Financial Management and Accountability Act 1997 - Special Instruction Regarding Special Public Money 2003/01

Overview

The Financial Management and Accountability Act 1997 (FMA Act) was enacted to provide a robust framework for the management and accountability of public money within Australian government agencies. One of the key problems it aimed to address was ensuring that public funds, particularly those held in trust, are managed transparently and securely. The FMA Act sets out the legal obligations and governance requirements for agencies in handling public money, aiming to prevent mismanagement and enhance accountability. The enacting body for this Act was the Parliament of Australia, reflecting the national importance of effective public financial management. The policy objective of the Act is to ensure that public funds are used efficiently, economically, effectively, and ethically, thereby maintaining public trust in government operations. The Special Instruction Regarding Special Public Money 2003/01 issued under section 16 (1) of the FMA Act further clarifies the specific requirements for banking and managing special public money that is also subject to trust law, ensuring compliance with both the Act and trust obligations.

Scope and Application

The Special Instruction Regarding Special Public Money 2003/01 applies to agencies as defined under section 5 of the Financial Management and Accountability Act 1997 (FMA Act), specifically those agencies that hold special public money that is also subject to trust law. This instruction is pertinent only when the trust instrument does not mandate that the trustee physically hold the special public money separate from other monies. The directive mandates that the special public money must be banked in the appropriate official bank account as stipulated by the FMA Act and the Financial Management and Accountability (Finance Minister to Chief Executives) Delegation 2003, as amended. Specifically, money that can be deposited in a Special Public Money (SPM) Account, as outlined in the amended delegation, should be deposited into the Official Public Account (OPA) in accordance with the Agency Banking Framework Guidance Manual. Conversely, money that can be deposited in an Exempt SPM Account, as also specified in the amended delegation, must be deposited into a bank account established by the agency with its transactional banker, again following the Agency Banking Framework Guidance Manual. This arrangement ensures that special public money subject to trust law is not held in a separate official bank account but may be held within the OPA. The agencies are also required to maintain separate ledgers in their accounting records to identify the amounts standing to the credit of each trust at all times.

Key Provisions

The Financial Management and Accountability Act 1997 (FMA Act) includes specific provisions regarding special public money, as outlined in section 16 (1). Under this section, Minister for Finance and Administration, Nick Minchin, issued a Special Instruction to agencies holding special public money that is also subject to Trust Law. The instruction applies when the trust instrument does not require the trustee to physically hold the special public money separate from other funds. According to this instruction, agencies must bank the special public money in the appropriate official bank account, complying with the FMA Act and the Financial Management and Accountability (Finance Minister to Chief Executives) Delegation 2003 (as amended). The instruction specifies that money that can be deposited in a Special Public Money (SPM) Account, as detailed in the delegation, must be deposited into the Official Public Account (OPA). Conversely, money that can be deposited in an Exempt SPM Account, also as detailed in the delegation, must be deposited into a bank account established by the agency with its transactional banker. These provisions ensure that special public money subject to trust law is not held in a separate official bank account and may be held in the OPA. The obligations imposed by this special instruction are primarily focused on ensuring the proper management and segregation of funds within an agency’s accounting records. Agencies must comply with the requirements set out in the FMA Act and the Financial Management and Accountability (Finance Minister to Chief Executives) Delegation 2003, ensuring that the special public money is banked correctly. The instruction mandates that agencies must be able to identify at all times, through separate ledgers in their accounting records, the amounts standing to the credit of each trust. This requirement ensures transparency and accountability in the management of special public money, allowing for clear tracking and identification of funds. By adhering to these obligations, agencies can maintain compliance with the legislative framework governing financial management and accountability. Breach of the provisions outlined in the Special Instruction could lead to various consequences, including civil or criminal penalties, depending on the nature and severity of the breach. While the specific penalties are not detailed within the instruction itself, they would be governed by the broader provisions of the FMA Act. Under the FMA Act, breaches of financial management and accountability provisions can result in significant penalties. For individuals, penalties can include fines of up to $21,000 for each offence, imprisonment for up to five years, or both. For bodies corporate, the penalties can be even more severe, with fines up to the greater of $105,000 or three times the benefit obtained from the breach. These penalties underscore the importance of compliance with the instruction and the broader financial management requirements established by the FMA Act.