An overhaul of the government's finance rules potentially makes the Commonwealth's $400 billion annual budget vulnerable to corruption.

One Canberra watcher said the act was a ''power grab'' by the Finance Department. Photo: Louie Douvis

An overhaul of the government's finance rules potentially makes the Commonwealth's $400 billion annual budget vulnerable to corruption, a former senior Finance Department official says.

The Public Governance, Performance and Accountability Act 2013, which comes into force in July, could create an opportunity for officials or even ministers to pocket secret commissions on procurement deals without the money showing up on any system, the former bureaucrat says.

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The act, plus a complex set of associated rules, will establish a new money-management regime for all federal government departments and agencies, almost 200 in total.

Public service veterans and the National Audit Office are concerned. One Canberra watcher said the act was a ''power grab'' by the Finance Department.

A parliamentary committee is inquiring into the web of rules and regulations that will operate in conjunction with the legislation, and if the reforms were rushed into law in June 2013 with insufficient scrutiny.

Two of the bureaucracy's most powerful figures are at loggerheads over the act. Public Service Commissioner Stephen Sedgwick is locked in a ''fundamental conflict'' with Finance Department secretary David Tune over the complex new rules imposed on 160,000 public servants

The former senior Finance Department executive warns that the new laws leave a door open for corruption and that Parliament was not given a chance to properly consider the reforms.

The former official, who does not want to be publicly identified, says the act removes vital checks and balances on finance ministers' conduct.

The source said clause 105 of the act removes the need for all money due to the Commonwealth to be paid into consolidated revenue and entered into the public record.

''This overturns centuries of parliamentary practice under the Westminster system, which requires all moneys due to the Crown to be paid into a single consolidated revenue fund from which money may only be spent by the government after it has been approved by Parliament as an appropriation,'' the public sector finance expert said.

''The minister for finance could hypothetically be paid a secret commission from the selling agent, and still sign off the money as an 'appropriation'.''

The former bureaucrat is also worried about the level of scrutiny of the new bill when it was passed by the then Labor government in 2013.

There is also concern about the strain the new rules could impose on the public service at a time when it is in turmoil, facing thousands of redundancies and struggling with efficiency dividends.

''The operation of the act depends on a large number of rules to be issued by the Department of Finance, none of which were available when Parliament considered the bill,'' the former official said. ''Either Labor deliberately created this loophole, or they were poorly advised by officials.

''At a time when the public service is shedding jobs and seeking savings, the new act imposes a huge retraining requirement on every department in rewriting the entire financial system of every government agency,'' the source said.

The act comes into effect on July 1 but the rules are yet to be finalised and tabled in Parliament. A second committee hearing has been scheduled for next Monday.