Bills Digest 109 1996-97 Financial Management and Accountability Bill 1996

Numerical Index | Alphabetical Index

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.


Passage History

Financial Management and Accountability Bill 1996

Date Introduced: 12 December 1996
House: House of Representatives
Portfolio: Finance
Commencement: On a date set by Proclamation but the Bill must commence by 1 July 1998 if it is enacted and receives the Royal Assent this year.


The Financial Management and Accountability Bill 1996 (the FMA Bill) forms part of a package of four Bills and associated measures designed to modernise controls on Commonwealth finances and over businesses owned or operated by the Commonwealth.

The other Bills in the package are:

  • the Auditor-General Bill 1996 (the Auditor-General Bill);
  • the Audit (Transitional and Miscellaneous) Amendment Bill 1996 (the Transitional Provisions Bill); and
  • the Commonwealth Authorities and Companies Bill 1996 (the CAC Bill).

The Auditor-General Bill, amongst other things, provides for the re-establishment of the Office of Auditor-General under the proposed new financial accountability regime replacing the Audit Act 1901 (the Audit Act); and styles the Auditor-General as an 'independent officer of the Parliament'. This Bill also re-creates the Australian National Audit Office (ANAO) as an independent statutory body employing staff under the Public Service Act 1922 but with a capacity to contract out work where considered appropriate by the Auditor-General.Together with the Transitional Provisions Bill, the Auditor-General Bill makes provision for a wider role for Parliament (through what will be the Joint Committee of Public Accounts and Audit) in selecting the Auditor-General and in monitoring the performance of that Office and the ANAO.The Auditor-General Bill also re-establishes the Office of Independent Auditor, who is the Parliament's auditor of the ANAO.

The Transitional Provisions Bill formally repeals the Audit Act, proposes consequential changes to enabling legislation affecting Commonwealth authorities so as to link those bodies to the CAC Bill, and provides for the Auditor-General in office at 30 June 1997 to see out the remainder of their 10 year term.The Public Accounts Committee Act 1951 is to be amended to enlarge the powers and functions of the Parliamentary Joint Committee of Public Accounts (JCPA).

The CAC Bill contains financial reporting, ethical and auditing provisions relating to corporate public authorities whose enabling legislation gives them 'ownership' of their operating funds and assets.It also extends to companies where the Commonwealth has a direct controlling interest and makes special provision for 100 percent Commonwealth owned companies.The CAC Bill replaces Part XI of the Audit Act which currently provides standard financial, reporting and auditing provisions for about two-thirds of Commonwealth authorities.

The FMA Bill (in part) replaces the Audit Act and associated controls and seeks to establish a new regulatory framework for Commonwealth instrumentalities which financially are agents of the Commonwealth.The FMA Bill therefore is principally concerned with those bodies which do not 'own' their funds and operate squarely within the framework established by sections 81 and 83 of the Commonwealth Constitution.Such bodies include the Departments of State, the Parliamentary Departments and many Statutory Authorities and government agencies which manage public money or property on behalf of the Commonwealth.The Bill also specifies the powers and responsibilities of the Minister for Finance with regard to their duties as custodian of the Treasury of the Commonwealth under the Constitution.

The principles and basic machinery provisions set out in the Bill are to be 'fleshed out' by subsidiary legislation, regulations and the Finance Minister's Orders.(1) Chief Executives of FMA agencies will also be responsible for promulgating operating instructions and for sub-delegating the Finance Minister's powers and functions under the Act to other officials.

Further, the FMA Bill:

  • provides that the Finance Minister will retain the sole power to agree to appropriate banking arrangements for public money, to make orders concerning the handling of receipts and withdrawals of public money, and its investment;
  • specifies the powers and responsibilities of the Minister for Finance generally;
  • revises the Commonwealth's Fund accounting structure, replacing the Trust Fund with two purpose-based Funds – the Reserve Money Fund and the Commercial Activities Fund;
  • modernises the accounting system for public money generally;
  • prescribes rules for the control and management of public property; and
  • outlines and enhances the powers and responsibilities of 'Chief Executives' of Commonwealth agencies.

A list of bodies coming within the scope of the FMA Bill forms Attachment A to this Digest.

The new Commonwealth Fund accounting arrangements established under the FMA Bill are depicted in Appendix A to the Bill.(2)


Commonwealth Accounting Framework

The accounting framework of the Commonwealth is broadly defined by the Australian Constitution.

Section 51 provides that the Parliament has power to make laws for, amongst other things, taxation and borrowing money on public credit.Parliament also has the exclusive right to impose customs and excise duties [section 90].

Money collected under the authority of Parliament by the Executive Government must form part of one CRF and may be appropriated (drawn on) for the purposes of the Commonwealth.

No money can, however, be drawn from the Commonwealth Treasury except under an appropriation made by law. Such laws may take the form of general Appropriations Bills (the legislation commonly associated with the Commonwealth Budget) or by standing appropriations contained in individual enabling laws or specific enactments.(3)

Public money can only be appropriated on the initiative of the Executive Government [section 56] as a message from the Governor General to the House of Representatives recommending an appropriation is required.

Since federation, the key features of day to day Commonwealth financial administration have been sections 81 and 83 of the Constitution and the Audit Act, which, as has been noted frequently, was the fourth piece of legislation enacted by the Commonwealth.

The Audit Act establishes the framework for financial administration of the Executive Government and the roles, powers and duties of Commonwealth officers involved in financial administration. Three tiers of subordinate (delegated) legislation prescribe these powers and functions in more detail. They are:

  • the Finance Regulations – made on the authority of the Governor–General;
  • the Finance Directions – given on the authority of the Minister for Finance; and
  • Secretaries' Directions – given on the authority of the Secretary of a Department to the staff of that Department.

The FMA Bill

The present FMA Bill closely resembles the Financial Management and Accountability Bill 1994 (the 1994 Bill) as read a third time in the House of Representatives, i.e. the 1994 Bill as amended in response to JCPA Report No. 331 (see below).

The 1994 Bill was introduced on 29 June 1994 by the then Minister for Finance, the Hon Kim Beazley and referred, on his motion, to the JCPA for review with an advisory report to be presented by 23 August 1994. Extensive public hearings were held and on 23 August 1994 the House agreed to extend the reporting deadline till 22 September 1994.

JCPA Report No. 331, An Advisory Report on the Financial Management and Accountability Bill 1994, the Commonwealth Authorities and Companies Bill 1994 and the Auditor-General Bill 1994, and on a Proposal to Establish an Audit Committee of Parliament, generally welcomed the introduction of the FMA Bill noting:

  • that it was arguably the most significant of the three Bills in the 1994 audit legislation package;(4)
  • the JCPA believed that the 1994 Bill would '(establish an appropriate structure for the financial management and accountability of the Commonwealth's assets';(5) and
  • that it rejected criticisms of the 1994 Bill which suggested that it did not contain sufficient detail of the standards, arrangements and administrative procedures needed for agencies to comply with the Bill.(6)

The JCPA recommended two minor changes to the 1994 Bill and these were reflected in three Government amendments made in the House on 8 December 1994.(7)

The Bill was introduced in the Senate on 6 February 1995 and passed on 27 March 1995 but with amendments. The House of Representatives subsequently agreed to one of the Senate amendments on 29 March 1995.The Bill did not, however, pass both Houses in the same form during the life of the last Parliament.

Main Provisions


As noted in the Explanatory Memorandum, the Bill recognises that some prescribed Agencies such as the Office of Parliamentary Counsel will have a 'Secretary' as defined in the Public Service Act. 'Chief Executive' as defined in clause 5 extends to Secretaries of Executive Departments, Departments of the Parliament and the heads of any other prescribed Agency who is the Secretary of that Agency for the purposes of the Public Service Act 1922.

'Public money' is defined so as to include money in the control or the custody of the Commonwealth or in the control or custody of a person acting on behalf of the Commonwealth including money held on trust for another person [clause 5].

Clause 5 also defines public property so as to include any property in the custody or under the control of the Commonwealth including such property that is held on trust for a person other than the Commonwealth. As recommended in JCPA Report No. 331, the expression 'public property' includes intellectual property.(8)

Incidental Borrowings/Banking of Public Money

Clause 8 provides that the Finance Minister may enter into an agreement with any bank for the receipt, custody, payment or transmission of public money, either inside or outside Australia. Subclause 8(3) limits overdraft drawings by the Commonwealth to periods of 30 days. This limitation is to ensure that such overdrafts may only arise as a consequence of the localised conduct of day to day Commonwealth banking business.Advances paid to the Commonwealth to finance its operations that involve a credit to the Consolidated Revenue Fund (CRF) dealt with in clauses 38 and 39. Clause 37 provides that any agreement for the borrowing of money by the Commonwealth (including the obtaining of an advance on overdraft) is of no effect unless the borrowing is authorised by an Act.

Clauses 8–16 deal with the receipt, custody and banking of public money. Clause 10 provides that all public money must be banked promptly, as required under the Finance Minister's Orders.

Clause 12 in effect gives the Finance Minister an effective veto on all arrangements for the receipt or custody of public money involving a person other than the Commonwealth, a Commonwealth official or a Minister.

Fund accounting, appropriations and payments

Part 4 of the Bill establishes new streamlined arrangements for the 'Commonwealth Fund' accounting structure.

Clause 17 provides for the classification of public money by account and clause 18 provides that all public money except funds subject to a Special Instruction [clause 16], must be credited as soon as practicable to the CRF.

Clause 19 provides for the recreation of the Loan Fund and for its operation in conjunction with the CRF.The Loan Fund is presently established under section 55 of the Audit Act which provides for a separate account to be maintained of all moneys raised on the public credit of the Commonwealth.Moneys standing to the credit of the Loan Fund may be expended only under the authority of an Act.

Clauses 20 and 21 provide respectively for the creation of the Reserve Money Fund (RMF) and the Commercial Activities Fund (CAF). Together these two Funds replace the Trust Fund established under section 60 of the Audit Act and arrangements for Trust Accounts authorised by section 62A of that Act.The Trust Fund moneys may be expended only for the purposes of the Fund, or under the authority of an Act. The Minister for Finance may invest moneys standing to the credit of the Trust Fund in specified kinds of investments.(9)Components of the CRF and the CAF are to be determined by the Minister for Finance with such determinations being subject to disallowance within 5 sitting days of being tabled [clause 22].(10)

Special Responsibilities of Chief Executives

Part 7 of the Bill seeks to give 'Chief Executives' (Departmental Secretaries etc) greater autonomy and added responsibility for the management of Agencies. This formal recognition of enhanced responsibilities of Chief Executives reflects changes that have taken place in the Australian Public Service (APS) over the last 15 years.At the same time, the scope of the proposed changes should not be overstated.The JCPA in Report No. 331 noted that it was:

(heartened, in particular, to see the balance that has been struck[in the corresponding provisions of the 1994 Bill] between the devolution of authority to the Chief Executives of agencies and the need for a counterbalancing chain of accountability back to Parliament.(11)

Part of that balance is maintained by not granting to Chief Executives the degree of autonomy that might be expected to apply if, for example, the APS were broken up into a multiplicity of self-governing/self-contained corporate entities.It is arguable that under the present Bill the powers of the Department of Finance are remain firmly entrenched although somewhat further removed from day to day operations.For example:

  • clause 48 provides that the Chief Executive must ensure that accounts and records of the Agency are kept as required by the Finance Minister's Orders and that the Finance Minister is given full and free access to all such records;
  • clause 49 provides that the Chief Executive must prepare financial statements in accordance with the Finance Minister's Orders;
  • clause 50 provides that the Finance Minister may require a Chief Executive to prepare financial statements covering a period of less than a financial year and these must be given to the Finance Minister; and
  • clause 63 provides that the Finance Minister may make Orders on any matter as required by the Act or where the Act permits such orders to be made.

Similarly, act of grace payments [clause 33] and the waiver of Commonwealth debts [clause 34] appear to remain the sole prerogative of the Finance Minister.

The Bill also provides that Chief Executives must:

  • manage the affairs of the Agency in a way that promotes the proper use of Commonwealth resources [subclause 44(1)] although this is also subject to the express caveats contained in subclause 44(2);
  • implement fraud control plans [clause 45];
  • maintain audit committees for their Agencies with the functions and responsibilities required by the Finance Minister's Orders [clause 46];
  • subject to certain defined exceptions, pursue debt recovery of each debt for which the Chief Executive is responsible (i.e. debts owing to the Commonwealth in respect of operations of the relevant Agency and debts owing to the Commonwealth which the Finance Minister has chosen to allocate to the Chief Executive) [clause 47];
  • ensure that accounts and records of the Agency are maintained as required [clause 48];
  • prepare financial statements and additional financial statements [clauses 49 and 50];
  • (within the terms prescribed by regulation) issue instructions to officials in their Agency on any matter on which regulations may be made [clause 52]; and
  • delegate any of their powers or functions under the Act to any official in the Agency [clause 53].


Clauses 54–57 develop the relationship between Agencies and the Auditor-General. Clause 57, for example, provides for the Auditor-General to examine Agency financial statements and report on whether they conform to the requirements of the FMA Act.

Application to Intelligence and Security Agencies

Clause 58 provides that the application of the FMA Act to an intelligence or security agency will be subject to any modifications that are prescribed by regulation.Section 70D of the Audit Act provides for 'Exempt Account' arrangements for the security and intelligence services. Commenting on these exemptions, the JCPA supported the principle that 'the Auditor-General should be able to audit the financial statements of security and intelligence agencies, including secret accounts, with appropriate restrictions on disclosure.'(12)


  1. Hon John Fahey, Second Reading Speech, Hansard, 12 December 1996: 7915.
  2. FMA Bill 1996: 41.
  3. Only about 30 percent of appropriations are accounted for by annual appropriation Bills.
  4. JCPA Report No. 331: 8.
  5. ibid: 9.
  6. ibid: 10.
  7. Hansard: 4217-4318.
  8. Refer Explanatory Memorandum: 3.
  9. Department of Finance, Commonwealth Financial Management Handbook, 1992: 77.
  10. An amendment to increase the time available for disallowance to 15 sitting days was moved by the then Opposition to the 1994 Bill but defeated. House of Representatives, Hansard, 8 December 1994: 4318.
  11. JCPA Report No. 331: 9.
  12. ibid: 21.

Attachment A

Proposed FMA Agencies

The following list of organisations represents the Proposed Agencies under the FMA Act 1996 (i.e. Commonwealth Bodies dealing in Public Moneys – refer to Note 2 Definitions).

Parliamentary Departments and Departments of State

  1. Department of the Senate
  2. Department of the House of Representatives
  3. Department of the Parliamentary Library
  4. Department of the Parliamentary Reporting Staff
  5. Joint House Department
  6. Attorney-General's Department
  7. Department of Administration Services
  8. Department of Communications and the Arts
  9. Department of Environment, Sport and Territories
  10. Department of Defence
  11. Department of Employment, Education, Training & Youth Affairs
  12. Department of Finance
  13. Department of Foreign Affairs & Trade
  14. Department of Health and Family Services
  15. Department of Immigration & Multicultural Affairs
  16. Department of Industrial Relations
  17. Department of Industry, Science & Tourism
  18. Department of Primary Industries & Energy
  19. Department of the Prime Minister & Cabinet
  20. Department of Social Security
  21. Department of Transport and Regional Development
  22. Department of the Treasury
  23. Department of Veterans Affairs

Prescribed FMA Agencies

  1. Administrative Appeals Tribunal
  2. Affirmative Action Agency
  3. AusAID
  5. Australia-Japan Foundation**
  6. Australian Bureau of Statistics
  7. Australian Centre for International Agricultural Research**
  8. Australian Competition and Consumer Commission**
  9. Australian Customs Service
  10. Australian Electoral Commission
  11. Australian Federal Police
  12. Australian Industrial Registry
  13. Australian National Audit Office
  14. Australian Secret Intelligence Service
  15. Australian Security Intelligence Organisation
  16. Australian Taxation Office
  17. Commonwealth Ombudsman Office
  18. ComSuper
  19. Family Court of Australia
  20. Federal Court of Australia
  21. Human Rights & Equal Opportunity Commission
  22. Industrial Relations Court of Australia
  23. Industry Commission
  24. Insurance & Superannuation Commission
  25. National Capital Planning Authority
  26. National Competition Council
  27. National Crime Authority
  28. National Native Title Registry
  29. Office of National Assessments
  30. Office of Parliamentary Counsel
  31. Office of the Director of Public Prosecutions
  32. Office of the Inspector-General of Intelligence & Security
  33. Office of the Official Secretary to the Governor-General
  34. Professional Services Review Scheme
  35. Public Service and Merit Protection Commission
  36. Spectrum Management Agency

CAC Bodies Prescribed as FMA Agencies for the Public Money That They Handle

  1. Aboriginal & Torres Strait Islander Commission*
  2. Australian Securities Commission*


1. – Certain organisations which, on the face of it, are not FMA Agencies, may nonetheless be affected by the FMA Act. For example:

* - ATSIC and the ASC are affected by both the FMA Act and the Commonwealth Authorities & Companies Act (CAC) Act: – the ASC, for instance, collects significant amounts of revenue (e.g. filling fees) on behalf of the Commonwealth and therefore it would be required to deal with those monies in accordance with the FMA Act. For the money that the ASC holds in its own right, the CAC Act would apply. This is similar for ATSIC.

** – The Australia–Japan Foundation, the Australian Centre for International Agricultural Research and the Australian Competition and Consumer Commission are all Bodies Corporate, but deal with public monies only – they will operate under the FMA Act only.

2. – The definition under the FMA Act describes 'Agency ' to mean:

(a). – a Department of State, including persons who are allocated to the Department (for the purpose of this Act) by regulations made for the purposes of this paragraph;

(b). – a Department of the Parliament, including persons who are allocated to the Department (for the purpose of the Act) by regulations made for the purpose of the paragraph; and

(c). – a prescribed Agency.

Contact Officer and Copyright Details

Bob Bennett
25 February 1997
Bills Digest Service
Information and Research Services

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9031
Commonwealth of Australia 1996

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1997.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 8 April 1997

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