Bills Digest no. 138 2006–07
Governance Review Implementation (Science Research
Agencies) Bill 2007
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.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Endnotes
Contact officer & copyright details
Passage history
Governance Review
Implementation (Science Research Agencies) Bill
2007
Date introduced:
28 March 2007
House: House of Representatives
Portfolio: Education, Science and
Training
Commencement:
Schedules 1, 2 and 3 date
to be fixed by proclamation or 6 months from the date of Royal
Assent, whichever comes first.
The purpose of
the Bill is to make amendments to the following Acts: the
Australian Institute of Marine Science Act 1987 (the AIMS
Act), the Australian Nuclear Science and Technology
Organisation Act 1987 (the ANSTO Act), and the Science and
Industry Research Act 1949 (the SIR Act), so as to implement
changes designed to enhance the governance arrangements of their
corresponding statutory authorities: the Australian Institute of
Marine Science (AIMS); the Australian Nuclear Science and
Technology Organisation (ANSTO); and the Commonwealth Scientific
and Industrial Research Organisation (CSIRO).
The Explanatory Memorandum states that the
Bill is one of a series introduced by the government designed to
improve transparency and consistency in relation to governance
arrangements for statutory authorities and office holders
(1) in response to the Government s endorsement of
observations and conclusions made by the
Review of the Corporate Governance of Statutory Authorities and
Office Holders (the Uhrig Review) conducted by Mr John
Uhrig AC in 2003.
The amendments in the Bill respond to and reflect
the relevant findings of the Uhrig Review. They also follow an
assessment of all three science agencies against the
recommendations of the Uhrig review.
One of the key conclusions of the Minister s
assessment of those science research agencies was that their
functions were best suited to the Board template (consistent with
the recommendation made by the Uhrig review) and should thus be
retained for each of the agencies.
As part of its 2001 election platform, the Coalition Government
signalled its intention to examine the efficacy of governance
arrangements of statutory authorities and office holders.
In November 2002, the Government announced a
review of the governance practices of statutory authorities and
office holders, with special focus on those agencies which impact
on the business community. The Prime Minister, the
Hon. John Howard, appointed Mr John Uhrig, AC,
to head the review. The objective of the review was to examine and
evaluate governance arrangements and practices and provide policy
options for Government to get the best from statutory authorities
and office holders and their accountability frameworks
.(2) In doing so, the Government noted the impact that
the performance of statutory authorities and office holders has on
business and the overall health of the Australian economy. In
particular, the review was to focus on the areas where businesses
have the right to expect the highest levels of efficiency, fairness
and transparency in their dealings with government.
A key task was to develop a broad template of
governance principles that, subject to consideration by government,
might be extended to all statutory authorities and office holders.
As part of the process of developing a broad template, the review
was asked to consider the governance structures of a number of
statutory authorities and office holders with critical
relationships with business and to consider best practice corporate
governance structures in both the public and private
sectors.(3)
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 is made clear.(4)
However, as Uhrig explained, the purpose of the template is to
serve as a reference point for the development of governance
arrangements and so it is expressed as an ideal .(5)
Uhrig recommended that the selection of the
management template and financial frameworks to be applied should
be based on the governance characteristics of a statutory
authority. (6)
For a summary of the responses and debate that followed the
release of the review, please refer to Dr. Richard Grant The
Uhrig Review and the future of statutory authorities
Research Note no. 50 2004 05, Parliamentary Library,
Australia.
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 (sections 44 46, 49
and 51), as well as allowing the Minister to give guidelines to the
CEO (section 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 (sections 15 16), and to ensure
that the authority s activities comply with government policies
(section 28). A board structure is favoured if there is a strong
commercial focus to the organisation, or if the agency is
intergovernmental.
As at 31 January 2007, there were 94 FMA Act
agencies and 99 CAC Act agencies.(7) 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.
On the basis of the findings of the Uhrig
Review, Ministers and their Departments have been undertaking an
assessment of their portfolio agencies against the governance
templates.(8) The Minister for Finance and
Administration has assumed a coordinating role in these
reviews.(9) Thus, a number of similar Acts have been
passed by Parliament incorporating Uhrig Review
recommendations.
AIMS was established by the
Australian Government in 1972 under the AIMS Act in recognition of
the significance of marine assets, especially the Great Barrier
Reef, to Australia. AIMS has a broad mandate which in summary
is:(10)
- to arrange, carry out, encourage and facilitate research and
development in relation to marine science and marine technology and
the application and use of marine science and marine technology;
and
- to co-operate with other institutions and persons in carrying
out this research and development.
- to produce, acquire, provide and sell goods, and to provide
services, in connection with marine science and marine technology
and the application and use of marine science and marine
technology; and
- to make available to other persons, on a commercial basis, the
knowledge, expertise, equipment, facilities, resources and property
of the Institute.
ANSTO is Australia's national nuclear research
and development organisation and the centre of Australian nuclear
expertise.(11) ANSTO was established by the Australian
Government in 1987 under the ANSTO Act, replacing the Australian
Atomic Energy Commission. ANSTO s head office and main facilities
are located in southern Sydney at Lucas Heights. It is also
responsbile for running the National Medical Cyclotron at Royal
Prince Alfred Hospital.
ANSTO has two nuclear reactors onsite:
HIFAR and the new OPAL from the
Argentine company INVAP. HIFAR was shut down on 30 January 2007.
OPAL went on line in April 2007.(12)
ANSTO s mandate is:(13)
- to support the development and implementation of government
policies and initiatives in nuclear and related areas, domestically
and internationally.
- to operate nuclear science and technology based facilities, for
the benefit of industry and the Australian and international
research community.
- to undertake research that will advance the application of
nuclear science and technology.
- to apply nuclear science, techniques and expertise to address
Australia 's environmental challenges and increase the
competitiveness of Australian industry.
- to manufacture and advance the use of radiopharmaceuticals
which will improve the health of Australians.
The CSIRO is the national government body for
scientific research in Australia, established by the SIR Act. As at
January 2006, CSIRO employed just over 6500 staff in 17 research
divisions(14) and two joint ventures located across 57
sites throughout Australia and overseas, (15)
undertaking research and development in key and strategic fields of
economics, social and environmental importance. As with AIMS and
ANSTO, a significant amount of CSIRO s expenditure and R&D
efforts are explicitly directed towards the priority goals aligned
with the National Research Priorities.(16)
The Explanatory Memorandum states that there
is no financial impact.
Schedule 1 Australian
Institute of Marine Science Act
1987 (the AIMS Act)
This schedule contains amendments relating to
the appointment, powers, tenure and termination of the Chief
Executive Officer (CEO). The theme in these amendments is a shift
in decision making power toward the Council.
Item 1 - Proposed paragraph
20A(a)
Existing subsection 20A of the AIMS Act deals
with certain Council deliberations or decisions which the
CEO is unable to participate in. The proposed amendment to
paragraph 20A(a) seeks to further limit the CEO s
participation in such contexts by providing that the CEO cannot
take part in any deliberation or decision of the Council with
respect to him or her; and that he or she shall be disregarded for
the purpose of constituting a quorum of the Council for any such
deliberation or decision.
Item 2 - Proposed section
21
The CEO of AIMS is to be appointed directly by
the Council and not by the Governor-General on the recommendation
by the Council.
Item 10 - Proposed subsections 30(1),
(3), (4) and (5)
An acting CEO is to be
appointed by the Council rather than the Minister, as is presently
the case.
Items 4 - Proposed subsection 22(1)
Tenure of CEO
The maximum period of tenure of the CEO is
reduced from 7 to 5 years.
Item 6 - Proposed subsection 25(2)
Terms and conditions of CEO appointment
It is proposed that the Council rather than
the Minister shall determine the terms and conditions of the
CEO.
Item 8 - Proposed repeal of sections
27 and 28 and insertion of a new section 27
The proposed subsection 27(1)
enables the Council to terminate the appointment of a CEO for
misbehaviour or physical or mental incapacity.
The proposed subsection 27(2)
provides further grounds for termination. The Council may terminate
the appointment of the CEO if he or she:(17)
- becomes bankrupt, applies to take the benefit of any law for
the relief of bankrupt or insolvent debtors, compounds with
creditors or makes an assignment of remuneration for their benefit;
or
- is absent, except on leave of absence granted by the Council,
from 3 consecutive meetings of the Council; or
- is absent from duty, except on leave of absence granted by the
Council, for 14 consecutive days or for 28 days in any 12 months;
or
- fails, without reasonable excuse, to comply with his or her
obligations under section 27F or 27J of the Commonwealth
Authorities and Companies Act 1997.
Proposed subsection 27(2) permits the Council
to terminate the appointment of a
CEO if the Council is satisfied that the
performance of a CEO has been
unsatisfactory for a significant period . The
Explanatory Memorandum states that as a guide,
at least 3 months may considered as a
significant period , and that the Board is to have
a deal of discretion as to the factors to be taken into account in
assessing performance and the relative importance of those
factors.(18)
It may also be appropriate to consider that
there may be instances where one significant transgression might be
sufficient in and of itself to warrant termination.
Item 9 - Proposed section 29
Maintaining a check on conflict of interest
The CEO will not be able to undertake any
other work unless approval is given by the Council, rather than the
Minister as is presently the case.
Item 11 - Proposes a repeal of section
42
Under the current Act, AIMS is unable to enter
into a contract involving payment by AIMS, of an amount greater
than $1 million; or if a higher amount is specified in the
regulations that higher amount.
The proposed repeal of section
42 removes this limit altogether, and accountability
assumes a different appearance by a requirement set out in the
Minister s Statement of Expectations, that that Minister is
notified in advance of AIMS entering into significant
contracts . The Explanatory Memorandum states that this is
in line with the provisions contained in section 15 of the CAC Act,
and that similar amendments are also made for ANSTO and CSIRO. It
is unclear as to what constitutes a significant
contract and it may be the case that that a contract is
significant either on account of its substance or the substantial
sum of money involved.
Interestingly, the same logic was not applied
in the case of Tourism Australia. The recent amendments made to the
Tourism Australia Act 2004 following a
review of Tourism Australia against the Uhrig recommendations
yielded a different result. In that case, the threshold for the
approval of contract was reduced from $5 million to $3 million, and
it was explained that while Tourism Australia was already complying
with Australian Procurement Guidelines, this change further
strengthened accountability commensurate with the high
level of Australian Government funding of the organisation.
[Emphasis added](19)
It is curious that organisations such as CSIRO
which receive an even higher level of funding have not had the same
logic applied to them.
Item 7
Proposed subsection 9(12) Composition of Boards
Existing section 9 of the Act provides that
the composition of the Board shall consist of the Executive
Director and not fewer than 2 nor more than 6 other members . The
amendment proposes that the Board is to consist of 6-9 members
including the Executive Director. The Explanatory Memorandum
explains that this reflects Uhrig Review recommendations for best
practice regarding governance by a board.(20)
Uhrig explained that:
Boards with less than six members may have
difficulty in meeting their statutory responsibilities due to
workload pressures and the potential lack of breadth of views. This
situation will be exacerbated in periods where vacancies exist.
There are, however, circumstances where a larger
board may be warranted. For example, when management of the risks
of the entity is such that a number of board committees are
required, larger board membership may be appropriate.
(21)
However, Uhrig also pointed out that it was
not possible nor appropriate to recommend a one size fits all when
looking at the public sector and that better practice was that:
Board size should be developed taking into
consideration factors such as an entity s size, complexity, risk of
operations and the needs of the board. (22)
Item 8 - Proposed insertion of
16A
The proposed section 16A
provides that the CEO cannot take part in any deliberation or
decision of the Council with respect to him or her; and that he or
she shall be disregarded for the purpose of constituting a quorum
of the Council for any such deliberation or decision.
Item 16 - Proposed subsection 21A(2)
Leave of absence of CEO
The Board may grant leave of absence (other
than recreation leave) on such terms and conditions as the Board
determines.
Item 19 - Proposed insertion of
subsection 21C(3)
Section 21C of the Act deals with the
conditions under which a CEO s appointment may be terminated.
Item 19
proposes the insertion of subsection
21C(3) which permits the Board to
terminate the appointment of a
CEO if the Board is satisfied that the
performance of a CEO has been
unsatisfactory for a significant period . The
Explanatory Memorandum states that as a guide,
at least 3 months may considered as a
significant period , and that the Board is to have
a deal of discretion as to the factors to be taken into account in
assessing performance and the relative importance of those
factors.(23)
It may also be appropriate to consider that
there may be instances where one significant transgression might be
sufficient in and of itself to warrant termination.
Item 21 - Proposed section 22 CEO s
duty to disclose pecuniary interests
The CEO must provide written notice to the
Board rather than to the Minister, of all direct and indirect
pecuniary interests that the CEO has or acquires in any
business.
Item 24 - Proposes a repeal of section
31
Under the current Act, ANSTO is unable to
enter into a contract involving payment by ANSTO, of an amount
greater than $5 million; or if a higher amount is specified in the
regulations that higher amount.
The proposed repeal of section
31 removes this limit altogether, and accountability
assumes a different appearance by a requirement set out in the
Minister s Statement of Expectations that that Minister is notified
in advance of ANSTO entering into significant
contracts . The Explanatory Memorandum states that this is
in line with the provisions contained in section 15 of the CAC Act.
. It is unclear however as to what constitutes a
significant contract , and it may be the case that
that a contract is significant either on account of its substance
or the substantial sum of money involved.
Note comments above in Schedule 1 relating to
the Tourism Australia Amendment Bill 2007.
Item 25 - Proposed
42(1)(b)
Paragraph 42(1)(b) of the ANSTO Act sets out
the powers that the Minister is not able to delegate. Item 24
amends 42(1)(b) removing reference to the Minister
s powers under subsections 26(1), (2), (9), (11), (15) and
(16) and sections 28 and 31.
Item 3 - Proposed subsections 8(2),
(3) and (4)
Item 3 repeals subsections 8(2), (3)
and (4) and inserts new subsections which address the
practical formal aspects of the establishment of Commonwealth
Scientific and Industrial Research Organisation (CSIRO) consistent
with the current requirements associated with incorporation of an
organisation that is subject to the CAC Act.
Items 4 to 6 - Paragraphs 9AA(1)(b),
(c) and (d)
Section 9AA of the SIR Act defines the powers
of CSIRO.
Item 4 repeals paragraph
9AA(1)(b) and substitutes it with a new paragraph which provides
that CSIRO may form, or participate in the formation of, a
partnership or company.
Item 5 is a minor amendment
designed to clarify paragraph 9AA(1)(c) rather than change its
substance. The effect is to make it clear that CSIRO is able to
make available to a person, on such conditions and
on payment of such fees or royalties, or otherwise, as the Chief
Executive (CE) determines, a discovery, invention or improvement
that is the property of the Organisation.
Item 6 amends paragraph
9AA(1)(d) so as to enable CSIRO to pay bonuses as determined by the
CE with the approval of the Board, instead of requiring the
approval of the Minister as is presently the case.
Items 7 and 8 - subsections 9A(1) and
(1A)
Item 7 amends subsection
9A(1) to have the effect of providing that the Organisation may, in
or in connection with the performance of its functions and the
exercise of its powers:
- accept money or other property given, devised, bequeathed,
assigned or otherwise made available to the Organisation (whether
on trust or otherwise); and
- agree to any conditions subject to which money or other
property is given, devised, bequeathed, assigned or otherwise made
available to the Organisation; and
- act as trustee of money or other property vested in the
Organisation upon trust.
Item 9 Proposed subsection
10B(1)
The CE shall be appointed by the Board. This
is consistent with the governance principles recommended by the
Uhrig Review.
Item 10 Proposed subsection
10B(2)
Requires that the board must consult with the
Minister prior to appointing a person as a CEO.
Item 20 - Proposed subsections 10G(1),
(4), (6) and (7)
An acting CE is to be
appointed by the Council rather than the Minister, as is presently
the case.
Item 11 Proposed subsection
10B(4)
Consistent with the logic and recommendations
of the Uhrig Review, this amendment provides that in regard to
matters not provided for by the Act, it is the Board (and not the
Minister) that shall determine the terms and conditions upon which
the CE holds office.
Item 12 Proposed subsection
10C(2)
The Board may grant leave of absence (other
than recreation leave) on such terms and conditions as the Board
determines.
Item 14 Proposed subsection
10E(1)
The Board rather than the Governor-General,
may terminate the appointment of a CE for misbehaviour or physical
or mental incapacity.
Items 15 - 17 Proposed subsection
10E(2)(d) and (e) and subsection 10E(2)
The grounds for terminating the appointment of
a CE which are listed in paragraphs 10E(2)(a) to (e) are to be
exercised by the Board and not the Governor-General.
Item 18 - Proposed insertion of
subsection 10E(3)
Section 21C of the Act deals with the
conditions under which a CE s appointment may be terminated.
Item 18
proposes the insertion of subsection
10E(3) which permits the board to
terminate the appointment of a CE
if the Board is satisfied that the performance of
a CE has been unsatisfactory for a significant
period . The Explanatory Memorandum states that as
a guide, at least 3 months may considered
as a significant period , and that the Board is to
have a deal of discretion as to the factors to be taken into
account in assessing performance and the relative importance of
those factors.
It may also be appropriate to consider that
there may be instances where one significant transgression might be
sufficient in and of itself to warrant termination.
Item 19 Proposed section 10F CE s duty
to disclose pecuniary interests
The CE must provide written notice to the
Board (rather than the Minister) of all direct and indirect
pecuniary interests that the CE has or acquires in any
business.
Item 22 Proposed subsection 12(2)
clarifies scope of the Boards powers
Clarifies that the Board has the necessary
powers to do all things necessary or convenient to be done for in
connection with the performance of its functions.
Item 23 - Proposed subsection 14A(4)
Creation of Deputy Chairperson of Board position
The position of Deputy Chairperson of the
Board is created by this amendment, and it provides that the
Governor-General shall appoint one part-time Board member to be
Chairperson of the Board and another of the part-time members to be
the Deputy Chairperson of the Board.
Item 31 - Proposed repeal and
replacement of subsection 15(5)
Where the Chairperson is not present at a
meeting, the Deputy Chairperson shall preside at the meeting. Where
the Deputy Chairperson is not present at a meeting, the members
must elect one of their members to preside at the meeting.
Item 32 - Proposed insertion of
section 15A
The CE cannot take part in any deliberation or
decision of the Council with respect to him or her; and he or she
shall be disregarded for the purpose of constituting a quorum of
the Council for any such deliberation or decision.
Item 36 - Proposed insertion of new
section 22A(1) Delegation of the Board s Powers
The Board may (by resolution) delegate to an
eligible person (or to a committee of eligible persons) all or any
of the Board s powers under the Act or the regulations.
It may be contrary to the logic of having a
board and providing for decision-making to be more diffuse, to
permit the delegation of the board s powers to an eligible person .
It is also unclear as to how long this delegation may be provided
for and the desirability for having an extended period of
delegation in the absence of checked guidelines.
Item 37 - Proposed repeal of section
50
Section 50 of the SIR Act provides that CSIRO
shall not, except with the approval of the Minister, enter into a
contract involving the payment or receipt by the Organisation of an
amount exceeding $250 000 or, if a higher amount is prescribed,
that higher amount .
The proposed amendment repeals section
50 and thus removes any such limit, and accountability
assumes a different appearance by a requirement set out in the
Minister s Statement of Expectations that that Minister is notified
in advance of CSIRO entering into significant
contracts . The Explanatory Memorandum states that this is
in line with the provisions contained in section 15 of the CAC Act.
It is unclear however as to what constitutes a significant
contract , and it may be the case that that a contract is
significant either on account of its substance or the substantial
sum of money involved.
Note comments above in Schedule 1 relating to
Tourism Australia Amendment Bill 2007.
Concluding comments
As already noted, this Bill is one of series
introduced by the government designed to make relevant and
appropriate reforms in response to observations and conclusions
made by the Uhrig Report.
- Explanatory
Memorandum, p. 1.
- Senator the Hon. N.
Minchin, Australian
Government Response to Uhrig Report, Media Release, 12
August 2004.
- J. A. Uhrig, AC,
Review of Corporate Governance of Statutory Authorities and Office
Holders, June 2003, p.1.
- Senator the Hon. N.
Minchin, op cit.
- J.A. Uhrig, op.
cit., p. 83.
- ibid, p.12, point
6.
- Department of
Finance and Administration, Chart of FMA Act and CAC Act
agencies,
http://www.finance.gov.au/Publications/docs/FMA_CACFlipchart.pdf
accessed on 1 May 2007.
- More than 160
Australian Government Agencies are being assessed against the Uhrig
Report principles and templates . Sussan Ley, MP, Parliamentary
Secretary to the Minister for Agriculture, Fisheries and Forestry,
Second Reading Speech: Primary Industries and Energy Research and
Development Amendment Bill 2007 , House of Representatives,
Debates, 1 March 2007.
- ibid.
- Section 3, AIMS
Act.
- ANSTO homepage
http://www.ansto.gov.au/discover/about_ansto.html
Accessed 5 May 2007.
- OPAL
Nuclear Reactor's International Role: A myriad projects revealed as
Australia's top nuclear research centre's new reactor comes on
line ABC Radio Australia Innovations Program, 16 April
2007
- ANSTO Mission
Statement
http://www.ansto.gov.au/discover/about_ansto/mission_and_strategy.html,
Accessed 5 May 2007.
- CSIRO s 17 Research
Divisions are:
Australia Telescope National Facility
Energy Technology
Entomology
Exploration & Mining
ICT Centre
Industrial Physics
Land and Water
Livestock Industries
Manufacturing and Materials Technology
Marine and
Atmospheric Research
Mathematics and Information Sciences
Minerals
Molecular and Health Technologies
Petroleum Resources
Plant Industry
Sustainable Ecosystems
Textiles and Fibre Technologies
CSIRO also participates in two joint ventures:
Ensis -
forestry and forest products, with New Zealand's Forestry research
organisation named Scion
Food Science
Australia - with the Victorian government
- CSIRO Snapshot,
April 2006. p. 3.
- ibid, p. 6;
http://www.aims.gov.au/pages/research/nrp/national-research-priorities.html,
Accessed 5 May 2007.
- Governance Review
Implementation (Science Research Agencies) Bill 2007, pp. 3-4.
- Explanatory
Memorandum, p. 8.
- Tourism
Australia Amendment Bill 2007, Bills Digest,
Parliamentary Library Australia. p. 8.
- Explanatory
Memorandum, p. 1.
- J.A. Uhrig op. cit.,
p. 96.
- ibid.
- Explanatory
Memorandum, p. 8.
Juli Tomaras
Law and Bills Digest Section
8 May 2007
Parliamentary Library
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