Senate

Revised Explanatory Memorandum

(Circulated by authority of the Minister for Finance, Senator the Hon Mathias Cormann)

Chapter 2 - Commonwealth entities and the Commonwealth

Part 2-1 - Core provisions for this Chapter

Division 1 - Guide to this Part

47. Item 8 would amend the Guide to Chapter 2 (Commonwealth entities and the Commonwealth) by inserting the following words "(For Commonwealth companies, see Chapter 3.)". This is proposed to assist readers of the PGPA Act in understanding that matters relating to Commonwealth companies are not included in Chapter 2 of the Act.

Division 2 - Core provisions for this Chapter

Section 10: Commonwealth entities

48. Item 9 would amend paragraph 10(1)(d) and introduce a new paragraph 10(1)(e) that would allow for circumstances in which a body corporate is established under rather than by a law (as in the case of indigenous land councils).

49. Item 10 would replace the current note in subsection 10(1) with a note stating that Commonwealth companies are covered under Chapter 3 of the PGPA Act and are not Commonwealth entities under the PGPA Act. This approach is consistent with Item 8 .

Section 12: Accountable authorities

50. Item 11 would amend subsection 12(2) (table item 3) to allow for the accountable authority of a listed entity to be prescribed by an Act (as well as by the PGPA rules).

51. Items 12 and 13 would amend subsection 12(2) (table item 4) to omit the words "established by a law of the Commonwealth" and simply refer to a body corporate, and insert wording to allow for the accountable authority of a body corporate to be prescribed by an Act (as well as by the PGPA rules).

Section 13: Officials

52. Item 14 would repeal subsections 13(2) and (3) and replace them with an expanded set of provisions (subsections 13(2) to 13(5)) and subheadings to provide greater clarity in relation to who is and who is not an official, including officials within a listed entity.

Part 2-2 - Accountable authorities and officials

Division 1 - Guide to this Part

Section 14: Guide to this Part

53. Item 15 would amend section 14 (Guide to this Part) to align with changes being made to this Part of the Act, including the proposed introduction of section 20A ( Item 17 ), and changes to section 23 ( Items 18 and 19 ) and section 30 ( Items 20 to 27 ).

Division 2 - Accountable authorities

Subdivision A - General duties of accountable authorities

Section 19: Duty to keep responsible Minister and Finance Minister informed

54. Item 16 would amend subsection 19(2) of the PGPA Act to clarify the intent of the provision. Judicial activity is beyond the scope of the PGPA Act whereas the administrative staff supporting courts and tribunals will be subject to the Act. The amendment is proposed to clarify that this section and the provision of information to the responsible Minister and Finance Minister applies to the administrative entity supporting the operation of the court or tribunal.

Subdivision BA - Accountable authority instructions

Section 20A: Accountable authority instructions

55. Item 17 would introduce a new Subdivision BA with a single new section (20A) to provide express power to an accountable authority to issue instructions to any official of the entity and to officials of other entities in relation to particular matters concerning the management of public resources for which that accountable authority is responsible including allowing officials of other entities to access appropriations of that entity. The instructions are instruments for the purposes of the finance law, but are exempt from the LI Act. The exemption recognises that such instructions are not suitable for publication on the Federal Register of Legislative Instruments as they contain information that is for internal application within an entity and may, in some cases, be commercially sensitive.

56. The instructions would fulfil a similar role to the Chief Executive's Instructions issued currently under section 52 of the FMA Act. Section 20A will ensure that the accountable authorities of all Commonwealth entities have the express power to give directions to officials about the application of the finance law.

Section 23: Power in relation to arrangements and commitments

57. Items 18 and 19 would amend the heading and content of this section to broaden its application beyond arrangements and to provide an express authority for the accountable authorities of non-corporate Commonwealth entities to approve a commitment of relevant money for which the accountable authority is responsible. The accountable authorities of corporate Commonwealth entities do not need this express power because they enter into arrangements and approve commitments of relevant money in their own right, rather than on behalf of the Commonwealth.

Division 3 - Officials

Subdivision A - General duties of officials

Section 26: Duty to act in good faith and for proper purpose

58. Items 19A and 19B would amend section 26, including the heading to insert the word "honestly" to more closely align this provision with subsection 13(1) of the PS Act and subsection 13(1) of the Parliamentary Service Act.

Section 27: Duty in relation to use of position

59. Item 19C would amend section 27 to omit the term "position to" and replace with the term "position". This amendment is structural in nature and relates to the amendments made in items 19C and 19D.

60. Item 19D would amend subsection 27(a) to include the phrase "or seek to gain, a benefit" to more closely align this provision with subsection 13(10) of the PS Act and subsection 13(10) of the Parliamentary Service Act.

61. Item 19E would amend subsection 27(b) to include the phrase "or seek to cause" to more closely align this provision with subsection 13(10) of the PS Act and subsection 13(10) of the Parliamentary Service Act that are proposed through the Public Governance, Performance and Accountability (Consequential and Transitional Provisions) Bill 2014.

Section 28: Duty in relation to use of information

62. Item 19F would amend section 28 to omit the term "information to" and replace with the term "information". This amendment is structural in nature and relates to the amendments made in Items 19F and 19G .

63. Item 19G would amend subsection 28(a) to include the phrase "or seek to gain, a benefit" to more closely align this provision with subsection 13(10) of the PS Act and subsection 13(10) of the Parliamentary Service Act.

64. Item 19H would amend subsection 28(b) to include the phrase "or seek to cause" to more closely align this provision with subsection 13(10) of the PS Act and subsection 13(10) of the Parliamentary Service Act that are proposed through the Public Governance, Performance and Accountability (Consequential and Transitional Provisions) Bill 2014.

Subdivision B - Provisions relating to general duties of officials

Section 30: Termination - accountable authority, or member of accountable authority, contravening general duties of officials

65. Item 20 would amend the heading for section 30 by making it explicit that only an accountable authority, or member of an accountable authority, can have his or her appointment terminated under section 30. This amendment is proposed to address a potential misunderstanding that this provision covers all officials.

66. Item 21 would amend the wording for subsection 30(1) to clarify that it applies where a person is appointed to a position in a corporate Commonwealth entity.

67. Item 22 would amend paragraph 30(1)(a) to clarify that the person who can terminate an appointment to a position is the person who is responsible for making appointments to that position.

68. Item 23 would amend the wording of paragraph 30(1)(c) to state that a breach of any rules made for the purposes of sections 25 to 29 would also be grounds for consideration of termination action under the provisions of section 30. The current wording of the provision is limited to the sections of Act.

69. Item 24 would include a new provision (subsection 30(1A)) to clarify the operation of section 30 in relation to persons occupying ex officio positions. The amendments will ensure that where a person is appointed to a position within a corporate Commonwealth entity (for example, if he or she is appointed to be the chief executive) and, as a result, automatically becomes the accountable authority or a member of the accountable authority of the entity (for example, if he or she automatically becomes a board member), then section 30 would allow his or her appointment to the position to be terminated if he or she breaches a relevant duty.

70. Conversely, a person appointed to a position in an entity that leads to their occupying a position on the board of another entity would not be subject to termination from the other entity as they were not "appointed" to a position in that other entity. They would, however, in the event of a breach of their duties as an official be subject to any employment sanctions within their originating entity.

71. Items 25 and 26 would include new subheadings to help ensure that the purpose of the substantive provisions 30(2) and 30(5) is made clear.

72. Item 27 would replace subsection 30(6) and include a new subheading to clarify the purpose of the provision. The wording in the provision is proposed to be amended to recognise that this section applies in addition to any matters in the enabling legislation of entities and does not limit any provision in the enabling legislation.

Section 31: Interaction between Subdivision A and other laws

73. Item 28 would amend section 31 to ensure that both Subdivision A of the PGPA Act (sections 25 to 29) and any rules made for the purposes of that Subdivision do not limit the application of other laws.

Part 2-3 - Planning, performance and accountability

Division 1 - Guide to this Part

Section 33: Guide to this Part

74. Item 29 would amend the Guide to this Part of the Act to replace the reference to "whole-of-government" reporting with "Australian Government financial" reporting to reflect changes proposed in Item 36 . Division 2 - Planning and budgeting

Section 35: Corporate plan for Commonwealth entities

75. Item 30 would amend paragraph 35(1)(a) to clarify that corporate plans should be prepared at least annually for an entity. This approach would reflect the public policy position articulated during the passage of the PGPA Act that corporate plans should be prepared on an annual basis and also provides greater certainty about the application of the provision.

76. Item 31 would include a new subsection 35(6) and associated subheading to recognise that if an accountable authority varies a corporate plan for a Commonwealth entity then the accountable authority must comply with any requirements prescribed by the rules in relation to variations to corporate plans. The need for this section has become apparent after a review of existing legislation across the Commonwealth, which demonstrated that many Acts expressly deal with arrangements for the amendment of corporate plans.

Division 3 - Performance of Commonwealth entities

Section 40: Audit of annual performance statements for Commonwealth entities

77. Item 32 would include a note at the end of subsection 40(1) stating that the Auditor-General may at any time conduct a performance audit of a Commonwealth entity under the Auditor-General Act 1997. This note would clarify that the Auditor-General can conduct performance audits even where the Auditor-General has not been requested to do so by the responsible Minister or the Finance Minister under section 40 of the Act.

Division 4 - Financial reporting and auditing for Commonwealth entities

Section 44: Audit of subsidiary's financial statements

78. Item 33 would amend subsection 44(1) to clarify it relates to corporate Commonwealth entities as this is the only category of Commonwealth entity that may have a subsidiary.

Division 6 - Annual report for Commonwealth entities

Section 46: Annual report for Commonwealth entities

79. Item 34 would amend subsection 46(1) to make it clear that the accountable authority of an entity is responsible for the preparation and giving of an annual report to the entity's responsible Minister.

80. Item 35 would amend subsection 46(2) to require for annual reports to be provided to the relevant Minister by the 15th day of the fourth month after the reporting period (usually October) so that the Minister can table the annual report in each House of Parliament.

81. The intent behind this provision is that the annual report should be provided to the Minister with sufficient time for the Minister to consider and then table the annual report before the end of the fourth month after the end of a reporting period, in line with existing practice. This allows for the timetable of Senate Legislation Committee meetings.

82. The proposed approach is consistent with section 9 of the CAC Act and also allows for an accountable authority to seek an extension to provide an annual report to a responsible Minister beyond the specified date in the PGPA Act in accordance with section 34C of the Acts Interpretation Act.

Division 7 - Australian Government financial reporting

83. Item 36 would amend the heading for Division 7 by renaming it from "Whole-of-Government financial reporting" to "Australian Government financial reporting". This amendment is proposed as sections 47 and 48 of the PGPA Act relate to different aspects of reporting on the public sector and the amended Division heading would represent a more accurate description of the activities.

Part 2-4 - Use and management of public resources

Division 1 - Guide to this Part

Section 50: Guide to this Part

84. Item 37 would amend section 50 to align the description in the guide with the proposed changes to section 55 of the PGPA Act at Item 39 .

Division 2 - Funding and expenditure

Section 52: Commitment or expenditure of relevant money

85. Item 38 would amend the heading of section 52 to correct an error in the current version of the PGPA Act by replacing the word "and" with the word "or", to align the heading within the substantive provision.

Division 3 - Banking

Section 55: Banking or dealing with relevant money

86. Item 39 would amend section 55 to clarify the responsibilities of Ministers and officials in relation to the banking of or dealing with relevant money. The amendment would provide greater scope for the Finance Minister to prescribe banking arrangements through the rules, to reflect the diversity of entities' banking requirements. The revised features will specify that:

•

A Minister who receives relevant money must ensure that the money is given to an official of a non-corporate Commonwealth entity as soon as practicable.

•

An official who receives relevant money (including from a Minister) that can be banked (bankable money) must deposit the money in a bank as soon as practicable and/or deal with the money in accordance with requirements in the rules.

•

If the money is non-bankable money then the rules can specify how such money is to be handled.

87. This section is proposed to be amended in this way so that Ministerial obligations for banking or dealing with relevant money are contained in the primary legislation and are not confused with the directions to officials that are contained in the rules.

Division 4 - Borrowing

Section 56: Borrowing by the Commonwealth

88. Item 40 would amend this section to allow for circumstances in which banking is permitted "under" as well as "by" an Act. The revised words would provide the Commonwealth with a greater degree of certainty about when entering into arrangements to borrow money is authorised.

Section 57: Borrowing by corporate Commonwealth entities

89. Three amendments are proposed to section 57 of the Act:

•

Item 41 would amend section 57 by inserting a paragraph number "(1)" at the start of the existing text to take into account the proposed insertion of a new subsection ( Item 43 refers).

•

Item 42 would amend subsection 57(1) to allow for circumstances in which borrowing is permitted "under" as well as "by" an Act. The revised words would provide corporate Commonwealth entities with certainty that existing arrangements in relation to the operation of other legislation will continue to operate.

•

Item 43 would add a new subsection 57(2) to recognise that an authorisation under paragraph 57(1)(b) by the Finance Minister is a legislative instrument but is not subject to disallowance under section 42 of the LI Act. The exemption from disallowance is proposed as such activities are integral to the effective operation of Executive Government and subjecting the authorisations to disallowance would undermine commercial certainty for both the corporate Commonwealth entities and the parties with whom they would engage.

Division 5 - Investment

Section 58: Investment by the Commonwealth

90. Item 44 would introduce a new subsection 58(9) to deal with an authorisation by the Finance Minister or the Treasurer (as the case may be), to reinvest the proceeds of an investment upon maturity of that investment in an authorised investment with the same entity, under subsection 58(6). Subsection 58(9) would recognise that such an authorisation was a legislative instrument, but would ensure that it was not subject to the disallowance provisions under the LI Act. The activities covered under these investment provisions are integral to the internal operations of the Executive Government and, while the authorisations will be properly disclosed, any possibility of disallowance would constrain the ability of the Commonwealth and other parties to enter into arrangements with commercial certainty.

Section 59: Investment by corporate Commonwealth entities

91. Three amendments are proposed to section 59:

•

Item 45 would amend subparagraph 59(1)(b)(iii) to refer to the form of investment rather than the manner of investment, which provides a more accurate description of the activity.

•

The provision would also add a new subparagraph 59(1)(b)(iv) to allow for corporate Commonwealth entity to make investments in any other form prescribed by the rules. A rule making capacity in this context was omitted from the original drafting of the PGPA Act.

•

Item 46 would include a new subsection 59(4) to recognise that an authorisation under subparagraph 1(b)(iii) by the Finance Minister is a legislative instrument but is not subject to disallowance under section 42 of the LI Act. The exemption from disallowance is proposed as such activities are integral to the effective operation of Executive Government and, while the authorisations will be properly disclosed, any possibility of disallowance would undermine commercial certainty in transactions between the Commonwealth and other parties in the investment arrangements.

Division 7 - Waivers, set-offs and act of grace payments (current heading)

92. Item 47 would rename the heading for Division 7 of Part 2-4 of the PGPA Act to more accurately reflect the activities involved. It is proposed that the Division be renamed as:

•

Division 7 - Waivers, modifications of payment terms, set-offs and act of grace payments

Section 63: Waiver of amounts, or modifications of payment terms

93. Item 48 would repeal and replace the current section 63 to more clearly confer two distinct powers - a power to waive an amount owing to the Commonwealth, and a power to modify payment terms attaching to such amounts. This simplifies administrative practices relating to the provision, including how these powers are delegated to officials.

94. The section name would also be amended to expressly refer to "modification of payment terms" in recognition of this feature of the section.

95. The section would also include a new feature in the new subsection 63(3), allowing for any waiver to be the subject of conditions, including payment of an amount should specified circumstances occur. The inclusion of this provision would allow for more effective administration of debts, including the ability to recover part of amounts owing.

96. A new subsection 63(5) is proposed to clarify that an authorisation of a waiver or modification by the Finance Minister is not a legislative instrument within the meaning of section 5 of the LI Act. The authorisation is of an administrative rather than a legislative nature and, as such, does not fall within the scope of that section of that Act.

Section 64: Setting off amounts owed to, and by, the Commonwealth

97. Item 49 would include a technical amendment to subsection 64(1) to clarify that any set-off occurs as a result of the Finance Minister authorising a set-off of payments owed to and by the Commonwealth as part of a cost effective mechanism to manage amounts owing. This mechanism is consistent with the approach provided for in section 35 of the FMA Act.

98. Item 50 is proposed as a result of the amendment described in Item 49 . This is proposed to ensure that any authorised set-off should be in accordance with the rules, and would also ensure that there is a consistency of approach in relation to the application of rules for authorisation for set-offs and waivers of debts owing to the Commonwealth.

99. Item 51 would add a new subsection to clarify that an authorisation of a set-off by the Finance Minister is not a legislative instrument within the meaning of section 5 of the LI Act. The authorisation is of an administrative rather than a legislative nature and as such does not fall within the scope of that section of that Act.

Section 65: Act of grace payments by the Commonwealth

100. Item 52 would repeal subsection 65(2) and insert new subsections 65(2) , 65(3) and 65(4) that allow for:

•

the authorisation of any payment to be in accordance with any requirements prescribed by the rules (this requirement is already imposed by current subsection 65(2) but the wording has changed slightly); and

•

the inclusion of a new subsection 65(3) permitting the Finance Minister to attach terms and conditions to an act of grace payment.

101. The need for such amendment became apparent during the development of the rules, when questions were raised about whether the existing provision would enable the Finance Minister to attach terms and conditions to an act of grace payment. The proposed amendments address this concern.

102. Subsection 65(4) clarifies that the authorisation of such a payment by the Finance Minister is not a legislative instrument within the meaning of section 5 of the LI Act. The authorisation is of an administrative rather than a legislative nature and as such does not fall within the scope of that section of that Act.

Division 8 - Special provisions applying to Ministers and certain officials

Section 66: Gifts of relevant property

103. Item 53 would include a minor amendment to the internal numbering of section 66 by inserting a paragraph number "(1)" to take into account proposed inclusion of a new subsection as described in Item 55 .

104. Item 54 would repeal subparagraph 66(b)(ii) to ensure that the Finance Minister's power to authorise is stated before the rule making power in the PGPA Act.

105. Item 55 would include a new subsection 66(2) to clarify that an authorisation of a gift by a Minister or an official of a non-corporate Commonwealth entity is not a legislative instrument within the meaning of section 5 of the LI Act. The authorisation is of an administrative rather than a legislative nature and as such does not fall within the scope of that section of that Act.

Division 9 - Special provisions applying to Ministers only

Section 71: Approval of proposed expenditure by a Minister

106. Item 56 would include a minor technical amendment to reverse the order of subsections 71(2) and (3) as they have been printed in the wrong order in the current version of the Act.

Part 2-5 - Appropriations

Division 1 - Guide to this Part

Section 73: Guide to this Part

107. Item 57 would amend the paragraph relating to Division 3 in the guide to omit "another" and substitute this with the word "an" consistent with the wording used in section 80 relating to special accounts ( Item 60 refers).

Division 2 - Appropriations relating to non-corporate Commonwealth entities and the Commonwealth

Section 75: Transfers of functions between non-corporate Commonwealth entities

108. Item 58 deals with the transfer of resources and functions between non-corporate Commonwealth entities, which is often necessary following machinery of government changes. It would amend subsection 75(5), which deals with Parliamentary Departments, to correct wording that currently limits the provision to transfers of resources and functions between Parliamentary Departments.

109. The current provision does not allow for instances when a transfer of resources or functions is between a Parliamentary Department and another non-corporate Commonwealth entity (for example, a Department of State). To allow for such circumstances it is proposed to amend this subsection to apply in relation to any transfers of functions 'involving' a Parliamentary Department.

110. New subsection 75(5) would provide that the Finance Minister must not make a determination about a Parliamentary Department without the written recommendation of the relevant Presiding Officer. It is also proposed as part of this item to include a note to subsection 75(5) to clarify that if the transfer is between Parliamentary Departments, then the recommendation of both Presiding Officers would be needed before the Finance Minister could make the determination.

Section 76: Notional payments and receipts by non-corporate Commonwealth entities

111. Item 59 would amend the wording of paragraphs 76(c) and 76(d) to clarify that the finance law (rather than just the PGPA Act and rules) applies to notional payments and notional receipts that are covered by section 76. The finance law, as described in section 8 of the PGPA Act also includes instruments made under the PGPA Act and Appropriation Acts.

Section 80: Special accounts established by an Act

112. Item 60 would amend the wording of the title of section 80.

113. Item 61 would amend the wording of subsection 80(1) to ensure that it applies to special accounts established by any Act, including the PGPA Act. The current wording of the heading and provision is limited to a special account established by other Acts.