The Federation Funding Agreements Framework

On 28 August 2020, the Council on Federal Financial Relations (CFFR) implemented new governance arrangements for Commonwealth-state funding agreements, known as the Federation Funding Agreements (FFA) Framework. The Framework can be conceived as comprising five elements: the Intergovernmental Agreement on Federal Financial Relations (IGA FFR); CFFR and its role as gatekeeper; the FFA architecture; the FFA Principles; and the administrative arrangements.

Intergovernmental Agreement on Federal Financial Relations

The IGA FFR outlines the objectives, principles and institutional arrangements governing financial relations between the Commonwealth and the states and territory (states) governments. It recognises that the states have primary responsibility for many areas of service delivery, but that coordinated action is necessary to address Australia’s economic and social challenges. It provides the foundation for the establishment of funding agreements between the Commonwealth and the states.

Council on Federal Financial Relations

On 29 May 2020, CFFR was asked by National Cabinet to take responsibility for all Commonwealth-state funding agreements and review the stock of existing agreements with a view to consolidation and rationalisation. CFFR’s aim is to make sure that agreements are negotiated and administered efficiently, including through the standardisation of agreements where possible. CFFR's level of involvement in the negotiation of agreements may be determined by National Cabinet, or by its own selection of a negotiation pathway. CFFR will assume more direct involvement in agreement negotiation where an agreement is of national significance, provides substantial economic benefit, may post major social or fiscal risks, or involves particular complexities.

FFA Architecture

The new FFA architecture consolidated all existing federal funding agreements into two forms of agreements: National Agreements and sectoral FFAs. National Agreements contain significant policy content and act as sources of ongoing funding, and have relatively complex and bespoke terms and conditions.

The sectoral FFAs covering Health, Education and Skills, Infrastructure, Environment, and Affordable Housing, Community Services and Other, consolidated all existing National Partnership Agreements, Streamlined Agreements and Project Agreements as schedules. New agreements under the relevant sectoral FFA are now termed FFA Schedules.

All current and expired National Agreements, sectoral FFAs and their related FFA Schedules are available on this website.

FFA Principles

Eight FFA Principles were developed by CFFR and endorsed by National Cabinet to formalise CFFR’s role in influencing the policy direction and content of new agreements under the FFA Framework. These Principles outline how new agreements should be constructed and the process for their negotiation. The FFA Principles should be read alongside the complementary IGA FFR Principles.

The eight FFA Principles are as follows:

Principle 1

Strong economic, social and fiscal outcomes:

New agreements will promote strong economic and social outcomes and support strong fiscal outcomes (for example: improved employment outcomes, the facilitation of private sector investment where appropriate, and regard for social or health needs or efficiency of service delivery).

Principle 2

Limit the number of low value agreements to ensure value for money:

CFFR will monitor new agreements to limit the number of low value agreements to minimise the administrative costs associated with the agreement and avoid complexity that does not deliver significant benefit.

Principle 3

Balance government priorities:

New agreements will recognise and balance the priorities of all levels of government.

Principle 4

Budget autonomy and greater flexibility:

New agreements will provide states with budget autonomy and flexibility, where practical, to deliver services and infrastructure in a way that they consider will most effectively and efficiently improve outcomes for Australians.

Principle 5

Funding certainty:

New agreements that fund ongoing services will provide states with funding certainty where possible.

Principle 6

CFFR will retain oversight over agreements:

Portfolio ministers are required to inform CFFR once they have policy authority for a new agreement.

Principle 7

CFFR will involve portfolio ministers:

CFFR will decide whether new agreements are pursued, and the allocation of responsibilities for new agreement negotiation, implementation, monitoring, evaluation, and renewal. As required, CFFR should leverage the expertise of portfolio ministers.

Principle 8

Accountability and transparency:

Agreements, and exchanges of letters that constitute agreements, will be published on the CFFR website to promote transparency and accountability. Reporting should include what measured outcomes were achieved and evidence on their cost effectiveness.