Implementing the Uhrig Review:implications of becoming an FMA agency

Corporate Governance Forum, Canberra 25 October 2005

Welcome and Introduction

Rayne de Gruchy CEO AGS

Corporate Governance

Commonwealth Statutory Bodies and Office Holders

The Uhrig review*

Objective• Advise on the corporate governance of

statutory authorities

– Regulators

– Service providers

*Review of the Corporate Governance of Statutory Authorities and Office Holders (June 2003)

Outcomes from the review

• Two templates– Board– Executive Management

• Governance Principles– Parallel communication– Statements of Expectations/Intent– Board best practice principles

Assessment Process

• Portfolio ministers were asked to assess their portfolio bodies against the governance templates and implement changes

• The following bodies are to be assessed:– Statutory Authorities and Office Holders– Prescribed Agencies– Commonwealth Companies (not GBEs)– Other bodies scheduled by the minister

Process

• Assess 160 bodies using templates– Complete by March 2006– Ministers responsible for assessment, not a self-

assessment by the body– Finance Minister to co-ordinate and monitor the

process– Six monthly implementation reports from ministers

• Implementation completed by March 2007• Branch

Two Governance Templates (Ideal Types)

• Governance board

• Executive management

Board Template

A Board may be justified where:

• It has ‘full power to act’– For example - commercial operations

Board: ‘Power to Act’

Board has power to act where Government has delegated :– freedom to determine strategy and direction– ability to appoint and terminate the CEO, and – oversight of risk

Justifiable Board

If a Board can be justified then:• Apply best practice principles (Uhrig chapter 6)• Boards should be governed by Commonwealth

Authorities and Companies Act 1997 financial legislation – Directors’ duties– Bodies corporate– Legally and financially separate from the

Commonwealth

Executive Management Template

• Appropriate where high degree of ministerial control exists

• Appropriate for regulators, service providers, research bodies

• Bodies legally and financially part of the Commonwealth

• Bodies governed by executive management should be covered by the Financial Management and Accountability Act 1997 financial legislation

Other Elements

• ‘No Surprises’ principle

• Parallel Communication– Inform minister and departmental secretary to ensure department can

advise minister– Recognises the role of departments as the principal source of advice to

ministers

• Introduce Statements of Expectations and Statement of Intent– To clarify government’s expectations– Public documents– Should respect statutory independence of body

More information

Uhrig Report

www.finance.gov.au/governancestructures

List of CAC Bodies and FMA Agencieshttp://www.finance.gov.au/finframework/cac_bodies.html

Moving from a CAC body to an FMA agency – the HIC/Medicare Australia

experience

Anne Stumpf,

A/g General Counsel

Medicare Australia

On 1 October 2005, HIC moved from

•A statutory authority under the CAC Act, with its own board, employment framework and distinct legal identity, to•“Medicare Australia”a prescribed agency under the FMA Act;a statutory agency under the Public Service Act; andpart of the Commonwealth

Transition through:

•legislative amendments•finance systems enhancements•re-structure of HR system•corporate governance changes•re-branding, reflecting name change•communication initiatives

Project approach:

•Governance Transition project team•Project scheduling tightly managed;Risk Management & Change Management Plans•Early engagement of key stakeholders:- DHS, DEWR, APSC, DoFA, ANAO

Particular FMA issues

•CEIs and supporting Policies•New financial delegations – regs 9, 13 & 10•Customised training•Reg 10 issues

- longer lead-time for some contracts- contingent liability issues

Particular FMA issues (c’td)

•Lower threshold for open tenders, under CPGs•Enhanced contract reporting•Drawing rights, Special Account, s 31 agreement•Subsidiary company

“Transitionals” in legislation

•Part 3 of Schedule 2 to Human Services Legislation Amendment Act 2005•“Due diligence” work

HR Transition

•s 72 determination•Remuneration Tribunal determination : CEO•Other PS Act determinations•Continuity of HR process eg recruitment, discipline

Corporate Governance changes

•s46 FMA Act – Audit Committee•internal governance arrangements•Statement of Expectations/Statement of Intent

Re-branding and communication aspects

•Name change to “Medicare Australia” – considerable re-branding work•Communication to staff•External communications

In conclusion

•Look for opportunity value

Moving from CAC bodies to FMA Agencies the ACMA experience

Jonquil Ritter, General Counsel, Australian Communications and Media Authority

Tips for achieving a smooth transfer process

Anne Kelly, Special Counsel

AGENDA OF FIRST MEETING OF WORKING GROUP

A: Governance issues during the transition period

B: Preparing the staff for the new environment

C: Due diligence preparation for transition

A. GOVERNANCE ISSUES DURING THE TRANSITIONAL PERIOD

– Role of the board in the transition process;

– Decision making during the transitional period

– Interaction of the board with the Minister

– Close liaison with other relevant department

B. PREPARING THE STAFF FOR THE NEW ENVIRONMENT

— Process for ensuring staff are kept up to date with arrangements

— Training on the new governance environment

C: DUE DILIGENCE PREPARATION FOR TRANSITION

— Functions of the authority

— Contracts and other arrangements

— Liabilities

Morning Tea

10.35am to 11am

Becoming an FMA agencyEmployment issues

Richard Harding, Senior General Counsel

Becoming a PS Act Agency

— Employment Issues

Becoming a PS Act Agency

— Threshold issues

– To PS Act or not to PS Act?

– Transmission of business?

– Is there a change of employer?

Becoming a PS Act agency

— What instruments set terms and conditions of employment?

– Constituting Act

– CEO determination under the Act

– Certified agreement

– AWAs

– Award

– Common law contracts

Becoming a PS Act agency

— What happens to these instruments on transfer to PS Act employment?

– Material from constituting statute will go

– CA, AWAs and award will usually transmit to the new employer

– Note WorkChoices changes

Becoming a PS Act agency

— What instruments will already be there waiting for you?

– The PS Act and all the instruments under it

– The APS Award

– Some other legislation?

Becoming a PS Act Agency

— How will the staff be moved?

– Usually, by the PS Commissioner under section 72 of the PS Act

– Unusually, by legislation

Becoming a PS Act agency

— Preserving conditions using the PS Regs

– Scheme in regulation 8.2 will be relevant

– Operate until a new award, CA or AWA comes into operation

Becoming a PS Act agency

— Some other issues to consider

– Policy parameters

– Other employment legislation may apply

– APS Values and Code of Conduct

– Delegations

Financial management under the FMA Acthandling public money, appropriations and procurement

Kathryn Graham, Senior General CounselSimon Konecny, Senior Executive Lawyer

Introduction

— Section 44 of the FMA Act

— Chief Executive’s Instructions

Scenario Part 1: Banking and appropriations

Banking

— Is the XYZ Bank compliant with the core protocols?

— New bank accounts must be opened

Appropriations

— The Consolidated Revenue Fund

— Is there an appropriation which will cover the expenditure?

— What are record keeping responsibilities?

– maintaining a ledger

Retaining revenue

— Section 31 agreements

— What will be in the agreement?

— Who will sign it?

— Recording credits to the appropriation

Drawing rights

— What do drawing rights do?

— For debiting an appropriation

— For making payments of public money

— Who will we issue drawing rights to?

Scenario Part 2 - Procurement

FMA Regulates

— The entry of contracts

— The procurement process

— Contract terms

Relevant Regulations affecting the entry of contracts

— Regulation 9

— Regulation 10

— Regulation 12

— Regulation 13

Relevant Provisions affecting the ProcurementProcess

— Regulation 8 – Commonwealth Procurement Guidelines

— Regulation 9 – Government Policies

Relevant Regulations affecting contract terms

— Regulation 9 – Government Policy

— Regulation 10 – contingent liabilities

Issues when outsiders spend public money

— They become subject to the FMA Act

— Issues relating to banking, delegations and drawing rights

From ATSIC to ATSIS to OIPC

Bernie Yates, Deputy Secretary, Office of Indigenous Policy Coordination

From ATSIC to ATSIS From ATSIC to ATSIS to OIPCto OIPC

AGS Workshop on AGS Workshop on Implementing the Uhrig ReviewImplementing the Uhrig Review

25 October 200525 October 2005

Sub-titleSub-title

“Birth, Death & Resurrection”

Timeline to the Changes (1)Timeline to the Changes (1)

• Gov’t announces ATSIC/ATSIS changes 17 April 2003

• ATSIS established as FMA agency 1 July 2003

• Gov’t announces new arrangementsin Indigenous affairs 15 April 2004

• Legislation introduced to abolish ATSIC 27 May 2004

• Senate Committee reference 16 June 2004• New arrangements introduced 1 July 2004

Timelines (2)Timelines (2)

• ATSIC High Court challenge Sept 2004

• Election announced (Bill lapses) Sept 2004• Bill reintroduced Late 2004• Bill passed, ATSIC abolished March

2005• ATSIC Regional Councils

abolished 30 June 2005 • ATSIS abolished 30 June 2005

What was ATSIC: platypus? What was ATSIC: platypus?

Hybrid beast: CAC agency, BUT:• No separation of powers between elected &

administrative arms (policy setting & funding decisions – implications for trust/nepotism)

• Minister appointed CEO (subject to Board’s agreement)- CEO had dual accountabilities

• Minister approved Budget framework (quarantined 75% of program funds)

• Staff under PS Act (elected arm involved)• Governance tensions ‘built in’

(1)(1) ATSIC to ATSIS (transitional) ATSIC to ATSIS (transitional)

Government announcement:• ‘Separation of powers’

(policy V’s funding decisions) 17 April 2003

Budget incorporation: May 2003

Start-up: 1 July 2003

(1)(1) ATSIC to ATSIS (transitional) ATSIC to ATSIS (transitional)New administrative arrangements:• New FMA Executive Agency (ATSIS), with former ATSIC funds

• Government-ATSIC Transition Agreement (‘protocol’)

• MoG change & transfer of 1200 staff & almost $1bn administered funds (20+ programs)

• Shift to FMA operating arrangements (including first-time provision of $22m employee entitlements & depreciation)

• Minister’s Directions to ATSIS CEO (including continuing policy role for ATSIC & Regional Councils)

• Communications strategy

(2)(2) ATSIS to New arrangements ATSIS to New arrangements

Announcement: 15 April 2004

Budget incorporation

(transitional, via DIMIA) May 2004

Start-up: 1 July 2004

(2)(2) ATSIS to New arrangements ATSIS to New arrangements

New administrative arrangements

• MoG changes, including s.72 transfer of 1200 staff to 8 portfolios/10 agencies (including new employment conditions)

• Establishment of 29 whole-of-government Indigenous Coordination Centres across Australia (including coordinated funding arrangements for ex-ATSIC programs & continuing policy role for Regional Councils until July 2005

• Transitional Budget arrangements (s.27 $$ transfers effected later in 2004)

• Communications strategy

(3)(3) Slow death of ATSIC/ATSISSlow death of ATSIC/ATSIS

• ALP/Govt back abolition of ATSIC April 2004• Bill introduced 27 May 2004• Senate Committee reference 16 June 2004• Election (Bill lapsed) October 2004• Bill reintroduced November

2004• High Court challenge

to Transition Agreement Sept/Oct 2004• Bill passed, ATSIC abolished &• set basis for assets transfer March 2005• ATSIC Regional Councils abolished 30 June 2005 • ATSIS abolished 30 June 2005

LessonsLessons

• Indigenous affairs experience more one of survival than a ‘best case’ (count your Uhrig blessings)

• Days are over for making career change decisions between agencies aimed at avoiding Ministers (!)

• Establish dedicated transition support team with relevant expertise- target exceptional people, including CAC/FMA/legal knowledge; but must be practical (keep you out of jail; make things happen; speak Plain English)

• Be bold (but pray a lot)

LessonsLessons• Don’t squander time (every day is precious): can

achieve remarkable things in impossible timelines when you have to (not recommended for a long life)

• Involve/manage stakeholders (advisory group?)- critical importance of communications (don’t rely on mind-reading)

• Close connections to Minister/Office• Don’t let crystal ball gazers have a field day

(staff communications critical) • Pray a lot

LessonsLessons

• Don’t go it alone: involve central agencies early: they have important expertise; can’t avoid them, so why not use them?

• Have faith that there is life after death (if you’ve prayed a lot)

QuestionsQuestions

…Good luck

Lunch

Please join us for lunch