EXPLANATORY STATEMENT
SELECT LEGISLATIVE INSTRUMENT 2011 No. n
Issued by the Authority of the Minister for Finance and Deregulation
Commonwealth Authorities and Companies Act 1997
Commonwealth Authorities (Annual Reporting) Orders 2011
The Commonwealth Authorities and Companies Act 1997 (the CAC Act) contains reporting, accountability and other rules for Commonwealth authorities and Commonwealth companies.
The CAC Act provides for the Finance Minister to issue annual reporting Orders, requiring Commonwealth authorities to report specific on public sector issues as part of their Annual Report of Operations.
The current Commonwealth authority annual reporting Orders are the Commonwealth Authorities and Companies (Report of Operations) Orders 2008. The Commonwealth Authorities (Annual Reporting) Orders 2011 (the Orders) replace the 2008 Orders and broaden the scope of information to be reported in the Annual Report of Operations to better reflect public sector standards of accountability and transparency. The new Orders are also more user-friendly.
The CAC Act requires the directors of a Commonwealth authority to give their responsible Minister an annual report at the end of each financial year (in accordance with section 9 of the CAC Act). The annual report, at a minimum, must include a report of operations, financial statements, and the Auditor-General’s report on those financial statements.
Legislative Instruments Act 2003
The Orders are a legislative instrument for the purposes of the Legislative Instruments Act 2003. The Orders are subject to disallowance and to sunsetting under section 42 and Part 6, respectively, of the Legislative Instruments Act 2003. They also become publicly available, through publication on the Federal Register of Legislative Instruments.
Consultation was undertaken with Commonwealth authorities, responsible Ministers and portfolio Departments in relation to these Orders, in accordance with section 17 of the LI Act.
Best Practice Regulation Preliminary Assessment
A Best Practice Regulation Preliminary Assessment was undertaken in accordance with the guidance issued by the Office of Best Practice Regulation. This assessment indicated that a regulation impact statement was not required, as the Orders only affect Commonwealth authorities under the CAC Act, and do not affect the private or not-for-profit sectors.
Commencement
The Orders commence on the day after they are registered on the Federal Register of Legislative Instruments.
Details of the Commonwealth Authorities (Annual Reporting) Orders 2011
Clause 1 – Name of Orders
This clause provides that the title of the Orders is the Commonwealth Authorities (Annual Reporting) Orders 2011.
Preliminary
The next 6 clauses of these Orders cover preliminary matters, such as timing of application and purpose, plus the process for directors to approve an annual report. The process in relation to exemptions from specific requirements is also explained.
Clause 2 – Commencement
This clause provides that the Orders are to commence on the day after they are registered.
Clause 3 – Application of Orders
This clause provides that the Orders apply to Commonwealth authorities in relation to each financial year ending on or after 30 June 2012, with the exception of clause 15 (related entity transactions) which will apply to (and from) annual reports for the 2012-2013 financial year, and notes that the 2011-2012 financial year will be the first financial that they will apply to.
Clause 4 – Revocation of previous Orders
This clause revokes the Commonwealth Authorities and Companies (Report of Operations) Orders 2008, but saves them to the extent that they concern annual reports due by 15 October 2011.
Clause 5 – Purpose
This clause provides that the purpose of the Orders is to:
- Specify the requirements for the Annual Report of Operations the directors of a Commonwealth authority must provide and include in its annual report.
- Require that the Annual Report of Operations must be given to the responsible Minister within the timeframe identified in subsection 9(2) of the CAC Act, for tabling in Parliament.
Clause 6 – Approval by directors
This clause provides that the Annual Report of Operations must be approved by a resolution of directors, or where the authority has only one director, by that director.
The Annual Report of Operations must be signed by a director and detail how and when approval was given. It must also state that the director(s) are responsible for the preparation and contents of the Annual Report of Operations as required in accordance with section 9 of the CAC Act and the Finance Minister’s Orders.
Clause 7 – Exemptions
This clause provides that the Finance Minister may grant a written exemption to the directors of a Commonwealth authority, or class of Commonwealth authorities, from any requirement of the Orders. The written exemption may include conditions.
Details of any exemption must be provided in the Annual Report of Operations.
Requirements
The next 15 clauses of these Orders cover the specific reporting requirements sought from a Commonwealth authority, such as information about the organisational structure, governance, directors, and activities of the authority. The final clause deals with 7 short definitions, which have been used to help improve the readability of the other parts of the Orders.
Clause 8 – Parliamentary standards of presentation
This clause provides that the Annual Report of Operations of a Commonwealth authority must comply with the presentation and printing standards for documents presented to the Parliament.
Clause 9 – Plain English and clear design
This clause provides that the Annual Report of Operations must be constructed in an accessible manner, and information included in the report must be relevant, reliable, concise, understandable and balanced.
Clause 10 – Enabling legislation
This clause provides that the Annual Report of Operations must specify the Commonwealth authority’s enabling legislation, including its objectives and functions as specified in the legislation.
Clause 11 – Responsible Minister
This clause provides that the Annual Report of Operations must specify the current responsible Minister’s name and the name of any other responsible Minister during the financial year being reported on.
Clause 12 – Ministerial directions and other statutory requirements
Where the Commonwealth authority is obliged to act in a manner inconsistent with the best interests of the Commonwealth authority, this Order provides for the Annual Report of Operations to provide details of:
- directions issued by the responsible Minister, or other Minister, under the enabling legislation of the Commonwealth authority or other legislation; and
- general policies of the Australian Government that apply under section 28 of the CAC Act before 1 July 2008; and
- General Policy Orders that were applied to the Commonwealth authority under section 28 and 48A of the CAC Act after 1 July 2008.
The Annual Report of Operations must also give an explanation of non-compliance where a direction, general policy or General Policy Order has not been fully complied with.
Clause 13 – Information about directors
This clause provides that the Annual Report of Operations must include information about the directors of the Commonwealth authority, such as their names, qualifications, experience, board meeting attendance and whether they are an executive or non-executive director.
Clause 14 – Outline of organisational structure and statement on governance
This clause provides that the Annual Report of Operations must provide an outline of the organisational structure of the Commonwealth authority (including subsidiaries) and the location of major activities and facilities.
The Annual Report of Operations must also include information on the main corporate governance practices that the Commonwealth authority had in place during the financial year. For example, information on:
- board committees of the authority and their main responsibilities; and
- education and performance review processes for directors; and
- ethics and risk management policies.
Clause 15 – Related entity transactions
This clause improves transparency around conflicts of interests by requiring Commonwealth authorities to disclose the decision making process undertaken by the board of the authority, when it enters into a procurement or grant transaction where a director of the authority is also a director of the other company, where the value of the transaction is at least $10,000 (GST inclusive).
As stated above regarding clause 3, (Application of Orders), the commencement of clause 15 is delayed by a year, compared to the other requirements for annual reports, and will therefore apply from the 2012-2013 financial year onwards (that is, the annual report will not be required until the annual report due on 15 October 2013). This reason for this is to allow time for directors to establish record-keeping processes over the course of the financial year.
That said, if directors can (and wish to) report on this issue regarding 2011-2012, then that, of course, is open to them.
Clause 16 – Key activities and changes affecting the authority
This clause requires the Annual Report of Operations to detail any key activities and changes that have affected the operations or structure of the Commonwealth authority during the financial year.
Clause 17 – Judicial decisions and reviews by outside bodies
This clause requires the Annual Report of Operations to detail the particulars of judicial decisions or decisions of administrative tribunals that have had, or may have, a significant effect on the operations of the authority.
The annual report must also contain the particulars of reports on the operations of the authority by the Auditor-General, a Parliamentary Committee, the Commonwealth Ombudsman or the Office of the Australian Information Commissioner.
Clause 18 – Obtaining information from subsidiaries
This clause requires directors of a Commonwealth authority to provide an explanation of information they are unable to obtain from a subsidiary that is required to be included in the Annual Report of Operations.
Clause 19 – Indemnities and insurance premiums for officers
This clause requires the Annual Report of Operations to detail any indemnity given to an officer, including for insurance against the officer’s liability for legal costs.
Clause 20 – Disclosure requirements for GBEs
This clause requires GBE authorities to disclose in the Annual Report of Operations an assessment of:
- significant changes in overall financial structure and condition over the financial year; and
- any events or risks that could cause reported financial information not to be indicative of future operations or financial condition; and
- dividends paid or recommended in relation to the financial year; and
- details of any community service obligations, including an outline of actions taken to achieve these obligations and an assessment of the cost of fulfilling those obligations.
Information can be excluded where the directors believe, on reasonable grounds, that it is commercially sensitive and would likely result in unreasonable commercial prejudice to the GBE. The annual report must state whether information has been excluded.
Clause 21 – Index of annual report requirements
This clause provides that the Annual Report of Operations must provide an index of annual report requirements identifying where information on legislative requirements can be found in the annual report.
Clause 22 – Definitions
Defines several key terms used in these Order, such as annual report being defined by reference to section 9 of the CAC Act, and the CAC Act being defined as meaning the Commonwealth Authorities and Companies Act 1997.
The Definitions clause has been placed at the back of the Orders, to help with their readability generally, and on the basis, in particular, that none of the definitions are particularly unexpected, unclear or unusual.