Under the Financial Management Act 1994

Preparing to load PDF file. please wait...

0 of 0
100%
Under the Financial Management Act 1994

Transcript Of Under the Financial Management Act 1994

Standing Directions 2018
Under the Financial Management Act 1994
Issued 11 October 2018 Incorporating revisions to 13 December 2019
OFFICIAL

The Secretary Department of Treasury and Finance 1 Treasury Place Melbourne Victoria 3002 Australia Telephone: +61 3 9651 5111 Facsimile: +61 3 9651 2062 dtf.vic.gov.au
Authorised by the Victorian Government 1 Treasury Place, Melbourne, 3002
© State of Victoria 2019
You are free to re-use this work under a Creative Commons Attribution 4.0 licence, provided you credit the State of Victoria (Department of Treasury and Finance) as author, indicate if changes were made and comply with the other licence terms. The licence does not apply to any branding, including Government logos. Copyright queries may be directed to [email protected]
ISBN 978-1-922222-73-2 (pdf/online) First published August 2016 New edition approved by Minister for Finance 11 October 2018
If you would like to receive this publication in an accessible format, please email [email protected] This document is also available in Word and PDF format at dtf.vic.gov.au
OFFICIAL

Contents
Introduction ....................................................................................................... 1
Background ................................................................................................................................1 Victoria’s Financial Management Framework ...........................................................................1 Summary of the Directions ........................................................................................................2 Application of the Directions .....................................................................................................3
Excluded entities ...............................................................................................................3 Application to Independent Offices, CSV, JCV and the Judicial Commission....................3 Other State entities ...........................................................................................................3 Scope of Direction requirements ...............................................................................................3 Applying other legislation, standards and policies ....................................................................4 Structure of Directions, Instructions and Guidance...................................................................4 Delegations of the Assistant Treasurer to the DTF Deputy Secretary .......................................4 Formatting and referencing in the Directions............................................................................5
1. Purpose and application.......................................................................... 6
1.1 Purpose ..............................................................................................................................6 1.2 Application .........................................................................................................................6
Complete exemption ............................................................................................6 Exemption from Direction 3.7.2.1 ........................................................................6 1.3 Commencement ................................................................................................................7 1.4 Transitional arrangements.................................................................................................7 Direction 2.4.5(a)(ii): CFO qualifications ..............................................................7 Direction 3.7.2.1: Central Banking System and Eligible Financial Assets .............7 1.5 Exemptions ........................................................................................................................7 1.6 Definitions and interpretation ...........................................................................................8 1.7 Order of precedence........................................................................................................11
2. Roles and responsibilities ...................................................................... 12
2.1 Overview of roles.............................................................................................................12 2.2 Responsible Body.............................................................................................................12 2.3 Accountable Officer .........................................................................................................13
General responsibilities ......................................................................................13 Additional responsibilities to the Responsible Minister.....................................14 Additional responsibility of Portfolio Agency Accountable Officer....................14 Additional responsibilities of Portfolio Department Accountable Officer .........14 Responsibility to establish requirements for excluded entities .........................14 Additional responsibility of DTF Accountable Officer ........................................15 2.4 Chief Finance Officer........................................................................................................15 Access to executive ............................................................................................15 General responsibilities ......................................................................................15 Additional responsibilities of Portfolio Agency CFO...........................................16 Additional responsibilities of Portfolio Department CFO...................................16 CFO expertise and qualifications ........................................................................16 CFO whole of government responsibilities ........................................................17 2.5 Delegations of responsibilities under these Directions ...................................................18

OFFICIAL

Standing Directions 2018 Under the Financial Management Act 1994, Incorporating revisions to 13 December 2019

i

3. Governance........................................................................................... 19
3.1 Effective financial governance.........................................................................................19 3.2 Oversight and assurance..................................................................................................19
Audit Committee ................................................................................................19 Internal Audit......................................................................................................21 3.3 Financial authorisations...................................................................................................23 3.4 Internal control system....................................................................................................24 3.5 Fraud, Corruption and Other Losses................................................................................24 Fraud, Corruption and Other Losses policy ........................................................24 Recordkeeping .................................................................................................... 24 Significant or Systemic Fraud, Corruption and Other Losses .............................25 3.6 Purchasing cards ..............................................................................................................25 3.7 Managing risk...................................................................................................................25 Risk management framework and processes.....................................................25 Treasury management, including Central Banking System................................26 3.8 Pricing ..............................................................................................................................27 3.9 Managing financial information.......................................................................................27
4. Delivering services................................................................................. 28
4.1 Planning and managing performance..............................................................................28 Accountable Officer responsibilities...................................................................28
4.2 Using and managing public resources .............................................................................28 Acquisition of assets, goods and services...........................................................28 Discretionary financial benefits – grants, sponsorships and donations.............29 Asset management accountability .....................................................................29 Public construction accountability .....................................................................29
4.3 Resource management in Portfolio Departments...........................................................29 4.4 Financial reporting operations in Portfolio Departments ...............................................29
5. Compliance and reporting ..................................................................... 30
5.1 Financial management compliance .................................................................................30 Financial management compliance framework .................................................30 Annual assessment of financial management compliance ................................30 Detailed periodic review of financial management compliance........................30 Financial management compliance attestation .................................................30 Dealing with Compliance Deficiencies................................................................30 Reporting Material Compliance Deficiencies .....................................................31 Portfolio Departments’ reporting to DTF ...........................................................31
5.2 Annual reporting..............................................................................................................31 Requirements .....................................................................................................31 Declaration in financial statements....................................................................32 Declaration in report of operations....................................................................32 Consolidated Financial Statements ....................................................................32 Agreements between Agencies..........................................................................32
5.3 External reporting and information provision .................................................................33 Agency reporting and information provision .....................................................33 Additional reporting for Controlled Entities.......................................................33 Portfolio department to report material issues to DTF......................................33
Delegation of the Minister for Finance ............................................................. 34

OFFICIAL ii

Standing Directions 2018 Under the Financial Management Act 1994, Incorporating revisions to 13 December 2019

Revisions/updates to Standing Directions effective from 1 July 2018

Direction(s) revised/updated
New SD 4.2.4

Date revision came into operation
1 July 2018

New edition incorporating revisions to SDs 1.2, 1.4, 1.5, 1.6 & 3.7.2.1 to 4
Various

11 October 2018 7 December 2018

Revisions to SDs 2.1, 2.3.1, 2.4.6, 2.5 and 3.3
Revisions to SDs 1.4, 2.5, 3.3, 4.1, 4.3 and 5.2

26 March 2019
13 December 2019
Click here to enter a date.

Nature of revision/update Incorporating references to Ministerial Directions under the PD&CM Act 1994 Incorporating Central Banking System requirements
Minor revisions approved by Deputy Secretary, DTF under delegated authority, as follows: References to ‘Minister for Finance’ updated to reflect administration of relevant sections of the FMA by the Assistant Treasurer from 29 November 2018 Provisions relating to Portfolio Department CFOs revised to incorporate implementation of Government policy Revisions to update and clarify operational requirements, and to remove spent provisions

OFFICIAL

Standing Directions 2018 Under the Financial Management Act 1994, Incorporating revisions to 13 December 2019

iii

Introduction1
Background
These Standing Directions are issued by the Minister for Finance (from 29 November 2018, the Assistant Treasurer) under section 8 of the Financial Management Act 1994 (FMA). They specify public sector agency responsibilities to achieve a high standard of public financial management and accountability. In Victoria, the procedures and requirements for using public resources are set out in a series of statutes, which are supported by subordinate instruments such as regulations, directions, and instructions. The primary source of authority for the collection and use of public resources is the Constitution Act 1975, supported by the FMA, the Audit Act 1994 and the Public Administration Act 2004. These Acts and the supporting instruments made under them hold Agencies accountable for the use of the resources provided to them.
Victoria’s Financial Management Framework
Each Agency is accountable to its Responsible Minister for its own financial management and reporting on the resources it uses. The Department of Treasury and Finance (‘DTF’) is responsible for supporting the Treasurer and the Assistant Treasurer in discharging their accountability to Parliament for the overall financial management performance of the State and the Government’s obligations under the FMA. The FMA sets the financial management accountability, reporting and financial administration obligations of the Government and the Victorian public sector. The diagram below sets out the financial management framework hierarchy.

OFFICIAL

1 This Introduction is non-mandatory background information.

Standing Directions 2018 Under the Financial Management Act 1994, Incorporating revisions to 13 December 2019

1

The obligations in the FMA are supported by:
• the Financial Management Regulations 2014 made under section 59 of the FMA, establishing further financial administration requirements for government;
• these Standing Directions under section 8 of the FMA, establishing standards for financial management accountability, governance, performance, sustainability, reporting and practice for Agencies;
• the Instructions made by the DTF Deputy Secretary under a delegation of the Minister for Finance’s (from 29 November 2018, the Assistant Treasurer’s) power. The Instructions are linked to specific Directions through corresponding numbering and provide more detailed mandatory requirements, in specific areas of risk; and
• the Financial Reporting Directions made by the Minister for Finance (from 29 November 2018, the Assistant Treasurer) under section 8 of the FMA. These mandate financial reporting requirements to ensure consistent application of accounting treatment across the Victorian public service. Financial Reporting Directions may also impose other government non-financial policy and disclosure requirements. The Minister for Finance (from 29 November 2018, the Assistant Treasurer) has delegated the power to make and issue Financial Reporting Directions to the DTF Deputy Secretary, which allows for minor and technical changes to be made more flexibly.
Summary of the Directions
These Directions support the FMA by specifying responsibilities of Agencies, Portfolio Departments and DTF to ensure:
• effective governance and accountability in the Victorian public sector regarding financial and risk management, financial sustainability and financial performance;
• the achievement of statutory functions and/or government objectives and priorities in a financially efficient and responsible manner;
• that the community and Parliament have confidence in the financial management and long-term financial sustainability of Agencies and the State; and
• that the information provided to Parliament and the public about the management of finances and resources is clear, accurate and readily understandable.
In addition, the Directions specify responsibilities of Portfolio Departments to support their Responsible Minister in the financial oversight of Portfolio Agencies.
The Directions also specify responsibilities for DTF as the central agency supporting the Treasurer and Assistant Treasurer on whole of State financial performance matters.
Accountability for specific requirements in these Directions is generally linked to one of the three key financial management governance positions within an agency, namely the Responsible Body (for example, the board), Accountable Officer (for example, the CEO) or Chief Finance Officer. These positions are likely to delegate implementation of certain requirements to Agency officers under Direction 0. However, ultimate accountability for the requirements still remains with the position specified in the Direction.
For those Agencies without a statutory board or equivalent governing body established under legislation, the Directions deem the Responsible Body and Accountable Officer to be the same person. For Independent Offices, the Directions deem the Responsible Body, Accountable Officer and Responsible Minister as the same person. See the definitions of these terms in Direction 1.6.

OFFICIAL 2

Standing Directions 2018 Under the Financial Management Act 1994, Incorporating revisions to 13 December 2019

Application of the Directions
Direction 1.2 provides that the Directions and Instructions are mandatory for all Agencies (that is, Public Bodies and Departments as defined in the Directions), except for some specified classes of Agencies that are listed in the Direction.
Excluded entities
Under Direction 1.2, school councils, incorporated committees of management,2 class B cemetery trusts and the volunteer units/brigades of VicSES and the Country Fire Authority (CFA) are excluded from the Directions. However, under Direction 2.3.5, Portfolio Departments, VicSES and CFA must establish appropriate financial management requirements for these entities.
Application to Independent Offices, CSV, JCV and the Judicial Commission
These Directions and the Instructions apply to all Independent Offices, Court Services Victoria (CSV), the Judicial College of Victoria (JCV), and the Judicial Commission of Victoria (the Judicial Commission). Where it is appropriate for Independent Offices, CSV, JCV, or the Judicial Commission to have financial management arrangements that differ from other Agencies, the Directions provide for differential application through the definitions in Direction 1.6, as follows:
• ‘Government objectives and priorities’ is defined differently, to mean the functions and/or objectives for which it was established as specified in its establishing legislation;
• the ‘Responsible Minister’, ‘Responsible Body’ and ‘Accountable Officer’ are the same person; and
• they are not ‘Portfolio Agencies’.
Further, under Direction 5.1.6(b), Independent Offices, CSV, JCV, and the Judicial Commission are subject to a different requirement for reporting Material Compliance Deficiencies.
Other State entities
Other State entities that do not fall within the definition of ‘Agency’ are not bound by the Standing Directions, but are encouraged to apply them where this would enhance their financial accountability and control frameworks.
Scope of Direction requirements
All Directions are issued under section 8 of the FMA. Accordingly, all requirements are intended to be interpreted in a manner consistent with the Direction making power provided by section 8. In particular, all requirements are related to financial management, financial performance and financial sustainability, and are not intended to impose any purely non-financial obligation.
Direction 1.7 sets out the order of precedence for the FMA, the Directions, Financial Reporting Directions, Instructions and other legislation.

OFFICIAL

2 Except if listed in Instruction 1.2(b). See Direction 1.2(b).

Standing Directions 2018 Under the Financial Management Act 1994, Incorporating revisions to 13 December 2019

3

Applying other legislation, standards and policies
The Directions provide that Agencies must apply various laws, standards and policies, including the Victorian Government Risk Management Framework (Direction 3.7.1), the Cost Recovery Guidelines (Direction 3.8), and others.
To apply a law, standard or policy, the Agency must comply with the mandatory requirements set out in it. Non-mandatory requirements set out in the law, standard or policy remain non-mandatory under the Directions.
Some laws, standards and policies only apply to particular Agencies (i.e., they apply to some but not all of the Agencies subject to the Directions). In this case, only those Agencies that are subject to the relevant law, standard or policy must apply it under the Directions.
Structure of Directions, Instructions and Guidance
The Directions, Instructions and Guidance are structured3 as follows:
• Directions are issued by the Assistant Treasurer, and mandatory;
• Instructions are issued by DTF, and mandatory; and
• Guidance is issued by DTF, and non-mandatory.
These Directions set out key financial management controls. Agencies may tailor their implementation of the Directions, having regard to their circumstances, including their risk profile, size, and the nature and complexity of their operations. This is recognised in Direction 1.1(b).
The Instructions are made by the DTF Deputy Secretary under a delegation of the Assistant Treasurer’s power. The Instructions are linked to specific Directions through corresponding numbering. The Instructions provide more detailed mandatory requirements, in specific areas of risk. They specify processes or procedures that may require more regular update than the Directions.
Guidance provides supporting information in relation to the interpretation and implementation of the Directions and Instructions. The Guidance is linked to specific Directions through corresponding numbering. It is not mandatory.
Delegations of the Assistant Treasurer to the DTF Deputy Secretary
Through a separate delegation instrument, the Minister for Finance (from 29 November 2018, the Assistant Treasurer) has delegated to the DTF Deputy Secretary the powers and functions to:
• make minor or technical amendments to the Directions and Financial Reporting Directions;
• make, issue, amend or revoke Instructions; and
• exempt a person, Agency or class of Agencies from specific or all requirements in the Instructions (and to amend or revoke exemptions).

3 Financial Reporting Directions are issued separately under the FMA, and do not fit within this structure.

OFFICIAL 4

Standing Directions 2018 Under the Financial Management Act 1994, Incorporating revisions to 13 December 2019
DirectionsInstructionsRequirementsAgenciesFma