Financial Framework Legislation Amendment Bill (No.1) 2011

Bills Digest no. 10 2011–12

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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.

Richard Webb
Economics Section
6 July 2011

Contents
Purpose
Background
Financial implications
Key provisions
Concluding comments 

 


 

Date introduced:  2 June 2011
House:  House of Representatives
Portfolio:  Finance and Deregulation
Commencement:  Sections 1 to 3—and anything in the Bill not covered elsewhere by the table in clause 3—commence on Royal Assent. Schedules 4 and 5 also commence on Royal Assent. Schedules 6 to 8 commence on the day after the Bill receives Royal Assent. Schedule 1 commences on a day to be fixed by Proclamation subject to the proviso that Schedule 1 will not commence if its provisions do not commence within the 12 months—beginning on the day the Bill receives Royal Assent—in which case the provisions in Schedule 1 will commence on the day after the 12 month period.  Schedule 2 commences on a day or days to be fixed by Proclamation subject to the proviso that Schedule 2 will not commence if any of its provisions do not commence within the 12 months—beginning on the day the Bill receives Royal Assent—in which case the provisions in Schedule 2 will commence on the day after the 12 month period.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

To amend eight Acts to clarify aspects of the financial management of Commonwealth agencies, companies and authorities.  

Background

The majority of Commonwealth government bodies are agencies which are regulated by either the FMA Act or the CAC Act.[1] A characteristic of agencies is that they provide various services that are non-market in nature and entail the transfer and redistribution of income. The Financial Management and Accountability Act 1997 (FMA Act) is the principal Act governing the financial and other aspects of agencies. They include the collection of public money, the maintenance of accounting records, control and management of public property, the responsibilities of chief executives, and the power of the Finance Minister to make regulations and delegate powers.

The Commonwealth Authorities and Companies Act 1997 (CAC Act) regulates certain aspects of:

∙ the corporate governance, financial management and reporting of Commonwealth authorities (authorities), which are in addition to the requirements of their enabling legislation; and

∙ the corporate governance and reporting of Commonwealth companies (companies) which are in addition to the requirements of the Corporations Act 2001.[2]

Examples of CAC Act authorities are the Australian Law Reform Commission, the Australian Broadcasting Corporation and the Civil Aviation Safety Authority. Examples of CAC Act companies are the Australian Strategic Policy Institute Limited, the Aged Care Standards and Accreditation Agency Limited, and Medibank Private Limited.[3] Some CAC Act authorities and companies are classified (by regulation) as government business enterprises (GBEs).[4] An example of an authority that is also a GBE is Australia Post. Examples of companies that are GBEs are the Australian Rail Track Corporation, Medibank Private, and NBN Co Limited. Features of GBEs include that they provide services for profit and pay dividends to the government as owner.

Financial implications

The Bill does not have any financial implications.

Key provisions

Schedule 1—Amendment of the Commonwealth Authorities and Companies Act 1997

Part 3 of the CAC Act deals with the reporting and other obligations for authorities, and Part 4 with these obligations for companies. With respect to reporting obligations, GBE authorities and companies must prepare corporate plans under sections 17 and 42 respectively. The purpose behind the amendments in Schedule 1 is to remove from the CAC Act the requirement that corporate plans cover certain matters and instead, specify these matters in regulations.  As the Special Minister of State for the Public Service and Integrity and Special Minister of State, Mr Gary Gray, stated in the second reading speech:

Specifically, Schedule 1 of the Bill contains minor amendments to the Commonwealth Authorities and Companies Act 1997 to enable the content requirements for the corporate plans of government business enterprises to be specified under regulations, rather than the Act. This allows that content to be updated more readily.[5]

Schedule 2—Amendment of the Financial Management and Accountability Act 1997

Special accounts

A special account is a mechanism to manage money designated for a specific purpose. A special account is an appropriation mechanism that sets aside an amount within the Consolidated Revenue Fund to be spent for that specific purpose. The appropriation authority is section 20 or 21 of the FMA Act. A special account can be established by a legislative instrument made by the Finance Minister under section 20 of the FMA Act, or by an enabling Act under section 21 of the FMA Act. The Finance Minister can, by determination, establish special accounts under subsections 20(1) and 20(2) and abolish special accounts under subsection 20(3).  Item 1 adds two new subsections which deal with sunsetting and disallowance of determinations.  Proposed subsection 20(6) relates to subsections 20(1) and 20(2) and provides that a determination made under these two subsections is a legislative instrument but that the sunsetting provisions of Part 6 of the Legislative Instruments Act 2003 do not apply to the determination. Proposed subsection 20(7) provides that a determination made under subsection 20(3) is also a legislative instrument but that neither section 42 of the Legislative Instruments Act 2003 (which deals with disallowance) nor Part 6 of that Act (which contains sunsetting provisions) applies to the determination.

Auditors

Agencies are required to have internal and external auditors. Section 46 of the FMA Act requires that agencies establish audit committees to conduct internal audits. Item 2 amends paragraph 46(1)(b) to make explicit the fact that the external auditor is the Auditor-General.

Instructions

Part 7 of the FMA Act deals with the special responsibilities of chief executives. Section 52 deals with chief executives’ instructions, and provides that regulations may authorise chief executives to give instructions to officials on matters dealt with by regulations made under the FMA Act. Item 3 adds proposed subsection 52(3) and provides that such instructions are legislative instruments but that neither section 42 of the Legislative Instruments Act 2003 (which deals with disallowance) nor Part 6 of that Act (which contains sunsetting provisions) applies to the instructions.

However, the Government has proposed amending item 3.[6] The amendment provides that an instruction is not a legislative instrument. Consequently, the disallowance and sunsetting provisions of the Legislative Instruments Act 2003 as first proposed are not applicable. 

Guidelines

Section 64 of the FMA Act permits ministers to issue guidelines on matters that fall within their responsibilities.  Subsection 64(3) states that a guideline is a legislative instrument. Item 4 repeals subsection 64(3) and substitutes proposed subsection 64(3) which provides that a guideline is a legislative instrument but that neither section 42 of the Legislative Instruments Act 2003 (which deals with disallowance) nor Part 6 of that Act (which contains sunsetting provisions) applies to the guideline.

Schedule 3—Amendment of the Legislative Instruments Act 2003

Item 1 removes from the Legislative Instruments Act 2003 three legislative instruments that are not subject to disallowance while item 2 removes three legislative instruments that are not subject to sunsetting. The Explanatory Memorandum notes that these provisions will be redundant by virtue of Schedule 2.[7]

Schedule 7—Amendment of the Wheat Export Marketing Act 2008

All wheat exporters must pay the export charge for wheat that is produced in and exported from Australia.[8] Further, section 10 of the Wheat Export Marketing Scheme Act 2008 deals with application fees charged to companies that wish to be accredited as wheat exporters.  Section 59 of the Wheat Export Marketing Scheme Act 2008 deals with credits of amounts to the wheat exports Australia special account. Item 1 repeals section 59 and substitutes proposed section 59. This provides that three categories of revenue must be credited to the Wheat Exports Australia Special Account. They are revenue from the wheat exports charge (proposed paragraph 59(a)), application fees charged under section 10 (proposed paragraph 59(b)), and any other amounts received for any purpose of the wheat exports Australia special account (proposed paragraph 59(c)). The Explanatory Memorandum explains the purpose of proposed section 59:

Item 1 broadens the crediting clause of the Wheat Special Account to reflect the purpose clause in the Wheat Special Account and to enable Wheat Exports Australia to credit amounts to the Wheat Special Account for similar amounts that other agencies would collect under section 31 of the FMA Act and regulation 15 of the FMA Regulations.

Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) enables an FMA Act agency to retain certain amounts received, by increasing the agency’s most recent departmental item in an Appropriation Act by an amount equal to the amount received by that agency.  Regulation 15 of the Financial Management and Accountability Regulations 1997 (FMA Regulations) prescribes the types of amounts that an FMA Act agency may credit to their most recent departmental item.

Wheat Exports Australia does not receive a departmental appropriation in annual Appropriation Acts, as this FMA Act agency is financed through levies and amounts collected from industry, rather than a departmental appropriation.  Unlike other FMA Act agencies, Wheat Exports Australia does not have a departmental item that may be increased to reflect amounts collected under section 31 of the FMA Act and regulation 15 of the FMA Regulations.[9] 

Concluding comments

The Bill’s provisions are largely technical in nature and, as such, uncontroversial.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2460.


[1].       For a list of agencies that operate under the Financial Management and Accountability Act 1997, see the Department of Finance and Deregulation website, viewed 27 June 2011, http://www.finance.gov.au/financial-framework/fma-legislation/fma-agencies.html

[2].       Department of Finance and Deregulation website, viewed 27 June 2011, http://www.finance.gov.au/financial-framework/cac-legislation/cac-act.html

[3].       The Department of Finance and Deregulation maintains a ‘flipchart’ of the agencies subject to the FMA Act and bodies subject to the CAC Act. See the Department of Finance and Deregulation website, viewed 27 June 2011, http://www.finance.gov.au/publications/flipchart/docs/FMACACFlipchart.pdf

[4].       For a list of GBEs and the Acts under which they are established, see Commonwealth Authorities and Companies Regulations 1997, viewed 27 June 2011, http://www.comlaw.gov.au/Details/F2011C00129

[5].       G Gray, ‘Second reading speech: Financial Framework Legislation Amendment Bill (No. 1) 2011’, House of Representatives, Debates, 2 June 2011, p. 22, viewed 27 June 2011, http://parlinfo/parlInfo/genpdf/chamber/hansardr/2011-06-02/0063/hansard_frag.pdf;fileType=application%2Fpdf

[6].       The proposed amendment can be found on the Bills home page, viewed 29 June 2011, http://parlinfo/parlInfo/search/display/display.w3p;adv%3Dyes;orderBy%3Dcustomrank;page%3D0;query%3DFinancial%20framework%20legislation%20amendment%20bill%20(No.%201)%202011%20Dataset%3AbillsCurBef,billsCurNotBef;rec%3D0;resCount%3DDefault

[7].       Explanatory Memorandum, Financial Framework Legislation Amendment Bill (No. 1) 2011, p. 5.

[8].       For information on the charge, see the Wheat Exports Australia website, viewed 27 June 2011, http://www.wea.gov.au/wheatexports/WheatExportCharge.htm

[9].       Explanatory Memorandum, op. cit., p. 19.

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