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2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FINANCIAL FRAMEWORK
LEGISLATION AMENDMENT BILL (NO. 4) 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 ........................................................................................... ii
I. GENERAL OUTLINE ................................................................................................................. 1
Main features of the FFLA Bill (No. 4) 2012 ............................................................................. 1
Financial Impact Statement ......................................................................................................... 2
Statement of Compatibility with Human Rights ......................................................................... 2
II. NOTES ON CLAUSES............................................................................................................... 3
Part 1 - Preliminary .................................................................................................................... 3
Clause 1: Short Title ................................................................................................................................. 3
Clause 2: Commencement ........................................................................................................................ 3
Clause 3: Schedules .................................................................................................................................. 3
III. OVERVIEW OF AMENDMENTS.......................................................................................... 4
Schedule 1 - Amendments ....................................................................................................................... 4
IV. NOTES ON SCHEDULE 1 - AMENDMENTS ..................................................................... 5
Amending the Commonwealth Authorities and Companies Act 1997 ..................................................... 5
Clarifying references to guidelines in relation to procurement ................................................................ 5
Amending the Environmental Protection and Biodiversity Conservation Act 1999 ............................... 5
Providing greater autonomy to the Director of National Parks to enter into contracts ............................ 5
Amending the Ozone Protection and Biodiversity Greenhouse Gas Management Act 1989 .................. 6
Clarifying mechanism for refunds and remissions of levies .................................................................... 6
Amending the Papua New Guinea (Staffing Assistance) 1973 ................................................................ 6
Establishing a framework to address overpayments ................................................................................ 6
Amending the Public Accounts and Audit Committee Act 1951 .............................................................. 8
Updating definitions to provide gender neutral terms .............................................................................. 8
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 i
Table of Abbreviations and Common Terms
Abbreviation or common term Full term or description
Acts Interpretation Act Acts Interpretation Act 1901
AusAID The Australian Agency for International Development
CAC Act Commonwealth Authorities and Companies Act 1997
Commonwealth authority Bodies corporate that are established by Commonwealth legislation
for a public purpose, and which hold money on their own account.
Commonwealth company Companies registered under the Corporations Act which the
Commonwealth controls.
Constitution Commonwealth of Australian Constitution Act
CRF Consolidated Revenue Fund
DNP Director of National Parks
EPBC Act Environment Protection and Biodiversity Conservation Act 1999
FFLA Bill Financial Framework Legislation Amendment Bill
Finance Department of Finance and Deregulation
Finance Minister Minister for Finance and Deregulation
FMA Act Financial Management and Accountability Act 1997
Item An item of a Schedule of the FFLA Bill
JCPAA Joint Committee of Public Accounts and Audit
Ozone Act Ozone Protection and Synthetic Greenhouse Gas Management
Act 1989
PAAC Act Public Accounts and Audit Committee Act 1951
PNG Act Papua New Guinea (Staffing Assistance) Act 1973
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 ii
Financial Framework Legislation Amendment
Bill (No. 4) 2012
I. GENERAL OUTLINE
Main features of the FFLA Bill (No. 4) 2012
1. The 9 page Financial Framework Legislation Amendment Bill (No. 4) 2012 (FFLA Bill)
would, if passed, amend 5 Acts across 3 portfolios.
2. There are five main purposes of the proposed amendments.
· First, to amend the Commonwealth Authorities and Companies Act 1997 (CAC Act) to
substitute references to "Commonwealth Procurement Guidelines" with "guidelines in
relation to procurement", given the recent change of name of the guidelines to the
Commonwealth Procurement Rules and to create consistent wording between references in
the Financial Management and Accountability Act 1997 and the CAC Act.
· Second, to amend the Environment Protection and Biodiversity Conservation Act 1999 to
provide the Director of National Parks with greater autonomy to enter into contracts with an
increased threshold of $1,000,000 (currently $250,000) without seeking the approval of the
Minister. Currently, regulations could prescribe a threshold of $1,000,000 and, after the
commencement of the proposed amendments, could still prescribe a higher threshold
amount.
· Third, to amend the Ozone Protection and Synthetic Greenhouse Gas Management Act 1989
to establish a new special appropriation for the purpose of making remissions or refunds of
import levies and manufacture levies, including those related to synthetic greenhouse gas
management equipment.
· Fourth, to amend the Papua New Guinea (Staffing Assistance) Act 1973 to establish a
framework for dealing with overpayments, and to address instances where the relevant
agency makes payments from appropriations to recipients, that are not, in practice,
consistent with the requirements or preconditions imposed by this Act and risk breaching
section 83 of the Constitution. This amendment flows from the amendments made by the
Financial Framework Legislation Amendment Act (No. 2) 2012, that were developed in
consultation with the Australian National Audit Office following concerns raised in the
context of finalising financial statements for the 2010-11 financial year.
· Fifth, to amend the Public Accounts and Audit Committee Act 1951 (PAAC Act) to update
labels of defined terms "the Chairman" and "the Vice-Chairman" with the gender neutral
terms "Chair" and "Deputy Chair". The Audit (Transitional Measures) Act 1997 sought to
do this, but the amendment was misdescribed and did not follow through to the consolidated
Public Accounts and Audit Committee Act 1951 (PAAC Act). The FFLA Bill would also
remove "the" from these definitions to reflect earlier amendment to the Acts Interpretation
Act 1901, whereby "the" is now implied in defined terms.
3. This is the twelfth FFLA Bill since 2004, as part of an ongoing approach to maintaining the
Australian Government's financial framework. Ten of those Bills became law, with the first and
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 1
the sixth FFLA Bills lapsing upon the prorogation of the Australian Parliament for the 2004 and
2010 federal elections.
4. The first FFLA Bill focussed primarily on implementing text changes to reflect the creation
of Special Accounts, from 1 July 1999, in deeming provisions that were in the
Financial Management Legislation Amendment Act 1999. Later FFLA Bills, including this one,
cover a range of issues dealing with appropriations, financial management provisions, governance
structures and legislative anomalies.
Financial Impact Statement
5. The proposed amendments have no financial impact. The amendments are aimed at
addressing several issues such as: payments made from a certain appropriation that may risk
breaching section 83 of the Constitution; amend the governance and financial arrangements of
existing government bodies; and correcting a drafting error to ensure neutral terms appear for the
definitions of the Chair and Deputy Chair of the Joint Committee of Public Accounts and Audit
(JCPAA).
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
6. The proposed amendments do not engage any of the applicable rights or freedoms outlined in
the Human Rights (Parliamentary Scrutiny) Act 2011, such as those encompassed in the
International Covenant on Civil and Political Rights.
7. The proposed amendments do not limit any human rights, nor propose any offences or
penalties.
8. 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.4) 2012 2
II. NOTES ON CLAUSES
9. The structure of the Financial Framework Legislation Amendment Bill (No. 4) 2012
(FFLA Bill) comprises 3 clauses that refer to 1 Schedule containing the substantive amendments to
other Acts. These notes describe the 3 clauses and their effect.
Part 1 - Preliminary
Clause 1: Short Title
10. This clause provides that, should the FFLA Bill be enacted, the FFLA Bill may then be cited
as the Financial Framework Legislation Amendment Act (No. 4) 2012.
Clause 2: Commencement
11. This clause provides that items in Schedule 1 commence on the day after the Financial
Framework Legislation Amendment Act (No. 4) 2012 receives the Royal Assent;
Clause 3: Schedules
12. This clause provides that the amendments to the Acts are contained in Schedule 1 of the
FFLA Bill.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 3
III. OVERVIEW OF AMENDMENTS
13. The following overview of amendments proposed in Schedule 1 of the FFLA Bill is provided
in general terms, rather than by item number. Part IV of this Explanatory Memorandum contains a
more detailed description of Schedule 1 of the Bill, organised by item number.
Schedule 1 - Amendments
14. Schedule 1 amends 5 Acts, across 3 portfolios, to address several issues. Briefly, Schedule 1
of the FFLA Bill amends the:
· Commonwealth Authorities and Companies Act 1997 (CAC Act) to align references to
guidelines in relation to procurement with references contained in the Financial
Management and Accountability Act 1997 (FMA Act);
· Environment Protection and Biodiversity Conservation Act 1999, to clarify that the Director
of National Parks may enter into contracts with an increased threshold of $1,000,000
(currently $250,000) without seeking the agreement of the responsible Minister;
· Ozone Protection and Synthetic Greenhouse Gas Management Act 1989, to establish a new
special appropriation for the purpose of processing remissions or refunds of import levies,
including those for synthetic greenhouse gas management equipment and manufacturing
levies;
· Papua New Guinea (Staffing Assistance) Act 1973 to provide authority for recoverable
payments and recoverable death benefits to address administrative issues where technical
overpayments of an entitlement payment may be made, and thereby risk breaching section
83 of the Constitution. This amendment continues the work delivered in the Financial
Framework Legislation Amendment Act (No. 2) 2012; and
· Public Accounts and Audit Committee Act 1951 (PAAC Act) to substitute the definitions
"the Chairman" and "the Vice-Chairman" with the gender neutral terms "Chair" and
"Deputy Chair".
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 4
IV. NOTES ON SCHEDULE 1 - AMENDMENTS
15. An explanation of the amendments proposed in Schedule 1 is provided in sequential order.
Amending the Commonwealth Authorities and Companies Act 1997
Clarifying references to guidelines in relation to procurement
16. Item 1 amends section 47A(4) the CAC Act (Compliance with Government procurement
requirements) to omit "Commonwealth Procurement Guidelines" (CPGs) and substitute
"guidelines in relation to procurement".
17. This amendment seeks to update the CAC Act to ensure that it remains up-to-date when
referencing Government procurement policies. On 1 July 2012, the former CPGs were replaced by
the Finance Minister with the new name: "Commonwealth Procurement Rules" (CPRs).
18. There are 16 bodies, covered by the CAC Act, that are subject to procurement guidelines, as
determined by the Finance Minister's (CAC Act Procurement) Directions issued by the
Finance Minister under subsection 47A(2) of the CAC Act. The Directions provided that certain
bodies, covered by the CAC Act, were required to comply with certain provisions contained within
the CPGs.
19. The previous Finance Ministers (CAC Act Procurement) Directions 2010, which referenced
the CPGs, were repealed and replaced by the Finance Ministers (CAC Act Procurement)
Directions 2012 on 2 July 2012, to ensure Government procurement requirements would continue
to apply to relevant CAC Act bodies.
20. Amending subsection 47A(4) now reflects a housekeeping amendment to ensure that it
remains current and accurate. Item 1 also seeks to effect alignment between references to
Government procurement guidelines with those in the FMA Act to ensure consistency and clarity
across the Commonwealth's financial management framework.
21. Item 2 repeals and replaces the former subsection 47A(7):
"In this section:
Commonwealth Procurement Guidelines means the guidelines relating to procurement issued under
regulations made under the Financial Management and Accountability Act 1997."
22. Item 2 substitutes a new subsection 47A(7):
"In this section:
guidelines in relation to procurement means the guidelines relating to procurement issued under
regulations made under the Financial Management and Accountability Act 1997."
Amending the Environmental Protection and Biodiversity Conservation Act 1999
Providing greater autonomy to the Director of National Parks to enter into
contracts
23. Item 3 would amend sub-paragraph 514D(5)(a)(i) of the Environment Protection and
Biodiversity Conservation Act 1999 (EPBC Act) to increase, from $250,000 to $1,000,000, the
threshold for the Director of National Parks to obtain consent from the Minister responsible for the
EPBC Act to enter into contracts. Similar provisions exist in legislation relating to other
Commonwealth authorities, such as the Australian National Maritime Museum and Australian
Sports Commission. The purpose of provisions such as s.514D(5)(a)(i) of the EPBC Act is to
enable the relevant Minister to have oversight of significant transactions of the authority.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 5
24. The prescribed functions of the Director of National Parks (DNP) are centred on the
management of Commonwealth reserves under the EPBC Act, which include Uluru-Kata Tjuta and
Kakadu National Parks. The contract approval threshold for the Director was originally set at
$50,000 when the authority was established in 1976 (under the National Parks and Wildlife
Conservation Act 1975). The threshold was increased to $250,000 in 1992.
25. The increase in the cost of goods and services in the past 20 years has meant that many
routine transactions of the DNP now exceed the threshold, such as contracts for the purchase of fuel
and provision of services (including cleaning and maintenance of plant and equipment) required in
the management of Commonwealth reserves. The increase in the threshold to $1,000,000 takes
account of these increases while ensuring the Minister's consent is required for significant, non-
routine transactions of the DNP. The increase will apply to contracts to be entered into on or after
the amendment commences.
Amending the Ozone Protection and Biodiversity Greenhouse Gas Management
Act 1989
Clarifying mechanism for refunds and remissions of levies
26. Item 5 inserts a new section in the Ozone Protection and Synthetic Greenhouse Gas
Management Act 1989 (the Ozone Act) which provides for a special appropriation from the
Consolidated Revenue Fund for remissions or refunds payable under sections 69AA - 69AC.
27. The special appropriation is to provide a refund or remission of the carbon charge component
of the levy, paid by the licensee upon import or manufacture of a synthetic greenhouse gas (SGG)
or SGG equipment or where the SGG or SGG equipment has been exported in accordance with the
terms specified in sections 69AA - 69AC.
28. Currently, refunds or remissions under these provisions are paid under section 28 of the
FMA Act. It is considered that amending the Ozone Act to include this provision increases the
transparency and workability of the refund mechanism. The appropriation is limited by the terms
set out in section 69AA - 69AC and the amount provided in the refund or remission is limited to the
amount of the carbon charge component which was paid, or is payable by the licensee.
29. Practically, it is expected that exports of SGGs and SGG equipment, and the corresponding
refund or remission of the carbon charge component of the levy, would be a small proportion of the
expected revenue collected from the import or manufacture of SGG or SGG equipment.
Amending the Papua New Guinea (Staffing Assistance) 1973
Establishing a framework to address overpayments
Background
30. The Papua New Guinea (Staffing Assistance) Act 1973 (PNG Act) provides retirement
benefits for former employees of the administration of the Territory of Papua and New Guinea. The
PNG Scheme is a closed Scheme and there are no contributing members. However, pensions
continue to be payable to retired PNG Scheme members and their eligible dependants under the
PNG Act and the Papua New Guinea (Staffing Assistance) (Superannuation) Regulations
(PNG Regulations).
31. Originally constituted under the Superannuation Ordinance 1917 of the Territory of Papua
and the Superannuation Ordinance 1928 of the Territory of New Guinea, and later under the
Superannuation (Papua New Guinea) Ordinance 1951, on 1 July 1976 the PNG Scheme was
bought within the ambit of the PNG Act.
32. The Administrative Arrangements Order (AAO) currently provides that the Minister for
Finance and Deregulation is responsible for the PNG Act insofar as it relates to superannuation and
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 6
retirement benefits, and the Minister for Foreign Affairs and Trade has responsibility for all other
matters under the PNG Act.
33. ComSuper draws on an AusAID annual administered appropriation to make the necessary
pension payments. The changes proposed by item 6 of Schedule 1 are intended to deal with issues
in relation to drawing on this appropriation.
34. These changes do not affect the benefit entitlements of PNG Scheme pension recipients or
expand those persons eligible for a benefit (or the amount of those benefits) under the
PNG Scheme.
Recoverable death payments
35. The new subsection 62B(1) provides that an amount that is deposited into an account or paid
by way of cheque as a benefit payment under the PNG Act or the PNG regulations, but is paid after
the death of the recipient, may be paid by the Commonwealth (as a recoverable death payment).
This only applies when, on the last day on which changes could reasonably be made to the payment,
the Chief Executive Officer (CEO) of ComSuper does not know that the recipient has died, and
where the payment would have been payable if the recipient had not died. The new
subsection 62B(2) provides that the relevant amount is taken to have been paid to the deceased
person's estate.
36. A recoverable death payment is intended to cover situations where a benefit payment may
inadvertently be made to a person who has died prior to payment. An example of when this may
occur is where a person in receipt of pension payments dies and ComSuper only becomes aware of
the death sometime later.
37. Another situation where this provision may apply is where ComSuper becomes aware that a
person has died but this is after the time that instructions for the deposit have already been provided
to the financial institution. New section 62B of the PNG Act permits such a payment to be made,
and provides that the payment is a recoverable death payment. As with pension payments to
PNG Scheme recipients, these amounts will be made from AusAID's annual administered
appropriation.
38. The new subsection 62B(3) provides that a recoverable death payment that is paid under new
subsection 62B(1) is a debt due to the Commonwealth and may be recovered by the CEO of
ComSuper, on behalf of the Commonwealth, in a court of competent jurisdiction. The new
subsection 62B(3) also incorporates a note regarding the duty to pursue recovery of a debt under
section 47 of the FMA Act.
39. Section 47 of the FMA Act provides that the Chief Executive of an agency must pursue
recovery of debts due to the Commonwealth for which they are responsible. New subsection
62B(3) does not prevent the Chief Executive from pursuing recovery methods outside those
specified in new subsections 62B(3) or choosing to not recover the debt under the circumstances
allowable under section 47 of the FMA Act. For example, new subsection 62B(3) does not
preclude a voluntary arrangement or agreement being put in place to repay a debt that is a
recoverable death payment.
Reports about Recoverable Death Payments
40. The new section 62C deals with the reporting of recoverable death payments and ensures that
reporting of these payments is done in a way that promotes transparency and accountability.
41. The new section 62C provides the reporting requirements for payments made under
subsection 62B(1). New subsection 62C(1) provides that, during the applicable publication period,
the CEO of ComSuper is to publish a report on the number of recoverable death payments made,
when known that they have been made, and the total amount of those payments, in respect of a
reporting period. The report is to be published in a manner that the CEO of ComSuper considers
appropriate.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 7
42. However, a report is not required when there have not been any recoverable death payments
made in respect of a reporting period (new subsection 62C(2)).
43. The new subsection 62C(3) provides that a report is not required in relation recoverable
death payment unless, before the report is prepared a ComSuper official is aware of such a payment
being made under subsection 62B(1).
44. The new subsection 62C(4) provides that if a recoverable death payment was made during a
reporting period, but not reported because of the reasons set out in new subsection 62C(3), that it is
to be reported in a later reporting period, as provided under subsection 62C(5).
45. The new subsection 62C(5) sets out the reporting requirements where a recoverable death
payment has to be reported in a later reporting period to the period in which it was made.
46. The new subsection 62C(6) defines `reporting period' for the purposes of new section 62C as
meaning a financial year, or a shorter period if specified in a legislative instrument by the Minister.
Under new subsection 62C(7) the Minister may, by legislative instrument prescribe, a recurring
reporting period for the purposes of paragraph 62C(6)(b).
47. The new subsection 62C(8) defines the `applicable publication period' for a reporting period,
for the purposes of new section 62C, as meaning four months, or a shorter period if the Minister
prescribes a lesser number of months in a legislative instrument, commencing immediately after the
end of the reporting period. Subsection 62C(9) allows the Minister to make a legislative instrument
in relation to an applicable publication period referred to in paragraph 62C(8)(b), prescribing a
number of months.
48. References are made to Minister in new subsections 62C(7) and (8). Under the current AAO
the Minister for Finance and Deregulation has responsibility for those matters under the PNG Act,
insofar as they relate to superannuation and retirement benefits.
49. The four month period is to allow for the CEO of ComSuper to include the report in the
annual report, if that is preferred. The report may also be published on ComSuper's website or in
another accessible format, to ensure that the use of the recoverable payment provisions is
transparent and accountable. This seeks to ensure that overpayments will be addressed, and
minimised.
50. New subsection 62C(10) defines `ComSuper official' for the purposes of new section 62C as
meaning an official who is in or is part of ComSuper.
Amending the Public Accounts and Audit Committee Act 1951
Updating definitions to provide neutral terms
51. Items 7 - 11 seek to amend section 4 (definitions) of the PAAC Act to correct a drafting error
to ensure that gender neutral terms appear, as is the contemporary drafting practice. This minor and
mechanistic amendment to the PAAC Act does not seek to alter the effect of the provision.
52. Items 7 - 11 operate jointly to repeal the definitions of "the Chairman" and "the Vice-
Chairman", and insert "Chair" and "Deputy Chair". The inclusion of the word "the" in these
defined terms is no longer required due to section 18B of the Acts Interpretation Act 1901, which
provides that "the" is not required to appear in the titles of the "chair" and "deputy chair".
53. As background, the Audit (Transitional and Miscellaneous) Amendment Act 1997
(ATMA Act) sought to amend this provision to reflect gender neutral terms. However, the terms to
be repealed were misdescribed due to a drafting error, and to this technicality the amendment did
not appear in the substantive provisions of the PAAC Act.
54. Further amendments to the PAAC Act, to insert gender neutral references to "he or she",
were made by the Financial Framework Legislation Amendment Act (No. 1) 2006. The
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 8
amendments proposed in items 7 - 11 would continue this housekeeping work, while ensuring that
gender neutral and up-to-date terms appear for the definitions of the Chair and Deputy Chair of the
Joint Committee of Public Accounts and Audit (JCPAA).
55. As the JCPAA has a key oversight role of the Commonwealth's financial framework, it is
important that its enabling legislation remains reflective of contemporary practices.
Explanatory Memorandum to the Financial Framework Legislation Amendment Bill (No.4) 2012 9