Revised Explanatory Memorandum
(Circulated by authority of the Minister for Finance, Senator the Hon Mathias Cormann)Chapter 4 - Rules, delegations and independent review
Part 4-1 - The rules
Division 2 - The rules
Section 102: Rules relating to the Commonwealth and Commonwealth entities
117. Item 65 would amend the numbering for section 102 of the PGPA Act by inserting a subsection number "(1)". This is necessary because item 68 proposes to insert a new subsection in section 70.
118. Item 66 would repeal the current subsection 102(c), which covers procurement and grants. This is proposed as matters relating to procurement and grants would be addressed in the proposed sections 105B and 105C ( Item 72 refers).
119. Item 67 would include a new paragraph 102(1)(h) to enable rules to be made in relation to all Commonwealth entities (including non-corporate Commonwealth entities) that have ceased to exist or have had functions moved to other entities. The PGPA rules would establish requirements for:
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- preparing and giving of a report for such entities; and
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- preparing, auditing and giving of financial and performance statements for such entities.
120. Subsection 103(e) originally dealt with the preparation, auditing and giving of financial statements in relation to a non-corporate Commonwealth entity that has ceased to exist or had functions transferred. New section 102(1)(h) would provide coverage in relation to all Commonwealth entities, and would also allow for rules to be made in relation to broader reporting requirements (not just financial statements).
121. Item 68 would allow rules to be made prescribing that any breach of finance law by an official of a Commonwealth entity would not have consequences for the validity of a transaction, agreement, instrument, resolution or other thing, as the case may be. This rule making power would be used to provide protections to external parties entering into arrangements with Commonwealth entities in good faith.
Section 103: Rules relating to the Commonwealth and non-corporate Commonwealth entities
122. Item 69 would delete the current text for subsection 103(e) (see Item 67 for further information) and replace it with text that allows for the making of a rule to prescribe the name or purposes of a non-corporate Commonwealth entity that is a listed entity. This amendment is being proposed to address an issue in relation to non-statutory entities such as the Defence Material Organisation, to ensure that the purposes of such entities are properly described for the application of the PGPA Act and appropriations more broadly.
Section 104: Rules relating to the Commonwealth Superannuation Corporation
123. Item 70 would amend section 104 by limiting its operation to the Commonwealth Superannuation Corporation (CSC, within the meaning of the Governance of Australian Government Superannuation Scheme Act 2011). This item would permit rules to be made to modify the application of not only the PGPA Act, but also to modify the PGPA rules or an instrument made under proposed sections 105B or 105C, to the CSC. The ability to modify the operation of the PGPA Act in relation to intelligence or security agencies and listed law enforcement agencies is now proposed to be included in section 105D ( Item 72 refers).
Section 105: Rules in relation to other CRF money
124. Item 71 would amend subsection 105(3) by removing "or a Commonwealth entity" as the words are redundant within the meaning of the provision.
Part 4-1A - Other instruments
125. Item 72 would insert a new Part 4-1A to deal with instruments that are not rules and are not subject to disallowance.
Division 1 - Guide to this Part
126. Section 105A would be the Guide to this Part. It would contain explanatory material to assist the reader to understand the scope and operation of the Part.
Division 2 - Instruments relating to procurement
127. Section 105B would enable the issuing of legislative instruments by the Finance Minister in relation to procurements. A similar power was originally provided in the form of a rule making power by subsection 102(c) of the PGPA Act.
128. However, this approach would not have been consistent with current practice. Procurement rules are currently issued under FMA regulation 7 as non-disallowable instruments and are exempt from section 42 of the LI Act because they are significantly based on Australia's obligations under the Free Trade Agreement with the United States.
129. To ensure that they are not disallowable, it is proposed to relocate the power to make instruments in relation to procurement from Part 4-1 to Part 4-1A of the PGPA Act, and to include an exemption from section 42 of the LI Act to ensure that Australia can continue to meet its intergovernmental obligations under the Free Trade Agreement.
Division 3 - Instruments relating to grants
130. Section 105C would enable the issuing of legislative instruments by the Finance Minister in relation to grants. A similar power was originally provided in the form of a rule making power by subsection 102(c) of the PGPA Act.
131. However, this approach would not have been consistent with current practice. Grants rules are currently issued under FMA regulation 7A as non-disallowable instruments and are exempt from section 42 of the LI Act.
132. Grant arrangements are integral to the internal operations of government. The possibility of disallowance would undermine commercial certainty in arrangements key to the government's delivery of programmes and services. As a result the power to make instruments in relation to grants is proposed for relocation from Part 4-1 to Part 4-1A of the PGPA Act, and include an exemption from section 42 (disallowance) of the LI Act.
Division 4 - Instruments relating to intelligence or security agencies or listed law enforcement agencies
133. Subsection 105D would relate to the modification of the PGPA Act, rules and instruments in relation to designated activities of intelligence or security agencies or listed law enforcement agencies, to ensure that their operational responsibilities are not compromised.
134. This is currently provided for in section 104, which includes a rule making power. However, it is proposed to relocate this power to Part 4-1A, which confers power on the Finance Minister to make instruments other than rules.
135. The revised provision would allow for the responsible Minister to determine the scope of the designated activities within an entity and for the Finance Minister to then determine how the PGPA Act, rules and instruments are to be applied to support the designated activities. It is proposed that determinations made under this section are reviewed at least once every three years or if the activities of the entity change significantly.
136. The section would also confirm that the determinations made by the Ministers under subsections 105(2) and 105(3) are exempt from the LI Act. This would be a substantial exemption. The determinations would be unsuitable for publication on the Federal Register of Legislative Instruments as they would contain information relating to national security that would be unsuitable for public dissemination.
137. Existing accountability measures which are in place for these entities will continue to provide oversight in relation to designated activities.
Part 4-2 - Delegations
Division 2 - Delegations
Section 107: Finance Minister
138. Item 73 would include a consequential technical amendment to paragraph 107(2)(b) to ensure alignment with the amended order of the subsections in section 71 of the PGPA Act ( Item 56 refers). The reference to subsection 71(3) would be amended to be subsection 71(2).
139. Item 74 would include a new paragraph 107(2)(i) in the list of matters for which the Finance Minister cannot delegate authority. Part 4-1A relates to instruments that are not disallowable and given the nature of these activities it is proposed that the exercise of these powers be limited to the Finance Minister.
Section 110: Accountable authority
140. Item 75 would amend paragraph 110(2) to ensure that an accountable authority issues accountable authority instructions under section 20A of the PGPA Act and does not have the power to delegate this responsibility to another person. While the instructions may be prepared by another person, ultimate responsibility for governing an entity and issuing instructions on the application of the finance law within the entity rests with the accountable authority.