What is an example of a government corporation?

This page outlines the governance structures that support Australian Government bodies to undertake government activities. There are 4 types of governance structures, these are outlined in the below diagram:

All primary bodies are subject to the Public Governance, Performance and Accountability Act 2013 (the PGPA Act).

All primary bodies are included on the Flipchart and List of Commonwealth entities and companies and can be found at PGPA Act Flipchart and List.

What is a non-corporate Commonwealth entity?

Non-corporate Commonwealth entities are legally and financially part of the Commonwealth and include:

• departments of state
• parliamentary departments
• listed entities.

Reasons for creating a non-corporate Commonwealth entity

Creating a non-corporate Commonwealth entity may be suitable if it will:

• need direct accountability to the Parliament, including through parliamentary committees
• be primarily budget funded
• need to be subject to policies of the Australian Government
• raise relevant money or perform regulatory activities under a law of the Commonwealth
• need to be classified as part of the general government sector (GGS).

Government policies automatically apply to non-corporate Commonwealth entities. Enabling legislation can override government policy in the event of a conflict.

Departments of state

The departments of state are the main bodies that reflect the structure of government.

Examples of departments of state include:

• Department of Finance (within the Finance portfolio)
• Department of Defence and Department of Veterans’ Affairs (both within the Defence portfolio)
• Department of Health (within the Health portfolio).

The Governor-General establishes departments of state and appoints the ministers that administer them.

The Administrative Arrangements Order, available on the Department of the Prime Minister and Cabinet website, lists the matters dealt with by a each department of state and the legislation administered by each minister.

Parliamentary departments

The Parliamentary Service Act 1999 establishes the parliamentary departments. These are:

• Department of Parliamentary Services
• Department of the Senate
• Department of the House of Representatives
• Parliamentary Budget Office 

Parliamentary departments support the operation of the Parliament of Australia, its committees and members. They are accountable to the Parliament for their operations and subject to the PGPA Act.

Parliamentary departments do not form part of the executive government and are not in the Administrative Arrangements Order.

Listed entities

Listed entities are prescribed by legislation and can be any body, person, group of persons or an organisation. 

Entities are ‘listed’ to clearly define them as separate non-corporate Commonwealth entities and not part of another Commonwealth entity. For example, the Australian Office of Financial Management would be part of the Department of the Treasury if it were not a listed entity under the PGPA Act.
 

What is a corporate Commonwealth entity?

A corporate Commonwealth entity is a body corporate that has a separate legal personality from the Commonwealth. A corporate Commonwealth entity can enter into contracts and own property separate from the Commonwealth.

Corporate Commonwealth entities are still part of the Australian Government.

Corporate Commonwealth entities generally have enabling legislation that establishes the scope of their activities and a multi-member accountable authority (such as a board of directors). Examples of corporate Commonwealth entities include:

• the National Library of Australia
• the Australian Broadcasting Corporation
• Airservices Australia.

Reasons for creating a corporate Commonwealth entity

Creating a corporate Commonwealth entity may be suitable if:

• the body will operate commercially or entrepreneurially
• a multi-member accountable authority will provide optimal governance for the body
• there is a clear rationale for the assets of the body not to be owned or controlled by the Australian Government
• the body requires a degree of independence from the policies and direction of the Australian Government.

A level of financial autonomy from the government (and policies of the government) may be suitable for a body that needs to operate commercially and does not receive a substantial proportion of its funding from the Australian Government. A commercial focus may include the need to hold money on its own account, to borrow or invest money or to have the power to engage staff outside the Public Service Act 1999.

The PGPA Act does not give ministers a general power to direct the activities of a corporate Commonwealth entity. It does give broad powers to require the entity to provide information about its activities.

Corporate Commonwealth entities are generally not required to comply with policies of the Australian Government except where there is:

• a direction from the responsible Minister under the enabling legislation
• a government policy order.

Creating a new corporate Commonwealth entity

Creating a new corporate Commonwealth entity will generally require new legislation. The Finance Minister can establish a new body corporate through a rule made under the PGPA Act.

This option may provide greater administrative flexibility in creating and closing down corporate entities that have a limited span of activity. The Parliament still has a role in the creation of corporate Commonwealth entities because it can disallow a rule made by the Finance Minister.

Corporate Commonwealth entities also provides an alternative to creating a Commonwealth company. Corporate Commonwealth entities are subject to the PGPA Act have a different level of transparency and accountability compared to a company created under the Corporations Act 2001.
 

What is a Commonwealth company?

A Commonwealth company is a company established under the Corporations Act 2001 that the Commonwealth controls. It is legally separate from the Commonwealth.

The Commonwealth can solely or partly own a Commonwealth company. Examples of Commonwealth companies include:

• Snowy Hydro Limited
• NBN Co Limited.

Companies that are subsidiaries of a corporate Commonwealth entity, a Commonwealth company or the Future Fund Board of Guardians, are not Commonwealth companies.

Reasons for creating a Commonwealth company

Creating a Commonwealth company may be suitable if:

• the body will primarily conduct commercial or entrepreneurial activities and will generate profits for distribution to its members
• the body will operate in a commercial or competitive environment (at arm’s length from government)
• the Australian Government is going the sell the body in the short to medium term.

The members (shareholders or guarantors) form companies by registration under the Corporations Act 2001. Once created, a company has the power to enter into transactions, borrow money and operate without further permission from its members.

The Finance Minister’s approval is required for the Australian Government to form or participate in forming a new company.

The responsible Minister is required to table a notice in the Parliament when a Commonwealth entity engages in certain activities involving a company (e.g. acquisition or disposal of shares).

Issues when using companies structures

Lack of scrutiny

• there is no formal opportunity for parliamentary scrutiny before a company is established
• the objects of a company may be amended by its members without parliamentary scrutiny
• a company can borrow and invest money without government approval.

Budget funding

• Commonwealth companies may not be able to enter into multi-year agreements if they rely on annual funding from the government. Lack of funding certainty may affect their ability to pay debts when they fall due.

Public perception

• there may be an assumption, or a public perception, that there is a government guarantee for the operations of a Commonwealth company in the event of its failure.

Taxes

• a company is generally liable to pay Commonwealth, state and territory taxes and charges, whereas enabling legislation may exempt a statutory body from these taxes and charges.
   

More about secondary statutory structures

Statutory advisory structures

Statutory advisory structures are established by legislation to provide advice to government. They may assist with policy development, regulation, assurance activities or promote international relations.

These bodies may report to a Commonwealth entity, an accountable authority or to the minister. Often ministers appoint members.

Members are likely to be external to the Australian Government. A representative of the Commonwealth entity may be included as an ex officio member.

A Commonwealth entity will usually provide financial support and staff to the body.

Statutory office holders, offices and committees

The activities of a statutory office holder, office or committee are established in legislation to provide additional transparency regarding the roles, responsibilities and purpose of the body.

A statutory office holder, office or committee can exercise their role independently while operating within a Commonwealth entity. Separate branding or marketing can distinguish the body from the Commonwealth entity. For example, the Gene Technology Regulator is a statutory office holder in the Department of Health.

An existing Commonwealth entity will already have support functions like a chief financial officer and a human resources section, which will reduce the cost of the activity.

Reasons for establishing a statutory body

Creating a statutory body may be suitable:

• if the activity requires a level of independence from the responsible minister or the executive government
• to legally enforce decisions made by a regulator or decision-maker
• to provide for a distinct ongoing status for the activity by describing it within legislation
• to achieve higher levels of accountability and transparency by describing the activities and powers in legislation.
   

More about secondary non-statutory structures

Non-statutory advisory structures

Non-statutory advisory bodies provide advice to government but are not established in legislation.

These bodies commonly report to a Commonwealth entity, an accountable authority or to the minister directly. Often ministers appoint members. Members may be paid or unpaid.

Members are likely to be external to the Australian Government. A representative of the Commonwealth entity may be included as an ex officio member.

A Commonwealth entity will usually provide financial support and staff to the body.

Non-statutory activities with separate branding

An existing body can undertake new activities with separate branding. For example, COMCAR within the Department of Finance, AusIndustry in the Department of Industry, Innovation and Science or the Australian Government Actuary in the Department of the Treasury.

Co-locating a new activity within an existing body minimises set-up and ongoing administrative costs.

This is suitable for activities delivering services to the public or to government.

Co-locating a new activity in an entity may require changes to enabling legislation or the Administrative Arrangements Order.
 

Other governance relationships

Ministerial Councils and related bodies

Ministerial Councils provide a forum for Australian Government, State and Territory Ministers to discuss national policy issues. The Council of Australian Governments (COAG) manages matters of national significance or matters that need co-ordinated action by all Australian governments. Commonwealth or State/Territory departments usually provide the secretariat services.

Related bodies include sub-committees and working groups of the COAG Ministerial Councils that discuss policy issues and implement programs across Australia.

National law bodies

National law bodies coordinate national activities and undertake regulatory roles such as licensing, regulation or compliance. The Australian Government and the States and Territories often joint fund them as the result of inter-governmental agreement.

They are established under consistent laws enacted in every State and Territory (and possibly the Commonwealth) and may be incorporated under State/Territory law. The Australian Health Practitioner Regulation Agency is an example of a national law body that is not set up in Commonwealth legislation.

National law bodies may report to and be funded through a Commonwealth entity. A Commonwealth entity, the relevant COAG Ministerial Council, the States and Territories and/or industry may appoint members.
 

What are inter-jurisdictional and international bodies?

Governance structures for inter-jurisdictional bodies vary depending on the activities undertaken and the outcomes of negotiations between the participating jurisdictions. Statutory governance structures for inter-jurisdictional bodies can be set up in Commonwealth law (as a Commonwealth entity) or State and Territory law.

Examples of inter-jurisdictional bodies

Set up as a non-corporate Commonwealth entity:

• National Health Funding Body.

Set up as a corporate Commonwealth entity:

• the Australian Commission on Safety and Quality in Health Care and the Independent Hospital Pricing Authority.

Inter-jurisdictional bodies may also be national law bodies in the legislation of States and Territories.

Some significant governance challenges can arise when bodies are formed that are accountable to more than one government. Clarity of arrangements and responsibilities are normally contained within the framework of a single jurisdiction, and it is crucial to consider this when establishing any inter-jurisdictional body. Different types or levels of accountability to different jurisdictions may ultimately lead to a lack of accountability.

Inter-jurisdictional bodies as companies

Another approach for delivering inter-jurisdictional activities is to establish companies, usually limited by guarantee, with the Australian Government and State and Territory governments as members.

Placing Commonwealth public sector officials on the board of a Corporations Act company means that they cannot act in the Commonwealth’s best interests if they are different to the best interests of the company. This may put those officials in a conflict of their duties.

International bodies

The creation of an intergovernmental body with a foreign state – with governance and accountability requirements established by two separate legal systems – can lead to legal and regulatory issues.

Proposals to create intergovernmental and other joint entities will require ongoing consultation between the sponsoring entity and relevant departments, including the Department of Finance.
 

Structures linked to the Australian Government through statutory contracts, agreements and delegations.

These are bodies owned and operated by the private sector that, through legislation, legislative instrument, statutory contract or agreement, deliver services on the Government’s behalf.

Australian Government grants largely fund activities of these bodies, which may include research on behalf of their industry, or managing registrations and licensing. These grants may represent levies or fees collected on the industry’s behalf.
 

Joint ventures, partnerships and interests in other companies

Partnerships

Partnerships differ in state and territory laws. Entering into partnerships may place duties and liabilities solely on the Commonwealth. These duties may arise under state and territory laws or under the general law (e.g. the law of equity).

Trusts

Trust money received by the Commonwealth forms part of the Consolidated Revenue Fund and requires an appropriation from Parliament to spend.

Commonwealth entities cannot invest money held on trust without the authority of the Finance Minister. Trustees may need investment powers in order to remain consistent with the terms of the trust deed. Commonwealth entities should consult with the Department of Finance before accepting a request to act as a trustee.

Joint ventures

Joint ventures are business agreements that take different forms. Many joint ventures are incorporated under the Corporations Act 2001 to give them distinct legal personalities and recognised statutory frameworks.

Incorporated associations and cooperatives

The Australian Government can participate in forming bodies such as associations incorporated under state and territory law. For example, the various Cooperative Research Centres.

These bodies cannot transact business across Australia unless registered under the Corporations Act 2001.

The PGPA Act does not govern these bodies. This means that the responsible Minister and the Finance Minister have no power to seek information from them. Commonwealth entities should consult with the Department of Finance if they are considering using these governance structures.
 

Subsidiaries of corporate Commonwealth entities and Commonwealth companies

Corporate Commonwealth entities may have express powers under their enabling legislation to establish subsidiary companies. For example, the Commonwealth Scientific and Industrial Research Organisation.

Commonwealth companies generally have the power to establish subsidiaries.

A subsidiary of a corporate Commonwealth entity or Commonwealth company, if established in Australia, will generally be a company under the Corporations Act 2001.

A subsidiary created by a corporate Commonwealth entity will be subject to the reporting obligation and will be listed on the Australian Government Organisations Register.