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Certificate_of_Compliance_Circular_Dec_2011

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					                                                                                                                  Finance Circular
                                                                                                                      No. 2011/07


Certificate of Compliance – FMA Act Agencies
Key points
This circular:
            provides advice on the annual Certificate of Compliance process for Financial
             Management and Accountability Act 1997 (FMA Act) agencies;
            affects all Chief Executives, Chief Financial Officers, audit committees and officials of
             FMA Act agencies;
            replaces Finance Circular 2009/06: Certificate of Compliance – FMA Act Agencies and
             Finance Circular 2005/06: The financial framework—accountability for compliance
             and dealing with breaches; and
            is available at http://www.finance.gov.au/publications/finance-circulars/index.html.
                                                                     Contents
Foreword ................................................................................................................................................ 2
Part 1         The Certificate of Compliance Process .................................................................................. 3
       1.1        Key Concepts ....................................................................................................................... 4
       1.2        Key Steps ............................................................................................................................. 6
       1.3        Agency Governance ............................................................................................................ 7
       1.4        The Certificate of Compliance ........................................................................................... 10
Part 2         Guidance on Completing the Certificate ............................................................................. 11
       2.1        Compliance with the Financial Management Framework ................................................ 12
       2.2        Completing the Certificate ................................................................................................ 14
Part 3         Tools and Templates ............................................................................................................ 18
       3.1        Certificate of Compliance Letter Template ....................................................................... 19
       3.2        The Certificate of Compliance Template .......................................................................... 20
       3.3        Appendix A: Non-Compliance Schedule Template ........................................................... 21
       3.4        Appendix B: Financial Sustainability Schedule Template .................................................... 22
       3.5        Appendix C: List of Special Accounts Template ................................................................ 23
       3.6        Special Accounts Checklist ................................................................................................ 24
Part 4         Summary of Compliance Requirements in the FMA Act and Regulations ......................... 25
Part 5         Frequently Asked Questions ................................................................................................ 62




 Page 1 of 68                                                                                                        Finance Circular 2011/07
                                                                                                      Department of Finance and Deregulation
                                                                                          Foreword

Foreword
This circular provides guidance on the annual Certificate of Compliance (Certificate) process
for FMA Act agencies. The Certificate process is designed to improve compliance with the
Australian Government’s financial management framework and to ensure that Ministers are
kept informed of compliance issues within their portfolios.

Compliance monitoring is one element of the Department of Finance and Deregulation’s
(Finance) broader strategy to improve the quality of public financial management in all
aspects of Commonwealth operations. The Certificate process aims to improve
understanding of the financial management framework, and strengthen agency processes,
through the identification of non-compliance issues and actions taken to improve processes
and compliance. Analysis of Certificate results also provides an opportunity for Finance to
identify issues that are common across agencies, highlighting elements of the framework
that may require improvement.

In 2010 and 2011, the Australian National Audit Office (ANAO) examined the Certificate
process. The ANAO report, Management of the Certificate of Compliance Process in FMA Act
Agencies, tabled on 20 April 2011, states that the Certificate process “has been effective and
... has heightened the focus of agencies on compliance.”

This circular addresses suggestions contained in the Audit Report to improve the guidance
available to agencies on the Certificate process.

This circular is provided in 5 parts. Part 1 provides an overview of responsibilities and
requirements relating to the Certificate. Part 2 contains specific guidance about completing
the Certificate and Part 3 contains tools and templates. Part 4 provides further information
regarding how to report compliance issues. Part 5 contains frequently asked questions,
designed to give practical guidance to agency staff.

The FMA Act, FMA Regulations and related guidance are available on the Finance website at
http://www.finance.gov.au/financial-framework/fma-legislation/index.html.

Questions on the application of the Certificate process should be directed in the first
instance to your Chief Financial Officer area. For questions relating to this Finance Circular,
please contact the Financial Framework Policy Branch at finframework@finance.gov.au.




Kerry Markoulli
Assistant Secretary
Financial Framework Policy Branch
Financial Management Group
  December 2011




Page 2 of 68                                                                  Finance Circular 2011/07
                                                                Department of Finance and Deregulation
                                 Part 1 – The Certificate of Compliance Process




Part 1         The Certificate of Compliance Process


1.1 Key Concepts                                                      p. 4

1.2 Key Steps                                                         p. 6

1.3 Agency Governance                                                 p. 7

1.4 The Certificate of Compliance                                     p. 10




Page 3 of 68                                                 Finance Circular 2011/07
                                               Department of Finance and Deregulation
                                                                          Part 1.1 – Key Concepts

1.1 Key Concepts
agency means a Department of State or a Department of the Parliament (including persons
allocated to the Department by the Financial Management and Accountability
Regulations 1997 (FMA Regulations)), or any agency prescribed under the FMA Regulations
(see section 5 of the FMA Act; FMA Regulations 4-5; and Schedule 1 of the FMA Regulations).

allocated official means a person outside the Commonwealth who performs a financial task
and temporarily becomes an official of the FMA Act agency while they are undertaking that
financial task. They are temporarily “allocated” to that agency (see FMA Regulation 4).
As an “allocated official”, they are subject to all the requirements of the financial
management framework that apply to all officials, including the FMA legislation, the policies
of the Commonwealth and the relevant agency’s Chief Executive’s Instructions (CEIs).

If a person outside the Commonwealth is involved with the receipt, custody or payment of
public money under an agreement authorised under section 12 of the FMA Act, they do not
temporarily become an official (i.e. an allocated official), as that task is not a financial task
under FMA Regulation 3.

approver means a Minister or agency Chief Executive (including a Chief Executive’s
delegate). An approver is authorised to consider and approve spending proposals under
FMA Regulation 9. A person may also be authorised to approve proposals to spend public
money under legislation other than the FMA Act (see FMA Regulation 3).
Chief Executive means:
     (a) for a prescribed Agency—the person identified by the regulations as the Chief
     Executive of the Agency; or
     (b) for any other Agency—the person who is the Secretary of the Agency for the
     purposes of the Public Service Act 1999 or the Parliamentary Service Act 1999.
financial task means a task or procedure relating to the commitment, spending,
management or control of public money. It does not include a task or procedure that is
performed by a person outside the Commonwealth under an arrangement or agreement
authorised under section 12 of the FMA Act (see FMA Regulation 3 and section 12 of the
FMA Act).

official means a person who is in an agency or is part of an agency (see section 5 of the
FMA Act). This includes an individual who is allocated to an agency, including those
temporarily allocated (i.e. an allocated official).

outsider means any person other than the Commonwealth, a Minister or an official (see
section 12 of the FMA Act). For example, a contractor or consultant (including a company)
involved in an arrangement with the Commonwealth for the provision of goods or services,
such as administrative or management services undertaken for the Commonwealth, may be
an outsider.

proper use means efficient, effective, economical and ethical use that is not inconsistent
with the policies of the Commonwealth (see section 44 of the FMA Act). While the FMA Act
and Regulations do not define the terms efficient, effective, economical and ethical, it is

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                                                                        Part 1.1 – Key Concepts

useful to note that the Australian National Audit Office (ANAO) defines:
    -    efficiency as maximising the ratio of outputs to inputs;
    -    effectiveness as the extent to which intended outcomes were achieved; and
    -    economy as minimising cost.
public money means:
       a) money in the custody or under the control of the Commonwealth; or
       b) money in the custody or under the control of any person acting for or on behalf
          of the Commonwealth in respect of the custody or control of the money;
including such money that is held on trust for, or otherwise for the benefit of, a person other
than the Commonwealth (see section 5 of the FMA Act).

Public money includes Australian currency, foreign currency and cheques in any currency.
Public money can be appropriated by Parliament and is raised by or on behalf of the
Commonwealth through taxes, borrowings, loan repayments, rebates, levies, fees and other
means. Money held on trust by the Commonwealth and money found on Commonwealth
premises is also public money.

The FMA Act and Regulations apply to all money held or controlled by FMA Act agencies,
irrespective of whether the money is provided through the Federal Budget, a special
appropriation or raised by the agency, such as through cost recovery.




Page 5 of 68                                                                 Finance Circular 2011/07
                                                               Department of Finance and Deregulation
                                                                               Part 1.2 – Key Steps

1.2 Key Steps
1.     The Chief Executives of all agencies under the FMA Act are required to provide a
       completed Certificate of Compliance (Certificate) to their portfolio Minister each year.
2.     The purpose of the Certificate is to improve compliance with the Australian
       Government’s financial management framework and to ensure that Ministers, and the
       Presiding Officers in the case of the Parliamentary Departments, are kept informed of
       compliance issues within their portfolios.
3.     The Certificate process is an important means of identifying and disclosing instances of
       non-compliance with the financial framework, as a basis for continuous improvement.

Certificate of Compliance Process




1




1
    Financial Management Information System.

Page 6 of 68                                                                   Finance Circular 2011/07
                                                                 Department of Finance and Deregulation
                                                                          Part 1.3 – Agency Governance

1.3 Agency Governance
1.3.1 Responsibility of the Chief Executive
     Section 44 - Promoting the proper use of Commonwealth resources
       (1) A Chief Executive must manage the affairs of the Agency in a way that promotes proper use
           of the Commonwealth resources for which the Chief Executive is responsible.
           Note:     A Chief Executive has the power to enter into contracts, on behalf of the
                     Commonwealth, in relation to the affairs of the Agency. Some Chief Executives
                     have delegated this power under section 53.
       (2) In doing so, the Chief Executive must comply with this Act, the regulations, Finance Minister’s
           Orders, Special Instructions and any other law.
       (3) In this section:
           proper use means efficient, effective, economical and ethical use that is not inconsistent with
           the policies of the Commonwealth.

4. A key feature of the financial management framework, which is comprised of the
   FMA Act and Regulations, delegations and financial management policies,2 is that agency
   Chief Executives are directly responsible for the financial management of their agencies.
5. Part 7 of the FMA Act sets out the specific responsibilities of Chief Executives. Section 44
   places a special responsibility on Chief Executives to manage the affairs of their agency in
   a way that promotes the “proper use” of the Commonwealth resources for which they
   are responsible. Proper use means efficient, effective, economical and ethical use that is
   not inconsistent with the policies of the Commonwealth. In managing the affairs of the
   agency, Chief Executives must comply with the FMA Act and Regulations and any other
   law.
6.    Chief Executives generally discharge their responsibility under section 44 by ensuring
      that their agencies have appropriate internal controls, internal governance
      arrangements, delegations, guidance, education, reporting, monitoring, and process
      improvement mechanisms in place. For example, this may involve the establishment of
      specific risk assessment and management activities around fraud control, with the
      creation of a specific fraud control unit or appointment of Fraud Control Officers to
      mitigate, monitor and investigate suspected fraud.
7.    This broad responsibility to manage the affairs of an agency in a way that promotes
      proper use of Commonwealth resources, is complemented by other requirements in
      Part 7 of the FMA Act, such as the requirements relating to audit committees, financial
      reporting and fraud control plans.
8. The processes, systems and controls Chief Executives put in place to promote compliance
   with the financial management framework may vary between agencies, depending on
   their size, operations, structure and activities. In most cases, these processes and
   controls are an extension of those processes that give confidence to the Chief Executive

2
 The financial management policies of the Commonwealth are detailed in Finance Circulars, the Financial
Management Guidance series and the Financial Management Reference series. The financial management policies
which are reportable for Certificate purposes are detailed at Part 2.1.3 of this circular.

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                                                                Part 1.3 – Agency Governance

    on matters, such as the use of delegations and budgetary management. The
    Chief Executive may consider drawing on a program of internal audits, assessment of
    internal controls, specific senior management requirements, and specialised assurance in
    relevant high-risk areas, in addition to other advice, materials and processes in signing
    the Certificate. It is also expected that audit committees will review and monitor internal
    control mechanisms and advise Chief Executives on compliance issues on an ongoing
    basis.
9. Chief Executives should put in place appropriate controls to ensure that “officials” within
   their agency comply with the requirements of the financial management framework.
   Accordingly, Chief Executives should investigate possible breaches of legislation and
   non-compliance with Australian Government policy and initiate appropriate corrective
   action.

1.3.2 Responsibility of the Audit Committee
10. Under section 46 of the FMA Act, Chief Executives must establish an audit committee
    with functions and responsibilities specified in the FMA Regulations. The audit
    committee is a key component of an agency’s corporate governance and is an important
    mechanism for overseeing an agency’s financial management processes and compliance
    with the financial management framework.
11. Chief Executives must set the terms of reference for their audit committees, consistent
    with the general requirements contained in FMA Regulation 22C. Audit committees
    should put in place activities to promote internal compliance and monitoring
    arrangements. The Australian National Audit Office has published a Better Practice
    Guide entitled Public Sector Audit Committees which provides guidance on the
    establishment and operation of audit committees.
12. Audit committees play a key role in developing and implementing activities and procedures
    to support the Certificate process. The audit committee’s advice on internal controls should
    give confidence to a Chief Executive when completing the Certificate.

1.3.3 Responsibility of the Chief Financial Officer
13. Chief Financial Officers (CFOs) are generally the principal financial advisor to agencies’
    Chief Executives. The scope and range of activities undertaken by a CFO will vary, but
    his/her primary responsibility is to promote good budget and financial management
    practices and to support the Chief Executive to discharge his/her financial management
    responsibilities, in accordance with the FMA Act and Regulations and the financial
    management policies. This role usually involves overseeing the financial management
    and budget processes within an agency. It also includes establishing mechanisms to
    meet specific reporting requirements and advising the Chief Executive on the financial
    health of the agency. As such, the CFO will have a key role in an agency’s Certificate
    processes.

1.3.4 Responsibility of all officials
14. The financial management framework establishes specific financial management
    responsibilities for all officials. For example, section 14 of the FMA Act requires that
    officials must not misapply, improperly dispose of, or improperly use “public money”.

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                                                                             Part 1.3 – Agency Governance

     Section 41 mirrors this requirement for public property. In addition, the special
     responsibility of Chief Executives to promote the proper use of Commonwealth
     resources is a requirement that is generally also applied to officials, through CEIs,
     delegations and other internal requirements.
15. These requirements are reinforced by the various employment frameworks that apply
    to officials. For example, the Australian Public Service (APS) Code of Conduct sets out
    the standards of conduct required of all APS employees. This includes compliance with
    applicable Australian laws and using Commonwealth resources in a proper manner.
    Officials employed under other employment arrangements, for example Defence
    personnel or Australian Federal Police employees, are subject to similar requirements as
    a condition of employment.
16. There is a responsibility for all officials to comply with and, where relevant, report any
    suspected instances of non-compliance of the FMA Act, Regulations and financial
    management policies to the appropriate area within their agency.3 The agency will
    determine if any non-compliance is reportable for Certificate purposes.
    The identification and reporting of non-compliance should be used as the basis for
    improving agency processes and increasing awareness and understanding of the
    financial management framework.
17. Officials with specific financial management responsibilities, especially those who are
    delegates, should have a good understanding and knowledge of the financial
    management framework and their associated responsibilities.




3.
  The Certificate process does not require disclosure by employees that is contrary to any legal privilege that a
person might claim, including self-incrimination. Agencies should seek appropriate legal advice if such issues
arise.

Page 9 of 68                                                                             Finance Circular 2011/07
                                                                           Department of Finance and Deregulation
                                                        Part 1.4 – The Certificate of Compliance

1.4 The Certificate of Compliance
1.4.1 Purpose
18. The purpose of the Certificate is to improve compliance with the financial management
    framework and to ensure that Ministers are kept informed of compliance issues within
    their portfolios.

19. The Certificate process aims to improve official’s understanding of the financial
    management framework, and strengthen agency processes, through the identification of
    non-compliance issues and by undertaking action to improve processes and compliance.
    The Certificate promotes continuous improvement within agencies. Analysis of
    Certificate results also provides an opportunity for Finance to identify issues that are
    common across agencies, thereby highlighting elements of the framework that may
    require improvement.
20. The Certificate focuses on identifying non-compliance and improving agency processes.
    Therefore, individual agencies are not currently identified in the Certificate of
    Compliance Report to Parliament. Chief Executives should ensure that their systems are
    robust and identify non-compliance with a view to process improvement. In particular,
    agencies that report low or no instances of non-compliance should ensure that they have
    adequate processes to identify instances of non-compliance.
21. Finance prepares an analysis of annual Certificate results that is tabled in the Parliament
    each year. This analysis is aggregated to a portfolio level and does not identify agencies.
    This analysis is reported against six categories which represent key elements of the
    financial management framework (see Part 4 of this circular).

1.4.2 Certificate Requirements
22. The Certificate is based on a self-assessment by an agency’s Chief Executive. It is an
    assessment of an agency’s compliance based on advice and internal controls. The
    Certificate also requires Chief Executives to state whether their agency has adopted
    appropriate management strategies for all known risks that may affect the financial
    sustainability of the agency and whether it is operating within the agreed resources for
    the current financial year as at the date of signing (see Part 2.2 for further information).
23. The Certificate must be provided to the responsible portfolio Minister and the Finance
    Minister, by 15 October each year. If 15 October falls on a weekend, then the Certificate
    is required to be provided on the last working day prior to the weekend.




Page 10 of 68                                                                 Finance Circular 2011/07
                                                                Department of Finance and Deregulation
                                 Part 2 – Guidance on Completing the Certificate




Part 2          Guidance on Completing the Certificate


2.1 Compliance with the Financial Framework                              p. 12

2.2 Completing the Certificate                                           p. 15




Page 11 of 68                                                   Finance Circular 2011/07
                                                 Department of Finance and Deregulation
                                                                              Part 2.1– Compliance with the Financial Framework

2.1 Compliance with the Financial Management
    Framework
Elements of the Financial Management Framework
Whole-of-Government Financial Management Framework




                                                                           FMA Act and Regulations



                                                      Finance       Commonwealth           Finance Minister’s    Finance Minister’s
                                                     Minister’s      Procurement              Delegations         Determinations
                                                     Orders for       Guidelines,                                   and Special
                                                     Financial    Commonwealth Grant                                Instructions
                                                     Reporting    Guidelines and Fraud
                                                                   Control Guidelines



                                                           4            Financial management policies4




24. FMA Act agencies operate within an environment that is made up of legislation,
    legislative instruments and government policy. Within this context, the financial
    management framework consists of the legislation, delegations and financial
    management policies, such as those governing the management of Commonwealth
    resources. Given the broad scope of financial management policies, only certain policies
    are reportable for Certificate purposes (see Part 2.1.3 of this Circular).

2.1.1 The FMA Act and Regulations
25. The FMA Act and Regulations establish requirements for all Chief Executives and
    officials. Failure to meet these requirements, or exceeding the authority provided under
    this legislation should be reported at Appendix A to the Certificate.
26. To assist agencies, Part 4 of this circular provides information on the compliance
    requirements of the FMA Act and Regulations as at December 2011. This can be used to
    develop an internal compliance checklist or questionnaire, which should be regularly
    reviewed and updated when there are significant changes to the FMA Act and
    Regulations.

4.
 In addition to policies that are reportable in the Certificate (see Part 2.1.3 of this Circular), financial
management policies include the policies that are not reportable for Certificate purposes (e.g. the 30 day
payment policy to small businesses).


Page 12 of 68                                                                                                     Finance Circular 2011/07
                                                                                                   Department of Finance and Deregulation
                                                  Part 2.1– Compliance with the Financial Framework
2.1.2 Finance Minister to Chief Executives Delegation
27. The Finance Minister has delegated certain powers and responsibilities to
    Chief Executives, with directions. If a delegate does not comply with these directions, or
    if an official acts without the appropriate delegation, this should be reported at
    Appendix A to the Certificate against the relevant Schedule and Part of the Delegation.
28. The Finance Minister’s delegation to Chief Executives (the Delegation) is available on the
    Finance website at www.finance.gov.au/financial-framework/fma-legislation/fma-
    delegations.html.
29. Non-compliance with internal delegations should not be reported in the Certificate,
    unless there has also been non-compliance with the FMA Act or Regulations or the
    directions in the Finance Minister’s delegation. For example, non-compliance with
    directions in the Finance Minister’s delegation for FMA Regulation 10 would be
    reportable. In contrast, an internal policy which requires FMA Regulation 10 to be
    sought before FMA Regulation 9 approval would not be reportable. Issues relating to
    non-compliance with internal delegations should still be considered as part of an
    agency’s internal controls and improvement processes.

2.1.3 Reportable Financial Management Policies
30. Financial management policies include requirements that must be met by Chief
    Executives and officials in addition to legislative requirements. They do not include
    Finance publications that outline administrative processes, provide better practice
    guidance, interpret or explain the legislative requirements.
31. Those policies that are reportable for Certificate purposes may change from time to
    time. For the purposes of completing the Certificate, the financial management policies
    that Chief Executives are required to certify compliance with are:
         – the foreign exchange risk management policy, as outlined in the Australian
           Government Foreign Exchange Risk Management Guidelines;
         – competitive neutrality policy, as outlined in the Australian Government Competitive
           Neutrality Guidelines for Managers;
         – cost recovery policy, as outlined in the Australian Government Cost Recovery Guidelines;
         – contingent liabilities policy, as outlined in the Guidelines for Issuing and Managing
           Indemnities, Guarantees, Warranties and Letters of Comfort; and
         – the management of property policy, as outlined in the Commonwealth Property
           Management Guidelines.
32. Under FMA Regulation 9 5, “approvers” of spending proposals must be satisfied that giving
    effect to the spending proposal would be a proper use of Commonwealth resources (i.e.
    efficient, effective, economical and ethical use not inconsistent with the policies of the
    Commonwealth). All officials, particularly approvers, should therefore take care to inform
    themselves of new Commonwealth policies and ensure they take account of relevant

5
 See Finance Circular 2011/01 - Commitments to spend public money (FMA Regulations 7-12) for further information
regarding Regulation 9.

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                                                       Part 2.1– Compliance with the Financial Framework
       policies when approving spending proposals under FMA Regulation 9. For example,
       approvers should be particularly aware of the Government’s ongoing development and
       implementation of policies relating to whole-of-government procurement.

2.2 Completing the Certificate
33. The Certificate is a comprehensive report on each agency’s compliance with the financial
    management framework. A key focus of the Certificate is the activities undertaken to
    address non-compliance. The Certificate comprises five parts:
        –     the covering letter to the portfolio Minister (see Part 3.1), which must be copied
              to the Finance Minister;
        –     the Certificate (see Part 3.2), signed by the Chief Executive certifying that, except
              to the extent known and detailed in the appendices, officials within his/her agency
              complied with the financial management framework requirements during the
              previous financial year and have adopted appropriate management strategies for
              all known risks that may affect the financial sustainability of the agency;
        –     Appendix A (see Part 3.3), which details all known instances of non-compliance and the
              action/s taken (including timeframes) to improve agency processes;
        –     Appendix B (see Part 3.4), which gives an explanation of all known risks that may
              affect the financial sustainability of the agency and states whether the agency is
              operating within the agreed resources for the current financial year; and
        –     Appendix C (see Part 3.5), which lists all the Special Accounts that the
              Chief Executive was responsible for during the financial year.
34. The Certificate must be signed by the agency’s Chief Executive. This responsibility
    cannot be delegated.
35. The Certificate must be submitted to the responsible portfolio Minister 6 and copied to
    the Finance Minister. Where the portfolio Minister is not the Minister to which the
    agency normally reports, Chief Executives should also provide a copy of the Certificate to
    that Minister.
36. Chief Executives should implement activities to help complete their agency’s Certificate
    that are fit‐for‐purpose, having regard to factors such as the size of the agency, its
    activities, financial management arrangements, compliance history and key risk areas.
    For example, a Chief Executive may choose to regularly assess internal controls or use a
    combination of self-assessment questionaries and sample testing for high risk activities.
37. When developing internal processes to help complete the Certificate, officials should
    consider the impact of other tasks, such as completion of annual financial statements.
    Audit committees may, for example, wish to take the Certificate into account before
    providing advice to the Chief Executive on the agency’s financial statements. They may
    also wish to consider whether the financial sustainability component of the Certificate
    has any implications for the “going concern” information in the financial statements.
    Internal approval processes should allow sufficient time to provide a copy to the
    responsible portfolio Minister and the Finance Minister by the due date.
6.
     The Presiding Officers in the case of the three Parliamentary Departments.

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                                                                                  Department of Finance and Deregulation
                                                          Part 2.2– Completing the Certificate
38. In addition to the copy provided to the Finance Minister, an electronic copy of the
    Certificate, including all attachments, must be sent to finframework@finance.gov.au
    before 15 October each year. This will enable Finance to commence its analysis of the
    Certificate information to develop the annual Certificate Report for the Parliament.

2.2.1 Assessing Compliance: Chief Executive
39. Chief Executives should certify compliance based on their agency’s internal control
    mechanisms, management, and audit committee advice. Chief Executives are not
    required to check all actions and transactions of the agency. That said, Chief Executives
    must ensure that agencies have sufficient processes and internal controls in place to
    provide reasonable confidence that officials are complying with the requirements of the
    financial management framework.
40. When reviewing non-compliance results, Chief Executives should consider the adequacy
    of their agency’s internal controls. Low or no reported instances of non-compliance,
    depending on the size, financial activities, controls, and the processes of an agency, may
    not be a measure of good processes, but may in fact reflect a lack of understanding of
    the financial management framework or inadequate compliance processes.
41. The ANAO Audit Report, Management of the Certificate of Compliance Process in FMA
    Act Agencies (the Audit Report) contains better practice suggestions for agencies’
    Certificate processes. The suggestions cover:
       - understanding the financial management framework requirements and how they
         are implemented;
       - assessing internal controls supporting compliance with the financial management
         framework requirements;
       - determining the right approach to collecting Certificate information;
       - quality assuring compliance information;
       - making use of internal audit;
       - ensuring audit committee oversight of the Certificate process;
       - undertaking remediation and education; and
       - reviewing the effectiveness and efficiency of the Certificate process.

2.2.2 Assessing Compliance: Reporting Non-compliance
42. Compliance with the requirements of the FMA Act and Regulations, and the financial
    management policies, is not assessed based on materiality. All known instances of
    non-compliance must be reported at Appendix A to the Certificate, regardless of
    materiality.
43. In assessing non-compliance, a variety of sources of information should be used.
    For example, an agency may use surveys, reports from its internal auditor, Financial
    Management Information Systems, and other controls. Targeted quality assurance and
    sample testing of financial transactions in risk areas will assist to provide assurance on
    the accuracy of results.


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                                                         Part 2.2– Completing the Certificate
44. Where the processes and controls indentify compliance issues, all known instances of
    non-compliance must be reported. Generalised reporting is inappropriate and should be
    avoided (for example, reporting “several,” “a number of” or “multiple” instances of
    non-compliance).
45. The results of sample testing should not be extrapolated. Only known instances of
    non-compliance should be reported in the Certificate. If exact numbers are unavailable,
    where there are a large number of incidences of non-compliance caused by a systemic
    issue, the problem should be described and an estimate of the number of instances
    should be provided (see Part 5 of this circular for further examples).
46. Activities that give rise to multiple instances of non-compliance should be reported in
    the Certificate separately. For example, an agency may not have issued appropriate
    drawing rights for a period of time. In this case, an agency should report the actual
    numbers of non-compliance (for example, each payroll run made without appropriate
    drawing rights).
47. Consequential instances of non-compliance should not be reported in the Certificate.
    A consequential instance only occurs when multiple compliance issues are caused by the
    same error (i.e. no additional non-compliance would have occurred if the original
    non-compliance did not occur). For example, failure to bank public money promptly
    would not result in non-compliance with both section 10 of the FMA Act and
    FMA Regulation 17. It should only be reported as one instance of non-compliance
    against section 10. Only the original non-compliance is reportable in the Certificate.
    Consequential non-compliance may be noted in the explanation of the non-compliance,
    but need not be reported separately (see example at Part 5, Frequently Asked
    Question 3).
48. Only non-compliance that has occurred during the relevant reporting period is required
    to be reported in the Certificate. If instances of non-compliance from previous years
    come to light, Chief Executives should take appropriate action, as part of the continuous
    improvement process, but should not report these.
49. Where one agency provides another agency with the authority to perform a “financial
    task” for that agency, and the receiving agency acts outside that authority, the agency
    performing the financial task must report the relevant instances of non-compliance in
    their Certificate. For example, if Agency A sub-delegates the power to issue drawing
    rights to Agency B, and officials in Agency B make payments using Agency A’s
    appropriation without valid drawing rights, then Agency B must report the
    non-compliance in their Certificate.

2.2.3 Financial Sustainability
50. Effective risk engagement and management is integral to good corporate governance.
    It is important for agencies to manage risk effectively and efficiently, not only to meet
    their statutory obligations under the financial management framework but to improve
    organisational performance. Chief Executives must certify that known risks to the
    financial sustainability of their agency are being actively managed. Where known risks
    may affect the financial sustainability of an agency and appropriate management
    strategies have not or cannot be taken, an explanation must be provided at Appendix B.


Page 16 of 68                                                                Finance Circular 2011/07
                                                              Department of Finance and Deregulation
                                                                     Part 2.2– Completing the Certificate
51. Balancing increasing demands against limited financial resources is an important part of
    a Chief Executive’s responsibilities. Financial sustainability, in this context, is the ability
    of the agency to meet existing program requirements without the need for
    supplementation. This includes the management of capital and long-term assets and
    liabilities.
52. Chief Executives must also provide assurance that the agency is operating within the
    agreed resources for the current financial year. Where a Chief Executive is not operating
    within the agreed resources for the financial year (as recorded in the Australian
    Government’s Central Budget Management System), he/she must provide an
    explanation at Appendix B.
53. Where an agency has the approval of the Finance Minister for an operating loss for the
    current financial year, as at the date of signing, the Chief Executive may take that into
    account when determining whether the agency is operating within the agreed
    resources. Where an agency is operating at a loss without the Finance Minister's
    approval, an explanation must be provided at Appendix B. Agencies that are
    anticipating the need to seek approval for an operating loss from the Finance Minister in
    the current, or a future financial year, should also report this at Appendix B to the
    Certificate.

2.2.4 Special Accounts
54. Chief Executives must provide a list of Special Accounts for which they were responsible
    during the previous financial year at Appendix C to the Certificate (see Part 3.5 of this
    circular). To ensure accuracy, it is encouraged that the list of Special Accounts is settled
    in consultation with Finance, before submitting the Certificate. Please refer to the Chart
    of Special Accounts on the Finance website.7 This chart lists all Special Accounts
    managed by individual portfolios and agencies. The name of each Special Account on
    the chart is hyperlinked to its most recent instrument on the ComLaw database.
55. Part 3.6 of this circular includes a checklist of the issues that need to be considered to
    promote the efficient and effective management of Special Accounts. This attachment
    does not explicitly cover other compliance responsibilities relevant to Special Accounts,
    such as those required under the FMA Act in particular section 48, as these are
    addressed in the Certificate itself.
56. For further information on the management requirements for Special Accounts please
    refer to Finance Circular 2009/01 - An Introduction to Special Accounts and the
    Guidelines for the Management of Special Accounts.8




7.
   Available at www.finance.gov.au/financial-framework/financial-management-policy-guidance/special-
accounts.html.
8.
   Available at www.finance.gov.au/publications/finance-circulars/2009/01.html.

Page 17 of 68                                                                            Finance Circular 2011/07
                                                                          Department of Finance and Deregulation
                                              Part3 – Tools and Templates




Part 3          Tools and Templates


3.1 Certificate of Compliance Letter Template                           p. 19
3.2 Certificate of Compliance Template                                  p. 20
3.3 Appendix A – Non-Compliance Schedule Template                       p. 21
3.4 Appendix B – Financial Sustainability Schedule Template p. 22
3.5 Appendix C – List of Special Accounts Template                      p. 23
3.6 Special Accounts Checklist                                          p. 24




Page 18 of 68                                             Finance Circular 2011/07
                                           Department of Finance and Deregulation
                                                    Part 3.1 – Certificate of Compliance Letter

3.1 Certificate of Compliance Letter Template
Dear Minister,

Please find attached the Certificate of Compliance (Certificate) relating to < insert name of
agency > for the < insert date > reporting period.

The Certificate aims to improve compliance with the financial management framework by
strengthening agency processes and improving understanding of the financial management
framework. It also seeks to keep Ministers informed of compliance issues within their
portfolios.

The Certificate promotes continuous improvement through the identification of non-
compliance and action to improve processes and reduce non-compliance.

I am required to provide you with certification of compliance with the financial
management framework by my agency, including identifying any known risks to the financial
sustainability of my agency.

Based on my agency’s internal control mechanisms, management and audit committee
advice, I certify that I, and officials within my agency, complied with the requirements of the
financial management framework last financial year, < except to the extent known and
detailed in Appendix A to the Certificate >.

< You may wish to comment on the robustness of your Agency’s controls and internal
processes here >

I also certify that < insert name of agency > < has adopted or has not adopted > appropriate
management strategies for all currently known risks that may affect the financial
sustainability of the agency and < is operating or is not operating > within the agreed
resources for the current financial year.

I have provided a copy of the attached Certificate to the Finance Minister as required.

Yours sincerely



<insert Agency Chief Executive’s signature block>




Page 19 of 68                                                                 Finance Circular 2011/07
                                                               Department of Finance and Deregulation
                                                 Part 3.2 – Certificate of Compliance Template

3.2 The Certificate of Compliance Template
                CERTIFICATE OF COMPLIANCE < FINANCIAL YEAR >
                        < INSERT AGENCY NAME HERE >
Based on the agency’s internal control mechanisms, management, and audit committee
advice, I certify that for the financial year ended 30 June < insert year >, < insert agency
name >, except to the extent detailed in Appendix A, has:

    a) complied with the provisions and requirements of the Financial Management and
       Accountability Act 1997 (FMA Act) and the Financial Management and Accountability
       Regulations 1997 (FMA Regulations);
    b) exercised the powers delegated by the Finance Minister in the Financial
       Management and Accountability (Finance Minister to Chief Executives) Delegation
       2010 (the Delegation), as amended from time to time, in accordance with the
       Delegation;
    c) complied with the requirements for the management of the Special Accounts for
       which the agency is responsible, as listed at Appendix C; and
    d) complied with reportable financial management policies of the Commonwealth.
Except to the extent detailed in Appendix B, my agency has adopted appropriate
management strategies for all known risks that may affect the financial sustainability of my
agency and is operating within agreed resources for the current financial year.




____________________________________________________             Date: __________



CHIEF EXECUTIVE OF <<INSERT AGENCY NAME HERE>>




Page 20 of 68                                                                 Finance Circular 2011/07
                                                                Department of Finance and Deregulation
                                                            Part 3.3 – Appendix A: Non-Compliance Schedule
3.3 Appendix A: Non-Compliance Schedule Template
                   CERTIFICATE OF COMPLIANCE < FINANCIAL YEAR >
                           < INSERT AGENCY NAME HERE >
Agencies should use the following format to report non-compliance for the Certificate process (it can be
presented in landscape or portrait format).
Requirement of            Title of          Number of               The circumstances        Action taken
non-compliance            relevant          instances of            of non-compliance
                          Section,          non-compliance          with the
                          Regulation or                             requirements
                          policy
FMA Act
FMA Regulations
The Delegation
The requirements for
the management of
Special Accounts
The financial
management policies
of the
Commonwealth
The schedule should detail all known instances of non-compliance with:
   a) the FMA Act and/or the FMA Regulations;
   b) the Delegation;
   c) the requirements for the management of Special Accounts; and
   d) the reportable financial management policies of the Commonwealth are:
            i.    foreign exchange risk management policy as outlined in the Australian Government
                  Foreign Exchange Risk Management Guidelines;
            ii.   competitive neutrality policy as outlined in the Australian Government Competitive
                  Neutrality Guidelines for Managers;
           iii.   cost recovery policy as outlined in the Australian Government Cost Recovery Guidelines;
           iv.    contingent liabilities as articulated in the Guidelines for Issuing and Managing Indemnities,
                  Guarantees, Warranties and Letters of Comfort; and
           v.     the management of property policy as outlined in the Commonwealth Property
                  Management Guidelines.
The schedule should specify the:
    actual (or estimated) number of specific known instances of non-compliance;
    circumstances where the requirements were not complied with; and
    action that has been undertaken, including timeframes, to improve agency processes. This action
       should be based on the specific instances of non-compliance and should not be general
       statements. For example, where the agency has indentified a lack of understanding of a particular
       requirement, it is appropriate to indicate that training on that requirement has been delivered to
       all affected employees.

Page 21 of 68                                                                              Finance Circular 2011/07
                                                                             Department of Finance and Deregulation
                                                  Part 3.4 – Appendix B: Financial Sustainability Schedule

3.4 Appendix B: Financial Sustainability Schedule Template
The schedule should detail any known risks to the financial sustainability of the agency and strategies
to manage these risks.
The schedule should discuss whether the agency is facing any of the following financial sustainability
issues:
    a) not operating within agreed resources;
    b) seeking, or has obtained, approval from the Finance Minister for an operating loss for the
       financial year;
    c) increasing cost pressures for the financial year;
    d) need to seek supplementation for the financial year;
    e) expected difference in cash flow for the financial year; or
    f) other issues or risks.
An explanation of the issues should be detailed below.




Page 22 of 68                                                                         Finance Circular 2011/07
                                                                        Department of Finance and Deregulation
                                                          Part 3.5 – Appendix C: List of Special Accounts

3.5 Appendix C: List of Special Accounts Template
For the financial year ended 30 June, < insert year >, < insert agency name > has complied with
the legal and financial requirements for the management of the Special Accounts9 for which the
agency is responsible, as listed below:
       i.       < list all Special Accounts for which the agency is responsible >
       ii.
       iii.
       iv.




9.
  A checklist is available to assist in the assessment of compliance with Australian Government standards for
the management of Special Accounts (see Part 3.6 of this circular).

Page 23 of 68                                                                           Finance Circular 2011/07
                                                                          Department of Finance and Deregulation
                                                                 Part 3.6 – Special Accounts Checklist

3.6 Special Accounts Checklist

1. The Special Account(s) did not record a negative balance at any point during the
   financial year.
     Please contact your Agency Advice Unit (AAU) in Budget Group for advice and
     information if the Special Account(s) purported to record a negative balance during
     the financial year.
2. All debits were made in accordance with the debiting purpose(s) of the
   Special Account(s), as set out in the relevant determination or legislation.
     Amounts can only debited from a Special Account if they are consistent with the
     purpose of the Account (see paragraph 7c in the Guidelines for the Management of
     Special Accounts, Financial Management Guidance No. 7).
3.   All credits were made in accordance with the crediting provisions of the
     Special Account, as set out in the relevant determination or legislation; and


     All amounts appropriated under separate legislation with the policy intention of
     being credited to a Special Account, have been credited to the ledger record of the
     Special Account.

         For example, amounts appropriated in the annual Appropriation Acts as an
         Administered or Departmental item (such as an interest equivalency payment
         intended for a particular Special Account).

4. If an amount from a Special Account was invested, then this was undertaken in
   accordance with a Finance Minister’s delegation under section 39 of the Financial
   Management and Accountability Act 1997.
     See Section 9 (Banking and Investment) of the Guidelines for the Management of
     Special Accounts, Financial Management Guidance No. 7.

5.   The current drawing rights for the Special Account(s) are valid.

6.   All Special Accounts (including those abolished during the Financial Year) were
     reported in the Financial Statements and the Portfolio Budget Statements.




Page 24 of 68                                                                         Finance Circular 2011/07
                                                                        Department of Finance and Deregulation
                                   Part 4 - Compliance with the FMA Act and Regulations




Part 4          Summary of Compliance Requirements in the
                FMA Act and Regulations




Page 25 of 68                                                         Finance Circular 2011/07
                                                        Department of Finance and Deregulation
                                                                                             Part 4.1 – Compliance with the FMA Act and Regulations

4.1 Summary of Compliance Requirements in the FMA Act and Regulations
This table provides a summary of Certificate reporting requirements under the FMA Act and Regulations as at 1 December 2011. This is
designed to be used as a guide for agencies and may provide the basis of internal compliance checklists.
Section         Title                     Requirement                                                       Reportable Instances

1. The Commitment of Public Money by Agencies
Section 44      Promoting proper use of   (1) A Chief Executive must manage the affairs of the              Non-compliance may be reportable where the
                Commonwealth resources.       Agency in a way that promotes proper use of the               Chief Executive or delegate does not promote the
                                              Commonwealth resources for which the Chief                    proper use of Commonwealth resources or an
                                              Executive is responsible.                                     official enters into a contract without the
                                                                                                            appropriate delegation or authorisation under
                                          (2) In doing so, the Chief Executive must comply with this
                                                                                                            section 44.
                                              Act, the regulations, Finance Minister’s Orders, Special
                                              Instructions and any other law.                               For example, non-compliance may be reportable
                                                                                                            where there is a use of resources which is
                                          (3) In this section:
                                                                                                            inconsistent with a policy of the Commonwealth.
                                                proper use means efficient, effective, economical and
                                                ethical use that is not inconsistent with the policies of
                                                the Commonwealth.
Regulation 7    Commonwealth              (1) The Finance Minister may issue guidelines (to be called       An official must comply with the Commonwealth
                Procurement Guidelines        Commonwealth Procurement Guidelines) in relation              Procurement Guidelines (CPGs). The CPGs are a
                (Act, s 64)                   to procurement, including:                                    legislative instrument.
                                              (a) procurement policies and processes; and                   Non-compliance with the mandatory requirements
                                              (b) requirements regarding the publication of                 of the CPGs is reportable. The mandatory
                                                  procurement details; and                                  requirements are indicated by the term “must” in
                                              (c) requirements regarding entering into procurement          the CPGs.
                                                  arrangements; and
                                                                                                            Non-compliance with supplementary guidance on
                                              (d) the disposal of public property.
                                                                                                            procurement requirements, such as AusTender
                                          An official performing duties in relation to procurement
                                                                                                            reporting timeframes, is not reportable.
                                          must act in accordance with the Commonwealth
                                          Procurement Guidelines.

Page 26 of 68                                                                                                                         Finance Circular 2011/07
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                                                                                          Part 4.1 – Compliance with the FMA Act and Regulations
Section         Title                    Requirement                                                   Reportable Instances


Regulation 7A   Commonwealth Grant       (1) The Finance Minister may issue guidelines (to be called   An official must comply with the Commonwealth
                Guidelines (Act, s 64)       Commonwealth Grant Guidelines) in relation to grants      Grant Guidelines (CGGs). The CGGs are a
                                             administration, including:                                legislative instrument.
                                             (a) grant policies and processes; and                     Non-compliance with the mandatory requirements
                                             (b) requirements regarding the publication of grant       of the CGGs is reportable. The mandatory
                                                 details; and                                          requirements are indicated by the term “must” in
                                             (c) requirements regarding entering into grants.          the CGGs.
                                         (2) An official performing duties in relation to grants       Non-compliance with supplementary guidance on
                                             administration must act in accordance with the            grants requirements is not reportable.
                                             Commonwealth Grant Guidelines.
Regulation 7B   Commonwealth Cleaning    (1) The Minister for Tertiary Education, Skills, Jobs and     An official must comply with the Commonwealth
                Services Guidelines      Workplace Relations may issue guidelines (to be called        Cleaning Services Guidelines (Guidelines). The
                (Act, s 64)              Commonwealth Cleaning Services Guidelines) for the            Guidelines are a legislative instrument.
                                         administration of tenders conducted by Agencies in
                                                                                                       Non-compliance with the mandatory requirements
                                         relation to the procurement of cleaning services for
                                                                                                       of the Guidelines is reportable. The mandatory
                                         properties occupied by Agencies, including:
                                                                                                       requirements are indicated by the term “must” in
                                              (a) procurement policies and processes; and              the Guidelines.
                                              (b) requirements regarding entering into
                                                  procurement arrangements.                            Non-compliance with supplementary guidance on
                                                                                                       the Guidelines requirements is not reportable.
                                         (2) An official performing duties in relation to a tender
                                         conducted by an Agency in relation to the procurement of      The Guidelines apply from 1 January 2012.
                                         cleaning services for a property occupied by the Agency
                                         must act in accordance with the Commonwealth Cleaning
                                         Services Guidelines.
Regulation 8    Entering into an         A person must not enter into an arrangement unless:           While there is a compliance component for
                arrangement                  (a) a spending proposal has been approved under           Regulation 8, you should not report
                                                 regulation 9; and                                     non-compliance against this Regulation.
                                             (b) if required, written agreement has been given         Where either Regulation 9 approval or Regulation
                                                 under regulation 10.                                  10 agreement have not been obtained, those
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                                                                                                                   Department of Finance and Deregulation
                                                                                          Part 4.1 – Compliance with the FMA Act and Regulations
Section         Title                     Requirement                                                  Reportable Instances


                                                                                                       instances of non-compliance should be reported
                                                                                                       against that relevant Regulation.
                                                                                                       Where neither Regulation 9 approval nor
                                                                                                       Regulation 10 agreement were obtained,
                                                                                                       non-compliance must be reported against both.
                                                                                                       Note: Regulation 8 does not specify the order in
                                                                                                       which these approvals should be obtained.
Regulation 9    Approval of spending      An approver must not approve a spending proposal unless An instance of non-compliance is reportable
                proposals                 the approver is satisfied, after making reasonable inquiries, where:
                                          that giving effect to the spending proposal would be a
                                                                                                         the requirement of Regulation 8 is not met,
                                          proper use of Commonwealth resources (within the
                                                                                                            and an arrangement was entered into without
                                          meaning given by subsection 44 (3) of the Act).
                                                                                                            Regulation 9 approval for the spending
                                                                                                            proposal;
                                                                                                         the approval of the spending proposal was not
                                                                                                            a proper use of commonwealth resources;
                                                                                                         the spending proposal is inconsistent with
                                                                                                            government policy;
                                                                                                         an approver, approved a spending proposal
                                                                                                            beyond the limit of their delegation; and/or
                                                                                                         the amount paid under a contract exceeded
                                                                                                            the Regulation 9 approval.
                                                                                                        Note: Regulation 9 approval cannot be given
                                                                                                        retrospectively.
Regulation 10   Arrangements beyond       If:                                                          An instance of non-compliance is reportable where
                available appropriation         (a) a person proposes to enter into an arrangement;    an arrangement has been entered into and
                                                    and                                                Regulation 10 agreement had not been obtained
                                                (b) the relevant Agency has an insufficient            from the appropriate delegate or the Finance
                                                    appropriation of money, under the provisions of    Minister, before entering into the arrangement.
                                                    an existing law or a proposed law that is before
                                                                                                       Note: Regulation 10 agreement cannot be given
Page 28 of 68                                                                                                                    Finance Circular 2011/07
                                                                                                                   Department of Finance and Deregulation
                                                                                       Part 4.1 – Compliance with the FMA Act and Regulations
Section         Title                   Requirement                                                   Reportable Instances


                                                Parliament, to meet expenditure that might be         retrospectively.
                                                payable under the arrangement;
                                        the person must not enter into the arrangement unless the
                                        Finance Minister has agreed, in writing, to the expenditure
                                        that might become payable under the arrangement.
Regulation 11   Entering into loan      (1) Despite regulation 10A, a person must not give a loan     Non-compliance is reportable where a loan
                guarantees                  guarantee on behalf of the Commonwealth unless:           guarantee is given without the criteria of
                                                                                                      Regulation 11 having been complied with. In
                                            (a) a spending proposal for the loan guarantee has
                                                                                                      particular, where the Finance Minister's written
                                                 been approved under regulation 9; and
                                                                                                      approval has not been obtained, an instance of
                                            (b) if required, written agreement has been given
                                                                                                      non-compliance is reportable.
                                                 under regulation 10; and
                                            (c) the Finance Minister has, in writing, approved the
                                                 giving of the loan guarantee.
Regulation 12   Recording approval of   (1) If approval of a spending proposal has not been given     Non-compliance is reportable where there has
                spending proposal           in writing:                                               either been no documentation of a verbal
                                            (a) the approver must record the terms of the             Regulation 9 approval or the written record of the
                                                 approval in writing as soon as practicable after     approval does not provide appropriate evidence of
                                                 giving the approval; and                             compliance with Regulation 9.
                                            (b) if the spending proposal relates to a grant, the
                                                                                                      Non-compliance may also be reportable where
                                                 approver must include in the record the basis on
                                                                                                      documentation has not occurred “as soon as
                                                 which the approver is satisfied that the spending
                                                                                                      practicable”.
                                                 proposal complies with regulation 9.
                                        (2) If:                                                       For grants, non-compliance is reportable where
                                            (a) approval of a spending proposal has been given in     the basis on which the spending proposal was
                                                 writing; and                                         approved has not been recorded in writing.
                                            (b) the spending proposal relates to a grant; and
                                            (c) the approver has not recorded in writing the basis
                                                 on which the approver is satisfied that the
                                                 spending proposal complies with regulation 9;
                                        the approver must record that basis in writing as soon as
                                        practicable after giving the approval.

Page 29 of 68                                                                                                                    Finance Circular 2011/07
                                                                                                                   Department of Finance and Deregulation
                                                                                             Part 4.1 – Compliance with the FMA Act and Regulations
Section         Title                         Requirement                                                   Reportable Instances



2. The use of Drawing Rights by Agencies
Section 26      Drawing rights required for   (1) The Finance Minister may issue a drawing right to an      Non-compliance is reportable where the payment
                payment etc. of public            official or Minister that authorises the official or      of public money without a valid drawing right
                money                             Minister to do one or more of the following:              occurs.
                                                  (a) make a payment of public money;                       Note: Non-compliance is reportable against section
                                                  (b) request the debiting of an amount against an          26, rather than section 27, for each payment run.
                                                       appropriation;
                                                                                                            Note: The power to issue drawing rights under
                                                  (c) debit an amount against an appropriation.
                                                                                                            section 27 has been delegated to Chief Executives.
                                              (2) If a law requires the payment of an amount of public
                                                                                                            Where the directions have not been followed,
                                                  money and there is an available appropriation for that
                                                                                                            non-compliance should be reported against the
                                                  payment:
                                                                                                            Delegation (Schedule 1, Part 8 or Part 9, as
                                                  (a) the Finance Minister must issue sufficient drawing    applicable).
                                                       rights to allow the amount to be paid in full; and
                                                  (b) the recipient of any of those drawing rights must
                                                       exercise the rights in full.
                                              (3) If a law permits the payment of an amount of public
                                                  money, but does not require the payment of that
                                                  amount, there is no obligation to issue or exercise
                                                  drawing rights for that amount.
                                              (4) The Finance Minister may at any time revoke or amend
                                                  a drawing right.
                                              (5) A drawing right has no effect to the extent that it
                                                  claims to authorise the application of public money in
                                                  a way that is not authorised by an appropriation.
Section 27      Issue of drawing rights       (1) The Finance Minister may issue a drawing right to an      Refer to section 26 above.
                                                  official or Minister that authorises the official or
                                                  Minister to do one or more of the following:
                                                  (a) make a payment of public money;
                                                  (b) request the debiting of an amount against an
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                                                                                                                        Department of Finance and Deregulation
                                                                       Part 4.1 – Compliance with the FMA Act and Regulations
Section         Title   Requirement                                                   Reportable Instances


                                appropriation;
                            (c) debit an amount against an appropriation.
                        (2) If a law requires the payment of an amount of public
                            money and there is an available appropriation for that
                            payment:
                            (a) the Finance Minister must issue sufficient drawing
                                 rights to allow the amount to be paid in full; and
                             (b) the recipient of any of those drawing rights must
                                 exercise the rights in full.
                        (3) If a law permits the payment of an amount of public
                            money, but does not require the payment of that
                            amount, there is no obligation to issue or exercise
                            drawing rights for that amount.
                        (4) The Finance Minister may at any time revoke or amend
                            a drawing right.
                        (5) A drawing right has no effect to the extent that it
                            claims to authorise the application of public money in
                            a way that is not authorised by an appropriation.




Page 31 of 68                                                                                                  Finance Circular 2011/07
                                                                                                 Department of Finance and Deregulation
                                                                                                Part 4.1 – Compliance with the FMA Act and Regulations
Section         Title                          Requirement                                                     Reportable Instances



3. The Proper Use of Financial Resources
Section 14      Misapplication or improper     An official or Minister must not misapply public money or       Non-compliance is reportable where an official
                use of public money            improperly dispose of, or improperly use, public money.         undertakes an action which misapplies, improperly
                                                                                                               uses or disposes of public money.
                                                                                                               Instances usually relate to circumstances where
                                                                                                               fraud, theft, wilful misconduct or misappropriation
                                                                                                               has been identified within an agency. Misuse of a
                                                                                                               Commonwealth credit card or card number is
                                                                                                               reportable under section 60 and not section 14.
Section 15      Liability for loss of public   (1) If:                                                         The loss of public money in itself is not a
                money                               (a) a loss of public money occurs; and                     reportable instance of non-compliance. That said,
                                                    (b) at the time of the loss, an official or Minister had   agencies should report non-compliance against
                                                        nominal custody of the money as described in           this section for the loss of public money, where
                                                        subsection (2);                                        misconduct, or deliberate or serious disregard of a
                                               the official or Minister is liable to pay to the                reasonable standard of care by the official caused
                                               Commonwealth an amount equal to the loss. However, it           the loss.
                                               is a defence if the person proves that he or she took
                                                                                                               Non-compliance is also reportable where there has
                                               reasonable steps in all the circumstances to prevent the
                                                                                                               been no repayment to the Commonwealth where
                                               loss.
                                                                                                               a reasonable standard of care was not exercised by
                                               (2) A person has nominal custody of public money if:            the official.
                                                   (a) the person holds the money by way of a petty cash
                                                       advance, “change float” or other advance; or
                                                   (b) the person has received the money, but has not
                                                       yet dealt with it as required by section 10.
                                               (3) If:
                                                   (a) a loss of public money occurs; and
                                                   (b) an official or Minister caused or contributed to
                                                        the loss by misconduct, or by a deliberate or
                                                        serious disregard of reasonable standards of care;
                                               the official or Minister is liable to pay to the
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                                                                                                                           Department of Finance and Deregulation
                                                                                               Part 4.1 – Compliance with the FMA Act and Regulations
Section         Title                          Requirement                                                    Reportable Instances


                                               Commonwealth an amount equal to the loss. However, if
                                               the person’s misconduct or disregard was not the sole
                                               cause of the loss, the person is liable to pay only so much
                                               of the loss as is just and equitable having regard to the
                                               person’s share of the responsibility for the loss.
                                               (4) A person’s liability under this section that arises when
                                                   the person is an official or Minister is not avoided
                                                   merely because the person ceases to be an official or
                                                   Minister.
                                               (5) An amount payable to the Commonwealth under this
                                                   section is recoverable as a debt in a court of
                                                   competent jurisdiction.
                                               (6) The Commonwealth is not entitled to recover amounts
                                                   from the same person under both subsections (1) and
                                                   (3) for the same loss
Section 60      Misuse of Commonwealth         (1) An official or Minister must not use a Commonwealth        Non-compliance is reportable where there is a
                credit card                        credit card, or a Commonwealth credit card number,         misuse of a Commonwealth credit card or card
                                                   to obtain cash, goods or services otherwise than for       number to obtain cash, goods or services
                                                   the Commonwealth.                                          otherwise than for the Commonwealth.
                                               (2) Subsection (1) does not apply to a particular use of a     There is no distinction between deliberate
                                                   Commonwealth credit card or Commonwealth credit            (fraudulent) and accidental misuse. All misuse
                                                   card number if:                                            must be reported. Coincidental private
                                                                                                              expenditure should not be reported, if authorised
                                                   (a) the use is authorised by the regulations; and
                                                                                                              by the Chief Executive under Regulation 21.
                                                   (b) the Commonwealth is reimbursed in accordance
                                                        with the regulations.
Regulation 21   Credit cards (Act, ss 38 and   (1) An arrangement with a bank or other person under           The misuse of credit cards should be reported
                60)                                subsection 38 (2) of the Act may provide for the issue     against section 60 of the Act, and not
                                                   to, and use by, the Commonwealth of credit cards or        Regulation 21.
                                                   credit vouchers.
                                                                                                              Note that Regulation 21 allows a Chief Executive to

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                        (2) A Chief Executive may:                                    authorise coincidental private expenditure.
                            (a) authorise a holder of a Commonwealth credit card      Where coincidental private expenditure occurs
                                 to use the Commonwealth credit card to pay a         which is not authorised by the Chief Executive this
                                 claim that includes both official and coincidental   should be reported against section 60 as a misuse
                                 private expenditure; and                             of a Commonwealth credit card.
                            (b) specify arrangements for the holder of the
                                 Commonwealth credit card to reimburse the
                                 Commonwealth for that coincidental private
                                 expenditure.
                        (3) The holder of the Commonwealth credit card must pay
                            to the Commonwealth the amount paid by the
                            Commonwealth for the coincidental private
                            expenditure.
                        (4) The amount payable to the Commonwealth under this
                            regulation is recoverable as a debt in a court of
                            competent jurisdiction.
                        (5) In this regulation:
                        Commonwealth credit card:
                            (a) has the meaning given by subsection 60 (3) of the
                                Act; and
                            (b) includes a Commonwealth credit card number
                                mentioned in subsections 60 (1) and (2) of the Act.




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4. Banking and Investment by Agencies
Section 8       Agreements with banks         (1) The Finance Minister may, on behalf of the                 Non-compliance is reportable where an agreement
                about receipt, transmission       Commonwealth, enter into an agreement with any             for an overdraft on an official account is made with
                etc. of public money              bank:                                                      a bank and the repayment period is longer than
                                                                                                             30 days.
                                                  (a) for the receipt, custody, payment or transmission
                                                      of public money, either inside or outside Australia;   Note: The Finance Minister has delegated this
                                                      or                                                     power to Chief Executives with directions. Where
                                                  (b) for any other matter relating to the conduct of the    the directions are not complied with an instance of
                                                      banking business of the Commonwealth.                  non-compliance should be reported against the
                                              (2) An agreement under this section may provide for the        Delegation (Schedule 1, Part 1 to 3, as applicable).
                                                  payment of interest and other charges by the
                                                  Commonwealth.
                                              (3) An agreement under this section may not provide for
                                                  overdraft drawings by the Commonwealth unless it
                                                  provides for each drawing to be repaid within 30 days.
                                              Note: An overdraft drawing consists of the bank meeting
                                              the payment of a cheque, or making an “electronic
                                              payment” to another account, and in each case debiting
                                              the payment against an account that has an insufficient
                                              balance. Section 38 deals with overdrafts that arise in
                                              respect of advances that are paid to the Commonwealth.
                                              (4) An agreement for an overdraft on an official account
                                                  must not be made except under this section.
                                              (5) An agreement under this section may not be made for
                                                  a period of more than one year unless the agreement
                                                  can be terminated by the Commonwealth at any time
                                                  after giving notice of not more than 6 months.



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Section 9       Official bank accounts      (1) The Finance Minister may open and maintain bank          Non-compliance is reportable where an account is
                                                accounts in accordance with agreements under             opened without the term “official” in the title.
                                                section 8, and must open and maintain at least one
                                                                                                         Banking public money into a non-official account
                                                such bank account.
                                                                                                         should be reported against section 11 and not
                                            (2) A bank account must have a name that includes the        section 9.
                                                word “Official”.
                                            (3) An account for the receipt, custody, payment or
                                                transmission of public money must not be opened
                                                except in accordance with this section.
Section 10      Public money must be        An official or Minister who receives public money            Non-compliance is reportable for each transaction
                promptly banked etc.        (including money that becomes public money upon              where an official does not bank public money the
                                            receipt) must bank it as required by the regulations or      next banking day or a banking day approved by the
                                            otherwise deal with it as required by the regulations. For   Chief Executive, as provided by Regulation 17.
                                            this purpose, money includes cheques and similar
                                            instruments.
Section 11      Public money not to be      An official or Minister must not deposit public money in     Non-compliance is reportable for each transaction,
                paid into non-official      any account other than an official account. For this         where public money is banked into a non-official
                account                     purpose, money includes cheques and similar instruments.     account.
Section 13      Money not to be             An official must not withdraw money from an official         Non-compliance is reportable for each transaction,
                withdrawn from official     account except as authorised by the regulations.             where money is withdrawn from an official
                account without authority                                                                account without authority and the withdrawal is
                                                                                                         not consistent with Regulations 19 and 19A. There
                                                                                                         may also be instances of non-compliance with
                                                                                                         section 26 if this occurs.
Section 16      Special Instructions by     (1) The Finance Minister may, by legislative instrument,     Non-compliance is reportable where an official
                Finance Minister about          issue Special Instructions about special public money,   does not comply with any Special Instructions on
                handling etc. of special        including instructions about:                            special public money.
                public money
                                                (a) the custody of special public money;
                                                (b) the investment of special public money;

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                                                 (c) the application of interest or other amounts
                                                      derived from the investment of special public
                                                      money;
                                                 (d) the application of special public money in paying
                                                      the expenses involved in dealing with special
                                                      public money.
                                             (2) In case of inconsistency, Special Instructions override
                                                 this Act, the regulations and the Finance Minister’s
                                                 Orders. However, Special Instructions cannot be
                                                 inconsistent with the terms of any trust that applies to
                                                 the money concerned.
                                             (3) An official or Minister must not contravene any Special
                                                 Instruction.
Section 34      Finance Minister may waive   (1) The Finance Minister may, on behalf of the                 Section 34 provides the Finance Minister with the
                debts etc.                       Commonwealth:                                              power to waive, postpone, allow the payment by
                                                                                                            instalment, or defer the time for payment of debt.
                                                 (a) waive the Commonwealth’s right to payment of an
                                                                                                            The Finance Minister has delegated the power to
                                                      amount owing to the Commonwealth;
                                                                                                            waive debts to a limited number of Chief
                                                 (b) postpone any right of the Commonwealth to be
                                                                                                            Executives. The power to allow payment by
                                                      paid a debt in priority to another debt or debts;
                                                                                                            instalment or to defer the time for payment of
                                                 (c) allow the payment by instalments of an amount
                                                                                                            debt has been delegated to all Chief Executives.
                                                      owing to the Commonwealth;
                                                 (d) defer the time for payment of an amount owing to       Section 34 does not contain a compliance element,
                                                      the Commonwealth.                                     however subregulations 29(2)(a) and (b) impose
                                             Note: See also subparagraph 65(2)(a)(ia) (which allows         mandatory action to be taken by the Finance
                                             regulations to be made about the Finance Minister              Minister for a total amount of more than
                                             considering a report from specified persons before waiving     $250,000.
                                             a total amount that is more than a specified amount).
                                                                                                            Where an official exercises a power without the
                                             (3) A waiver may be made either unconditionally or on the      appropriate delegation under subsection 34(1), or
                                                 condition that a person agrees to pay an amount to         does not comply with the directions, an agency
                                                 the Commonwealth in specified circumstances.               should report this as an instance of
                                                                                                            non-compliance with the Delegation (Schedule 1,
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                                           (4) In this section:                                         Part 10 to 13 as appropriate).
                                           amount owing to the Commonwealth includes an amount          Where a debt is not recovered by a Chief Executive
                                           that is owing but not yet due for payment.                   (or delegate) it should be reported under section
                                                                                                        47, not section 34 or the Delegation.
Section 38      Finance Minister may       (1) The Finance Minister, on behalf of the Commonwealth,     Non-compliance is reportable where an
                borrow for short periods       may enter into an agreement with any bank for            arrangement has longer than 60 days for the
                                               borrowing money from the bank by way of advances         money to be repaid after the Commonwealth is
                                               (including advances on overdraft) that are to be paid    notified by the lender.
                                               to the Commonwealth and repaid by the
                                                                                                        Note: Subsection 38 (2) has been delegated to
                                               Commonwealth within 90 days.
                                                                                                        Chief Executives only for the issue of
                                           (2) The Finance Minister, on behalf of the Commonwealth,     Commonwealth credit cards (Schedule 1, Part 15).
                                               may enter into agreements in accordance with the
                                                                                                        Where a Chief Executive (other than the DFAT
                                               regulations for borrowing money from banks or other
                                                                                                        Chief Executive) enters into any other borrowing, it
                                               persons. Such an agreement must require the money
                                                                                                        should be reported as an instance of
                                               to be repaid within 60 days after the Commonwealth is
                                                                                                        non-compliance with the Delegation.
                                               notified by the lender of the amount borrowed.
Section 39      Investment of public       (1) The Finance Minister may, on behalf of the               Non-compliance is reportable where public money
                money                          Commonwealth, invest public money in any authorised      is invested in an investment which is not
                                               investment.                                              authorised under section 39.
                                           (2) The Treasurer may, on behalf of the Commonwealth,        Non-compliance is reportable where public money
                                               invest public money in any authorised investment.        is invested without a delegation from the Finance
                                                                                                        Minister. In particular, a special account which has
                                           (2A)     For the purposes of investing public money under
                                                                                                        an investment capacity still requires a delegation
                                               this section in securities of the Commonwealth, the
                                                                                                        from the Finance Minister to exercise investment
                                               Commonwealth is to be treated as if it were a separate
                                                                                                        power.
                                               legal entity to the entity issuing the securities.
                                           (3) An investment of public money under this section
                                               must not be inconsistent with the terms of any trust
                                               that applies to the money concerned.
                                           (4) If an amount invested under this section was debited
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                                                 from a Special Account, then expenses of the
                                                 investment may be debited from that Special Account.
                                             (5) Upon realisation of an investment of an amount
                                                 debited from a Special Account, the proceeds of the
                                                 investment must be credited to that Special Account.
                                             (6) At any time before an investment matures, the
                                                 Finance Minister or Treasurer, as the case requires,
                                                 may, on behalf of the Commonwealth, authorise the re
                                                 investment of the proceeds upon maturity in an
                                                 authorised investment with the same entity.
Section 40      Custody etc. of securities   An official who receives any bonds, debentures or other          Non-compliance is reportable against section 40 of
                                             securities in the course of carrying out duties as an official   the Act where the mandatory requirements of
                                             must deal with them in accordance with the regulations.          Regulation 20 are not followed.
Section 47      Recovery of debts            (1) A Chief Executive must pursue recovery of each debt          Non-compliance is reportable where a Chief
                                                 for which the Chief Executive is responsible unless:         Executive does not pursue recovery of each debt
                                                                                                              for which the Chief Executive is responsible unless
                                                 (a) the debt has been written off as authorised by an
                                                                                                              subparagraphs 1(a) to (c) are applicable.
                                                     Act; or
                                                 (b) the Chief Executive is satisfied that the debt is not    Where a debt was not pursued during the
                                                     legally recoverable; or                                  reporting period, it should be reported as
                                                 (c) the Chief Executive considers that it is not             non-compliance against section 47.
                                                     economical to pursue recovery of the debt.
                                             (2) For the purposes of subsection (1), a Chief Executive is
                                                 responsible for:
                                                 (a) debts owing to the Commonwealth in respect of
                                                     the operations of the Agency; and
                                                 (b) debts owing to the Commonwealth that the
                                                     Finance Minister has allocated to the Chief
                                                     Executive.


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Regulation 17   Prompt banking of received   (1) An official who:                                            Non-compliance should be reported against
                money (Act, s 10)                                                                            section 10 for each transaction where an official
                                                (a) receives public money in a bankable currency; or
                                                                                                             does not bank the public money the next banking
                                                (b) receives money in a bankable currency that
                                                                                                             day or a banking day approved by the Chief
                                                    becomes public money on receipt;
                                                                                                             Executive, as required by Regulation 17.
                                             must bank the money.
                                             (2) The official must bank the money as soon as
                                                 practicable, but in any case not later than:
                                                 (a) the next banking day; or
                                                 (b) a banking day approved by the Chief Executive for
                                                     this paragraph.
Regulation 18   Public money in non-         (1) An official who receives public money in a                  Non-compliance is reportable where reasonable
                bankable currency (Act,          non-bankable currency must take reasonable steps to         steps to safeguard the money are not taken. This
                s 10)                            safeguard the money.                                        may be indicated if the non-bankable currency is
                                                                                                             lost or stolen and reasonable steps were not taken.
                                             (2) In subregulation (1):
                                             non-bankable currency means:
                                                  (a) a currency that cannot be banked; or
                                                  (b) a currency the banking of which would, in the
                                                       opinion of the Chief Executive of the Agency by
                                                       which it is received, involve significant costs or
                                                       administrative difficulty.
Regulation 20   Custody etc of securities    If an official, in the course of carrying out duties as an      Non-compliance is reportable against section 40 of
                (Act, s 40)                  official, receives bonds, debentures or other securities, the   the Act where the mandatory requirements of
                                             official must:                                                  Regulation 20 are not complied with.
                                                 (a) issue a receipt for the bonds, debentures or other
                                                     securities received; and
                                                 (b) maintain a register of all bonds, debentures or
                                                     other securities received; and
                                                 (c) take reasonable steps to safeguard the bonds,
                                                     debentures or other securities.

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5. The Maintenance of Agency Accounts and Records
Section 44A     Keeping responsible           (1) A Chief Executive must:                                    Non-compliance is reportable where the Chief
                Minister and Finance          (a) give the Minister responsible for the Agency such          Executive does not provide financial information to
                Minister informed                 reports, documents and information in relation to the      the responsible Minister or the Finance Minister as
                                                  operations of the Agency as that Minister requires; and    required and within the time limits set by the
                                                                                                             Minister concerned.
                                              (b) give the Finance Minister such reports, documents and
                                                  information in relation to the financial affairs of the
                                                  Agency as that Minister requires.
                                              (2) A Chief Executive must comply with a requirement
                                                  under paragraph (1)(a) or (b) within the time limits set
                                                  by the Minister concerned.
                                              (3) This section does not limit any other power that a
                                                  Minister has to require information from an Agency.
Section 48      Accounts and records          (1) A Chief Executive must ensure that accounts and            Non-compliance is reportable where the records of
                                                  records of the Agency are kept as required by the          the agency are not kept as required by the Finance
                                                  Finance Minister’s Orders.                                 Minister’s Orders.
                                              (2) The Finance Minister is entitled to full and free access
                                                  to the accounts and records kept under subsection (1).
                                                  However, the Finance Minister’s access is subject to
                                                  any law that prohibits disclosure of particular
                                                  information.
Section 49      Annual financial statements   (1) A Chief Executive must give to the Auditor General the     Non-compliance is reportable where the
                                                  annual financial statements required by the Finance        requirements of subsections 49(1) to (4) are not
                                                  Minister’s Orders.                                         met.
                                              (2) The financial statements must be prepared in
                                                  accordance with the Finance Minister’s Orders and
                                                  must give a true and fair view of the matters that
                                                  those Orders require to be included in the statements.
                                              (3) If financial statements prepared in accordance with

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                                                the Finance Minister’s Orders would not otherwise
                                                give a true and fair view of the matters required by
                                                those Orders, the Chief Executive must add such
                                                information and explanations as will give a true and
                                                fair view of those matters.
                                            (4) In the financial statements, the Chief Executive must
                                                state whether, in his or her opinion, the financial
                                                statements give a true and fair view of the matters
                                                required by Finance Minister’s Orders.
Section 50      Additional financial        A Chief Executive must, when required by the Finance           Non-compliance is reportable where a Chief
                statements                  Minister, give the Finance Minister financial statements       Executive has not provided financial statements
                                            covering a period of less than a financial year. The Finance   covering a period of less than a financial year,
                                            Minister may require the statements to include some or all     when required by the Finance Minister.
                                            of the details that are required to be included in the
                                            annual financial statements.
Section 51      Reporting requirements if   Agency ceases to exist                                         Non-compliance is reportable where the financial
                Agency ceases to exist or   (1) If an Agency (the old Agency) ceases to exist, then, to    statements for a function which has been moved
                Agency functions are            the extent that its functions are not transferred to one   (either by transfer or if an agency ceases to exist)
                transferred                     or more other Agencies, the financial statements that      are not prepared by the Chief Executive nominated
                                                would have been required to be prepared under              by the Finance Minister.
                                                section 49 by the Chief Executive of the old Agency
                                                must be prepared by another Chief Executive
                                                nominated by the Finance Minister.
                                            Transfer of Agency functions
                                            (2) If a function of an Agency (the transferring Agency) is
                                                transferred to one or more other Agencies, either
                                                because the transferring Agency ceases to exist or for
                                                any other reason, the financial statements under
                                                section 49 for that function must be prepared by the
                                                Chief Executive or Chief Executives nominated by the
                                                Finance Minister.
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6. Miscellaneous Requirements
Section 12            Receipt and spending of            (1) An official or Minister must not enter into an                     Non-compliance is reportable where an official
                      public money by outsiders              agreement or arrangement for the receipt, custody or               enters into an arrangement which is not
                                                             payment of public money by an outsider unless:                     authorised by a Section 12 delegate or the Finance
                                                             (a) the Finance Minister has first given a written                 Minister and the arrangement:
                                                                 authorisation for the agreement or arrangement;
                                                                                                                                        involves the receipt, custody or payment
                                                                 or
                                                                                                                                         of public money; and
                                                             (b) the agreement or arrangement is expressly
                                                                                                                                        was intended to replace the requirements
                                                                 authorised by this Act or by another Act.
                                                                                                                                         of the FMA Act or Regulations (i.e. the
                                                         Penalty: Imprisonment for 7 years.
                                                                                                                                         “outsider” was not intended to be treated
                                                         Note: Chapter 2 of the Criminal Code sets out the general                       as an “allocated official”10 when
                                                                                                                                                                      10



                                                         principles of criminal responsibility.                                          performing a financial task).
                                                         (2) An outsider commits an offence if:                                 Note: Where the outsider does not comply with
                                                             (a) the outsider receives or has custody of public                 the terms of the authorised arrangement, this
                                                                 money under an agreement or arrangement                        should not be reported for Certificate purposes,
                                                                 mentioned in subsection (1); and                               and may result in penalties.
                                                             (b) the outsider makes a payment of the public
                                                                 money; and
                                                             (c) that payment is not authorised by the agreement
                                                                 or arrangement.
                                                         Penalty: Imprisonment for 2 years.
                                                         Note: Section 27 allows a drawing right to be issued to an
                                                         official or a Minister to debit an amount against an
                                                         appropriation (as a result of a payment of public money by
                                                         an outsider).
                                                         (3) In this section:


10.
      An allocated official is a person outside the Commonwealth who performs a financial task and temporarily becomes an official of the FMA Act agency.

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                                            outsider means any person other than the
                                            Commonwealth, an official or a Minister.
Section 33      Finance Minister may   (1) If the Finance Minister considers it appropriate to do      This requirement is not reportable for the
                approve act of grace       so because of special circumstances, he or she may          Certificate as non-compliance cannot occur.
                payments                   authorise the making of any of the following payments
                                                                                                       That said, non-compliance may be reportable by
                                           to a person (even though the payment or payments
                                                                                                       Finance against Regulation 29, or the Delegation if
                                           would not otherwise be authorised by law or required
                                                                                                       the requirements or directions are not met.
                                           to meet a legal liability):
                                           (a) one or more payments of an amount or amounts
                                                specified in the authorisation (or worked out in
                                                accordance with the authorisation);
                                           (b) periodical payments of an amount specified in the
                                                authorisation (or worked out in accordance with
                                                the authorisation), during a period specified in the
                                                authorisation (or worked out in accordance with
                                                the authorisation).
                                       Note: See also subparagraph 65(2)(a)(ia) (which allows
                                       regulations to be made about the Finance Minister
                                       considering a report from specified persons before
                                       authorising a total amount that is more than a specified
                                       amount).
                                       (3) Conditions may be attached to payments under this
                                           section. If a condition is breached, the payment may
                                           be recovered by the Commonwealth as a debt in a
                                           court of competent jurisdiction.
                                       Note: Act of grace payments under this section must be
                                       made from money appropriated by the Parliament.
                                       Generally, an act of grace payment can be debited against
                                       an Agency’s annual appropriation, providing that it relates
                                       to some matter that has arisen in the course of its
                                       administration.

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Section 39 A    Minister must inform        (1) The Minister who has the responsibility for any of the      There is a mandatory requirement under section
                Parliament of involvement       following events must table a notice of the event in        39A. That said, it is not a reportable requirement
                in a company by the             each House of the Parliament as soon as practicable         for the purposes of the Certificate. It is the
                Commonwealth or a               after the event occurs:                                     responsible Minister who must table the notice to
                prescribed body                 (a) the Commonwealth or a prescribed body forms, or         each House of the Parliament.
                                                     participates in forming, a company;                    The Certificate is a report from the Chief Executive
                                                (b) the Commonwealth or a prescribed body acquires          of the agency to the responsible Minister. As such
                                                     shares in a company (either by purchase or             this is not a reportable requirement for Certificate
                                                     subscription) or disposes of shares in a company;      purposes.
                                                (c) the Commonwealth or a prescribed body becomes
                                                     a member of a company;
                                                (d) a variation occurs in the rights attaching to
                                                     company shares held by the Commonwealth or a
                                                     prescribed body;
                                                (e) a variation occurs in rights of the Commonwealth
                                                     or a prescribed body as a member of a company;
                                                (f) the Commonwealth or a prescribed body ceases to
                                                     be a member of a company.
                                            (2) The notice must be in the form, and contain the
                                                particulars, set out in the regulations.
                                            (3) This section does not apply to:
                                                (a) an event mentioned in paragraphs (1)(a) to (f) that
                                                     occurs in relation to:
                                                     (i)     an authorised investment made under
                                                             section 39; or
                                                     (ii)    an investment made under the Future
                                                             Fund Act 2006; or
                                                (b) anything that results from the transfer to a
                                                     Minister of any property that is to be dealt with as
                                                     unclaimed property under Part 9.7 of the

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                                                     Corporations Act 2001; or
                                                 (c) a company that is conducted for the purposes of
                                                     an intelligence or security agency (within the
                                                     meaning given by section 85ZL of the Crimes Act
                                                     1914).
                                             (4) In this section:
                                                 company includes a body of a kind prescribed by the
                                                 regulations for the purposes of this section.
                                                 prescribed body means a body corporate that is, or is
                                                 included in, an Agency.
Section 41      Misapplication or improper   An official or Minister must not misapply public property      Non-compliance is reportable where an official
                use of public property       or improperly dispose of, or improperly use, public            misapplies, improperly disposes of, or improperly
                                             property.                                                      uses public property.
                                                                                                            The improper use of public property will be subject
                                                                                                            to the individual circumstances of the agency and
                                                                                                            should be considered in the context of CEIs and
                                                                                                            internal operational guidance.
                                                                                                            Reported instances against section 41 generally
                                                                                                            relate to circumstances where fraud, theft, wilful
                                                                                                            misconduct or misappropriation has been
                                                                                                            identified.
Section 42      Liability for loss etc. of   (1) If:                                                        The loss of public property is not in itself a
                public property                  (a) a loss of public property occurs; and                  reportable instance as there is no mandatory
                                                 (b) at the time of the loss, an official or Minister had   requirement for officials not to lose public
                                                      nominal custody of the property as described in       property.
                                                      subsection (2);
                                                                                                            Non-compliance is reportable where there has
                                             the official or Minister is liable to pay to the
                                                                                                            been no payment to the Commonwealth and there
                                             Commonwealth the amount of the loss. However, it is a
                                                                                                            was no reasonable defence (such as taking
                                             defence if the person proves that he or she took
                                                                                                            reasonable steps to prevent the loss) for the
                                             reasonable steps in all the circumstances to prevent the
                                                                                                            official not to become liable for the loss.
                                             loss.
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                        (2) A person (the custodian) has nominal custody of public
                            property if both of the following conditions are
                            satisfied:
                            (a) the custodian has taken delivery of the property
                                and has not returned it to the person entitled to
                                receive the property on behalf of the
                                Commonwealth;
                            (b) when the custodian took delivery of the property
                                the custodian signed a written acknowledgment
                                that the property was delivered on the express
                                condition that the custodian would at all times
                                take strict care of the property.
                        (3) If:
                            (a) a loss of public property occurs; and
                            (b) an official or Minister caused or contributed to the
                                 loss by misconduct, or by a deliberate or serious
                                 disregard of reasonable standards of care;
                        the official or Minister is liable to pay to the
                        Commonwealth the amount of the loss. However, if the
                        person’s misconduct or disregard was not the sole cause of
                        the loss, the person is liable to pay only so much of the
                        amount of the loss as is just and equitable having regard to
                        the person’s share of the responsibility for the loss.
                        (4) A person’s liability under this section that arises when
                            the person is an official or Minister is not avoided
                            merely because the person ceases to be an official or
                            Minister.
                        (5) An amount payable to the Commonwealth under this
                            section is recoverable as a debt in a court of
                            competent jurisdiction.

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                                           (6) The Commonwealth is not entitled to recover amounts
                                               from the same person under both subsections (1) and
                                               (3) for the same loss.
Section 43      Gifts of public property   An official or Minister must not make a gift of public          Non-compliance is reportable where an official
                                           property unless:                                                makes a gift of public property inconsistent with
                                                                                                           subsections 43(a) to (c).
                                               (a) the making of the gift is expressly authorised by
                                                   law; or                                                 The Finance Minister has delegated this power to
                                               (b) the Finance Minister has given written approval to      Chief Executives. Non-compliance is reportable
                                                   the gift being made; or                                 against the Delegation (Schedule 1, Part 17) where
                                               (c) the Commonwealth acquired the property to use it        the directions are not followed.
                                                   as a gift.
Section 45      Fraud control plan         A Chief Executive must implement a fraud control plan for       Non-compliance is reportable where a fraud
                                           the Agency. For this purpose, fraud includes fraud by           control plan for the agency has not been
                                           persons outside the Agency in relation to activities of the     developed and implemented.
                                           Agency.
Section 46      Audit committee            (1) A Chief Executive must establish and maintain an audit      Non-compliance is reportable where an audit
                                               committee with functions that include:                      committee is not established or maintained to
                                                                                                           undertake the functions at subparagraphs (a)
                                               (a) helping the Agency to comply with obligations
                                                                                                           and (b). Non-compliance is also reportable against
                                                   under this Act, the regulations and Finance
                                                                                                           section 46 if the audit committee is not constituted
                                                   Minister’s Orders; and
                                                                                                           in accordance the requirements of Regulation 22C.
                                               (b) providing a forum for communication between the
                                                   Chief Executive, the senior managers of the Agency
                                                   and the internal and external auditors of the
                                                   Agency.
                                           (2) The committee must be constituted in accordance
                                               with the regulations (if any).
Section 52      Chief Executive’s          (1) The regulations may authorise Chief Executives to give      This section does not contain a compliance
                instructions                   instructions to officials in their Agencies on any matter   element. This section is a discretionary power of
                                               on which regulations may be made under this Act.            the Chief Executive.

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                                      (2) An instruction cannot create offences or impose
                                          penalties.
Section 53      Chief Executive may   (1) A Chief Executive may, by written instrument, delegate        This section is a discretionary power of the Chief
                delegate powers           any of the following powers and functions to an official      Executive. That said, non-compliance is reportable
                                          in any Agency:                                                where the Chief Executive is subject to directions
                                                                                                        under sections 62 or 62A and the Chief Executive
                                         (a) the Chief Executive’s powers or functions under
                                                                                                        does not give corresponding directions to the
                                             this Act (including powers or functions that have
                                                                                                        second delegate.
                                             been delegated to the Chief Executive under
                                             section 62 or 62A);
                                         (b) the Chief Executive’s power to give instructions
                                             under regulations referred to in section 52.
                                      1AA) If:
                                          (a) the Chief Executive delegates a power or function
                                               to a person; and
                                          (b) the power or function is not one that has been
                                               delegated to the Chief Executive under section 62
                                               or 62A;
                                          the Chief Executive may give directions to the person
                                          in relation to the exercise of that power or the
                                          performance of that function. The person must
                                          comply with any such directions.
                                      1A) If the Chief Executive delegates to a person (the
                                          second delegate) a power or function that has been
                                          delegated to the Chief Executive under section 62 or
                                          62A, then that power or function, when exercised or
                                          performed by the second delegate, is taken for the
                                          purposes of this Act to have been exercised or
                                          performed by the Finance Minister or Treasurer.
                                      (2) If the Chief Executive is subject to directions in relation
                                          to the exercise of a power, or the performance of a

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                                                   function, delegated to the Chief Executive under
                                                   section 62 or 62A, then:
                                                   (a) the Chief Executive must give corresponding
                                                       directions to the second delegate; and
                                                   (b) the Chief Executive may give other directions (not
                                                       inconsistent with those corresponding directions)
                                                       to the second delegate in relation to the exercise
                                                       of that power or the performance of that function.
                                               (3) The second delegate must comply with any directions
                                                   of the Chief Executive.
Regulation      Guidelines on fraud (Act s     (1) The Minister for Home Affairs may issue guidelines (to     An official must comply with the Fraud Control
16A             64)                                be called Fraud Control Guidelines) about the control      Guidelines (FCGs). The FCGs are a legislative
                                                   of fraud, dealing with fraud risk assessments, the         instrument.
                                                   preparation and implementation of fraud control plans
                                                                                                              Non-compliance with the mandatory requirements
                                                   and reporting of fraud.
                                                                                                              of FCGs is reportable. The mandatory
                                               (2) An official performing duties in relation to the control   requirements are indicated by the term “must” in
                                                   and reporting of fraud must act in accordance with the     the FCGs.
                                                   Fraud Control Guidelines.
Regulation      Notice of share acquisitions   (1) A notice of an event mentioned in subsection 39A (2)       There is a mandatory requirement under
22AA            and other events (Act              of the Act must be in the form in Schedule 1A.             Regulation 22AA. That said, this is not a reportable
                s 39A)                                                                                        requirement for the purposes of the Certificate.
                                               (2) The notice must include the particulars set out in the
                                                                                                              Refer to section 39A.
                                                   table.
                                                    Item Particular
                                                     1. The name and portfolio of the Minister who has
                                                        the responsibility for the event
                                                     2. The nature of the event
                                                     3. The name of the company involved in the event
                                                     4. If the company is incorporated in Australia:
                                                           (a) the company’s ACN; or
                                                           (b) the company’s ARBN (if the company has an
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                                   ARBN)
                            5. If the company is a foreign company:
                                 (a) the jurisdiction in which the company is
                                 incorporated; and
                                 (b) any incorporation identifier provided for the
                                 company in that jurisdiction; and
                                 (c) the company’s ARBN (if the company has an
                                 ARBN)
                            6. The address of the company’s principal place of
                               business
                            7. Whether the company is included in an official list
                               of a stock exchange and, if so, the name of the
                               stock exchange
                            8. Whether the company is:
                                 (a) a company limited by shares; or
                                 (b) a company limited by guarantee; or
                                 (c) a company limited by guarantee and shares;
                                 or
                                 (d) an unlimited company; or
                                 (e) a no liability company
                            9. Whether the company is:
                                 (a) a public company (a company that is not a
                                 proprietary company within the meaning of
                                 section 9 of the Corporations Act 2001); or
                                 (b) a large proprietary company; or
                                 (c) a small proprietary company
                            10.Whether the company is a company with only 1
                               member
                            11.If the company is a foreign company, a description
                               of the legal structure of the company
                            12.If, before or after the event, there were 1 or more
                               ultimate holding companies:
                                 (a) the name of each ultimate holding company;
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                                 and
                                 (b) if applicable, the ACN or ARBN of each
                                 ultimate holding company; and
                                  (c) for each ultimate holding company that is a
                                 foreign company, the jurisdiction in which it is
                                 incorporated and the incorporation identifier (if
                                 any) provided for the company in that
                                 jurisdiction
                                 ---------------------------------------------
                        (3) The notice must also include a short statement about
                            the event, setting out the particulars in the table.
                           Item Information
                             1. The reasons for the event
                            2. Whether the Commonwealth or a prescribed
                               body will be under an obligation or will have a
                               liability because of the event
                            3. Whether, because of the event, the
                               Commonwealth or a prescribed body:
                                (a) has, or will have, control of the company; or
                                (b) no longer has, or will no longer have, control
                                of the company
                            4. The dollar value of any consideration paid or
                               received by the Commonwealth or a prescribed
                               body in relation to the event
                            5. Any other areas where the interests of the
                               Commonwealth or a prescribed body have been
                               affected by the event
                                ---------------------------------------------

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                                           (4) In this regulation, each of the following terms has the
                                               meaning given by section 9 of the Corporations Act
                                               2001:
                                              (a) ACN (short for ‘Australian Company Number’);
                                              (b) ARBN (short for ‘Australian Registered Body
                                                  Number’);
                                              (c) company limited by guarantee;
                                              (d) company limited by shares;
                                              (e) foreign company;
                                              (f) large proprietary company;
                                              (g) no liability company;
                                              (h) small proprietary company;
                                              (i) ultimate holding company;
                                              (j) unlimited company.
Regulation      Audit committees (Act, s   Membership                                                       Non-compliance is reportable against section 46 of
22C             46)                                                                                         the FMA Act where the Chief Executive has not
                                           (1) A Chief Executive who is appointing one or more
                                                                                                            provided terms of reference to the Audit
                                               members of an audit committee must:
                                                                                                            Committee, including the criteria at
                                               (a) have regard to:                                          Regulation 22C (1)(a) to (c).
                                               (i) the Agency’s governance framework and
                                                    assurance mechanisms; and
                                               (ii) the key risks to the Agency, including risks relating
                                                    to program delivery and implementation; and
                                               (b) ensure that each member to be appointed has, in
                                                    the Chief Executive’s opinion, appropriate skills
                                                    and experience to carry out the committee’s
                                                    functions, including the ability to advise the Chief
                                                    Executive about how the Chief Executive can
                                                    manage the key risks; and
                                               (c) ensure, as far as practicable, that the committee
                                                    includes at least one member who is not an
                                                    employee of the Agency (an external member).

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                        (2) The Chief Executive must appoint a member of an
                            audit committee (who may be an external member)
                            as the Chair of the committee.
                        (3) The Chief Executive must give an audit committee
                            terms of reference that include particulars of:
                           (a) its functions; and
                           (b) the frequency of its meetings; and
                           (c) its membership.
                            Functions of audit committee
                        (4) In addition to subsection 46 (1) of the Act, the
                            functions of an audit committee include the following,
                            unless the Chief Executive decides, in writing, that the
                            committee is not to have a particular function:
                           (a) reviewing periodically the adequacy of the
                               Agency’s governance arrangements;
                           (b) reviewing the operational effectiveness of the
                               Agency’s risk management framework;
                           (c) reviewing the adequacy of the Agency’s internal
                               control environment;
                           (d) reviewing the adequacy of the Agency’s controls
                               that are designed to ensure the Agency’s
                               compliance with legislation;
                           (e) advising the Chief Executive about the internal
                               audit plans of the Agency;
                           (f) advising the Chief Executive about the professional
                               standards to be used by internal auditors in the
                               course of carrying out audits in the Agency;
                           (g) as far as practicable, coordinating work programs
                               relating to internal and external audits;
                           (h) reviewing the adequacy of the Agency’s response

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                                   to reports of internal and external audits;
                               (i) reviewing the content of reports of internal and
                                   external audits, for the purpose of identifying
                                   material that is relevant to the Agency, and
                                   advising the Chief Executive about good practices;
                               (j) advising the Chief Executive about action to be
                                   taken on significant matters of concern, or
                                   significant opportunities for improvement, that are
                                   mentioned in reports of internal and external
                                   audits;
                               (k) advising the Chief Executive on the preparation
                                   and review of the Agency’s financial statements;
                               (l) providing any other advice to the Chief Executive
                                   about the Chief Executive’s obligations under the
                                   Act.
                            (5) A Chief Executive may add to, or vary, the functions of
                                an audit committee, having regard to:
                                (a) the Agency’s governance framework and
                                    assurance mechanisms; and
                                (b) the key risks to the Agency, including risks relating
                                    to program delivery and implementation.
Regulation      Estimates   (1) A Chief Executive must prepare budget estimates for         Non-compliance is reportable where the Chief
22D                             each financial year, and for any other periods directed     Executive has not prepared budget estimates in
                                by the Finance Chief Executive.                             accordance with Regulation 22D.
                            (2) The estimates must be:                                      Non-compliance should be reported where CFO
                                                                                            sign-off of the budget estimates is not provided in
                                (a) prepared in the form specified by the Finance Chief
                                                                                            the timeframes required by the Finance Secretary.
                                    Executive; and
                                (b) provided as required by the Finance Chief               These timeframes are communicated through the
                                    Executive.                                              relevant Estimates Memorandum issued by
                                                                                            Finance.


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Regulation 23   Disposal of property found   (1) If:                                                          Non-compliance is reportable where an official
                on Commonwealth                                                                               does not dispose of public property by sale unless
                                                 (a) property (other than money, or property to which
                premises etc (Act s 41)                                                                       it is impracticable, or undesirable.
                                                     subregulation (2) applies) is found on premises, or
                                                     in an aircraft, vessel, vehicle, container or            Non-compliance is also reportable where the
                                                     receptacle, under the control of the                     Commonwealth does not pay the owner of the
                                                     Commonwealth; and                                        property in accordance with subregulation 23(4), if
                                                 (b) the property is not claimed by its owner within 3        applicable.
                                                     months from the date on which it is so found;
                                             the Commonwealth may dispose of the property.
                                             (2) The Commonwealth may, at any time, dispose of:
                                                 (a) live plants or animals; or
                                                 (b) perishable goods; or
                                                 (c) articles that are, or could be, dangerous or
                                                     noxious;
                                                 (d) found on premises, or in an aircraft, vessel, vehicle,
                                                     container or receptacle, under the control of the
                                                     Commonwealth.
                                             (3) The Commonwealth must dispose of the property by
                                                 sale, unless it is impracticable, or undesirable in the
                                                 public interest, to do so.
                                             (4) If:
                                                 (a) the Commonwealth has disposed of property by
                                                     sale; and
                                                 (b) the person who was the owner of the property
                                                     immediately before the sale makes a claim on the
                                                     Commonwealth in respect of the property;
                                             the Commonwealth must pay to the person an amount
                                             equal to the amount for which the property was sold less
                                             the aggregate of any amounts reasonably spent by the
                                             Commonwealth for the storage, maintenance or disposal

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                                              of the property.
                                              (5) If property is sold by the Commonwealth, any right in
                                                  respect of the property vested in a person before the
                                                  sale ceases to exist at the time of the sale.
Regulation 24   Finance Minister may          (1) The Finance Minister may delegate to an official, by      Non-compliance is reportable under the
                delegate powers                   written instrument, all of the Finance Minister’s         Delegation where an official does not comply with
                                                  powers or functions under these Regulations (other        any directions of the Finance Minister. Where the
                                                  than this power of delegation).                           section or regulation does not have a compliance
                                                                                                            element, the relevant Schedule and Part of the
                                              (2) If a delegation by the Finance Minister relates to the
                                                                                                            Delegation should be reported.
                                                  Finance Minister’s powers or functions under
                                                  regulation 9 or 10, the Finance Minister may also
                                                  delegate the power of delegation under subregulation
                                                  (1) in relation to those powers or functions.
                                              (3) In exercising powers and functions under a delegation,
                                                  the official must comply with any directions of the
                                                  Finance Minister.
                                              (4) This regulation does not, by implication, limit:
                                                  (a) any other power of the Finance Minister to
                                                       authorise a person to act on behalf of the Finance
                                                       Minister; or
                                                  (b) any other power of an official to authorise a
                                                       person to act on behalf of the official.
Regulation 29   Act of grace payments and     (1) If a proposed authorisation under subsection 33 (1) of    Non-compliance is not reportable against this
                waiver of debts (Act, ss 33       the Act would involve, or be likely to involve, a total   Regulation by all agencies.
                and 34)                           amount of more than $250 000, the Finance Minister:
                                                                                                            Non-compliance can only be reported by Finance,
                                                  (a) must ask the persons mentioned in subregulation       where the requirements of subregulation 29(1) (a)
                                                      (3) to give him or her a report on the proposed       and (b) are not met.
                                                      authorisation, in the capacity of an Advisory
                                                                                                            Non-compliance is reportable against the
                                                      Committee; and
                                                                                                            Delegation (Schedule 1, Part 11 to 13 as
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                            (b) must not authorise the payment without                appropriate) where a delegate has not exercised
                                 considering the report of the Advisory Committee. the power in accordance with the directions in the
                        (2) If a proposed waiver under subsection 34 (1) of the Act Delegation.
                            would involve, or be likely to involve, a total amount of
                            more than $250 000, the Finance Minister:
                            (a) must ask the persons mentioned in subregulation
                                 (3) to give him or her a report on the proposed
                                 authorisation, in the capacity of an Advisory
                                 Committee; and
                            (b) must not authorise the payment without
                                 considering the report of the Advisory Committee.
                        (3) The persons are:
                            (a) either:
                                     (i) the Chief Executive Officer of Customs; or
                                     (ii) if the Agency that is responsible for the
                                          matter on which the Committee has to
                                          report is the Australian Customs and Border
                                          Protection Service — a Chief Executive
                                          nominated by the Finance Minister; and
                            (b) either:
                                    (i) the Secretary to the Department of Finance
                                          and Deregulation; or
                                    (ii) if the Agency that is responsible for the
                                          matter on which the Committee has to
                                          report is the Department of Finance and
                                          Deregulation — a Chief Executive nominated
                                          by the Finance Minister; and
                            (c) either:
                                     (i) the Chief Executive of the Agency that is
                                          responsible for the matter on which the
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                                                           Committee has to report; or
                                                      (ii) if there is no Agency responsible for the
                                                           matter — a Chief Executive nominated by
                                                           the Finance Minister.
                                           (4) A member of an Advisory Committee may appoint a
                                               deputy to act in his or her place.
                                           (5) An Advisory Committee may prepare its report without
                                               having a meeting
Regulation 30   Finance Minister may       (1) If, at the time of a person’s death, the Commonwealth      Non-compliance is reportable where, when
                approve payments pending       owed an amount to the person, the Finance Minister         deciding who should be paid, a person’s
                probate etc                    may authorise payment of that amount to the person         entitlement to the property of the deceased
                                               who the Minister considers should receive the              person is not taken into account in accordance
                                               payment.                                                   with subregulation 3.
                                           (2) The Minister may authorise the payment without
                                               requiring production of probate of the will of the
                                               deceased person or letters of administration of the
                                               estate of the deceased person.
                                           (3) In deciding who should be paid, the Finance Minister
                                               must have regard to the persons who are entitled to
                                               the property of the deceased person under the
                                               deceased person’s will or under the law relating to the
                                               disposition of the property of deceased persons.
                                           (4) Subject to subregulation (5), after the payment is
                                               made, the Commonwealth has no further liability in
                                               respect of the payment.
                                           (5) This regulation does not relieve the recipient from a
                                               liability to deal with the money in accordance with law.
                                           (6) This regulation does not have the effect of
                                               appropriating the CRF for the purposes of payments
                                               under this regulation.

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                                            (7) This regulation extends to a case in which the
                                                deceased person died before the commencement of
                                                this regulation.
Regulation 32   Agencies to co-operate      The old employer must give reasonable assistance                Non-compliance is reportable where the old
                                            necessary for the new employer to prepare the invoice for       employer does not give reasonable assistance to
                                            the purposes of regulation 33, including information in         the new employer to prepare the invoice for the
                                            writing about the employee’s entitlements.                      purposes of Regulation 33.
Regulation 33   Payment within 30 days of   (1) Within 30 days of the receipt of a correctly rendered       Non-compliance is reportable where the old
                a correctly rendered        invoice from the new employer, the old employer must            employer does not pay the new employer within
                invoice                     pay to the new employer an amount equal to the sum of           30 days of the receipt of a correctly rendered
                                            the value, worked out on the basis of the employee’s            invoice.
                                            salary immediately before leaving the old employer, of:
                                                (a) the employee’s annual leave entitlement at that
                                                    time; and
                                                (b) 95% of the employee’s long service leave
                                                    entitlement at that time.
                                            (2) In subregulation (1):
                                            long service leave entitlement, for an employee, means:
                                                (a) the period of long service leave to which the
                                                    employee is legally entitled; or
                                                (b) if the employee is not legally entitled to any long
                                                    service leave — the amount worked out by
                                                    multiplying the notional amount of long service
                                                    leave to which the employee is entitled for a year
                                                    of service by the weighting factor set out in the
                                                    following table that applies to the number of years
                                                    of service the employee has completed.
                                            Years of service              Weighting factor              x
                                            Less than 1                    0.5
                                            At least 1 but less than 2     0.6
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                                             At least 2 but less than 4    0.7
                                             At least 4 but less than 6    0.8
                                             At least 6 but less than 8    0.9
                                             At least 8                    1.0
Policies        -   Australian Government Agencies should consult with Financial Framework Policy
                    Foreign Exchange Risk   Branch if they require further information on reportable
                    Management              policies.
                    Guidelines;
                -   Australian Government
                    Competitive Neutrality
                    Guidelines for
                    Managers;
                -   Australian Government
                    Cost Recovery
                    Guidelines;
                -   Guidelines for Issuing
                    and Managing
                    Indemnities,
                    Guarantees, Warranties
                    and Letters of Comfort;
                    and
                -   Commonwealth
                    Property Management
                    Guidelines




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                                     Part 5 – Frequently Asked Questions




                Part 5 Frequently Asked Questions




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                                         Department of Finance and Deregulation
                                                         Part 5.1 – Frequently Asked Questions

5.1       Frequently Asked Questions
1. How often should I undertake Certificate activities?
      Your Chief Executive is required to undertake the Certificate sign-off and report to your
      Minister and the Finance Minister annually by 15 October.
      Your Chief Executive should determine which internal processes are appropriate for your
      specific agency to support annual sign–off. Factors, such as the specific requirements of
      the agency, including size, structure, nature of operations and the number of
      transactions, may be a consideration.
      You should consider undertaking a number of internal reporting rounds within a
      financial year to help continually assess breaches and promote improvement.
2. Should I report breaches where staff members have not complied with CEIs?
      No. The Certificate does not require your Chief Executive to certify compliance with CEIs.
      That said, the Model CEIs generally summarise the key requirements of the financial
      management framework and therefore may involve a reportable breach.
      Further, CEIs and any quality assurance processes related to them may help you decide
      whether there are any non-compliance issues.
3. How should I report breaches where one issue results in breaches of several financial
   management framework requirements?
      The Certificate does not require you to report consequential breaches. A consequential
      breach occurs where a breach of a requirement of the FMA Act or Regulations causes a
      breach with another part of the FMA Act or Regulations.
       For example, if a staff member did not bank public money on the next banking day (or a
      banking day approved by the Chief Executive), this would result in a breach with both
      section 10 of the FMA Act and Regulation 17. For Certificate reporting purposes, the
      breach should be reported against section 10 of the FMA Act. The breach of
      Regulation 17 is a consequential breach, and should not be reported separately.
      However, where either Regulation 9 approval and/or Regulation 10 agreement have not
      been obtained prior to entering into an arrangement, agencies must report these
      instances of non-compliance separately against the relevant regulations.
      Non-compliance with Regulation 9 is not “consequential” to the non-compliance with
      Regulation 10 as they are two separate and independent requirements. That said, the
      consequential breach against Regulation 8 should not be reported separately.
4. Does each breach need to be recorded against a specific requirement of the financial
   management framework?
      Yes. All known breaches need to be recorded against a specific requirement of the
      financial management framework, or the policies listed at Part 2.1.3 of this circular. The
      summary of the compliance requirements of the FMA Act and Regulations at Part 4 of
      this circular should help you to determine which requirement to report the breach
      against.



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                                                                Department of Finance and Deregulation
                                                           Part 5.1 – Frequently Asked Questions
5. If I am unsure whether there was a breach, how should I report this?
     You are only required to report known breaches of the financial management
     framework. However, where there are suspected breaches, for example, issues are
     being actively investigated, it may be appropriate to note these in the covering letter to
     your Minister or at Appendix A to the Certificate.
     For example, there may be a possible breach of section 83 of the Constitution, which
     would consequently be a breach of section 26 of the FMA Act, where a staff member
     used an appropriation in a way that was inconsistent with the purpose of the
     appropriation. If the agency is actively undertaking investigations at the time that the
     Certificate is signed, then a Chief Executive may wish to disclose this information in the
     covering letter and/or the sign-off sheet of the Certificate, but should not report specific
     instances, as they are not “known” breaches.
     A known breach of the Constitution should be reported against section 26 because
     section 27 (5) of the FMA Act provides that a “...drawing right has no effect to the extent
     that it claims to authorise the application of public money in a way that is not authorised
     by an appropriation”. Where a payment is made without a valid appropriation, then the
     effect of section 27 (5) would be to invalidate the drawing rights used to make the
     payment and there would be a breach of section 26.
6. Should I report breaches where a staff member has not complied with requirements
   of Finance guidance, such as Finance Circulars?
     No. Only breaches of the FMA Act, Regulations, delegations or financial management
     policies listed at Part 2.1.3 of this circular are reportable in the Certificate.
     For example, not complying with guidance on the Finance website regarding the specific
     AusTender reporting requirements and procurement publishing obligations is not
     reportable for Certificate purposes. That said, agencies should endeavour to meet these
     requirements.
     A further example is not complying with the 30 day payment policy to small business,
     which is expressed in Finance Circular 2008/10 - Procurement 30 Day Payment Policy for
     Small Business. This is also not reportable for Certificate purposes.
7. What should I report where there have been several instances of a particular breach, but
   I cannot determine the number?
     You are required to specify all actual known breaches. You should not report in a vague
     or generalised way. For example, you should not report “several,” “a number of” or
     “multiple” breaches. The results of sample testing should not be extrapolated.
     Where there are large numbers of known breaches, but the exact number is not known,
     it is sufficient for you to provide a reasonable estimate, based on the circumstances.
     (See Part 2.2 of this circular for further information).
8. Should I list each breach on a separate line in the Certificate?
     No. If there were 26 breaches of section 26 of the FMA Act, there is no need to have
     26 separate line items reported in Appendix A to the Certificate. It is sufficient to
     describe the problem and specify the number of instances of a similar nature. In this

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                                                                 Department of Finance and Deregulation
                                                         Part 5.1 – Frequently Asked Questions
     case the total number of instances (26) can be reported on a single line at Appendix A to
     the Certificate.
9. How should I report breaches where, on a number of occasions, money was deposited
   into a bank account that was not an official account?
     These circumstances are reportable against section 11 of the FMA Act and would result
     in multiple breaches. You should report each deposit into a non-official account as a
     breach.
10. How should I report breaches where the person responsible for initiating 26
    fortnightly payroll runs (involving 3,000 cheques) did not have a valid drawing right?
     In this case, the actual number of instances of breaches are reportable against
     section 26 of the FMA Act. You should report a separate instance of breach for each
     payroll run made without the appropriate drawing rights. In total, 26 breaches should be
     reported.
     (See Part 2.2 of this circular for more information).
11. How should I report breaches where a staff member did not recover a Commonwealth
    debt or waived it?
     Where a debt was not recovered, and it is not within the exempt categories at
     subsection 47(1) (a) to (c) of the FMA Act, and was either not pursued or it was waived,
     you should report a breach against section 47 of the FMA Act.
     Section 47 of the FMA Act requires Chief Executives to pursue recovery of all debts for
     which they are responsible, unless the debt has been written off as authorised by an Act,
     or it is considered that the debt is not legally recoverable or that recovery is not
     economical to pursue.
12. How should I report breaches where a person outside the Commonwealth, who is
    engaged under an authorised FMA Act section 12 arrangement, does not comply with
    the requirements of the financial management framework?
    If the arrangement with the person outside the Commonwealth is authorised under
    section 12 of the FMA Act and, for example, the person did not comply with the
    requirement to bank public money the next banking day, this would not be a breach of
    the FMA Act.
    The outsider is only required to operate within the requirements of section 12 and the
    terms and conditions of the contact. There is no requirement for the outsider to comply
    with the requirements of the financial management framework. While there is no
    requirement for the outsider to comply with the requirements of the financial
    management framework, staff members must still meet these requirements. For
    example, staff members still require drawing rights when making payments or debiting
    an appropriation.
    That said, if there is no authorised section 12 arrangement in place, the outsider will
    automatically become an allocated official of the agency when they are performing a
    financial task. Allocated officials are subject to the requirements of the financial
    management framework.


Page 65 of 68                                                                Finance Circular 2011/07
                                                               Department of Finance and Deregulation
                                                        Part 5.1 – Frequently Asked Questions
    If an allocated official has not complied with the requirements of the financial
    management framework, this is reportable for the purposes of the Certificate. From the
    example provided above, in relation to banking public money, a breach is reportable
    against section 10 of the FMA Act each time the money is not banked.
13. How should I report breaches where the estimates update sign-off was not provided in
    the required timeframe?
    You should report a breach against Regulation 22D where the sign-off on the estimates
    update has not been provided within the timeframe indicated in the relevant Estimates
    Memorandum issued by Finance. Regulation 22D requires that a Chief Executive must
    prepare budget estimates for each financial year, and for any other periods directed by
    the Finance Chief Executive. The estimates must be prepared in the form specified by the
    Finance Chief Executive.
14. How should I report the name of a Special Account in the Certificate?
    You should report the name of the Special Account as shown on the Chart of Special
    Accounts at http://www.finance.gov.au/financial-framework/financial-management-
    policy-guidance/docs/Chart-of-Special-Accounts.pdf.

15. How should I report a breach where Regulation 9 approval and Regulation 10
    agreement have not been obtained before entering into an arrangement?
    If you have entered into an arrangement (including a contract) without approval
    under Regulation 9 and, if required, agreement under Regulation 10, it would result in
    separate breaches with both Regulation 9 and 10. It would also result in a breach with
    Regulation 8.
    That said, you should not report the breach against Regulation 8, as it is considered to be
    a consequential breach. If Regulation 9 approval was not obtained, this should be
    reported as a breach against Regulation 9. If Regulation 10 agreement was not
    obtained, this should be reported as a breach against Regulation 10.
16. How should I report a breach when there is a Machinery of Government (MOG) change
    leading to a change in agency functions?
    When there is a MOG change leading to a change in agency functions, the Chief
    Executive should only report on the affected functions for the period those functions were
    actually under his or her control.
    Where an agency is abolished, as a result of the MOG change, the Chief Executive of the
    successor agency is required to report for the entire reporting period, including the
    functions of the abolished agency until the date of abolition.
    Where a new agency is created, as a result of a MOG change, the Chief Executive must
    report from the date the agency was created.
    If a new FMA Act agency is created or a CAC Act body becomes an FMA Act Agency the
    Chief Financial Officer of that agency should contact Financial Framework Policy Branch
    at finframework@finance.gov.au to discuss the Certificate process.




Page 66 of 68                                                                Finance Circular 2011/07
                                                               Department of Finance and Deregulation
                                                            Part 5.1 – Frequently Asked Questions
17. Can someone other than the Chief Executive sign-off the Certificate?
     No. Only the Chief Executive (or acting Chief Executive) can sign-off the Certificate.
     This responsibility cannot be delegated.
 18. What should I report against in Appendix B (financial sustainability) to the Certificate,
     for the “current financial year”?
     You are required to report on the financial sustainability for the “current financial year”
     (i.e. the year which is underway as at the date of signing). This is a different
     requirement compared to the Certificate reporting period. For example, for compliance
     reporting in October 2011, the compliance certification related to the 2010-11 financial
     year. This year’s financial sustainability reporting related to the 2011-12 financial year.
 19. When certifying financial sustainability, should I disclose that an operating loss has
     been approved, or will be sought, for the current financial year?
     Yes. If an operating loss has been approved by the Finance Minister, or you will be
     seeking approval, this should be indicated in Appendix B to the Certificate with an
     explanation.
20. Are individual agency Certificate results publicly available?
    Finance provides an aggregate analysis of annual Certificate results to Parliament each
    year. This analysis is at the portfolio group level and does not currently separately
    identify agencies.
    Agencies should consider the Certificate as a self-improvement process aimed at
    identifying and improving compliance with the financial management framework.
    Agencies may also wish to consider the implications of Freedom of Information
    legislation.
21. What processes should my agency have in place to ensure compliance with the
    financial management framework?
    Each agency is different and your Chief Executive should consider the size, operations,
    structure and activities of your agency when determining the appropriate processes,
    systems and controls to put in place to promote compliance with the financial
    management framework. That said, the Audit Report contains better practice
    suggestions, such as:
         -      strengthening quality assurance over survey results reported by business areas
                and officials;
         -      use of targeted testing, focusing on higher risk, more significant or high volume
                transactions in the agency’s context;
         -      periodically testing key internal controls to determine if they are working as
                expected; and
         -      strengthening audit committee oversight of the Certificate process, including
                follow-up on any remedial actions.

22. Should I survey all staff or undertake sample testing on compliance requirements?
    Surveying staff and undertaking sample testing are appropriate methods to gather
    Certificate information, and should be used in combination with other methods. You
Page 67 of 68                                                                    Finance Circular 2011/07
                                                                   Department of Finance and Deregulation
                                                             Part 5.1 – Frequently Asked Questions
    should choose an appropriate mix of approaches to gather Certificate data and try to
    avoid over-reliance on one information source. Potential options include:
    self‐assessment surveys completed by office holders, delegates or other staff with
    financial management responsibilities; provision of non‐compliance data captured by
    business areas with specific financial management framework responsibilities; financial
    or other system based checks; sample testing of financial transactions; and targeted
    reviews of internal controls.

    Once Certificate data has been gathered it is also important to quality assure it for
    accuracy. Quality assurance processes should focus on transactions which traditionally
    have been higher risk, more significant, or high volume in the agency’s context. You
    should undertake selective quality assurance of information provided by business areas
    or officials to help ensure its accuracy prior to completing the annual Certificate.

23. What remediation and education should I undertake?
    Appropriate remediation and education will depend on the nature and size of your
    agency. The Audit Report suggests that Chief Executives should:
                –   review trends in non-compliance over time at agency-wide and business area
                    levels to inform remediation strategies. Understand and address the
                    underlying causes of non-compliance, including any systemic issues;
                –   use analysis of Certificate results to identify staff knowledge gaps or business
                    areas experiencing particular difficulties, and focus staff training and
                    development in these areas;
                –   monitor the areas from which staff take part in training and awareness
                    programs, and encourage participation where required. Consider mandating
                    tailored training or awareness programs to support staff commencing to
                    exercise a spending delegation, drawing rights delegation or responsibility for
                    cost centre management; and
                –   review the implementation of remediation strategies, potentially as part of an
                    internal audit.




Page 68 of 68                                                                     Finance Circular 2011/07
                                                                    Department of Finance and Deregulation

				
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