FINANCIAL FRAMEWORK LEGISLATION AMENDMENT BILL (NO. 1) 2012 Explanatory Memorandum
FINANCIAL FRAMEWORK LEGISLATION AMENDMENT BILL (NO. 1) 2012
2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FINANCIAL FRAMEWORK
LEGISLATION AMENDMENT BILL (NO. 1) 2012
EXPLANATORY MEMORANDUM
(Circulated with the authority of the
Minister for Finance and Deregulation,
Senator the Hon Penny Wong)
TABLE OF CONTENTS
Table of abbreviations and common terms .......................................................... iii
I. GENERAL OUTLINE .......................................................................................... 1
Main features of the FFLA Bill 2012 ................................................................... 1
Financial Impact Statement................................................................................... 2
Statement of Compatibility with Human Rights ................................................... 2
II. NOTES ON CLAUSES ....................................................................................... 4
Long title ............................................................................................................... 4
Clause 1: Short title............................................................................................... 4
Clause 2: Commencement .................................................................................... 4
Clause 3: Schedules .............................................................................................. 5
III. OVERVIEW OF AMENDMENTS IN SCHEDULES .................................... 7
Schedule 1: Amending the Auditor-General Act 1997 ......................................... 7
Schedule 2: Amending the Commonwealth Authorities and Companies
Act 1997................................................................................................................ 7
Schedule 3: Amending the Financial Framework Legislation Amendment
Act 2010................................................................................................................ 7
Schedule 4: Amending the Financial Management and Accountability
Act 1997................................................................................................................ 8
Schedule 5: Repealing the Appropriation (Development Bank) Act 1975 and the
Car Dealership Financing Guarantee Appropriation Act 2009 ........................... 8
IV. NOTES ON SCHEDULE 1 - Amending the Auditor-General Act 1997 ........ 9
Auditor-General may audit any company that the Commonwealth controls ........ 9
Application.......................................................................................................... 10
V. NOTES ON SCHEDULE 2 - Amending the Commonwealth Authorities
and Companies Act 1997 ......................................................................................... 11
Budget estimates to be prepared as directed by the Finance Minister ................ 11
Application: Budget estimates ............................................................................ 12
Notifying the responsible Minister of decisions regarding significant events .... 12
Application: decisions regarding significant events ........................................... 13
Transitional arrangements: decisions regarding significant events .................... 14
VI. NOTES ON SCHEDULE 3 - Amending the Financial Framework
Legislation Amendment Act 2010............................................................................ 15
Misdescribed provisions: "and" and "or" ........................................................... 15
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 i
VII. NOTES ON SCHEDULE 4 - Amending the Financial Management and
Accountability Act 1997 ........................................................................................... 17
Commencement of Special Account determinations .......................................... 17
Drawing rights: focus on payments .................................................................... 18
Drawing rights: removal of penalty .................................................................... 20
Commonwealth to set off amounts owed with amounts payable ........................ 21
Clarification of the Finance Minister's delegation powers ................................. 22
Minor amendments to update headings .............................................................. 23
VIII. NOTES ON SCHEDULE 5 - Repealing redundant Acts .......................... 25
Repealing the Appropriation (Development Bank) Act 1975 ............................. 25
Repealing the Car Dealership Financing Guarantee Appropriation Act 2009 .. 25
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 ii
Table of abbreviations and common terms
Abbreviation or Full term or description
common term
Auditor-General Act Auditor-General Act 1997
APS Australian Public Service
CAC Act Commonwealth Authorities and Companies Act 1997
CAC Amendment Act Commonwealth Authorities and Companies Amendment
Act 2008
CAC Bill Commonwealth Authorities and Companies Bill 1996
CAC Orders Finance Minister's Orders issued under section 48 of the
CAC Act that detail information to be included in the annual
report of operations, and which comprise the Commonwealth
Authorities (Annual Reporting) Orders 2011 and the
Commonwealth Companies (Annual Reporting) Orders 2011
CAC Regulations Commonwealth Authorities and Companies Regulations 1997
Chief Executive Chief Executive, for a prescribed Financial Management and
Accountability Act 1997 (FMA Act) Agency under the
Financial Management and Accountability Regulations 1997,
means the person identified by the regulations as the Chief
Executive of the Agency, or, for any other FMA Act Agency,
means the person who is the Secretary of the relevant
Department for the purposes of the Public Service Act 1999
or the Parliamentary Service Act 1999
Commonwealth authority Body corporate that is established by Commonwealth
legislation for a public purpose, and which holds money on its
own account (as defined in section 7 of the CAC Act)
Commonwealth company Company registered under the Corporations Act 2001 that the
Commonwealth controls (as defined in section 34 of the
CAC Act)
CRF Consolidated Revenue Fund
FFLA Act 2008 Financial Framework Legislation Amendment Act 2008
FFLA Act 2010 Financial Framework Legislation Amendment Act 2010
FFLA Bill Financial Framework Legislation Amendment Bill
FFLA Bill 2012 Financial Framework Legislation Amendment Bill
(No. 1) 2012
Finance Minister The Minister who administers the Financial Management and
Accountability Act 1997
FMA Act Financial Management and Accountability Act 1997
FMA Bill Financial Management and Accountability Bill 1996
FMA Regulations Financial Management and Accountability Regulations 1997
FMLA Act Financial Management Legislation Amendment Act 1999
ICCPR International Covenant on Civil and Political Rights
Item An item of a Schedule of the FFLA Bill 2012
Tax Bonus Case Pape v Commissioner of Taxation (2009) 238 CLR 1
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 iii
Financial Framework Legislation
Amendment Bill (No. 1) 2012
I. GENERAL OUTLINE
Main features of the FFLA Bill 2012
1. The Financial Framework Legislation Amendment Bill (No. 1) 2012
(FFLA Bill 2012) would, if enacted, amend 4 Acts and repeal 2 Acts across
3 portfolios to clarify the Commonwealth's financial framework and amend the
governance and financial arrangements of existing Government bodies, among
other related measures.
2. Specifically, the FFLA Bill 2012 would, if enacted:
· Amend the Auditor-General Act 1997 (Auditor-General Act) to clarify that the
Auditor-General may accept an appointment under the Corporations Act 2001
as the auditor of any company that the Commonwealth controls, within the
expanded meaning of that concept that was added in 2008 to the
Commonwealth Authorities and Companies Act 1997 (CAC Act);
· Amend the CAC Act so that:
- directors of Commonwealth authorities and wholly-owned Commonwealth
companies (other than Government Business Enterprises) would prepare
Budget estimates, as directed by the Finance Minister (rather than their
responsible Minister), consistent with long-standing administrative
practices; and
- directors of Commonwealth authorities and wholly-owned Commonwealth
companies notify the responsible Minister of their actual decisions
(rather than just proposals) about certain significant events (such as
creating a subsidiary);
· Amend 2 misdescribed provisions in the Financial Framework Legislation
Amendment Act 2010 (FFLA Act 2010), which sought to update section 27A of
the CAC Act (to replace references to "at common law and in equity" and
"at common law or in equity" with the phrase "under the general law");
· Amend the Financial Management and Accountability Act 1997 (FMA Act) to:
- clarify the ability to set a future commencement date for Special Account
determination, by ensuring that it may commence on a day specified in the
determination, where that day is later the passage of 5 sitting days allowed
for a disallowance resolution in each House of Parliament;
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 1
- focus the operation of drawing rights on payments (rather than debiting,
or requesting the debiting of, an appropriation) and also remove the penalty
from the role of drawing rights, given their basic administrative role;
- insert a new section 35 to enable the Commonwealth to set-off, in whole
or in part, an amount owing to the Commonwealth by a person with an
amount owing by the Commonwealth to the same person, and make
regulations with respect to this section;
- limit the scope of the ability of the Finance Minister to delegate certain
powers to officials; and
- update and align related financial management provisions; and
· Repeal 2 redundant special appropriations to clean up the statute book and
improve the regulatory framework of the Commonwealth. The appropriations
to be repealed are the:
- Appropriation (Development Bank) Act 1975; and
- Car Dealership Financing Guarantee Appropriation Act 2009.
3. The FFLA Bill 2012 is the ninth Financial Framework Legislation
Amendment Bill (FFLA Bill) since 2004, and forms part of the ongoing program to
address financial framework issues as they arise, and assist in ensuring that specific
provisions in existing legislation remain clear and up-to-date. These changes have
been developed in collaboration with the relevant Ministers and their Departments.
4. A total of 6 out of 9 FFLA Bills have become law, with the first and the sixth
FFLA Bills lapsing upon the prorogation of the Australian Parliament for the 2004
and 2010 federal elections. The first FFLA Bill focussed primarily on amending
legislation to reflect the creation of Special Accounts in the Financial Management
Legislation Amendment Act 1999. Later FFLA Bills have covered a range of matters
including financial management provisions, governance structures and legislative
anomalies. The FFLA Bill 2012 continues this active program to improve the
Commonwealth's financial framework on an ongoing basis, as issues emerge and
solutions are identified.
Financial Impact Statement
5. The proposed amendments have no financial impact. The amendments are
aimed at improving financial legislation, which may lead to productivity gains for
a number of FMA Act agencies and CAC Act bodies.
Statement of Compatibility with Human Rights
6. The FFLA Bill 2012 seeks to make beneficial changes to financial and related
legislation by amending 4 Acts and repealing 2 Acts across 3 portfolios (the Prime
Minister and Cabinet, Treasury, and Finance and Deregulation portfolios).
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 2
7. The proposed amendments do not engage any of the applicable rights or
freedoms outlined in the Human Rights (Parliamentary Scrutiny) Act 2011, such as
encompassed in the International Covenant on Civil and Political Rights (ICCPR).
8. The proposed amendments do not limit any human rights, nor propose any
offences or penalties. Indeed, the proposed amendment to section 26 of the FMA Act
removes an offence and penalty from that Act.
9. This 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.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 3
II. NOTES ON CLAUSES
10. The structure of the Financial Framework Legislation Amendment Bill
(No. 1) 2012 (FFLA Bill 2012) comprises the long title, one clause that provides the
short title and then 2 clauses that refer to the 5 Schedules that contain the substantive
amendments to other Acts. These notes describe the content and effect of the long
title and the 3 clauses.
Long title
11. The long title of the FFLA Bill 2012 provides that it is a Bill for an Act to
amend the law relating to the Commonwealth's financial framework and governance
arrangements, and for other purposes.
12. The Australian Constitution provides direction on the nature and expenditure
of the Commonwealth. The Commonwealth's financial framework and governance
arrangements are made up of various Acts of Parliament, which concern, mostly,
the control of public resources.
13. The Financial Management and Accountability Act 1997 (FMA Act) and the
Commonwealth Authorities and Companies Act 1997 (CAC Act) are the principal
Acts that legislate the Commonwealth financial framework. Additional Acts provide,
in part, financial and governance arrangements for specific agencies. Such additional
Acts include the Acts including special appropriations that Schedule 5 of the FFLA
Bill 2012 would repeal.
14. Further information about the structure of the Australian Government and
related governance policies is contained in the List of Australian Government Bodies
and Governance Relationships and the Governance Arrangements for Australian
Government Bodies, through the website listing publications by the Department of
Finance and Deregulation (www.finance.gov.au). A single page listing FMA Act
agencies (by portfolio) and a page listing CAC Act bodies (by portfolio) is published
under the name of the "Flipchart" in the publications of the Department of Finance
and Deregulation (www.finance.gov.au).
Clause 1: Short title
15. This clause provides that, if the FFLA Bill 2012 is enacted, it may then be cited
as the Financial Framework Legislation Amendment Act (No. 1) 2012.
Clause 2: Commencement
16. This clause provides that if the FFLA Bill 2012 is passed:
· Clauses 1 to 3 would commence on the day that the FFLA Bill 2012 receives
Royal Assent;
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 4
· Items in Schedule 1, regarding the Auditor-General Act 1997 (Auditor-General
Act), would commence on a single day fixed by Proclamation within 6 months
from the date of Royal Assent, otherwise they would commence 6 months after
the date of Royal Assent. This would allow for related guidance materials to
be updated;
· Items in Schedule 2, Part 1, regarding the preparation of budget estimates by
bodies under the CAC Act, would commence the day after the FFLA Bill 2012
receives Royal Assent;
· Items in Schedule 2, Part 2, regarding the notification of decisions about
significant events by bodies under the CAC Act, would commence on a single
day fixed by Proclamation within 6 months from the date of Royal Assent,
otherwise they would commence 6 months after the date of Royal Assent.
This would allow sufficient time to update any relevant guidance materials;
· Items 1 and 2 in Schedule 3, regarding the Financial Framework Legislation
Amendment Act 2010 (FFLA Act 2010), would commence immediately after
the time that items 7 and 8 of Schedule 5 in the FFLA Act 2010 commenced
(respectively). That date was 1 March 2011 for both items 7 and 8 of Schedule
5 in the FFLA Act 2010. Retrospective commencement of these items would
ensure that the misdescriptions in items 7 and 8 of Schedule 5 in the FFLA Act
2010 would be corrected and would apply immediately after those items
became law. This retrospective commencement of these items would not affect
any entrenched or fundamental rights, but would serve to correct that minor
misdescription in the FFLA Act 2010;
· Items in Schedule 4, regarding the amendments to the FMA Act (such as the
introduction of a provision to allow for set off), would commence the day after
the FFLA Bill 2012 receives Royal Assent; and
· Items in Schedule 5, regarding the repeal of the Appropriation (Development
Bank) Act 1975 and the Car Dealership Financing Guarantee Appropriation
Act 2009, would commence on the day that the FFLA Bill 2012 receives Royal
Assent.
Clause 3: Schedules
17. This clause provides that each Act, as specified in one of the 5 Schedules to the
FFLA Bill 2012, is to be amended or repealed as set out in the applicable items in
that Schedule of the FFLA Bill 2012.
18. Clause 3 also provides that any other item in a Schedule has effect according to
its terms, which relates to provisions such as application provisions.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 5
19. Briefly, the Schedules in the FFLA Bill 2012, in consecutive order, would
amend or repeal the following Acts:
· Schedule 1 would amend the Auditor-General Act;
· Schedule 2 would amend the CAC Act;
· Schedule 3 would amend the FFLA Act 2010;
· Schedule 4 would amend the FMA Act; and
· Schedule 5 would repeal the Appropriation (Development Bank) Act 1975 and
the Car Dealership Financing Guarantee Appropriation Act 2009.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 6
III. OVERVIEW OF AMENDMENTS IN SCHEDULES
20. The following overview of amendments proposed in Schedules 1 to 5 of the
Bill is provided in general terms, rather than by item number.
21. Parts IV to VIII of this Explanatory Memorandum contain a description of the
Schedules of the Bill, organised by item number.
Schedule 1: Amending the Auditor-General Act 1997
22. Schedule 1 amends the Auditor-General Act 1997 (Auditor-General Act) to
clarify that the Auditor-General may accept an appointment under the Corporations
Act 2001 as the auditor of any company that the Commonwealth controls, within the
expanded meaning of Commonwealth "control" that was added in 2008 to the
Commonwealth Authorities and Companies Act 1997 (CAC Act).
Schedule 2: Amending the Commonwealth Authorities and Companies
Act 1997....
23. Schedule 2 amends the CAC Act to ensure that directors of Commonwealth
authorities and wholly-owned Commonwealth companies (other than Government
Business Enterprises) prepare Budget estimates as directed by the Finance Minister
(rather than their responsible Minister), consistent with long-standing administrative
practices.
24. This Schedule also seeks to ensure that, from 1 July 2012, directors of
Commonwealth authorities (including interjurisdictional authorities) and
wholly-owned Commonwealth companies notify the responsible Minister of
decisions (rather than just proposals) about certain significant events (such as creating
a subsidiary).
Schedule 3: Amending the Financial Framework Legislation Amendment
Act 2010....
25. Schedule 3 amends 2 misdescribed provisions in the Financial Framework
Legislation Amendment Act 2010 (FFLA Act 2010). The 2 misdescribed provisions
sought to update section 27A of the CAC Act by replacing references to "at common
law and in equity" (and "at common law or in equity") with the phrase "under the
general law".
26. These misdescriptions transposed the placement of the words "and" and "or",
which meant that the intended amendments made by these provisions did not initially
take effect as intended.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 7
Schedule 4: Amending the Financial Management and Accountability
Act 1997....
27. Schedule 4 amends the Financial Management and Accountability Act 1997
(FMA Act) to:
· clarify the ability to set a future commencement date for Special Account
determination, by ensuring that it may commence on a day specified in the
determination, where that day is later the passage of 5 sitting days allowed for
a disallowance resolution in each House of Parliament;
· focus the operation of drawing rights on payments (rather than debiting, or
requesting the debiting of, an appropriation) and also remove the penalty from
the role of drawing rights, given their administrative and practical role;
· insert a new section 35 to enable the Commonwealth to set-off, in whole or in
part, an amount owing to the Commonwealth by a person with an amount
owing by the Commonwealth to the same person, and to enable the making of
regulations with respect to helping implement this section over time;
· limit the scope of the ability of the Finance Minister to delegate certain powers
to officials; and
· update and align related financial management provisions.
Schedule 5: Repealing the Appropriation (Development Bank) Act 1975
and the Car Dealership Financing Guarantee Appropriation Act 2009
28. Schedule 5 repeals the Appropriation (Development Bank) Act 1975 and the
Car Dealership Financing Guarantee Appropriation Act 2009 given that the
appropriations contained in these Acts, as well as both Acts in their entirety, are now
redundant.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 8
IV. NOTES ON SCHEDULE 1 - Amending the
Auditor-General Act 1997
29. This Schedule seeks to amend the Auditor-General Act 1997 (Auditor-General
Act) to clarify that the Auditor-General may accept an appointment under
the Corporations Act 2001 as the auditor of any company that the Commonwealth
controls, within the current meaning of the Commonwealth Authorities and
Companies Act 1997 (CAC Act). In short, this ensures that the Auditor-General Act
is realigned with the wording used in the CAC Act.
30. The following detailed explanation of the amendments proposed in Schedule 1
is provided by reference to the items in sequential order.
Auditor-General may audit any company that the Commonwealth
controls
31. On commencement on 1 January 1998, both the Auditor-General Act
(paragraph 21(1)(c)) and the CAC Act (section 34) made reference to a "company in
which the Commonwealth has a controlling interest." The Commonwealth
Authorities and Companies Amendment Act 2008 (CAC Amendment Act) updated
section 34 of the CAC Act to refer, instead, to a "Corporations Act company that the
Commonwealth controls". The CAC Amendment Act also inserted a definition of
the meaning of "controls", as set out presently in subsection 34(1A).
32. The change to the CAC Act in 2008 from the expression "controlling interest"
to the defined term "controls" provided a clearer, and slightly broader, definition of
the companies captured by the CAC Act. The intention was to avoid doubt by
helping to ensure that a company, which the Commonwealth effectively controlled,
could not evade the scope of the CAC Act, due to any potentially narrow
interpretations of the phrase "controlling interest".
33. In short, the definition of "controls" in the updated section 34 of the CAC Act
covers 3 potential tests for control, of which only one test previously was covered by
the original phrase of "controlling interest" (regarding paragraph (b) in relation to
being able cast more than half the votes at a general meeting of the company).
34. When the CAC Amendment Act updated section 34 of the CAC Act,
paragraph 21(1)(c) of the Auditor-General Act was not updated at the same time,
even though it continued to refer to the original test in the CAC Act of a "company in
which the Commonwealth has a controlling interest".
35. Item 1 amends the Auditor-General Act to bring paragraph 21(1)(c) into line
with the broader test of "controls" that now appears in section 34 of the CAC Act.
36. Specifically, Item 1 first repeals paragraph 21(1)(c) of the Auditor-General Act
(which provides that the Auditor-General may accept appointment under the
Corporations Act 2001 as the auditor of "any other company in which the
Commonwealth has a controlling interest").
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 9
37. The use of the word "other" distinguishes paragraph 21(1)(c) companies from
Commonwealth companies (or subsidiaries of Commonwealth companies) referred to
in paragraph 21(1)(b)). While the relevant distinction may be relatively minor, that
distinction has existed since the commencement of the Auditor-General Act, so it is
prudent to ensure that the scope of the role of the Auditor-General is not diminished
by the proposed amendment.
38. Item 1 then inserts a new paragraph 21(1)(c) into the Auditor-General Act to
provide that the Auditor-General may accept an appointment as the auditor of
"any other company that the Commonwealth controls (as defined in section 34 of the
Commonwealth Authorities and Companies Act 1997)." This then ensures that the
broader definition of "controls" has replaced more restricted definition of
"controlling interest" that appears in paragraph 21(1)(c) currently.
Application
39. Item 2 provides that the amendment made by item 1 applies to appointments
accepted on or after the commencement of item 1. As noted under the heading
"Clause 2: Commencement" above, item 1 would commence on a single day fixed by
Proclamation within 6 months from the date of Royal Assent, or would commence
6 months after the date of Royal Assent.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 10
V. NOTES ON SCHEDULE 2 - Amending the
Commonwealth Authorities and Companies
Act 1997
40. This Schedule seeks to amend the Commonwealth Authorities and Companies
Act 1997 (CAC Act) to ensure that directors of Commonwealth authorities and
wholly-owned Commonwealth companies (other than Government Business
Enterprises) prepare Budget estimates as directed by the Finance Minister.
This Schedule also seeks to ensure that, from 1 July 2012, directors of
Commonwealth authorities (including interjurisdictional authorities) and
wholly-owned Commonwealth companies notify the responsible Minister of
decisions to undertake certain significant events.
41. The following detailed explanation of the amendments proposed in Schedule 2
is provided by reference to the items in sequential order.
Budget estimates to be prepared as directed by the Finance Minister
42. This amendment seeks to ensure that directors of Commonwealth authorities
and wholly-owned Commonwealth companies (other than Government Business
Enterprises) prepare Budget estimates, as directed by the Finance Minister (rather
than their responsible Minister), consistent with long-standing administrative
practice.
43. Currently, section 14 of the CAC Act requires directors of Commonwealth
authorities (other than Government Business Enterprises) to prepare Budget estimates
as directed by the responsible Minister. Items 1 to 3 amend section 14 of the
CAC Act to omit references to the "responsible Minister", wherever they appear, and
to substitute these references with "Finance Minister". That is, items 1 to 3 ensure
that the directors of Commonwealth authorities (other than Government Business
Enterprises) prepare Budget estimates as directed by the Finance Minister.
44. Similarly, section 39 of the CAC Act requires, currently, the directors of
wholly-owned Commonwealth companies (other than Government Business
Enterprises) to prepare Budget estimates as directed by the responsible Minister.
Items 4 to 6 amend section 39 of the CAC Act to omit all references to the
"responsible Minister", wherever they appears, and substitute these with references to
the "Finance Minister". That is, items 4 to 6 ensure that the directors of
wholly-owned Commonwealth companies (other than Government Business
Enterprises) prepare Budget estimates as directed by the Finance Minister.
45. These amendments seek to clarify sections 14 and 39 of the CAC Act as the
Finance Minister has consistently been the Minister responsible for setting the
requirements for collecting information from Budget estimates, from relevant
Commonwealth authorities and wholly-owned Commonwealth companies, in relation
to the preparation of the Commonwealth Budget.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 11
Application: Budget estimates
46. Item 7 provides that the amendments made by items 1 to 6 apply to Budget
estimates for the financial year starting on or after 1 July 2012 (and any other period
commencing after 1 July 2012) where a direction is given on or after the
commencement of this Part.
47. As the Budget in relation to 2012-2013 will be introduced at the start of the
Winter sittings in May 2012, items 1 to 7, if enacted, would have immediate
relevance and application to reinforcing existing practice in the current Budget
process.
Notifying the responsible Minister of decisions regarding significant
events
48. Item 8 repeals and replaces section 15 of the CAC Act, which requires the
directors of a Commonwealth authority to notify the responsible Minister when the
Commonwealth authority proposes to do certain significant things. Item 8 inserts a
new section 15, which requires the directors of a Commonwealth authority to notify
the responsible Minister when they decide that the authority is to do certain
significant things. This amendment provides that the directors of a Commonwealth
authority are required to provide written particulars of the decision immediately to
the responsible Minister. This amendment clarifies when directors should notify the
responsible Minister of significant events, by making it clear that notification is to
occur immediately, once the board has decided that the authority is to do something
significant.
49. Item 9 makes an amendment that is consequential to item 8 by updating
paragraph 33A(2)(b) of the CAC Act to omit "of a proposal mentioned in subsection
15(1)", and substitute "under subsection 15(1)". This amendment is necessary to
retain the alignment of subsection 33A(2)(b) with section 15, following the
implementation of item 8.
50. Similar to the item 8 amendment, item 10 repeals and replaces section 40 of the
CAC Act, which requires the directors of a wholly-owned Commonwealth company
to notify the responsible Minister when the wholly-owned Commonwealth
company proposes to do certain significant things. Item 10 inserts a new section 40,
which requires the directors of a wholly-owned Commonwealth company to notify
the responsible Minister when they decide that the company is to do certain
significant things. This amendment provides that the directors of a wholly-owned
Commonwealth company are required to provide written particulars of the decision
immediately to the responsible Minister. This amendment clarifies when directors
should notify the responsible Minister of significant events, by making it clear that
notification is to occur immediately, once the board has decided that the company is
to do something significant.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 12
51. A significant event, as set out in sections 15 and 40, includes:
· forming a company or participating in the formation of a company;
· participating in a significant partnership, trust, unincorporated joint venture or
similar arrangement;
· acquiring or disposing of a significant shareholding in a company;
· acquiring or disposing of a significant business;
· commencing or ceasing a significant business activity; and
· making a significant change in the nature or extent of its interest in a significant
partnership, trust, unincorporated joint venture or similar arrangement.
52. The amendments in items 8 to 10 seek to bring about greater consistency in
reporting requirements under the CAC Act. In relation to section 15 of the CAC Act,
the Explanatory Memorandum to the Commonwealth Authorities and Companies Bill
1996 (CAC Bill), which led to the CAC Act, stated that it was envisaged that the
Finance Minister's Orders would require notifications of significant events to be
incorporated in the annual report of operations.
53. The Finance Minister's Orders, issued under section 48 of the CAC Act, are,
currently, 2 instruments that detail the information to be included in the annual report
of operations: the Commonwealth Authorities (Annual Reporting) Orders 2011 and
the Commonwealth Companies (Annual Reporting) Orders 2011 (CAC Orders).
The CAC Orders require directors of Commonwealth authorities and wholly-owned
Commonwealth companies to disclose the "decision-making process" when the board
"decides" to enter into certain types of transactions. These requirements regarding
annual reporting were implemented following a recommendation in 2009 by the
Senate Standing Committee on Finance and Public Administration, to improve
transparency around the operations of CAC Act bodies. Items 8 to 10 seek to
strengthen this connection and increase the integrity of the reporting framework
under the CAC Act, by creating consistent reporting obligations for directors of
CAC Act bodies. The words "decide" and "decision" are consistent with the wording
used in the CAC Orders.
54. This formal requirement in no way derogates from the ability of the board of a
Commonwealth authority or wholly-owned Commonwealth company to inform the
responsible Minister, at any earlier stage, of any potential or imminent matter that
may lead to a decision to undertake a significant event. Similarly, a CAC Act body
may maintain a dialogue with its portfolio Department of State and any other relevant
parts of the Commonwealth regarding any matters that may lead to a decision to
undertake something significant.
Application: decisions regarding significant events
55. Item 11 provides that the amendments made by items 8 to 10, apply to
decisions to undertake certain significant things, made on or after 1 July 2012.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 13
Transitional arrangements: decisions regarding significant events
56. Item 12 provides that any guidelines made under section 15 of the CAC Act
and in force immediately prior to the commencement of Part 2 (items 8 to 14) would
continue to have effect as if they were issued under the new section 15 of the
CAC Act (as made by item 8).
57. Item 13 provides that any regulations made under section 33A of the CAC Act
and in force immediately prior to the commencement of Part 2 (items 8 to 14) would
continue in force as if they were issued under the new section 33A of the CAC Act
(as made by item 9).
58. Item 14 provides that any guidelines made under section 40 of the CAC Act
and in force immediately prior to the commencement of Part 2 (items 8 to 14) would
continue to have effect as if they were issued under the new section 40 of the
CAC Act (as made by item 10).
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 14
VI. NOTES ON SCHEDULE 3 - Amending the
Financial Framework Legislation Amendment
Act 2010
59. This Schedule seeks to amend 2 misdescribed provisions in the Financial
Framework Legislation Amendment Act 2010 (FFLA Act 2010). The 2 misdescribed
provisions sought to update section 27A of the CAC Act by replacing references to
"at common law and in equity" (and "at common law or in equity") with the phrase
"under the general law". These misdescriptions transposed the placement of the
words "and" and "or", which meant that these provisions did not take effect.
60. The following detailed explanation of the amendments proposed in Schedule 3
is provided by reference to the items in sequential order.
Misdescribed provisions: "and" and "or"
61. Item 1 corrects a minor error in item 7 of Schedule 5 of the FFLA Act 2010.
Item 7 sought to make a substantive change to subsection 27A(1) of the CAC Act, to
omit "at common law or in equity" [emphasis added] and substitute that phrase with
"under the general law". However, subsection 27A(1) refers to "at common law and
in equity" [emphasis added]. As item 7 of the FFLA Act 2010 was misdescribed,
subsection 27A(1) was not amended to remove the reference to "at common law and
in equity" and replace that phrase with "under the general law". As noted at
paragraph 150 of the Explanatory Memorandum to the FFLA Act 2010, the intention
behind item 7 was to replace the reference to common law and equity with the phrase
"under the general law", which was defined in the CAC Act through item 1 of
Schedule 5 of the FFLA Act 2010.
62. Accordingly, item 1 amends item 7 of Schedule 5 of the FFLA Act 2010 to
omit "or" and substitute that word with "and". This change would enable the
FFLA Act 2010 to amend subsection 27A(1) of the CAC Act to remove the reference
to "at common law and in equity" and replace that phrase with "under the
general law".
63. Item 2 corrects a minor error in item 8 of Schedule 5 of the FFLA Act 2010,
which is similar to the minor error outlined above. Item 8 sought to make a
substantive changes to the note in subsection 27A(1) of the Commonwealth
Authorities and Companies Act 1997 (CAC Act), to omit "at common law and in
equity" [emphasis added] and substitute that phrase with "under the general law".
However, the note to subsection 27A(1) refers to "at common law or in equity"
[emphasis added]. As item 8 of the FFLA Act 2010 was misdescribed, the note to
subsection 27A(1) was not amended to remove the reference to "at common law or in
equity" and replace that phrase with "under the general law". As noted at paragraph
150 of the Explanatory Memorandum to the FFLA Act 2010, the intention behind
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 15
item 8 was to replace the reference to common law and equity with the phrase
"under the general law".
64. Item 2 amends item 8 of Schedule 5 of the FFLA Act 2010 to omit "and" and
substitute that word with "or". This change would enable the FFLA Act 2010 to
amend the note to subsection 27A(1) of the CAC Act to remove the reference to
"at common law or in equity" and replace that phrase with "under the general law".
65. In short, therefore, the proposed amendments to section 27A and the note to
section 27A had transposed the words "and" and "or", respectively.
This misdescription is rectified by the amendments in Schedule 3.
66. The commencement of the correction applies retrospectively to the
commencement date of the FFLA Act 2010, for the reasons set out under the heading
"Clause 2: Commencement", above.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 16
VII. NOTES ON SCHEDULE 4 - Amending the
Financial Management and Accountability
Act 1997
67. This Schedule seeks to amend the Financial Management and Accountability
Act 1997 (FMA Act) to:
· clarify the commencement date for Special Account determinations;
· focus the operation of drawing rights on payments;
· remove the penalty relating to drawing rights;
· insert a new section 35 to enable the Commonwealth to set off, in whole or in
part, an amount owing to the Commonwealth by a person with an amount
owing by the Commonwealth to the same person;
· clarify the Finance Minister's delegation powers; and
· make minor amendments to update headings in the FMA Act.
68. The following detailed explanation of the amendments proposed in Schedule 4
is provided in the 6 themes set out in the paragraph above (that is, the amendments
will not be provided in sequential order, as set out in the notes on other Schedules
elsewhere in this Explanatory Memorandum).
Commencement of Special Account determinations
69. Item 3 amends subsection 22(4) of the FMA Act to enable the Finance Minister
to clarify the day on which a Special Account determination made under section 20
of the FMA Act can commence. Currently:
· the Finance Minister may establish a Special Account by making a legislative
instrument under s 20 of the FMA Act (Special Account determination);
· subsection 22(2) of the FMA Act requires the Finance Minister to table the
Special Account determination in each House of the Parliament;
· subsection 22(3) provides either House with 5 sitting days to move a motion
disallowing the determination; and
· subsection 22(4) provides if no such resolution is passed by either House,
the Special Account determination takes effect on the day immediately after the
last day upon which such a resolution could have been passed.
70. Item 3 amends subsection 22(4) to remove any doubt over whether a Special
Account determination may operate from a date later than the last possible date of
disallowance. That is, the amendment to subsection 22(4) provides that a Special
Account determination may take effect on a date specified in the determination that is
later than the 5 sitting days after a motion of disallowance could be moved.
The reason for this clarification is that Special Accounts are often created so that they
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 17
may be used by new Government agencies once established. Accordingly, it is useful
to have a Special Account determination start on the same day that the new
Government Agency commences.
71. Regulation 10 and Schedule 4 of the Legislative Instruments Regulations 2004
note that the disallowance and commencement arrangements in section 22 of the
FMA Act differ from the general disallowance arrangements set out in section 57 of
the Legislative Instruments Act 2003.
72. Item 14 clarifies that the amendment made by item 3 applies to determinations
to establish Special Accounts made on or after the commencement of that item.
Clause 2 provides that, if passed, the amendment to subsection 22(4) would
commence the day after the Financial Framework Legislation Amendment Bill
(No. 1) 2012 (FFLA Bill 2012) receives Royal Assent.
Drawing rights: focus on payments
73. The Financial Management and Accountability Act 1997 (FMA Act)
introduced the phrase "drawing rights" in sections 26 and 27 of that Act.
The Explanatory Memorandum to the Financial Management and Accountability Bill
1996 (FMA Bill) stated that "the system of drawing rights proposed to be established
under these clauses is intended to give operational substance to section 83 of the
Constitution."
74. This was consistent with the view long held by the Commonwealth that
sections 81 and 83 of the Australian Constitution conferred on the Commonwealth a
substantive power to spend money from the Consolidated Revenue Fund (CRF) and
the Treasury, and that sections 81 and 83 of the Constitution enabled such spending
through the appropriations process.
75. The Financial Management Legislation Amendment Act 1999 (FMLA Act)
amended sections 26 and 27 of the FMA Act to refocus drawing rights again in
relation to the change from accounting through funds to reflecting the concept of a
single self-executing CRF. In summary, this change reflected a statutory clarification
in 1999 from the initial structure set out in the FMA Act for the first 18 months of its
operation (whereby agencies had to manage amounts across a statutory "Consolidated
Revenue Fund", which differed from the CRF in the Constitution, as well as amounts
in what were described as component of the Reserved Money Fund (RMF) and also
the Commercial Activities Fund (CAF)).
76. The change from 1 July 1999 reflected a clearer approach, which is still applied
today, of relying only on a self-executing concept of the CRF, as established by the
Constitution. This approach also used the concept of a Special Account (being an
appropriation ledger of amounts from within the CRF) to replace the former
"components" of the RMF or the CAF (which in turn had replaced the former
concept of a trust account, within the Trust Fund, as established in the Audit
Act 1901).
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 18
77. Following this, in the case of Pape v Commissioner of Taxation (Tax Bonus
Case) (2009) 238 CLR 1, the High Court of Australia found that sections 81 and 83
of the Australian Constitution do not confer on the Commonwealth a power to spend
money. The ability for the Commonwealth to spend money is found elsewhere in the
Constitution, in particular the executive power of the Commonwealth in section 61 of
the Constitution.
78. Analysing drawing rights in light of the Tax Bonus Case, it is appropriate to
refocus drawing rights onto the process of making payments, as proposed through
item 1 and items 4 to 8, and to provide the Finance Minister with a power to control
that process, including, if necessary, the power to control the timing of discretionary
Government expenditure.
79. Item 4 amends paragraphs 26(b) and 26(c) to maintain that the concept of a
drawing right for debiting an appropriation, or requesting the debit of an
appropriation, only in relation to the 4 appropriations that operate in tandem with the
concept of a "general drawing right limit", as set annually through the Appropriation
Act (No. 2) (and updated, within a financial year, where necessary, through the
Appropriation Act (No. 4)).
80. Accordingly, the FFLA Bill 2012 seeks to reinforce the existing concept of a
"general drawing right limit" that appears in design of the Special Accounts in the
COAG Reform Fund Act 2008 and the 3 Special Accounts in the Nation-building
Funds Act 2008: the Building Australia Fund, Education Investment Fund and Health
and Hospitals Fund.
81. Item 1 captures these 4 Special Accounts within a new definition, "designated
Special Account appropriation", for the purposes of sections 26 and 27 of the FMA
Act. That is, item 1 would add a definition into section 5 of the FMA Act that a
"designated Special Account appropriation" is an appropriation under section 21 of
the FMA Act that relates to the following Special Accounts:
· The COAG Reform Fund established by the COAG Reform Fund Act 2008; and
· Special Accounts established by the Nation-building Funds Act 2008.
82. Item 2 removes the note to subsection 12(2). This note referred to a drawing
right issued under section 27 allowing an official or a Minister to debit an amount
against an appropriation.
83. The amendments to sections 26 and 27 made by items 4 and 7 would mean that
drawing rights are only issued in relation to debiting (or requesting the debiting) of an
appropriation for a designated Special Account appropriation, so the note to
subsection 12(2) no longer has general relevance.
84. Item 7 makes similar amendments to paragraphs 27(1)(b) and 27(1)(c) to the
amendments made by item 4 to paragraphs 26(1)(b) and 26(1)(c). That is, item 7
inserts the use of the term "designated Special Account appropriation", which item 1
defines in section 5 of the FMA Act.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 19
85. Item 8 replaces subsection 27(5) with an updated subsection that explains that
a drawing right has no effect where it purports to authorise a payment of public
money for which there is no available appropriation.
86. This also focuses the role of the drawing right on the concept of making a
payment, rather than the internal procedural matter of debiting an appropriation.
The need for an appropriation would still apply for notional payments, through the
continued operation of section 6 (which treats a notional payment between agencies,
where both are within the Commonwealth, as equivalent to a real payment by an
Agency to a recipient outside of the Commonwealth).
87. Importantly, the changes proposed by these items would not affect the
obligation on agencies to maintain proper accounts and records, under section 48 of
the FMA Act, or the obligation to keeping track of amounts debited from
appropriations (as also reflected in the Finance Minister's Orders).
Drawing rights: removal of penalty
88. Items 5 and 6 remove the penalty attached to section 26 of the FMA Act.
The penalty introduced in the FMA Act on 1 January 1998, and also as amended on
1 July 1999, has never been used for a prosecution. When the penalty was initially
designed, it related to whole-of-Government banking practices that have changed
significantly, in particular through the introduction of "Agency banking" which was
phased into use across the Australian Government from 1 July 1999.
89. If an official has misused public money, then other substantive offences and
penalties exist in the FMA Act (for example, regarding the misuse of the
Commonwealth credit card), the Crimes Act 1914 and the Criminal Code Act 1995
(for example, regarding defrauding the Commonwealth or misuse of Commonwealth
computers, etc.).
90. Similarly, sanctions exist under the Public Service Act 1999 for Australian
Public Service (APS) non-compliance with section 26. The APS Code of Conduct
(set out in section 13 of the Public Service Act 1999) provides that an APS employee
must act with "care and diligence" and must "use Commonwealth resources in a
proper manner". There are similar disciplinary arrangements for non-APS
employees, such as parliamentary staff under the Parliamentary Service Act 1999,
or the significant disciplinary arrangements applicable to members of the Australian
Defence Force or the Australian Federal Police.
91. Accordingly, removing the penalty is consistent with the principle in the policy
of the Attorney-General's Department, Guide to Framing Commonwealth Offences,
Infringement Notices and Enforcement Powers.
92. Item 5 would repeal the penalty from section 26. Item 6 removes the note
from section 26 to reflect the amendment in item 5.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 20
Commonwealth to set off amounts owed with amounts payable
93. Item 10 inserts a new section 35 into the FMA Act to empower the Finance
Minister, on behalf of the Commonwealth, to exercise a discretion to "set off"
amounts owed to the Commonwealth with amounts payable to the Commonwealth.
94. Proposed subsection 35(1) provides that if an amount (or debt) is owed to the
Commonwealth by a person (including a company or other entity), and another
amount is owed by the Commonwealth to that same person, the Finance Minister
may neutralise the amounts payable to the extent that set off is relevant.
95. Proposed subsection 35(2) provides that certain payments are exempt from
being used for a set off action. That is, amounts cannot be set off against payments
by the Commonwealth that would be inalienable or absolutely inalienable
(being wording that appears in legislation for entitlements to payments, such as
section 1061EK of the Social Security Act 1991, or section 66 of the Paid Parental
Leave Act 2010, which make an advance social security payment and a paid parental
leave instalment "absolutely inalienable"). The set off provision also does not apply
to a payment, or right to receive a payment, that cannot, due to a Commonwealth Act,
be assigned by the recipient to another person (such as section 126B of the
First Home Saver Accounts Act 2008, which states that payments from a First Home
Save Account cannot be assigned).
96. Proposed subsection 35(3) defines the terms "amount owing by the
Commonwealth" and "amount owing to the Commonwealth" that are used in
proposed subsection 35(1). To avoid doubt, these terms are defined to include any
amounts that are owed but are not yet due for payment.
97. In the context of a current Budget deficit with a clear policy of returning to
surplus, set off may provide a more cost effective mechanism to preserve public
finances. In short, less would need to be paid to a recipient than would have been the
case if the Commonwealth needed to make its payment in full, without setting off the
amount owing to the Commonwealth.
98. The rationale behind the proposed section 35 is to provide the Finance Minister,
on behalf of the Commonwealth, with the ability to recover debts in a cost neutral
and more effective manner than exists currently at a whole-of-Government level.
The main current options involve, in the first instance, the obligation on Chief
Executives to pursue a debt. In certain circumstances a debt may be written off under
section 47 of the FMA Act. Where write off is not viable or possible, then the waiver
mechanism may be invoked under section 34 of the FMA Act, which would mean
that the debt would not be paid to the Commonwealth. The set off provision is not to
be confused with the ability in section 34 of the FMA Act to waive a debt on
condition that a person agrees to pay an amount to the Commonwealth in specified
circumstances, or otherwise allowing the payment by instalments.
99. In addition to the existing legislative mechanisms, the proposed set off
provision would provide a further avenue to handle debts, instead of having recourse
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 21
to common law and the rules of equity. Indeed, set off is not a new statutory concept
at the Commonwealth level. There are numerous set off provisions across the
Commonwealth statute book (such as section 137 of the Clean Energy Act 2011).
It is proposed that section 35 would operate at a whole-of-Government level,
allowing for more streamlined policy development with a centralised mechanism,
and involving advice to the Finance Minister from her Department of State.
100. The set off mechanism has a further potential use to benefit recipients of
payments made by the Commonwealth that may have, in some way, been affected by
non-compliance with statutory or other legal requirements. In these situations,
there may be a further and later mechanism for the Commonwealth to pay the
recipient (such as a specific Act designed for that effect) and the new amount could
potentially be used as a set off against any requirement that the recipient repay the
initial amount (to the extent that the relevant amount is not inalienable).
101. Item 13 amends the power to make regulations in section 65 of the FMA Act
by adding a new subparagraph 65(2)(a)(iaa), which relates to the new section 35 of
the FMA Act that is proposed through item 10 of the Financial Framework
Legislation Amendment Bill (No. 1) 2012 (FFLA Bill 2012). This new subparagraph
allows for regulations to set requirements, if necessary, regarding reports from
specified persons that might assist the Finance Minister to consider any set off
arrangements above a particular amount.
Clarification of the Finance Minister's delegation powers
102. Item 12 repeals subsection 62(1) of the FMA Act and inserts a new subsection
62(1) that specifies that the Finance Minister cannot delegate any of the following
powers or functions:
· the power to issue Special Instructions under section 16 of the FMA Act; or
· the power to make a determination under section 20 of the FMA Act; or
· a function under subsection 39A(1) of the FMA Act; or
· the power to make Orders under section 63 of the FMA Act.
103. Currently, subsection 62(1) enables the Finance Minister to delegate any of her
powers or functions under the FMA Act, except the power to make Orders or to
delegate a function under subsection 39A(1). New subsection 62(1) would also
prevent the Finance Minister from delegating powers to issue Special Instructions
under section 16 or make determinations under section 20.
104. To date, the Finance Minister has not delegated the powers to issue Special
Instructions under section 16 or make determinations under section 20.
This amendment seeks to preserve the intention of sections 16 and 20, which is that
only the Finance Minister may issue Special Instructions and make Special Account
determinations. This amendment simply ensures that these powers are not delegated
henceforth.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 22
105. Item 15 is a saving provision to ensure that all existing delegations would not
be affected by item 12 and would continue until altered or revoked by the Finance
Minister.
Minor amendments to update headings
106. The note to item 2 of Schedule 8 of the Financial Framework Legislation
Amendment Act 2010 (FFLA Act 2010) updated the heading to section 31 of the
FMA Act from "Relevant Agency receipts" to "Retaining prescribed receipts".
Section 31 enables agencies to receive and retain certain types of receipts that are
prescribed in the FMA Regulations. Agencies can add the prescribed receipts to their
most recent departmental appropriation. The heading to section 31was amended to
clarify the purpose of that section, however, the heading to the corresponding
provision in subsection 32A(4) was not updated at the same time. Subsection 32A(4)
clarifies when prescribed receipts are taken to be received and added to an Agency's
departmental appropriation.
107. Item 9 makes a minor amendment to make the heading to subsection 32A(4)
consistent with the heading to section 31. Item 9 repeals the heading "Relevant
Agency receipts" and replaces it with "Retaining prescribed receipts".
108. Item 47 of Schedule 1 of the Financial Framework Legislation Amendment Act
2008 (FFLA Act 2008) made a change to the definition of "proper use" in subsection
44(3) to expand it from meaning "efficient, effective and ethical use" to "efficient,
effective and ethical use that is not inconsistent with the policies of the
Commonwealth". To include use "that is not inconsistent with the policies of the
Commonwealth" in the heading to section 44, the note to item 47 of Schedule 1 of the
FFLA Act 2008 added "etc." after the word "use". That is, the FFLA Act 2008
changed the heading to section 44 from "Promoting efficient, effective and ethical
use of Commonwealth resources" to "Promoting efficient, effective and ethical use
etc. of Commonwealth resources".
109. Later, item 5A of Schedule 8 of the Financial Framework Legislation
Amendment Act 2010 (FFLA Act 2010) changed the definition of "proper use" to
insert the word "economical" after the word "effective". In effect, the definition of
"proper use" in section 44 became "proper use means efficient, effective, economical
and ethical use that is not inconsistent with the policies of the Commonwealth".
To avoid a particularly cumbersome heading to section 44 by including the word
"economical" in the heading, the note to item 5A of Schedule 8 of the FFLA Act
2010 amended the heading to section 44 of the FMA Act from "Promoting efficient,
effective and ethical use etc. of Commonwealth resources" to "Promoting proper use
etc. of Commonwealth resources".
110. However, as the inclusion of "etc." in the heading was intended to encompass
use "that is not inconsistent with the policies of the Commonwealth", when the
heading was revised through the FFLA Act 2010 to refer to "proper use", retaining
part of the definition of "proper use" by including "etc." was made redundant.
Item 11 makes a minor change to the heading of section 44 to remove the redundant
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 23
"etc." from the heading. Item 11 repeals the heading "Promoting proper use etc. of
Commonwealth resources" and replaces this heading with "Promoting proper use of
Commonwealth resources".
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 24
VIII. NOTES ON SCHEDULE 5 - Repealing
redundant Acts
111. This Schedule seeks to repeal 2 redundant special appropriations in the
Appropriation (Development Bank) Act 1975 and the Car Dealership Financing
Guarantee Appropriation Act 2009 by repealing those Acts.
112. The following detailed explanation of the amendments proposed in Schedule 5
is provided by reference to the items in sequential order.
Repealing the Appropriation (Development Bank) Act 1975
113. Item 1 repeals the Appropriation (Development Bank) Act 1975, which
comprises the long title, section 1 that provides the short title of the Act, section 2
that provides the commencement of the Act, and then subsection 3(1) that contains
the substance of the Appropriation (Development Bank) Act 1975.
114. Subsection 3(1) of the Appropriation (Development Bank) Act 1975 provides
that the Treasurer may issue out of the Consolidated Revenue Fund (CRF) an
amount, or amounts in total, not exceeding $20,000,000 for the purposes of
section 85 of the Commonwealth Banks Act 1959. There is no further content in
section 3. The Financial Framework Legislation Amendment Act 2010 repealed
subsection 3(2), which provided that the CRF could be appropriated to the extent
necessary for the purpose of subsection 3(1).
115. Section 85 of the Commonwealth Banks Act 1959 enabled the Treasurer to lend
to the Commonwealth Development Bank of Australia amounts appropriated from
the Parliament, as agreed to between the Treasurer and the Board of Directors of the
Commonwealth Bank of Australia. Section 85 of the Commonwealth Banks Act 1959
was repealed through the Commonwealth Bank Sale Act 1995, which rendered
subsection 3(1) of the Appropriation (Development Bank) Act 1975 obsolete.
Accordingly, the Appropriation (Development Bank) Act 1975 is now redundant and
can be repealed in its entirety.
Repealing the Car Dealership Financing Guarantee Appropriation Act
2009
116. Item 2 repeals the Car Dealership Financing Guarantee Appropriation
Act 2009. This Act was established to support car dealerships at the beginning of the
global financial crisis to help ensure their viability.
117. The Government provided a Commonwealth guarantee on securities provided
to these dealerships to help ensure their continued financial viability. There are no
longer any active guarantees and the guarantees are no longer available to
dealerships. The Car Dealership Financing Guarantee Appropriation Act 2009 is
now obsolete and can be repealed in its entirety.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No. 1) 2012 25