Bills Digest no. 119 2006–07
Governance Review Implementation (Treasury Portfolio
Agencies) Bill 2007
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
Governance Review Implementation (Treasury
Portfolio Agencies) Bill 2007
1 March 2007
House: House of Representatives
The majority of the
Bill commences on 1 July 2007.
The Bill seeks to improve the corporate
governance of three statutory authorities the Australian Securities
and Investments Commission (ASIC), the Corporations and Markets
Advisory Committee (CAMAC) and the Australian Prudential Regulation
Authority (APRA) by bringing them under the Financial
Management and Accountability Act 1997.
Nearly all government bodies fall under the
Financial Management and Accountability Act 1997 (the FMA
Act) or the Commonwealth Authorities and Companies Act
1997 (the CAC Act).
The FMA Act focuses primarily on the
obligations and responsibilities of Chief Executives and the way
officials handle public money, public property and other resources
of the Commonwealth. The FMA Act applies to budget-funded
authorities managed by a CEO, and establishes various management
and reporting responsibilities for the CEO (s. 44 46, 49 and
51), as well as allowing the Minister to give guidelines to the CEO
(s. 64). Furthermore, the FMA Act provides an accountability
framework for CEOs to manage agency resources.
The CAC Act, on the other hand, requires
directors and officers to exercise their powers and duties in the
best interests of the body and for a proper purpose. Directors
duties apply to help ensure that prudent decisions are made on the
resources that, as a matter of law, the body holds in its own
right. The CAC Act applies to authorities that are corporate
entities managed by a board. It requires the head of the board to
report to the responsible Minister (s. 15 16), and to ensure that
the authority s activities comply with government policies (s.
As at 31 January 2007, there were 94 FMA Act
agencies and 99 CAC Act agencies.(1) The Department of
Finance and Administration publication Governance
Arrangements for Australian Government Bodies (August
2005) provides further explanation on the FMA Act and CAC Act and a
comparison between the two pieces of legislation (Appendix E).
This Bill is designed to bring governance
arrangements for ASIC, CAMAC and APRA into line with the model
detailed in the
Review of Corporate Governance of Statutory Authorities and Office
Holders (the Uhrig Review) conducted by Mr John Uhrig AC
in 2003.(2) A number of similar Acts have been passed by
Parliament incorporating Uhrig Review recommendations into a
variety of statutory bodies.
The Coalition had
flagged its intention to examine statutory authorities and office
holders in its 2001 election platform. On 14 November 2002, the
Prime Minister, the Hon. John Howard, appointed Mr John Uhrig AC to
review the governance practices of statutory authorities and office
holders, particularly those agencies which impact on the business
The objective of
the review was to identify issues concerning existing governance
arrangements and to provide policy options for Government to gain
the best from statutory authorities and office holders and their
The Prime Minister
received the Uhrig Review in June 2003, and it was released by the
Minister for Finance and Administration on 12 August 2004.
The Report recommended that two templates
should apply 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
that for statutory authorities, the selection of the management
template and financial frameworks to be applied should be based on
the governance characteristics of each statutory
authority.(5) Specifically, Uhrig found that the FMA Act
should be applied to statutory authorities where it is appropriate
they be legally and financially part of the Commonwealth and do not
need to own assets. The CAC Act should be applied to statutory
authorities where it is appropriate that they be legally and
financially separate from the Commonwealth.
This Bill brings
key economic regulators the Australian Securities and Investment
Commission (ASIC), and the Australian Prudential Regulatory
Authority (APRA), and expert advisory committee the Corporations
and Markets Advisory Committee (CAMAC), under the FMA Act.
ASIC is a statutory authority established by
the Australian Securities and Investments Commission Act
2001 (ASIC Act). ASIC is funded by the Commonwealth, and also
collects fees and charges, which is returned to the consolidated
revenue fund. During 2005-06 ASIC raised $543 million in fees and
charges, and had an expenditure of $218 million.(6) The
ASIC Act requires ASIC to:
uphold the law uniformly, effectively and
promote confident and informed participation by
investors and consumers in the financial system
make information about companies and other
bodies available to the public, and
improve the performance of the financial system
and the entities within it.(7)
ASIC is currently a CAC Act body, but is
prescribed as an FMA Act agency for the purposes of the public
money that it holds.(8)
CAMAC is a statutory authority under section
146 of the ASIC Act. Prior to March 2002, it was known as the
Companies and Securities Advisory Committee (CASAC). CAMAC
comprises part-time members appointed by the Treasurer. The
Chairman of ASIC is a member of the Committee by virtue of s. 147
of the ASIC Act.
Subsection 148(1) of the ASIC Act sets out
CAMAC s functions which are, on its own initiative or when
requested by the Minister, to advise the Minister, and to make to
the Minister such recommendations as the Committee thinks fit,
about any matter connected with:
a proposal to make corporations legislation or
to amend that legislation
the operation or administration of that
law reform in relation to that legislation
companies or a segment of the financial products
and financial services industry, or
a proposal for improving the efficiency of the
APRA is the prudential regulator of the
Australian financial services industry. It oversees banks, credit
unions, building societies, general insurance and reinsurance
companies, life insurance, friendly societies, and most members of
the superannuation industry. APRA is funded largely by the
industries that it supervises. It was established on 1 July 1998 by
the Australian Prudential Regulation Authority Act 1998
(the APRA Act). APRA currently supervises institutions holding
approximately $2.5 trillion in assets for 20 million Australian
depositors, policyholders and superannuation fund
In his Second Reading speech for the Bill, the
Parliamentary Secretary to the Treasurer stated:
the three agencies will hold money and property
on behalf of the Commonwealth, rather than in their own right. The
agencies will also have the power to enter into contracts on behalf
of the Commonwealth. In addition, ASIC and APRA will retain the
power to enter into contracts on their own behalf, however the
intention is that this power will only be used for regulatory
purposes (for example, regulatory agreements).
It is important to note that the above changes will not adversely
affect the operational capabilities and independence of the
statutory bodies. As noted in the Uhrig Review, it is the authority
s legislative framework (and not its financial framework), which
establishes the level of operational independence required to
exercise its statutory responsibilities
There does not appear to have been any comment
from political parties or interest groups on this Bill. The
Australian National Audit Office (ANAO) has been conducting a
series of audits on government agencies and their compliance with
the FMA Act governance and reporting requirements. For example, in
January 2005 the ANAO tabled a report on
Investment of Public Funds, which looked at investment of
public funds by FMA Act and CAC Act bodies. Amongst the findings
was that in the six sample FMA Act agencies audited, there were
shortcomings in the management of investment of public funds, and
that some FMA Act agencies were holding investments not authorised
by the relevant legislation. The ANAO also found that consistent
governance and reporting processes had yet to be developed by all
Over the past 18 months the Joint Committee of
Public Accounts and Audit has reviewed a number of ANAO reports
regarding financial management and reporting within government
agencies, and has noted a general decline in standards.
The Explanatory Memorandum states that there
is no financial impact.
Schedule 1 makes amendments
to the ASIC Act, the Corporations Act and the APRA Act in order for
ASIC, CAMAC and APRA to conform to the requirements of the FMA Act.
Schedule 2 provides for application and
transitional provisions, and Schedule 3 makes some
minor consequential amendments.
Part 1 of Schedule 1 makes
amendments to the Australian Securities and
Investments Commission Act 2001 (the ASIC Act) and the
Corporations Act 2001 (the Corporations Act) in order for
ASIC to come under the FMA Act.
Items 1-6 insert new
definitions and amendments to the ASIC Act to bring ASIC under the
FMA Act. Item 7 states that any real or personal
property held by ASIC is held for and on behalf of the
Commonwealth. Any money received by ASIC is received for and on
behalf of the Commonwealth. Item 8 states that
ASIC s financial liabilities will become the Commonwealth s
Item 9 inserts new
section 10A into the ASIC Act, which provides that the
Chairperson of ASIC is not subject to direction by ASIC in relation
to their performance of functions or exercise of powers under the
FMA Act or the Public Service Act 1999. This is a standard
provision that ensures that the Chairperson s personal obligations
under the FMA Act and the Public Service Act are kept separate from
the collegiate decision-making processes which otherwise govern
ASIC.(13) Items 44 and 51 later in the
Bill make the same provision for the CAMAC Convenor and the APRA
Item 12 inserts new finance
and reporting requirements into the ASIC Act to ensure compliance
with the FMA Act. New section 133 establishes the
Companies and Unclaimed Moneys Special Account, under the FMA Act.
The special account is a ledger account recording a right to draw
money from the consolidate revenue fund. Section
134 sets out the type of money that must be credited to
the Special Account, and section 135 sets out the
purposes of the Special Account.
New section 136 sets out the
annual reporting requirements, according to the FMA Act. Under the
FMA Act, the Chairperson of ASIC, as its Chief Executive, will be
personally responsible and accountable for managing the agency in a
way which promotes the efficient, ethical and effective use of
New section 137 ensures that
ASIC s general immunity to taxation will be retained, stating that
ASIC is not subject to taxation under the laws of the Commonwealth
or of a State or Territory. Subsection 137 (2)
provides that the regulations may provide that this does not apply
in relation to a specified law. This is consistent with the
previous taxation provisions in the ASIC Act.
Items 13 to 39 make
amendments to the Corporations Act. Currently, under subsection
601AD(2) of the Corporations Act, a company s property on
deregistration vests in ASIC. Under the proposed amendments to the
Corporations Act, a distinction will be made: non-trust property
will vest in ASIC; and trust property will vest in the Commonwealth
(new subsections 601AD(1) and 601AD(2)) of the Corporations Act.
The Explanatory Memorandum states in practice these amendments will
maintain the status quo in relation to this area of the law, as
ASIC will perform all the duties and exercise all the powers of the
Commonwealth as trustee in relation to property held on trust by
the Commonwealth .(14)
Item 24 inserts new
subsections 610AE(1) and (1A), providing
that when trust property vests in the Commonwealth, the
Commonwealth will be granted a discretion to continue to act as
trustee or to apply to a court for the appointment of a new
trustee. The Explanatory Memorandum states that in practice, ASIC
acting on behalf of the Commonwealth will choose how to exercise
this discretion .(15) Where the Commonwealth continues
to act as trustee, subsection 610(1A) provides that it must credit
the money to a Special Account, or otherwise sell or dispose of the
property as it thinks fit, and credit the proceeds to a Special
Account. A new Special Account, established under section 20 of the
FMA Act, will be created for this purpose.
Part 2 of Schedule 1 amends
the ASIC Act to enable CAMAC to come under the FMA Act.
Item 42 adds a new paragraph
to section 146 of the ASIC Act, to provide that any real or
personal property held by CAMAC is held for and on behalf of the
Commonwealth. Any money received by CAMAC is received for and on
behalf of the Commonwealth. Item 43 inserts
new section 146A, which provides that CAMAC s
financial liabilities will become the Commonwealth s
Item 44 inserts new
section 147A, which mirrors that of item 9 regarding
direction by CAMAC to its Convenor (see item 9 above).
Item 46 repeals sections 159
to 168 of the existing ASIC Act and inserts new sections relating
to taxation and reporting requirements, as outlined for ASIC
Part 3 of Schedule 1 amends
the APRA Act to bring APRA under the FMA Act. Currently, APRA is a
CAC Act body and holds money in its own name. This Bill removes
references to APRA s money , as it will now hold public money and
public property for and on behalf of the Commonwealth. APRA s
financial liabilities will become the Commonwealth s financial
liabilities (item 50).
Item 49 alters the
contracting powers of APRA, allowing APRA to enter contracts for
and on behalf of the Commonwealth, in respect of public money and
public property. Under new subsection 11(3) of the
APRA Act, APRA may also enter into contracts in its own right. The
Explanatory Memorandum notes that it is intended that APRA will use
this power for regulatory agreements, rather than for operational
Items 53 to 58, 60-61, and
67 deal with changes to employment practices.
Currently the power to employ staff and engage consultants rests
with APRA. In practice this will continue, although the Bill
transfers the employment powers from APRA to the Chair. This is
because under the FMA Act, the Chair will be personally responsible
for managing the affairs of the Agency in a way that promotes the
proper use of the Commonwealth s resources. It is important to note
that although it will fall under the FMA Act, APRA s employment
arrangements will not be subject to the Public Service Act. The
Explanatory Memorandum states that this permits a high degree of
flexibility in some employment practices in order to assist APRA to
attract and maintain highly skilled staff in the highly competitive
financial services employment market. (17)
Item 58 requires the APRA
Chair to determine the APRA Values and the APRA Code of Conduct,
and for the Chair and APRA members and staff to uphold and promote
the Values and Code of Conduct. This is in line with other
government agencies which do not fall under the Public Service Act.
There is no requirement that the APRA Values and Code of Conduct be
the same as the APS Values and Code of Conduct.
Items 62 to 65 make changes
to the financial and taxation arrangements in Part 5 of the APRA
Act, similar to the changes for the ASIC Act, outlined above. The
changes include the establishment of an APRA Special Account,
credits to the Account, and the purposes of the Account
Item 66 sets out the annual
reporting requirements for APRA under the FMA Act.
Schedule 2 of the Bill
includes application and transitional provisions which are designed
to ensure a smooth transition for ASIC, CAMAC and APRA to the FMA
Item 2 of Schedule 2 provides
that any real or personal property or money that is held by ASIC or
CAMAC, or financial liabilities, that exist immediately prior to
the commencement of the Act is taken, immediately after
commencement, to be held by ASIC or CAMAC for and on behalf of the
Commonwealth. Item 11 makes a similar provision
Items 3 to 5 relate to
property held on trust by ASIC prior to the commencement, which
after commencement will be taken to be held by ASIC for and on
behalf of the Commonwealth. Items 6 and 7 deal
with the transfer of registration certificates for land and other
assets after commencement of the Act. Item 8
states that any court of tribunal proceedings pending immediately
before commencement in relation to property held in trust, to which
ASIC was a party, then following commencement the Commonwealth
shall be substituted for ASIC as a party to the proceedings.
Item 12 provides that staff
and consultants appointed by the Chair of APRA prior to the Act s
commencements will continue their appointment under the new FMA Act
Items 14 and 15 clarify the
reporting requirements for the three agencies. If an agency was
required to provide a report (whether a financial statement or
otherwise) under the CAC Act, then that agency must provide a
report for so much of the period as occurs before the commencement
time (14). If a similar report is required under the new FMA Act
reporting requirements, then a single report will suffice.
Item 15 clarifies that the new annual reporting
requirements will apply from 2007-08 onwards. Item
16 ensures that any agency record-keeping obligations
under the CAC Act will continue to apply to those records after the
commencement of the new Act.
Item 17 provides the
Constitutional safety net that if property is acquired under this
Schedule otherwise than on just terms, the Commonwealth will be
liable to pay a reasonable amount of compensation. If agreement
cannot be reached, proceedings can be instituted in a court to
determine a reasonable amount of compensation.
Item 19 provides that the
Minister may delegate all or any of his or her powers under the
Schedule, in relation to any Agency, to the Agency head. The
delegate must comply with any directions of the Minister when
exercising or performing powers or functions under a
Schedule 3 contains technical
amendments to the ARPA Act.
As noted above, this Bill is one of a series
introduced by the government to implement the Uhrig Report
recommendations. The ANAO has found, over a number of reports, some
shortcomings in government agencies adherence to FMA Act
Department of Finance and Administration, Chart of FMA Act
and CAC Act agencies, available at:
accessed 6 March 2007.
J. A. Uhrig, AC, Review of Corporate Governance of Statutory
Authorities and Office Holders, June 2003, available at.
Sen. the Hon. N. Minchin (Minister for Finance and
Administration), Australian Government Government Response to Uhrig
Report, media release 12 August 2004, http://www.finance.gov.au/scripts/Media.asp?Table=MFA&Id=550.
Uhrig, op.cit., p. 12, point 6.
ASIC Annual Report 2005-06, available at:
accessed 20 March 2006.
ASIC internet site:
accessed 6 March 2007.
Part 2 of Schedule 1 to the Financial Management and
Accountability Regulations 1997 outline ASIC s FMA role in
regard to public moneys.
CAMAC internet site:
accessed 9 March 2007.
APRA internet site: http://www.apra.gov.au/aboutApra/,
accessed 6 March 2007.
Hon. Chris Pearce MP, Parliamentary Secretary to the Treasurer,
Second Reading Speech: Governance Review Implementation (Treasury
Portfolio Agencies) Bill 2007 , House of Representatives,
Debates, 1 March 2007.
Australian National Audit Office, Report no. 22, 2004-05:
Investment of Public Funds, Parliament of Australia, 18
Explanatory Memorandum, p. 17.
Explanatory Memorandum, p. 12.
Explanatory Memorandum, p. 19.
Explanatory Memorandum, p. 23.
20 March 2007
Bills Digest Service
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