Bills Digest no. 127 2005–06
Australian Research Council Amendment
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
Contact Officer & Copyright Details
Australian Research Council
Date introduced: 30 March 2006
House: House of
Portfolio: Education, Science and Training
Commencement: Sections 1 to 3 commence on Royal Assent. The
provisions dealing with the governance structure (Schedule 1)
commence on the later of Royal Assent or 1 July 2006. The
provisions covering the funding of research (Schedule 2) commence
on the day after Royal Assent.
The main purpose of the Bill is to amend the governance
structure of the Australian Research Council in line with the broad
recommendations of the 2003
Review of the Corporate Governance of Statutory Authorities and
Office Holders (the Uhrig Report).
The Australian Research Council (ARC) was originally created
through the Employment, Education and Training Act 1988,
but subsequently became an independent statutory body under the
Australian Research Council Act 2001 (the ARC Act). The
ARC is currently governed by a board.
Under the section 6 of the ARC Act, ARC functions include
providing recommendations to the Science Minister for funding under
grants programs administered by it and more generally providing any
advice on research matters requested by the Minister.(1)
The various research grants programs are provided under the Federal
Government s Backing Australia s
Ability initiative, a ten-year program running from
2001-2011. Details of the ARC s National Competitive Grants Program
(NCGP) can be accessed at http://www.arc.gov.au/grant_programs/default.htm.
On 15 July 2005, Education Minister Brendan Nelson
announced the intention to abolish the ARC Board, with the ARC
to be headed by a Chief Executive Office, Professor Peter H
j.(2) According to the Minister, the decision was
informed by the recommendations of the Uhrig Report.
The Uhrig Report recommended two templates be applied to ensure
good governance of statutory authorities: agencies should either be
managed by a Chief Executive Officer (CEO) or by a board structure.
Both templates detail measures for ensuring the boundaries of
responsibilities are better understood and the relationship between
Australian government authorities, Ministers and portfolio
departments are made clear.
The report recommended that the selection of the management
template and financial frameworks to be applied should be based on
the governance characteristics of a statutory authority:
- The Financial Management and Accountability Act 1997
should be applied to statutory authorities where it is appropriate
that they be legally and financially part of the Commonwealth and
do not need to own assets. This includes Budget-funded authorities.
Uhrig recommended that these organisations should be governed by a
- The Commonwealth Authorities and Companies Act 1997
should be applied to statutory authorities where it is appropriate
that they be legally and financially separate from the
Commonwealth. Uhrig recommended that these organisations should be
governed by a board.
In general, agencies which exclusively manage Commonwealth
appropriations should be represented and governed by a CEO. A board
structure is favoured if there is a strong commercial focus to the
organisation, or if the agency is intergovernmental.
On 4 May 2006, the Australian National Audit Office (ANAO)
released its report
The Australian Research Council s Management of Research
Grants.(3) The overall audit conclusion
37. The audit identified that ARC
was meeting the requirements of the ARC Act in administering grants
for basic and applied research. However, shortcomings in ARC s
administrative processes meant that ARC was not in a position to
determine and inform the government about whether all grants met
their objectives, that funds were used as intended, and that ARC
goals were being fully met. While ARC had a strong focus on
selecting the best applications, it had few systematic processes to
enable effective or timely post-award management of grants.
38. ARC had established
governance and organisational structures that supported the
National Competitive Grants Program (NCGP), ARC s vehicle for
administering grants. Overall, the ARC had developed a workable
decentralised model with universities for administering grants on
ARC s behalf. Funding Agreements were in place and ARC s monthly
payments to universities were accurate and timely. However, ARC had
few systematic processes to monitor progress and final reporting of
projects. As a result, ARC could not fully account that grants were
used as intended, or assess the extent that ARC s output and
outcome were being met.
39. ARC has a substantial
peer-review process in place, with a strong focus on research merit
and national benefit. This enables ARC to select and fund high
40. ANAO has made nine
recommendations and a number of suggestions to strengthen ARC s
management of grants, with particular emphasis on improving the
effectiveness, transparency and accountability of ARC s grants
administration. These recommendations are particularly important in
light of changes to ARC s governance announced by the then Minister
following the Uhrig Review.
In particular reference to the Uhrig Report and the ARC, the
ANAO report stated:(5)
2.22 The Uhrig Review emphasised
the primary role that departments and portfolio secretaries have in
providing advice and support to their Ministers. The Government
endorsed the report s governance principles.
Departments are the primary source of public
sector advice to Ministers and are best placed to support Ministers
in the Governance of the statutory authorities. In this respect
they are akin to an advisory function within a parent company in
providing advice to the CEO about activities of the company s
2.23 ARC is an integral component
of broader government initiatives, particularly in the areas of
national research priorities and development of a new research
quality framework. To ensure a well-coordinated and complementary
approach to implementing Government policies and programs, it is
important for ARC and DEST to develop and maintain clear links
through formal as well as informal arrangements.
2.24 ANAO found that while ARC
sits within the Education, Science and Training portfolio, ARC had
little documentation describing formal arrangements between ARC and
DEST for key administrative processes, such as clearing of key
documents or exchanging information and data. ANAO also noted that,
as a result of the then Minister s impending retirement of the
Board, the DEST Secretary would no longer link ARC and DEST through
her Board membership. This raised a risk that advice and
information from DEST on issues such as strategic planning would be
2.25 ANAO found sufficient
business risks in the current process to recommend that ARC and
DEST formalise their consultative and reporting activities, to
ensure regular and ongoing information exchange between ARC and
DEST on common policy areas such as national research policy, and
on broader significant administrative matters. This could be
through a Memorandum of Understanding or other similar means.
Recommendation No.1 - 2.26
Consistent with the Government s expectation following the
Review of the Corporate Governance of Statutory Authorities and
Office Holders and to ensure regular and ongoing information
exchange and reporting, ANAO recommends that ARC and DEST develop a
Memorandum of Understanding or similar arrangement.
ARC s response: Agreed.
DEST s response: Agreed.
DEST agrees with Recommendation 1 and notes the
importance of requiring a Memorandum of Understanding between DEST
and the ARC.
This is consistent with the Government s
expectation following the Review of the Corporate Governance of
Statutory Authorities and Office Holders and will ensure
regular and ongoing information exchange and reporting between the
DEST enjoys a good working relationship with the
ARC and will work with the ARC to ensure that the Memorandum of
Understanding formalises consultative and reporting activities on
national research policy matters.
In response to the Government s intention to retire the ARC
Board by early 2006, the Australian Vice-Chancellors Committee
stressed the need for peer review in any new ARC legislation and
concern about its operation without a board.(6) The
National Tertiary Education Union has expressed similar sentiments,
believing that the board is a source of strategic advice on
research funding and a buffer to the political whims of the
day.(7) In a
submission to the Senate Employment, Workplace Relations and
inquiry into the Bill, the Federation of Australian Scientific
and Technological Societies (FASTS) commented:(8)
FASTS believes the disestablishment of the ARC
Board does not, in and of itself, undermine the capacity of the ARC
to carry out its functions although we note that the proposed
changes to the Act will mean the integrity of the relations between
the Minister and the CEO of the ARC will be of critical importance.
FASTS argues the Government is entitled to publicly state its
expectations, provide broad direction, approve funding rules and
criteria, set funding caps on programs and accept or not accept
advice. In turn, the ARC is entitled to determine and manage
operational issues as to how it develops and provides advice on
funding decisions and other matters related to research consistent
with the scope specified by the Government. FASTS believes there
are weaknesses in the legislation with implications for how the ARC
carries out its functions of making high quality funding
recommendations and providing advice to the Minister on matters
relating to research.
Accordingly, FASTS recommends the legislation be
- ensure the integrity of the selection of members of committees,
notably the College of Experts, that play a role in the peer or
expert review process leading to recommendations for funding;
- confirm the ARC has the power to initiate inquiries into
matters relating to research of its own volition, and
- provide the Minister greater flexibility to delegate
However, other sectors note that the current research grants
system may need an overhaul in order to foster a more efficient
grant application process, given that significant resources are
expended by the majority of unsuccessful grant applicants. As well,
it may help make the selection process more open and accountable.
Such issues were explored in the ANAO report discussed above.
In reference to the College of Experts comment in the FASTS
submission quoted above, the Minister committed, in the second
reading speech for the Bill, to retaining this group in its current
role.(9) The Minister has also said that she intends to
form another committee:(10)
The CEO will receive input on research matters
directly from an advisory committee which I will create under the
new provisions of the act. The committee will have a broad
membership and will focus on providing strategic advice about the
ARC s operations. The committee will not look at individual grant
The Explanatory Memorandum comments:(11)
The Bill increases the overall appropriation by
$572.250 million due to the indexation of existing grant funding
and the extension of the funding cap to include the last year of
the 2005-06 forward estimates period (2008-09). This increase was
announced as part of the Government s 10-year commitment to Science
and Innovation as announced in Backing Australia s Ability:
Building our Future through Science and Innovation in May
Although not directly related to the
Bill, in the 2006-07 Federal Budget, the ARC received a government
allocation of $14,922,000 just up from $14,846,000 in the previous
year. Average staffing levels were set to rise from 70 to 75
persons. The total administered appropriations rose significantly
from $546,151,000 to a budgeted $570,302,000. This is a rise of 4.4
percent. The ARC had no new measures, but was subject to a
budgetary adjustment due to a change in accounting policies on
grants and liabilities.
Item 1 revises the objects of the Act in
section 3. The only change is that the Act is no longer designed to
provide for the funding of research programs. Neither the second
reading speech nor the Explanatory Memorandum shed light on the
rationale for this change.
Item 3 inserts new Parts 2 and
4 into the Act to replace existing Parts 2, 3 and
New Part 2 specifies that the ARC will consist
of the CEO, ARC staff and designated committees . There will no
longer be a board. The existing functions of the ARC in Part 2
which include provision on advice on research matters requested by
the Minister now become functions of the ARC CEO and have been
transferred to new Part 5.
New Part 4 deals with designated committees.
The major changes of the current provisions dealing with committees
is that these committees are, at least in a formal sense, more
directly under the control of the Minister. Currently, the
committees are established, and members are appointed, by the ARC
board with the approval of the Minister. Under new Part
4, the establishment and membership is directed by the
Minister, although presumably the Minister is advised by the ARC
CEO is such matters. New subsection 32(2) does
specify that the Minister must, in appointing members to a
designated committee, try to ensure that the composition of the
committee reflects the diversity of the interests in the matter or
matters that the committee will be dealing with.
New Part 5 deals with the position of the CEO.
As mentioned above, the current functions of the ARC are
transferred to become the functions of the CEO under new
section 33B. New section 33C sets out the
Minister s ability to direct the CEO in their performance of these
functions. The limitation of the director power is the same as the
existing in section 7 that is, the Minister cannot direct that a
particular grant proposal should, or should not, be
approved as deserving financial assistance . Note that
under section 51 of the Act it is the Minister, rather than the
ARC, that makes a final decision on whether a grant proposal is to
receive funding. This will not change under the
Bill. Any new section
33C directions must be tabled with 15 sitting days after
it is given, as is the situation under the current Act.
Currently the CEO is appointed by the Minister after considering
the ARC board s advice. This advice will no longer by available
under the Bill. However, the provision that the Minister must
consider the candidates record in research and management is
retained in new section 34. The CEO may delegate
his or her powers or functions, including those that have delegated
to them by the Minister, to an ARC staff member down to the rank of
Executive Level 2: new section 66(2).
Existing section 49 of the Act sets
out the annual cap on ARC grants funding for future years.
Item 2 repeals paragraphs 49(f), (g) and (h) and
substitutes new paragraphs 49(f), (g), (h) and (i)
which set out the funding caps for the financial years starting 1
July 2005 up to 1 July 2008. The cap for the 2006-07 financial year
has been reduced by about $15 million and the cap for 2007-08 has
been reduced by about $5 million. New paragraph 49
(i) adds an addition year of funding the 2008-2009
financial year. That year has a cap of $552.945 million.
- Assessment of grant applications is actually done by the ARC s
College of Experts who then make appropriate recommendations to the
ARC Board, see: http://www.arc.gov.au/about_arc/expert.htm.
- Enhancing Governance Arrangements Australian Research Council
Media Release 15 September 2005.
- Audit Report No. 38 2005 06.
- ibid., p. 21.
- ibid., pp. 42 43.
- Research grants board to go The Age 19 July 2005 p.
- Minister s ARC grip stays tight The Australian 5 April
2006 p. 24.
- P. 1.
- Hon. Julie Bishop, House of Representatives Debates 30
March 2006 p. 7.
- Explanatory Memorandum, p. 1.
- Existing Part 3 deals with the ARC Board.
Law and Bills Digest Section
Science, Technology, Environment and Resources Section
11 May 2006
Bills Digest Service
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