After the initial discussion about private investment, the discussion at the Senate’s economics legislation committee has shifted to another topic.

On Monday night, officials from the National Audit Office were asked about the matter of Treasury making payments worth $2.3 billion to the states that may have been in breach of the constitution.

It relates to some passages in Treasury’s 2024-25 annual report, which was published on October 24.

Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund

Section 83 of the Commonwealth of Australia Constitution Act 1900 (the Constitution) provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law. Treasury has controls in place to reduce any instances of non-compliance with section 83 wherever possible and ensure there is no intentional misuse of funds. Recovery action is taken to rectify any instances of non-compliance as soon as it is identified.

During 2025-25, Treasury continued to monitor and adapt its verification procedures for payments made under the Federation Financial Relations Act 2009 and the Federation Reform Fund Act 2008.

The Treasury identified that eight payments made to the States and Territories in 2024-25 totalling $2.28 billion relating to the Energy Bill Relief extension scheme were in breach of section 83 of the Constitution. The payments were made without appropriate written ministerial authorisation in place for the senior official to approve the payments on the Minister’s behalf. The States had met the requirements for the payments therefore the potential breaches are technical in nature. Written authorisation from the Minister for the relevant senior officials to approve these payments was put in place and internal processes updated to align with the revised authorisation.

Officials from the National Audit Office appeared before Senate estimates on Monday, and they were asked about it.

How could Treasury make eight payments totalling $2.28 billion that were in breach of the constitution?

LIBERAL SENATOR JAMES PATERSON: How would you characterise payments of this volume being made without ministerial authorisation?

MS CARLA JAGO, GROUP EXECUTIVE DIRECTOR: We expect that all payments are made in accordance with the law. Steps were taken in this instance, when the issue was identified, to rectify that so that they were retrospectively authorised.

Senator PATERSON: But prior to those steps being taken, these payments were unlawful, weren’t they?

Ms Jago: Our understanding is that they were in breach of section 83 of the Constitution before they were retrospectively authorised.

Senator PATERSON: Is it a serious thing, in the ANAO’s view, that a department is making unlawful payments to the tune of $2.3 billion?

Ms Jago: We see any potential breach of section 83 of the Constitution as a serious matter.

Senator PATERSON: Is there a difference between a technical breach and a serious breach of the law?

Ms Jago: I’m not sure what a technical breach versus a serious breach—

Senator PATERSON: Nor am I. That’s why I am asking.

MS RONA MELLOR, DEPUTY AUDITOR-GENERAL: You’d appreciate that we’re very black-and-white people. A breach is a breach.

Senator PATERSON: You should be, and I agree with you. A breach is a breach. An unlawful payment of any money is a worry but particularly when it’s $2.3 billion.

Ms Mellor: You would hopefully be aware that, in December, we would normally table a summary of all financial statements and results, and we do include in that summary what we call ‘L findings’, or breaches, and there will be some. This one, in the evidence Ms Jago’s given, sounds like it was rectified and wouldn’t be reported as a breach, because it was rectified. But certainly, as we’re auditing, when we see legislative breaches, we report on those to the parliament at the end of the calendar year.

In my next post, I’ll cover what Ms Wilkinson had to say about the matter.