EXPLANATORY STATEMENT

Issued by the authority of the Minister for Finance and Deregulation

Financial Management and Accountability Act 1997

Financial Management and Accountability Orders 2008

The Financial Management and Accountability Orders 2008 (the FMA Orders) are Orders made by the Minister for Finance and Deregulation (the Finance Minister) 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 2005 (the previous FMA Orders) and are expressed to commence retrospectively from 1 July 2007. This retrospective operation reflects primarily that, in relation to the transfer of leave entitlements between agencies, the previous arrangements were unworkable.  It also reflects that, regarding those transfers, Agencies had appropriate processes in place in the financial year immediately preceding the commencement of the FMA Orders, to the extent that their practices were consistent with the procedures set out in Part 6 of the FMA Orders. In accordance with section 12(2) of the Legislative Instruments Act 2003 (LI Act), no person is disadvantaged or rendered liable for anything by this retrospective operation.

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; business operations of an Agency; and transferring  leave entitlements when employees move between Agencies.

The FMA Orders update and clarify the previous FMA Orders. In particular, they:

• remove the existing reference to Agency Appropriation Advices.  This was a redundant requirement that has not operated since 1999;
• clarify the orders’ application to financial transfers made within Agencies that are merely administrative, such that no appropriation is being used to support a payment;
• allow Agencies to reach their own agreement on which Agency’s rules should apply where officials from one Agency are performing a financial task for another Agency;
• update to the section dealing with the transfer of leave entitlements when employees move between Agencies; and
• make other minor amendments to formatting and numbering.

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 LI Act.

All affected Agencies were consulted and given the opportunity to comment on two successive occasions. Legal advice from the Australian Government Solicitor has confirmed the effect of the FMA Orders, including their retrospective application.

The FMA Orders commenced on 1 July 2007.

ATTACHMENT

Details of the Financial Management and Accountability Orders 2008

Part 1:  Preliminary

Order 1.1 - Name of Orders

This order provides that the FMA Orders are the Financial Management and Accountability Orders 2008.

Order 1.2 - Commencement

This order provides that these FMA Orders commence on 1 July 2007.

Order 1.3 - Revocation of the Financial Management and Accountability Orders 2005

This order specifies that these FMA Orders revoke the Financial Management and Accountability Orders 2005.

Order 1.4 - Definitions

This order defines certain terms used in the FMA Orders.

Part 2:  Special responsibilities of Chief Executives

Part 7 of the Financial Management and Accountability Act 1997 (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 FMA Orders.

Orders 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.

Order 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.

Orders 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. Order 2.2.1 specifies that a Chief Executive must prepare a report at least every two years as referred to in the ‘Commonwealth Fraud Control Guidelines’.

Order 2.2.2 specifies that this report is to include an assessment of risks for fraud on the Agency, and a fraud control plan. Order 2.2.3 requires that the report must be provided by the Chief Executive to the Agency’s responsible Minister.

Order 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 2007 are the Commonwealth Fraud Control Guidelines May 2002.

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.

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 FMA Orders and the Commonwealth is reimbursed in accordance with the FMA Orders.

Orders 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.

Order 2.5.4 defines the term ‘Commonwealth Credit Card’ by reference to section 60.

Order 2.6 - Chief Executive may delegate powers

Orders 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.

Order 2.7 - 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. This order mirrors delegation powers in 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.

Order 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.

Order 3.1.2 defines banking day as a day on which a bank is open to the public for general banking business.

The notes to these orders 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 FMA Orders, and imposes a penalty for a failure to bank public money as required by these Orders.

Order 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. 

Order 3.2.2 defines “non-bankable currency”.

Notes to these orders 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 FMA Orders.

Orders 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.

Order 3.3.1 has been revised to clarify that order 3.3.1 applies to internal transfers, where an appropriation is not required to support the transfer.

Order 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.

The notes to this order have been redrafted to clarify that these Orders apply to internal transfers made within Agencies, where no appropriation is being used to support a payment.

Part 4:  Care and custody of public property

Order 4.1 - Custody etc of securities

This order requires an official to issue a receipt for, maintain a register of, and ensure the protection of, all securities received.

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 FMA Orders. It also imposes a penalty for a failure to deal with securities in accordance with the FMA Orders.

Part 5:  Business operations

Order 5.1 - 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.

Part 6:  Transferring leave entitlements

Part 6 has been revised and now solely relates to the transfer of an employee’s leave entitlements between Agencies and other specified employers.

Order 6.1 - Payments for leave entitlements when employees move between Agencies etc

Order 6.1.1 provides for the broad application of this order and specifies when the order will apply. Under order 6.1.1 a funds transfer scheme applies when an employee moves to another Agency, a Commonwealth authority, or the High Court of Australia. The order does not apply when an employee moves between Agencies as a consequence of a government function being transferred between Agencies.

Order 6.2.2 specifies that the old employer must pay the new employer within 30 days of receiving a correctly rendered invoice from the new employer. The amount to be paid is calculated as the sum of the employee’s annual leave and 95% of the employee’s annual leave immediately before leaving the old employer.

The note to this order provides that if the move is for a short period and the employee will be returning to the old employer, the employers may agree that in some circumstances the old employer may not need to pay the new employer, so long as the employee will not be denied access to the applicable leave.

Order 6.1.3 provides that the old employer must give reasonable assistance if necessary for the new employer to prepare an invoice for the purposes of order 6.1.2. This may include information in writing regarding the employee’s entitlements.

Order 6.1.4 outlines the specific rules applying to members of the Defence Force.

Order 6.1.5 details the definitions for this order. The definition of ‘employee’ has been expanded to avoid confusion regarding the application of the order and specifically lists those legislative employment frameworks to which the order applies.  The amount transferred for long service leave is also defined in this order. For those employees who have not yet legally qualified for long service leave, such leave is calculated on an actuarial basis.

Part 7:  Savings and transitional provisions

Order 7.1 – Actions taken and instruments made under the 2005 Orders

Order 7.1.1 is a new order and provides that actions done under the authority of the previous FMA Orders are taken to have been done under the authority of the corresponding provision or group of provisions of the FMA Orders 2008. The note to this order clarifies that this will include delegations made by Agency Chief Executives as well as the delegations and determinations made by the Finance Chief Executive.

Order 7.2 – Payments made before Registration under order 6.4 of the 2005 Orders

Order 7.2.1 is a new order which specifies that where an Agency has made a payment under the 2005 Orders to comply with order 6.4 of those orders, that payment is taken to have been made in compliance with Part 6 of these orders even if that payment was made on or after 1 July 2007 and before these orders were registered.

Order 7.3 – References to 2005 Orders in instruments

Order 7.3.1 provides that when a reference in an instrument is to the 2005 Orders or provisions in those orders it will be taken to include a reference to these orders and the corresponding provision or group of provisions, unless there is no longer a corresponding provision or group of provisions.

Order 7.4 – Meaning of 2005 Orders

Order 7.4.1 is a new order which has been inserted to define 2005 Orders as referring to the Financial Management and Accountability Orders 2005.

Deletions from the Previous FMA Orders

Former Order 4.1 – Agency Appropriation Advice and Schedule 1 – Prescribed Form

Under the previous FMA Orders, former order 4.1 allowed the Finance Chief Executive to provide an advice to a Chief Executive that issued out of the Consolidated Revenue Fund public money that was appropriated by an Annual Appropriation Act. That public money was available to be applied by the Chief Executive, subject to conditions consistent with conditions in a prescribed form under Schedule 1 of the former order.

The FMA Orders have removed the former order 4.1 and Schedule entirely, as they were redundant requirements that had not operated since 1999.

Previous Order 6.1.1 – Officials performing financial tasks between Agencies

Under the previous FMA Orders, former order 6.1.1 covered compliance with instructions issued by the Chief Executive of another Agency, when officials were performing a financial task for the other Agency.

That order was unclear and could produce some unintended results. The removal of that order therefore further encourages Agencies to reach their own agreement on which Agency’s rules should apply, where officials from one Agency perform a financial task for another Agency.