Finance Circular

No. 2005/13

To all Financial Management and Accountability Act 1997 agencies

Allocation of responsibilities for special appropriations
Purpose

The Australian National Audit Office identified in Audit Report No.15 2004-2005, Financial Management of Special Appropriations, that there was no general process to assist agencies and departments in determining responsibilities for managing and reporting on particular special appropriations. This Finance Circular details a process to allocate agency responsibility for special appropriations to particular agencies, consistent with the broader allocation of responsibility for legislation detailed by the Administrative Arrangements Order (AAO).[1]

Target Audience

This circular is relevant for all Financial Management and Accountability Act 1997 (FMA Act) Chief Executives and Chief Finance Officers (CFOs).

Key Points
  1. A special appropriation is an appropriation that appears in an Act, (other than those in the Annual Appropriation Acts), which appropriates money from the Consolidated Revenue Fund for a particular purpose.
  2. The AAO sets out the legislation administered by a Minister of State administering a department and the matters dealt with by each department (including matters arising under the legislation administered by the Minister of State).[2] The AAO does not allocate responsibility for legislation to FMA Act agencies, other than departments, within a portfolio.
  3. This Finance Circular provides guidance on how to allocate special appropriations, contained within legislation, to the relevant FMA Act agencies within a portfolio and Chief Executives’[3] subsequent responsibilities to manage those special appropriations in accordance with the FMA Act.[4]
  4. Legislation that contains a special appropriation may include provisions that (expressly or by implication[5]) allocate responsibility for financial management functions of a special appropriation to a specific official in a particular FMA Act agency.
  5. Where legislation does not allocate responsibility for a special appropriation to a specific official[6], a Minister of State may choose to allocate the financial management responsibilities to the Chief Executive of an FMA Act agency within his or her portfolio.[7] In the absence of any such allocation, a department’s Chief Executive will be responsible for the special appropriation.
  6. Accordingly, it is the responsibility of a department to ensure that all special appropriations contained within legislation that are the responsibility of its Minister are managed by the department, or are allocated by the Minister to other FMA Act agencies within the Minister's portfolio.[8]
  7. Once a Minister has allocated responsibility for a special appropriation to an FMA Act agency Chief Executive within the portfolio, that Chief Executive must manage that appropriation in accordance with the FMA Act, including the duty to promote the efficient, effective and ethical use of Commonwealth resources (in accordance with section 44 of the FMA Act).
  8. In most cases the FMA Act agency Chief Executive that is allocated responsibility for a special appropriation will provide relevant delegations to officials in his or her agency to perform the financial management functions in relation to that appropriation. However, there may be instances where a Chief Executive considers that, in accordance with
    section 44 of the FMA Act, it is more appropriate for officials within another FMA Act agency to make payments from that special appropriation. In this instance, the Chief Executive may:

-delegate the power to issue drawing rights to the Chief Executive (or another official) of the receiving FMA Act agency; or

-issue a drawing right directly to the relevant official in the receiving FMA Act agency.

In addition to the requisite delegation / drawing right, the relevant FMA Act agencies should agree in writing how they will manage the relationship, thus providing clarity about the financial and administrative responsibilities of the parties. [9]

Background

Allocation of responsibility for special appropriations by the Minister

9.It is appropriate to review the allocation of responsibility for the administration of special appropriations within a portfolio after a Minister is appointed to the portfolio or after a new FMA Act agency is created (including when Machinery of Government or AAO changes occur). Departments should consult with the FMA Act agency receiving the relevant responsibility to ensure that the agency is able to comply with its responsibilities.

Chief Executives’ responsibilities under the FMA Act

10.Under section 62 of the FMA Act the Finance Minister has delegated certain powers to Chief Executives, enabling them to manage the affairs of their agencies.[10] Under
section 53 of the FMA Act Chief Executives have the power to delegate their powers or functions, in part or full, to officials of any FMA Act agency.[11] Where a Chief Executive chooses to delegate these powers or functions to officials in another agency, it is important that the Chief Executives (or officials) of both agencies are aware of their responsibilities under the FMA Act and this is detailed in writing.

11.The financial statement reporting requirements detailed in the Financial Management and Accountability (Financial Statement) Orders (FMA Orders)[12] set out the disclosure requirements for special appropriations. If a department or an FMA Act agency is unsure of the disclosure requirements it should contact the Accounting Policy Branch in Finance.

Action required

12.All departments should ensure that responsibility for the administration of special appropriations in legislation administered by the Minister administering the department is clearly allocated to an FMA Act agency within the portfolio. The department should seek the Minister’s approval of allocations and subsequently advise all relevant portfolio agencies of this allocation.

13.In seeking their Minister’s approval of the allocation of responsibilities for special appropriations, the department’s officials should have due regard for:

  • the requirements of section 44 of the FMA Act, which places a duty on Chief Executives to promote the efficient, effective and ethical use of public money, public property and other Commonwealth resources; and
  • corporate governance principles and practices of the relevant FMA Act agencies.

Contacts

14.If FMA Act agencies have queries regarding the AAO they should contact Government Section in the Department of the Prime Minister and Cabinet on
(02) 6271 5535.

  1. If you have any queries on the allocation of appropriations, please contact the Finance and Banking Branch at .

16.If your department is dealing with the creation of a special appropriation or changes to an existing special appropriation, through changes to legislation, then, in accordance with the drafting directions of the Office of Parliamentary Counsel, please contact Finance’s Legislative Review Branch at .

17.For queries regarding the reporting of special appropriations please contact Accounting Policy Branch at .

Jonathan Hutson

Division Manager

Financial Framework Division

Financial Management Group

24 October 2005

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[1] A copy of the current Administrative Arrangements Order can be found at: http://www.pmc.gov.au

[2]A portfolio may contain more than one department.

[3]While a Minister will generally allocate responsibility for a special appropriation to an FMA Act agency in his or her portfolio, the Chief Executive of that FMA Act agency (or his or her delegate) will use the powers delegated by the Finance Minister to administer the special appropriation in accordance with the FMA Act.

[4]This Finance Circular should be read in conjunction with Finance Circular 2004/16 ‘Appropriation Management: Responsibilities of Agencies’ and Finance Circular 2004/17 ‘Appropriations for Payment to CAC Bodies’ available at http://www.finance.gov.au/publications/finance-circulars/index.html

[5]Legislation may, by implication, allocate responsibility for a special appropriation to officials of a particular FMA Act agency. In these instances responsibilities may be subject to legal interpretation and require agencies to seek legal advice for clarification.

[6] The designated official would generally be the Chief Executive of an FMA Act agency.

[7]The Minister may allocate financial management responsibility for a special appropriation to one or more Chief Executives within his or her portfolio.

[8]The administration of special appropriations should be allocated to an FMA Act Agency and not a Commonwealth Authorities and Companies Act 1997 (CAC Act) body, unless permitted by in legislation. CAC Act bodies managing special appropriations, generally, can only do so on behalf of an FMA Act agency.

[9] For guidance on the issuance of these drawing rights refer to Finance Circular 2004/07 Drawing Rights: Payments and Debiting Appropriations available at: http://www.finance.gov.au/publications/finance-circulars/index.html

[10]For information on the delegation of powers by the Finance Minister refer the current Financial Management and Accountability (Finance Minister to Chief Executives) Delegation located at: http://www.finance.gov.au/financialframework/fma-legislation/fma-delegations.html

[11]Given the Finance Minister’s role under the FMA Act, it is also possible in certain circumstances for the Finance Minister to delegate, to a specific Chief Executive, the power to issue a drawing right regarding a specific special appropriation. Where the arrangements in paragraph 10 are not appropriate agencies should consult with Finance.

[12] The current FMA Orderscan be found at:http://www.finance.gov.au/financial-reporting-and-accounting-policy/index.html