A new way to set up a Commonwealth organisation

Public Governance, Performance and Accountability Act 2013, section 87, corporate Commonwealth entities
Parliamentary Library

As outlined by the Department of Finance, until recently there have been three main options for the establishment of a new Commonwealth organisation (please refer to the Department of Finance for some important details, exceptions and nuances that have been omitted for the purposes of this FlagPost):

1. Non-corporate Commonwealth entities (NCEs), which are legally and financially part of the Commonwealth (for example the Departments of state and the parliamentary departments). NCEs can be established without the need for legislation, but some are established by legislation, for example the Australian Federal Police. Companies controlled by the Commonwealth are not NCEs (see below).

2. Commonwealth companies are companies established by the Commonwealth under the Corporations Act 2001 and wholly controlled by the Commonwealth. There are currently 15 Commonwealth companies including four Government Business Enterprises (ASC Pty Ltd, Australian Rail Track Corporation Ltd, Moorebank Intermodal Company Ltd and NBN Co Ltd).

3. Corporate Commonwealth entities (CCEs) are bodies corporate that have a distinct and separate legal existence from the Commonwealth, and can exercise certain legal rights such as entering into contracts and owning property. Typically, CCEs are established by legislation as statutory authorities. Examples include the Australian Institute of Health and Welfare and the National Library of Australia.

Adding to the above options, section 87 of the PGPA Act provides that CCEs can be established by means of disallowable legislative instruments made by the Minister for Finance. The ADHA (Health portfolio) and OPH (Arts portfolio) are the first CCEs to be established in this way.

Further information about other specific Commonwealth organisations including their corporate status can be found at the Australian Government Organisations Register (AGOR) and the Department of Finance. 

A new mechanism to establish a corporate Commonwealth entity (CCE)

In its 2013 report covering the PGPA Bill, the Senate Standing Committee for the Scrutiny of Bills (SB Committee) observed that section 87:

… enables the executive government to establish new corporate Commonwealth entities through rules made for this purpose. This is a significant new power as new bodies corporate are usually established by an Act of Parliament.

In making the case for this new provision, the Revised Explanatory Memorandum (EM) for the PGPA Bill emphasised efficiency, asserting that:

… establishing a new statutory authority by an Act of Parliament can be time-consuming and can constrain the government’s ability to respond effectively to changes in its operating environment.

The SB Committee did not express objections to this rationale, and noted assurances in the EM and from the Government that ‘the power cannot be used to abolish an entity that has been established by legislation or to wind up a company’, and that rules made under section 87 will be subject to disallowance. The SB Committee also noted that the power under section 87 is not unprecedented—a similar power exists in the Primary Industries and Energy Research and Development Act 1989 to create statutory authorities for research and development purposes. The SB Committee was, however, concerned to ensure that appropriate accountability frameworks will apply to any entity established using this new mechanism.

As a delegation of a power from the Parliament to a minister (specifically, the Minister for Finance, as provided for in section 101 of the PGPA Act), a rule made under section 87 will be a type of legislative instrument (also referred to as delegated or subordinate legislation). In accordance with Senate Standing Order 23(3), disallowable delegated legislation is scrutinised by the Senate Standing Committee on Regulations and Ordinances (RO Committee), with a focus on individual rights and liberties, and parliamentary propriety. The RO Committee lists disallowable instruments about which it has concerns in its Index of instruments and reports its concerns to the Parliament in its Delegated legislation monitor, tabled in the Senate each Senate sitting week.  In addition, any disallowable instrument can be the subject of a disallowance motion in either House of the Parliament.

The ADHA: progress toward establishment

Under the Public Governance, Performance and Accountability (Establishing the Australian Digital Health Agency) Rule 2016 (ADHA Rule), the ADHA will replace the National E-Health Transition Authority Ltd (NEHTA). Formed in July 2005, NEHTA is a company limited by guarantee whose board consists of the heads of the nine Commonwealth, state and territory health departments, plus two independent directors. The Explanatory Statement that accompanied the ADHA Rule noted that, partly in response to consultation, the ADHA will be governed by a skills-based board supported by technical advisory committees. The ADHA will also have a role in the governance of the Personally Controlled Electronic Health Record system (now known as My Health Record).

As provided for by section 87 of the PGPA Act, the ADHA Rule addresses matters relevant to the establishment of a statutory entity, such as name, functions, powers, governing body, Chief Executive, staff, and the relevant minister and their powers.

The ADHA Rule was tabled in the Senate on 2 February 2016 and, in the subsequent 15 sitting days, no senator gave a notice of motion for the disallowance of the Rule. The ADHA Rule is not listed in the RO Committee’s 2016 Index of instruments, and was not identified as raising any concerns referable to the RO Committee's scrutiny principles in the relevant Delegated legislation monitor (No. 2 of 2016).

Section 73 of the ADHA Rule provides that the assets and liabilities of NEHTA will become the responsibility of the ADHA on a Transfer Day to be set by the Minister for Health in a new form of delegated legislation, a ‘notifiable instrument’. As explained by the Federal Register of Legislation, notifiable instruments are laws on matters of detail made by a person or body authorised to do so by enabling legislation. They are not subject to disallowance, nor do they sunset automatically after 10 years. They are, however, subject to automatic repeal if they solely provide for the amendment, repeal or commencement of Acts or other instruments. The Transfer Day of 1 July 2016 has been set by the Public Governance, Performance and Accountability (Establishing the Australian Digital Health Agency) Transfer Day Notice 2016, which was registered with the Federal Register of Legislation on 9 May 2016, the day Parliament was dissolved. As a notifiable instrument the Transfer Day Notice is not subject to disallowance.

OPH: progress toward establishment

The Museum of Australian Democracy at Old Parliament House (OPH) is currently a non-corporate Commonwealth entity (NCE). Since July 2008, OPH has been established as an Executive Agency under section 65 of the Public Service Act 1999. The Department of Finance observes that ‘the Executive Agency structure provides a degree of independence from departmental management where that is appropriate to an agency’s activities.’ However, the Explanatory Statement for the Public Governance, Performance and Accountability (Establishing Old Parliament House) Rule 2016 (OPH Rule) observes that:

[establishment as a corporate Commonwealth entity] will place OPH on an equivalent footing as the other national collecting institutions. It will also have an added benefit of simplifying its complex funding structure, with five department and administered appropriations reduced down to three department appropriations.

The OPH Rule was registered with the Federal Register of Legislation on 9 May 2016, the day Parliament was dissolved, and is disallowable. From the day Parliament commences, senators will have 15 sitting days in which to move to disallow the OPH Rule. Similarly to the ADHA rule, the OPH Rule addresses matters relevant to the establishment of a statutory entity.

By means of an Order dated 9 May 2016, the Governor-General has abolished Old Parliament House as an Executive Agency, with effect from 1 July 2016.

Assessing the operation of section 87

An opportunity to assess the operation of section 87 and associated rules will arise in 2017. Section 112 of the PGPA Act requires the Minister for Finance, in consultation with the Parliament’s Joint Committee of Public Accounts and Audit, to instigate an independent review of the PGPA Act and rules as soon as practicable after 1 July 2017. The report must be tabled in both houses of Parliament.


Flagpost is a blog on current issues of interest to members of the Australian Parliament

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