EXPLANATORY STATEMENT

Issued by the authority of the Minister for Finance and Administration

Financial Management and Accountability Act 1997

Determination 2007/04 to establish a Special Account

Purposes of Determination 2007/04

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 Australian Reward Investment Alliance 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 Australian Reward Investment Alliance (ARIA) 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.

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

Operation of Determination 2007/04

Purpose of the Australian Reward Investment Alliance Special Account

The determination will establish a single Special Account for ARIA, to replace the two existing Special Accounts which currently enable the administration and management of the three Australian Government civilian superannuation schemes:  the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), and the Public Sector Superannuation Accumulation Plan (PSSAP). 

The new determination is also required to reflect the fact that instead of three prescribed agencies administering these schemes (the CSS Board, PSS Board, and ComSuper), there will be only two:  ARIA, and ComSuper. 

The new Special Account’s purposes do not broaden or narrow the scope of the current primary purposes or the Special Accounts.  Rather, the determination is drafted to accommodate the amalgamation of the CSS Board with the PSS Board, which has been re-named as ARIA, and to enable current arrangements to continue.  That is, employer contributions to each Scheme are kept separate from employee contributions to each Fund in the following manner: 

• employers participating in the CSS, PSS and PSSAP pay fees to ComSuper for the administration costs (record maintenance, benefit calculations and payment, and provision of member information) incurred by ComSuper and ARIA in respect of the relevant Scheme;
• ComSuper then pays an agreed share of this revenue to the ARIA Special Account for ARIA to administer the relevant Scheme; and
• moneys from the super funds themselves (the pool of money contributed by employees) is used by ARIA to meet the management and investment costs of each Fund. 

Reasons for establishing a new Special Account

In 2002, the Government appointed Mr John Uhrig AC to conduct a review of the corporate governance of Commonwealth statutory authorities and to develop a template of governance principles aimed at improving the performance of statutory authorities and their accountability frameworks. An assessment of the CSS Board and the PSS Board, which were formerly responsible for administering the CSS, PSS and PSSAP, based on the Uhrig template of governance principles, recommended the two Boards amalgamate and be renamed ARIA.

ARIA was created by the Superannuation Legislation Amendment (Trustee Board and Other Measures) Act 2006 and came into existence on 1 July 2006.  A new Special Account established under section 20 of the FMA Act will ensure continued transparency of the administration of the CSS, PSS and PSSAP.

To this end, the crediting and purpose clauses have been drafted in such a way to continue to reflect the policy that moneys from employer fees are spent on the administration of the CSS, PSS and PSSAP, ensuring that moneys from the super funds themselves are only spent on the investment and management of these funds. 

Clause 5(1) specifies the purposes for which a Special Account can be debited.

• Paragraphs 5(1)(a), (b) and (c) describe the primary purposes for which expenditure can be made from the Special Account.
• Paragraph 5(1)(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(1)(e) allows the balance of the Special Account to be reduced without a notional or real payment occurring.
• Paragraph 5(1)(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

ARIA is the agency affected by this instrument, and 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 Legislative Instruments Act 2003).

Estimates of transactions on the Australian Reward Investment Alliance Special Account