SYDNEY, AAP – There is an “urgent and compelling need” to change the way the NSW corruption watchdog, electoral commission and other oversight bodies are funded to ensure their independence, a NSW parliamentary committee says.

Seven politicians from across the political spectrum, including the Labor, Liberal and National parties, signed off on a report recommending a suite of changes to the bodies’ funding models.

The report concludes that the “the current funding arrangements cannot be allowed to continue”.

“Independent oversight bodies in this state play a very important role in our democratic system,” committee chair and Greens MP David Shoebridge said upon on the report’s publication on Friday.

“It is important that these bodies receive funding that is set fairly, transparently and independently.”

The committee wants parliamentary committees to set the funding for oversight bodies after consulting with government agencies.

Currently, the NSW cabinet decides how much money to set aside in the parliamentary budget each year for oversight bodies.

The committee believes giving the government the power to set the funding amounts adversely affects the independence of the watchdogs.

The report is the latest development in a brewing war over the funding of oversight bodies, especially the Independent Commission Against Corruption.

An October report from the NSW auditor general said the current approach for setting funding for oversight agencies “presents threats to their independent status” and argued cabinet should receive independent advice on the funding decisions.

It pointed out that funding decisions are made by people who might be subject to investigations.

In November, the upper house amended the parliamentary budget bill to add an extra $7.3 million in funding for ICAC.

But on the final sitting day of the year, the government sent it to the governor for sign-off without the amendment, arguing the upper house did not have the power to amend the budget.

“The Greens and One Nation do not write the budget, the government does,” Treasurer Dominic Perrottet said at the time, adding they should “learn their place”.

It was the first time since 1996 that the parliament had referred a law to the governor disregarding changes made by the upper house.

The new report threatens a constitutional showdown in the courtroom if the funding model is not reformed.

If the government does not agree with the committee’s recommendations, the committee said it was “likely” the power of the lower house to send a law to the governor which ignores upper house amendments would be legally tested.

The report says it would be “preferable for these matters to be determined by political consensus, centred on the need for the parliament and critical state oversight bodies to be financially independent, than by judicial determination”.

Premier Gladys Berejiklian appeared before ICAC last year, admitting to a long-running, secret affair with Liberal MP Daryl Maguire, who was being investigated by the watchdog.

The Maguire inquiry is ongoing and it is not yet clear what findings, if any, will be made against Ms Berejiklian.

The committee looked at the funding of the ICAC, the Law Enforcement Conduct Commission, the NSW Ombudsman, the NSW Electoral Commission, and the Audit Office of NSW, as well as the funding of parliament.

The recommendations largely reiterate those in an earlier report by the committee in March 2020.