FINANCIAL MANAGEMENT AMENDMENT BILL 2009

SERIAL NO. 37 

LEGISLATIVE ASSEMBLY OF THE NORTHERN TERRITORY

TREASURER

EXPLANATORY STATEMENT

GENERAL OUTLINE

This Bill amends the Financial Management Act.

The purpose of this Bill is to amend the Financial Management Act to facilitate the revised Commonwealth funding arrangements included in the Intergovernmental Agreement (IGA) on Federal Financial Relations and effect other minor administrative amendments.

The IGA approved by the Council of Australian Governments in November 2008 sets out a new, overarching framework for the financial arrangements between the Commonwealth and the states and territories. Included in the IGA are new payment arrangements for Specific Purpose Payments and National Partnership Agreements whereby from January 2009 payments have been made by the Commonwealth Treasury to state and territory Treasuries for distribution to relevant line agencies. 

A review was undertaken of the Territory’s financial management framework and the associated provisions of the Financial Management Act, to consider the most appropriate means to implement the new receipt and payment arrangements, whilst maintaining a high level of accountability and transparency. 

Consistent with the requirements of the Intergovernmental Agreement and approaches adopted by the jurisdictions, this tied funding from the Commonwealth will be paid into the Central Holding Authority and will be provided to agencies in the form of appropriation. This requires amending the definition of Purpose in the Financial Management Act to explicitly include a new Purpose representing the Commonwealth funding. It also requires the differentiation between increases in appropriation for Territory funded activities and appropriation for “tied” Commonwealth funding arrangement which can only be used for an activity specified in funding agreements.

The differentiation complemented the amendments in the existing provision to increase appropriation.  Under section 19 (Increase or replenishment of Treasurers Advance), appropriation may be increased without requiring a new Appropriation Act but this increase is subject to the lesser of five percent of total appropriations or the amount of excess funds in the CHA. The amendments to this section will allow for the calculation of the five percent rule to exclude the Purpose designated as Commonwealth.

Commonwealth revenue has historically been subject to change between years and within years. In order to manage these variations a new section providing a standing appropriation is established to allow an increase appropriation during the year, in accordance with an increase in a Commonwealth funding agreement. Once an agreement has been reached with the Commonwealth for new and increased funding the Treasurer is required to authorise these increases in appropriation. A new section requires the Treasurer to table a statement of the increase in this type of appropriation in the Legislative Assembly within six sitting days. This adds another level of accountability and transparency, similar to that of current provisions for variations to appropriation (sections 20 and 21). The provision of a standing appropriation is also consistent with that of other jurisdictions that receipt their Commonwealth funding into their equivalent consolidated revenue accounts, namely Victoria and the Australian Capital Territory.

The requirement to amend the Financial Management Act also provided an opportunity to include contemporary changes and other administrative amendments such as inclusion definitions, repealing of redundant sections and the alignment of the reporting requirements with the Fiscal Integrity and Transparency Act.

NOTES ON CLAUSES

Clause 1 Short title

This is the formal clause which provides for the citation of the Bill. The Bill when passed will be cited as the Financial Management Amendment Bill 2009. 

Clause 2 Act Amended 

The Act amends the Financial Management Act

Clause 3 Amendment of section 3 (Interpretation)

Amends section 3 by the inclusion of various definitions. 

The most significant change to this section is to the definition of Purpose. This was specifically to include all purposes currently identified in Appropriation Acts and to include a new Purpose for Commonwealth funding related activities under the IGA. The inclusion of a Purpose for Commonwealth distinguishes between appropriations for Territory funded activities and complements the amendments to section 19(1) and the establishment of a new section 19A (refer Clause 7 and 8 respectively).

The term “Allocation” is now replaced with the term “appropriation”.

Other amendments to this section included contemporary changes and definitions directing to the relevant section in the Financial Management Act.

Clause 4 Amendment of section 9 (Treasurer’s annual financial statement)

Amends section 9 to align the reporting and tabling timeline with the Fiscal Integrity and Transparency Act. 

Clause 5 Amendment of section 10 (Annual financial statements of Government Business Divisions)

Amends section 10 to align the timing of the tabling of the financial statement with the requirements of the Fiscal Integrity and Transparency Act. The timing for the preparation of financial statements has been amended from 3 months to 2 months to align with the current practice, whilst allowing the Treasurer to modify this period through a direction whenever necessary.

Clause 6 Amendment of section 11 (Other financial statement)

Amends section 11 to align the timing of the tabling of the financial statement with the requirements Fiscal Integrity and Transparency Act. The timing for the preparation financial statements have been amended from 3 months to 2 months to align with the current practice, whilst allowing the Treasurer to modify this period through a direction.

Clause 7 Amendment of section 19 (Increase or replenishment of Treasurer’s Advance)

The amendment of section 19 excludes the Purpose designated as Commonwealth in the calculation of total appropriations when applying the five percent rule. 

The exclusion of appropriation to the Purpose designated as Commonwealth in section 19 supports the distinction between increases in appropriation for Territory funded activities and appropriation for “tied” Commonwealth funding arrangements.

Clause 8 New section 19A

This establishes a new section 19A

Section 19A Increase of funds available from the Commonwealth

Section 19A provides a standing appropriation allowing the Treasurer to increase appropriation during the year, in accordance with an increase in a Commonwealth funding agreement under the IGA. The Treasurer is to table a statement of the increase in the Legislative Assembly within six sitting days. 

Clause 9 Amendment of section 20 (Transfer of Allocations)

This amends section 20 to aid simplicity and clarity but does not change the meaning of the section.  

Clause 10 Repeal of section 22

This repeals section 22 as utilisation of this provision to borrow forward or carry over funds from and to a future financial year has not been used since the introduction of accrual accounting.

Clause 11 Repeal and substitution of section 24

Repeals current section 24 and substitutes a new section 24. This is the result of the repealing of section 22, and thus the words “subject to section 22” need to be removed.

Clause 12 Repeal and substitution of Part 8

Repeals current Part 8 and substitutes a new Part 8. 

The current Part 8 has transitional provisions for previous amendments to the Financial Management Act which no longer apply. This is to be replaced with transitional provisions for the current amendments.

The application of the amendments to the Financial Management Act is to have a retrospective application to reflect the changes in the Commonwealth funding arrangements which commenced in 1 January 2009. The amendments to the Financial Management Act must be enacted before the commencement of the Appropriation (Additional to 2008-2009) Bill and the Appropriation (2009-2010) Bill, prior to 30 June 2009. 

Although Schedule 1 of the Bill includes a list of the Acts to be amended, the inclusion of a transitional clause will allow for those Acts with the term “Allocation” to mean the term “appropriation” if the context permits.

Clause 13 Repeal of Schedule

This repeals the Schedule referred to in current Part 8 which is also being repealed in Clause 12.

Clause 14 Further amendments of the Financial Management Act

Schedule 1 lists the amendments to various sections as a result of contemporised changes and replacing the term “Allocation” with “appropriation”.

Clause 15 Amendments of other Acts

Schedule 2 lists the consequential amendments to other Acts, replacing the term “Allocation” with “appropriation”.