10.5 Commonwealth-State funding agreements

National Cabinet has tasked the Treasurers, through the Council on Federal Financial Relations (CFFR), with responsibility for all Commonwealth-State funding agreements (including bilateral agreements).

The Federation Funding Agreements (FFA) Framework developed by CFFR, and endorsed by National Cabinet, ensures that CFFR acts as the gatekeeper for all Commonwealth-State funding agreements.

Agencies should ensure negotiations are underpinned by the FFA Framework principles, the Intergovernmental Agreement for Federal Financial Relations (Council on Federal Financial Relations - Intergovernmental Agreement on Federal Financial Relations) and the Principles for intergovernmental activities (see Chapter 10.1).

10.5.1 CFFR’s leadership role

CFFR retains visibility of all funding agreements through a reporting process, in which CFFR considers the strategy for each forthcoming agreement, allowing CFFR to choose to provide specific guidance, receive oral updates on progress, or negotiate key aspects of certain agreements (among other options).

CFFR will provide direction on its requirements for progression of each agreement, including whether Treasurers will negotiate the economic and fiscal aspects of the agreements or delegate negotiation on the economic and fiscal aspects of the agreement to portfolio ministers.

Agencies will work with QT to support the Treasurer with CFFR’s leadership role and support the negotiation of agreements in a timely manner. This may include proactive policy work or preliminary without prejudice negotiations. Agencies should consult with QT for further advice.

CFFR may also provide direction on the negotiation and execution process such as:

• Providing and/or receiving written guidance on the content of the agreement
• Requesting oral or written updates on the progress of negotiations at future CFFR meetings
• Reviewing the agreement for consistency with the standard terms and conditions and the FFA Principles
• Specifying that the agreement be executed by CFFR
• Requiring no further action
• The Treasurer will communicate these requirements to relevant Ministers as they arise.

10.5.2 Negotiation and approval pathway for Commonwealth-State funding agreements

The negotiation and approval pathway for funding agreements will differ depending on an assessment of risk and economic, fiscal or policy impact.

It is the responsibility of agencies to ensure DPC and QT are immediately informed of the commencement of any negotiations. If a Minister, other than the Treasurer, has received official correspondence on a new or varied funding agreement, the Minister should formally refer the correspondence to the Premier and the Treasurer for consideration and action/advice.

Queensland Ministers and agencies will take a proactive approach to all negotiations to ensure Queensland is strongly positioned to maximise outcomes. Queensland Ministers will ensure all negotiations are conducted in accordance with the Principles for intergovernmental activities (see Chapter 10.1).

Ministers, in consultation with the Premier and the Treasurer, will be responsible for ensuring Queensland Cabinet or Cabinet Budget Review Committee (CBRC) approval is sought for a proactive negotiating strategy and/or framework at the outset of discussions on any major agreements.

Generally, CBRC endorsement should be sought for execution of new agreements, and extensions and/or variations to existing Commonwealth-State funding agreements. However, these requirements may be varied, based on an assessment of risk and economic, fiscal or policy impact. Agencies should seek advice from DPC and QT on these matters.

10.5.3 Negotiating frameworks

Negotiating frameworks are an important tool for ensuring Queensland’s interests are best served in intergovernmental funding negotiations. The level of detail required in a negotiating framework will vary depending on the status and importance of the negotiation. However, as a minimum a negotiating framework will identify:

• the key risks to the state and proposed mitigation strategies
• threshold clauses that must be included in the final agreement
• threshold clauses that must not be included in the final agreement
• tangible options to incentivise Queensland’s agreement
• strategies to minimise the fiscal exposure to Queensland
• options to exit negotiations including the associated risks and implications.

While the content of negotiating frameworks will be refined as negotiations progress, it is important that agencies take a proactive role to ensure Queensland is best positioned from the outset of negotiations. There is no need to wait for Commonwealth or other state and territory priorities to be known before developing a Queensland negotiating framework based on the best possible outcomes for Queensland.

Agencies should seek advice from DPC and QT in developing negotiating frameworks. A suggested negotiating framework template is included in the Appendices at Intergovernmental Agreement Negotiating framework template.

Guidance on basic Queensland positioning on key elements of funding agreements is also provided in the Appendices at Queensland’s negotiating position on proposed. Changes to these positions may be considered in exceptional circumstances. However, these must be discussed with DPC and QT, and the reasons for any variance must be explained in a Cabinet or CBRC submission seeking approval for the negotiating framework.

10.5.4 General process for Treasurer-negotiated agreements

The following process will generally apply for agreements negotiated by the Treasurer.

The Treasurer will work closely with relevant Ministers to negotiate these agreements. Unless otherwise determined by the Premier or the Cabinet, these agreements will be signed by the Treasurer on behalf of Queensland.

In supporting the Treasurer and Portfolio Minister with these negotiations, QT and agencies will consult with DPC at the earliest opportunity and throughout the negotiation process.

At the commencement of negotiations, the Treasurer and relevant Portfolio Minister will bring advice to Cabinet or CBRC and seek endorsement of a negotiating framework (in accordance with Intergovernmental Agreement Negotiating framework template and Queensland’s negotiating position on proposed in the Appendices).

The Treasurer will be responsible for ensuring the Premier is kept updated on the progress of negotiations, including unresolved fiscal or policy elements. The Premier will advise the Treasurer if an update on the negotiations (including seeking authority for an updated negotiating framework) should be provided to Cabinet.

At the completion of negotiations, the Treasurer and relevant Minister should seek CBRC endorsement to sign the agreement on behalf of Queensland. However, the Treasurer may seek the support of the Premier to vary these requirements as needed, based on an assessment of risk and economic, fiscal or policy impact.

10.5.5 General process for Minister-negotiated agreements

The following process will generally apply for agreements negotiated by Portfolio Ministers.

Portfolio Ministers and their agencies will lead the negotiation of these agreements. Unless otherwise determined by the Premier, Treasurer or Cabinet, the Minister will sign these agreements.

The Treasurer will be responsible for ensuring the relevant Portfolio Minister is advised of any requirements in relation to:

• Cabinet/CBRC considerations
• consultation with other agencies
• the content of the agreement (over and above what is already provided by the FFA Principles)
• expected frequency and format of updates on the progress of negotiations
• the proposed signatory to the agreement.

As soon as practicable at the commencement of negotiations, the lead agency will develop a negotiating framework for consideration by DPC and QT with advice provided to the agency if the negotiating position requires consideration by CBRC, Cabinet or by the Treasurer and/or Premier via correspondence.

Agencies should continue to engage QT in the consideration and negotiation of fiscal implications associated with these agreements.

For agreements of a routine or low-value nature, a streamlined negotiating framework can be developed.
At the completion of negotiations, the relevant Minister should write to the Treasurer, with a copy to the Premier, to seek endorsement for the proposed Queensland Government final position on the Agreement, such as a recommendation to sign.

The Treasurer may recommend to the Premier that a proposed position on the agreement requires CBRC consideration.

This process may be varied by agreement between the Minister, the Treasurer and Premier, preferably in writing.

For example, for agreements deemed low risk and low value, the Treasurer may agree to approve a request from a Minister for an exemption from CBRC consideration on advice from QT and with the support of DPC. The Treasurer will advise the Minister and copy the Premier into this advice.

The Premier may provide advice to the Treasurer on the Portfolio Minister's recommendation for signing an agreement or a request for an exemption from CBRC consideration.

10.5.6 Variations to existing funding agreements

Once finalised, agreements may be varied for several reasons. The process for variations will vary depending on the impact of the proposed variation. While variations that result in an increased fiscal impact or increased fiscal risk may require CBRC consideration, some variations, such as those that are extremely low risk, may not require further approvals.

Portfolio Agencies should seek guidance from QT as soon as they are aware that an agreement requires variation. QT will consult with DPC and advise the Agency of the appropriate negotiation and approval process for the Queensland position on the variation.

If QT and DPC determine the variation is extremely low risk and that further approvals are not required, the Minister may proceed to finalise the variation on behalf of Queensland and should write to the Treasurer, with a copy to the Premier, to advise once the variation has been signed.

10.5.7 Renewal of existing funding agreements

Existing agreements may be renewed. The renewal usually takes the form of a new agreement, rather than a continuation of the existing agreement and should follow the process for a new agreement.

While renewals that result in an increased fiscal risk may require CBRC consideration, other renewals, such as those deemed by QT and DPC to be extremely low risk, may not require further approvals.

If the existing agreement is continued, then this is considered a variation to the existing agreement.

10.5.8 Performance and risk reporting

The Treasurer is responsible for ensuring Cabinet is kept informed of Queensland’s performance under intergovernmental funding agreements. QT will oversee regular risk and performance reporting with the support of DPC. QT, with the support of DPC, will also lead Queensland’s participation in any whole-of-government performance reporting.

10.5.9 Implementation

Ministers remain responsible for implementing funding agreements relevant to their portfolio, including those executed by the Treasurer. Ministers will ensure the Treasurer is kept up to date on the status of implementation and will write to the Treasurer (with a copy to the Premier) as soon as feasible to escalate any significant risks to Queensland’s ability to meet implementation requirements.