Chair
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