Chapter 4 Part 3 – Amendments relating to finance
Background
4.1
Schedule 1, Part 3 of the Bill will amend the Norfolk Island Act 1979
(Cwlth) to ‘enable the implementation of a contemporary financial management
framework.’[1]
4.2
In particular, the new financial management framework will be ‘a
customised and proportionate…framework that addresses the management of public
money and public property, preparation of budgets, financial reporting, annual
reports and procurement’ by the Government of Norfolk Island and its
Administration.’[2]
4.3
This includes appointment of the Commonwealth Auditor-General to
undertake audits of the annual financial statements of the Administration and
Territory authorities.[3] The option of appointing
a Commonwealth Financial Officer to provide assistance to Norfolk Island is
also included.[4]
4.4
Further, the provisions in the proposed Bill implementing a financial
framework will come into effect on 1 July 2010.
Summary of key sections
4.5
A summary of the key sections contained in Schedule 1, Part 3 follows.
4.6
Proposed subsection 4(1) and sections 25, 27, 47 and 48 will
clarify the definition of public money and public property of the Territory to
correspond with the definition contained in section 5 of the Financial
Management and Accountability Act 1997 (Cwlth).
4.7
Proposed subsection 4(1) and section 46 will define Territory
Authority modelled on the definition of Commonwealth Authority in section
7(1) of the Commonwealth Authorities and Companies Act 1997 (Cwlth).
4.8
Proposed section 48 will require the Legislative Assembly to make
appropriations to support expenditure by the Government of Norfolk Island,
including Ministers and the Administration.
4.9
Proposed new section 48A will require the Norfolk Island Minister
of Finance to prepare annual budgets for the Administration and Territory
Authorities. These annual budgets must be prepared in accordance with
Regulations and Ordinances made under the Norfolk Island Act. This section also
provides that the Norfolk Island Minister for Finance must as soon as practicable
cause copies of annual budget statements to be tabled in the Legislative
Assembly and provided to the Administrator. Once received, the Administrator is
required to provide a copy to the relevant Commonwealth Minister.
4.10
Proposed new section 48B will require the Norfolk Island Minister
for Finance to prepare annual financial statements for the Administration and
Territory Authorities as soon as practicable after the end of a financial year
and then provide the financial statements to the Commonwealth Auditor-General
for audit.
4.11
Proposed new section 48C will require the Commonwealth
Auditor-General to prepare an audit report on the annual financial statements
required under section 48B. The Commonwealth Auditor-General must provide a
copy of the audit report to the Norfolk Island Minister for Finance, the
Administrator and the responsible Commonwealth Minister. The Norfolk Island
Minister for Finance must table a copy of that audit report in the Legislative
Assembly, accompanied by the annual financial statements, as soon as
practicable after receiving it. The responsible Commonwealth Minister must
cause a copy of the audit report to be tabled in each House of the Parliament
as soon as practicable.
4.12
Proposed new section 48D enables the Commonwealth Auditor-General
to charge audit fees for statement audits made under section 48C.
4.13
Proposed new section 48E will allow the Commonwealth
Auditor-General to conduct performance audits of the Administration and
Territory Authorities. The Commonwealth Auditor-General must provide a copy of
the report to the Norfolk Island Minister for Finance, the Administrator and
the responsible Commonwealth Minister. The Auditor-General must cause reports
on performance audits under this section to be tabled in each House of the
Parliament. The Norfolk Island Minister for Finance must table a copy of that
report in the Legislative Assembly as soon as practicable after receiving it. The
responsible Commonwealth Minister must cause a copy of the report to be tabled
in each House of the Parliament as soon as practicable. Copies of the audit
report must also be supplied to the relevant Chief Executive Officer and
manager or managers of the Territory authority which was the subject of the
audit.
4.14
Proposed new section 48F requires the Commonwealth
Auditor-General to seek comments on proposed reports required under section
48E. Where the Administration was the subject of the audit, the Auditor-General
must provide the Chief Executive Officer with a copy of the proposed report.
Where a Territory authority was the subject of the audit, the Auditor-General
must provide the responsible manager or managers with a copy of the proposed
report.
4.15
Proposed new section 48G will ensure that the Commonwealth Auditor-General
has all of the powers and functions necessary to undertake his or her
obligations under the Norfolk Island Act.
4.16
Proposed new section 48H will require the Norfolk Island Minister
for Finance to prepare periodic financial statements in relation to the
Administration and each Territory authority. The financial statements must be
prepared in accordance with regulations and Orders made under the Norfolk
Island Act. This section also provides that the Norfolk Island Minister for
Finance must as soon as practicable cause copies of the financial statements to
be tabled in the Legislative Assembly and provided to the Administrator. Once
received, the Administrator is required to provide a copy to the relevant
Commonwealth Minister.
4.17
Proposed new section 48J will require the Chief Executive Officer
to prepare annual reports as soon as practicable after the end of a financial
year. The annual report must be prepared in accordance with regulations, and
must report on the operations of the Administration and Territory authorities
in that financial year. This section also provides that the annual report must
be given to the Norfolk Island Chief Minister, who, as soon as practicable
after receiving it must table a copy of the annual report in the Norfolk Island
Legislative Assembly, and provide a copy of the annual report to the
Administrator. As soon as practicable after receiving a copy of the report, the
Administrator must send it to the responsible Commonwealth Minister.
4.18
Proposed new sections 48K and 48L will provide for the Chief
Executive Officer and/or the Minister for Finance to request, by written
notice, a Territory authority to provide information in order to prepare the
reports and statements required to be produced by them under the Norfolk Island
Act.
4.19
Proposed new section 48M will place an obligation on the Chief
Executive Officer to manage the affairs of the Administration in a way that
promotes the proper use of the Administration’s resources.
4.20
Proposed new section 48N will place an obligation on the Manager
or managers of a Territory Authority to manage the affairs of the Territory
Authority in a way that promotes the proper use of the Authority’s resources.
4.21
Proposed new section 48P will require the Norfolk Island Minister
for Finance to ensure that the accounts and records of the Administration
properly record and explain the transactions and financial position of the
Administration.
4.22
Proposed new section 48Q will require the responsible manager or
managers to ensure that the accounts and records of a Territory Authority are
prepared and kept in accordance with regulations and Orders made under the
Norfolk Island Act.
4.23
Proposed new section 48R will provide for regulations to be made
in relation to public money and public property of the Territory, and other resources
of the Administration. This provision will allow the Commonwealth to prescribe
regulations to supplement and provide further detail of the financial framework
provisions in Part VI of the Norfolk Island Act.
4.24
Proposed new section 48S will provide for regulations to be made
in relation to public money, property and other resources of the Territory and
Territory Authorities. This provision will allow the Commonwealth to prescribe
regulations to supplement and provide further detail of the financial framework
provisions in Part VI of the Norfolk Island Act.
4.25
Proposed new section 48T will allow the Commonwealth Finance Minister
to make Orders to supplement and provide further detail of the financial
framework provisions in Part VI of the Norfolk Island Act.
4.26
Proposed new section 51 will require the Norfolk Island Minister
for Finance to provide to the responsible Commonwealth Minister reports,
documents and information relating to the operations of the Administration.
4.27
Proposed new section 51A requires the Norfolk Island Minister for
Finance to provide to the Commonwealth Finance Minister, reports, documents and
information relating to the operations of the Administration.
4.28
Proposed new section 51B will require the Norfolk Island Minister
for Finance to provide to the responsible Commonwealth Minister reports,
documents and information relating to the operations of a Territory authority. These
are to be provided on request and in accordance with time limits set by the
responsible Commonwealth Minister.
4.29
Proposed new section 51C provides the Commonwealth Finance
Minister with the same authority to access relevant documents and information
as the responsible Commonwealth Minister under section 51B.
4.30
Proposed new section 51D will enable the appointment of a
Commonwealth Financial Officer for Norfolk Island at the discretion of the
Governor-General. It is intended that such an appointment may be made in the
event that the Governor-General is of the view that Norfolk Island would
benefit from Commonwealth assistance, for example in the implementation of the
financial framework obligations under this Part of the Norfolk Island Act.
4.31
Proposed new section 51E will provide a power for the responsible
Commonwealth Minister to apply for an injunction to enforce compliance with the
financial management and accountability provisions (defined in subsection 4(1)).
A new financial framework
Current financial reporting practice
4.32
The Norfolk Island Public Moneys Act 1979 requires that each of
the four funds (Revenue Fund, the Administration Services Fund, the Trust Fund
and the Loan Fund) prepare: an income and expenditure statement, appropriation
account, balance sheet, statement of cash flows, and notes to and forming part
of the financial statements.[5]
4.33
The Government of Norfolk Island for the first time recently produced
audited financial statements in accordance with International Financial
Reporting Standards (IFRS). ‘Statements required by the Public Moneys Act
1979 were also produced, but not audited.[6]
4.34
The Attorney-General’s Department stated that the Department of Finance
and Deregulation had ‘advised that in its view, these statements are not
prepared in accordance with accepted accounting conventions.’[7]
4.35
In addition, the Attorney-General’s Department advised that previous
annual financial statements of the Government of Norfolk Island did not follow
generally accepted accounting conventions. While annual financial statements
were prepared for the Norfolk Island Administration, these did not include the
two Territory authorities.[8] Monthly financial
indicators are prepared, ‘although they are limited to certain financial
statements and only for certain funds.’[9]
4.36
In its 2008 report entitled Review of the cost to maintain the public
grounds and reserves by the public sector, the Norfolk Island Legislative
Assembly Public Accounts and Estimates Committee (PAEC) made a number of
findings in regard to performance management and financial management relating
to the Norfolk Island Administration.
4.37
In particular, in regard to performance management, the PAEC found that
the Administration did not have in place a system that quantifies work output
against financial input. The PAEC stated:
Unfortunately, the Administration does not have in place at
this time, a system that quantifies work output against financial input. The
inability to measure work output undermines a manager’s capacity to both
evaluate and compare his/her department’s efficiency. Regrettably, the
Committee could not expand on performance with managers however sees it as an
important aspect of necessary reform which was highlighted from this inquiry.
Management must monitor their service delivery against key performance
indicators on an ongoing basis to meet their relevant objectives. The continued
effectiveness, including relevance and priority of every core business unit
within every department must be evaluated annually.[10]
4.38
However, the PAEC noted that measuring and monitoring performance in the
public sector is provided for in the Human Resources Policy and Procedures
Manual, created under the Norfolk Island Public Sector Management Act 2000.
4.39
Recommendation 11 of the PAEC’s report stated:
The CEO and CMG establish and implement the Norfolk Island
Administration Performance Management System as provided for in Human Resources
Policy and Procedures Manual.[11]
4.40
In regard to financial management, the PAEC stated that creation of the
performance management system under recommendation 11 is the first step towards
financial and public sector reform. Further, the obligation of the Norfolk
Island public sector to plan, budget and report on accruals, outcomes and
outputs was emphasised and tied to the effective delivery of services. The PAEC
stated:
The creation of the Performance Management System at
Recommendation 11 is seen as the first tangible step towards financial and
public sector reform. The 12th Legislative Assembly have included in
their strategic objectives the continued improvement and reform of service
delivery by the public sector. Clearer accountability, underpinned by a robust
performance monitoring and evaluation regime must create a performance culture
within the public sector. Management focus must improve the responsiveness of
the public sector to the needs of the government and the community. Financial
management must put departments on more business like footings with management
obligation to plan, budget and report on accruals, outcomes and outputs. The Committee
sees effective financial management as closely connected to the public sector’s
ability to meet the expectations of the Norfolk Island Government in delivery
of their objectives.[12]
4.41
Norfolk Labor was critical of the financial management capacity of the
Government of Norfolk Island and highlighted various issues in regard to
financial management. Norfolk Labor drew attention to:
n ‘Gross and ill‐considered public
spending in most recent years has depleted the public account and undermined
the capacity to maintain existing services and to fund on‐going government in
general
n Over‐spending tarnished further
by a distinct lack of transparency, misinformation and accountability
n Government policy is
now driven by a desire to contain and/or reduce expense resulting in continuing
poor quality outcomes for the island community
n Statutory deadlines
for financial reporting not being met.’[13]
4.42
EcoNorfolk agreed with the need for a new financial framework and
stated:
We agree with Minister O’Connor that the amendments to the
Norfolk Island Act 1979 to reform the electoral system and establish a
contemporary financial management framework will assist the Norfolk Island
Government in meeting the needs and expectations of our community and to plan
for our future.[14]
4.43
Mr Michael King MLA was highly critical of the current budgetary
position of the Government of Norfolk Island since 2006 when the Government of
Norfolk Island had undertaken to reform its financial management practices. Mr
Michael King MLA stated:
Measures to improve the budgetary position have failed in the
extreme. Since 2006 the Government’s general reserves have been steadily
depleted; its quick ratio of liquidity (current realisable assets to current
liabilities) falling from 1.2:1 to 0.4:1 clearly evidencing an inability to pay
debts as they fall due. Capital outlay in the general revenue area is non‐existent having fallen
steadily since 1979 from some 12% of expenditure, through to some 2% in 2006,
to zero in 2008/2009. A persistent decline in capital outlay is a clear sign
that capital maintenance, capital replacement and capital purchases are being
deferred (even ignored) with resultant obsolescence, inefficiencies, OHS issues
and mounting long‐term
outlays which in Norfolk’s case are totally unfunded. The ‘current cash
balance’ of the consolidated public account diminished by some $9m in
2008/2009. A lay appreciation of this fall is that some $3m can be attributed
to the GFC [Global Financial Crisis] or the resultant decline in visitor
numbers. The remainder of this fall can be sheeted home to excessive,
improperly planned and managed and unbudgeted expenditure by the Government.
There is ample evidence available to support claims that projects were not
properly costed, that public procurement processes were not followed and that
some expenditure was not warranted. These features reflect a distinct departure
from any reform path and an abandonment of any concept of financial planning.[15]
Purpose of the new financial framework
4.44
The financial management framework included in the proposed Bill will:
n ‘bring Territory
authorities into Norfolk Island’s consolidated financial statements, budgets
and annual reports (providing a more complete picture of Norfolk Island’s
financial position)’; and
n ‘introduce a
statutory requirement for all financial statements, annual reports, audit
reports and budgets to be tabled in the Norfolk Island Legislative Assembly
(currently some of these documents are tabled, by convention only).’[16]
4.45
Further, subject to consultation with Norfolk Island, the financial
management framework may address:
n ‘minimum budget
requirements including the production of qualitative and quantitative
statements (e.g. comprehensive budget financial statements, based on external
reporting standards, including forward projections);
n commitments to spend
public money; and
n accounts and
records.’[17]
Regulations and orders
4.46
The details of the financial framework will be ‘included in regulations
and/or Commonwealth Finance Minister’s Orders made under the Norfolk Island
Act 1979 (Cwlth).’[18]
4.47
This reflects the current Commonwealth financial framework, ‘which
provides details supplementing financial management and accountability
requirements in the Financial Management and Accountability Act 1997,
the Commonwealth Authorities and Companies Act 1997, the Charter of
Budget Honesty Act 1998 and others in instruments such as the Financial
Management and Accountability Regulations 1997 and Financial Management
and Accountability Orders (Financial Statements for reporting periods ending on
or after 1 July 2009).’[19]
4.48
The Attorney-General’s Department advised that the Commonwealth Finance
Minister’s Orders ‘are likely to establish minimum requirements for budgeted,
periodic and annual financial statements, providing for greater transparency,
comparability and readability of Norfolk Island’s financial statements.’[20]
4.49
The minimum requirements established ‘are likely to include compliance
with Australian Accounting Standards, which are based on IFRS, and include
additional disclosure to reflect requirements particular to Australia and the
not-for-profit sector, in particular.’[21]
4.50
Compliance with Australian Accounting Standards will ensure that Norfolk
Island practice ‘is consistent with Australian Local Governments, State
Governments and the Commonwealth Government.’[22]
4.51
In addition, the Orders may ‘formalise the recent change to
IFRS-compliant annual financial statements.’ The Attorney-General’s Department
commented that the benefit is that ‘periodic financial statements’ produced for
Norfolk Island ‘are likely to be more comprehensive than those currently
produced, providing more complete and accurate financial information as to the
ongoing financial position of the Norfolk Island Government.’[23]
4.52
The Government of Norfolk Island will be able to add further detail to
Orders ‘where they see additional benefit to users of those statements in doing
so.’[24]
Implementation of a new financial framework
4.53
The Government of Norfolk Island agreed in principle that a new
financial framework is desirable, but that it should be established under
Norfolk Island legislation and regulations. The Government of Norfolk Island
stated:
In principle, we agree that a new financial framework is
desirable but believe that wherever practicable this should be established
under Norfolk Island legislation and regulations, not Commonwealth legislation.
The Norfolk Island Government is prepared to cooperate in making the necessary
changes in consultation with the Commonwealth.[25]
4.54
The Attorney-General’s Department advised that a working group had been
established to develop regulations which would enable the implementation of the
new financial framework for Norfolk Island. The working group consists of
departmental officers, Norfolk Island Administration officers and members of
the Government of Norfolk Island. The Attorney-General’s Department stated:
A joint working group is to be convened to discuss and
develop the financial framework regulations. This working group will involve
officers from the Attorney-General’s Department, the Department of Finance and
Deregulation and the officers you have nominated from the Norfolk Island
Administration and the Norfolk Island Government. The purpose of the working
group will be to discuss the proposed content of the regulations, and ensure
that proposals are understood and able to be implemented by the Norfolk Island
Administration and Territory authorities.[26]
4.55
The Government of Norfolk Island commented that as part of the working
group process, the Administration was raising issues about the costs associated
with the proposed Bill. The Government of Norfolk Island stated:
An officer-level working group has already been established
to fine-tune and work toward implementation of the new financial framework. The
CEO of the Administration is writing in detail to the Acting Assistant
Secretary of the Attorney-General's Department about a range of practical and
administrative issues requiring clarification and action, including the costs
of the changes and how these will be reimbursed in terms of the Commonwealth's
commitment that the changes would be made without cost to Norfolk Island.[27]
4.56
The Attorney-General’s Department stated that the working group would
meet before July 2010 to discuss the content of regulations relating to the new
financial framework. The Attorney-General’s Department stated:
It is anticipated that this working group will meet prior to
July to discuss the content of the regulations. The Norfolk Island Government
and Administration will be given the opportunity to comment on draft
regulations before they are registered.[28]
Conclusions
4.57
While the annual financial statements of the Government of Norfolk
Island have recently been prepared using International Financial Reporting
Standards, the statements did not comply with accepted accounting conventions.
4.58
Further, previous annual financial statements of the Government of
Norfolk Island did not follow generally accepted accounting conventions.
Although annual financial statements were prepared for the Norfolk Island
Administration, these did not include the two Territory authorities and monthly
financial indicators are limited to certain financial statements and only for
certain funds.
4.59
Further, the Norfolk Island Public Accounts and Estimates Committee
(PAEC) in its 2008 report, made a number of critical findings in regard to
performance and financial management by the Norfolk Island public sector. In
particular, the committee notes the PAEC findings which state that:
Financial management must put departments on more business
like footings with management obligation to plan, budget and report on
accruals, outcomes and outputs. The Committee sees effective financial
management as closely connected to the public sector’s ability to meet the
expectations of the Norfolk Island Government in delivery of their objectives.[29]
4.60
Taking into consideration the PAEC’s findings and further evidence
received, implementation of a new financial framework will assist the
Government of Norfolk Island and its Administration by allowing for greater
financial transparency and accountability and comparison between other Australian
jurisdictions.
4.61
A joint working group has been established to develop regulations to enable
the implementation of a new financial framework for Norfolk Island.
4.62
The committee supports the working group approach to developing
regulations accompanying the proposed changes to the financial management
framework as it will allow for any issues or concerns to be discussed and
addressed prior to implementation.
Proposed subsection 4(1) – definition of responsible manager
Background
4.63
Proposed subsection 4(1) will include a definition of responsible
manager. The term responsible manager ‘will identify the person
responsible for the finances of the Territory authority for the purpose of the
new financial framework in Part VI of the Norfolk Island Act.’[30]
Analysis
4.64
The Government of Norfolk Island made a number of comments in relation
to ‘concerns that arise on a casual reading of the proposed amendments
contained in Part 3’ of the Bill.[31]
4.65
Specifically, the Government of Norfolk Island raised concern about the
definition of responsible manager and stated the definition ‘is
extremely vague and likely in the variety of circumstances in which the
Administration and related entities operate give rise to confusion.’[32]
4.66
The Explanatory Memorandum states that ‘the definition of responsible
manager means the most senior individual (or group of individuals - where the
body has a governing council) with the body who (or which) is responsible for
the operation and finances for the Territory Authority.’[33]
Conclusions
4.67
Subsection 4(1) will create a definition for responsible manager
that is then applied to other relevant items that apply to the new financial
framework, provided for under Part 3 of the Bill.
4.68
The definition of responsible manager is provided in the
Explanatory Memorandum as ‘the most senior individual (or group of individuals
- where the body has a governing council) with the body who (or which) is
responsible for the operation and finances for the Territory Authority.’
Proposed new section 48(F) – Requirement of Commonwealth Auditor-General to
seek comments on proposed performance audit reports
Background
4.69
New section 48F will require the Commonwealth Auditor-General to seek
comments on proposed [performance audit] reports required under section 48E.[34]
4.70
In cases ‘where the Administration was the subject of the audit, the
Auditor-General must provide the Chief Executive Officer with a copy of the
proposed report.’[35]
4.71
Further, ‘where a Territory authority was the subject of the audit, the Auditor-General
must provide the responsible manager or managers with a copy of the proposed
report.’ A timeframe is imposed on receiving comments.[36]
Analysis
4.72
New Division 2 of the Bill inserts several new proposed sections ‘which
provides that the Auditor-General’s powers and functions apply in respect of
Norfolk Island as provided under the Auditor-General Act.’ In addition, ‘where
the scope of that Act does not otherwise extend, the Norfolk Island Act is
amended to enable those provisions to apply.’[37]
4.73
The Government of Norfolk Island advocated that ‘proposed new section
48F(5) should be amended to enable the Minister for Finance to request a copy
of all written comments on a performance audit report.’[38]
4.74
Section 48F is modelled on section 19 of the Auditor-General Act 1997
(Cwlth). Section 19 appears in full below.
19 Comments on proposed report
(1) After
preparing a proposed report on an audit of an Agency under section 15, the
Auditor‑General must give a copy of the proposed report to the Chief Executive
of the Agency.
(2) After
preparing a proposed report on an audit of a body under section 16 or 17,
the Auditor‑General must give a copy of the proposed report to:
(a) if
the body is a Commonwealth authority or a subsidiary of a Commonwealth
authority—an officer of the Commonwealth authority or the subsidiary of the
Commonwealth authority; or
(b) if
the body is a Commonwealth company or a subsidiary of a Commonwealth company—a
director or senior manager of the Commonwealth company or the subsidiary of the
Commonwealth company.
(3) After
preparing a proposed report on an audit under section 15, 16, 17 or 18,
the Auditor‑General may give a copy of, or an extract from, the proposed
report to any person (including a Minister) who, or any body that, in the Auditor‑General’s
opinion, has a special interest in the report or the content of the extract.
(4) If
the recipient of the proposed report, or the extract from the proposed report,
gives written comments to the Auditor‑General within 28 days after
receiving the proposed report, or the extract from the proposed report, the
Auditor‑General must consider those comments before preparing a final
report.
(5) The
Auditor‑General must, in the final report, include all written comments
received under subsection (4).
4.75
The Explanatory Memorandum provides that new section 48(F) will ‘ensure
that auditees and other persons considered by the Auditor-General to have a
special interest [in an audit] have the opportunity to review all proposed
reports arising from a performance audit.’[39]
4.76
Further, under this section ‘recipients of proposed reports [will] have
28 days to respond to the Auditor-General on the proposed report.’[40]
4.77
The confidentiality requirements provided by Part 5, Division 2 of the
Auditor-General Act will apply, and under subsection 36(3) of that Act, ‘recipients
must not disclose information in the reports except as authorised by the
Auditor-General.’[41]
4.78
Subsection 19(4) of the Auditor-General Act provides that if written
comments are provided to the Auditor-General after receipt of a proposed audit
report or an extract of a proposed audit report, then these comments must be
considered by the Auditor-General. Subsection 19(4) appears below.
(4) If
the recipient of the proposed report, or the extract from the proposed report,
gives written comments to the Auditor‑General within 28 days after
receiving the proposed report, or the extract from the proposed report, the
Auditor‑General must consider those comments before preparing a final
report.
4.79
Subsection 19(5) which follows then requires the Auditor-General to
include all written comments received in the final report.
(5) The
Auditor‑General must, in the final report, include all written comments
received under subsection (4).
4.80
Proposed subsection 48F(4) of the Bill provides a similar process to
follow in the case of consideration of written comments for Norfolk Island
audits. Proposed subsection 48(F) appears below.
(4) If
the recipient of the proposed report, or the extract from the proposed report,
gives written comments to the Auditor‑General within 28 days after
receiving the proposed report, or the extract from the proposed report, the
Auditor‑General must consider those comments before preparing a final
report.
4.81
Proposed subsection 48F(5) provides, (similarly to subsection 19(5) of
the Auditor-General Act) that all written comments received must be included in
the final report under section (4).
4.82
Further, under proposed new section 48E copies of a performance audit
report ‘must be provided to the Minister for Finance, the Administrator and the
responsible Commonwealth Minister.’ The report must also be ‘tabled in both the
Commonwealth Parliament, and the Norfolk Island Legislative Assembly. This is
consistent with performance audits undertaken under sections 15 and 16 of the Auditor-General
Act 1997.’[42]
Conclusions
4.83
Proposed new section 48(F) of the Bill is almost identical to section 19
of the Auditor-General Act and provides for the same process to be followed in
terms of preparing a proposed performance audit report, receiving written
comments and inclusion of the written comments in a final report.
4.84
As proposed subsection 48F(5) of the Bill requires that all written
comments received under subsection (4) must be included in the final report, any
person may have access to the written comments received by the Auditor-General
by accessing the final report.
4.85
In addition, Auditor-General’s reports are required to be tabled within
the Commonwealth Parliament and the Norfolk Island Legislative Assembly. Reports
are also made available to public sector agencies that are the subject of
performance or audit reports. Further, reports are generally available on the
Australian National Audit Office website.
4.86
The Commonwealth Auditor-General is an independent officer of the
Parliament and works within the parameters of the Auditor-General Act 1997
(Cwlth) to provide auditing services to the Parliament and public sector
agencies.
4.87
The committee believes it would be inappropriate to amend the
Auditor-General Act to allow a Minister to receive written comments provided to
the Auditor-General as it infringes on the independence of the office of
Auditor-General. Further, the anonymity of those providing written comments
would be compromised and could over time create reluctance for officials to
provide information for performance audits.
Proposed new section 51D - option to appoint a Commonwealth Financial
Officer for Norfolk Island
Background
4.88
New section 51D will enable the appointment of a Commonwealth Financial
Officer for Norfolk Island at the discretion of the Governor-General.[43]
4.89
The appointment of a Commonwealth Financial Officer is an optional
appointment and would be ‘made in the event that the Governor-General is of the
view that Norfolk Island would benefit from Commonwealth assistance, for
example in the implementation of the financial framework obligations under this
Part of the Norfolk Island Act.’[44]
4.90
Under this new section, the Commonwealth Financial Officer would have ‘access
to all relevant financial accounts, records, documents and information related
to the Administration or a Territory authority. Additional functions and powers
may be prescribed by regulation.’[45]
Analysis
4.91
The Government of Norfolk Island was concerned about the creation of new
Commonwealth Public Service positions such as the Commonwealth Financial Officer
and deputy or deputies to the Administrator. Appointment of a deputy or deputies
to the Administrator is discussed in Chapter 2.
4.92
Specifically, the Government of Norfolk Island stated the creation of
the Commonwealth Financial Officer ‘effectively again
returns Australian rule prior to 1979.’[46]
4.93
The Government of Norfolk Island added that it
welcomed further dialogue to clarify the Commonwealth’s intentions. The
Government of Norfolk Island stated:
The Norfolk Island Government’s concerns are that the
practical purpose and function of such officials remains unknown. The
Government therefore welcomes further dialogue with the Commonwealth to clarify
and particularise Commonwealth intentions in this regard.[47]
4.94
Dr Candice Snell did not support the appointment of a Commonwealth
Financial Officer instead advocated retaining authority for financial matters
with the Norfolk Island Minister for Finance. Dr Candice Snell stated:
[If] the changes in the bill were to say that the current
finance minister would no longer have control of finances on Norfolk Island,
and that would be changed to a Commonwealth financial officer or member. What I
am saying is that I still think that we could utilise our finance minister
here. I think that making changes and making decisions on payments and things
like that should be still done here, but I do agree that instead of taking that
power away from him we could work together and use a Commonwealth financial
audit every six months or every three months—or whatever they find
appropriate—rather than taking that power away.[48]
4.95
The Attorney-General’s Department advised that the appointment of the
Commonwealth Financial Officer is optional and would be made in consultation
with the Government of Norfolk Island and the Administration. The
Attorney-General’s Department stated:
In relation to the Commonwealth financial officer … it is in
fact not an inevitability. It is in fact a further possibility. I suspect the department
of finance might be involved in talking with the Attorney-General’s Department
about issues that might have arisen, but it may indeed be through some issues
raised by the Norfolk Island administration itself that means there would be
some extra benefit of further resources. My understanding is that it is an
officer who would be appointed by the responsible minister, so it would be a
matter for advice from the Attorney-General’s Department. But I expect there
would be consultation with the Norfolk Island administration and ministers and
also with the department of finance and the Commonwealth.[49]
4.96
In addition, the Attorney-General’s Department outlined the
circumstances where a Commonwealth Financial Officer would be appointed for
Norfolk Island and exampled the implementation of the financial and
accountability provisions of the Bill. The Attorney-General’s Department
stated:
The position of Commonwealth financial officer would be
filled by an existing Commonwealth officer in the event that such an appointment
is considered necessary by the responsible Commonwealth minister—for example,
if Norfolk Island requested assistance from the Commonwealth in the
implementation of the financial management and accountability provisions
contained in this bill.[50]
4.97
Further, the Attorney-General’s Department advised that in the event a
Commonwealth Financial Officer was required to be appointed either on request
by the Government of Norfolk Island, Administration or by the Commonwealth, ‘the
position [would] provide support, assistance, expertise, information or
training.’ The Commonwealth intends to monitor … progress in implementing the
reforms to determine if the appointment of such an officer is necessary.’[51]
4.98
The EcoNorfolk Foundation supported financial management reform and the
implementation of a new financial framework for Norfolk Island, including the
appointment of a Commonwealth Financial Officer for Norfolk Island. The
EcoNorfolk Foundation stated:
On financial frameworks, we thank the Commonwealth government
for its continual commitment in assisting Norfolk Island in implementing the
frameworks effectively. It is an important milestone that the appointment by
the Commonwealth of a Commonwealth Financial Officer for Norfolk Island is
undertaken as a priority, as is the amendment to the Norfolk Island Act to
provide for the appointment of the Commonwealth Attorney-General to conduct
audits of the Norfolk Island administration financial statements.[52]
Conclusions
4.99
The Government of Norfolk Island raised concerns about the intent and
purpose of a Commonwealth Financial Officer. However, there was also support
for the appointment of a Commonwealth Financial Officer in the context of
assisting with the implementation of the financial framework included in the
Bill.
4.100
The appointment of a Commonwealth Financial Officer is an optional
appointment which may be made at the discretion of the Governor-General.
4.101
The Attorney-General’s Department stated that a Commonwealth Financial
Officer may be appointed at the request of the Government of Norfolk Island or
Administration to provide support, assistance, expertise, information or
training in relation to the implementation of the new financial framework.
Further, the Attorney-General’s Department indicated that it would monitor
progress in implementing the reforms to determine if the appointment of a
Commonwealth Financial Officer is necessary.
4.102
The committee believes the option of appointing a Commonwealth Financial
Officer provides an important safety net for the Government of Norfolk Island
and Administration in the event that support, assistance, expertise,
information or training is required in relation to the implementation of the
new financial framework.
Proposed new section 51E – Power of Commonwealth Minister to apply for an
injunction to force compliance with financial management and accountability
provisions
Background
4.103
Proposed new section 51(E) ‘provides a power for the responsible
Commonwealth Minister to apply for an injunction to enforce compliance with the
financial management and accountability provisions [as] defined in subsection
4(1).’[53]
4.104
Pursuant to this section, an injunction may be ordered by the Federal
Court of Australia ‘requiring a person to restrain from doing an action, or
compel a person to do an action, in order to comply with the financial
management and accountability provisions.’ In addition, an interim injunction
may be granted, ‘however it specifies that no undertakings as to damages are to
be made where the interim injunction is granted.’[54]
4.105
For a restraining action – ‘an injunction may only be granted where the
person has previously engaged in conduct that contravenes the financial
management and accountability provisions, or where it appears to the Court that
the person will engage in conduct of that kind.’[55]
4.106
In regard to compelling a person to do an action, ‘an injunction may
only be granted where the Court is satisfied the person has previously refused
or failed to do the action in contravention of the financial management and
accountability provisions, or if it appears to the Court that it is likely the
person will refuse or fail to do the action.’[56]
Analysis
4.107
The Government of Norfolk Island stated that it is extremely
inappropriate that a Federal Court injunction be used as a way to enforce compliance
with financial management and accountability provisions as provided under
section 51(E). The Government of Norfolk Island stated:
The Norfolk Island Government similarly considers it
extremely inappropriate that the Commonwealth proposes to use the threat and
application of Federal Court injunctions under proposed new section 51E as a
means of enforcing financial management and accountability provisions. There
are no such provisions in the Australian Capital Territory
(Self-Government) Act 1998 or the Northern Territory (Self- Government)
Act 1978. The existence of such obligations and their enforcement should be
dealt with under Norfolk Island legislation.[57]
4.108
There is no provision in Commonwealth legislation applying to other
jurisdictions which allows for an injunction to be sought enforcing compliance
with financial management and accountability provisions as contained in new
section 51(E).
Conclusions
4.109
The Government of Norfolk Island stated that it considers the provision
of enforcement of compliance with financial management and accountability
provisions under new section 51(E) to be ‘extremely inappropriate.’ Then
advocates that ’the existence of such obligations and their enforcement should
be dealt with under Norfolk Island legislation.’
4.110
Proposed Part 3 of the Bill establishes a new financial framework for
Norfolk Island. The committee believes that it is appropriate to include provisions
which require performance obligations under the Act to be undertaken.
4.111
While new section 51(E) allows for an injunction to be sought to enforce
compliance with financial management and accountability measures included in
the Bill, there is no penalty attached to non compliance.
4.112
It is unclear whether the Government of Norfolk Island agrees with
inclusion of proposed section 51(E) in the Bill. The committee suggests that
the issues relating to section 51(E) and the concerns raised by the Government
of Norfolk Island can be addressed through the financial framework joint
working group.