Victorian Bills Explanatory Memoranda Victorian Bills Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
Financial Management and Constitution
Acts Amendment Bill 2017
Introduction Print
EXPLANATORY MEMORANDUM
General
This Bill amends the Financial Management Act 1994 and the Constitution
Act 1975 to further improve the operation of those Acts and makes
consequential amendments to other Acts.
Clause Notes
Part 1--Preliminary
Clause 1 sets out the purposes of the Bill, which are--
• to set out in the Constitution Act 1975 (Constitution
Act) the ongoing basis of the State's public finances,
namely the Public Account, the Consolidated Fund and
the Trust Fund; and
• to reform financial management processes under the
Financial Management Act 1994 (FMA) by (among
other matters): updating and setting out more clearly
the processes through which departments are funded
and appropriations applied; requiring compliance with
Australian accounting standards; providing more clearly
for receipt of funds from other jurisdictions, usually
the Commonwealth; providing more fully for reporting
periods which are not a financial year; specifying the
responsibilities of key departmental officers; and
renaming the Victorian Government Purchasing Board
as the Victorian Government Procurement Board; and
• to make consequential amendments to other Acts.
581253 1 BILL LA INTRODUCTION 28/11/2017
Clause 2 provides that certain clauses of the Bill will come into operation
on 1 July 2018, while the remaining clauses will come into
operation on 1 July 2019.
Almost all of the provisions amending Part 6 (Budget
management) of the FMA will come into operation on 1 July
2019, as will the associated amendments to the Constitution Act,
and amendments to other sections of the FMA which operate in
conjunction with the provisions of Part 6.
This later commencement will enable the 2019-20 State Budget
to be prepared on a basis consistent with the Bill. This is not
possible for the 2018-19 State Budget, as preparation for that
Budget will be well under way, and possibly completed, before
the Bill is enacted.
Having provisions commence uniformly at the start of a financial
year minimises transitional matters for entities affected by the
amendments, while the 7 months or so between the introduction
of the Bill into Parliament and the operational start of those
provisions commencing on 1 July 2018 allows sufficient
preparation time for entities.
Part 2--Financial Management Act 1994
Clause 3 inserts some additional definitions into the FMA, amends others,
and removes some that are no longer required.
In particular, the substituted definition of public body removes
the current reference to a "public statutory authority", a term for
which no Australian legislature or court has established a precise
meaning.
Instead, the FMA will define a public body as comprising all
bodies corporate which are a public entity or a special body
or an Administrative Office as defined under the Public
Administration Act 2004. (The only Administrative Office
which is a body corporate is the Environment Protection
Authority.)
A public entity within the meaning of the Public Administration
Act 2004 includes a company established under the Corporations
Act 2001 of the Commonwealth (Corporations Act), if is wholly
owned by the State or performs a public function on behalf of
the State and is a body to which a Minister or the Governor in
Council could appoint at least one-half of the board.
2
Such a company will be subject to financial accounting and
reporting requirements of the Corporations Act. Section 109
of the Constitution of the Commonwealth states that "when a
law of a State is inconsistent with a law of the Commonwealth,
the latter shall prevail, and the former shall, to the extent of
the inconsistency, be invalid". Therefore any provisions of
the FMA inconsistent with the Corporations Act, or with any
other Commonwealth legislation, will not apply, to the extent
of the inconsistency, to a public body that is a Corporations Act
company.
However, section 5E of the Corporations Act explicitly
provides that it "is not intended to exclude or limit the concurrent
operation of any law of a State or Territory". Therefore, a public
body which is a Corporations Act company will be required to
comply with the FMA, and with subordinate legislation under
it, to the extent that doing so does not require the company to
contravene a specific provision of the Corporations Act.
Restricting the definition of public body in the FMA to bodies
corporate, each of which is a public entity or a special body
or an Administrative Office as defined under the Public
Administration Act 2004, would exclude certain entities which
under current definitions are considered, or specifically stated,
to be subject to the FMA. Such entities are unincorporated,
or are in categories of entity excluded from the definition of
public entity, such as an exempt body, or are bodies specified
in section 16(1) of the Public Administration Act 2004, and
therefore but for the amendment to the definition of department
made by this clause would continue to be treated as departments
for the purposes of the FMA.
Some of those entities previously considered to be either
a department or public body under the FMA are therefore
specifically included in the definition of public body, either
by name or by category.
However, not all entities in these categories have been brought
within the definition of public body. This clause also inserts a
new subsection (3) into section 3 of the FMA which provides
that an unincorporated entity which is controlled by the State,
but is not a department and does not come within the new
definition of a public body, and is not required by Australian
accounting standards to be treated as part of a public body, is
to be treated for the purposes of the FMA (e.g. with respect to
3
budgeting, financial reporting and procurement) as part of
the department whose Ministers include the Minister who
has responsibility for the unincorporated entity.
In addition, new subsection (2) of section 3 of the FMA inserted
by this clause provides that the Minister administering section 3
may include or exclude other entities as public bodies through a
notice published in the Government Gazette. Such a notice will
be disallowable by either House of Parliament, as discussed in
the notes to clause 7.
This clause also repeals the definition of financial year.
Issues relating to this are discussed in the notes to clause 5.
Clause 4 inserts a new subsection (2) into section 5 of the FMA which
provides that a person who is not a Minister may be declared by
the Governor in Council to be the "relevant Minister" in relation
to a public body, or in relation to another entity for the purposes
of a specified provision of the FMA which applies to that entity.
This new section 5(2) will operate in conjunction with new
section 28(2) inserted by clause 24 and discussed in the notes
to that clause. For example, should a separate appropriation be
provided in an annual appropriation Act for the purposes of an
entity which is not subject to a Minister's direction or control,
that entity would be a department for the purposes of Part 6
of the FMA. New section 5(2) would enable the Governor in
Council to declare a person (normally the entity's accountable
officer) who is not a Minister to be the relevant Minister for that
entity.
Clause 5 repeals section 6 of the FMA, which currently empowers the
Minister administering that section to declare that a period other
than the 12 months ending on 30 June is the financial year for a
public body or class of public bodies.
This power to change the meaning of the term "financial
year" for the purposes of the FMA can be confusing, because
section 44(6)(d) of the Interpretation of Legislation Act 1984,
supported by common usage in Australia, states that a financial
year is the period of 12 months ending on 30 June, although
that section does also enable that provision to be over-ridden by
another Act.
4
To clarify this position, new section 41 of the FMA inserted
by clause 39 introduces the concept of a reporting period,
which is defined as either a financial year (which will now
mean a financial year as provided by the Interpretation of
Legislation Act 1984), or another period determined by the
Minister administering new section 45B of the FMA inserted
by clause 44. These issues are discussed in more detail in the
notes to clauses 39 and 44.
Clause 6 amends section 8 of the FMA, which empowers the Minister
administering that section to give directions to authorities
and public bodies and specified officers of those entities.
The amendment to section 8 made by clause 6(1) matches
an amendment made to section 3 of the FMA by clause 3(4)
by changing the term "chief finance and accounting officer"
to "chief finance officer", the preferred title for that role.
This amendment is replicated by other clauses which apply
this change to all other instances of "chief finance and
accounting officer" throughout the FMA.
The amendment of section 8(2) and the repeal of section 8(4)
by clause 6(2) and (3) reflect the provisions of new section 53B
inserted by clause 51 and discussed in the notes to that clause,
and the provisions of section 59(3), as amended by clause 64.
These provisions enable the varying (subject to disallowance
by either House of a determination under section 53B(3)
or (4), or a regulation made under section 59(3) as amended
by clause 64) of the otherwise mandatory application of
Australian Accounting Standards under new section 53B.
The first amendment made by clause 6(4) deletes the words
"in the Trust Fund" which follow the words "Trust Account"
in section 8(5) of the FMA. The definition of Trust Account
inserted in section 3 of the FMA by clause 3(1) refers to the
definition of Trust Account inserted in section 5 of the
Constitution Act by clause 68(3). This definition specifies
that each Trust Account is an account established in the Trust
Fund, and so makes it unnecessary for the words "in the Trust
Fund" to continue to be included in section 8(5).
The second amendment made by clause 6(4) substitutes
"any other Act" in place of "another Act", for consistency
throughout the FMA, as amended by this Bill.
5
Clause 7 inserts new sections 8A and 8B in the FMA. New section 8A
empowers the Minister administering that section to determine
by notice published in the Government Gazette that a provision
of the FMA, other than a provision of Part 3, 4 or 6 of the FMA,
or a regulation made under section 59 of the FMA does or does
not apply to a specified department or public body.
Parts 3, 4 and 6 have been excluded from this power as they
relate to key operational aspects of appropriations to departments
and other entities specifically provided for in an annual
appropriation Act. These fundamental requirements would
only be varied if a significant structural change to the process
of appropriations was being introduced, which would necessarily
require new or amending legislation.
It is not necessary for new section 8A to extend this new power
to directions made under section 8 of the FMA, as power to
exempt specified entities or persons from directions already
exists under section 8(3)(d) of the FMA.
To ensure that Parliament retains control over what would
otherwise constitute a power of the Minister to amend the FMA
or regulations without reference to Parliament, new section 8B
provides that either House may disallow a notice published
under new section 8A, as though the disallowance provisions
under the Subordinate Legislation Act 1994 with respect to
legislative instruments applied to it.
New section 8B also applies to a notice published under new
section 3(2) of the FMA declaring an entity to be or not to be
a public body, as discussed in the notes to clause 3, and to a
notice published under new section 53B(3) or (4) varying the
application of Australian accounting standards, as discussed in
the notes to clause 51.
Clause 8 repeals Part 2 of the FMA. Part 2 comprises sections 9, 10,
11 and 12 of the FMA.
Section 9, other than section 9(3), is in effect moved to the
Constitution Act as new section 91 of that Act by clause 69,
and is discussed in the notes to that clause.
Sections 9(3) and 10 are in effect consolidated with other current
provisions of the FMA into new section 17 inserted by clause 14,
and are discussed in the notes to that clause.
6
Section 11 becomes in effect new section 18A of the FMA
inserted by clause 15.
Section 12 is repealed without being incorporated into new
section 35 inserted by clause 30, and is discussed in the notes
to that clause.
Clause 9 revises the heading to Part 3 of the FMA from "Public Ledger
and Public Account" to "Accounts of departments and investment
of money in the Public Account".
Revision of the heading is necessary because the explicit
reference to a ledger currently in section 13 of the FMA is
removed by the repeal of that section by clause 10, and is
discussed in the notes to that clause.
Similarly, the explicit requirements currently in section 14 of the
FMA relating to the Public Account are in effect moved to new
sections 89(1) and 90(1) of the Constitution Act by clause 69,
and are discussed in the notes to that clause. Section 14 of the
FMA is therefore repealed by clause 10.
New section 18 of the FMA inserted by clause 15 provides for
investment of money in the Public Account, and is discussed in
the notes to that clause. As new section 18 is included in Part 3
of the FMA, the new heading to that Part inserted by clause 9
refers directly to such investment.
Clause 10 repeals sections 13 and 14 of the FMA.
With respect to section 13, sections 24 and 25 of the FMA
require the Minister administering those sections to prepare
and transmit to Parliament, respectively, an annual report and
a mid-year report, each of which is required to present fairly
transactions on the Public Account and other detailed financial
information relating to the State.
Complying with this requirement and other provisions of the
FMA is only possible if proper detailed financial records are
maintained and rigorously verified by internal and external audit,
regardless of whether these records are collectively known as
"the Public Ledger". Section 13 is therefore superfluous, as
the processes it mandates are a necessary consequence of other
provisions of the FMA.
7
In any case, while section 13 mandates a ledger, it does not name
it "the Public Ledger". The only places in which that term occurs
in the FMA are the headings to Part 3 and section 13.
The provisions of section 14 are in effect moved to the
Constitution Act by clause 69, as new sections 89(1) and 90(1)
of that Act.
Clause 11 amends section 15(1) to include a reference to one or more ADI
in place of the current wording. ADI is defined by section 38
of the Interpretation of Legislation Act 1984 in the same
terms as the definition of authorised deposit-taking institution
in section 3 of the FMA, and accordingly the latter definition is
repealed by subclause 3(6)(a).
Clause 11(2) inserts new section 15(4) of the FMA which
applies a revised definition of department in section 15 of the
FMA. The same definition is also applied in new section 15A,
as discussed in the notes to clause 12, in Part 4 of the FMA
(which comprises only section 23, in consequence of clauses 17
and 18) by new section 23(5) inserted by clause 18, and in Part 6
of the FMA by new section 28(1) inserted by clause 24.
In the remaining sections of the FMA, the definition of
department in section 3 applies.
The effect of the extension of the definition which applies in
sections 15, 15A and 23 and in Part 6 is that for certain purposes
relating to budget and appropriation management, "department"
includes other entities in respect of which an annual
appropriation Act authorises the Treasurer to issue money from
the Consolidated Fund. In addition to the 7 core departments,
these entities currently are: the departments of the Parliament,
the Victorian Auditor-General's Office (VAGO), Parliamentary
Investigatory Committees, the Parliamentary Budget Office
(PBO) and Court Services Victoria (CSV).
Clause 12 inserts new section 15A into the FMA. New section 15A(1)
establishes that the Treasurer must provide each department,
by transfer from the Public Account into a departmental bank
account, with sufficient money to enable the department to
meet its expenses, liabilities or obligations as they fall due.
8
New section 15A(1) also provides that the department's Working
Account established under section 23 of the FMA, as substituted
by clause 18, is debited with respect to such transfers, unless
there is another Trust Account from which the department is
authorised to make part or all of the payment.
If the department has access to other funds from outside the
Public Account, e.g. if an Act authorises the department to
receive and retain funds which are not required to be paid into
the Public Account, and from which it is authorised to make a
particular payment, the Treasurer's obligation is only to provide
any necessary additional funds from the Public Account to
enable the department to make the payment in full.
While currently the FMA does not specifically require the
Treasurer to ensure that departments are able to meet expenses,
liabilities and obligations as they fall due, any person or entity
owed money by a department under a legally enforceable debt
or other financial obligation may take proceedings against the
department, and if successful, section 26(2) of the Crown
Proceedings Act 1958 appropriates the Consolidated Fund to
the extent necessary to pay the amount of the court judgement.
New section 15A(1) is therefore consistent with the intent of
that provision, namely that departments and other entities
representing the Crown must pay their obligations as they fall
due. It is also consistent with the public sector values set out
in section 7 of the Public Administration Act 2004.
As discussed in the notes to clause 11 with respect to new
section 15(4) inserted by that clause, new section 15A(1)
also applies to the departments of the Parliament, VAGO,
Parliamentary Investigatory Committees, PBO and CSV by
virtue of new section 15A(2).
Clause 13 substitutes section 16 of the FMA. This substitution removes
the ambiguity in the current section which may appear to provide
a discretion that public money collected or received on behalf of
the State or its entities may be paid into either the Public Account
or a departmental bank account outside the Public Account.
The new section requires that such money be paid into the Public
Account, unless required by or under an Act to be paid into an
account outside the Public Account.
9
New sections 89 and 91(2) of the Constitution Act inserted
by clause 69 together further require that money paid into the
Public Account must be credited to the Consolidated Fund,
unless required or authorised by or under an Act to be credited
to a Trust Account.
Clause 14 substitutes section 17 of the FMA. This substitution effectively
repeals the procedures relating to warrants set out in the current
section 17. This repeal is consistent with the effective repeal of
current section 93 of the Constitution Act by the substitution of
that section by clause 69. The reasons for abolition of warrants
are discussed in the notes to clause 69.
The new section 17 consolidates, clarifies and extends provisions
in current sections 9(3), 10 and 29(2)(a)(ii) and (iii) of the FMA
with respect to money received under agreements with other
jurisdictions. In addition to the current references to specific
purpose payments from, or agreements with, the Commonwealth
or a municipal council, the new section 17 extends its application
to an agreement with another State or a Territory or a foreign
government, should the State enter into such an agreement.
New section 17(1)(c) provides that new section 17 applies to
money which is required by or under an Act to be paid into
the Public Account and credited to the Consolidated Fund.
The provisions of new sections 89 and 91(2) of the Constitution
Act inserted by clause 69 require that all money received by the
State and its entities, including money received from another
jurisdiction, must be paid into the Public Account and credited
to the Consolidated Fund, unless required or authorised by or
under an Act to be paid into an account outside the Public
Account, or to be paid into the Public Account and credited to
a Trust Account.
New section 17(4) provides a standing appropriation which
enables money received from another jurisdiction, in accordance
with new section 17(2) and (3), to be either transferred from
the Consolidated Fund to a Trust Account from which payments
may be made in accordance with the agreement with the other
jurisdiction, or paid out of the Public Account into an account
outside the Public Account in accordance with the agreement.
10
Clause 15 substitutes new sections 18 and 18A into the FMA in place of
the current section 18. New section 18 in effect modifies and
extends the provisions of current sections 18 and 21 with respect
to investment of money in the Public Account. In particular,
new section 18(2) and (3) expand on the current sections 18(2)
and 21 by requiring explicitly that interest or earnings from the
investment of money from a Trust Account must be credited to
that Trust Account where there is a specific requirement to do so,
and in all other cases must be credited to the Consolidated Fund.
New section 18(4) provides that the investment of money in
the Public Account does not represent a transaction on either the
Consolidated Fund or any Trust Account. Investment of money
does not amount to applying an appropriation, and therefore
does not amount to a debiting of the Consolidated Fund, or a
debiting of a Trust Account for the purpose of expenditure for a
purpose consistent with the establishment of the Trust Account.
Similarly, the return of an amount of invested principal does not
constitute revenue for the Consolidated Fund or a Trust Account,
although the receipt of interest or other earnings from an
investment does.
New section 18A inserted by clause 15 is a re-statement of
current section 11 of the FMA.
Clause 16 revises the heading to Part 4 of the FMA from "The Trust Fund"
to "Departmental Working Accounts".
Revision of the heading is necessary because current sections 19,
20, 21 and 22 relating to the Trust Fund are repealed by
clause 17.
The only remaining section of Part 4 is section 23, and although
a new section 23 is substituted in place of the current one by
clause 17, both the current section and the new one relate to
departmental Working Accounts, and the heading to Part 4 is
therefore changed to reflect this.
Clause 17 repeals sections 19, 20, 21 and 22 relating to the Trust Fund.
The provisions of sections 19 and 22 are replicated, with some
variations, in new section 93 of the Constitution Act inserted by
clause 69.
11
New sections 66 and 67 of the FMA inserted by clause 66 make
transitional provisions for Trust Accounts existing before the
commencement of this Bill.
Section 20 is repealed without replacement. Should money be
received by the State to be held in trust for investment, it would
be able to be placed in a Trust Account established under new
section 93(1) of the Constitution Act inserted by clause 69,
and invested with an appropriate agency such as Treasury
Corporation of Victoria, the Victorian Funds Management
Corporation or State Trustees Limited in accordance with the
legislation governing each of those entities.
Section 21 is effectively subsumed into new section 18 inserted
by clause 15.
Clause 18 substitutes section 23.
New section 23 varies from the current section in that it requires
the establishment of a Working Account for each department,
under the extended definition of department set out in
section 23(5) and discussed in the notes to clause 11, whereas
the current section requires that a department be nominated by
the Minister administering section 23.
The standing appropriation in current section 23(3), and the
provisions of current section 23(2), which govern the operation
of that standing appropriation, are not replicated in new
section 23, but are effectively replicated in new sections 28A
and 28B inserted by clause 24.
New section 23(3) provides that the balance of a Working
Account may be less than zero. This provision is necessary to
ensure that amounts may be paid out of the Public Account,
and accordingly debited to a department's Working Account, to
meet the department's expenses, liabilities or obligations as they
fall due (as required by new section 15A inserted by clause 12),
before an appropriation is applied and an amount transferred
from the Consolidated Fund into the department's Working
Account in accordance with new sections 28A and 28B inserted
by clause 24.
12
Clause 19 inserts 2 new principles of sound financial management in
section 23D(1) of the FMA. These new principles require that
the systems and procedures of the Government, including its
entities, are directed to achieving effective management of
public resources and best value for money, and ensuring that
their financial management decisions have regard to the
Government's strategic priorities.
However, new section 23D(3) inserted by this clause also
provides that the second new principle relating to strategic
priorities does not apply to entities that are not subject
to Ministerial control or direction, as their operational
independence requires that they undertake their statutory
responsibilities.
Clause 20 inserts new section 23L(3) in the FMA. The effect of this
subsection is to remove the obligation for the Minister
administering section 23L to prepare a budget update if a
pre-election budget update has been released within 3 months
before the budget update is due.
The table in section 27D(3) of the FMA provides that the budget
update is normally due by 15 December each year. The effect
of new section 23L(3) is therefore to remove the obligation
to prepare a budget update if a pre-election budget update is
released on or after 15 September of that year, which is 3 months
before the due date for the budget update.
The inclusion of new section 23L(3) does not preclude the
preparation of a budget update in a year when it is not required,
if the Minister administering the relevant provisions of the FMA
so chooses.
Clause 21 amends section 24 of the FMA, which specifies certain matters
which must be included in the annual financial report of the State
prepared under that section, consequent on other amendments
made by this Bill.
Section 24(2)(d) is repealed, as clause 24 substitutes section 28
of the FMA. The content of current section 28 has effectively
been incorporated into new section 35 which is substituted by
clause 30.
The reference to section 31 of the FMA in section 24(2)(f) is
omitted, as sections 31 and 31A are repealed and effectively
incorporated in new section 30, which is substituted by clause 26.
13
The references to section 32 of the FMA in section 24(2)(g) are
replaced by references to new section 28D, as current section 32
is repealed by clause 27 and its content incorporated in new
section 28D, which is inserted by clause 24.
Consequent on the substitution of new section 35 and
the insertion of 35A by clause 30, new section 24(2)(h) is
substituted, and an additional section 24(2)(ha) inserted, which
provide for the inclusion in the State's annual financial report of,
respectively, details of amounts advanced under new section 35,
and details of amounts appropriated under new section 35A.
New section 24(2)(la) is also inserted, requiring for the first time
the inclusion in the annual financial report of the State of details
of directions in relation to the transfer of money that is not
required for the purposes of a particular Trust Account or is held
in a Trust Account that is being closed. Such directions may be
given under new section 93(7) of the Constitution Act inserted by
clause 69.
Clause 22 substitutes new section 26(2B) and (3A) of the FMA.
Current section 26(2B) and (3A) provide respectively that the
quarterly financial report for the December quarter must include
financial statements for the half-year, and the June quarterly
financial report must include financial statements for the full
year.
The new subsections substituted by clause 22 qualify that
requirement by providing that those financial statements are not
required to be included in the relevant quarterly financial report
if the statements are included respectively in the mid-year
financial report prepared under section 25 of the FMA, or the
annual financial report prepared under section 24 of the FMA.
Clause 23 substitutes 15 December as the due date, in place of the current
date of 15 November in the table to section 27D(3) of the FMA,
by which the quarterly financial report for the September quarter
of each financial year must be prepared under section 26(1) of the
FMA.
This makes the due date for the quarterly financial report for the
September quarter identical to the due date for the budget update,
making it possible for that quarterly financial report and the
budget update to be published together.
14
However, in a financial year in which there is no budget update
as a consequence of new section 23L(3) inserted by clause 20,
it may not be possible for the quarterly financial report for the
September quarter to be published together with the pre-election
budget update, as the data for the September quarter may not be
available by the time at which the pre-election budget update
must be prepared.
Clause 24 substitutes new sections 28, 28A, 28B, 28C, 28D and 28E in
place of current section 28 of the FMA.
Current section 28 has the heading "Appropriation for borrowing
against future appropriation", but as an annual appropriation Act
appropriates amounts in respect of one financial year, and not in
respect of any subsequent financial year, "future appropriation" is
generally a notional concept only.
Usually the annual appropriation Act for a financial year only
receives Royal Assent, and therefore comes into operation, a
few days before the start of that financial year, i.e. a few days
before the end of a financial year into which part of an actual
appropriation for the next financial year could be brought
forward.
Even if current section 28 were to be invoked during those few
days in which there is an operating annual appropriation Act for
the next financial year, section 28 does not operate to reduce any
amount appropriated by that Act for the next financial year.
Current section 28 does not, therefore, meaningfully "bring
forward" any appropriation for a future financial year. Instead,
it provides a mechanism for increasing the amount appropriated
for a particular purpose in respect of a department by an annual
appropriation Act, and so is a means of supplementing the
amounts appropriated by an annual appropriation Act.
Accordingly, it has been consolidated into the new section 35
substituted by clause 30.
New section 28
New section 28 applies to Part 6 of the FMA the revised
definition of department discussed in the notes to clause 10.
The effect of this revised definition is to include within
the scope of Part 6 departments of the Parliament, VAGO,
Parliamentary Investigatory Committees, PBO and CSV, as
15
well as any other entity for which a future annual appropriation
Act may authorise the Treasurer to issue money from the
Consolidated Fund for a specified purpose. Some current
sections of Part 6 apply to departments of the Parliament or
CSV through specific provisions in those sections.
As the departments of the Parliament and CSV have specific
governance provisions set out in various Acts and subordinate
instruments, new section 28 also varies the definition of relevant
Minister with respect to departments of the Parliament and CSV
to ensure that Part 6 operates consistently with those governance
provisions. Should any other entity with special governance
provisions requiring variation to the meaning of "relevant
Minister" come within the definition of department in Part 6
through inclusion in an annual appropriation Act, a declaration
under new section 5(2), as inserted by clause 4, will provide a
means of incorporating that variation in Part 6.
Although the FMA currently has numerous references to
appropriations being applied (e.g. current sections 30(1), 32(1),
33(1) and (3) and 34(1)), nowhere does it or any other Act
specify what application signifies, nor what consequences it has,
nor at what point in time it occurs. New sections 28A and 28B
fill that gap.
New section 28A
New section 28A provides that an amount of an appropriation
under an Act for a particular purpose is applied when the balance
of the Consolidated Fund is reduced by that amount.
New section 28B
New section 28B provides that when an amount of an
appropriation is applied and the balance of the Consolidated Fund
reduced by that amount in accordance with new section 28A, the
amount is to be credited to the Working Account of the relevant
department, unless an Act requires or authorises it to be credited
to another Trust Account (i.e. a Trust Account which is operated
for purposes related to that department, but which is not that
department's Working Account) or to be paid out of the Public
Account into a bank account which is outside the Public Account.
16
New section 28C
New section 28C is effectively a substitute for current section 34
of the FMA, which is repealed by clause 29. New section 28C
provides that even if an amount of an appropriation has been
applied, the Treasurer may determine that part or all of that
amount has not been applied. If the Treasurer so determines,
the amount that has been determined not to have been applied
must be deducted from the department's Working Account and
credited to the Consolidated Fund.
The 2 most likely circumstances under which a Treasurer could
determine that an amount of an applied appropriation is to be
considered not to have been applied, and transferred back into
the Consolidated Fund are, firstly, that on certification of a
department's revenue for a financial year, the Treasurer
determines that the department has not met performance targets
for the year and accordingly has not earned all of the revenue
available to it through appropriations for the provision of outputs.
Secondly, a department's revenue may have been budgeted and
paid, in previous financial years, at a level sufficient to meet
some long-term obligation, such as payments for long-service
leave or investment in fixed assets, but subsequent actuarial
assessments or reprioritisation of government objectives means
that the department will not require all of the amounts "reserved"
in its Working Account for that purpose.
The section requires that a determination by the Treasurer under
this section must be made before finalisation of the department's
financial statements for a financial year if the transactions
consequent on the determination are to be reported in those
financial statements. Otherwise, the determination will be
considered to have been made in respect of the subsequent
financial year and will be reported in the financial statements
for that subsequent financial year.
New section 28D
New section 28D is effectively a substitute for current section 32
of the FMA, which is repealed by clause 27. Current section 32
is referred to as a "carry over" provision, which enables an
amount of unapplied appropriation with respect to a particular
financial year to be available to be applied in the following
financial year if the Minister administering section 32 (currently
17
the Treasurer, who administers the whole of Part 6) so
determines.
New section 28D(1) provides that such a determination may be
made not by the Minister administering the new section but by
the relevant Minister for the department, provided that the
Treasurer consents.
New section 28D(3) establishes in the FMA the policy currently
set out in a subordinate instrument that an amount carried over to
the following financial year, but still not applied with respect to
that financial year, may not be carried over again.
New section 28E
New section 28E provides for payment to be made, through
transfer of an amount between Working Accounts, by one
department to another for goods or services that the second
department provides to the first. This mechanism avoids the
need for departments to transfer cash between their respective
bank accounts.
Clause 25 substitutes section 29 of the FMA.
This new section substantively repeats the provisions of the
current section 29, with the following variations--
• the section no longer refers specifically to a "Schedule"
to an appropriation Act, but instead refers simply to an
"annual appropriation Act", as it is possible that the
form of a future annual appropriation Act may not
include a Schedule; and
• as discussed with respect to section 17 as substituted by
clause 14, the provisions of current section 29(2)(a)(ii)
and (iii) are now reflected in new section 17 and so do
not appear in new section 29.
Both current section 29 and new section 29 enable departments
(including departments of the Parliament, VAGO, Parliamentary
Investigatory Committees, PBO and CSV) to access amounts
received by them from the provision of outputs (for example,
fees for service), or from the proceeds of asset sales, as
though the amounts received had been added to the amounts
appropriated by an annual appropriation Act for, respectively,
provision of outputs or additions to the net asset base of the
department.
18
Such receipts are required by new section 91(2) of the
Constitution Act inserted by clause 69 to be paid into the
Consolidated Fund. For a department to access them, both
current section 29(1) and new section 29(1) require that the
annual appropriation Act include a specific reference, or
"annotation" as it is generally termed, that section 29 applies to
that appropriation in respect of that department. Both sections
also require that there be an agreement between the Treasurer
(who is the Minister administering current section 29) and the
relevant Minister for the department setting out the extent and
conditions of this annotation.
Clause 26 substitutes section 30 of the FMA.
This new section is to be read in conjunction with new section 28
inserted by clause 24. New section 28(1) revises the definition of
department for the purposes of the whole of Part 6 of the FMA
to include any entity, such as a department of the Parliament,
VAGO, Parliamentary Investigatory Committees, PBO or CSV,
for the purposes of which an annual appropriation Act authorises
the Treasurer to issue money from the Consolidated Fund.
New section 28(2) varies the definition of relevant Minister for
the purposes of the whole of Part 6 of the FMA with respect to
departments of the Parliament and CSV, by providing that
"relevant Minister" refers respectively to the presiding officers
of the Parliament within the meaning of the Parliamentary
Administration Act 2005 (acting singly or jointly with respect
to specific departments of the Parliament, as set out in new
section 28), and to the Courts Council acting with the consent of
the Treasurer and the Attorney-General, or to a person declared
under section 5 as amended by clause 4.
The effect of this varied definition is that new section 30
substantively replicates the effects of the current sections 30,
31 and 31A. Accordingly, sections 31 and 31A are repealed by
clause 27.
New section 30 enables the relevant Minister (under the extended
meaning discussed above) to determine, with the consent of the
Treasurer, to transfer an amount that is part of an appropriation
for a particular purpose provided by an annual appropriation
Act to a department administered by the relevant Minister to an
appropriation for another purpose provided by the same annual
appropriation Act for the same department.
19
Clause 27 repeals current sections 31, 31A and 32.
As discussed in the notes to clause 26, the effects of current
sections 31 and 31A are preserved in new section 30 inserted by
that clause, read in conjunction with the section 28 inserted by
clause 24.
As discussed in the notes to clause 24, new section 28D inserted
by that clause is effectively a substitute for current section 32.
Clause 28 substitutes section 33. Current section 33(1) provides that
when part or all of an appropriation set out in Schedule 1 to an
annual appropriation Act is applied, the Consolidated Fund is
appropriated to the extent necessary to enable some or all of the
amount of applied appropriation to be paid in a future financial
year to meet expenses, obligations or arrangements relating to the
purposes for which the amount was appropriated in the Schedule.
New sections 28A and 28B of the FMA, inserted by clause 24,
provide that on application of an amount of an appropriation
under any Act, the amount applied is required to have been
debited from the Consolidated Fund and credited to a
department's Working Account, or if required or authorised
by or under an Act, credited to a Trust Account that is not a
Working Account, or paid from the Public Account to a bank
account outside the Public Account.
Amounts in a Trust Account, including a Working Account, may
be drawn on at any future time to meet expenses, liabilities or
obligations without further debiting of the Consolidated Fund.
These 2 new sections therefore supersede the provisions of
current section 33(1), which is effectively repealed by this clause.
Current section 33(3) is also effectively repealed by clause 28
as it is considered a spent provision, with its sole purpose having
been to ensure that current sections 33(1) and (2) did not apply to
amounts appropriated in financial year 1997-98.
The purpose of current section 33(2) is to ensure that amounts of
appropriation equivalent to the amount expensed for depreciation
of assets are applied, and subsequently drawn on, solely for the
purpose of investment in assets. However, the wording of
current section 33(2) refers to amounts of appropriation applied
in respect of the depreciation of an asset. Under the Victorian
system of accrual appropriations, amounts are not appropriated
with respect to specific expenses of departments, including
20
depreciation of assets, but instead each annual appropriation Act
authorises the Treasurer to apply appropriations as revenue of
departments.
New section 33(3) therefore substitutes, in place of the above
purported restriction in current section 33(2), a restriction on the
use of amounts held in a department's Working Account that
represent the department's "depreciation equivalent" revenue.
The depreciation equivalent revenue arises from the inclusion of
depreciation in the calculation of an entity's operating expenses.
The budget for each department is formed on the basis that the
department's estimated revenue from appropriations will equal
its estimated expenses to be funded from those appropriations.
Many departmental expenses, such as employees' salaries and
payments to suppliers of goods and services, become due and
payable at the time the expense is incurred or within a short time
afterwards. However, depreciation is a non-cash expense which
represents the using-up of the value of the department's assets
over time. Depreciation equivalent revenue is an amount of
revenue equivalent to that depreciation expense which is
"reserved" for the purpose of replacing the asset when it is
obsolete.
Depreciation is distinct from maintenance expense, which relates
to the goods and services necessary to keep an asset in proper
working order during the course of its useful life, not to provide
for its eventual replacement. Maintenance is therefore an
expense which becomes due and payable within a short period
after being incurred.
New section 33(1) provides that section 33 relates only to applied
appropriations for the provision of outputs. There are several
other sources of departmental funding for investment in assets
which are not covered by section 33, such as appropriations for
additions to the department's net asset base, which are provided
separately in annual appropriation Acts (and may be added to
by receipts from asset sales, under an agreement covered by
section 29 of the FMA), and amounts credited under legislation
into a Trust Account from which funds may be debited for
investment in assets.
21
The restriction set by new section 33(3) is that the amount
of applied appropriations for the provision of outputs in a
department's Working Account which may be drawn on for the
purpose of investment in assets in the current financial year must
not exceed the aggregate of appropriation amounts credited in
previous years equivalent to the aggregate depreciation expense
in each of those previous years plus the amount of depreciation
expense recorded by the department for the current year, less the
aggregate total of amounts of depreciation equivalent revenue
which have been drawn in previous financial years for investment
in assets.
New section 33(6) defines closing depreciation equivalent
balance and depreciation equivalent movement which determine
the amount available to the department from this source for the
investment in assets.
New section 33(6) also defines the comprehensive operating
statement of the department. As required by section 40 of the
FMA, the Treasurer provides to Parliament with the annual
appropriation Bills a statement of information in the form of
Budget Papers. As part of this, Budget Paper 5 includes an
estimated comprehensive operating statement for each
department for the Budget year.
This estimated comprehensive operating statement is prepared on
a "portfolio" basis, which means that in addition to financial data
relating to the department itself, it includes financial data relating
to those general government sector entities for which part or all
of whose revenue and expenses are aggregated with those of the
department. In particular, for these entities the department holds
these entities' depreciation equivalents centrally, for allocation
during the Budget process to the Government's highest priorities
for investment in assets by the department.
For the Parliament, Budget Paper 5 includes a single estimated
comprehensive operating statement covering all of the entities
for which provision is made in the Parliament annual
appropriation Act. New section 33(2) therefore provides that
for the purposes of section 33, and in particular the calculation
of depreciation equivalent balance and depreciation expense,
all of the Parliamentary entities are aggregated. This provision
does not preclude the consideration of, and provision of funding
to, distinct asset investment projects for any of these entities.
22
A table of approved major asset investment projects, both new
and ongoing, by each department for the next financial year is
also published as part of the Budget papers. These projects have
been determined by Cabinet as part of the annual Budget process.
New section 33(4) provides that the Treasurer, in consultation
with the relevant Minister for the department, may determine
the maximum amount of the department's accumulated operating
surplus that be deducted from the Working Account and paid
from the Public Account for investment in assets. An operating
surplus arises when a department's operating revenue exceeds its
operating expenses for a financial year.
Such a determination may relate to investment projects
determined by Cabinet through the Budget process, or in some
cases may relate to urgent and unforeseen investments which
become necessary during the course of the financial year.
The amount available to the department under new section 33(3)
and (4) may be reduced in consequence of a determination by
the Treasurer under new section 28C(1), inserted by clause 24,
to reduce the amount of an applied appropriation.
New section 33(5) provides, for the avoidance of doubt, that
amounts of liabilities or obligations incurred by a department
for the provision of assets, such as payments under leases, and
amounts transferred to the relevant entities of a department to
fund their investment in assets, are included in the total of asset
investment for each department.
Clause 29 repeals current section 34 of the FMA. As discussed in the notes
to clause 24, new section 28C effectively replaces the content of
current section 34.
Clause 30 substitutes section 35 and inserts section 35A of the FMA.
New section 35
Clause 24 substitutes section 28, the content of which has
been consolidated into new section 35. However, this
consolidation does not replicate in full all provisions of
current sections 28 and 35.
23
The principal variations between new section 35 and current
sections 28 and 35 are--
• each of current sections 28 and 35 separately authorises
the issuing from the Consolidated Fund during a
financial year of amounts which in total could not
exceed 0.5% of the total amount which the relevant
annual appropriation Act for that financial year
authorised the Treasurer to issue from the Consolidated
Fund. As new section 35 consolidates these 2 separate
provisions, it sets a limit of 1%; and
• current section 28 also set a limit of 3% of the total
amount appropriated by the annual appropriation Act
for the particular department, whereas current section 35
has no such departmental limit. New section 35 also
does not have a departmental limit; and
• current section 28 provides a standing appropriation
for amounts issued from the Consolidated Fund,
whereas current section 35 provides for an advance
from the Public Account. New section 35 provides for
an advance from the Consolidated Fund, but does not
appropriate it, and credits the amount of the advance
to the departmental Working Account.
This is consistent with new section 92 of the
Constitution Act inserted by clause 69, which provides
for appropriation of the Consolidated Fund, but also
provides that money may also be otherwise deducted
from the Consolidated Fund in accordance with an Act.
New section 35 is the only provision in the FMA which
authorises advances from the Consolidated Fund, and
specifies the circumstances and conditions applying to
such advances.
It is therefore not necessary to replicate in this new
section the power in current section 12 of the FMA for
the Minister administering that section to determine the
terms and conditions of advances from the Consolidated
Fund, and so clause 8 repeals section 12 without
replacement; and
24
• current section 28 applies to CSV, but not to a
department of the Parliament, while current section 35
does not apply to either. However, new section 35
will apply to departments of the Parliament, VAGO,
Parliamentary Investigatory Committees, PBO and
CSV; and
• current section 28 requires an Order in Council
published in the Government Gazette, while current
section 35 requires no notification, although current
section 24 of the FMA requires details of advances to
be published in the annual financial report of the State.
Section 24(2)(h), substituted by clause 21, will require
the publication of similar details in respect of advances
made under new section 35; and
• current section 35 ties the timing of advances to the
obtaining of Parliamentary sanction, but does not make
it clear what is intended by "Parliamentary sanction",
as no appropriation is required. New section 35 requires
that an amount advanced under this section from the
Consolidated Fund must be repaid to the Consolidated
Fund, by debiting the department's Working Account,
by no later than the end of the second financial year
following the year in which the advance is made.
Unless a department has another source of revenue from
which an advance could be repaid, it is likely that an
additional appropriation will be required to enable it
to do so. If an advance was made before the end of a
financial year, but after the introduction into Parliament
of the annual appropriation Bill for the next financial
year, that Bill would not include any additional
appropriation. There would therefore be no available
source of revenue from which the department could
repay the advance, unless it reduced its expenditure on
provision of outputs in some way. However, additional
appropriation could be provided in the subsequent
annual appropriation Bill relating to the second financial
year after the one in which the advance was made.
25
New section 35A
New section 35A replicates in the FMA the provisions of
section 3(2) and (3) of the Appropriation (2017-2018)
Act 2017, which in turn replicate provisions which have been
included in each annual appropriation Act since and including
the Act in respect of financial year 1974-75.
These provisions enable departmental appropriations to be
supplemented specifically to meet any shortfall in amounts
available to department to pay salaries and related costs, such
as employer superannuation contributions, arising from
determinations (or other legally enforceable orders) under
Commonwealth workplace relations laws or Acts of the
Victorian Parliament.
The inclusion of section 35A will mean that it will no longer be
necessary for the annual appropriation Acts for each financial
year to include equivalent provisions.
Clause 31 substitutes section 36(1)(a). Current section 36(1)(a) refers to
"Parliamentary sanction" without specifying what is required
to provide such sanction. New section 36(1)(a) continues to
provide for advances to authorities from the Public Account
of amounts sufficient to fund ordinary annual services for one
month without referring to Parliamentary sanction.
This clause also amends section 36(1)(b), which authorises
advances to authorities for specific purposes which may fall
outside the scope of ordinary annual services of government.
Both current and new section 36(1) ensure that funding will be
available to provide ongoing government services for up to one
month should the passage of an annual appropriation Act be
temporarily delayed.
Current section 36(2) is not amended, and continues to require
that advances under section 36(1) must be repaid within the
financial year they are made, unless the Minister administering
section 36 approves otherwise.
Clause 31 also substitutes section 36(3). Current section 36(3)
provides that section 36 applies to CSV, which it would not
otherwise do, as the rest of section 36 makes provision for
advances to authorities and repayment of those advances.
26
CSV is a "public body", not an "authority", for the purposes of
the FMA, as those terms are defined in section 3 of the FMA,
and this position does not change following the amendments to
definitions in section 3 made by clause 3. Section 3 of the FMA
defines authority as being either a department or a prescribed
person or body.
However, section 36 will continue to apply to CSV, and will
now also apply to departments of the Parliament, VAGO,
Parliamentary Investigatory Committees and PBO, by virtue
of the inclusion of those entities, for the purposes of Part 6
of the FMA, within the definition of department in the new
section 28(1) inserted by clause 24.
New section 36(3) provides that the provision of money in
the Public Account to an authority as a temporary advance is
not a transaction on either the Consolidated Fund or any Trust
Account. This is consistent with new section 18(4) inserted by
clause 15 with respect to the investment of money in the Public
Account.
Clause 32 inserts new section 36A in Part 6 of the FMA. New section 36A
provides that an amount may be advanced from a Trust Account
established under section 93(1) of the Constitution Act inserted
by clause 69 whose purposes include the making of such an
advance and that the amount advanced is credited to the
Consolidated Fund.
New section 36A(1) and (2) replace the provisions of current
section 38(1), which is effectively repealed by the substitution
of section 38 by clause 34.
The purpose of new section 36A is to enable the balances of the
Trust Fund to be used to offset any deficit in the Consolidated
Fund that may arise from the application of appropriations.
It is likely that such a deficit will arise on the application of the
$2 billion one-off standing appropriation provided for in new
section 68 of the FMA inserted by clause 66.
The making of such an advance may leave the Trust Account
from which it is made with a balance of less than zero. This is
consistent with new section 93(8) of the Constitution Act inserted
by clause 69, because no transaction on the Public Account is
involved in making such an advance.
27
As these advances do not require drawing cash from the Public
Account, interest is not charged on them.
To facilitate repayment from time to time in part or in full of
any such advance, new section 36A(3) provides a standing
appropriation to enable the amount of the repayment to be
debited from the Consolidated Fund and credited to the Trust
Account.
Clause 33 substitutes section 37(1)(a). New section 37(1)(a) restricts the
issuing of money from the Public Account to an authority or a
public body to enable payments to be made by agreement with
or on account of another government to circumstances in which
the payment cannot be made under new section 17 inserted by
clause 14.
Clause 33 also inserts new section 37(3) and (4) into the FMA.
Current section 37 authorises an advance from the Public
Account if money is required to be paid by the Minister
administering section 37 by agreement with or on account of
another Government, or to or on account of an authority or
public body.
Section 36 differs from section 37 of the FMA, both before and
after the amendments made to each section by clause 31 and
clause 33 respectively, as section 36 applies only to authorities
while section 37 also applies to public bodies.
New section 37(3) provides that any interest payable under
current section 37(2) of the FMA is to be paid into the
Consolidated Fund. This is consistent with current section 9(2)
of the FMA, which under the combined effects of clauses 8 and
69 will effectively become new section 91(2) of the Constitution
Act, as it requires receipts which are not required or authorised
by law to be paid into a Trust Account or an account outside the
Public Account to be paid into the Public Account and credited
to the Consolidated Fund.
New section 37(4) provides that the provision of money in the
Public Account to an authority or public body and its subsequent
repayment are not transactions on either the Consolidated Fund
or any Trust Account. This is consistent with new section 18(4)
inserted by clause 15 with respect to the investment of money in
the Public Account.
28
Clause 34 substitutes section 38. Current section 38 provides that if
there is insufficient money in the Consolidated Fund to meet
appropriations, the Minister administering section 38 may apply
other moneys in the Public Account to meet the appropriations,
and this shall be deemed a temporary advance, to be repaid
immediately on receipt of moneys under current section 39 of
the FMA.
Current section 39, which is substituted by clause 35, empowers
the Governor in Council to authorise the Minister administering
section 39 to arrange a temporary advance if the Minister is of
the opinion that the money in the Consolidated Fund is likely to
be insufficient to meet appropriations, and that money raised
from such a temporary advance is deemed to be legally available
to meet appropriations.
Current section 39 also requires money raised from such a
temporary advance to be credited to a special account in the
Trust Fund, to be issued and applied only to meet appropriations
of the Consolidated Fund, and to be repaid from money received
by the Consolidated Fund during the financial year the advance
was made, or if that is not possible, during a succeeding financial
year. Interest on such a temporary advance is charged at a rate
not exceeding that determined by the Minister administering
section 39 and is paid from the Consolidated Fund, which is
appropriated to the extent necessary.
New section 36A(1) and (2) replace the content of current
section 38(1), which is effectively repealed by its substitution
by clause 34.
New section 38 provides that if there is insufficient money in the
Public Account to make a payment that is authorised to be made
from it, the Minister administering new section 38 may borrow
money and pay it into the Public Account to enable the payment
to be made.
New section 38 also provides that money borrowed under that
section must be repaid as soon as practicable after there are
sufficient funds in the Public Account, and no later than the end
of the following financial year. New section 38(3) provides that
any interest charged on the borrowing is to be debited from the
Consolidated Fund, which is appropriated to the extent necessary,
and paid out of the Public Account.
29
New section 38 of the FMA operates consistently with new
sections 89 and 91(3) of the Constitution Act inserted by
clause 69. New section 89 of the Constitution Act maintains the
Public Account and requires that money required or authorised
under any Act to be credited to or deducted from either the
Consolidated Fund or a Trust Account must be paid into or from
the Public Account, and that any payment into or out of the
Public Account in accordance with this requirement must be
credited to, or debited from, the Consolidated Fund or a Trust
Account.
New section 91(3) of the Constitution Act provides that the
Consolidated Fund may have a balance of less than zero.
The combined effect of these new provisions of the FMA and the
Constitution Act is that--
• the balance of the Public Account, plus any money
invested from the Public Account in accordance with
new section 18 inserted by clause 15, represents the
combined balances of the Consolidated Fund and the
Trust Fund; and
• new section 15A of the FMA inserted by clause 12
requires the Treasurer to pay out of the Public Account,
into a departmental bank account, sufficient money to
enable that department to meet any expense, liability or
obligation as it falls due, with the departmental Working
Account or a Trust Account debited to that extent; and
• as the Consolidated Fund may have a balance of less
than zero, a debit of the Consolidated Fund and
corresponding credit to a Trust Account or the
departmental Working Account to provide funding to
a department may be made if there is appropriation
authority under an Act for it, regardless of the
subsequent balance of the Consolidated Fund; and
• the cash to make the payment must be drawn from the
Public Account in accordance with new section 89 of
the Constitution Act, and if there is insufficient cash in
the Public Account to make the payment, the required
amount of additional cash may be borrowed under new
section 38 of the FMA.
30
Accordingly, under the provisions of new section 38 of the FMA
and the new provisions of the Constitution Act inserted by
clause 69, it is only necessary to arrange a borrowing when the
balance of the Public Account would otherwise be insufficient to
make a payment, not when the balance of the Consolidated Fund
would be, as under current sections 38 and 39 of the FMA.
Clause 35 substitutes section 39 of the FMA. As discussed in the notes
to clause 34, current section 39 is no longer needed, given the
provisions of new section 38 of the FMA and new section 91(3)
of the Constitution Act.
New section 39 provides explicit authority for offsetting
arrangements to operate if money is borrowed from, and other
money invested with, the same entity at the same time with
respect to the Public Account.
New section 39(3) ensures that any offsetting arrangement cannot
operate to the detriment of a Trust Account which is entitled to
receive interest or earnings on the investment of any part of the
balance of that Trust Account.
Clause 36 repeals current section 40(3), which provides that section 40
applies to a department of the Parliament, which it would not
otherwise do, as section 40(1) and (2) apply to departments and
a department of the Parliament is not a department within either
the current definition in section 3 of the FMA, or the new
definition substituted in that section by clause 3.
However, section 40 will continue to apply to a department of
the Parliament by virtue of the inclusion of a department of the
Parliament, as well as VAGO, Parliamentary Investigatory
Committees, PBO and CSV, for the purposes of Part 6 of the
FMA, within the definition of department in the new
section 28(1) made by clause 24.
Clause 37 inserts new section 40DA in the FMA. New section 40DA
provides that the Treasurer must only give an indemnity against
a specific risk to a statutory authority or State company, or to a
person who is a current or past officer of a statutory authority or
State company, if the Treasurer is satisfied either that exceptional
circumstances exist which justify the provision of an indemnity,
or that the entity or person has sought insurance or an indemnity
against that risk from the Victorian Managed Insurance Authority
(VMIA), if eligible to do so, or from an authorised commercial
31
insurer, and that VMIA or the insurer has declined to provide that
insurance or indemnity on reasonable commercial terms, or at all.
VMIA is empowered under section 24 of the Victorian
Managed Insurance Authority Act 1996 (VMIA Act) to
provide insurance to a department or a "participating body", and
under section 25 of that Act to provide indemnity to a current or
former officer of a statutory authority (other than VMIA itself) or
State company.
For many years government policy has been, and continues to be,
that normal commercial risks should be covered through normal
commercial arrangements on normal commercial terms, and
specific State indemnities provided only when such arrangements
are not available.
While indemnities under current sections 40C and 40D are
entirely at the Treasurer's discretion, new section 40DA
now imposes an obligation on an entity or person to test the
availability of commercial insurance or indemnity before
seeking an indemnity from the Treasurer, unless the Treasurer
is satisfied that there are exceptional circumstances.
New section 40DA does not apply to an indemnity under current
section 40E to an owner of goods lent for exhibition, or otherwise
temporarily provided, to the State or an entity of the State, as it
would be inappropriate to require always that such an owner seek
a commercial insurance or indemnity arrangement. However, the
Treasurer retains discretion to request that the owner does this, or
that the entity to which the goods are being lent does so.
Clause 38 amends current section 40F of the FMA to replace the term
"a trust account in the Trust Fund established under section 19"
with "a Trust Account".
The definition of Trust Account inserted in section 3 of the
FMA by clause 3 refers directly to the definition in section 5
of the Constitution Act as inserted by clause 68(3), which
provides that a Trust Account is an account established in the
Trust Fund by or under an Act. It is therefore unnecessary to
specify in section 40F that a Trust Account is "in the Trust
Fund".
32
The reference to section 19 of the FMA is also deleted by this
clause, as section 19 is repealed by clause 17. Trust Accounts
are now established under section 93(1) of the Constitution Act
inserted by clause 69, or by or under another Act.
This clause also inserts a new section 40F(2) requiring that
before the Treasurer requires payment of an amount as a
condition of providing an indemnity, the Treasurer must consult
with the Minister administering section 24(1) of the VMIA Act,
under which that Minister approves insurance premiums charged
by VMIA. Such consultation will facilitate consistency between
the pricing of similar risks under the FMA and under the VMIA
Act.
Clause 39 inserts new sections 41 and 41A into the FMA. New section 41
inserts into Part 7 of the FMA a definition of independent public
body which comprises certain bodies which, because of their
investigatory nature or the separation of powers, have operational
independence from Ministers, including any Minister
administering a section of the Act establishing such a body.
New section 41 also defines reporting period for a department
or public body for the purposes of section 45 of the FMA,
which clause 43 amends to adopt that term. This adoption is
made by reference to the power of the Minister administering
new section 45B, which is inserted by clause 44, to vary the
reporting period for a department or public body. If not varied
by that Minister, the reporting period is a financial year within
the meaning of the Interpretation of Legislation Act 1984
(i.e. a period of 12 months ending at midnight on 30 June).
New section 41 also includes definitions of responsible body
and responsible Minister with respect to governance of and
accountability for financial reporting by a department or public
body. Since 1 July 2016 these definitions have been set out in
the Standing Directions of the Minister for Finance issued under
section 8 of the FMA, which are mandatory for departments and
public bodies, except to the extent of specific exclusion or
exemptions approved by the Minister.
Clause 39 also inserts new section 41A into the FMA, which
specifies the responsibilities of a "responsible body" within the
meaning of new section 41. These responsibilities have also been
set out in the Standing Directions of the Minister for Finance
since 1 July 2016.
33
New section 41A(2) imposes a requirement on the responsible
body of a department or public body to further in a financially
efficient and effective manner the objectives and functions of
the Government of the State.
However, new section 41A(3) exempts from this requirement
each independent public body defined by new section 41, also
because of their operational independence and the separation of
powers. These bodies, as with all other departments and bodies,
remain subject to the requirement to further in a financially
efficient and effective manner the purpose and objectives of any
Act that is relevant to them.
Clause 40 inserts new section 42(3) and (4) into the FMA. Section 42
currently requires that each department and public body have
an "accountable officer", and specifies that that position is held
by the department head of a department (as employed by the
Premier under section 12(2) of the Public Administration
Act 2004) or the chief executive officer (by whatever name
called) in the case of a public body.
New section 42(3) provides that the accountable officer of an
entity which is a department or public body is responsible for
the entity's financial management, financial performance and
financial sustainability to the entity's responsible body and
responsible Minister and to the Secretary of DTF (if the entity is
a department) or, if the entity is a public body, any department
head with respect to whom the entity is a relevant public entity.
New section 42(4) specifies certain duties of each accountable
officer with respect to management of and accountability for the
use of public resources.
The provisions of new section 42(3) and (4) have also been set
out in the Standing Directions of the Minister for Finance since
1 July 2016.
Clause 41 inserts a new heading to section 43 of the FMA and makes
complementary amendments to current section 43(1) and (2).
The clause also inserts a new section 43(3) into the FMA.
The amendments to the heading and to current sections 43(1)
and (2) match an amendment made to section 3 of the FMA by
clause 3(4) by changing the term "chief finance and accounting
officer" to "chief finance officer", the preferred title for that role.
34
Section 43(1) currently requires that the accountable officer
of each entity that is a department or public body designate a
position of chief finance officer (as the title of that position
will become after the amendment discussed above) and also,
in respect of each of 2 specific duties, designate a person to
undertake that duty. Nothing in the FMA, or any other Act,
precludes the same person undertaking 2, or all 3, of these roles.
However, given the responsibilities of the accountable officer
and chief finance officer specified in the provisions inserted in
the FMA by clauses 39, 40 and 41, it is not necessary that the
FMA specifically require the accountable officer to designate
persons to undertake particular tasks, as ensuring that those
tasks are performed is part of the accountable officer's general
responsibilities. Accordingly, current section 43(1)(b) and (c)
are repealed.
Section 43(2) currently specifies that the chief finance officer
(as the title of that position will become after the amendment
discussed above) of the entity is responsible to the accountable
officer of the entity for the maintenance of proper accounting
records and systems and other records.
New section 43(3) provides that the chief finance officer of a
department or public body is responsible for that entity's financial
management, financial performance and financial sustainability
to the entity's responsible body and responsible Minister and
to the Secretary of DTF (if the entity is a department) or, if the
entity is a public body, to any department head with respect to
whom the entity is a relevant public entity.
The provisions of new section 43(3) have also been set out in
the Standing Directions of the Minister for Finance since 1 July
2016.
Clause 42 substitutes section 44A and inserts new section 44AB.
While new section 44A relates to the same subject matter as the
current section, it expands the responsibilities of the accountable
officer and also extends them from the accountable officer of a
public body to the accountable officer of a department, requiring
that the accountable officer of an entity that is a department
or public body must provide information promptly to the
responsible body or responsible Minister of the entity or the
Secretary of DTF if the information has been requested or the
35
accountable officer considers that one or more of those persons
should be aware of it.
New section 44A also requires the accountable officer of a public
body to provide information promptly to any department head
with respect to whom the entity is a relevant public entity if the
information has been requested or the accountable officer
considers that that department head should be aware of it.
New section 44AB requires the chief finance officer of a public
body to provide the chief finance officer of any department
with respect to the department head of which the public body
is a relevant public entity with details of operational risks of the
public body which may have a material impact on the financial
position or performance of the State, and with any related
information subsequently requested by that chief finance officer
of that department. New section 44AB also requires that the
chief finance officer of that department provide the information
promptly to the Secretary of DTF.
The provisions of new sections 44A and 44AB have also been set
out in the Standing Directions of the Minister for Finance since
1 July 2016.
Clause 43 amends current section 45 to replace references to "financial
year" with "reporting period", as discussed in the notes to
clause 5.
Current section 45(4) provides that the financial statements of an
Administrative Office (other than the Environment Protection
Authority) must be incorporated in and consolidated with the
financial statements of the department in relation to which the
Administrative Office was established.
New section 3(3) inserted by clause 3 provides that an
unincorporated entity, other than a department or public body,
controlled by the State (which would include an unincorporated
Administrative Office) is to be taken to form part of a department
if the relevant Minister of that department also administers the
entity.
The only incorporated Administrative Office is the Environment
Protection Authority, which is a public entity and therefore a
public body. Every other Administrative Office, unless specified
as a public body by or under section 3, will be part of a
department, and its financial statements therefore consolidated
36
into those of the department. Given this, there is no need for
section 45(4) and accordingly it is repealed.
Clause 44 inserts new sections 45A and 45B into the FMA.
Both of these new sections relate to the power of the Minister
administering current section 6 of the FMA to vary the financial
year for a public body. Current section 6 is repealed by clause 5.
As also discussed in the notes to clauses 5 and 39, the term
"reporting period" is now adopted throughout the FMA in place
of the former use of the term "financial year", which is now
restricted to mean a period of 12 months ending at midnight on
30 June, as provided by section 44(6)(d) of the Interpretation
of Legislation Act 1984.
The FMA currently makes no specific provision for the
preparation of the financial statements and report of operations
of an entity which has ceased to exist. As soon as the entity
ceases to exist, which is the time at which, in a practical if not
a formal sense, the operations and financial transactions (other
than necessary corrections and adjustments) of the entity also
cease, there is no longer an accountable officer, chief finance
officer, responsible Minister or responsible body for that entity,
and hence no person or body with responsibility for the report
of operations and financial statements.
New section 45A fills this gap by assigning responsibility for
the preparation and certification of the financial statements and
report of operations of an entity which has ceased to exist to the
comparable persons or bodies with respect to the entity to which
were transferred the functions of the entity which has ceased to
exist.
If the functions have ceased to be undertaken at all, responsibility
is transferred to persons or bodies designated by the Minister
administering new section 45A, after consultation with the
Minister who administered the entity which has ceased to exist,
or if the Minister makes no such designation, to the relevant
Minister or a department head for whom the entity that has
ceased to exist was a relevant public entity under the Public
Administration Act 2004, or if there is no such department
head, to the Minister administering new section 45A or the
Secretary of DTF.
37
New section 45A will therefore ensure that in all cases persons
or bodies can be identified who are responsible for preparing
the final financial statements and final report of operations of an
entity that has ceased to exist.
New section 45B effectively replicates for the Minister
administering this new section the power of the Minister
administering current section 6 to vary the reporting period for a
public body, but also expands this to power to cover departments.
New section 45B(1) and (2) together effectively replicate the
provisions of current section 6(1) with respect to varying the
reporting period for the first or final financial statements and
report of operations for an entity which is a department or
public body, or a class of such entities. In both current
section 6(1) and new section 45B(2) it is explicit that this
power overrides a reporting period specified by or under any
other Act for that entity or class of entities.
New section 45B(6) restricts a reporting period determined for
the first or final financial statements and report of operations
of an entity to being less than 2 years, and the start and finish
of such a reporting period must be, as the case requires, the
time when the entity comes into existence and the end of its
usual reporting period, or the start of its usual reporting period
and the time when it ceases to exist.
New section 45B(3) and (4) together effectively replicate the
provisions of current section 6(2) with respect to varying the
reporting period for the financial statements and report of
operations, not being the first or final such statements and
report, for an entity which is a department or public body, or
a class of such entities. In both current section 6(2) and new
section 45B(4) it is explicit that this power does not override
a reporting period specified by or under any other Act for that
entity or class of entities. If such a reporting period is to be
varied, amendment of the relevant other Act will be required.
New section 45B(5) requires the determination made by the
Minister to specify the day and time on which the reporting
period ends. While it is possible under current section 6 for the
Minister to specify a time, this is not explicitly required, and in
some cases this could lead to doubts as to whether the start or
end of a day was intended.
38
Clause 45 amends current section 46 of the FMA to replace references to
"financial year" with "reporting period", as discussed in the notes
to clause 5.
Clause 46 amends current section 49 of the FMA to replace references to
"financial year" with "reporting period", as discussed in the notes
to clause 5.
Clause 47 amends current section 50 of the FMA to replace references to
"financial year" with "reporting period", as discussed in the notes
to clause 5.
Clause 48 amends current section 52 of the FMA to replace references to
"financial year" with "reporting period", as discussed in the notes
to clause 5.
Clause 49 amends current section 53 of the FMA to replace references to
"financial year" with "reporting period", as discussed in the notes
to clause 5.
Clause 50 amends current section 53A to insert an exclusion from the
operation of the section for any corporation within the meaning
of the Corporations Act which is a public body as defined by
section 3 as amended by clause 3. As they are public bodies,
the corporations excluded by this amendment from the operation
of section 53A are subject to the requirements of section 46 with
respect to tabling of their annual report and audited financial
statements.
This clause also replaces references to "financial year" with
"reporting period", as discussed in the notes to clause 5. It also
replaces the references to "31 October" with references to the
day that is 4 months after the end of the reporting period for the
body, so that the same amount of time will be available for the
preparation, auditing and transmission to Parliament of the body's
annual report as for a body whose reporting period is a financial
year as specified in section 44(6)(d) of the Interpretation of
Legislation Act 1984.
Clause 51 inserts new section 53B into the FMA, requiring that all financial
statements and reports prepared under the FMA must be
consistent with Australian accounting standards issued by the
Australian Accounting Standards Board, as in force at the time
relevant to the preparation of the financial statements or report.
This requirement is currently in force through Standing
39
Directions 2.4.2(c)(i) and 5.2.1(a), given by the Minister for
Finance under section 8 of the FMA.
The question of whether or not an Australian accounting standard
applies to an entity is not solely for the entity concerned to
determine. Any entity which is subject to the FMA and is
required by the FMA to prepare a report or financial statements
must comply without exception (unless determined otherwise
under the other provisions of new section 53B or section 59, as
amended by clause 64) with Australian accounting standards in
preparing that report or those financial statements.
An accounting standard will not apply to that entity only if the
entity is specifically exempted. However, in practice it may be
the case that the operations, assets, liabilities and capital of the
entity, and transactions relating to them, during the reporting
period do not engage with any provision of that accounting
standard. For example, it is likely that the operations and
transactions of most, but certainly not all, departments and public
bodies in Victoria will have no engagement with accounting
standard AASB 141 (Agriculture), and so in practice that
accounting standard can be said not to apply to those entities.
Conversely, accounting standard AASB 124 (Related Party
Disclosures), which first came into operation with respect to
financial reporting for the 2016-17 financial year, requires all
reporting entities, including government entities, to examine
their records and disclose details of related party transactions
and other information. The need to examine their records and
disclose certain information, means that that accounting standard
applies to all entities, even those for which it is determined that
there are no related party transactions to disclose
The Auditor-General (or other auditor, if applicable) of a
particular report or financial statement of an entity must
determine whether or not in preparing that report or statement
the entity has failed in any material way to comply with
Australian accounting standards. In this sense only, the auditor
is the arbiter of whether a particular accounting standard applies
to the entity.
40
New section 53B(2) provides that compliance with Australian
accounting standards does not apply to the extent that it would
prevent the preparation of consolidated financial statements or
reports of 2 or more departments or public bodies, other than
VAGO, in accordance with a determination of the relevant
Minister for those departments or public bodies made under
section 53(1)(b) of the FMA.
New section 53B(3) and (4) provide respectively that the
Minister may determine, by notice published in the Government
Gazette, that all or part of an Australian accounting standard
does not apply to a specified department or public body and
that a specified alternative accounting practice applies to that
department or public body in place of that part of the Australian
accounting standard that has been determined not to apply.
A notice under either new section 53B(3) or (4) is disallowable
by either House of Parliament under new section 8B inserted by
clause 7.
Clause 52 substitutes a new heading to Part 7A of the FMA, which
effectively replaces "supply" with "procurement". The use of
the word "procurement" reflects modern practice and by the
provisions of this Bill is adopted throughout the FMA and related
legislation, such as the Project Development and Construction
Management Act 1994.
Clause 53 amends current section 54AA of the FMA effectively to replace
"supply" with "procurement" with respect to the name of the
policies made by the Victorian Government Procurement Board,
as it will become after the implementation of clause 54.
Clause 54 effectively replaces "supply" with "procurement" with respect to
the name of Victorian Government Procurement Board (VGPB),
as it will become after the implementation of this clause.
Clause 54(1) also removes the reference in the heading to current
section 54A to "establishment of" VGPB, as new section 54A(1)
continues VGPB, rather than establishing it under its new name,
from the commencement date of 1 July 2018 specified in
clause 2.
41
Clause 55 substitutes section 54B, updating the current functions of VGPB
with the following variations--
• "supply" is replaced by "procurement"; and
• the specific references to: management and disposal
of goods; provision of staff training and consultancy
services; use and application of purchasing systems and
electronic training; and a comprehensive data base are
omitted; and
• new references to: consultation with the Minister;
fostering best practice and improving efficiency and
effectiveness; and reviewing compliance and reporting
the findings of such reviews are included.
Clause 56 amends current section 54C of the FMA relating to the powers of
VGPB.
The clause substitutes section 54C(2), effectively removing
the powers of VGPB to: enter into contracts or arrangements
on behalf of itself, departments, specified entities or the State;
advertise, call and award tenders; and consider or approve
requisitions for the procurement of goods and services.
It also updates section 54C(2) and (3) by replacing "supply"
with "procurement" and substituting a power to require
accountable officers to undertake internal audits, rather than
to "audit", to assess compliance with procurement policies and
Ministerial directions.
Clause 57 amends section 54J of the FMA by adding power for VGPB to
delegate its powers (except for specified exceptions, such as
the power of delegation itself) to employees as well as VGPB
members. Although VGPB does not currently have employees,
it is within its powers to do so in the future.
This clause also replaces the reference to "compliance audits"
with "internal audits" and the reference to "supply policies"
with "procurement policies".
42
Clause 58 substitutes section 54K(2) of the FMA. Clause 60 effectively
repeals current section 54M, with the consequence that VGPB
will prepare its report of operations and financial statements
under section 45 of the FMA. New section 54K(2) provides that
VGPB will continue to be required to include in its report of
operations a copy of any direction given to it by the Minister.
Clause 59 amends section 54L of the FMA to substitute "procurement"
in place of "supply" and to require VGPB to consult with the
Minister administering that section before VGPB prepares,
makes, amends or revokes procurement policies. It also removes
the reference in section 54L to the management and disposal of
goods.
Clause 60 substitutes section 54M. This effectively repeals current
section 54M, which requires VGPB, by 30 September each year,
to provide the Minister administering that section with a report of
VGPB's operations for the previous financial year, and requires
that Minister to provide the report to Parliament within 7 sitting
days of receiving it.
The effective repeal of current section 54M does not mean that
VGPB does not have to report to its Minister and to Parliament.
As a body corporate established by an Act, with the right to
appoint all members of its board vested in the Governor in
Council by section 54D of the FMA, and with a public function
to exercise on behalf of the State, VGPB is a public entity
within the meaning of the Public Administration Act 2004
and so is a public body for the purposes of the FMA under the
new definition of public body inserted by clause 3.
VGPB is therefore required to prepare financial statements
and a report of operations under section 45 of the FMA, and the
relevant Minister must table these in Parliament under section 46.
New section 54M inserted in the FMA by this clause
establishes in legislation procurement principles which reflect
the Government and VGPB's operational principles. However,
the principles set out in new section 54M will apply to all
procurement by a department or public body, in contrast to
the procurement policies made by VGPB under section 54L
(as amended by clause 59), which apply only to departments
and specified entities.
43
Clause 61 amends the heading and the substantive provisions of
section 54O of the FMA to empower the Minister administering
that section to obtain a licence over land or premises required
for the purposes of any department or Minister, and so provide
greater flexibility with respect to the types of arrangements
under which departments or Ministers can have access to land
for public purposes.
Currently section 54O only empowers the Minister to obtain
a lease over land for those purposes. This contrasts with the
Minister's powers under section 54P, which authorise the
Minister to grant a lease over, or a licence to enter and use,
any Crown land or building or structure on Crown land, which
is not required for the purposes of any department or Minister,
or for any other public purpose.
Clause 62 amends section 55 by changing the term "chief finance and
accounting officer" to "chief finance officer".
Clause 63 amends section 57 in 3 places by changing the term "chief
finance and accounting officer" to "chief finance officer".
Clause 64 amends section 59(1) of the FMA to add 4 new specific matters
on which the Governor in Council may make regulations, and to
amend one existing matter.
Clause 64(1) inserts new paragraphs (ba), (bb) and (bc) into
section 59(1) which respectively empower the Governor
in Council to make regulations with respect to: financial
performance planning for and performance management of any
entity which is an authority or public body; policies, systems
and procedures for the assessment of, or the provision of advice
relating to, the performance of any such entity by its responsible
body, accountable officer or chief finance officer; and policies,
systems and procedures for the provision of advice or the taking
of corrective or preventative action following an audit of any
such entity under the Audit Act 1994.
Clause 64(2) inserts new paragraph (da) into section 59(1) which
empowers the Governor in Council to make regulations with
respect to compliance with Australian accounting standards by
departments and public bodies.
44
Clause 64(3) substitutes section 59(1)(i). Both the current and
new section 59(1)(i) relate to the provision of goods and services
to the State, but the new provision: extends the scope of
paragraph (i) to include policies as well as systems and
procedures; covers "procurement" instead of "supply"; and
covers procurement by or on behalf of departments or public
bodies as well as the State.
Clause 64(3) also inserts new paragraph (ia) into section 59(1)
to empower the Governor in Council to make regulations with
respect to policies, systems and procedures for the procurement
of any works or public construction by or on behalf of the State
or an entity which is a department or public body.
New paragraph (ia) also makes the exercise of this power
contingent on consultation with the Minister administering Part 4
of the Project Development and Construction Management
Act 1994. That Part of that Act empowers that Minister to
set standards and issue written directions relating to public
construction, provided that such standards or directions are
consistent with other Acts and regulations.
Section 31 of that Act specifically provides that such standards
and directions prevail over any inconsistency with supply
policies (which will be amended to refer to "procurement"
policies) made by VGPB under section 54L of the FMA.
The requirement in new paragraph (ia) for consultation between
Ministers with respect to the making of regulations under the
FMA is intended to minimise the risk of any such inconsistency.
Clause 64(3) also inserts new paragraph (ib) into section 59(1)
to empower the Governor in Council to make regulations with
respect to procedures for the application of appropriations.
Clause 64(4) substitutes "any other Act" in place of "another
Act", for consistency throughout the FMA as amended by this
Bill.
Clause 64(5) updates the terminology of section 59(3) and also
removes the references in that section to specific bodies other
than the Australian Accounting Standards Board. This revision
provides consistency between the regulation-making power in
this section with respect to accounting standards and other
accounting practices and the provisions of new section 53B
inserted by clause 51.
45
New section 53B(5) specifically provides that a determination
made under new section 53B(3) or (4) must be consistent with
regulations made under section 59. The disallowance provisions
of the Subordinate Legislation Act 1994 apply to regulations
made under section 59.
Clause 65 inserts new section 65 which provides that any determination
made under current section 6 before its repeal by clause 5, with
respect to the "financial year" for a department or public body, is
treated as though it was a determination made under section 45B
inserted by clause 44 with respect to the "reporting period" for
that department or public body.
Clause 66 inserts new sections 66, 67 and 68 into the FMA, which are
transitional provisions.
New section 66
New section 66 provides for continuity before and after
commencement of the provisions in the Bill in--
• the balance of the Consolidated Fund; and
• the existence of Trust Accounts, whether created under
the FMA or any other Act; and
• the balances of Trust Accounts, subject to the
adjustments set out in new section 67 with respect to
departmental Working Accounts; and
• the application of Part 7A of the FMA, which relates to
procurement, to bodies or offices within the meaning of
the Public Administration Act 2004; and
• the application of Part 7 of the FMA, which relates to
accountability and reporting, to bodies specified under
paragraph (c) of the current definition of public body in
section 3 of the FMA; and
• the Minister's power to close a Trust Account opened
under either current section 19(1) or current
section 23(1) of the FMA; and
• the preparation of financial statements or reports with
respect to the 2018-19 financial year, or any part of that
financial year, under the FMA in its current form.
46
New section 66(8) provides for the determination of the closing
depreciation equivalent balance of each department at the end of
the 2018-19 financial year by the Treasurer, in consultation with
the relevant Minister in relation to the department. The process
of determination and consultation will enable resolution of any
technical issues concerning the calculation of depreciation of
entities whose assets are covered by each department's
depreciation equivalent balance.
New section 67
New section 67 provides for the continued operation of
provisions of the FMA with respect to some Working Accounts
established under current section 23(1) of the FMA.
The Working Accounts to which this section applies are those
opened for a "nominated department" which is not a department
under the definition of department substituted by clause 3.
The definition of nominated department in current section 23(5)
means that a part of a department, which provides outputs and
receives fees for those outputs, and has been declared by the
Minister to be a nominated department, can have a Working
Account. The definition of department in current section 3 also
includes a body or office specified in section 16(1) of the Public
Administration Act 2004.
Therefore new section 67 does not apply to Working Accounts
opened under either current section 23(1) or new section 23(1)
for departments within the restricted meaning of department
substituted by clause 3, that is, the departments established by an
Order under section 10 of the Public Administration Act 2004.
New section 67 also provides for the continued application of
current section 23(2), (3), (4) and (5) of the FMA to Working
Accounts for "nominated departments" which are not
departments as from 1 July 2019, as though those sections had
not been effectively repealed by the substitution of section 23
by clause 18.
New section 68
New section 68 provides that as soon as a Working Account
for a department (that is, a department established by an Order
under section 10 of the Public Administration Act 2004) is
established under new section 23(1) of the FMA by the Minister
administering new section 93(1) of the Constitution Act,
47
the opening balance of that Working Account must represent
the balance as at 1 July 2019 of a ledger account called the
45000-SAU Inter-Entity Account maintained by the Department
of Treasury and Finance for that department, plus the
department's share of the total of up to $2 billion previously
incurred as long-term expenses by departments but in respect of
which no appropriation of the Consolidated Fund had previously
been applied to provide revenue to meet these liabilities.
An appropriation for an estimated amount of $1915 million as
at 1 July 1998 to cover these long-term expenses had previously
been included in section 4(1) of and Part 2 of Schedule 1 to the
Appropriation (1998/99) Act 1998. However, that
appropriation lapsed unapplied at the end of the 1998-99
financial year and, until now, no similar appropriation has
subsequently been included in any Act.
New section 68(4) appropriates the Consolidated Fund in respect
of the opening balances of the Working Accounts and the
previously unfunded liabilities as at the commencement of
accrual output budgeting.
Clause 67 repeals Schedule 1 to the FMA. That Schedule sets out the
prescribed form of the draft warrant required to be prepared and
signed under current section 17 of the FMA in consequence of
current section 93 of the Constitution Act.
Current section 17 of the FMA is effectively repealed by the
substitution of section 17 by clause 14 and current section 93
of the Constitution Act is effectively repealed by the substitution
of section 93 by clause 69.
Part 3--Constitution Act 1975
Clause 68 inserts 3 new definitions in section 5 of the Constitution Act,
substitutes another, and makes a minor typographical revision
to another.
The substituted definition of Consolidated Fund and the new
definitions of Public Account, Trust Account and Trust Fund
are consequential on the substitution of Divisions 1 and 2 of
Part V of the Constitution Act and the insertion of new
Division 2A into that Part by clause 69.
48
For the first time in any Act, the Trust Fund is specifically
defined as comprising all Trust Accounts, including Working
Accounts established under section 23 of the FMA as substituted
by clause 18.
Clause 69 substitutes Divisions 1 and 2, which comprise new sections 89,
90, 91, and 92, of Part V of the Constitution Act and inserts new
Division 2A consisting of new section 93. Current sections 89,
90, 91, 92, 93 and 94 are effectively repealed.
New section 89
New section 89(1) of the Constitution Act effectively replicates
part of current section 14 of the FMA, which is repealed by
clause 10. New section 89(1) requires the Minister administering
that section to maintain the Public Account, which under the
new definition inserted in section 5 of the Constitution Act by
clause 68 is identified with the Public Account previously opened
and maintained under section 14 of the FMA.
Clause 69 also inserts new section 89(2) and (3) into the
Constitution Act. New section 89(2) provides that if an Act or a
provision made under an Act requires or authorises money to be
paid into, or out of, the Consolidated Fund or a Trust Account,
that money must respectively be paid into, or out of, the Public
Account.
Similarly, new section 89(3) provides that if money is paid into,
or out of, the Public Account under new section 89(2), the same
amount must respectively be credited to, or deducted from, the
Consolidated Fund or the Trust Account, as the case may be.
It has long been accepted financial practice that any inflow of
money into, or outflow of money from, the Public Account must
be mirrored by a transaction on the Consolidated Fund or one or
more Trust Accounts. However, new section 89(2) and (3)
provide explicitly for the first time that this must occur.
These requirements reflect that the Public Account is an actual
bank account (or several accounts), as discussed in the notes to
this clause with respect to new section 90, while the Consolidated
Fund and each Trust Account are not bank accounts, but ledger
records of transactions.
49
Current section 89
Current section 89 of the Constitution Act is effectively repealed
by its substitution by clause 69. Current section 89 relates to
Consolidated Revenue.
Parliament's power to appropriate the Consolidated Revenue is
set out in current section 92 of the Constitution Act, which
clause 69 effectively repeals. New section 92 is discussed in
more detail below.
New section 90
New section 90(1) of the Constitution Act effectively replicates
the part of current section 14 of the FMA which is not replicated
in new section 89(1) of the Constitution Act, namely that the
Public Account must be kept as an account with an ADI, which
under section 38 of the Interpretation of Legislation Act 1984
means an "authorised deposit-taking institution" within the
meaning of the Banking Act 1959 of the Commonwealth.
Although new section 90(1) refers to a single account with
a single institution, section 37(c) of the Interpretation of
Legislation Act 1984 provides that, in the absence of a contrary
intention, words in the singular include the plural, so that it is
consistent with new section 90(1) if the Public Account were
maintained as multiple accounts in one or more institutions.
New section 90(2) provides explicitly that, unless an Act
provides otherwise, the Minister administering that section may,
at any time, open a new account (with an approved deposit-taking
institution as required by new section 90(1)) as part of the Public
Account, and close an existing one.
Current section 90
Current section 90 of the Constitution Act is effectively repealed
by its substitution by clause 69. Current section 90 provides that
"the Consolidated Revenue shall be permanently charged with
all the costs charges and expenses incidental to the collection
management and receipt thereof such costs charges and expenses
being subject nevertheless to be reviewed and audited in such
manner as shall be directed by any Act of the Parliament".
50
Current section 90 of the Constitution Act has been redundant
for many years, possibly because the exact nature, and therefore
the amount, of "the costs charges and expenses incidental to the
collection management and receipt" of revenue was difficult to
determine. Instead, the administrative costs of the State Revenue
Office and its predecessors have been met from the appropriation
for the Department of Treasury and Finance and its predecessors
under an annual appropriation Act.
Also, it is not necessary to make special provision in the
Constitution Act for audit of the expenses of revenue collection,
as such expenses form part of the transactions on the Public
Account and transactions of the Victorian general government
sector which must be included in the annual financial report of
the State, which is prepared under section 24 of the FMA and
audited by the Auditor-General under section 9A of the Audit
Act 1994.
New section 91
New section 91 of the Constitution Act effectively replicates
current section 9 of the FMA, other than section 9(3), with the
whole of current section 9 being repealed by clause 8.
New section 91(1) continues the Consolidated Fund, which under
the new definition inserted in section 5 of the Constitution Act by
clause 68 is identified with the "Consolidated Fund" previously
opened and maintained under current section 9(1) of the FMA.
New section 91(2) effectively replicates current section 9(2)(b)
of the FMA in requiring that all money raised by or on behalf of
or received by the State, or payable under an Act on behalf of the
State to an employee or office-holder under an Act be credited
to the Consolidated Fund, unless the money is required or
authorised by or under an Act to be credited to a Trust Account
or an account outside the Public Account.
Current section 9(2)(a) of the FMA, which requires money
which forms part of the Consolidated Revenue to be credited to
the Consolidated Fund unless an Act provides otherwise, is not
replicated in new section 91(2) of the Constitution Act, nor in
any other section inserted in Part V by clause 69, consistent with
the abolition of the concept of "Consolidated Revenue" by the
effective repeal of current section 89 of the Constitution Act by
this clause.
51
This lack of replication of current section 9(2)(a) of the FMA
does not deprive the State of any revenue, nor change the
recording of it in the State's ledgers, as all money which currently
forms part of the Consolidated Revenue under current section 89
of the Constitution Act will continue to be required under new
section 91(2) of the Constitution Act to be credited to the
Consolidated Fund, although it will remain possible for new
legislation to change this requirement, should Parliament so
determine with respect to certain money raised by the State.
New section 91(2) of the Constitution Act operates in
conjunction with new section 89(2) to require that money
credited to the Consolidated Fund, or to a Trust Account in
accordance with new section 91(2)(b)(i), is paid into the Public
Account.
New section 91(3) provides that the Consolidated Fund may
have a balance of less than zero. It has always been possible
for Parliament to authorise, under annual appropriation Acts
or standing appropriations in other Acts, for more money to be
debited from the Consolidated Fund in the course of a financial
year than is credited to it.
While it is possible for the balance of the Consolidated Fund to
be maintained at zero or above through borrowing by the State,
given that money raised on behalf of the State is required to be
credited to the Consolidated Fund under new section 91(2)(a)(i),
this does not change the State's net financial position. However,
section 38 of the FMA substituted by clause 34 authorises the
Minister administering that section to borrow money and pay it
into the Public Account (also crediting the Consolidated Fund in
accordance with new section 91(2)(a)(i) of the Constitution Act),
so that the Public Account does not have a balance of less than
zero. Whether or not overdraft facilities are available on the
Public Account is a contractual matter between the State and the
institution or institutions with which the Public Account is kept.
Current section 91
Current section 91 of the Constitution Act is effectively repealed
by the substitution of section 91 by clause 69. Current section 91
provides that "Her Majesty shall not be entitled to any territorial
casual or other revenues of the Crown (including royalties) from
any source whatsoever accruing to the Crown in right of the State
of Victoria".
52
Together with current section 17 of the Constitution Act and that
part of current section 92 referring to "waste lands of the Crown",
current section 91 represents a compromise reached between the
Victorian Government and the Colonial Office concerning the
Bill that became the Constitution Act 1855 (UK). In summary,
the Imperial Government agreed to hand over control of Crown
lands to the Victorian Government, including the proceeds of the
disposal of those lands, in exchange for the inclusion of a Civil
List in the Constitution Act 1855 (UK).
The Civil List was later abolished, but although the reference to
the Queen not being entitled to other revenues was retained, it is
now only of historical interest. Other States have long since
repealed their equivalent provisions.
New section 92 and current section 92
New section 92 and current section 92 both deal with the
same broad subject matter, namely the power of Parliament to
appropriate--that is, to authorise the spending of--the State's
money. However, new section 92 varies from current section 92
in that: the new section appropriates money from the balance of
the Consolidated Fund, while the current section appropriates
money from the Consolidated Revenue; and the new section
includes some additional specific provisions relating to
appropriation.
Current section 92 is linked directly to current section 89
by section 89 defining Consolidated Revenue as comprising
certain receipts which " ... Parliament has power to appropriate...".
The list of receipts in current section 92 includes taxes, duties,
rates and imposts levied by an Act and receipts from disposal
of waste lands of the Crown. The term "levied by an Act" is
not a restriction in practice, as constitutional tradition under the
Westminster system is that taxation, by whatever name, can
only be imposed by an Act. Also, although specifically
mentioned in current section 89 but not in current section 92,
royalties are considered to form part of Consolidated Revenue.
However, receipts from sales of assets other than "waste lands
of the Crown" do not form part of taxation, and it is therefore
doubtful that current section 92 empowers Parliament to
appropriate them, although such receipts have been the subject
of appropriations in the past.
53
New section 92 puts this issue beyond doubt by providing that
Parliament has power to appropriate all money credited to the
Consolidated Fund under new section 91, which includes all
receipts of the State and its agencies, other than money which
Parliament has already authorised by legislation to be credited
directly to a Trust Account, or paid into an account other than
the Public Account.
Appropriation is ultimately a cash concept, in that it is one form
of control over the spending of money from the Public Account,
with the other form being the conditions imposed on debiting
a Trust Account, which are set by legislation or by the
Minister administering new section 93 of the Constitution Act,
as discussed below. However, appropriations are aligned to
accrual budgeting through the provisions of Part 6 of the FMA,
as amended, which enable amounts in the Consolidated Fund to
be transferred to a Trust Account under an applied appropriation
and then to be debited from that Trust Account and cash paid
out of the Public Account at any subsequent time, which may be
during a financial year subsequent to the one in the appropriation
was applied.
New section 92(1) inserted by clause 69 empowers Parliament
to appropriate the balance of the Consolidated Fund by or under
an Act for the purposes specified in that Act. This new section
effectively replicates current section 92, but with respect to the
Consolidated Fund instead of the Consolidated Revenue.
New section 92(2) inserted by clause 69 explicitly embeds in the
Constitution Act another fundamental constitutional tradition
under the Westminster system that appropriation requires an Act
of Parliament.
New section 92(3) inserted by clause 69 explicitly provides that
nothing can be drawn from the balance of the Consolidated Fund,
whether through appropriation or otherwise, unless authorised by
an Act. As discussed in the notes to clause 30, new section 35 of
the FMA inserted by that clause authorises the debiting of the
Consolidated Fund to make advances to departments without
appropriating the Consolidated Fund.
54
New section 92(4) inserted by clause 69 is intended to remove
doubt regarding whether an appropriation is required to debit
the Consolidated Fund for the purposes of correcting an error.
For example, if an Act provides for money to be credited directly
to a Trust Account, but that money was incorrectly credited to the
Consolidated Fund, new section 92(4) provides explicitly that an
appropriation is not required to debit the Consolidated Fund and
credit the Trust Account to reverse that error.
New section 93
New section 93 of the Constitution Act effectively replicates
current sections 19 and 22 of the FMA relating to the Trust Fund,
with some variations, with those current sections of the FMA
being repealed by clause 17.
The definition of Trust Fund inserted in the Constitution Act by
clause 68 explicitly provides for the first time that the Trust Fund
is the collective name for all Trust Accounts, including Working
Accounts established under new section 23(1) of the FMA.
New section 93(1) effectively replicates current section 19(1)
of the FMA, by authorising the Minister administering the
section to create Trust Accounts and define their purposes.
New section 23 of the FMA substituted by clause 18 requires
the Minister administering new section 93(1) of the Constitution
Act to establish a Trust Account for each department as a
Working Account for that department.
New section 93(2) of the Constitution Act effectively replicates
current section 19(3) of the FMA in providing that the balance of
each Trust Account forms part of the balance of the Trust Fund.
New section 93(3) of the Constitution Act explicitly empowers
the Minister establishing a Trust Account to determine whether
interest or earnings from investment of money from a Trust
Account is to be credited to that Trust Account. This removes
doubt as to whether such a provision could be specified by the
Minister as part of the purposes for which the Trust Account was
established.
55
New section 93(4) of the Constitution Act effectively replicates
current section 22 of the FMA in providing that money in a Trust
Account may only be expended for the purposes for which the
Trust Account was established, whether under new section 93(1)
of the Constitution Act or by or under another Act, or as
authorised by or under any Act.
New section 93(5) of the Constitution Act effectively replicates
current section 19(4) of the FMA in providing that the Minister
administering new section 93(5) may direct that a Trust Account
be closed, and that that direction must be complied with after all
liabilities of the Trust Account have been paid.
New section 93(6) of the Constitution Act provides that the
power under new section 93(5) only applies to Trust Accounts
established under new section 93(1). This means that closing a
Trust Account established by or under another Act can only be
done if there are provisions in an Act for closure of such a Trust
Account. New section 93(7) of the Constitution Act effectively
replicates current section 19(5) of the FMA in providing that the
Minister administering new section 93(7) may direct that money
in a Trust Account which is not needed for the purpose for which
the Trust Account was established or money in a Trust Account
closed under new section 93(5) must be credited to another Trust
Account or to the Consolidated Fund.
New section 93(8) of the Constitution Act explicitly provides that
a Trust Account must not have a balance of less than zero unless
this is explicitly authorised by or under an Act. This removes
doubt as to whether a Trust Account could operate in deficit
without such explicit provision.
New section 93(9) inserted by clause 69 is intended to remove
doubt regarding whether an adjustment to the balance of a Trust
Account to correct an error is a transaction in accordance
with the purpose for which the Trust Account was established.
New section 93(9) provides that such an adjustment is not to be
taken as a transaction on the Trust Account or the Trust Fund.
For example, if an amount was wrongly credited to a particular
Trust Account which should, under an Act, have been credited
to another Trust Account, a reversal of that credit would be
authorised by new section 93(9).
56
Current section 93
Current section 93 of the Constitution Act is effectively repealed
by its substitution by clause 67. Current section 93 provides that
"no part of the Consolidated Fund shall be issued or shall be
made issuable except in pursuance of warrants under the hand of
the Governor directed to the Treasurer of Victoria".
As discussed in the notes to clauses 14 and 67, the substitution of
section 93 of the Constitution Act together with the substitution
of section 17 of the FMA and the repeal of Schedule 1 to the
FMA abolishes the requirement for warrants to be signed by the
Governor and the Auditor-General before money may be drawn
from the Public Account in consequence of an applied
appropriation of the Consolidated Fund.
Warrants do not represent an effective financial control measure.
The first warrant prepared in each financial year covers the
aggregate amount appropriated by the annual appropriation
Act, with another warrant prepared to cover sums that can be
reasonably estimated will be required to be paid from special
appropriations during the financial year. Further warrants may
be required if there is additional unexpected expenditure under
special appropriations, or under annotated appropriations, as
authorised by section 29 of the FMA.
The Commonwealth and other States have already repealed their
equivalent provisions.
Current section 94
The substitution of Divisions 1 and 2 of Part V of the
Constitution Act and the insertion of new Division 2A in that
Part by clause 69 effectively repeals current section 94 without
enacting a new section 94.
Current section 94(1) provides 4 special appropriations for
purposes related to the operations of Parliament and the
Executive Council.
Except for the $2000 for the Clerk of the Parliaments, which is
intended only to be a nominal sum to reflect the status of this
traditional position, these special appropriations are insufficient
to fund more than a small proportion of the aggregate costs of
the annual salaries of the Clerks and the expenses incurred to
operate the Executive Council and the Houses of Parliament.
These aggregate costs are largely funded through the annual
57
appropriation Acts and there is no reason to retain these special
appropriations for no effective purpose.
Current section 94(2) simply provides that amounts shall be
issued under these special appropriations in current section 94(1)
by the Minister administering Part 7 of the FMA. Abolishing the
special appropriations by repealing current section 94(1) removes
any need to issue amounts, and so current section 94(2) is not
replaced.
Part 4--Consequential amendments
Clause 70 makes 3 consequential amendments to the Project Development
and Construction Management Act 1994.
Section 3(1) of that Act currently includes a definition of public
body for the purposes of Parts 3 and 4 of that Act, which is
similar to, but not entirely consistent with, the definition of
public body currently in section 3 of the FMA. The amended
definition inserted by clause 70(1) will directly tie the definition
in the Project Development and Construction Management
Act 1994 to that in the FMA, as amended by clause 3.
This will assist increasing consistency between the policies,
systems and procedures covering the procurement of goods and
services under the FMA and those covering the procurement of
public construction under the Project Development and
Construction Management Act 1994.
Clause 70(2) and (3) substitute "procurement" in place of
"supply" in the heading and text of section 31 of the Project
Development and Construction Management Act 1994.
These amendments also ensure that, as intended, that Act will
remain consistent with the terminology of Part 7A of the FMA.
Clause 71 inserts new paragraph (k) into section 16(1) of the Public
Administration Act 2004, to provide that the chairperson of
VGPB has the powers of a public service body Head under that
Act with respect to VGPB employees. Although VGPB does
not currently have employees, it may do so in the future, and if
that does occur then the employment provisions of the Public
Administration Act 2004 will apply.
Clause 72 substitutes "procurement" in place of "purchasing" in the text
of section 8(a) of the Victorian Industry Participation Policy
Act 2003, thus updating the reference to VGPB.
58
Part 5--Repeal of amending Act
Clause 73 provides that this Bill is repealed on 1 July 2020, one year after
its default commencement on 1 July 2019.
The operation of section 15(1) of the Interpretation of
Legislation Act 1984 means that the repeal of the amending Act
does not affect the ongoing operation of the amendments made
by the Bill.
59