WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Financial Management and Accountability Bill
1996
Date Introduced: 12 December 1996
House: House of Representatives
Portfolio: Finance
Commencement: On a date set by Proclamation but
the Bill must commence by 1 July 1998 if it is enacted and receives
the Royal Assent this year.
The Financial Management and Accountability Bill 1996 (the FMA
Bill) forms part of a package of four Bills and associated measures
designed to modernise controls on Commonwealth finances and over
businesses owned or operated by the Commonwealth.
The other Bills in the package are:
- the Auditor-General Bill 1996 (the Auditor-General Bill);
- the Audit (Transitional and Miscellaneous) Amendment Bill 1996
(the Transitional Provisions Bill); and
- the Commonwealth Authorities and Companies Bill 1996 (the CAC
Bill).
The Auditor-General Bill, amongst other things, provides for the
re-establishment of the Office of Auditor-General under the
proposed new financial accountability regime replacing the
Audit Act 1901 (the Audit Act); and styles the
Auditor-General as an 'independent officer of the Parliament'. This
Bill also re-creates the Australian National Audit Office (ANAO) as
an independent statutory body employing staff under the Public
Service Act 1922 but with a capacity to contract out work
where considered appropriate by the Auditor-General.Together with
the Transitional Provisions Bill, the Auditor-General Bill makes
provision for a wider role for Parliament (through what will be the
Joint Committee of Public Accounts and Audit) in selecting the
Auditor-General and in monitoring the performance of that Office
and the ANAO.The Auditor-General Bill also re-establishes the
Office of Independent Auditor, who is the Parliament's auditor of
the ANAO.
The Transitional Provisions Bill formally repeals the Audit Act,
proposes consequential changes to enabling legislation affecting
Commonwealth authorities so as to link those bodies to the CAC
Bill, and provides for the Auditor-General in office at 30 June
1997 to see out the remainder of their 10 year term.The Public
Accounts Committee Act 1951 is to be amended to enlarge the
powers and functions of the Parliamentary Joint Committee of Public
Accounts (JCPA).
The CAC Bill contains financial reporting, ethical and auditing
provisions relating to corporate public authorities whose enabling
legislation gives them 'ownership' of their operating funds and
assets.It also extends to companies where the Commonwealth has a
direct controlling interest and makes special provision for 100
percent Commonwealth owned companies.The CAC Bill replaces Part XI
of the Audit Act which currently provides standard financial,
reporting and auditing provisions for about two-thirds of
Commonwealth authorities.
The FMA Bill (in part) replaces the Audit Act and associated
controls and seeks to establish a new regulatory framework for
Commonwealth instrumentalities which financially are agents of the
Commonwealth.The FMA Bill therefore is principally concerned with
those bodies which do not 'own' their funds and operate squarely
within the framework established by sections 81 and 83 of the
Commonwealth Constitution.Such bodies include the Departments of
State, the Parliamentary Departments and many Statutory Authorities
and government agencies which manage public money or property on
behalf of the Commonwealth.The Bill also specifies the powers and
responsibilities of the Minister for Finance with regard to their
duties as custodian of the Treasury of the Commonwealth under the
Constitution.
The principles and basic machinery provisions set out in the
Bill are to be 'fleshed out' by subsidiary legislation, regulations
and the Finance Minister's Orders.(1) Chief Executives of FMA
agencies will also be responsible for promulgating operating
instructions and for sub-delegating the Finance Minister's powers
and functions under the Act to other officials.
Further, the FMA Bill:
- provides that the Finance Minister will retain the sole power
to agree to appropriate banking arrangements for public money, to
make orders concerning the handling of receipts and withdrawals of
public money, and its investment;
- specifies the powers and responsibilities of the Minister for
Finance generally;
- revises the Commonwealth's Fund accounting structure, replacing
the Trust Fund with two purpose-based Funds – the Reserve
Money Fund and the Commercial Activities Fund;
- modernises the accounting system for public money
generally;
- prescribes rules for the control and management of public
property; and
- outlines and enhances the powers and responsibilities of 'Chief
Executives' of Commonwealth agencies.
A list of bodies coming within the scope of the FMA Bill forms
Attachment A to this Digest.
The new Commonwealth Fund accounting arrangements established
under the FMA Bill are depicted in Appendix A to the Bill.(2)
Commonwealth Accounting Framework
The accounting framework of the Commonwealth is broadly defined
by the Australian Constitution.
Section 51 provides that the Parliament has power to make laws
for, amongst other things, taxation and borrowing money on public
credit.Parliament also has the exclusive right to impose customs
and excise duties [section 90].
Money collected under the authority of Parliament by the
Executive Government must form part of one CRF and may be
appropriated (drawn on) for the purposes of the Commonwealth.
No money can, however, be drawn from the Commonwealth Treasury
except under an appropriation made by law. Such laws may take the
form of general Appropriations Bills (the legislation commonly
associated with the Commonwealth Budget) or by standing
appropriations contained in individual enabling laws or specific
enactments.(3)
Public money can only be appropriated on the initiative of the
Executive Government [section 56] as a message from the Governor
General to the House of Representatives recommending an
appropriation is required.
Since federation, the key features of day to day Commonwealth
financial administration have been sections 81 and 83 of the
Constitution and the Audit Act, which, as has been noted
frequently, was the fourth piece of legislation enacted by the
Commonwealth.
The Audit Act establishes the framework for financial
administration of the Executive Government and the roles, powers
and duties of Commonwealth officers involved in financial
administration. Three tiers of subordinate (delegated) legislation
prescribe these powers and functions in more detail. They are:
- the Finance Regulations – made on the authority of the
Governor–General;
- the Finance Directions – given on the authority of the
Minister for Finance; and
- Secretaries' Directions – given on the authority of the
Secretary of a Department to the staff of that Department.
The FMA Bill
The present FMA Bill closely resembles the Financial Management
and Accountability Bill 1994 (the 1994 Bill) as read a third time
in the House of Representatives, i.e. the 1994 Bill as amended in
response to JCPA Report No. 331 (see below).
The 1994 Bill was introduced on 29 June 1994 by the then
Minister for Finance, the Hon Kim Beazley and referred, on his
motion, to the JCPA for review with an advisory report to be
presented by 23 August 1994. Extensive public hearings were held
and on 23 August 1994 the House agreed to extend the reporting
deadline till 22 September 1994.
JCPA Report No. 331, An Advisory Report on the Financial
Management and Accountability Bill 1994, the Commonwealth
Authorities and Companies Bill 1994 and the Auditor-General Bill
1994, and on a Proposal to Establish an Audit Committee of
Parliament, generally welcomed the introduction of the FMA
Bill noting:
- that it was arguably the most significant of the three Bills in
the 1994 audit legislation package;(4)
- the JCPA believed that the 1994 Bill would '(establish an
appropriate structure for the financial management and
accountability of the Commonwealth's assets';(5) and
- that it rejected criticisms of the 1994 Bill which suggested
that it did not contain sufficient detail of the standards,
arrangements and administrative procedures needed for agencies to
comply with the Bill.(6)
The JCPA recommended two minor changes to the 1994 Bill and
these were reflected in three Government amendments made in the
House on 8 December 1994.(7)
The Bill was introduced in the Senate on 6 February 1995 and
passed on 27 March 1995 but with amendments. The House of
Representatives subsequently agreed to one of the Senate amendments
on 29 March 1995.The Bill did not, however, pass both Houses in the
same form during the life of the last Parliament.
Definitions
As noted in the Explanatory Memorandum, the Bill
recognises that some prescribed Agencies such as the Office of
Parliamentary Counsel will have a 'Secretary' as defined in the
Public Service Act. 'Chief Executive' as defined in clause
5 extends to Secretaries of Executive Departments,
Departments of the Parliament and the heads of any other prescribed
Agency who is the Secretary of that Agency for the purposes of the
Public Service Act 1922.
'Public money' is defined so as to include money in the control
or the custody of the Commonwealth or in the control or custody of
a person acting on behalf of the Commonwealth including money held
on trust for another person [clause 5].
Clause 5 also defines public property so as to
include any property in the custody or under the control of the
Commonwealth including such property that is held on trust for a
person other than the Commonwealth. As recommended in JCPA
Report No. 331, the expression 'public property' includes
intellectual property.(8)
Incidental Borrowings/Banking of Public Money
Clause 8 provides that the Finance Minister may
enter into an agreement with any bank for the receipt, custody,
payment or transmission of public money, either inside or outside
Australia. Subclause 8(3) limits overdraft
drawings by the Commonwealth to periods of 30 days. This limitation
is to ensure that such overdrafts may only arise as a consequence
of the localised conduct of day to day Commonwealth banking
business.Advances paid to the Commonwealth to finance its
operations that involve a credit to the Consolidated Revenue Fund
(CRF) dealt with in clauses 38 and 39.
Clause 37 provides that any agreement for the
borrowing of money by the Commonwealth (including the obtaining of
an advance on overdraft) is of no effect unless the borrowing is
authorised by an Act.
Clauses 8–16 deal with the receipt,
custody and banking of public money. Clause 10
provides that all public money must be banked promptly, as required
under the Finance Minister's Orders.
Clause 12 in effect gives the Finance Minister
an effective veto on all arrangements for the receipt or custody of
public money involving a person other than the Commonwealth, a
Commonwealth official or a Minister.
Fund accounting, appropriations and payments
Part 4 of the Bill establishes new streamlined arrangements for
the 'Commonwealth Fund' accounting structure.
Clause 17 provides for the classification of
public money by account and clause 18 provides
that all public money except funds subject to a Special Instruction
[clause 16], must be credited as soon as
practicable to the CRF.
Clause 19 provides for the recreation of the
Loan Fund and for its operation in conjunction with the CRF.The
Loan Fund is presently established under section 55 of the Audit
Act which provides for a separate account to be maintained of all
moneys raised on the public credit of the Commonwealth.Moneys
standing to the credit of the Loan Fund may be expended only under
the authority of an Act.
Clauses 20 and 21 provide respectively for the
creation of the Reserve Money Fund (RMF) and the Commercial
Activities Fund (CAF). Together these two Funds replace the Trust
Fund established under section 60 of the Audit Act and arrangements
for Trust Accounts authorised by section 62A of that Act.The Trust
Fund moneys may be expended only for the purposes of the Fund, or
under the authority of an Act. The Minister for Finance may invest
moneys standing to the credit of the Trust Fund in specified kinds
of investments.(9)Components of the CRF and the CAF are to be
determined by the Minister for Finance with such determinations
being subject to disallowance within 5 sitting days of being tabled
[clause 22].(10)
Special Responsibilities of Chief Executives
Part 7 of the Bill seeks to give 'Chief Executives'
(Departmental Secretaries etc) greater autonomy and added
responsibility for the management of Agencies. This formal
recognition of enhanced responsibilities of Chief Executives
reflects changes that have taken place in the Australian Public
Service (APS) over the last 15 years.At the same time, the scope of
the proposed changes should not be overstated.The JCPA in
Report No. 331 noted that it was:
(heartened, in particular, to see the balance that has been
struck[in the corresponding provisions of the 1994 Bill] between
the devolution of authority to the Chief Executives of agencies and
the need for a counterbalancing chain of accountability back to
Parliament.(11)
Part of that balance is maintained by not granting to Chief
Executives the degree of autonomy that might be expected to apply
if, for example, the APS were broken up into a multiplicity of
self-governing/self-contained corporate entities.It is arguable
that under the present Bill the powers of the Department of Finance
are remain firmly entrenched although somewhat further removed from
day to day operations.For example:
- clause 48 provides that the Chief Executive
must ensure that accounts and records of the Agency are kept as
required by the Finance Minister's Orders and that the Finance
Minister is given full and free access to all such records;
- clause 49 provides that the Chief Executive
must prepare financial statements in accordance with the Finance
Minister's Orders;
- clause 50 provides that the Finance Minister
may require a Chief Executive to prepare financial statements
covering a period of less than a financial year and these must be
given to the Finance Minister; and
- clause 63 provides that the Finance Minister
may make Orders on any matter as required by the Act or where the
Act permits such orders to be made.
Similarly, act of grace payments [clause 33]
and the waiver of Commonwealth debts [clause 34]
appear to remain the sole prerogative of the Finance Minister.
The Bill also provides that Chief Executives must:
- manage the affairs of the Agency in a way that promotes the
proper use of Commonwealth resources [subclause
44(1)] although this is also subject to the express
caveats contained in subclause 44(2);
- implement fraud control plans [clause
45];
- maintain audit committees for their Agencies with the functions
and responsibilities required by the Finance Minister's Orders
[clause 46];
- subject to certain defined exceptions, pursue debt recovery of
each debt for which the Chief Executive is responsible (i.e. debts
owing to the Commonwealth in respect of operations of the relevant
Agency and debts owing to the Commonwealth which the Finance
Minister has chosen to allocate to the Chief Executive)
[clause 47];
- ensure that accounts and records of the Agency are maintained
as required [clause 48];
- prepare financial statements and additional financial
statements [clauses 49 and 50];
- (within the terms prescribed by regulation) issue instructions
to officials in their Agency on any matter on which regulations may
be made [clause 52]; and
- delegate any of their powers or functions under the Act to any
official in the Agency [clause 53].
Auditor-General
Clauses 54–57 develop the relationship
between Agencies and the Auditor-General. Clause
57, for example, provides for the Auditor-General to
examine Agency financial statements and report on whether they
conform to the requirements of the FMA Act.
Application to Intelligence and Security Agencies
Clause 58 provides that the application of the
FMA Act to an intelligence or security agency will be subject to
any modifications that are prescribed by regulation.Section 70D of
the Audit Act provides for 'Exempt Account' arrangements for the
security and intelligence services. Commenting on these exemptions,
the JCPA supported the principle that 'the Auditor-General should
be able to audit the financial statements of security and
intelligence agencies, including secret accounts, with appropriate
restrictions on disclosure.'(12)
- Hon John Fahey, Second Reading Speech, Hansard, 12 December
1996: 7915.
- FMA Bill 1996: 41.
- Only about 30 percent of appropriations are accounted for by
annual appropriation Bills.
- JCPA Report No. 331: 8.
- ibid: 9.
- ibid: 10.
- Hansard: 4217-4318.
- Refer Explanatory Memorandum: 3.
- Department of Finance, Commonwealth Financial Management
Handbook, 1992: 77.
- An amendment to increase the time available for disallowance to
15 sitting days was moved by the then Opposition to the 1994 Bill
but defeated. House of Representatives, Hansard, 8 December 1994:
4318.
- JCPA Report No. 331: 9.
- ibid: 21.
Attachment A
Proposed FMA Agencies
The following list of organisations represents the Proposed
Agencies under the FMA Act 1996 (i.e. Commonwealth
Bodies dealing in Public Moneys – refer to Note 2
Definitions).
Parliamentary Departments and Departments of State
- Department of the Senate
- Department of the House of Representatives
- Department of the Parliamentary Library
- Department of the Parliamentary Reporting Staff
- Joint House Department
- Attorney-General's Department
- Department of Administration Services
- Department of Communications and the Arts
- Department of Environment, Sport and Territories
- Department of Defence
- Department of Employment, Education, Training & Youth
Affairs
- Department of Finance
- Department of Foreign Affairs & Trade
- Department of Health and Family Services
- Department of Immigration & Multicultural Affairs
- Department of Industrial Relations
- Department of Industry, Science & Tourism
- Department of Primary Industries & Energy
- Department of the Prime Minister & Cabinet
- Department of Social Security
- Department of Transport and Regional Development
- Department of the Treasury
- Department of Veterans Affairs
Prescribed FMA Agencies
- Administrative Appeals Tribunal
- Affirmative Action Agency
- AusAID
- AUSTRAC
- Australia-Japan Foundation**
- Australian Bureau of Statistics
- Australian Centre for International Agricultural
Research**
- Australian Competition and Consumer Commission**
- Australian Customs Service
- Australian Electoral Commission
- Australian Federal Police
- Australian Industrial Registry
- Australian National Audit Office
- Australian Secret Intelligence Service
- Australian Security Intelligence Organisation
- Australian Taxation Office
- Commonwealth Ombudsman Office
- ComSuper
- Family Court of Australia
- Federal Court of Australia
- Human Rights & Equal Opportunity Commission
- Industrial Relations Court of Australia
- Industry Commission
- Insurance & Superannuation Commission
- National Capital Planning Authority
- National Competition Council
- National Crime Authority
- National Native Title Registry
- Office of National Assessments
- Office of Parliamentary Counsel
- Office of the Director of Public Prosecutions
- Office of the Inspector-General of Intelligence &
Security
- Office of the Official Secretary to the Governor-General
- Professional Services Review Scheme
- Public Service and Merit Protection Commission
- Spectrum Management Agency
CAC Bodies Prescribed as FMA Agencies for the Public Money That
They Handle
- Aboriginal & Torres Strait Islander Commission*
- Australian Securities Commission*
Notes:
1. – Certain organisations which, on the face of it, are
not FMA Agencies, may nonetheless be affected by the FMA Act. For
example:
* - ATSIC and the ASC are affected by both the FMA Act and the
Commonwealth Authorities & Companies Act (CAC) Act: – the
ASC, for instance, collects significant amounts of revenue (e.g.
filling fees) on behalf of the Commonwealth and therefore it would
be required to deal with those monies in accordance with the FMA
Act. For the money that the ASC holds in its own right, the CAC Act
would apply. This is similar for ATSIC.
** – The Australia–Japan Foundation, the Australian
Centre for International Agricultural Research and the Australian
Competition and Consumer Commission are all Bodies Corporate, but
deal with public monies only – they will operate under the
FMA Act only.
2. – The definition under the FMA Act describes 'Agency '
to mean:
(a). – a Department of State, including persons who are
allocated to the Department (for the purpose of this Act) by
regulations made for the purposes of this paragraph;
(b). – a Department of the Parliament, including persons
who are allocated to the Department (for the purpose of the Act) by
regulations made for the purpose of the paragraph; and
(c). – a prescribed Agency.
Bob Bennett
25 February 1997
Bills Digest Service
Information and Research Services
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.
IRS staff are available to discuss the paper's contents
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ISSN 1323-9031
Commonwealth of Australia 1996
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Published by the Department of the Parliamentary Library,
1997.
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Last updated: 8 April 1997
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