EXPLANATORY STATEMENT

Issued by the Authority of the Minister for Finance

Public Governance, Performance and Accountability Act 2013

Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016

The Public Governance, Performance and Accountability Act 2013 (PGPA Act) sets out a framework for regulating resource management by the Commonwealth and relevant entities. Section 101 of the PGPA Act provides that the Finance Minister may make rules by legislative instrument to prescribe matters giving effect to the Act.

The Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016 (Corporate Entity Annual Reporting Rule) is being made to amend the rule made under the PGPA Act. The rule instrument is the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule).

The Corporate Entity Annual Reporting Rule contains provisions that provide minimum requirements for the preparation of annual reports by corporate Commonwealth entities under the PGPA Act. Details of the Corporate Entity Annual Reporting Rule are set out at Attachment A. A statement of compatibility with human rights is set out at Attachment B.

The Corporate Entity Annual Reporting Rule is a legislative instrument for the purposes of the Legislation Act 2003.

Consultation

The Department of Finance (Finance) has worked with the Office of Parliamentary Counsel in developing the Corporate Entity Annual Reporting Rule.

Finance consulted stakeholders from corporate Commonwealth entities in relation to the annual report requirements. A public consultation paper, requesting comments on the proposed approach for annual report requirements for 2015-16, was also released.

An exposure draft of the Corporate Entity Annual Reporting Rule was posted on the Department of Finance website.

Finance consulted with the Joint Committee of Public Accounts and Audit (JCPAA) throughout the development of the Corporate Entity Annual Reporting Rule. The JCPAA is required to approve the annual report requirements for corporate Commonwealth entities under subsection 46(4) of the PGPA Act. The Corporate Entity Annual Reporting Rule was approved by the JCPAA on 3 May 2016.

Attachment A

Details of the Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016

Section 1—Name of instrument

This section provides that the title of the instrument is the Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016.

Section 2—Commencement

This section provides that the instrument commences on the later of:

• the day after the instrument is registered on the Federal Register of Legislative Instruments; and
• the commencement of the Public Governance, Performance and Accountability Amendment (Non-corporate Commonwealth Entity Annual Reporting) Rule 2016.

Section 3—Authority

This section states that the instrument is made under the PGPA Act.

Section 4—Schedules

This section ensures that if anything in the Schedule of this instrument makes an amendment to another instrument, then those amendments will apply after commencement of this instrument.

Schedule 1—Amendments

Public Governance, Performance and Accountability Rule 2014

Item 1 – Section 4

Item 1 inserts a definition of ‘related entity’ in Section 4 of the PGPA Rule.

Item 2 – At the end of Division 3A of Part 2‑3

Item 2 adds “Subdivision B—Annual report for corporate Commonwealth entities” at the end of Division 3A of Part 2-3.

Section 17BA Guide to this Subdivision

Section 17BA specifies that Subdivision B is made for subsection 46(3) of the Act and sets out the requirements for annual reports for corporate Commonwealth entities. Section 17BA notes that the annual report requirements for corporate Commonwealth entities were approved by the Joint Committee of Public Accounts and Audit on 3 May 2016.

Section 17BB Approval of annual report by accountable authority

Section 17BB requires that the annual report must be approved by the accountable authority. The annual report must be signed by the accountable authority, or a member of the accountable authority where a group of persons is the accountable authority, and detail how and when approval was given. It must also state that the accountable authority is responsible for the preparation of the annual report and providing a copy to the responsible Minister.

Section 17BC Parliamentary standards of presentation

The annual reports for corporate Commonwealth entities are tabled in Parliament. As such, section 17BC requires that the report must comply with guidelines for presenting documents to the Parliament (for example, presentation and printing standards).

Section 17BD Plain English and clear design

Subsection 17BD(1) requires that corporate Commonwealth entities must be conscious of the interests of the Parliament and other persons interested in the annual report when preparing the annual report.

Subsection 17BD(2) states that the information included in the annual report must also be relevant, reliable, concise, understandable and balanced. Where practicable, this should be achieved by:

• using clear design (for example, through headings and adequate spacing);
• defining acronyms and technical terms (for example, in a glossary);
• using tables, graphs, diagrams and charts; and
• including any additional matters as appropriate.

Section 17BE Contents of annual report

Section 17BE details the content that is required to be included in corporate Commonwealth entities’ annual reports for the reporting period. These are the minimum requirements that must be included in the annual report. The accountable authority may include other information in the annual report where it is considered appropriate.

Paragraph 17BE(a) provides that the annual report must specify the corporate Commonwealth entity’s legislation establishing the body.

Paragraph 17BE(b) provides that the annual report must include:

• a summary of the objects and functions of the corporate Commonwealth entity as set out in its legislation (referred to in Paragraph 17BE(a)); and
• the purposes of the corporate Commonwealth entity as included in the entity’s corporate plan for the reporting period.

Paragraph 17BE(c) requires that the annual report must specify the current responsible Minister’s name and the name of any other responsible Minister during the reporting period being reported on. The title of the responsible Minister (or Ministers if there are multiple responsible Ministers during the reporting period) must also be included.

Paragraph 17BE(d) provides that the annual report must include details of any directions issued by the responsible Minister, or other Minister(s), under an Act or instrument. Furthermore, Paragraph 17BE(e) provides that any government policy order that applied to the corporate Commonwealth entity under section 22 of the PGPA Act must also be included in the corporate Commonwealth entity’s annual report. Where a direction or order referred to in paragraph (d) or (e) was not complied with during the reporting period, Paragraph 17BE(f) requires an explanation of the non-compliance to be included in the annual report.

Paragraph 17BE(g) requires the annual report to contain the annual performance statements for the corporate Commonwealth entity for the period in accordance with paragraph 39(1)(b) of the PGPA Act and section 16F of the PGPA Rule.

Paragraph 17BE(h) requires the annual report to contain a statement that details any instance of  significant non-compliance with the PGPA Act or the rule under paragraph 19(1)(e) of the PGPA Act that occurred during the reporting period.

Paragraph 17BE(i) requires the annual report to contain information detailing the entity’s response to remediate any instance of significant non-compliance with the PGPA Act or the rule, as identified through the entity’s response to paragraph 17AE(2)(d).

Paragraph 17BE(j) provides that the annual report must include information about the accountable authority of the corporate Commonwealth entity, or each member of the accountable authority where a group of persons is the accountable authority. The annual report must include the name, qualifications and experience of the accountable authority or each member of the accountable authority. Where a corporate Commonwealth entity has a number of members as the accountable authority, the annual report must include the number of meetings of the accountable authority attended by each member during the reporting period and whether each member is an executive or non-executive member. An executive member is an employee of the corporate Commonwealth entity, responsible for executive functions in the management and administration of the entity. Non-executive members are independent of corporate management and not employees of the corporate Commonwealth entity.

Paragraph 17BE(k) provides that an organisational structure of the corporate Commonwealth entity (including any subsidiaries of the entity) must be included in the annual report.

Paragraph 17BE(l) provides that the annual report must include an outline of the location (whether or not in Australia) of major activities or facilities of the corporate Commonwealth entity.

Paragraph 17BE(m) provides that the annual report must include information on the main corporate governance practices that the corporate Commonwealth entity had in place during the financial year. This requirement can assist a corporate Commonwealth entity to demonstrate that its governance is sound.

Paragraph 17BE(n) requires corporate Commonwealth entities to disclose the decision making process undertaken by the accountable authority when it enters into a procurement or grant transaction where a member of the accountable authority holds a similar position in the organisation that provides the good or service or receives the grant. The organisation providing the good or service or receiving the grant may take the form of a Commonwealth entity, Commonwealth company or a private company. The disclosure of the decision making process is only necessary where the value of the transaction, or if there is more than one transaction, the aggregate value of those transactions, is at least $10,000 (GST inclusive).

If the corporate Commonwealth entity’s annual report includes information under paragraph 17BE(n) and there is only one relevant transaction, paragraph 17BE(o) requires that the value of the transaction must be included in the annual report. If there is more than one transaction included under paragraph 17BE(n), the number of transactions and the aggregate of value of the transactions must be included in the annual report.

Paragraph 17BE(p) provides that the annual report must include any significant activities and changes that affected the operations or structure of the corporate Commonwealth entity during the period. This requirement intends to assist the reader of the annual report to understand the corporate Commonwealth entity’s performance over the past financial year.

As entities of the Australian Government, corporate Commonwealth entities are expected to have levels of accountability suitable for the public sector. Part of demonstrating these qualities include reporting on judicial decisions and reports by third parties. As such, paragraph 17BE(q) requires that the annual report must include details of judicial decisions and decisions of administrative tribunals made during the period that have had, or may have, a significant effect on the operations of the corporate Commonwealth entity. Similarly, paragraph 17BE(r) requires that the annual report include details of any report about the entity made by the Auditor-General (excluding the Auditor-General’s audit of the entity’s annual financial statements under section 43 of the PGPA Act), a Parliamentary committee, the Commonwealth Ombudsman or the Office of the Australian Information Commissioner.

Paragraph 17BE(s) provides that where the accountable authority has been unable to obtain information from a subsidiary needed for its annual report, that the corporate Commonwealth entity provide an explanation of what has not been obtained and its effect on its annual report.

Paragraph 17BE(t) provides that a corporate Commonwealth entity must include the details of any indemnity that applied, during the reporting period, to any member of the accountable authority or officer of the entity against a liability. This will include any premiums paid, or agreed to be paid, for insurance against the member or officer’s liability for legal costs.

In order to assist readers locate information, paragraph 17BE(u) requires that an index be included in the annual report which identifies where the requirements of section 17BE and 17BF are located in a corporate Commonwealth entity’s annual report.

Note 1 recognises that other legislation exists that may require corporate Commonwealth entities to include additional information in their annual reports.

Section 17BF Disclosure requirements for government business enterprises

Subsection 17BF(1) provides that a government business enterprise that is a corporate Commonwealth entity is required to disclose the following information in the annual report:

• an assessment of significant changes in overall financial structure and condition over the financial year;
• an assessment of any events or risks that could cause reported financial information not to be indicative of future operations or financial condition;
• 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 the obligations and an assessment of the cost of fulfilling the obligations.

Subsection 17BF(2) provides that information can be excluded where the accountable authority believes, on reasonable grounds, that it is commercially sensitive and would likely result in unreasonable commercial prejudice to the government business enterprise. The annual report must state whether information has been excluded.

Item 3 – At the end of Chapter 5

Item 3 adds “Part 2—Amendments made by the Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016” at the end of Chapter 5.

Section 32 Application of amendments made by the Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016

Section 32 provides that the amendments made to the PGPA Rule by the Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016 apply in relation to any reporting period that begins on or after 1 July 2015.

Attachment B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016

The Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016 is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the legislative instrument

The Public Governance, Performance and Accountability Act 2013 (PGPA Act) sets out a framework for regulating resource management by the Commonwealth and relevant entities. Section 101 of the PGPA Act provides that the Finance Minister may make rules by legislative instrument to prescribe matters giving effect to the Act.

The Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016 is being made to amend the rule instrument made under the PGPA Act, the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule). The PGPA Rule is to support the implementation of the PGPA Act.

The Public Governance, Performance and Accountability Amendment (Corporate Commonwealth Entity Annual Reporting) Rule 2016 contains provisions that provide minimum requirements for the preparation of annual reports by corporate Commonwealth entities under the PGPA Act.

Human rights implications

The legislative instrument does not engage any of the applicable rights or freedoms.

Conclusion

The legislative instrument is compatible with human rights as it does not raise any human rights issues.

Senator the Hon Mathias Cormann
Minister for Finance