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Last updated: March 2008

Constitutional, legal and Government framework

Machinery of Government changes

The terms ‘machinery of Government changes’ (MOG) and ‘administrative re-arrangements’ are interchangeable and are used to describe a variety of organisational or functional changes affecting the Commonwealth.

Some common examples of administrative re-arrangements are:

Not all administrative re-arrangements involve a change to the AAO but the Prime Minister’s agreement will be required on each occasion and action may also need to be taken to move employees under section 72 of the Public Service Act 1999 or to transfer amounts that have been appropriated under section 32 of the Financial Management and Accountability Act 1997.

This section covers:

Administrative Arrangements Order

Under the Constitution, the Governor-General, on the advice of the Prime Minister, appoints Ministers, establishes Departments of State and formally allocates executive responsibility among Ministers through the Administrative Arrangements Order (AAO).

The AAO is published in the Commonwealth Gazette. It sets out the matters dealt with by each Department of State and the legislation administered by a Minister of State administering a Department. The AAO entry for each Department of State covers the principal matters and legislation administered by all agencies (including statutory agencies and executive agencies) within the relevant portfolio.

The Department of the Prime Minister and Cabinet (PM&C) is responsible for the provision of advice to the Prime Minister on machinery of Government changes and the preparation of the documentation necessary to give effect to those changes. PM&C also maintains the AAOs.

Financial/resource management aspects of an administrative re-arrangement

Section 32 of the FMA Act

Where a machinery of Government (MOG) change results in partial or full transfer of a function to another agency, the losing agency will need to make arrangements for the transfer of any remaining departmental and administered appropriations relating to the function to the gaining agency. Section 32 of the Financial Management and Accountability Act 1997 (FMA Act) allows for the transfer of an amount that has been appropriated where a function becomes a function of another FMA Act agency, either because an agency is abolished or for any other reason.

The Finance Minister, or his or her delegate, may issue a determination to transfer from the losing agency to the gaining agency some, or all, of an amount that has been appropriated for performing that function by the losing agency.

Agency Advice Units in the Department of Finance and Deregulation should be contacted for assistance.

Transfer of functions between FMA Act agencies and CAC bodies

Section 32 transfers can only occur between FMA Act agencies. That is, where a function has been transferred from a body subject to the Commonwealth Authorities and Companies Act 1997 (CAC Act) to an FMA Act agency or vice versa, section 32 of the FMA Act has no application. Agencies should contact the relevant AAU in the Department of Finance and Deregulation to discuss specific circumstances and it is possible that agencies may need to seek legal advice on these issues.

Where legal issues are likely to take some time to resolve, Finance will consider if interim measures may need to be put in place to enable continuation of service delivery. Agency advice units in the Department of Finance and Deregulation should be contacted for assistance.

Transfer of Special Accounts

Special Accounts record amounts that can be set-aside from the Consolidated Revenue Fund for specific purposes. A Special Account may be established either by the Finance Minister's determination under section 20 of the FMA Act, or by other enabling legislation in accordance with section 21 of the FMA Act. Determinations that establish a Special Account take effect after  five sitting day disallowance period required by the Legislative Instruments Act.  The Finance Minister may vary, revoke or abolish a section 20 Special Account, while the Minister responsible for a statutory Special Account is responsible for undertaking changes to the enabling legislation for the Special Account.

In the event of MOG changes, agencies should consider whether any Special Accounts they manage may be affected. The relevant AAU in the Department of Finance and Deregulation should be consulted in relation to any proposals to transfer, establish, vary or abolish Special Accounts. Special Accounts made under other enabling legislation (s.21 of the FMA Act) automatically transfer to the gaining Minister.

Special appropriations

A special appropriation is an appropriation that appears in an Act (other than those in the annual appropriation Acts), which appropriates money from the Consolidated Revenue Fund for a particular purpose.

When a MOG change occurs, portfolio Departments should review the allocation of responsibilities for administering relevant special appropriations to ensure the responsibilities lie with the appropriate agency. If responsibility for administering a special appropriation is to be transferred, the portfolio Department should ensure that the gaining agency is able to comply with its statutory responsibilities. Further guidance can be found on the Finance website at Finance Circular 2005/13: Allocation of responsibilities for special appropriations.

Transfer of assets and liabilities between FMA Act agencies

The process for determining the amount of appropriation that is to be transferred is separate and distinct from the process of transferring assets and liabilities. FMA Act agencies should identify those assets and liabilities that are to be transferred, preferably under a Memorandum of Understanding (MoU). This identification needs to consider those assets (including cash) and liabilities that belong to the function that is to be transferred. Cash to be transferred may include amounts of cash that have been accumulated to meet future commitments, including provisions, make good and funding of depreciation. Accounting for the transfer should be in accordance with relevant accounting standards and the Financial Management and Accountability (Financial Statement) Orders.

Superannuation Arrangements

Since 1 July 2005, most new Australian Government employees and statutory office holders are covered by the choice of superannuation fund arrangements (choice) under the Superannuation Guarantee (Administration) Act 1992

Choice has allowed agencies to have different superannuation arrangements, such as contribution rates, salary sacrifice contributions and employer (default) funds, agencies should consider the implications to superannuation arrangements under a MOG change. Agencies should consult with the Department of Finance and Deregulation on Australian Government superannuation scheme issues and consult with the Department of Education, Employment and Workplace Relations on industrial instruments.

Movement of employees as a result of an administrative re-arrangement

Section 72 of the Public Service Act 1999 gives the Public Service Commissioner certain powers in relation to administrative re-arrangements. Under this section the Commissioner may:

There is no power under the Public Service Act to move employees out of the APS to non-Commonwealth employment.

The movement or engagement of employees under section 72 of the Public Service Act is not subject to normal APS merit selection requirements.

The principle that ‘staff follow function’ generally applies to the movement of employees within or into the APS or between the APS and non-APS Commonwealth employment in order to give effect to an administrative re-arrangement.

Workplace relations aspects of administrative re-arrangements

Section 72 of the Public Service Act 1999 and regulations 8.1 and 8.2 of the Public Service Regulations 1999 set out specific provisions relating to remuneration and other conditions of employment of persons moved between APS agencies, or between the APS and other Commonwealth employment as a result of an administrative re-arrangement.

In addition, the transmission of business provisions of the Workplace Relations Act 1996 may be relevant where an administrative re-arrangement involves the movement of functions and employees into, or out of, the APS.

The operation of these provisions can vary depending on the circumstances of each administrative re-arrangement. As such, agencies should contact the Department of Education, Employment and Workplace Relations for advice in these circumstances.