8. SANCTIONS AND SAFEGUARDS

8(1) Where an annual report under subclauses 4(35)(a) and 4(35)(b) provided by a State to the Commonwealth shows a significant divergence of actual and planned performance, the Commonwealth may withhold Financial Assistance to that State relative to the area of the significant divergence. Should Financial Assistance be withheld, the Commonwealth may require the State to report more frequently than annually until the divergence has reduced to a level within an agreed range.

8(2) In relation to any State, and after consultation with the State Minister, the Minister can withhold all or a proportion of Financial Assistance if the Minister reasonably believes that a serious or persistent breach of this Agreement has occurred, including where certification provided under subclause 4(34) shows that an amount of assets or funds has not been used for Allowable Uses.

8(3) In relation to any State where certification provided under subclause 4(34) shows that an amount of assets or Financial Assistance has not been used for Allowable Uses, or if the Minister reasonably believes that such funds or assets have not been used for Allowable Uses, the Minister, after consultation with the State Minister, may require the State to add that amount to its funding contribution or may reduce Financial Assistance to the State by that amount.

8(4) Where:

(a) requirements for specification of outputs and targets under subclause 6(1)(e); or

(b) obligations under subclauses 3(2) and 3(3);

have not been met, including meeting the specified time frames, the Minister may withhold a proportion of Financial Assistance until such time as the requirements or obligations have been met to the satisfaction of the Commonwealth.

8(5) Within 28 working days of receiving a proposed Bilateral Agreement, receiving proposed outputs and targets under subclause 6(1)(e) or evidence of rectification of any breach under subclauses 8(1), 8(2) and 8(4), the Commonwealth will respond to a State to:

(a) indicate agreement to commence or resume provision of any Financial Assistance due to a State; or

(b) indicate additional work or changes to strategies sought by the Commonwealth and commence discussion with the relevant State in order to agree action required in order for Financial Assistance to commence or resume.

8(6) The parties will, as far as is possible, seek to resolve any disputes arising from this Agreement using internal dispute mechanisms. The parties will use their best endeavours to reach a settlement within the spirit of the Agreement and in an expeditious manner.

8(7) Where reporting requirements under subclause 4(33), 4(34) or 4(35) have not been met, for Grant Years one to four, funding to that State in the Grant Year in which a report was due will be reduced by up to five per cent of the previous Grant Year’s Base Funding allocation. The Minister will determine whether funding should be reduced and by how much. In such a case, the reduction will occur in the final six months of the Grant Year in which reporting was due.