EXPLANATORY STATEMENT
Issued by the authority of the Minister for Finance and Administration
Financial Management and Accountability Act 1997
Financial Management and Accountability Orders 2005
The Financial Management and Accountability Orders 2005 (the FMA Orders) are Finance Minister’s Orders issued pursuant to subsection 63(1) of the Financial Management and Accountability Act 1997 (the Act). This subsection provides that the Finance Minister may make Orders on any matters which the Act requires or permits Orders to be made and on any matter on which regulations under the Act may be made.
The Act provides a framework for the proper management of public money and public property that applies to Chief Executives and officials of Agencies.
The FMA Orders revoke and replace the Financial Management and Accountability Orders 1997 (the previous FMA Orders).
The FMA Orders set out a range of requirements in relation to the financial management of Agencies subject to the Act. In particular, they cover: certain responsibilities of Agency Chief Executives; requirements for the care and custody of public money and public property; the payment of public money; the establishment of business operations; and payments for leave entitlements when employees move between Agencies.
The FMA Orders update and clarify the previous FMA Orders. In particular, they:
- update headings to insert relevant cross-references to sections of the Act and the Financial Management and Accountability Regulations 1997 (FMA Regulations);
- clarify references to related penalty provisions in the Act;
- update definitions, such as removing terms already defined through the Act;
- update references to the Commonwealth Fraud Control Guidelines in order 2.2;
- amend Part 3, relating to care and custody of public money, to more appropriately reflect the wording of the Act;
- remove Part 5A, that previously dealt with annual financial statements, and is now covered by separate orders;
- remove order 6.5, relating to payments for transferred employees’ leave entitlements from 19 December 1999 to 1 July 2001, which is no longer necessary as any outstanding rights are now protected by section 15 of the Legislative Instruments Act 2003 (Legislative Instruments Act);
- remove Table A, relating to out-of-date application, saving and transitional provisions; and
- make minor drafting amendments.
The details of the FMA Orders are shown in the Attachment to this Explanatory Statement.
The FMA Orders are a disallowable legislative instrument for the purposes of the Legislative Instruments Act.
In relation to section 17 of the Legislative Instruments Act, the Criminal Justice Division of the Attorney-General’s Department was consulted on order 2.2: “Fraud control report to responsible Minister”.
The Office of Legislative Drafting and Publishing within the Attorney-General’s Department prepared the FMA Orders instrument. Independent legal advice confirmed the effect of the FMA Orders.
The Office of Regulation Review advised that the preparation of a Regulation Impact Statement was not mandatory as the FMA Orders do not have a direct or significant indirect effect on business or restrict competition.
The FMA Orders commenced on 1 July 2005.
ATTACHMENT
Details of the Financial Management and Accountability Orders 2005
Part 1: Preliminary
Order 1.1 - Name of Orders
This order provides that the FMA Orders are the Financial Management and Accountability Orders 2005.
Order 1.2 - Commencement
This order provides that these FMA Orders commence on 1 July 2005.
Order 1.3 - Revocation of the Financial Management and Accountability Orders 1997
This order specifies that these FMA Orders revoke the Financial Management and Accountability Orders 1997.
Order 1.4 - Definitions
This order defines certain terms used in the FMA Orders.
It has been revised to update the definitions contained in the previous FMA Orders. In particular, some definitions have been moved to the order in which the terms are used. Also, terms defined in the Act have been removed, and a note inserted to reflect that other words and phrases used in the FMA Orders are defined in section 5 of the Act.
Part 2: Special Responsibilities of Chief Executives
Part 7 of the Act outlines special responsibilities of Chief Executives. Part 2 of the FMA Orders covers matters on which Part 7 of the Act requires Finance Minister’s Orders to be made and other matters necessary for carrying out or giving effect to the Act and the FMA Regulations.
Order 2.1 - Audit Committee
Section 46 of the Act requires each Chief Executive to establish an Audit Committee for their Agency with powers and responsibilities as required by the Finance Minister’s Orders.
The heading to this order now incorporates a cross-reference to section 46 of the Act.
Suborders 2.1.1 and 2.1.2 deal with the terms of reference for, and specify functions and responsibilities of, Audit Committees. Those functions and responsibilities include:
- approval of internal audit plans; and
- review of audit reports; and
- advice to the Chief Executive on action to be taken in relation to audit reports; and
- coordination of internal and external audit programs; and
- advice to the Chief Executive in relation to the Agency’s financial statements.
The new suborder 2.1.3 defines the term ‘Auditor-General’ by reference to the Auditor-General Act 1997.
Order 2.2 - Fraud control report to responsible Minister
Section 45 of the Act requires a Chief Executive to implement a fraud control plan for the Agency. Regulation 19 of the FMA Regulations provides for the issue of guidelines about the control of fraud by the Minister for Justice.
The heading to this order now incorporates cross-references to section 45 and regulation 19.
Suborders 2.2.1, 2.2.2, 2.2.3 and 2.2.4 set out the requirements for the preparation of Agency fraud control reports by Chief Executives.
The previous suborder 2.2.1 specified that a Chief Executive was required to prepare a report on fraud control for the Agency, as soon as practicable after the review period referred to in the Fraud Control Policy of the Commonwealth and the guidelines issued by the Minister for Justice under regulation 19. This suborder has been updated, by removing the out-of-date reference to the Fraud Control Policy of the Commonwealth, and clarified, by specifying that a Chief Executive must prepare a report at least every two years as referred to in the ‘Commonwealth Fraud Control Guidelines’.
Suborder 2.2.2 specifies that this report is to include an assessment of risks for fraud on the Agency, and a fraud control plan. Suborder 2.2.3 requires that the report must be provided by the Chief Executive to the Agency’s responsible Minister.
The new suborder 2.2.4 defines the term ‘Commonwealth Fraud Control Guidelines’, by reference to the guidelines in force or existing on the date these orders commence, in accordance with regulation 19. The Commonwealth Fraud Control Guidelines existing on 1 July 2005 are the Commonwealth Fraud Control Guidelines May 2002.
The reference to the Minister for Justice contained in the previous FMA Orders has been removed as it was unnecessary given the wording of regulation 19.
Order 2.3 - Accounts and records
Section 48 of the Act requires a Chief Executive to ensure that accounts and records are kept as required by the Finance Minister’s Orders.
The heading to this order now incorporates a cross-reference to section 48.
This order requires that a Chief Executive must ensure that the Agency’s accounts and records properly record and explain the Agency’s transactions and financial position. The order also sets out a number of specific requirements in relation to the way that accounts and records are to be kept.
Order 2.4 - Estimates
To provide for the co-ordination of budget processes, this order requires Chief Executives to prepare budget estimates in the form and at such times as required by the Finance Chief Executive.
Order 2.5 - Use of a Commonwealth credit card for particular purposes
Section 60 of the Act prohibits, and imposes a penalty for, the use of a Commonwealth credit card or Commonwealth credit card number other than for an official Commonwealth purpose, unless the particular use is authorised by the Finance Minister’s Orders and the Commonwealth is reimbursed in accordance with the Finance Minister’s Orders.
The heading to this order now incorporates cross-references to section 60 and regulation 21.
Suborders 2.5.1, 2.5.2 and 2.5.3 provide for Chief Executives to authorise particular private use of Commonwealth credit cards when that use is coincidental to an official purpose, and to specify the arrangements for the holder of the Commonwealth credit card to reimburse the Commonwealth for that coincidental private expenditure. For example, private expenses such as telephone charges may be authorised for inclusion in accommodation charges for official travel to avoid the practical problems of separate billing arrangements. Where such an arrangement is authorised, the credit card holder must repay the private expense to the Commonwealth.
Suborder 2.5.4 has been inserted to define the term ‘Commonwealth Credit Card’ by reference to section 60.
Order 2.6 - Chief Executive may delegate powers
Suborders 2.6.1 and 2.6.2 provide for the delegation of the powers and functions of Chief Executives under the FMA Orders. These mirror similar powers of delegation under the Act and the FMA Regulations.
Part 3 Care and Custody of Public Money
Order 3.1 - Prompt banking of received money
Section 10 of the Act requires that public money must be banked, or otherwise dealt with, as required by the Finance Minister’s Orders, and imposes a penalty for a failure to bank public money as required by the orders.
The heading to this order now incorporates a cross-reference to section 10.
Suborder 3.1.1 specifies that public money received in a bankable currency must be banked no later than the next banking day, or another banking day approved by the relevant Chief Executive. The latter provision recognises that there are situations where it is not practical or cost-effective to bank on the next banking day.
Suborder 3.1.2 defines banking day as a day on which a bank is open to the public for general banking business.
Suborder 3.1.1 has been redrafted to more accurately reflect the wording of section 10.
Additional notes to these orders have been inserted to reference:
- the statement in section 10 of the Act that money includes cheques and similar instruments; and
- the requirement in section 11 of the Act that an official must not deposit public money in any account other than an official account.
Order 3.2 - Public money in non-bankable currency
Section 10 of the Act requires that public money must be banked, or otherwise dealt with, as required by the Finance Minister’s Orders, and imposes a penalty for a failure to bank public money as required by the orders.
The heading to this order now incorporates a cross-reference to section 10.
Suborder 3.2.1 requires that an official dealing with received money in a non-bankable currency must ensure the safe custody of that money. It covers situations, which occasionally arise in some overseas countries, where adverse financial conditions make it impossible or impracticable for the local currency to be banked.
Suborder 3.2.1 has been redrafted to more accurately reflect the wording of section 10.
Suborder 3.2.2 has been inserted to define “non-bankable currency” in the same terms as the interpretation provision of the previous FMA Orders.
Notes to these orders have been inserted to reference:
- the existence of a penalty under section 10 for a failure to bank public money as required by these orders; and
- the statement in section 10 that money includes cheques and similar instruments.
Order 3.3 - Withdrawals from, including internal transfers between, official accounts
Section 13 of the Act prohibits, and imposes a penalty for, the withdrawal of money from an official account except as authorised by the Finance Minister’s Orders.
The heading to this order now incorporates a cross-reference to section 13.
Suborders 3.3.1, 3.3.2 and 3.3.3 authorise withdrawals from official accounts, including internal transfers which are necessary in the ordinary course of business, and require a drawing right to authorise withdrawals from official accounts.
Suborder 3.3.4 provides a definition of cash advance as meaning public money, in the custody or control of an official, and held outside an official account, for the purpose of making payments of public money in cash.
An additional note to this order has been inserted to reference the existence of a penalty under section 13 for withdrawal of money from an official account that is not authorised by these orders.
Part 4 Payment of Public Money
Order 4.1 - Agency Appropriation Advice
This order sets out the procedural arrangements that allow the Finance Chief Executive to issue an advice, called Agency Appropriation Advice, to Agencies when drawing against an appropriation.
Part 5 Care and custody of public property
Order 5.1 - Care etc of securities
Section 40 of the Act provides that an official who receives bonds, debentures or other securities in the course of carrying out official duties must deal with them in accordance with the Finance Minister’s Orders. It also imposes a penalty for a failure to deal with securities in accordance with these orders.
The heading to this order now incorporates a cross-reference to section 40.
This order requires an official to issue a receipt for, maintain a register of, and ensure the protection of, all securities received.
Revoked Part 5A Annual financial statements
This part has been revoked as the requirements for annual financial statements are set out in separate orders. The previous Part 5A comprised a part heading entitled “Annual financial statements”. No orders were contained in the part.
Part 6 Miscellaneous
Order 6.1 - Compliance with instructions issued by the Chief Executive of another Agency
This order requires that an official of one Agency, who uses the services of another Agency to perform financial tasks, must comply with an instruction by the Chief Executive of that other Agency about the performance of those tasks.
Order 6.2 - Business operation of an Agency
This order provides that certain activities of an Agency can be determined by the Finance Chief Executive as a business operation. Once an activity of an Agency has been determined to be a business operation, the Agency must prepare separate, auditable financial statements in accordance with the requirements specified in the Finance Minister’s Orders relating to financial statement preparation.
Order 6.3 - Finance Chief Executive may delegate powers
This order provides for the delegation of the powers and functions of the Finance Chief Executive under the FMA Orders. They mirror delegation powers in the FMA Regulations.
Order 6.4 - Payments for leave entitlements when employees move between Agencies etc on or after 1 July 2001
Suborders 6.4.1 and 6.4.2 continue a funds transfer scheme that applies when individual employees move between Agencies or from an Agency to a Commonwealth authority, usually where they have attained promotion or transfer. The scheme does not apply when the employees move between Agencies as a consequence of a government function being transferred between Agencies. Separate funding transfers apply in that situation, pursuant to section 32 of the Act.
Suborders 6.4.3, 6.4.4, 6.4.7 and 6.4.8 specify the amount to be transferred with the employee. Military personnel who transfer into civilian work may, for example, be are often employed in their new Agency at a lower salary rate. In these cases, suborder 6.4.4 requires the Department of Defence to transfer an amount based on the new salary, to avoid a windfall gain to the new Agency. Suborder 6.4.7 requires no funding transfer for annual or long service leave in those cases where the liability does not transfer with the employee. This is usually when the employee is able to be paid out the leave and takes that option. The amount transferred for long service leave for those employees who have not yet legally qualified for that leave is calculated on an actuarial basis (suborder 6.4.8). The term ‘ongoing employee’ is defined to apply the funding transfer scheme to military as well as civilian employees.
Suborders 6.4.5 and 6.4.6 sets out the requirements for timing and verification of payment. The amount must be paid within 30 days (normal payment terms) and must be accompanied by a written statement to enable the receiving Agency to verify that the amount being transferred is correct.