EXPLANATORY STATEMENT
Select Legislative Instrument 2011 No. 163
Issued by the authority of the Minister for Finance and Deregulation
Financial Management and Accountability Act 1997
Financial Management and Accountability Amendment Regulations 2011 (No. 4)
The Financial Management and Accountability Act 1997 (FMA Act) provides a framework of rules for the proper management of public money and public property by Chief Executives and officials of FMA Act Agencies.
Subsection 65(1) of the FMA Act provides that the Governor-General may make regulations prescribing matters required or permitted by the FMA Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the FMA Act.
Section 5 of the FMA Act provides that for the purposes of the FMA Act, a prescribed Agency means a body, organisation or group of persons prescribed by the regulations for the purposes of that definition. Agencies are currently prescribed in Schedule 1 to the Financial Management and Accountability Regulations 1997 (the Principal Regulations).
The amending Regulations prescribe the Interim Independent Hospital Pricing Authority (Interim IHPA) as an FMA Act Agency by amending Schedule 1 to the Principal Regulations. The Interim IHPA has also been established as an Executive Agency under subsection 65(1) of the Public Service Act 1999.
The establishment of the Interim IHPA as an Executive Agency was agreed by the Commonwealth and the States as an interim measure prior to legislation establishing a statutory authority under the FMA Act to be called the Independent Hospital Pricing Authority.
Under the National Health Reform Agreement, the Council of Australian Governments (COAG) agreed to establish a national approach to activity based funding (ABF) and to funding public hospital services, where possible, on the basis of a national efficient price for each service.
The Interim IHPA would: start to develop and specify national classifications to classify public hospitals’ activities for ABF; determine the national efficient price for services; and resolve disputes on cross-border issues.
The amending Regulations also correct a numbering error in the Principal Regulations. There were two Regulations numbered 22D. One covered “Estimates” and the other covered “Special arrangements for audit committees”. The amending Regulations re-number the latter as Regulation 22CA, reflecting its link to Regulation 22C “Audit committee”.
The amending Regulations also omit the subheading “Part 1 Prescribed agencies that do not handle money other than public money” in Schedule 1 to the Principal Regulations. This subheading is no longer necessary because the subheading “Part 2 Prescribed agencies that handle money other than public money” was previously omitted when the only prescribed Agency under it, the Australian Reward Investment Alliance, ceased to be a prescribed Agency.
The amending Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Consistent with section 17 of the Legislative Instruments Act 2003, consultation occurred with the Departments of Health and Ageing and Prime Minister and Cabinet.
The amending Regulations commence on 1 September 2011.
Overview
The Financial Management and Accountability Amendment Regulations 2011 (No. 4) were introduced to amend the Financial Management and Accountability Regulations 1997, thereby updating the framework governing the proper management of public money and public property by Chief Executives and officials of prescribed Agencies under the Financial Management and Accountability Act 1997 (FMA Act). Enacted by the authority of the Minister for Finance and Deregulation, these Regulations address the need to formally recognise the Interim Independent Hospital Pricing Authority (Interim IHPA) as an FMA Act Agency, aligning with the National Health Reform Agreement's objective of establishing a national approach to activity-based funding and pricing for public hospital services. The policy objective is to facilitate the Interim IHPA's role in developing national classifications, determining national efficient prices, and resolving cross-border disputes, thereby ensuring a more efficient and coordinated approach to hospital funding across Australia.
Additionally, the Regulations correct a numbering error within the Principal Regulations and streamline the structure of Schedule 1 by omitting unnecessary subheadings, reflecting the current landscape of prescribed Agencies. The consultation process involved the Departments of Health and Ageing and Prime Minister and Cabinet, ensuring that the amendments meet the necessary regulatory standards and objectives. These Regulations came into effect on 1 September 2011, providing a legislative basis for the Interim IHPA's activities and ensuring compliance with the broader framework established by the FMA Act.
Scope and Application
The Financial Management and Accountability Amendment Regulations 2011 (No. 4) extend the application of the Financial Management and Accountability Act 1997 (FMA Act) by prescribing the Interim Independent Hospital Pricing Authority (Interim IHPA) as an FMA Act Agency. This addition is achieved by amending Schedule 1 to the Financial Management and Accountability Regulations 1997. The Interim IHPA, established as an Executive Agency under the Public Service Act 1999, is tasked with developing and specifying national classifications for classifying public hospitals’ activities for activity-based funding, determining the national efficient price for services, and resolving cross-border funding disputes. This regulatory amendment aligns with the national health reform agreement aimed at establishing a national approach to activity-based funding and funding public hospital services on the basis of a national efficient price for each service. The amending Regulations also rectify a numbering error in the Principal Regulations by re-numbering Regulation 22D to Regulation 22CA, and remove a redundant subheading from Schedule 1. These changes ensure the regulations remain accurate and efficient. The Regulations are a legislative instrument under the Legislative Instruments Act 2003, having been subject to consultation with relevant departments, and they commence on 1 September 2011.
Key Provisions
The Financial Management and Accountability Amendment Regulations 2011 (No. 4) primarily serve to include the Interim Independent Hospital Pricing Authority (Interim IHPA) as a prescribed agency under the Financial Management and Accountability Act 1997 (FMA Act). By amending Schedule 1 of the Financial Management and Accountability Regulations 1997, these Regulations add the Interim IHPA to the list of agencies subject to the provisions of the FMA Act (section 5). This inclusion ensures that the Interim IHPA is accountable for the proper management of public money and public property, aligning it with the legislative framework designed for other FMA Act agencies. The Interim IHPA's role is crucial in developing and specifying national classifications for activity-based funding (ABF) of public hospitals, determining the national efficient price for services, and resolving cross-border disputes.
The obligations placed on the Interim IHPA, as an FMA Act agency, include adhering to the financial management and accountability standards set out in the FMA Act. This involves maintaining proper records, ensuring transparency in financial operations, and complying with any additional regulations or guidelines prescribed by the regulations. The Interim IHPA must also report on its financial activities and ensure that public funds are used efficiently and effectively for the purposes intended. Furthermore, the Interim IHPA is required to work within the parameters of the National Health Reform Agreement, which mandates a national approach to funding public hospital services based on a national efficient price for each service.
Failure to comply with the provisions of the FMA Act and the regulations may result in various consequences. The FMA Act provides for both civil and criminal penalties for breaches of its provisions. For civil penalties, section 83 of the FMA Act allows for fines of up to 50 penalty units (currently equivalent to AUD 5,350) for individuals and 250 penalty units (currently equivalent to AUD 26,750) for bodies corporate. Additionally, section 84 of the FMA Act allows for criminal prosecution for more serious breaches, which can result in fines of up to 500 penalty units (currently equivalent to AUD 53,500) for individuals and 2,500 penalty units (currently equivalent to AUD 267,500) for bodies corporate, as well as imprisonment for up to two years. These penalties serve as deterrents to ensure adherence to the financial management standards outlined in the Act.