Joint Committee of Public Accounts and Audit

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Inquiry into the effects of the ongoing efficiency dividend on smaller public sector agencies

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Terms of Reference

Since 1987-88 an annual "efficiency dividend" has been applied to the operational appropriations of Commonwealth public sector agencies. The rate of the dvidend now stands at 1.25 per cent, with the Government imposing an additional one-off 2 per cent efficiency dividend for 2008-09 appropriations (with a pro-rata reduction in 2007-08 appropriations). The Joint Committee of Public Accounts and Audit will inquire into and report on the effects of the ongoing efficiency dividend on smaller public sector agencies, including:

• whether the efficiency dividend has a disproportionate impact on smaller agencies, including whether or not smaller agencies are disadvantaged by poorer economies of scale or a relative inability to obtain funding for new policy proposals;
• whether the efficiency dividend is now affecting the capacity of smaller agencies to perform core functions or to innovate;
• what measures small agencies are taking to implement the efficiency dividend, and the effect on their functions, performance and staffing arrangements;
• any impacts of the efficiency dividend on the use by smaller agencies of "section 31" agreements to secure non-appropriation receipts (eg through user charges and cost recovery) - noting that these receipts are not subject to the efficiency dividend;

• how application of the efficiency dividend is affected by factors such as the nature of an agency's work (for example, cultural, scrutiny, or regulatory functions) or the degree of discretion in the functions performed by smaller agencies; and
• if appropriate, alternatives to an across-the-board efficiency dividend to encourage efficiency in the Commonwealth public sector, including consideration of whether certain agencies should be exempted from the efficiency dividend, or whether the rate of the dividend should vary according to agency size or function.

For the purposes of its inquiry the Committee defines "smaller agencies" as those with an operational budget (that is to say, departmental as distinct from administrative appropriations) of $150 million per annum or less, and may particularly focus on a selection of such agencies as case studies. However, submissions relevant to the terms of reference will be accepted from other agencies.

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