Audit (Transitional and Miscellaneous) Regulations 1997 No. 390
EXPLANATORY STATEMENT
STATUTORY RULES 1997 No. 390
Issued by the authority of the Minister for Finance and Administration
Audit (Transitional and Miscellaneous) Amendment Act 1997
Audit (Transitional and Miscellaneous) Regulations
The attached Statutory Rules make regulations under Clause 8(1) of Schedule 4 to Audit (Transitional and Miscellaneous) Amendment Act 1997 (the Act).
Clause 8(1) of Schedule 4 to the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Act is one of a package of four Acts which will replace the Audit Act 1901. Amongst other things, the Act repeals the Audit Act 1901. It will commence on 1 January 1998, the day fixed by Proclamation for the commencement of another of that package of Acts, the Financial Management and Accountability Act 1997.
These regulations cover matters required or permitted to be made under the Act and other matters to provide for the transition to the new legislative framework for the financial management of the Commonwealth. In summary, the proposed regulations will cover:
PART 1 - PRELIMINARY.
Regulations 1, 2 and 3
These regulations respectively cover the citation and commencement of, and define certain terms used in, the regulations;
PART 2 - APPLICATION OF THE AUDITOR-GENERAL ACT 1997.
The regulations in this part continue various matters which were done or commenced under the provisions of the Audit Act 1901 as if they had been done or commenced under the relevant provisions of the Auditor-General Act 1997.
Regulation 4
Regulation 4 will continue any appointment of an Acting Auditor-General under section 8 of the Audit Act 1901 in force immediately before 1 January 1998 as if the appointment had been made under clause 7 of Schedule 1 of the Auditor-General Act 1997.
Regulation 5
This regulation will continue the appointments of persons under section 11 of the Audit Act 1901 to assist the Auditor-General in the performance of his functions as if those persons were engaged under contract under section 27 of the Auditor-General Act 1997.
Regulations 6 to 11
These regulations provide for various audits which were commenced under the authority of the Audit Act 1901, but which have not been completed before 1 January 1998, to continue to completion as if the relevant sections of the Audit Act 1901 remained in force.
Regulation 12
This regulation provides that auditing standards set under section 63MB of the Audit Act 1901 shall continue in effect after 1 January 1998 as if they had been set under section 24 of the Auditor-General Act 1997.
Regulation 13
Regulation 13 will allow the indemnity provided under section 70E of the Audit Act 1901 to continue to apply after 1 January 1998 to persons appointed to assist the
Auditor-General in the performance of his functions in relation to matters which may arise from that work.
PART 3 - APPLICATION OF FINANCIAL MANAGEMENT AND
ACCOUNTABILITY ACT AND REGULATIONS AND ORDERS MADE UNDER THAT ACT.
The regulations in this part provide transitional arrangements for various matters done under the provisions of the Audit Act 1901 as if they had been done under the relevant provisions of the Financial Management and Accountability Act 1997.
Regulations 14, 15 and 16
These regulations provide for banking arrangements in place under the provisions of the Audit Act 1901 for overdrafts on official accounts, the receipt, custody, payment or transmission of public money and the opening and maintenance of official bank accounts to continue after 1 January 1998 as if those arrangements had been made under sections 8 and 9 of the Financial Management and Accountability Act 1997.
Regulation 17
Regulation 17 provides transitional arrangements for dealing with certain money held on trust by the Commonwealth where, having regard to the terms on which the money is held, it is inappropriate for them to be dealt with through the Commonwealth's fund accounting structure. Arrangements made in accordance with subsection 25(3) of the Audit Act 1901 for this purpose are continued after 1 January 1998 as if they had been made in accordance with section 16 of the Financial Management and Accountability Act 1997.
Regulation 18
Regulation 18 provides transitional arrangements for action in relation to act of grace payments being considered in accordance with section 34A of the Audit Act 1901, but not completed before 1 January 1998. These will be taken to be in accordance with section 33 of the Financial Management and Accountability Act 1997.
Regulation 19
Regulation 19 provides for money invested under section 62A of the Audit Act 1901 before 1 January 1998 to be taken to have been invested under section 39 of the Financial Management and Accountability Act 1997.
Regulation 20
Regulation 20 provides transitional arrangements for action taken in relation to waivers of the Commonwealth's rights to certain money and stores being considered in accordance with section 70C of the Audit Act 1901. These will be taken to be in accordance with section 34 of the Financial Management and Accountability Act 1997.
Regulation 21
This regulation deals with Guidelines issued by Ministers on matters for which they were responsible under section 73 of the Audit Act 1901. These will continue after 1 January 1998 as if they had been issued under section 64 of the Financial Management and Accountability Act 1997. The Commonwealth Procurement Guidelines will be continued in this way.
Regulation 22
Regulation 22 will continue the approval until 30 June 1998 of certain special types of advances approved by the Secretary of the Department of Finance and Administration for the purposes of paragraph 74(1)(j) of the Finance Regulations. These will be taken after 1 January 1998 as approvals for the purpose of Financial Management and Accountability Regulation 15.
Regulation 23
Regulation 23 continues the effect of the authority issued to agencies on the limits of availability of appropriations under Finance Regulation 90.
Regulation 24
Regulation 24 continues agreements made for the purposes Appropriation Act (No. 1) 199798 or Appropriation (Parliamentary Departments) Act 1997-98 as if they were agreements made under section 31 of the Financial Management and Accountability Act 1997. These agreements deal with certain kinds of receipts of Agencies which are appropriated for the purposes of running costs in addition to the amounts specified in the Appropriation Acts.
PART 4 - APPLICATION OF COMMONWEALTH AUTHORITIES AND COMPANIES ACT 1997
Having regard to the mid-financial year commencement of Commonwealth Authorities and Companies Act 1997 (the CAC Act), the regulations in this Part provide transitional arrangements for various matters or actions taken in accordance with the various laws, rules etc which were in force immediately before commencement of the CAC Act on 1 January 1998.
Regulation 25
Regulation 25 allows for the carry over of defined terms in the CAC Act into this Part.
Regulation 26
Regulation 26 defines a "transitional financial year" of a Commonwealth authority or Commonwealth company for the purposes of this Part as a financial year that commenced before 1 January 1998.
Regulation 27
Subregulation 27(1) provides that, if the directors of a Commonwealth authority prepare the annual report (including financial statements) for the transitional financial year in accordance with the rules etc applying immediately before 1 January 1998 (the ,old rules'), they will be deemed to have complied with the rules etc in the CAC Act relating to annual reports (the 'CAC rules').
Subregulation 27(2) provides that the directors of a Commonwealth authority which has a financial year commencing between 1 January 1998 and 30 June 1998 must prepare the annual report for that year in accordance with the 'CAC rules' except that the annual report need not include a report of operations prepared in accordance with Finance Minister's Orders issued pursuant to clause 1 (a) of Schedule 1 to the CAC Act.
The effect of subregulations 27(1) and 27(2) is as follows:
* Authorities with financial years ending on 30 June
The directors will be able to prepare the annual report for the year ending 30 June 1998 in accordance with the 'old rules'.
* Authorities with financial years ending on 30 September
The directors will be able to prepare the annual report for the years ending 30 September 1997 and 30 September 1998 in accordance with the 'old rules'.
* Authorities with financial years ending on 31 December
The directors will be able to prepare their annual report for the year ending 31 December 1997 in accordance with the 'old rules'. However, the directors will be obliged to prepare the annual report for the year ending 31 December 1998 in accordance with the CAC rules, except that the effect of subregulation 27(2) is that the annual report need not include a report of operations prepared in accordance with Finance Minister's Orders issued pursuant to clause 1 (a) of Schedule 1 to the CAC Act.
Subregulation 27(3) will enable the Finance Minister to amend the current guidelines for 'Financial Statements of Commonwealth Authorities' after 1 January 1998. (The guidelines will be superseded by Finance Minister's Orders (FMOs) issued under the CAC Act. The FMOs will apply to authorities' financial years commencing on or after 1 January 1998).
Regulation 28
The effect of regulation 28 is that, if the directors of a Commonwealth authority prepare its financial statements for the transitional financial year in accordance with the 'old rules' (that is, the rules etc applying immediately before 1 January 1998), the Auditor-General may prepare the audit report on those financial statements in accordance with the audit rules in force immediately before 1 January 1998.
Regulation 29
Subsection 8(2), and section 12, of the CAC Act oblige the directors of a Commonwealth authority to ensure that the financial statements of relevant subsidiaries are audited by the Auditor-General.
Depending on the circumstances, it may not be reasonable for this obligation to become effective midway through a subsidiary's annual accounting period. Accordingly, regulation 29 provides that subsection 8(2), and section 12, of the CAC Act do not apply to the financial statements of a subsidiary of a Commonwealth authority that relate to an annual accounting period which began before 1 January 1998.
Regulation 30
Section 14 of the CAC Act provides that the directors of a Commonwealth authority must prepare budget estimates for each financial year.
Regulation 30 provides that the directors will be deemed to have complied with section 14 if they prepare estimates of receipts and expenditure, or budget estimates, in relation to the transitional year in accordance with the rules etc in force immediately before 1 January 1998.
Regulation 31
Section 17 of the CAC act provides that the directors of a Commonwealth authority that is a GBE must prepare a corporate plan at least once a year and give it to the responsible Minister.
Regulation 31 provides that the directors will be deemed to have complied with section 17 of the CAC Act if the corporate plan given to the responsible Minister during the transitional year has been prepared in accordance with the rules etc in force immediately before 1 January 1998.
Regulation 32
Paragraph 63E(1)(c) of the Audit Act 1901, and various provisions in the establishing legislation of Commonwealth authorities, require that certain modes of investment of certain Commonwealth authorities require the approval of the Treasurer. These requirements will be repealed by the Audit (Transitional and Miscellaneous) Amendment Act 1997 and replaced by paragraph 18(3)(d) of the CAC Act.
Regulation 32 provides that approvals given by the Treasurer prior to 1 January 1998 under the repealed provisions will continue to have effect for the purposes of paragraph 18(3)(d) of the CAC Act.
Regulation 33
Section 20 of the CAC Act provides that a Commonwealth authority must keep accounting records in a way that enables the preparation of the financial statements required by the CAC Act and in a way that allows those financial statements to be conveniently and properly audited in accordance with that Act.
Regulation 33 provides that a Commonwealth authority will be deemed to have complied with section 20 if it keeps accounting records in relation to the transitional financial year in accordance with the legal requirements in force immediately before 1 January 1998.
Regulation 34
Regulation 34 provides that the financial year of the Army and Air Force Canteen Service Board of Management that commenced on 31 January 1997 shall end on 30 June 1998. Its purpose is to facilitate the conversion of the Board to a financial year commencing on 1 July and ending on 30 June.
Regulation 35
Subsection 35(2) and section 37 of the CAC Act require the directors of a Commonwealth company to ensure that the financial statements of relevant subsidiaries are audited by the Auditor-General.
Depending on the circumstances, it may not be reasonable for this obligation to become effective midway through a subsidiary's annual accounting period. Accordingly, regulation 35 provides that subsection 35(2) and section 37 of the CAC Act do not apply to the financial statements of a subsidiary of a Commonwealth company that relate to an annual accounting period which began before 1 January 1998.
Regulation 36
Section 39 of the CAC Act provides that the directors of a wholly-owned Commonwealth company must prepare budget estimates for each financial year.
Regulation 36 provides that the directors will be deemed to have complied with section 39 if they prepare estimates of receipts and expenditure, or budget estimates, in relation to the transitional year in accordance with the rules etc in force immediately before 1 January 1998.
Regulation 37
Section 42 of the CAC Act provides that the directors of a wholly-owned Commonwealth company that is a GBE must prepare a corporate plan at least once a year and give it to the responsible Minister.
Regulation 37 provides that the directors will be deemed to have complied with section 42 if the corporate plan given to the responsible Minister during the transitional financial year has been prepared in accordance with the rules etc in force immediately before 1 January 1998.
Regulation 38
Subsections 35(1) and 36(2) of the CAC Act require, in effect, that the Auditor-General be appointed the auditor of a Commonwealth company, or, if someone else is appointed the auditor, that the Auditor-General prepare a report on the company's financial statements. Clearly, if the company adopts this second option, it will be obliged, in effect, to pay for two audits of its financial statements. Consequently it will normally be in the company's best interests to adopt the first option and appoint the Auditor-General its auditor.
Regulation 38 recognises that it may not be feasible for a Commonwealth company to change its auditor midway through a financial year. Consequently it provides that subsections 35(1) and 36(2) of the CAC Act do not apply to the financial statements of a Commonwealth company for a financial year that commenced before 1 January 1998.