FINANCIAL MANAGEMENT AND ACCOUNTABILITY AMENDMENT REGULATIONS 2010 (NO. 3) (SLI NO 171 OF 2010)

Details on the Financial Management and Accountability Amendment Regulations 2010 (No. 3)

Commencement and Transitional Arrangements

Regulation 1 sets out the name of the Regulations, as made under section 65 of the Financial Management and Accountability Act 1997 (FMA Act).

Regulation 2 states that the Regulations commence on 1 July 2010.

Regulation 3 states that Schedule 1 amends the Financial Management and Accountability Regulations 1997 (the Principal Regulations).

Regulation 4 addresses transitional issues, and preserves the operation of acts done, and instruments made, under the authority of the Principal Regulations, the Financial Management and Accountability Orders 2005 and the Financial Management and Accountability Orders 2008 that were in place, or had savings-provisions apply, before the commencement of Schedule 1.

The reason for including a broad transitional and savings provision is to allow Agencies until 1 July 2011 to adjust their internal procedures, Chief Executive’s Instructions, delegations and related materials, consistent with the updated framework.

Regulation 3 – Definitions

Item [1] – This item omits “agency agreement” from regulation 3 (Definitions). The definition of “agency agreement” was only used in regulation 7 (Commonwealth Procurement Guidelines) and is incorporated into the definition of “arrangement” (refer item [2]).

Item [2] – This item inserts a new definition, “arrangement”, to mean an arrangement, including a contract or agreement, under which public money is payable or may become payable. The definition improves the readability of the Principal Regulations by consolidating matters that were dealt with under the definitions of “agency arrangement” and “Commonwealth contract” (refer items [1] and [3]). The note to the definition clarifies that an arrangement also covers “notional” payments between FMA Act Agencies.

The definition of “arrangement” also provides greater clarity on its coverage by specifically excluding matters that should not be considered under regulation 9 (Approval of spending proposals) or regulation 10 (Arrangements beyond available appropriation). These matters are the:

· engagement of employees;

· appointment of statutory office holders;

· the acquisition of particular property or services (under a general arrangement with the supplier of that property or those services), for the purposes of providing a statutory or employment entitlement; and

· entering into an international agreement governed by international law.

There has never been an intention for the engagement of employees, the appointment of statutory office holders, or international agreements subject to international law, to be treated as 'arrangements' to be approved in accordance with regulations 9 and 10, and the new definition expresses this position on the face of the regulation, in the interests of clarity. There has been some doubt over the extent to which regulations 9 and 10 apply to the provision of statutory or employment entitlements under a general or 'head' arrangement (such as the Executive Vehicle Scheme (EVS)). Specifically, it has not been clear whether the approval process under regulations 9 and 10 applies only to the general arrangement or applies also in relation to each particular service or piece of property (for example, in the case of the EVS, each vehicle) acquired under the general arrangement. The definition of 'arrangement' clarifies that the acquisition of particular property and services (in such circumstances and for such purposes), does not constitute an arrangement for the purposes of the Principal Regulations. Accordingly, the regulation 9 and 10 process does not apply in relation to such acquisitions. The general or 'head' arrangement is, of course, an 'arrangement' for the purposes of the Principal Regulations and will be subject to the regulation 9 and 10 process as required by regulation 8 (Entering into an arrangement) (refer item [11]).

Where there is a specific indemnity associated with, but not directly part of the engagement or appointment of statutory office holders, regulation 10 (Arrangements beyond available appropriation) or regulation 10A (Contingent liabilities) will apply, through the operation of regulation 8 (refer item [11]).

Item [3] – This item omits the definition of “Commonwealth contract” from regulation 3, as the concept is included in the definition of “arrangement” (refer item [2]).

Item [4] – This item substitutes the definition of “spending proposal” to mean a proposal that could lead to entering into an arrangement. This simplified definition of spending proposal improves the readability of the Principal Regulations and is made possible by the definition of “arrangement” (refer item [2]).

Item [5] – This item omits the term “Treasury Chief Executive” from regulation 3, reflecting that the concept was only used in regulation 25A (Treasury Chief Executive may delegate powers). Regulation 25A is deleted as Chief Executives’ delegations are dealt with centrally under revised regulation 26 (Chief Executive may delegate powers) (refer item [33]).

Items [6] and [7] – These two items insert a new exclusion from the definition of “grant” set out in regulation 3A (Meaning of grant). Paragraph 3A(2)(l) reflects that a payment of assistance for the purposes of Australia’s international development assistance program is excluded from the meaning of a grant arrangement. A note is inserted reflecting that the Commonwealth has regard to the definition of official development assistance as defined by the Development Assistance Committee of the Organisation for Economic Cooperation and Development.

Regulation 6 – Chief Executive’s Instructions

Item [10] - This item substitutes regulation 6 (Chief Executive’s Instructions (Act s 52)) to delete paragraphs 6(1)(a), 6(1)(b) and subregulation 6(2).

Paragraphs 6(1)(a) and 6(1)(b) detail the matters on which a Chief Executive of an Agency is authorised to give instructions and the purpose for which such instructions could be given. These paragraphs unnecessarily duplicate the list of matters detailed in paragraphs 65(2)(a) and 65(2)(b) of the FMA Act^{^[1]}. A reference to paragraphs 65(2)(a) and 65(2)(b) of the FMA Act is included in the regulation to assist with referencing.

Subregulation 6(2) previously stated that a Chief Executive is not authorised to issue an instruction that is inconsistent with the FMA Act, the Principal Regulations or with Orders made under the FMA Act. However, due to the creation of a centralised regulation (regulation 26A, Operation of instruments under the Regulations) covering the primacy of the FMA Act, Principal Regulations and the FMA Orders over other instruments provided for in the Principal Regulations, this regulation is no longer required (refer item [33]).

Regulation 7 – Commonwealth Procurement Guidelines and Regulation 7A – Commonwealth Grant Guidelines

Item [11] – This item substitutes regulation 7 (Commonwealth Procurement Guidelines) and regulation 7A (Commonwealth Grant Guidelines) and also moves regulation 13 to regulation 8 (Entering into an arrangement).

Regulation 7 is amended and streamlined through:

· applying the new definition of “arrangement” (refer item [2]);

· the inclusion of Commonwealth Procurement Guidelines publishing requirements in subregulation 7(1), enabling subregulation 7(3) to be deleted;

· the creation of the centralised regulation 26A (refer item [33]), enabling subregulation 7(2) to be deleted; and

· re-numbering regulation 7 to reflect the deletions outlined above.

Regulation 7A is amended and streamlined through:

· the inclusion of Commonwealth Grant Guidelines publishing requirements in subregulation 7A(1), enabling subregulation 7A(3) to be deleted;

· the creation of the centralised regulation 26A (refer item [33]), enabling
subregulation 7A(2) to be deleted; and

· re-numbering regulation 7A to reflect the deletions.

Regulation 8 – Entering into an arrangement

Item [11] also moves matters previously dealt with by regulation 13 to regulation 8. The wording of regulation 8 incorporates the definition of “arrangement” (refer item [2]).

Regulation 8 restricts a person from entering into an arrangement unless a spending proposal has been approved under regulation 9 and, if required, written agreement from the Finance Minister has been provided under regulation 10. Moving the previous regulation 13 to regulation 8 establishes a logical sequence for practitioners, with the obligation to obtain approval under regulation 9 and, if necessary, agreement under regulation 10 contained in regulation 8.

Two notes have been added to regulation 8. The first note indicates that, where a spending proposal has to be agreed under regulation 10, there is no specific requirement that it be agreed before obtaining approval under regulation 9. This is achieved because regulation 10 no longer requires agreement by the Finance Minister (or delegate, where the Finance Minister delegates this power) before an approval is provided under regulation 9 (refer item [15]). The note also recognises the ability of a Chief Executive to determine the order of the regulation 9 and 10 processes, for example through the Chief Executive’s Instructions. The second note clarifies that Chief Executives have the power to enter arrangements, on behalf of the Commonwealth, in relation to the affairs of the Agency (refer to section 44 of the FMA Act^{^[2]}). The note also indicates that some Chief Executives have delegated this power under section 53 of the FMA Act^{^[3]}.

These amendments combined, alleviate the practical difficulty some Agencies had in complying with the timing aspect of the previous requirements where the regulation 9 approver and the person providing the regulation 10 agreement were different.

Regulation 9 – Approval of spending proposals

Items [12], [13] and [14] – These items relate to regulation 9 (Approval of spending proposals). Item [12] amends the heading for regulation 9 from “Approval of spending proposals – principles” to “Approval of spending proposals” to clarify the content of the regulation.

Item [13] inserts “after making reasonable” instead of “after reasonable”. This insertion clarifies the action that is required, that is, “making” reasonable inquiries. Regulation 9 does not require external inquiries to be made where approvers, in the absence of any such inquiries, can satisfy themselves that giving effect to the spending proposal would be a proper use of public money. The primary meaning of 'inquiry' is 'an investigation into a matter'. Accordingly, as a matter of ordinary language regulation 9 simply requires an approver to reasonably investigate whether the proposed expenditure would be a proper use of public money. The reference to 'reasonable inquiries' indicates that there are limits to the extent to which approvers need to satisfy themselves that proposed expenditure is proper.

Regulation 9 does not prescribe the wording an approver must use in approving a spending proposal. However, wording that avoids doubt, such as “I approve this spending proposal”, is considered appropriate in these circumstances to ensure clarity exists that a regulation 9 approval has occurred. Regulation 9 stipulates that an approver can only approve a spending proposal if satisfied that the spending proposal is a proper use of Commonwealth resources with “proper use” having the meaning given by subsection 44(3) of the FMA Act^{^[4]}.

Item [14] amends the existing note to regulation 9 to clarify that “proper use” has the meaning conferred by the FMA Act, which at the time the note commences, is an efficient, effective and ethical use not inconsistent with the policies of the Commonwealth. Item [14] also inserts a new note to recognise that a spending proposal may be approved at any time prior to entering an arrangement, and on occasion, it may be appropriate to approve a spending proposal well in advance of entering into an arrangement. For example, when undertaking tender and grants processes, as it may be difficult to change these processes once they have been initiated and after the potential spending proposal has been identified. The second part to the note clarifies that an approval of a spending proposal indicates an expectation that an arrangement will be entered into.

Note 3 clarifies that approvals may be given subject to conditions.

Regulation 10 – Arrangements beyond available appropriation

Item [15] – This item inserts regulations 10, 10A and 11 in place of previous regulation 10 (Approval of future spending proposals) and regulation 11 (Approval of spending proposals ‑ officials).

Regulation 10 (Arrangements beyond available appropriation) deals with entering into an arrangement that will require appropriation beyond the appropriation currently available to the Agency. Regulation 10 clarifies that, where an Agency has an insufficient appropriation of money to meet expenditure that might become payable under an arrangement, the Finance Minister is required to agree in writing to the expenditure, before the arrangement can be entered into. The Finance Minister may delegate this power under regulation 24 (Finance Minister may delegate powers).

An Agency, in determining whether it has sufficient uncommitted appropriation to meet expenditure, should examine if the amount of appropriation available to the Agency (under an Act or a Bill that is before the Parliament) is not, or will not be, sufficient to meet the expenditure, having regard to all the expected expenditure of the Agency. Further guidance on uncommitted appropriation is contained in the Financial Management and Accountability (Finance Minister to Chief Executives) Delegation 2009.

The wording of regulation 10 no longer requires the Finance Minister (or delegate) to agree under regulation 10, before an approval is provided under regulation 9 . However, a Chief Executive of an Agency has the ability to order the regulation 9 and 10 processes as appropriate, through the Chief Executive’s Instructions. Nonetheless, approval under both regulations 9 and 10 is required before a person can enter an arrangement (refer item [11]).

The note to regulation 10 clarifies that in some circumstances, the Finance Minister’s approval will not be required for contingent liabilities that satisfy the provisions set out in regulation 10A (Contingent liabilities).

Regulation 10A – Contingent liabilities

Subregulation 10A provides that regulation 10 will not apply where the requirements in regulation 10A(1) are met in relation to contingent liabilities (with the exception of loan guarantees, covered separately by regulation 11 (Entering into loan guarantees)). A contingent liability will not trigger a regulation 10 approval requirement if: the person who is entering into an arrangement is satisfied that the contingency event is both remote and if the event did occur, the most probable expenditure it would involve would not be material.

The definitions of “remote” and “material” are defined in subregulations 10A(2) and 10A(3) respectively. An event is remote if there is less than five per cent probability that it will occur. Expenditure is material if it is at least an amount specified by the Finance Minister in a legislative instrument, or if the Finance Minister has not made a legislative instrument, $5,000,000. Agencies retain the flexibility to request from the Finance Minister that an amount of more than $5,000,000 be set in a legislative instrument or, if appropriate, they may elect to set a lower amount, for example, through the Chief Executive’s Instructions.

While there is no requirement for a decision relying upon regulation 10A to be in writing, it would be appropriate for the person relying upon regulation 10A to make a written record. The existing processes under regulations 9, 10 and 12 provide an opportunity for such a decision to be recorded in writing.

Regulation 11 – Entering into loan guarantees

Previous regulation 11 (Approval of spending proposals – officials) is deleted. This regulation was relevant when Parliamentary Secretaries had a status lesser than a Minister. That distinction was changed due to an update of the Ministers of State Act 1952 (and then reflected in the Principal Regulations themselves in 2002).

Regulation 14 is moved to regulation 11 (Entering into loan guarantees) and restructured to improve readability. This regulation restricts a person giving a loan guarantee, so that a loan guarantee on behalf of the Commonwealth can be entered into only when: the spending proposal for the guarantee has been approved under regulation 9, written agreement has been given under regulation 10 (where required), and the Finance Minister has provided written approval for the giving of the guarantee. Regulation 11 also provides that regulation 10A does not apply if the relevant contingent liability is a loan guarantee.

Former Regulation 13 and Former Regulation 14

Item [16] – This item deletes regulations 13 and 14. The function performed by regulation 13 has moved to regulation 8 (refer item [11]). The function performed by regulation 14 is incorporated in regulation 11 (refer item [15]).

Regulation 16A – Guidelines on Fraud

Item [18] – This item substitutes a streamlined regulation 16A (Guidelines on Fraud (Act s 64)) reflecting the creation of a centralised regulation 26A (refer item [33]). Regulation 16A is amended by substituting the words “arrangements for reporting of fraud” with “reporting of fraud”. With the addition of the definition of “arrangement” (refer item [2]), phrases containing “arrangement” used with a different meaning have been replaced (or omitted, refer item [35]) to avoid confusion.

Regulation 22 – Investment of public money

Item [25] – This item substitutes “Finance Minister” for “Minister” in paragraph 22(1)(b). Previously, “Minister” meant “Finance Minister” through the interaction of paragraph 39(10)(a) of the FMA Act (Investment of public money) and paragraph 22(1)(b). However, using “Finance Minister” (as defined in section 5 of the FMA Act)^{^[5]} provides clarity without recourse to paragraph 39(10)(a) of the FMA Act.

Item [26] – This item inserts two new subregulations into regulation 22 which relate to delegations by the Treasurer. These provisions previously existed at regulation 24A but moving them to regulation 22 centralises all references to the Treasurer and the Treasurer’s power to delegate in one regulation and allows for regulation 24A (Treasurer may delegate powers) to be deleted (refer item [33]).

Part 8 – Found property

Item [30] – This item substitutes the heading to Part 8 to “Part 8 Found property”. To improve the readability of the Principal Regulations, Part 8 is divided into two parts, Part 8 deals with found property and Part 8A covers delegations and instruments (refer item [32]).

Part 8A – Delegations and instruments

Item [32] – This item inserts a new heading “Part 8A Delegations and instruments” into the Principal Regulations. This amendment is made to improve the readability of the regulations through allowing several regulations dealing with delegations and instruments to be consolidated (refer item [33]).

Regulation 24 – Finance Minister may delegate powers

Item [33] – This item substitutes existing regulations 24, 24A, 25, 25A and 26 with revised regulations 24 (Finance Minister may delegate powers) and 26 (Chief Executive may delegate powers) and regulation 26A (Operation of instruments under the Regulations).

Subregulation 24(1) is amended to allow the Finance Minister to delegate to an official, by “written” instrument, rather than by a “signed” instrument, the Finance Minister’s powers or functions under the Principal Regulations, except for this power of delegation. The use of the word “written” is consistent with section 62 of the FMA Act^{^[6]}.

Subregulation 24(2) provides that the power of delegation in this regulation can be delegated by the Finance Minister but only in relation to powers or functions under regulations 9 or 10. Through the ability to sub-delegate “powers and functions”, this provision also provides the Finance Minister with the power to sub-delegate the power to issue directions to a sub‑delegate in relation to any sub-delegations that may be issued (ie. the sub-delegate could issue directions in conjunction with delegations). Only the Finance Minister can provide the power to delegate; the person receiving this power cannot provide the power to delegate to another person.

Subregulation 24(3) requires that an official must comply with any directions of the Finance Minister in exercising powers and functions under a delegation. The obligation to comply with any direction given by the Finance Minister would include any directions given to a
sub-delegate relating to the power of sub-delegation under subregulation 24(2). This provision does not allow a sub-delegate to issue directions in a sub-delegation that are inconsistent with any directions received from the Finance Minister in relation to sub‑delegating powers under regulation 24(2).

Subregulation 24(4) clarifies that nothing in this regulation by implication, limits any other power of the Finance Minister to authorise a person to act on behalf of the Finance Minister or any other power of an official to authorise a person to act on behalf of the official.

Regulation 24A is deleted (refer item [26]).

Regulation 25 – Finance Chief Executive may delegate powers and Regulation 25A – Treasury Chief Executive may delegate powers

Regulations 25 (Finance Chief Executive may delegate powers) and 25A (Treasury Chief Executive may delegate powers) are deleted. The function of regulation 25 is incorporated into regulation 26 and the function of regulation 25A is no longer required, as there is no longer a reference to the Treasury Chief Executive in the Regulations (refer item [5]).

Regulation 26 – Chief Executive may delegate powers

Subregulation 26(1) allows a Chief Executive to delegate to an official, by “written” instrument, rather than “signed” instrument, the Chief Executive’s powers or functions under the Principal Regulations, consistent with the terminology employed in section 53 of the FMA Act^{^[7]}. Subregulation 26(1) will also explicitly provide that the power of delegation in this regulation can be delegated. Through the ability to sub-delegate “powers and functions”, this provision would also provide the Chief Executive with the power to sub-delegate the power to issue directions to a sub-delegate in relation to any sub-delegations that may be issued (ie. the sub-delegate could issue directions in conjunction with delegations).

Subregulation 26(2) requires that an official must comply with any directions of the Chief Executive in exercising powers and functions under a delegation. The obligation to comply with any direction given by the Chief Executive would include any directions given to a sub‑delegate relating to the power of sub-delegation under subregulation 26(1). This provision does not allow a sub-delegate to issue directions in a sub-delegation that are inconsistent with any directions received from the Chief Executive in relation to sub‑delegating powers under subregulation 26(1).

Furthermore, in delegating any powers or functions (including the power to delegate) the Chief Executive would generally be expected to adequately consider the capacity of the person receiving the delegation before providing this power. It is expected that the power to delegate would normally be provided to someone at Senior Executive Service level (or equivalent). Only the Chief Executive can provide the power to delegate; the person receiving this power cannot provide the power to delegate to another person.

Subregulation 26(3) clarifies that nothing in this regulation by implication, limits any other power of the Chief Executive to authorise a person to act on behalf of the Chief Executive or any other power of an official to authorise a person to act on behalf of the official.

Regulation 26A is a centralised regulation that reflects the primacy, in terms of legislative instruments, of the FMA Act, Principal Regulations and the FMA Orders over other instruments provided for in the Principal Regulations. Making this a stand-alone regulation allows it to be stated once only in the Principal Regulations and removed from regulations 6 (item [10]), 7 (item [11]), 7A (item [11]) and 16A (item [18]) without derogating from their meaning. Subregulation 26A(2) will also provide a list of potential subordinate legislative instruments.

Consequential Amendments – References to “Arrangement”

Regulation 28 – Modification of Act for prescribed law enforcement agency

Item [35] – This item omits the line “Those Orders allow for special arrangements to be made for the agency” from the note in subregulation 28(3). This sentence is unnecessary as the application of Finance Minister’s Orders to prescribed law enforcement agencies is adequately explained in the first sentence of the note. With the insertion of a definition for “arrangement” (refer item [2]), the deletion of this sentence also assists in achieving consistency in its meaning in the Principal Regulations.

Regulation 28A – Non-application of relevant regulations to operational money

Item [37] – This item updates subregulation 28A(1) (Non-application of relevant regulations to operational money) to reflect the updated numbering of subregulations 7(2), 7A(2) and

16A (2) that results from the consolidation of a number of subregulations with the establishment of regulation 26A (refer item [33]).

Schedule 1 – Prescribed Agencies

Items [39] and [40] – These items omit the phrase “employed under other arrangements” and insert the word “engaged” when prescribing the persons who comprise the Royal Australian Mint and Australian Reward Investment Alliance as Agencies under the FMA Act. With the insertion of a definition for “arrangement” (refer item [2]), phrases containing “arrangement” used with a different meaning have been replaced (or omitted, refer item [35]) in the Principal Regulations to avoid confusion.

Amendment of Regulation headings

Items [8], [9], [17], [20], [31], [36] amend the headings to a number of regulations to include reference to the relevant section of the FMA Act for the purpose of making the Principal Regulations more readable.

Items [19] [21] [22], [24], [27] – [29], [34] amends the headings of a number of regulations by deleting a comma between “Act” and the referenced section of the FMA Act. This is a technical drafting style amendment that has no affect on the operation of the items.

Items [23] and [38] reflect changes in the manner of referring to multiple sections of the FMA Act in the heading to a regulation, by moving a comma and deleting the word ‘and’. This is a technical drafting style amendment that has no affect on the operation of the items.

[2] Section 44, Promoting efficient, effective and ethical use etc. of Commonwealth resources

[3] Section 53, Chief Executive may delegate powers

[4] Section 44, Promoting efficient, effective and ethical use etc. of Commonwealth resources

[6] Section 62, Finance Minister may delegate powers

[7] Section 53, Chief Executive may delegate powers

Commonwealth Numbered Regulations - Explanatory Statements