Financial Management Amendment Bill 2003 (No 3)

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Financial Management Amendment Bill 2003 (No 3)

Transcript Of Financial Management Amendment Bill 2003 (No 3)

STANDING COMMITTEE ON PUBLIC ACCOUNTS
Financial Management Amendment Bill 2003 (No 3)
MARCH 2004
Report 10

Committee membership
Mr Brendan Smyth, MLA (Chair) Ms Karin MacDonald, MLA (Deputy Chair) Ms Kerrie Tucker, MLA

Secretariat support

Secretary: Administration:

Ms Stephanie Mikac Mrs Judy Moutia

Contact information

Telephone: (02) 6205 0136 Facsimile: (02) 6205 0432

Email:

[email protected]

Post:

GPO Box 1020 CANBERRA ACT 2601

Website: www.legassembly.act.gov.au/committees

i

Resolution of appointment
The Standing Committee on Public Accounts was appointed by the Legislative Assembly on 11 December 2001 to: (i) examine:
(A) the accounts of the receipts and expenditure of the Australian Capital Territory;
(B) the financial affairs of authorities of the Australian Capital Territory; and
(C) all reports of the Auditor-General which have been presented to the Assembly;
(ii) report to the Assembly, with such comments as it thinks fit, any items or matters in those accounts, statements and reports, or any circumstances connected with them, to which the Committee is of the opinion that the attention of the Assembly should be directed;
(iii) inquire into any question in connection with the public accounts which is referred to it by the Assembly and to report to the Assembly on that question; and
(iv) examine matters relating to economic and business development, small business, tourism, market and regulatory reform, public sector management, taxation and revenue and sustainability.
ii

Terms of reference
To inquire into the Financial Management Amendment Bill 2003 (No 3); and the general questions of the requirements, purpose, structure, limitations, Ministerial and associated obligations relating to the Treasurer’s Advance provisions of the Financial Management Act 1996, considering inter alia views from interested parties in the ACT and the operations of Treasurer’s Advance provisions in other jurisdictions and report to the Legislative assembly no later than 1 April 2004.1
Conduct of the inquiry
The Committee invited selected community and public sector individuals and organisations to lodge submissions to the inquiry. The Committee received responses from a number of Australian jurisdictions’ department’s of Treasury and Auditors-General. A list of responses received is at Appendix A. Subsequently, two public hearings were held. On 17 March 2004, the Committee heard from Mr Ted Quinlan, MLA, Treasurer, Mr Phil Hextell, Director, Accounting Branch, Department of Treasury; and Mrs Tu Pham, Auditor-General, and Mr Bernie Sheville, Director Financial Audits. On 24 March 2004, the Committee heard from Ms Roslyn Dundas, MLA.
1 Legislative Assembly for the ACT, Fifth Assembly, Minutes of Proceedings No 89, Thursday, 12 February 2004, p 1124.
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Table of contents

Committee membership.......................................................................................................i Secretariat support.................................................................................................................i Contact information ..............................................................................................................i Resolution of appointment................................................................................................ ii Terms of reference..............................................................................................................iii Conduct of the inquiry ......................................................................................................iii

SUMMARY OF RECOMMENDATIONS.......................................................................V

1.

INTRODUCTION ...................................................................................................1

2.

BACKGROUND ......................................................................................................1

3.

THE TREASURER’S ADVANCE AND SIMILAR PROVISIONS IN

OTHER AUSTRALIAN JURISDICTIONS .....................................................................5

4.

THE PURPOSE OF THE FINANCIAL MANAGEMENT AMENDMENT

BILL 2003 (NO 3)...................................................................................................................6

5.

OTHER MATTERS ...............................................................................................18

DISSENTING REPORT BY KARIN MACDONALD, MLA TO THE STANDING COMMITTEE ON PUBLIC ACCOUNT’S REPORT NO 10 OF 2004 .......................21

APPENDIX A – WRITTEN SUBMISSIONS RECEIVED BY THE COMMITTEE.24

APPENDIX B – WITNESSES WHO APPEARED BEFORE THE COMMITTEE ....25

APPENDIX C - TREASURER’S ADVANCE AND SIMILAR PROVISIONS IN FINANCIAL LEGISLATION IN AUSTRALIAN AND SELECTED INTERNATIONAL JURISDICTIONS ...........................................................................26

APPENDIX D – LEGAL ADVICE IN RELATION TO THE USE OF THE TREASURER’S ADVANCE FOR CHILD PROTECTION .........................................28

iv

Summary of recommendations
The Committee recommends that:

Recommendation 1
The Legislative Assembly should not consider the Financial Management Amendment Bill 2003 (No 3) until the Government presents its amendments to the Financial Management Act 1996, in relation to the Treasurer’s Advance.

Recommendation 2

The Government’s proposed amendments to the Financial Management Act 1996 in relation to the Treasurer’s advance should:

(a) provide for urgent and unforeseen expenditure, and where there is an error in omission or the understatement of other appropriations;

(b) include the Commonwealth’s definition of urgency;

(c) define expenditure as:

(i)

entering into a contract to make a payment for goods or

services; or

(ii)

entering into a contract to make a payment of a grant or

subsidy; or

(iii) entering into a contract to make a payment for a capital

injection.

(d) provide for the return of ‘unspent’ funds to the Territory’s Banking Account by 30 June each year;

(e) provide that Treasurer’s Advance authorisations be tabled in the Legislative Assembly within 3 sitting days of issue and that this information be presented cumulatively, with a summary of total expenditures tabled at 30 June each year.

Recommendation 3
The Government develop regulations as a matter of priority, for the use of the Treasurer’s Advance.

Recommendation 4
The Government should not circumvent the Estimates process by using the Treasurer’s Advance to make payments for items already included in a supplementary appropriation bill.

v

1. Introduction
1.1. On 26 November 2003, the Financial Management Amendment Bill 2003 (No 3) (the Bill) and accompanying explanatory statement were presented to the Legislative Assembly.2 On 12 February 2004, not withstanding Standing Order 1743, the Legislative Assembly referred the Bill to the Standing Committee on Public Accounts for inquiry. In addition, the inquiry reference includes examining the general questions of the requirements, purpose, structure, limitations, Ministerial and associated obligations relating to the Treasurer’s Advance provisions of the Financial Management Act 1996 (FMA), considering inter alia views from interested parties in the ACT and the operations of Treasurer’s Advance provisions in other jurisdictions.4
2. Background
2.1. In recent years, the use of the Treasurer’s advance has been the subject of scrutiny by the former5 Auditor-General.6 In his Report No 11 of 2001: Financial Audits with Years Ending to 30 June 2001, the Auditor-General recommended that
the FMA provisions relating to the use of the Treasurer’s Advance be reviewed and if necessary modified to remove any uncertainty as to the requirements of Section 18(1)(c ) of the FMA. This could be considered as part of the review of the FMA currently being undertaken by the Department of Treasury; and
the Department of Treasury design and implement an effective system for monitoring compliance with Section 18(1) (c ) of the FMA.7
2 Legislative Assembly for the ACT, Fifth Assembly, Minutes of Proceedings No 82, Wednesday, 26 November 2003, p 1035. 3 Standing Order 174 states that ‘Immediately after a bill has been agreed to in principle a Member may move that the bill be referred to a select or standing committee’. 4 Legislative Assembly for the ACT, Fifth Assembly, Minutes of Proceedings No 89, Thursday, 12 February 2004, p 1124. 5 Mr John A Parkinson. 6 Report No 11 of 2001: Financial Audits with Years Ending to 30 June 2001 and Report No 7 of 2002: Financial Audits with Years Ending to 30 June 2002. 7 Auditor-General’s Report No 11 of 2001: Financial Audits with Years Ending to 30 June 2001, pp 30-31.
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2.2. These recommendations were made after the Auditor-General found that there were instances in relation to the use of the Treasurer’s advance in the 2000-2001 financial year where
expenditure could have been foreseen at the time Appropriation Acts were passed.8
2.3. Further, the Auditor-General commented
The Department of Treasury was involved in preparation and passage of the Appropriation Acts and also with approving the payments from the Treasurer’s Advance. It is therefore probable that Treasury officials, if they had considered the issue, would have reasonably foreseen the need for some of the payments to be made at the time the Appropriation Acts were passed; and
It seems there were no systems in the Department of Treasury, or the agency requesting payment to be met from the Treasurer’s Advance, to monitor compliance with this part of the FMA.9
2.4. The Chief Executive to the Department of Treasury agreed with the Auditor-General that the FMA required clarification and that the Treasurer’s Advance was being looked at as part of the review of the FMA. The Chief Executive also commented that it was not necessarily possible to determine whether a breach of the FMA had occurred due to doubt surrounding the meaning of paragraph 18(1)(c ) of the FMA.10
2.5. Paragraph 18(1)(c ) of the FMA was subsequently amended11 to
remove the requirement that the Treasurer may only authorise expenditure from the Treasurer’s Advance provided the need for that expenditure could not have been foreseen at the time of the passing of any Appropriation Act. The …provision …require[s] that the Treasurer may authorise expenditure from the Treasurer’s Advance provided the need for that expenditure could not have been foreseen at the time of the presentation of the first Appropriation Act for the financial year.12
8 ibid., p 27. 9 ibid., pp 28-29. 10 ibid., p 30. 11 Previous amendment to the FMA in relation to the Treasurer’s Advance was to subsection 18(3) which was ‘recast to remove unnecessary words [to] bring the subsection more closely into line with current drafting practice and update language to reflect a change in terminology’, Statute Law Amendment Act 2001 (No 2), p 230. 12 Financial Management Amendment Bill 2001 (No 4) Explanatory Memorandum circulated by authority of the Treasurer, Mr Ted Quinlan, MLA, p 4.
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AssemblyCommitteeFmaAccountsTreasury