Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2007)

Administered by Department of Finance

Legislation au F2008L00085 Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Issued by the authority of the Minister for Finance and Deregulation

Financial Management and Accountability Act 1997

Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2007)

Commonwealth Authorities and Companies Act 1997

Commonwealth Authorities and Companies Orders (Financial Statements for reporting periods ending on or after 1 July 2007)

 

Financial Management and Accountability Act 1997 (FMA Act)

Subsection 63(1) of the FMA Act provides that Orders may be made on any matter on which the FMA Act requires or permits Orders to be made and on any matter on which regulations under the FMA Act may be made. Section 49 of the FMA Act provides that the Chief Executive of an Australian Government Agency must prepare financial statements in accordance with Finance Minister’s Orders.  These requirements are currently specified in Schedule 1 to the Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2006).

The Financial Management and Accountability Orders set out the financial statement reporting requirements for Australian Government Agencies for reporting periods ending on or after 1 July 2007. Details of the main changes to reporting requirements for the reporting periods ending on or after 1 July 2007, as compared to the requirements that were previously in force are provided in Attachment A.

Specifics in relation to the Orders are as follows:

Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2007)

Clause 1 of the Orders deals with naming of the Orders.

Clause 2 of the Orders deals with commencement of the Orders.

Clause 3 inserts Schedule 1, which sets out requirements for the preparation of annual financial statements for reporting periods ending on or after 1 July 2007, and specifies the legislation to which it applies. It also notes that this Schedule 1 is identical to Schedule 1 to the Commonwealth Authorities and Companies Orders (Financial Statements for reporting periods ending on or after 1 July 2007).

Commonwealth Authorities and Companies Act 1997 (CAC Act)

Subsection 48(1) of the CAC Act provides that Orders may be made on any matter on which the CAC Act requires or permits Orders to be made.  Section 9 of the CAC Act requires the directors of a Commonwealth Authority to prepare an annual report in accordance with Schedule 1 to the CAC Act.  Part 1 of Schedule 1 to the CAC Act provides that the annual report must include financial statements prepared by the directors in accordance with the Finance Minister’s Orders. These requirements are currently specified in Schedule 1 to the Commonwealth Authorities and Companies Orders (Financial Statements for reporting periods ending on or after 1 July 2006).

The Commonwealth Authorities and Companies Orders set out the financial statement reporting requirements for the reporting periods ending on or after 1 July 2007. Details of the main changes to the requirements for reporting periods that were previously in force are provided in Attachment A.

The form and content of the Schedule 1 financial reporting requirements for a particular year is the same for both the abovementioned Orders.

Specifics in relation to the Orders are as follows:

Commonwealth Authorities and Companies Orders (Financial Statements for reporting periods ending on or after 1 July 2007)

Clause 1 deals with the naming of the Orders.

Clause 2 deals with the commencement of the Orders.

Clause 3 inserts Schedule 1, which sets out requirements for the preparation of annual financial statements for reporting periods ending on or after 1 July 2007, and specifies the legislation to which it applies. It also notes that this Schedule 1 is identical to Schedule 1 to the Financial Management and Accountability Orders (Financial Statements for reporting periods on or after 1 July 2007).

 

Consultation

All Commonwealth entities required to apply the Orders have been consulted, with the opportunity to provide comments on the draft version, in their preparation.  The Australian National Audit Office has been consulted and provided detailed comments on the Orders.  All feedback has been considered and amendments made where appropriate.

 


Attachment A to the Explanatory Statement

(Proposed Changes to the Finance Minister’s Orders for 2007-08)

This attachment summarises the main changes in relation to the Finance Minister’s Orders requiring the preparation of financial statements for reporting periods ending on or after 1 July 2007 for agencies and authorities.

The main changes are:

(1)   The addition of the following new policies:

  1. Division 11 – Early adoption of accounting pronouncements: making it explicit that the Secretary of the Department of Finance and Deregulation can instruct entities to early adopt changes in accounting standards.
  2.                 Division 18 – Income: removes options on accounting for grants that were re‑introduced by accounting standard AASB 2007‑4.  Entities must continue to account as per the requirements in 2006‑07.  This maintains comparability with information presented in previous years.
  3.               Division 39 – Joint ventures: removes options on the recognition of interests in jointly controlled entities that were re‑introduced by accounting standard AASB 2007‑4.  Entities must apply the equity method to facilitate the Whole of Government consolidation.

 

(2)   The following substantive changes to existing policies:

  1. Division 15 – Departmental and administered items: significant changes to this Division to reflect the new regime whereby Cabinet will determine whether items are departmental or administered as part of the policy/costing process.
  2.               Division 17 – Approved exemptions:
  • The exemption allowing the Future Fund to present its financial statements in a format consistent with that used in the funds management industry has been clarified so that it is clear the exemption is from otherwise reporting in accordance with the FMOs (which exemption was previously issued separately from the FMOs); and
  • The Aboriginal and Torres Strait Islander Land Account and Aboriginals Benefit Account are exempt from the administered disclosure requirements of the FMOs.  They are also exempt from appropriations and outcomes reporting to the extent that they have none (previous exemption was issued separately from the FMOs).  Both the Land Account and the ABA consist entirely of administered items but will present accounts in the more comprehensive departmental format.  There is no reduction in disclosure as a result. 

 

iii.               Division 22 – Director/executive remuneration: this Division has been redrafted to improve clarity.  Sections have been moved between black letter, policy and guidance and sections on policy and guidance have been added.

iv.                  Division 33 – Valuation of non-financial assets: the requirement for a formal revaluation of non-financial assets every five years has been removed as this has proved confusing for agencies. Agencies must still comply with more general requirements contained in the accounting standards that most assets should be carried at “fair value” each year.

v.                    Division 38 – Assets held in trust: unidentified receipts are not to be treated as assets held in trust but instead treated as administered revenue and deposited to the Official Public Account.  This more easily facilitates a refund if the amount is subsequently identified.

vi.                  Division 45 – Financial instruments: amendment clarifying the subsequent measurement of financial liabilities (this was the subject of an exemption from the FMOs in 2006‑07).

vii.              Division 60 – Cash flow statement: removes options regarding cash flow statements that were re‑introduced by accounting standard AASB 2007‑4.  Entities must use the direct method whereby major classes of gross cash receipts and gross cash payments are disclosed, rather that the indirect method under which the profit or loss is adjusted for items of a non‑cash nature.  Entities must present dividends as a component of financing activities.

viii.            Division 100 – Recognition of Appropriations – General: inclusion of an overview of the Financial Framework Legislation Amendment Act (No. 1) 2007 (FFLA Act) and its implications, particularly in relation to section 31 ‘net appropriations’.

ix.                Division 101 – Recognition of appropriations – departmental: investments made under sections other than section 39 of the FMA Act must be disclosed in the same format as those made under section 39.

x.                  Division 104 – Disclosure of appropriations: revisions of disclosure tables to improve presentation.

xi.                Division 120 – Special Accounts: revisions of disclosure tables to improve presentation and inclusion of an overview of the FFLA Act and its implications, particularly in relation to subsections 20(1) and 21(1) which relate to the establishment of special accounts.

 

Overview

The Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2007) and the Commonwealth Authorities and Companies Orders (Financial Statements for reporting periods ending on or after 1 July 2007), collectively known as the Finance Minister’s Orders, were introduced to update and refine the financial reporting requirements for Australian Government agencies and authorities. Enacted in 2007 by the Minister for Finance and Deregulation, these Orders were designed to address the need for clear, consistent, and compliant financial reporting standards across Commonwealth entities, in line with the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997. The policy objective was to ensure that all financial statements prepared by these entities accurately reflect their financial position and performance, facilitating better governance and accountability. The Orders were developed following consultations with relevant stakeholders, including the Australian National Audit Office, to ensure the requirements were both practical and effective.

Scope and Application

The Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC Act) apply to Australian Government Agencies and Commonwealth Authorities, respectively, mandating the preparation of annual financial statements. These Acts require the Chief Executive of Australian Government Agencies and the directors of Commonwealth Authorities to prepare financial statements in accordance with the Finance Minister's Orders. The Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 1 July 2007) and the Commonwealth Authorities and Companies Orders (Financial Statements for reporting periods ending on or after 1 July 2007) set out the financial statement reporting requirements for these entities. Both sets of Orders are identical in their requirements for reporting periods commencing after 1 July 2007. The main changes to the financial reporting requirements include the early adoption of accounting pronouncements, changes to income and joint venture accounting, clarification of exemptions for certain accounts, and adjustments to the presentation of financial statements to enhance comparability and compliance with accounting standards.

Key Provisions

The Financial Management and Accountability Orders (FMA Orders) and the Commonwealth Authorities and Companies Orders (CAC Orders), both effective from reporting periods ending on or after 1 July 2007, establish comprehensive guidelines for the preparation and presentation of financial statements for Australian Government Agencies and Commonwealth Authorities respectively. Under section 63(1) of the Financial Management and Accountability Act 1997 (FMA Act), the Orders detail specific requirements for financial statement preparation, mandating that the Chief Executive of an Australian Government Agency prepare financial statements in accordance with the Finance Minister’s Orders (FMA Act s 49). Similarly, under subsection 48(1) of the Commonwealth Authorities and Companies Act 1997 (CAC Act), the directors of a Commonwealth Authority are required to prepare an annual report that includes financial statements prepared in line with these Orders (CAC Act s 9). Both sets of Orders incorporate Schedule 1, which delineates the financial statement requirements applicable to the specified reporting periods. The obligations imposed by these Orders are substantial, requiring meticulous adherence to the prescribed financial reporting standards. For Australian Government Agencies, this involves preparing annual financial statements that conform to the detailed specifications outlined in Schedule 1 to the FMA Orders. Commonwealth Authorities, on the other hand, must ensure their annual reports, inclusive of financial statements, comply with the CAC Orders. This involves a rigorous process of aligning financial reporting with the legislative mandates, which includes accounting for grants, income recognition, treatment of jointly controlled entities, and other financial aspects as specified in the Orders. Furthermore, both sets of Orders mandate consultation with relevant entities and consider feedback to ensure the Orders are practical and effective. Failure to comply with the requirements set forth by the FMA and CAC Orders can lead to significant consequences. While the Orders themselves do not explicitly state the penalties for non-compliance, breaches of the FMA Act and CAC Act may attract penalties under other provisions of these Acts. For example, section 110 of the FMA Act provides that a person who is negligent in the performance of their duties or functions under the Act may be subject to disciplinary action. Additionally, under section 127 of the FMA Act, a person who makes a false or misleading statement in a document required by the Act may be subject to a penalty. Similarly, under section 12 of the CAC Act, an officer who knowingly authorises the publication of false or misleading financial reports may be liable for penalties. The penalties may vary, but they can include substantial fines and, in severe cases, imprisonment.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.