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Last updated: March 2008
Financial management and budget frameworks
Financial management legislation
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For more information:
- Commonwealth Authorities and Companies Act 1997
- Financial Management and Accountability Act 1997
- Public Service Act 1999
For lists of bodies and further information on prescribed agencies under the FMA Act and bodies subject to the CAC Act, see:
- Prescribed FMA Act agencies and CAC Act bodies
- Finance Circular 2003/01: Prescribing agencies under the Financial Management and Accountability Act 1997
- Governance Arrangements for Australian Government Bodies
- List of Australian Government Bodies and Governance Relationships
- Flipchart of FMA Act Agencies/CAC Act Bodies
- Finance Circular 2006/08 Certificate of Compliance – FMA Act Agencies
- Finance Circular 2006/11 Compliance Reporting – CAC Act bodies
The financial management responsibilities of heads of agencies that are financially part of the Commonwealth are set out in the Financial Management and Accountability Act 1997 (FMA Act). Such agencies include Departments of State, Departments of the Parliament and agencies prescribed under the FMA Act, collectively prescribed agencies. The head of a prescribed agency is the Chief Executive. The Chief Executive of a prescribed agency is usually also the agency head for the purposes of the Public Service Act 1999.
Entities that are legally and financially separate from the Commonwealth will generally be subject to the requirements of the Commonwealth Authorities and Companies Act 1997 (CAC Act).
The Australian Government has decided that Financial Management and Accountability Act 1997 (FMA Act) agencies and CAC Act bodies in the GGS must report on legislative compliance and financial sustainability, on an annual basis, to the responsible Minister and the Minister for Finance and Deregulation (Finance Minister)
Financial Management and Accountability Act 1997
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The Financial Management and Accountability Act 1997 (FMA Act) provides a framework for the proper management of public money and public property-that is, money or property that is in the custody or control of the Commonwealth or in the custody or under the control of any person acting for or on behalf of the Commonwealth in respect of the custody or under the control of the money or property, including such money or property that is held on trust for, or otherwise for the benefit of, a person other than the Commonwealth..
Under the FMA Act, the agency Chief Executive (generally also an agency head for the purposes of the Public Service Act 1999) must manage the affairs of the agency in a way that promotes the efficient, effective and ethical use of the Commonwealth resources, that is, public money and public property, for which the Chief Executive is responsible (section 44).
Other specific responsibilities of Chief Executives under the FMA Act include:
- instituting a fraud control plan (section 45)
- establishing an audit committee (section 46)
- pursuing the recovery of debts owed to the Commonwealth for which that chief executive is responsible (section 47)
- ensuring accounts and records are kept in accordance with the Finance Ministers Orders (section 48)
- providing the Auditor-General with financial statements in the required form (section 49).
The Finance Minister has also delegated powers under the FMA Act and the Financial Management and Accountability Regulations 1997 (FMA Regulations) to chief executives, through the Financial Management and Accountability (Finance Minister to chief executives) Delegation 2007 (as amended) (the Delegation). Delegations are to be exercised in accordance with the limits and directions provided.
Financial Management and Accountability Regulations
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The Financial Management and Accountability Regulations 1997 (FMA Regulations) cover matters necessary or convenient for carrying out or giving effect to the Financial Management and Accountability Act 1997 (FMA Act).
Under regulation 6 of the FMA Regulations, the Chief Executive of an agency is authorised to give instructions to officials in that agency (Chief Executive’s Instructions–CEIs) on any matter necessary or convenient for the carrying out or giving effect to the FMA Act or FMA Regulations
Regulations 9 to 13 set out the requirements that must be satisfied before a Chief Executive, or his or her delegate or authorised official, can enter into a contract, agreement or arrangement under section 44 of the FMA Act that will result in a commitment to spend public money.
Under regulation 13, a person must not enter into a contract, agreement or arrangement under which public money is, or may become, payable unless a proposal to spend public money for the proposed contract, agreement or arrangement has been approved under regulation 9 and, if necessary, in accordance with regulation 10.
Regulation 9 requires that an approver must not approve a spending proposal unless the approver is satisfied, after making such inquiries as are reasonable, that the proposed expenditure (a) is in accordance with the policies of the Commonwealth; and (b) will make efficient and effective use of the public money. If the proposal involves the expenditure of “special public money” then paragraph 9(c) requires the approver to also ensure it is consistent with the terms under which the money is held by the Commonwealth.
Regulation 10 requires that where there is not sufficient appropriation to support the cost of a spending proposal, an approver must not approve the spending proposal unless the Minister for Finance and Administration has given written authorisation for the approval. The Finance Minister has delegated powers under regulation 10, with some limitation, to agency chief executives.
The FMA Regulations also prescribe a number of agencies for the purposes of the FMA Act–that is, those agencies, which are not Departments of State, or Departments of the Parliament, to which the FMA Act applies (see Schedule 1 to the FMA Regulations).
Delegations
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The FMA Act and FMA Regulations confer powers and functions on chief executives that may be delegated. A Chief Executive may, in writing, delegate a power or function to one or more officials. Note that the delegate does not have the power to sub-delegate, without a specific provision in legislation. However, there may be a capacity for an authorisation - officials should be aware of the capacity that they are acting within and seek legal advice if necessary.
Chief Executive’s Instructions
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Chief Executive's Instructions (CEIs) are the primary mechanism for a Chief Executive to set out the processes to promote the proper use of Commonwealth resources, including public money and property by officials in his or her agency.
The Australian National Audit Office (ANAO) has recommended in ANAO Performance Audit Report, No. 42, 2003-2004, Financial Delegations for the Expenditure of Public Monies in FMA agencies on the use of financial delegations for the expenditure of public money, that agencies’ CEIs:
- specify the responsibility and timeframe for review and updates
- include specific details of the FMA Regulations legislative framework that are to be adhered to and how they are to be applied
- are accurately reflected in other procedural documents
- are updated regularly so that only references to current Commonwealth and agency practices are included.
Financial Management and Accountability Orders
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The Financial Management and Accountability Orders 2005 also cover matters related to the Financial Management and Accountability Act 1997. They provide additional detail in relation to the following responsibilities of chief executives:
- Audit committee functions and responsibilities
- Fraud control report to responsible Minister
- Maintenance of accounts and records
- Preparation of Budget Estimates
- Use of a Commonwealth credit card for particular purposes
- Delegation of chief executive powers under these Orders.
Finance Minister's Orders (FMOs)
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Chief executives of agencies subject to the Financial Management and Accountability Act 1997 (FMA Act) (in most cases, the agency head) are required to:
- prepare annual financial statements, in accordance with the Finance Minister's Orders, which give a true and fair view of the matters required by those Orders (section 49(2))
- provide annual financial statements to the Auditor-General (section 49(1)).
These audited financial statements are included in Agency Annual Reports
For this purpose the Minister for Finance and Administration (Finance Minister) makes the Financial Management and Accountability (Financial Statement) Orders each year. These Orders are referred to as the Finance Minister’s Orders (FMOs) and they include Schedule 1 Requirements for the Preparation of Financial Statements of Australian Government Entities.
Commonwealth Authorities and Companies Act
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The Commonwealth Authorities and Companies Act 1997 (CAC Act) applies to Commonwealth authorities and Commonwealth companies.
Commonwealth authorities are bodies corporate that are established by legislation for a public purpose, and which hold money on their own account. For Commonwealth authorities, the CAC Act contains detailed rules about reporting and accountability, and deals with other matters such as banking and investment and the conduct of officers.
Commonwealth companies are companies registered under the Corporations Act 2001 in which the Commonwealth has a direct controlling interest. For Commonwealth companies, the CAC Act contains reporting and other requirements that apply in addition to the requirements of the Corporations Act 2001.
The Commonwealth Authorities and Companies Regulations 1997 provides more detail about the matters addressed in the Act.
The Finance Minister has made Finance Minister’s Orders under the CAC Act for the preparation of annual reports by Commonwealth authorities, relating to the financial statements (equivalent to the FMOs made under the FMA Act) and the annual Report of Operations.
