The 2009 Intergovernmental Agreement on Federal Financial Relations (Intergovernmental Agreement) established the overarching framework for Australia’s federal financial relations. It recognised that while state and territory governments (States) have constitutional responsibility for many areas of service delivery, coordinated action may be desirable to address Australia’s economic and social challenges. The framework was intended to provide the States with flexibility to deliver services, while increasing governments’ accountability to the public through a combined focus on the achievement of outcomes, clearer specification of roles and responsibilities, and enhanced performance reporting.
A key to achieving the aims of the Intergovernmental Agreement is in the design of National Partnership Agreements, which outline agreed policy objectives in areas of nationally significant reform or for service delivery improvements. Commonwealth payment is tied to achieving outcomes and outputs, which requires well-defined performance measures and deliverables that are clearly linked to the outcomes and outputs of the National Partnership Agreements.
National Partnership Agreements are administered by Commonwealth portfolio departments that approve payments on assessment that States have met the performance measures and milestones outlined in agreements, while the Commonwealth Department of the Treasury is responsible for making payments.
The ANAO selected National Partnership Agreements for audit because of the risk associated with the transfer of significant Commonwealth funding to the States (on average $16 billion per year) through these agreements under the Intergovernmental Agreement. The Intergovernmental Agreement established a new framework designed to improve the transparency and accountability of National Partnership Agreements with a clearer focus on the delivery of specified outcomes. The audit aims to provide assurance that National Partnership Agreements have been developed and implemented in line with the transparency, funding and performance requirements of the Intergovernmental Agreement.