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Legislative Assembly for the ACT: 2007 Week 2 Hansard (6 March) . . Page.. 154..

MR STANHOPE (continuing):

Mr Speaker, today I am tabling the Financial Management Amendment Bill 2007. This bill provides amendments to the Financial Management Act 1996 to allow the effective administration of the cash management framework as announced in the 2006-07 budget.

As part of the 2006-07 budget, the government announced that cash management across ACT government agencies would be reformed to strengthen transparency and accountability, and to ensure that cash balances are used more effectively. Features of the cash management reforms include:

  • minimising agencies' cash balances, with appropriation provided on a "just-in-time"basis; and

  • establishing an appropriate cash buffer for each department to suit operational circumstances and working capital needs.

The above reforms have already been reflected in the 2006-07 budget. It is, however, necessary to support the new arrangements with amendments to the Financial Management Act.

This bill inserts provisions into the Financial Management Act that will facilitate the efficient and effective cash management of departments by providing appropriation mechanisms to:

  • preserve appropriations from one financial year to the next; and

  • provide additional funding to agencies to pay unbudgeted, abnormally high levels of employee entitlements.

As part of the cash management reforms, cash holdings within departments have been reduced to a level sufficient to meet operational circumstances and working capital requirements. This is known as a "buffer". As a consequence of these reforms agencies will no longer be able to draw down all remaining appropriation at the end of the financial year. However, should a department not draw down its remaining appropriations by 30 June and not roll funding over through the budget process, then the appropriation lapses under current legislation. This can be a problem in particular for capital works and other significant projects, given the size or complexity of projects and the difficulties with forecasting yearly appropriation requirements. This bill inserts a provision to address the lapsing of appropriation at the end of a financial year where the appropriation is still required in a future year.

The bill amends the Financial Management Act by inserting a provision that allows for appropriations to be preserved from one financial year to the next based on an instrument signed by the Treasurer. Authorisation by instrument will allow rollovers of appropriation on an exception basis, with the merits of each rollover to be assessed individually. Obviously, agencies would need to demonstrate that undrawn appropriations exist in the previous year, and the nexus between the appropriation and a particular project or program.

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