PUBLIC SECTOR FINANCIAL MANAGEMENT

Review of the FMA and CAC Acts

Finance commenced a strategic examination of the robustness of the public sector governance framework, particularly in terms of its future direction, to ensure it meets the requirements of the Parliament.

The Department also reviewed the operational efficiency of the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC Act) resulting in the following changes, and proposed changes, to these pieces of legislation:

• greater clarity and consistency in terminology across the accrual framework through proposed amendments to 80 pieces of legislation. These changes are set out in the Financial Management Legislation Amendment Bill 2001, due for introduction in the Spring 2001 Parliamentary sittings;
  
  
• as part of a Commonwealth-wide process, legislation administered by Finance was harmonised with the Criminal Code Act 1995;
  
  
• the removal of redundant references to statutory marketing authorities in Commonwealth Authorities and Companies Regulations 1997.

Agency Banking

Prior to 1 July 1999, transactional banking services were provided by the Reserve Bank of Australia. Since then FMA Act agencies' transactional banking services have been open to competition. Agencies have been able to choose the service provider that can best meet their business needs in terms of cost and quality of service. The agency banking framework encourages improved cash management procedures and is consistent with the FMA Act devolved management framework. During 2000–01, the private sector banking industry continued to actively compete in tenders for agencies' transactional banking services.

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During 2000–01, 52 agencies indicated to Finance that they either have completed, or intend to complete market testing for transactional banking services by November 2001. Finance assisted agencies in market testing these services by releasing a market testing toolkit, which included a model contract, and by releasing the results of a pre-qualification scheme for banks.

The Australian National Audit Office (ANAO) commenced concurrent performance audits and compliance audits in 2001 examining the banking arrangements of a number of agencies. As the agency with central responsibility for the banking framework, Finance has assisted the ANAO in this work. The audits are due to be finalised in the first half of 2001–02.

Procurement Policy

Finance is responsible for the development and maintenance of the Commonwealth's procurement and competitive tendering and contracting (CTC) policy framework. The Department continued to strengthen its focus on the provision of high quality policy advice and guidance material. This requires Finance to work with industry, Commonwealth departments and agencies and multi-jurisdictional councils. It reflects the environment of devolved responsibility, provided for under the FMA Act, in which Chief Executives are responsible for managing their procurement processes.

In 2000–01, Finance published and distributed Commonwealth procurement circulars and policy guidance on a range of issues, including Best Practice Guidance for Establishment of Consultancy Panels and Standard Access Contract Clauses. The Department also commenced several reviews of its major procurement and CTC policy documents, including the Commonwealth Procurement Guidelines, the Performance Improvement Cycle Guidance for Managers and Competitive Tendering and Contracting—Guidance for Managers. These reviews will update guidance to reflect developments in Government policy and are scheduled for completion in the first half of 2001–02.

Finance also provided a submission and appeared as a witness before the Senate References Committee inquiry 'Accountability to the Senate in Relation to Government Contracts' and provided input to the related ANAO inquiry.

This year, the Department continued to support the Government in achieving its objective of having Commonwealth departments and agencies source at least ten per cent of Government purchases from small and medium-sized enterprises (SMEs). A Finance survey monitoring the Government's achievement against its SME target for the period 1999–2000 indicated that in the order of 27.6 per cent of Government purchases were sourced from SMEs, significantly exceeding the Government's target.

As part of its continuous improvement strategy, Finance commenced a review of the Gazettal Publishing System (GaPS), which provides a public record of contracts entered into by Commonwealth departments and agencies. This review is aimed at ensuring GaPS continues to meet broader stakeholder needs and maintains relevance against emerging and changing demands. Finance expects to complete this in the second half of 2001.

At the international level, Finance has had significant success in a number of arenas. Finance assumed a lead role in the negotiation of a government procurement chapter of the Australia-Singapore free trade agreement. Significant progress has been made towards agreement on a mutually beneficial and liberalising government procurement chapter of this agreement. The Department participated in a capacity building exercise with the Royal Thai Government, providing expert advice in a review of its procurement framework and practices. Finance also contributed to the World Trade Organisation Working Group on Transparency in Government Procurement.

In recognition of this contribution, and of the role Australia can play in providing leadership in information sharing and capacity building, Finance has been nominated to Chair the APEC Government Procurement Experts Group.

GST and Notional Taxes

Having overseen the successful implementation of The New Tax System by Commonwealth agencies, Finance's GST Implementation Unit was decommissioned in October 2000 and replaced with a Notional Taxes team. This team communicates important whole-of-government taxation information to Commonwealth agencies, thereby helping to reduce duplication of effort. In 2000–01 the Notional Taxes team distributed this information through a series of News Sheets to agencies. Finance also administered Agency Pricing Guidelines for changes in the prices of goods and services under The New Tax System, and provided the Australian Tax Office with proof of identity of Commonwealth agencies for their ABN and GST registration.

Finance implemented a new reporting framework that enhances transparency of the Competitive Neutrality (CN) payments system in the Commonwealth Budget, and conducted the first annual survey of Commonwealth agencies' implementation of, and compliance with, CN policy principles. Commonwealth agencies undertaking significant business activities are required to comply with CN policy. The enhancements to the framework during the year ensure that this continues to be done in a transparent manner.

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Management of Discretionary Payments

Finance assisted the Parliamentary Secretary to the Minister of Finance and Administration with special discretionary responsibilities under the FMA Act for the provision of Commonwealth Act of Grace payments and waivers of debts owed to the Commonwealth. In 2000–01, 116 Act of Grace payments valued at $17.4 million and 197 debt waiver cases valued at $55.7 million were reviewed.

The Department also advised the Minister on Natural Disaster Relief Arrangements. Over the last five years, the Commonwealth has provided $384 million in natural disaster relief to the States and Territories. In 2000–01, $117 million was provided for relief directed to natural disasters such as the extensive flooding in central and western Queensland, the central Northern Territory and northern Western Australia.

The Minister issued a new Determination under the Appropriation Act (No.2) 2000–2001, drafted by Finance, giving effect to the Natural Disaster Relief Arrangements. This Determination came into force on 1 July 2001. It was drafted following extensive consultation with the States and Territories, and creates a more streamlined administration of the Natural Disaster Relief Arrangements.

Working with the Department of Prime Minister and Cabinet, the Department of Agriculture, Fisheries and Forestry Australia and the Department of Transport and Regional Services, Finance successfully negotiated relief packages for sugar cane growers and flood-affected NSW farmers during 2000–01. The income support programme under the Sugar Industry Assistance Package totalled $22.5 million, and was paid to 4,057 individual recipients during the year ending 30 June 2001. Centrelink delivered this programme.

Finance also manages the Commonwealth's Natural Disaster Risk Management Studies Programme, which, through the issue of capital grants, encourages local governments to undertake natural disaster risk assessment and damage minimisation studies.

In 2000–01 the Minister approved the funding of 72 risk management studies, totalling $2.1 million. In the programme's first two years of operation, the Commonwealth contributed $4.2 million to 144 projects. A total of $13.1 million has been committed to such studies nationally, with contributions from all levels of government.

Finance is responsible for funding disaster memorials as approved by the Commonwealth. A total of $50,000 was paid to the Childers Memorial Fund for a memorial commemorating the lives lost in the backpacker hostel fire in Childers, Queensland in June 2000. A further $50,000 was paid into a trust fund established to build a memorial to the young Australians who lost their lives in a canyoning accident in Interlaken, Switzerland in July 1999.

Public Works Committee

The Department assisted the Parliamentary Secretary with the formal Parliamentary processes involved in referring several public works projects to the Joint Parliamentary Committee on Public Works, as required by the Public Works Committee Act 1969. This involved coordinating input from nine Commonwealth agencies, in particular working closely with Defence. In its general report in March 2001 the Committee expressed its appreciation for Finance's assistance in facilitating references and expediency motions.

In February 2001, a Finance project referred to the Public Works Committee for consideration was the construction of a new law courts complex in Adelaide, at a total cost of $76.6 million, with a planned completion date of December 2003. In June 2001 the Committee's recommendation that the project proceed was tabled in Parliament.

Property Statutory Responsibilities

Finance advised the Minister regarding his statutory responsibilities under the Lands Acquisition Act 1989 for the acquisition, management and disposal of property. Specific issues in 2000–01 related to property proposals involving native title, applications for minerals exploration in environmentally sensitive areas of Commonwealth land, some acquisitions in parks involving State interests, and compensation for compulsory acquisitions undertaken in the past.