Commonwealth officials (including APS employees) will soon be subject to new general duties based on the director and officer duties contained in the Corporations Act.
As part of a move to base duties on concepts understood across the public and private sectors, new general duties will apply to Commonwealth officials from 1July 2014 under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).
The PGPA Act consolidates the governance, performance and accountability requirements for the Commonwealth, and will replace the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC Act).
Key concepts under the PGPA Act
The PGPA Act mainly applies to Commonwealth entities. A "Commonwealth entity" includes both:
- a non-corporate Commonwealth entity (essentially an FMA agency under current terminology); and
- a corporate Commonwealth entity (essentially a CAC Act authority).
The PGPA Act contains a number of significant changes in the governance of Commonwealth entities. A single definition of "public resources" is used to apply to all money and all property held by Commonwealth entities, including corporate Commonwealth entities. This is a major change and the rationale for extending this definition to Commonwealth authorities is that their moneys and property are still public resources in the sense that they should be properly managed.
Every Commonwealth entity has an "accountable authority". This is the Secretary of a department, the person or group of persons prescribed for an agency that is not a department and the Board of a corporate Commonwealth entity.
The accountable authority of a Commonwealth entity must govern the entity in a way that promotes:
- the proper use and management of public resources for which the authority is responsible;
- the achievement of the purposes of the entity; and
- the entity's financial sustainability.
The PGPA Act also contains provisions about planning by, and the accountability of, "Commonwealth companies" (CAC Act companies under current terminology). Their obligations are discussed in "The Public Governance, Performance and Accountability Act: implications for CAC bodies".
New general duties of officials
The new general duties apply to "officials" of Commonwealth entities. An "official" is broadly defined as an individual who is in, or forms part of, the Commonwealth entity (that is, the FMA agency or CAC Act authority in current terminology).
Officials include members of the accountable authority, officers, employees and any other prescribed individuals. Consultants and independent contractors are excluded unless they are prescribed individuals.
It is worth noting that a number of the new duties are similar to, and overlap with, several of the existing duties of APS employees under the APS Code of Conduct. For example, the code requires an APS employee to act with care and diligence, and behave honestly and with integrity, in connection with APS employment. The code also deals with conflicts of interest and improper use of information or power.
Duty of care and diligence
Officials will have a general duty to exercise his or her powers, perform his or her functions and discharge his or her duties with the degree of care and diligence that a reasonable person would exercise if the person:
- were an official of a Commonwealth entity in the Commonwealth entity's circumstances; and
- occupied the position held by, and had the same responsibilities within the Commonwealth entity as, the official.
Duty of good faith and proper purpose
Officials will have a general duty to exercise his or her powers, perform his or her functions and discharge his or her duties in good faith and for a proper purpose
Duties relating to use of position and information
Officials will have a general duty to not improperly use his or her position to:
- gain an advantage for himself or herself or any other person; or
- cause detriment to the entity, the Commonwealth or any other person.
They also cannot improperly use information (obtained by the person because they are an official of a Commonwealth entity) to:
- gain an advantage for himself or herself or any other person; or
- cause detriment to the Commonwealth entity, the Commonwealth or any other person.
Duty to disclose material interests
Officials will have a general duty to disclose details of any material personal interest of the official that relates to the affairs of the entity.
For Commonwealth entities that are subject to the Public Service Act 1999, the PGPA Act is an Australian law for the purposes of the Public Service Act 1999. This means that a breach of any of these general duties is a breach of the APS Code of Conduct. Potential sanctions for breach of the code are termination of employment, reduction in classification, reassignment of duties, reduction in salary, deductions from salary by way of fine and a reprimand.
For a corporate Commonwealth entity that is not subject to the Public Service Act 1999, the PGPA Act provides that the person who appoints the members of the accountable authority can terminate the appointment of a member who has breached a general duty (subject to natural justice requirements), and the accountable authority is required to implement measures directed at ensuring the entity's officials comply with the PGPA Act (for example, as a condition of employment).
Importantly, the new duties are in addition to, and do not replace, other duties that may apply to officials – for example, the APS Code of Conduct, general law duties (such as an obligation to keep confidential information confidential), a breach of employment duties (such as express obligations in an employment contract or implied duties such as good faith) or, in an extreme case, a breach of the Criminal Code (such as for fraud or theft).
As a first step, officials of Commonwealth entities should familiarise themselves with the new general duties, including (for APS employees) the extent to which they exceed and vary from the existing obligations under the APS Code of Conduct.
Secondly, the PGPA Rules will be important in providing extra detail and clarity on the operation of the general duties. For example, for the duty of care and diligence, what protection is available for operational decisions made in good faith and for a proper purpose (known in the private sector as "the business judgement rule")? To what extent can officials rely upon advice from delegates in making decisions?
The Rules will also need to define a number of procedural matters for the disclosure of material personal interests.
The Department of Finance and Deregulation is currently working on the Rules which are disallowable instruments and are expected to commence on 1 July 2014.
Further, Chief Executive Instructions may also be used to clarify the operation of the general duties within a Commonwealth entity (including procedural requirements).
You might also be interested in...
- New requirements in establishing Commonwealth companies
- Commonwealth entities get new performance assessment requirements
- The Public Governance, Performance and Accountability Act: implications for CAC bodies
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.