Implementation & PGPA Act section 75 determinations

The effective date of a Machinery of Government (MoG) change will be either the date:

• that the revised Administrative Arrangements Orders (AAOs) were issued
• specified in a government decision, or
• specified in legislation or a legislative instrument – see also PGPA Act section 75 determinations below.

Under MoG arrangements, responsibility for functions transfers from the transferring entity to the receiving entity on the effective date of the MoG change. However, functional and administrative responsibilities for associated assets, liabilities, revenues and expenses may not transfer to the receiving entity until later. 

In practice, it is often impossible to arrange for all the necessary transfers to occur on the date of the MoG change unless the impending change is known in advance. As a result, the date that the receiving entity becomes responsible for transferred assets, liabilities, revenues and expenses may vary. 

The transferring and receiving entities often need to agree on:

• the amount of annual appropriations transferred and the transfer dates
• staff transferring to the receiving entity under section 72 of the Public Service Act 1999 (PS Act). Even those staff specifically allocated to a function being transferred will not transfer to the receiving entity until section 72 determinations are made by the Public Service Commissioner – similar arrangements may apply to entities that employ staff under Acts other than the PS Act
• any other assets, liabilities, revenues and expenses that remain in the control of the transferring entity until such time as there is agreement to transfer them. In some cases, this may require agreement by external parties.

Any proposed appropriations for the transferring function(s) which have been included in annual appropriation Bills before Parliament at the MoG change date should be reassigned to the receiving entity through a section 75 determination once the appropriation bills receive royal assent. The date of effect of the section 75 determination is independent of, but may be aligned with, other accounting for MoG changes, as shown below.

Effective date of transfer

The transfer date for responsibilities for assets and liabilities and related revenue and expenses should align.

Administered items are managed by an entity on behalf of the Australian Government and are not subject to the explicit control of a specified entity. The Public Governance, Performance and Accountability Act 2013 (PGPA Act) and AASB 1004 Contributions do not distinguish between administered and departmental items and place responsibility for all items with the relevant entity and accountable authority. 

Reporting of administered items should be by the entity responsible for the function using the same accounting principles and treatment applied to departmental items. Entities should confirm with their legal teams which entity is responsible for administered activities and items following a MoG change, for example, by reviewing changes to the functions and legislation specified in the AAOs and determining what administered items are linked to those functions and legislation. 

Implementation of the financial consequences of a MoG change not previously announced can be considerably simplified if the receiving and transferring entities:

• focus initially on the items that transfer immediately (for example, responsibility for payments from special appropriations)
• establish agreement on a future date at which all other items will be transferred and document that agreement in a Memorandum of Understanding (MoU)
• communicate relevant matters to Finance (such as changes in responsibility for special accounts, for access to appropriations through Central Budget Management Systems (CBMS)).

To continue operations after MoG changes occur, one option for the receiving entity is to request that the transferring entity continue to manage related receipts and payments on its behalf (on an interim or ongoing basis). In such cases, the receiving entity must provide the transferring entity with appropriate delegations and authorisations. Both entities will need to report on amounts paid and received under these delegations in their financial statements - see section 47 of the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR). 

Agreements between the entities on the transfer of revenues, expenses, assets and liabilities should be documented in a MoU. Documentation of agreements is important for clarifying accountability, preventing misinterpretations and as supporting evidence. A MoU may also deal with the transfer of other rights and responsibilities which are not recorded as assets and liabilities (for example, obligations under legal agreements or responsibility for intellectual property).

Section 75 of the PGPA Act applies if a function of a non-corporate Commonwealth entity (NCE) is transferred to another NCE, such as where the transferring entity is abolished. Finance makes determinations under section 75 of the PGPA Act under a delegation from the Minister for Finance to transfer annual Appropriation Act amounts between NCEs.

A section 75(2) determination will detail amendments to the annual Appropriation Acts, effective from the later of the determination date or the commencement date.

For practical reasons, it may be administratively easier for reporting purposes if the effective date of a PGPA Act section 75 determination is from an agreed commencement date rather than the determination date (for example at the beginning or end of a month or 1 July). Entities should contact the Annual Appropriations Team where they wish to have an agreed date as the effective date.