Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The Financial Framework Legislation Amendment Bill 2008 primarily amends the Financial Management and Accountability Act 1997 (the FMA Act) to further simplify the financial management framework. This bill will reduce red tape in the government’s internal administration of the 100 agencies that are governed by the FMA Act, including 19 departments of state and a range of statutory and executive agencies. The bill also sets out consequential amendments and corrects minor errors in other laws.

This is the fifth financial framework bill since 2004, being part of an ongoing approach to maintaining the financial framework of the Australian government. This ongoing process of monitoring and review, and clarifying issues as they arise, is consistent with responsible government.

The bill’s proposed amendments primarily clarify the operation of the law, rather than change it substantively, and allow for more efficient processes.

For example, a key reform included in this bill relates to contracts that involve non-Commonwealth entities handling public money. The current law allows these entities, called ‘outsiders’, to receive or hold public money, and thus effectively only remit that money to the Commonwealth. There are cases, however, where outsiders legitimately need to make payments of public money, but this can only occur currently through an unnecessarily complex process.

Accordingly, an amendment is proposed to section 12 of the FMA Act that will allow outsiders to make payments of public money, where the relevant arrangement is authorised by me, as the Minister for Finance and Deregulation, or by my delegate, or by the parliament. This is an important deregulation initiative that, by definition, benefits not only the Commonwealth but also contractors, trustees and other outsiders, who are in a position of handling public money that could also involve the making of payments.

Second, and also affecting contracting processes, the bill adds a short note in section 44 explaining that the obligation on chief executives to promote the ‘proper use’ of Commonwealth resources includes an implied capacity for chief executives to enter contracts. By definition, such contracts are made on behalf of the Commonwealth, using the executive power of the Commonwealth, but this process has not necessarily been sufficiently clear to date.

The ability for other officials in agencies to enter contracts can then also more clearly be seen as requiring a delegation, or an authorisation, made to them by their chief executive, in relation to that agency. Similarly, a relevant chief executive or an appropriately authorised official can enter arrangements on behalf of agencies as well as their own, such as relating to whole-of-government procurement initiatives and the ‘proper use’ of Commonwealth resources across the government generally.

A third important reform in the bill relates to the definition of ‘proper use’ of Commonwealth resources in section 44. The current reference to ‘efficient, effective and ethical use’ of Commonwealth resources will be expanded to refer to efficient, effective and ethical use ‘that is not inconsistent with the policies of the Commonwealth’.

A proper use of resources would, in many ways, already take account of relevant Commonwealth policies. There are several benefits in this being stated expressly.

For a start, it reinforces the clear role that policy plays in agencies ascertaining the efficient, effective and ethical use of Commonwealth resources. Also, it helps ensure that contracts entered into by FMA Act agency chief executives, or their officials, are not inconsistent with Commonwealth policy. Next, it reinforces the longstanding requirement in regulations made under the FMA Act that require approvers of proposals for procurement and grants et cetera to ensure that the spending proposal is efficient, effective and in accordance with Commonwealth policy. And, last but not least, it places an appropriate emphasis on how policies are developed, implemented and maintained in and across agencies.

Another important proposal in the bill involves an explicit recognition that ministers responsible for FMA Act agencies may request information relating to that agency’s operations. This requirement is implied in the exercise of responsible government, but has not been explicitly articulated on the face of the FMA Act. The new proposed section 44A will, however, mirror equivalent provisions that already apply to bodies governed by the Commonwealth Authorities and Companies Act 1997 (colloquially known as the CAC Act), thereby improving consistency between the FMA Act and the CAC Act.

Some other clarifications proposed by the bill to the FMA Act include: the way that payments supported by appropriations can occur between and within FMA Act agencies, simplifying requirements for drawing rights that support payments of public money, updating penalty provisions, clarifying the application of the Legislative Instruments Act 2003, moving certain requirements to the FMA regulations to allow more efficient placement and updating, and simplifying how investments are made on behalf of the Commonwealth, by removing two archaic bodies corporate from section 39 of the FMA Act.

The bill also updates or affects five other laws, of which two are a consequence of updates being made to the FMA Act in this bill.

First, the bill amends the Defence Home Ownership Assistance Scheme Act 2008, as a consequence of the reforms relating to ‘outsiders’ that I mentioned are being made in this bill. And, second, the bill makes an appropriations related amendment to an explanatory note in the Public Service Act 1999, which mirrors a similar update being made by the bill to the act of grace provisions in the FMA Act.

Turning to other acts being amended, the bill corrects references in the Reserve Bank Act 1959 to the CAC Act that have been outdated since changes to the CAC Act occurred in 1999. Fourth, the bill amends the act supporting the Albury-Wodonga Development Corporation to place that organisation under the CAC Act, as one of the two accepted frameworks supporting Commonwealth-created entities. And, fifth, the bill implements a transfer of funding for the Water Smart Australia program, which is moving from the National Water Commission to the Department of the Environment, Water, Heritage and the Arts.

In summary, this bill reflects the fact that the FMA Act and the CAC Act comprise a robust financial framework. Since their commencement in 1998, both have accommodated a number of different policy imperatives, including devolution and the introduction of accrual budgeting. The present reforms will ensure the financial framework remains responsive to the needs of the government and of the parliament.

In that regard, this bill is consistent with updates made to the CAC Act that I introduced into this House on 13 February 2008, and which will commence on 1 July 2008, including an important clarification to the mechanism by which general policies of the government apply, and are made transparent, to over 80 relevant bodies under the CAC Act.

Overall, this work demonstrates the government’s ongoing commitment to deregulation, where appropriate, of the financial framework, while optimising the accountability and transparency of the operations of government generally.

I commend the bill to the House.

Debate (on motion by Mrs Bronwyn Bishop) adjourned.