Senate

Revised Explanatory Memorandum

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

Table of abbreviations and common terms

General outline

1. The Public Governance, Performance and Accountability Amendment Bill 2014 (the Bill) would, if enacted, amend the PGPA Act to:

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make technical amendments to improve the understanding and operation of the Act;

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better align the general duties in the PGPA Act with the duties in the Public Service Act 1999 (PS Act);

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provide greater certainty over the use and management of public resources and the capacity of an accountable authority to issue instructions on resource management and governance matters within entities;

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include a requirement that Commonwealth entities must provide annual reports to their Minister by the 15th day of the fourth month after the end of the reporting period;

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clarify the nature of various legislative instruments, including the introduction of a new Part to the PGPA Act (Part 4-1A) to deal with other instruments that are not subject to disallowance, but are subject to appropriate scrutiny as they relate to procurement and grant activities and arrangements covering intelligence or security agencies and listed law enforcement agencies.

2. The PGPA Act replaces the FMA Act and the CAC Act as the primary financial legislation of the Commonwealth from 1 July 2014.

3. The transition to the PGPA Act has required the development of supporting rules and other legislative instruments, as well as consequential amendments to be made to the enabling legislation of Commonwealth entities to replace references to provisions in the FMA and CAC Acts with references to the equivalent provisions in the PGPA Act.

4. The process of developing the supporting rules and identifying consequential amendments to the enabling legislation of Commonwealth entities has also provided an opportunity to further improve the features of the PGPA Act and to ensure the supporting rules can be implemented in a fashion supportive of the overall intent of the PGPA Act and the broader public management reform agenda of which it forms a part.

5. This Bill reflects the results of these considerations and the consultations within and outside of government on the effective implementation of the PGPA Act.

Financial Impact Statement

6. The Bill would add to and amend a number of provisions in the PGPA Act to clarify, simplify, enhance and improve the understanding and operation of the Commonwealth's financial management framework within the context of a modernised financial regime.

7. While the effect of the proposed amendments is difficult to quantify in monetary terms, it is expected that simplification of the regulatory requirements for Commonwealth entities will contribute to long-term efficiencies in terms of achieving improved governance, transparency and accountability arrangements for Commonwealth entities (including both non-corporate Commonwealth entities and Commonwealth entities) within the Australian Government.

Statement of compatibility with human rights

8. The Bill, if enacted, will not affect any of the applicable rights or freedoms outlined in the Human Rights (Parliamentary Scrutiny) Act 2011, such as those in the International Covenant on Civil and Political Rights.

9. The Bill does not propose any offences or penalties that limit any human rights.

10. The Bill is therefore compatible with the human rights and freedoms recognised or declared in the international instruments listed in subsection 3(1) of the Human Rights (Parliamentary Scrutiny) Act 2011.

The Bill in the context of broader reform activities

11. The Commonwealth's financial framework provides rules for the governance of Commonwealth entities and Commonwealth companies and for the proper management and use of public resources. The framework supports the government in meeting its obligations and responsibilities to the public and the Parliament. It is an important feature of an accountable and transparent public sector and guides the daily work of Commonwealth entities and Commonwealth companies, including the work of office holders and employees.

12. The PGPA Act is the cornerstone of a broad, integrated package of reforms to the Commonwealth's financial framework. Taken together, the reforms seek to deliver long-lasting benefits, including:

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improved quality of information to Parliament to support its constitutional role in relation to Commonwealth expenditure;

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a more mature approach to risk across the Commonwealth;

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improved productivity and performance of the Commonwealth public sector with accompanying benefits for a broad range of stakeholders; and

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reduced red tape within the Commonwealth and for partners who contribute to delivering Australian Government programs and services, including grant recipients.

13. The aim of the reform agenda, through the PGPA Act, is to create a financial framework where entities have the flexibility and incentives to adopt appropriate systems and processes that help them to achieve diverse policy and statutory objectives efficiently and effectively. The Act is also intended to underpin other aims in reducing red tape, achieving appropriate simplification, and encouraging joint ventures with partners both within and external to government.

14. It will take several years to implement the reforms and integrate them fully into the practices and processes of Commonwealth entities and Commonwealth companies. Gradual introduction of the reforms will ensure that they are appropriately tested and refined in light of experience.

Related legislative activity

15. The PGPA Act was passed by the previous Parliament and was given Royal Assent on 29 June 2013, with the first five sections coming into effect on 1 July 2013. Sections 6 to 112 of the Act are subject to delayed implementation and are to come into effect 12 months later, on 1 July 2014.

16. The intervening 12 month period has been taken up with the development of supporting rules to give effect to the operation of the Act and an assessment of any consequential amendments that may be required to the legislation of Commonwealth entities arising from the introduction of the PGPA Act and the replacement of the FMA and CAC Acts.

PGPA rules and other instruments

17. The PGPA rules and other instruments made by the Finance Minister under the PGPA Act will replace a range of instruments under current legislation, including the FMA Regulations, CAC Regulations and Finance Minister's Orders. They will be used to prescribe the requirements and procedures necessary to give effect to the governance, performance and accountability matters covered by the PGPA Act.

18. For an Act to enable rules, rather than regulations, is consistent with current drafting practice. The Office of Parliamentary Counsel reserves the use of regulations to a limited range of matters, which it considers are more appropriately dealt with in regulations made by the Governor-General than in an instrument made by some other person. Matters in this category include offence provisions, powers of arrest or detention, entry provisions and search or seizure provisions. The rules will be legislative instruments subject to disallowance by Parliament and will sunset under the provisions of the LI Act.

19. The majority of rules are to be in place for 1 July 2014, and will be presented to Parliament before that date for the 15 sitting days of the disallowance period for legislative instruments of this type. A number of rules do not need to be in place for 1 July 2014. The Department of Finance intends to engage in further consultation with stakeholders, including the Parliament, before these rules are released in late 2014. Amongst these proposed rules are the rules in relation to corporate planning, performance statements and annual reports. Time will be taken to provide stakeholders with the opportunity to provide their views on the form and content of these rules.

20. The Bill would also allow the Finance Minister to make other instruments that are not disallowable under the LI Act. This arrangement in relation to procurement and grants is consistent with existing arrangements under the FMA Act. An exemption from the LI Act for modified arrangements in relation to intelligence and security agencies and listed law enforcement agencies is consistent with arrangements operating under the FMA and CAC Acts.

Consequential amendments

21. The Public Governance, Performance and Accountability (Consequential and Transitional Provisions) Bill 2014 (Consequential and Transitional Bill) is scheduled for presentation to Parliament in the same sittings as this Bill. The intent of the Consequential and Transitional Bill is to amend the enabling legislation of Commonwealth entities and companies so as to:

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replace references to the FMA and CAC Acts with the equivalent provisions in the PGPA Act;

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simplify enabling legislation where provisions of the PGPA Act cover a matter previously dealt with in enabling legislation; and

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amend enabling legislation to clarify which matters are covered by the PGPA Act and which matters are covered by the enabling legislation, such as in the case of planning and reporting, or disclosure of interest arrangements where an entity may have additional obligations over and above those imposed through the PGPA Act.

22. The variety of entity governance and operational arrangements across the Commonwealth is such that the degree of amendment required to enabling legislation varies from entity to entity, but the overall approach is one of seeking alignment between the PGPA Act and enabling legislation in introducing a more consistent and coherent framework that does not impinge on the ability of an entity to meet its statutory obligations to Parliament and to the community.

Application and transitional provisions

23. The Consequential and Transitional Bill will also include application and transitional provisions to ensure that some provisions in the PGPA Act will not impose substantive requirements until after 1 July 2014, and that some provisions within the FMA and CAC Acts would continue to operate for a limited period.

24. For example, there will be an application provision in relation to corporate plans. Corporate plans will need to be developed and published for the 2015-16 financial year, but will not need to be available on 1 July 2014. Corresponding transitional provisions will be available to confirm that entities with existing requirements to produce a corporate plan will continue to do so for 2014-15 under the requirements of their enabling legislation before those provisions cease to have effect.

25. A further example is that existing provisions in relation to the presentation of audited financial statements and annual reports will continue to apply after 1 July 2014 in relation to matters for the 2013-14 financial year, until those reporting obligations have been met.

Consultation

26. The PGPA Act was presented to Parliament following two years of consultation and consideration of issues. The period since its passage has provided an opportunity for reflection and consultation on the provisions of the Act and whether they could be further improved.

27. The Department of Finance has continued to engage in an extensive consultation program with stakeholders within and outside government, including the establishment of a Project Board supported by steering committees considering issues in relation to:

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appropriations and resourcing;

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planning and reporting;

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governance and risk management;

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streamlining and reducing red tape; and

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legislation and rules.

28. All of the steering committees include wide representation from across government, and arrangements have been put in place to consult with other jurisdictions and sectors as part of an ongoing approach to seeking views on how to develop and implement the aims of the broader reform agenda.

29. These consultation efforts have been supplemented through workshops and consultations with entities in Sydney, Melbourne, Adelaide, Alice Springs and Darwin, as well as ongoing conversations with, and feedback from, Commonwealth entities across Australia.

30. Several of the proposed amendments included in the Bill are the result of consultation with Commonwealth entities about their enabling legislation and its operation, as well as the result of consultation on the PGPA rules, with the final form of those rules requiring amendments to the PGPA Act to allow their implementation in as simplified and streamlined manner as possible.

Structure of the Bill

31. The structure of the Bill involves:

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a clause that provides for the short title of the legislation;

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a commencement clause, stating that the Bill will come into effect immediately after section 6 of the PGPA Act;

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a clause that refers to the Schedule containing the substantive amendments to the PGPA Act; and

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Schedule 1 to the Bill.

32. An explanation of the amendments proposed in Schedule 1 is provided in sequential order in this Explanatory Memorandum.

Main features of the Bill

33. The Bill, if enacted, would make a number of technical amendments to clarify aspects of the Act and improve its operation as well as amendments supporting the effective operation of the proposed PGPA rules. The key features of the Bill involve:

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amendments to definitions and technical aspects covering the recognition and operation of provisions relating to entities, officials and accountable authorities;

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the introduction of a provision (section 20A) to provide explicit authority for accountable authorities to issue instructions in relation to the operation of the PGPA Act and the broader finance law;

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expanding section 23 to provide explicit authority to the accountable authorities of non-corporate Commonwealth entities to make commitments of relevant money (as well as power to enter into arrangements);

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amending sections 26 to 28 to better align the terminology with the PS Act;

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clarifying who is subject to section 30, as well as its application to "ex officio" members of accountable authorities;

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amending provisions in relation to planning, performance and reporting to clarify responsibilities and accountabilities, including a requirement that Commonwealth entities must provide annual reports (under section 46) to their Minister by the 15th day of the fourth month after the end of the reporting period;

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amending requirements in relation to the banking of and dealing with relevant money by Ministers and officials (under section 55) to provide more clarity in relation to responsibilities in relation to dealing with bankable and unbankable money;

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clarifying the status of authorisations made in relation to borrowing, investments and payments, as well as clarifying how similar provisions in other legislation interacts with these provisions;

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amendments to rule making powers to amend and clarify the scope of matters covered; and

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the introduction of a new Part to the PGPA Act (Part 4-1A) to enable the Finance Minister to make other instruments (relating to procurements, grants, intelligence or security agencies and listed law enforcement agencies) that are not subject to disallowance.

Notes on Clauses

Chapter 1 - Introduction

Part 1-1 - Introduction

Division 1 - Preliminary

Clause 1: Short title

34. Under this clause, if the Bill is enacted, it may be cited as the Public Governance, Performance and Accountability Amendment Act 2014.

Clause 2: Commencement

35. Under this clause, if the Bill is enacted:

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Clauses 1 to 3 will commence on the day that the Bill receives Royal Assent.

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Items in Schedule 1 will commence immediately after the commencement of section 6 of the Public Governance, Performance and Accountability Act 2013.

Clause 3: Schedule(s)

36. This clause provides that the items set out in Schedule 1 to the Bill will amend the PGPA Act.

NOTES ON SCHEDULE 1

Part 1-2 - Definitions

Division 2 - The Dictionary

Section 8: The Dictionary

37. Items 1 to 7 would insert new definitions for terms that appear in the Bill or have not been properly recognised in the PGPA Act. Key amendments to definitions are explained below.

38. Item 1 would include a reference to a definition for "bankable money" that would be incorporated into proposed amendments to subsection 55(2) of the PGPA Act ( Item 39 refers).

39. Item 1 would also include a reference to a definition of "controls" in subsection 89(2), which sets out the circumstances in which the Commonwealth controls a Commonwealth company.

40. Item 2 would amend the definition of "Department of State" to remove the reference to "ordinary meaning" and reflect the fact that it is intended to have the same meaning as the term that appears in section 64 of the Constitution. Amendments would also allow a body to be recognised as part of a Department through an Act or the PGPA rules, and for single persons, for example statutory officers, to form part of the Department of State.

41. Item 3 would amend the existing definition for "listed entity" to clarify which entities are covered by the definition. Listing an entity that would otherwise form part of a Department of State allows that entity to be formally recognised as a separate Commonwealth entity for PGPA purposes. For example, if the Defence Material Organisation was not a listed entity, it would form part of the Department of Defence for the purposes of the PGPA Act.

42. The definition of listed entity would be amended to ensure that an Act may prescribe an entity to be a listed entity. This would be in addition to the existing mechanism for the PGPA rules to prescribe entities as listed entities, which is consistent with current practice under the FMA Regulations.

43. Item 4 would involve a technical amendment to expand the meaning of official to cover additional subsections proposed for section 13 of the Act ( Item 14 refers).

44. Item 5 would amend the definition of "Parliamentary Department" to recognise that it includes any body, person, group of persons or organisation that is prescribed by an Act or the rules.

45. Item 6 would correct a printing error in the current version of the PGPA Act. The proposed amendment seeks to omit the wording "subsidiary of a Commonwealth entity" and substitute this with "subsidiary of a corporate Commonwealth entity".

46. Item 7 would amend the definition of special account to omit the words, "any other" and substitute them with the word "an", which is consistent with the words proposed for section 80 of the PGPA Act ( Item 60 refers).

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:

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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.

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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.

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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:

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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).

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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.

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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:

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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.

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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.

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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:

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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:

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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

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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.

Chapter 3 - Commonwealth companies

Part 3-1 - Companies, subsidiaries and new corporate Commonwealth entities

Division 2 - Core provisions for this Chapter

Section 89: Commonwealth companies

114. Item 62 would amend subsection 89(2) to ensure that the word "controls" appears in bold, to indicate that the word has a specific meaning (as described in subsection 89(2) of the PGPA Act).

Part 3-2 - Planning and accountability

Division 2 - Planning and budgeting

Section 95: Corporate plan for Commonwealth companies

115. Item 63 would amend paragraph 95(1)(a) to clarify that the section applies to Commonwealth companies (the PGPA Act currently includes a printing error, referring to companies as entities) and that a corporate plan must be prepared at least once each reporting period.

116. Item 64 would add a new subsection to ensure that if the Directors vary any corporate plan then the Directors must comply with any requirements prescribed in the PGPA rules in relation to the variation of corporate plans. This is consistent with the proposed requirements under section 35 of the PGPA Act in relation to Commonwealth entities ( Item 31 refers).

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.