Purpose of the Bill

The purposes of the National Collecting Institutions Legislation Amendment Bill 2020 (the Bill) are:

•  to allow six national collecting institutions (NCIs)[1] to invest donated funds otherwise than in accordance with low risk options provided for in subsection 59(1) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and
•  to standardise various administrative provisions across the NCIs’ enabling Acts,[2] including in relation to: ministerial approvals, directions and delegations; length of tenure on governing bodies; financial thresholds; planning and reporting; and other relatively minor provisions.

Structure of the Bill

This Bill comprises two schedules:

•  Schedule 1 comprises amendments in relation to powers to invest donated funds and
•  Schedule 2 comprises amendments that aim to standardise various administrative provisions across the NCIs’ enabling Acts.

Committee consideration

Senate Environment and Communications Legislation Committee

The Bill was referred to the Senate Environment and Communications Legislation Committee for inquiry and report by 12 February 2021 (extended from 29 January 2021). The Committee held a hearing on 28 January 2021 at which no issues of concern were raised.[3] In their evidence to the Committee, the NCI agency heads indicated that they supported the proposed amendments.[4] In its report, the Committee recommended passage of the Bill.[5]

Senate Standing Committee for the Scrutiny of Bills

In its Scrutiny Digest 18/20, the Senate Standing Committee for the Scrutiny of Bills stated it had ‘no comment’ in relation to the Bill.[6]

Policy position of non-government parties/independents

No major issues of concern were raised at a Senate Committee hearing (see above). In their additional comments in the Committee’s report on the Bill, the Australian Greens did not oppose the Bill, but stated ‘NCIs should be appropriately funded by government sources and not reliant on private donations’.[7]

Position of major interest groups

In their evidence to a Committee hearing on 28 January 2021, the NCI agency heads indicated that they supported the proposed amendments.[8] For example, the Director of the NMA observed:

… over the course of the last five years it would be fair to say our board; indeed, the boards of our institutions and the responsible agency heads have argued for greater latitude around the rules governing investment of donated moneys to our institutions. This is something that has been provoked by the donors themselves being concerned that we had constraints in the way that we could usefully invest their moneys … [T]he other changes, some of the streamlining also of disposals and threshold amounts with disposals for materials being lifted, are part of a response to what are operational issues that have arisen over recent years given that those figures haven't been amended for some time … [W]e have [also sought] some streamlining and some clarity and some greater correspondence between our acts around these provisions.[9]

In its submission to the Senate committee inquiry, the National Public Galleries Alliance, which represents the small-to-medium public gallery sector, noted:

We understand that the proposed legislative changes have been developed in consultation with the NCIs. [T]he NGPA supports all of the amendments … We believe the Bill will enable the National Gallery of Australia and the National Portrait Gallery to increase earned income – strengthening their financial sustainability, and streamline the processes involved in administering the requirements of the Act.[10]

Recent reports by the Joint Standing Committee on the National Capital and External Territories[11] and the Australian National Audit Office (ANAO)[12] considered donations (funds and collection items, respectively), but did not discuss or receive evidence about limitations on or options for the investment of donated funds.

Financial implications

The Explanatory Memorandum states that ‘the Bill is not expected to have any significant impact on Commonwealth expenditure or revenue’.[13]

Statement of Compatibility with Human Rights

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.[14]

Parliamentary Joint Committee on Human Rights

In its Human rights scrutiny report 15 of 2020, the Parliamentary Joint Committee on Human Rights noted ‘no comment’ in relation to the Bill.[15]

Key issues and provisions

Schedule 1: Investment of donated funds

NCI Governance arrangements

Each of the six NCIs are established under their own Act of Parliament (enabling Act) which sets out the purposes and powers of each NCI.[16] The NCIs are permitted to receive donations, endowments and bequests, and have done so to varying degrees, in some cases through fundraising foundations established for that purpose.[17]

The NCIs are also subject to the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the subsidiary Public Governance, Performance and Accountability Rule 2014 (PGPA Rule), which set out governance and accountability arrangements applicable to all Government entities.

Current limitations on investments

Subsection 59(1) of the PGPA Act governs how Corporate Commonwealth Entities (CCEs) such as the NCIs may invest funds.[18] Subsection 59(1) provides that investments of funds for which the entity is responsible are not permitted unless:

• the funds are not immediately required for the purposes of the entity and
• the investment is in low risk financial products: bank deposits; securities guaranteed by the Commonwealth, a state or a territory; other investments approved by the Minister for Finance; or any other form of investment prescribed by PGPA Rule.[19]

Provisions in Schedule 1 would exempt funds donated to the six NCIs from those limitations, thereby providing opportunities for the NCIs to seek greater returns on the investment of donated funds.

The Explanatory Memorandum states ‘these restrictions act as a disincentive to donors, as institutions are unable to generate competitive rates of return on donated funds, reducing potential value for money’.[20] This view was also stated by the NCI agency heads at a Committee hearing on 28 January 2021.[21]

Proposed investment arrangements for donated funds

Items 1 and 2 amend the ANMM Act to insert a provision that the ANMM may invest specified funds otherwise than in accordance with section 59 of the PGPA Act. Proposed subsection 45(3) would allow the following categories of funds to be invested ‘in any other form of investment’ in addition to investments authorised by the PGPA Act:

• money accepted as a bequest or a gift
• money derived from the disposal of property that has been given, devised, bequeathed or assigned to the ANMM other than by the Commonwealth and
• money received from an investment made under proposed subsection 45(3) or from the disposal of such an investment.

However, donated revenue or other property held by the ANMM on trust, or accepted subject to a condition, would continue to be dealt with in accordance with the trust obligations or conditions.[22]

Items 4–5, 7–8, 10–11, 13–14 and 16–17 make the same amendments to the NFSA Act, NGA Act, NLA Act, NMA Act and NPGA Act, respectively.

It is intended that the new provisions ‘would also apply to moneys received by any foundation associated with [an NCI]’ but ‘the provisions would not rely on a separate foundation being established by the NCI for investment purposes [and] those NCIs without foundations may still receive philanthropic support by trust, or directly as cash’.[23]

At the Committee hearing on 28 January 2021, the NFSA observed that the investment arrangements will have ‘minimal impact on the NFSA as we do not receive considerable amounts of financial donations. We receive our donations in the form of collection items’.[24] In this context, it is worth noting that the Bill will allow, but not require, donated revenue to be invested in ways not permitted under the PGPA Act. As set out in  the Explanatory Memorandum states that ‘investing beyond the limitations established by the PGPA Act would be at the discretion of the governing bodies of each of the NCIs’, and ‘the Bill does not seek to compel [an] NCI to undertake broadened investment activity’.[25]

Investment policy

Under the proposed arrangements, an investment, or the disposal of such an investment, must be made in accordance with the relevant NCI’s investment policy.[26] While there is no requirement for an NCI to formulate such a policy if it does not intend to expand investments beyond the limits imposed by the PGPA Act, it must formulate an investment policy to meet the proposed legislative requirements for broader investment of donations proposed by the Bill. Item 3 amends the ANMM Act to provide that the ANMM’s governing body may formulate a written policy which outlines: the investment strategy; benchmarks and standards for assessing the performance of the investments; and risk management of such investments. Items 6, 9, 12, 15 and 18 make identical amendments to the NFSA Act, NGA Act, NLA Act, NMA Act and NPGA Act, respectively.

The Bill does not prescribe how a policy is to be formulated, but if an investment policy is formulated, a copy must be published on the NCI’s website.[27] Investments need not be included on the website, but would be reported in the NCI’s financial statements in its annual report.[28] Each NCI must conduct periodic reviews of its investment policy.[29]

Notably, while an NCI is required to comply with any investment policy in place, the amendments provide that a failure to do so does not affect the validity of any transaction.[30]

Discussion of issues

Interaction with PGPA Act

The six enabling Acts would be amended to effectively include an exemption for certain types of funds from the narrow investment rules under subsection 59(1) of the PGPA Act. However, the Bill does not amend the PGPA Act to make it clear that other Acts may include provisions that enable some corporate Commonwealth entities to invest money outside the limits of what is permitted under subsection 59(1).

In addition, section 8 of the PGPA Act defines ‘relevant money’ as money that is held by, or standing to the credit of any bank account, of the Commonwealth or a Commonwealth entity. Without doing so explicitly, the Bill appears to create a new subset of ‘relevant money’ based on the source of the funds.

There may be no technical obstacles to the approach taken by the Bill. However, transparency may be better facilitated if the PGPA Act was amended to include, for example:

• an explanation of the relationship between ‘relevant money’ (which is defined as money held to the credit of a Commonwealth entity) and the new subset dealt with in the current Bill (which can be broadly defined as money received from donors) and
• a specific provision making clear that subsection 59(1) is not applicable to the new subset of funds held by the NCIs and sourced from donors.

Application  

Item 19 provides that the amendments in Schedule 1 apply to money accepted or received before commencement. As explained by the Explanatory Memorandum:

This would enable the broader investment of donated revenue in accordance with amendments made by the Bill of these sorts of money even if already held by the NCI, and even if it has yet to be accepted or received prior to commencement of the Bill.[31] [emphasis added]

It appears unlikely that retrospectivity would have detrimental consequences for any interested parties or stakeholders.

Schedule 2: Other amendments

The Minister’s Second Reading speech noted:

The bill also provides an opportunity to make administrative amendments to the enabling Acts of the six national collecting institutions, which reflect differing drafting approaches over the period 1960 to 2013 and are hence inconsistent with each other. Some of these Acts also contain provisions that are no longer necessary in light of the commencement of other legislation of broader application.[32]

The amendments proposed in Schedule 2 fall into the following categories:

1.   Ministerial approval not needed for certain investments

2.   Ministerial directions

3.   Ministerial delegations

4.   Governing bodies

5.   Financial thresholds

6.   CEO delegations; planning and reporting; NGA storage

1. Ministerial approval not needed for investments

As noted above, amendments made by Schedule 1 would insert into the six enabling Acts a provision that an NCI may invest donated funds otherwise than in accordance with section 59 of the PGPA Act. Items 9, 14, 24, 34, 46, and 52 of Schedule 2 amend the enabling Acts to ensure that written approval of the Minister is not required for such investments.[33]

2. Ministerial directions (ANMM, NGA, NLA and NMA)

The Explanatory Memorandum notes that ‘there is inconsistency across the enabling NCI Acts in relation to the power of the Minister to issue a written ministerial direction to a governing body’.[34] The NLA Act currently has no provision for the Minister to issue directions, while the other Acts vary in terms of the scope of the issues which directions may cover, with the NGA Act being the most restricted, with Ministerial directions being limited to staffing of the National Gallery. Amendments in Schedule 2 will bring four enabling Acts into broad alignment with the NFSA Act and NPGA Act by:

• giving the Minister the power to give directions by legislative instrument to the governing bodies of the ANMM, NGA, NLA and NMA (as applicable) and
• removing a requirement for such directions to be tabled in the Parliament, as legislative instruments must be published on the Federal Register of Legislation.[35]

Such legislative instruments will not be subject to disallowance by the Parliament, as directions by a Minister to a person or body are exempt from this process.[36]   

The PGPA Rule requires that such directions must be disclosed in NCI annual reports.[37]

At the Committee hearing on 28 January 2021, the Department of Infrastructure, Transport, Regional Development and Communications noted that while provision for ministerial directions is common in the arts portfolio legislation, use of ministerial directions is rare. Observing that ministerial directions are intended to be used for general or policy issues (rather than in relation to specific cases or issues), officials gave as an example a government-wide direction in the early 2000s about foreign exchange risk management.[38]

3. Ministerial delegations (ANMM, NGA, NLA and NMA)

The Explanatory Memorandum notes that ‘the Bill seeks to align [ministerial] delegation provisions across the six Acts’.[39] The ANMM Act, NMA Act and NPGA Act are the only NCI Acts which currently provide for the delegation of the Minister’s functions or powers. The NMA Act allows the Minister to delegate any of the Minister’s powers (other than the power of delegation) to any person, while the ANMM Act and NPGA Act provide for more restricted delegation powers.[40] The proposed amendments will bring five enabling Acts into alignment with the NPGA Act.[41] Under proposed provisions, the Minister may delegate specific powers to the Secretary of the Department and relevant SES employees or acting SES employees of the Department. The Minister may delegate most powers, including:

… approvals to acquire or dispose of collection material, property, right or privilege or enter a contract for the construction of a building, subject to specified thresholds; or to appoint temporary agency heads during a vacancy in the office or any period where the office holder is absent from duty or unable to perform the duties of the office.[42]

The Minister would not be able to delegate the power to make or terminate appointments to governing bodies or permanent appointments of agency heads (where applicable), the power to give directions to the governing body, or the power to delegate.[43]

In addition, item 1 would repeal subsection 8(6) of the ANMM Act, which provides that the Minister may delegate powers related to making land and other assets controlled by the Commonwealth available to the ANMM. The Minister does not have this power of delegation in relation to other NCIs.[44]

4. Governing bodies

Membership limited to nine years, including acting (ANMM, NGA, NLA, and NMA)

Under proposed provisions, there would be a maximum service period of nine years in total (including periods of acting) for an individual member of an NCI’s governing body. Amending items will bring four enabling Acts into alignment with the NFSA Act and NPGA Act.[45]

In relation to current NCI board and council members, the Explanatory Memorandum notes:

After the relevant amendments commence, the maximum service cap would not impact existing NCI Board or Council members while they complete their current terms. It would be a matter to consider in the context of appointments, particularly if they involve reappointments. An assessment of existing governing body appointments has shown that there is one member whose current term will bring them in excess of the proposed 9 year cap.[46]

The maximum service cap would not apply to NCI agency heads, or representative members on the ANMM Council (one position) or the NLA Council (two positions).[47]

In relation to the representative members on the NLA Council, items 29, 30 and 31 would amend section 15 of the NLA Act to repeal a requirement that the Governor-General terminate the appointment of a Senator or Member of Parliament elected to sit on the National Library of Australia Council if their term as a Senator or Member of Parliament ends. In line with existing arrangements for parliamentary representatives elected to the National Archives of Australia Advisory Council, the NLA representative appointments would end automatically, without the need for a letter of resignation or advice to the Governor-General.[48]

Quorum requirements (ANMM, NLA and NMA)

The NGA Act and NMA Act currently specify a minimum of seven members as a quorum and the NLA Act specifies five.[49] Proposed amendments to these three Acts would standardise a quorum as the majority of appointed members, aligning with existing provisions in the NFSA Act, ANMM Act and NPGA Act.[50] The Explanatory Memorandum argues that aligning the Acts will ‘[ensure] continuity of operations should there be vacancies in the governing body membership, or absences from meetings’.[51]

Deputy and acting arrangements (NGA and NMA)

Amendments to the NGA Act (item 21) and the NMA Act (item 42) would bring those Acts into alignment with other NCI Acts in relation to the appointment of an acting Chair, an acting Deputy Chair and acting members and would remove the ability for part-time members to appoint a person as their deputy.[52]

Council minutes (ANMM)

Item 5 would omit from subsection 23(10) of the ANMM Act the requirement for the ANMM Council to forward a copy of the minutes of its meetings to the Minister. Other NCI governing bodies are not required to do this. Minutes of governing body meetings are routinely made available to the portfolio Department and may be provided to the Minister on request.[53]

Board delegations (NPGA)

The NGA Act and the NMA Act currently provide that their councils can delegate all or any of their powers.[54]

Item 50 proposes amending the NPGA Act to enable the NGPA Board to delegate responsibility in relation to the disposal of works of art and related material.[55] The Board would be permitted to delegate this power to the NPGA Director; a Board member; or an SES employee, or acting SES employee, of the NPGA. Proposed subsection 29A(2) would require the delegate to comply with any written directions of the Board.

5. Financial thresholds

Currently ‘all NCIs require ministerial approval under their enabling legislation, to enter into a transaction above a specified financial threshold’.[56] However, the Explanatory Memorandum notes inconsistencies, in that ‘of the six NCI Acts, two do not specify any thresholds in the Act itself, only in Regulations. The remaining four Acts specify amounts in the Acts but also specify higher amounts in the Regulations’.[57]

Amending items will align the six enabling Acts, removing references to specific financial thresholds within the primary legislation.[58] The Second Reading speech foreshadows that the ‘regulations of each of the Acts will be remade, where necessary, to include a common threshold of $2 million below which ministerial approval would not be required prior to entering a contract’.[59] In its response to a question on notice at the Senate Environment and Communications Legislation Committee inquiry into the Bill, the Department of Infrastructure, Transport, Regional Development and Communications advised that financial thresholds regulations will be disallowable.[60]

It is proposed that under remade regulations the NPGA’s threshold of $1 million would increase to $2 million, bringing it in line with other NCIs. The NGA currently has a $10 million threshold for acquiring works of art. It is proposed that remade regulations will retain this amount, and introduce a corresponding $10 million threshold for disposals of works of art.[61] In addition:

The proposed amendments will list six common categories of arrangement which will have corresponding threshold values listed in regulations … acquisition and the disposal of collection material; the acquisition and disposal of property, right and privilege; building construction; and entering into a lease of land. [emphasis added][62]

Contracts for day-to-day operations are exempt from the new thresholds—these include ‘essential operational services such as utilities, security, cleaning and routine general maintenance’.[63] The Explanatory Memorandum notes:

As the value for a particular service is considered on a cumulative basis, multi-year procurements regularly exceed the applicable threshold where they are extended or renewed. This requires new approval by the Minister on each occasion and can present a risk, for example, where there are time limitations to secure discounts, or where a whole of Government agreement is being negotiated. Prior to entering into an arrangement, NCIs seek independent expert advice on the terms of arrangements as needed to ensure value for money.[64]

Exemptions for ‘day-to-day operations’ will be aligned in the six enabling Acts.[65]

Amendments requiring the disposal of collection items to be disclosed in annual reports will align the ANMM and the NLA with other NCIs.[66]

6. CEO delegations; Planning and reporting; NGA storage

CEO delegation powers (ANMM, NLA and NMA)

Schedule 2 also amends the CEO delegation powers in respect of the ANMM, NLA and NMA. The NFSA Act, NGA Act and NPGA Act do not include CEO delegation powers.

Items 7 and 8 retain the delegation powers under the ANMM Act and insert a qualification that the delegate must comply with any written directions. Item 33 amends the NLA Act to repeal the Director-General’s delegation powers as there are no powers available under the NLA Act which may be meaningfully delegated.[67]

Section 32 of the NMA Act relates to the power of the NMA Director to engage consultants. Item 45 would add proposed subsection 32(3) which would provide the Director with the power to delegate this power to an SES employee or acting SES employee of the NMA.[68]

Planning and reporting requirements (ANMM, NFSA and NPGA)

The Second Reading speech outlined amendments to align the NCIs’ planning and reporting requirements by removing provisions that are additional to those required by the PGPA Act.[69] Amendments to three enabling Acts would:

... remove the requirement to seek the Minister’s approval [for their corporate plans], rather it will require [each NCI] to present the plan to the Minister in accordance with the provisions of the PGPA Rule; align the timing to that of other Commonwealth entities; and remove the requirement for the plan to be tabled in the Parliament. The amendment would also remove all requirements related to the [NCI’s] preparation of an annual operational plan.[70]

Collection storage (NGA)

Item 17 would repeal section 5 of the NGA Act, which currently requires that the national collection shall be housed in the Australian Capital Territory (ACT). At a Committee hearing on 28 January 2021, officials noted that other NCIs are able to store their collections within or outside the ACT. Officials suggested that cost efficiencies may be achievable by allowing the NGA the option of storing collection items in other capital cities or regional centres.[71]

Paragraph 6(1)(b) of the NGA Act currently specifies that the NGA’s functions include to exhibit, or make available for exhibition by others, works of art from the national collection or that are otherwise in the Gallery’s possession. Item 18 would add in paragraph 6(1)(b) the words ‘in Australia or elsewhere’. This addition would clarify that ‘the exhibition of works is not limited to within Australia’, which in turn would support the NGA’s ‘important international exchange and exhibition programs’.[72]