EXPLANATORY STATEMENT

Issued by the authority of the Minister for Finance and Administration

Financial Management and Accountability Act 1997

Determination 2006/31 to establish a Special Account

Purposes of Determination 2006/31

The attached instrument makes a determination under subsection 20 (1) of the Financial Management and Accountability Act 1997 (FMA Act) to establish a Special Account entitled, Enforcement Special Account.  It also specifies the nature of amounts that may be credited to, and the purposes for which amounts may be debited from, the Enforcement Special Account.

Special Accounts generally

In accordance with the Constitution, all revenues or moneys raised or received by the Government of the Commonwealth form one Consolidated Revenue Fund (CRF) and may not be spent unless under an appropriation by the Parliament for the purposes of the Commonwealth.  A Special Account is established by a determination that sets out the amounts that may be credited and the purposes for which it may be debited.  Special Accounts established by determination are supported by an appropriation under section 20 of the FMA Act.  In effect, Special Accounts allow amounts from the CRF to be spent on a purpose specified in the determination.

Determinations that establish Special Accounts, or vary determinations that establish Special Accounts, are subject to section 22 of the FMA Act. Section 22 of the FMA Act requires the Finance Minister to table a copy of the establishing or varying determination in each House of Parliament. Either House may disallow a determination within five sitting days of tabling.  If the determination is not disallowed, it comes into effect on the calendar day after the last day on which it could have been disallowed.

Regulation 10 of the Legislative Instruments Regulations 2004 preserves the disallowance provisions under section 22 of the FMA Act by exempting Special Account determinations from subsections 57(2) and 57(5) of the Legislative Instruments Act 2003 (LI Act).

Special Accounts can be abolished by a determination of the Finance Minister.  However, there is no requirement to table the determination to abolish a Special Account.

Operation of Determination 2006/31

Purpose of the Enforcement Special Account

This Determination is required in order to establish a Special Account, to provide funding for the Australian Securities and Investments Commission (ASIC), within the exercise of its functions and powers, to investigate and bring legal and/or administrative proceedings against individuals and corporations in relation to suspected breaches of legislation administered by ASIC, such as the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001.   

The investigations and subsequent proceedings would typically relate to matters for which ASIC could not absorb the costs without significantly prejudicing its existing general enforcement role, and/or those matters which are critical to continued public confidence in the corporate regulatory framework. 

It is intended that the Special Account will be credited with $30 million per annum from ASIC’s annual departmental appropriation.  Establishing the Special Account will give ASIC the flexibility to conduct major investigations into, and bring legal and/or administrative proceedings against individuals and corporations in relation to, possible corporate or financial services misconduct when required, without the need to seek additional Budget funding. 

Reasons for establishing a new Special Account

The Enforcement Special Account will be established by a stand-alone determination of the Finance Minister.  Special Account determinations are legislative instruments for the purposes of the LI Act and are required to be registered on the Federal Register of Legislative Instruments (FRLI). 

This determination will commence when the period for disallowance has expired. 

Clause 5 specifies the purposes for which the Special Account can be debited.

• Paragraphs 5(a),(b) and (c) describe the primary purposes for expenditure of amounts from the Special Account.
• Paragraph 5(d) allows incidental costs, including such items as auditing, reporting, budgeting, accounting and information technology services incurred in the course of operating the Special Account, to be debited from the Special Account.
• Paragraph 5(e) allows the balance of the Special Account to be reduced without a notional or real payment occurring.
• Paragraph 5(f) allows the Special Account to be debited in a manner that would otherwise be permitted by section 28 of the FMA Act. It is included to simplify accounting for these transactions.

Consultation

ASIC is the agency affected by this instrument. The agency was provided with drafts of the instrument and agrees with the form of the instrument. As the instrument is for internal machinery of government purposes only, no consultation was considered necessary with other persons (see sections 17 and 18 of the LI Act).

Estimates of transactions on the Enforcement Special Account