The Intergovernmental Agreement on Federal Financial Relations (IGAFFR) provides the overarching framework for financial relations between the Commonwealth and the States and Territories. The following protocol seeks to provide clarity for NSW Ministers and agencies about processes for:

• negotiating and entering into agreements; and
• progress reporting.

There are three broad types of financial/policy arrangements under the IGAFFR:

• National Agreements which are policy agreements and are generally supported by National Specific Purpose Payments;
• National Partnerships which can be either reform or project based and generally provide for payments to States and Territories; and
• General Revenue Assistance which includes the ongoing provision of GST payments.

This protocol addresses arrangements for negotiating agreements under categories 1 and 2 above.

Negotiation and Signature

National Agreements

National Agreements are high level policy documents that record COAG’s agreed objectives, outcomes, outputs and performance benchmarks in broad service sectors. National Agreements are signed by Heads of Governments.

National Agreements are not funding agreements, but may be associated with a National Specific Purpose Payment (see below). There are currently six National Agreements in place: the National Healthcare Agreement, National Education Agreement, National Agreement for Skills and Workforce Development, National Disability Agreement, National Affordable Housing Agreement, and National Indigenous Reform Agreement.

National Agreements are enduring and subject to periodic review. Where existing National Agreements are to be amended, or new National Agreements negotiated, COAG establishes defined, time-limited processes to progress this work. Generally the NSW Department of Premier and Cabinet (DPC), NSW Treasury and the relevant line agency will jointly represent NSW in these negotiations.

As long term, broad policy agreements, National Agreements must be considered by Cabinet before being signed by the Premier.

National Specific Purpose Payments

National Specific Purpose Payments are a financial contribution from the Commonwealth to support State service delivery in key service delivery sectors. The States are required to spend each National Specific Purpose Payment in the service sector relevant to the payment – but there is full budget flexibility to allocate funds within the sector. With the exception of the National Healthcare Agreement ^[1] and the National Indigenous Reform Agreement, there is a National Specific Purpose Payment related to each National Agreement.

Schedule D of the IGAFFR provides for the payment of National Specific Purpose Payments by the Commonwealth – including the base Commonwealth financial contribution, growth factors and distribution of National Specific Purpose Payments among the States and Territories.

As long term financial arrangements, National Specific Purpose Payments should always be considered by Cabinet before NSW agrees revised or new arrangements.

National Partnerships

National Partnerships, and any payment to the States under them, support specific projects, facilitate reforms and/or reward jurisdictions that deliver on national reforms or achieve service delivery improvements. National Partnerships are signed by Heads of Governments.

National Partnerships have a defined structure which includes the purpose for the agreement, agreed outcomes and outputs, the roles and responsibilities of each party, funding arrangements, performance benchmarks and reporting requirements.

Usually line agencies (at both the Commonwealth and State levels) lead the negotiation of National Partnerships. This is appropriate given their service delivery expertise and in-depth knowledge of the policy context. However, early and ongoing involvement of central agencies is also important to ensure that National Partnerships align with whole of government priorities. Central agencies will also be responsible for maintaining the principles of the IGAFFR (including that a National Partnership is appropriate in the circumstances, there is an outcome focus, sound performance monitoring framework, funding certainty, and proportionate administrative and reporting burden).

NSW line agencies should consult the National Reform Unit DPC prior to agreeing in principle to pursue a National Partnership, immediately upon receipt of first drafts from the Commonwealth, and throughout the negotiation.

DPC and NSW Treasury will work closely with line agencies to provide support during the negotiation of National Partnerships.

National Partnerships must be approved in writing by the Treasurer and the relevant portfolio Minister(s) before the Premier signs the agreement. Depending on the nature of the National Partnership, Cabinet consideration may be required.

Project Agreements

During 2011 a new type of National Partnership was agreed – called a Project Agreement – for relatively low value and/or low risk projects. Like National Partnerships, Project Agreements define the agreed outcomes and outputs, the roles and responsibilities of each party, funding arrangements, performance benchmarks and reporting requirements. Project Agreements tend to be output, rather than outcome, focussed. They are signed by portfolio Ministers and replace Omnibus National Partnerships and their associated Implementation Plans.

As for National Partnerships, line agencies should consult the National Reform Unit DPC prior to agreeing in principle to pursue a Project Agreement, immediately upon receipt of first drafts from the Commonwealth, and throughout negotiation.

DPC and NSW Treasury will work closely with line agencies to provide support during the negotiation of Project Agreements.

Portfolio Ministers may only sign Project Agreements following consultation with the Premier and Treasurer.

Implementation Plans

National Partnerships may have schedules called Implementation Plans. Implementation Plans are succinct, high-level documents that summarise jurisdiction-specific plans for achieving the objectives and outcomes set out in the National Partnership. Implementation Plans must never amend the scope of National Partnerships. Ideally Implementation Plans should not deal with the matters outlined above for National Partnerships including funding, performance benchmarks and reporting. Implementation Plans are signed by portfolio Ministers.

Usually State line agencies draft IPs.

NSW line agencies should consult the National Reform Unit DPC immediately upon the Commonwealth initiating the development of an Implementation Plan, and throughout the negotiations.

DPC and NSW Treasury will work closely with line agencies to provide support during the negotiation of Implementation Plans.

Portfolio Ministers may only sign Implementation Plans following consultation with the Premier and Treasurer.

Reporting

There are two types of reporting under the IGAFFR:

• assessment of performance of governments made by the COAG Reform Council (CRC) and
• milestone/progress reporting by States to the Commonwealth.

The National Reform Unit DPC coordinates NSW input to CRC reporting processes. This includes preparing NSW comments, in consultation with relevant line agencies and NSW Treasury, on the CRC’s draft National Agreement and (reward) National Partnership performance reports.

Most National Partnerships (or associated Implementation Plans) and Project Agreements require line agencies to furnish milestone/progress reports to the relevant Commonwealth line agency. These may, or may not, be linked to the release of milestone/progress payments to the States. NSW line agencies should consult with the National Reform Unit DPC when preparing reports for submission to the Commonwealth.

Contact

Dr Meg Montgomery
Director
National Reform Unit
Department of Premier and Cabinet
[email protected]
(02) 9228 5410

Footnotes

[1]

On 1 July 2011 COAG agreed to replace the Healthcare Special Purpose Payment with activity-based funding arrangements specified in the National Health Reform Agreement. The Special Purpose Payment will remain in place until activity based funding commences on 1 July 2012.