First of all, thank you for the opportunity to present to the committee today on the Public Governance, Performance and Accountability Act and related topics. We refer to the act as the “PGPA Act”, and I'll do that for ease of reference throughout.
The PGPA Act came into effect on July 1, 2014, but it represents the third significant wave of reform in our framework since the 1980s. I can elaborate more on that a bit later. The unique part of this wave is that the PGPA Act consolidates in a single piece of legislation all of the governance, performance, and accountability requirements that apply to the key areas of government activity, and it sets out a regulatory framework for national government and for the entities which comprise it.
In terms of the budget process, the PGPA Act requires “accountable authorities”—and accountable authorities are either boards or individuals, the chief executives—to prepare budget estimates in accordance with any direction issued by the finance secretary, who is the non-parliamentary head of the finance department. It doesn't, however, address specific requirements for the budget process or the parliamentary estimates process in any given year. These sorts of issues are covered in separate legislation by the Standing Orders of our Parliament, particularly of our Senate.
In the case of legislation, there's another piece of legislation that is important here, the Charter of Budget Honesty Act 1998, which in many ways is part of the second wave of broad reforms that I talked about earlier. Then, annually, we supplement that with budget process operational rules, which cabinet approves each year and which govern the operation of the budget in any given year.
The PGPA Act drew on earlier reform attempts, including two separate pieces of legislation that covered, on the one hand, departments of state and similar activities, and on the other hand, companies and other statutory bodies. It brought all those things together into a common framework.
We also took the opportunity—and government took the opportunity—to introduce new elements and requirements, not just to replicate what was already there. In particular, the act creates positive duties on all officials. An official in our context is now defined as anyone from the head of a department to an army reservist and they are covered by this framework, so there are positive duties on all officials and the heads of all public sector organizations in terms of how resources are managed.
The act has provisions that strengthen the focus on risk, on co-operation, and on performance and accountability. It's an act that goes to the questions of budgeting and resource management, but it goes to those things in the context of governance more broadly.
There are five key principles of the act. I'll briefly refer to those.
The first is that government should act and operate as a coherent whole. The second is that a uniform and consistent set of duties should apply to all resources handled by any Commonwealth entity. The third is that public sector performance goes beyond the financial to the non-financial. The fourth is that to improve performance you need to engage constructively with risk. The fifth is that the financial framework for which we are responsible, including the rules and supporting policy, should support the requirements of the government and the Parliament to discharge their responsibilities.
A key element we've been working on lately is the performance aspect of this framework. We introduced two new elements through that set of reforms: corporate plans, which are forward-looking documents for entities, and annual performance statements, which are intended to strengthen the focus on performance that entities provide. Together, they are meant to be read as the start point, and subsequently, in reporting against the annual performance statements, the end point of a full cycle.
A key element in our thinking is to see the management of the public sector as a cycle, from planning and resourcing to implementation and evaluation. Historically, we've been good at some of those things, but not at others. We're trying to use these reforms to get good at all of them.
We've also been working on a range of other things that are still to be worked through in terms of this third wave of reform. I'll briefly describe those.
We're working on our appropriations basis and how we provide resources to entities. We think we have a very complex appropriations framework, and we think there's, at the very least, a job to do to simplify and streamline appropriations. We're working on cash management—how cash is treated in our system—and in particular on ensuring that the legitimate interests of government in a whole-of-government approach to cash management are given force.
We're working on joining up, which is really about how entities and organizations in the public sector connect with each other. We find that there are no problems or issues in our policy areas these days that can reasonably and effectively be best managed within a silo. In fact, all of them require cross-entity, cross-program, and cross-jurisdiction co-operation, and our systems really haven't been designed to facilitate that.
We call our approach “differential regulation”, which is to say that if risk is fundamental to how we should think about government and how it works, then risk needs to be differentiated. Some aspects of public management are riskier than others. Some organizations have a different risk profile than others. Our regulations need to recognize that.
Very importantly, on the performance framework, as I've mentioned, given that we are a national government and have organizations spread across the country, we need to get better at providing information and guidance in a way that people can take advantage of, because we recognize that the success of any reform program is dependent on people's ability to work within the context that is provided.
I might leave it at that as the opening statement. I'm happy to go to questions.