Circular No 2011/01 - Ministerial Council for Federal Financial ...

AUSTRALIAN
GOVERNMENT
FEDERAL FINANCES
CIRCULAR NO. 2011/01
To agencies subject to the Financial Management and Accountability Act 1997
19 JANUARY 2011
PAYMENT ACCOUNTABILITIES AND CERTIFICATION ARRANGEMENTS
SUMMARY
This circular seeks to confirm the accountabilities of Commonwealth Ministers and agencies with
regard to payments made under the framework for federal financial relations that has applied since
1 January 2009. It also sets out the monthly payment process to enable the Treasury to make these
payments to the States and Territories and provides guidance to Commonwealth agencies on
payment certification arrangements.
Project payments (milestone based)
In the case of National Partnership project payments where the achievement of milestones is
required by the relevant National Partnership before a payment is made to a State or Territory, the
relevant Commonwealth Minister will determine, based upon expenditure and performance
reporting arrangements set out in the National Partnership, whether the project payment will be
paid.
National Partnership project payments will only be made in accordance with the requirements set
out in the relevant National Partnership and unless specifically provided for in the agreement, there
is no scope for payments for partial performance.
Payment certification
To assure the Treasurer that payments made under the framework for federal relations are accurate,
appropriate and have legal authority, all payments must be certified by an authorised certifier,
generally the Chief Financial Officer.
Authorised certifiers will explicitly:
• provide assurance that the relevant Commonwealth Minister has determined that the project
payments can be paid in accordance with the requirements set out in the relevant National
Partnership agreements for milestone based payments;
• provide assurance that the Commonwealth Minister and agency have complied with the
Financial Management and Accountability Act 1997 (FMA Act) and relevant FMA
Regulations;
• confirm that amounts recommended for payment are accurate and that appropriate control
processes are in place;
• confirm that the National Partnership Agreements have been signed by jurisdictions for each
payment; and
• confirm that Implementation Plans (where relevant) have been agreed with jurisdictions for
each payment.
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PAYMENT ACCOUNTABILITIES
Federal Financial Relations Circular 2011/01
1. Improved accountability is a key objective under the framework for federal financial relations.
2. Federal Finances Circular 2009/03 details the roles and responsibilities of Commonwealth
Ministers and agencies under the framework. This Circular seeks to confirm the payment
accountabilities outlined in that Circular.
3. The Treasurer is responsible, on the advice of the relevant Commonwealth Minister, for the
estimates, appropriations, efficient payment and the financial reporting of National Partnership
payments.
National Partnerships – Project payments
4. Project payments will involve set funding arrangements that specify an amount of money to be
provided at certain times, and which may be subject to the satisfactory attainment by the States of
milestones.
5. The relevant Commonwealth Minister is accountable for policy, implementation and
evaluation in respect of project payments.
6. Where the achievement of pre-determined milestones is required by the relevant National
Partnership before a payment is made to a State or Territory, the relevant Commonwealth Minister
will determine, based upon expenditure and performance reporting arrangements set out in the
National Partnership, whether the project payment will be paid. National Partnership project
payments will only be made in accordance with the requirements set out in the relevant National
Partnership and unless specifically provided for in the agreement, there is no scope for payments
for partial performance.
7. As noted above, National Partnerships generally require Commonwealth Ministers to assess
and certify payments to Commonwealth officials. In some instances, this responsibility has been
delegated to Commonwealth officials in the agreement. The issue of delegating responsibility for
making a determination in respect of project payments has been considered by the Heads of
Treasuries in a review of National Agreements, National Partnerships and Implementation Plans
under the Intergovernmental Agreement on Federal Financial Relations. The findings of the review
are expected to be considered at the next Council of Australian Governments (COAG) meeting. In
the interim, project payments need to continue to be assessed and certified by Commonwealth
Ministers (or an authorised delegate where allowed by the agreement). We expect to issue further
guidance on issues identified in the Heads of Treasuries’ review following consideration by COAG.
8. Where the achievement of a milestone is not required before a payment is made to a State or
Territory, payments will be scheduled in accordance with the payment profile set out in the National
Partnership.
National Partnerships – Facilitation payments
9. When an area emerges as a national priority, National Partnership facilitation payments may be
used to assist States to lift service standards or to provide the capacity to engage in certain agreed
reform activities.
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Federal Financial Relations Circular 2011/01
10. As facilitation payments have no performance benchmarks, the Treasurer will determine
payments specified in a National Partnership agreement once a copy of the signed agreement is
received by the Treasury. Treasury will liaise with portfolio agencies to ensure facilitation
payments are included in the monthly advice provided to the Department.
National Partnerships – Reward payments
11. National Partnership reward payments will be provided to those States that deliver reform
progress and will be contingent on the achievement of performance benchmarks. The achievement
of performance benchmarks for reward payments will be assessed by the COAG Reform Council.
12. Payments will only be made in accordance with the requirements set out in the relevant
National Partnership and unless specifically provided for in the agreement, there is no scope for
payments for partial performance.
13. The Treasurer will make a determination as soon as possible after Cabinet’s consideration of
the report from the COAG Reform Council as to whether the reward payment will be paid. The
payment will be paid on the first possible (regular) payment date after the Treasurer’s
determination.
Other general revenue assistance
14. Other general revenue assistance includes royalty revenue sharing payments, compensation
payments and payments for ACT municipal services.
15. Advice will be required for some payments, such as royalties, from relevant Commonwealth
Ministers.
‘Through’ payments
16. Payments made ‘through’ the States and Territories to third parties are currently made through
the COAG Reform Fund. Treasury liaises with relevant portfolio agencies to ensure ‘through’
payments are included in monthly payment advice provided to the Department.
PAYMENT PROCESSES AND CERTIFICATION
17. Each month, the Treasury will send out agency payment advice forms (APAFs) to portfolio
agencies. Indicative dates are detailed in Tables 1 and 2 of Appendix A.
18. Commonwealth Ministers, through their departments (or other agencies), will advise the
Treasurer, through the Treasury, of the payments that are to be made for that month using the APAF
provided by Treasury. Information will generally be due to the Treasury by the last day of the
previous month for the 7 th of the month payments (National Partnership payments) or by the 13 th of
the month for the 21 st of the month payments (General Revenue Assistance), except where there are
timing issues related to public holidays or weekends.
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Federal Financial Relations Circular 2011/01
19. If advice is not provided on or before the indicative return dates, the payment will be paid in
the subsequent month. There is limited flexibility with return dates as there are a number of
processes the Treasury needs to undertake subsequent to receipt of the APAFs to facilitate payment
on the specified date. Each month the Treasury undertakes quality assurance of the APAFs,
prepares and obtains Ministerial sign-off for the determination under the Federal Financial
Relations Act 2009, and prepares and uploads information on Govdex. The time needed to
adequately complete these processes has been taken into consideration when setting deadlines for
the provision of APAFs.
National Partnerships
20. To assure the Treasurer that National Partnership payments are accurate, appropriate and have
legal authority, the APAF must be certified by an authorised certifier.
21. Authorised certifiers will explicitly:
• provide assurance that the relevant Commonwealth Minister (or delegate) has determined that
the project payments can be paid in accordance with expenditure and performance reporting
arrangements set out in relevant National Partnership agreements and in accordance with
paragraph D31(c) of the Intergovernmental Agreement on Federal Financial Relations (IGA);
• provide assurance that Commonwealth Ministers and agencies have complied with the
Financial Management and Accountability Act 1997 (FMA Act) and relevant FMA
Regulations before payments are made. The APAF explicitly requires certifiers to confirm
that agreements underlying the payments have been approved in accordance with FMA
Regulations (specifically Regulations 9 and 10) (Federal Finances Circular 2009/03 details
FMA obligations);
• confirm that the amounts recommended for payment are accurate and that appropriate control
processes are in place within the agency to support accurate advice (refer to Appendix B for
details on what is meant by accuracy and controls);
• confirm that National Partnership Agreements have been signed by jurisdictions for each
payment, using a drop down menu built into the APAF; and
• confirm that Implementation Plans (where relevant) have been agreed with jurisdictions for
each payment, using a drop down menu built into the APAF.
22. Agencies must advise the Treasury if there are no payments intended to be made for a month
by completing a nil APAF signed by an authorised certifier.
23. As confirmed in monthly APAFs, all payments must be supported by a relevant National
Partnership Agreement (or other written agreement), signed by relevant jurisdictions and the
Commonwealth and, where applicable, an Implementation Plan which outlines arrangements for
payments to the States and Territories. The COAG Reform Fund Act 2008 requires that payments to
the States and Territories may not be made without a written agreement specifying the terms and
conditions under which payment is made. Consequently, these National Partnership Agreements
and Implementation Plans must be provided to the Treasury, otherwise no payment can be made.
These agreements and Implementation Plans will be posted on the Federal Financial Relations
website – www.federalfinancialrelations.gov.au.
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Federal Financial Relations Circular 2011/01
24. Information provided as part of the APAF will also include variance explanations for material
changes when compared against estimated expenditure. Where a variance is identified an
explanation must be provided when submitting payment details as payments will not be made
without an appropriate explanation.
25. APAFs will also detail payment types – facilitation, reward or project payments (refer to
Federal Finances Circular 2009/03 for further information on classification of payments and
accountabilities under each of these payments). Payment types will be detailed using drop down
menus within the payment certification template. Where necessary, the Treasury will assist
agencies in classifying the type of payment to be made.
26. Commonwealth agencies must advise the Treasury of any new payments that need to be
included in the APAF.
27. Once all information has been received, the Treasury will prepare a determination for the
Treasurer to sign in order for payments to be made. The Federal Financial Relations Act 2009
provides for the Treasurer, through a written determination, to credit amounts to the COAG Reform
Fund for the purpose of providing financial assistance to the States and Territories in the form of
National Partnership payments. The determination may be disallowed by Parliament.
28. As outlined above, the four key details in the payment and certification process are as follows:
• agencies must ensure that for National Partnership project payments where the achievement
of milestones is required, the relevant Commonwealth Minister (or delegate where allowed)
has approved the payment;
• the APAF must be received by the required deadline;
• the APAF must contain the correct payment details; and
• the payment certification must be signed by an authorised certifier.
Other General Revenue Assistance and ‘Through’ payments
29. Authorised certifiers have similar obligations to that for National Partnership payments (above)
except to the extent that certain aspects of National Partnership payments do not apply to Other
General Revenue Assistance or ‘through’ payments.
30. Agencies must advise the Treasury if there are no payments intended to be made for the month
by completing a nil APAF signed by an authorised certifier.
Nation Building Funds and Other Special Accounts
31. Amounts transferred to the COAG Reform Fund special account from other special accounts
within the Commonwealth (for example, Nation Building funds) will not be included in the
Treasurer’s determination. However, these payments will still need to be appropriately certified.
32. For Nation Building Funds, a copy of the relevant direction for these payments will need to be
forwarded to the Treasury with the APAF by the last day of the previous month as payments are
made on the 7 th of each month.
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Authorised Certifiers
Federal Financial Relations Circular 2011/01
33. In order to ensure an appropriate level of authorisation by portfolio agencies on behalf of their
Commonwealth Minister, only Chief Financial Officers (CFOs) and two other nominated senior
authorised persons may certify payments for submission to the Treasury.
34. Ordinarily an agency’s CFO will certify payments. Should the CFO not be available, then
either of the two other authorised persons may certify the payments.
35. The two nominated senior authorised persons should hold a section 44 delegation under the
FMA Act. Section 44 requires that a Chief Executive or delegate 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, where “proper use” means efficient, effective and ethical use that is not
inconsistent with the policies of the Commonwealth.
36. In certifying payments for submission to the Treasury, the certifier is not actually exercising
their delegation as such, however, it is considered appropriate from an internal control and audit
perspective that a certifier should be a section 44 delegate.
37. The Treasury will shortly be requesting from agencies the names and positions of two other
senior authorised persons that may certify payments.
38. The register of authorised certifiers will be reviewed annually and agencies must also advise
the Treasury of any changes throughout the year.
39. Payments will not be made where they are not signed by the CFO or an authorised certifier.
Transfer of funds and information on GovDex
40. Under the centrally administered payment arrangements of the framework, all payments are
processed by the Commonwealth Treasury and paid directly to each State or Territory Treasury.
State and Territory Treasuries are responsible for distributing the funding within their jurisdiction.
41. Having State and Territory Treasuries distribute Commonwealth-sourced funding to State or
Territory portfolio agencies helps reinforce that State and Territory agencies are primarily
accountable to their own Parliament and the public for their service delivery performance, including
in respect of their delivery of programs for which the Commonwealth provides a financial
contribution.
42. Information regarding payments made is posted on the government information sharing
website GovDex – www.govdex.gov.au. This information is provided initially in draft form to
assist State and Territory Treasuries with cash forecasting and management. Final information is
provided once the determination has been signed by the Treasurer.
43. The information on GovDex provides individual monthly payments, cumulative balances and
tracking against budgeted amounts which will assist State, Territory and Commonwealth agencies
with tracking payments and cash flow management.
Annual summary of payments
44. For each financial year, an annual summary of amounts certified for payment by agencies
throughout the year will be sought. This process, first introduced for the 2009-10 financial year,
aims to facilitate an annual reconciliation to ensure all payments have been correctly made and
reported.
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45. This reconciliation process occurs in two stages:
Federal Financial Relations Circular 2011/01
• as part of the Treasury’s hard-close process, an initial reconciliation will be carried out in
May covering the period 1 July 2010 to 30 April 2011; and
• a final reconciliation carried out at the end of the financial year covering the remaining two
months.
46. This process will be undertaken again for the 2010-11 financial year, commencing in
May 2011.
Contact Information
Manager
Federal Finances Unit
The Treasury
Telephone: (02) 6263 3888
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INDICATIVE PAYMENT DATES
Federal Financial Relations Circular 2011/01
Table 1 – Indicative National Partnership Agreement Payment Dates (7 th of Month)
Agency payment advice form
(APAF) distributed
APAF due back to Treasury
(12 noon)
Payment date
Tue, 18 January 2011 Fri, 28 January 2011 Mon, 7 February 2011
Wed, 16 February 2011 Fri, 25 February 2011 Mon, 7 March 2011
Fri, 18 March 2011 Wed, 30 March 2011 Thu, 7 April 2011
Tue, 19 April 2011 Fri, 29 April 2011 Mon, 9 May 2011
Fri, 20 May 2011 Mon, 30 May 2011 Tue, 7 June 2011
Thu, 19 June 2011 Wed, 29 June 2011 Thu, 7 July 2011
Tue, 19 July 2011 Fri, 29 July 2011 Mon, 8 August 2011
APPENDIX A
Fri, 19 August 2011 Tue, 30 August 2011 Wed, 7 September 2011
Mon, 19 September 2011 Wed, 28 September 2011* Fri, 7 October 2011
Tues, 18 October 2011 Fri, 28 October 2011 Mon, 7 November 2011
Fri, 18 November 2011 Tue, 29 November 2011 Wed, 7 December 2011
* Due dates for agency payment advice forms (APAFs) brought forward due to public holidays or
weekends.
KEY POINTS:
1. Agencies must ensure that for National Partnership project payments where the achievement of
milestones is required, the relevant Commonwealth Minister (or delegate where allowed) has
approved the payment;
2. the APAF must be received by the required deadline, otherwise payment will be made in the
subsequent month;
3. the APAF must contain the correct payment details; and
4. the payment certification must be signed by an authorised certifier.
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Federal Financial Relations Circular 2011/01
Table 2 – Indicative General Revenue Assistance Payments Dates (21 st of Month)
Agency payment advice form
(APAF) distributed
APAF due back to Treasury Payment date
Fri, 28 January 2011 Fri, 11 February 2011 Mon, 21 February 2011
Fri, 25 February 2011 Thu, 10 March 2011* Mon, 21 March 2011
Fri, 25 March 2011 Wed, 13 April 2011 Thu, 21 April 2011
Fri, 29 April 2011 Fri, 13 May 2011 Mon, 23 May 2011
Fri, 27 May 2011 Fri, 10 June 2011* Tue, 21 June 2011
Thu, 30 June 2011 Wed, 13 July 2011 Thu, 21 July 2011
Fri, 29 July 2011 Fri, 12 August 2011 Mon, 22 August 2011
Fri, 26 August 2011 Tue, 13 September 2011 Wed, 21 September 2011
Fri, 30 September 2011 Thu, 13 October 2011 Fri, 21 October 2011
Fri, 28 October 2011 Fri, 11 November 2011 Mon, 21 November 2011
Fri, 25 November 2011 Tue, 13 December 2011 Wed, 21 December 2011
* Due dates for agency payment advice forms (APAFs) brought forward due to public holidays or
weekends.
KEY POINTS:
1. the APAF must be received by the required deadline, otherwise payment will be made on the
21 st day of the subsequent month;
2. the APAF must contain the correct payment details; and
3. the payment certification must be signed by an authorised certifier.
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ACCURACY AND CONTROLS
Federal Financial Relations Circular 2011/01
APPENDIX B
The following describes what is meant by accuracy and controls, which forms part of the APAF
certification process:
• Appropriate financial systems, internal controls, record keeping systems and approval
processes are established, maintained and reviewed regularly in the agency to reasonably
provide assurance of the completeness and accuracy of the financial payment details and
related information provided to Treasury.
• Payments are complete, accurate, and prepared in accordance and compliant with the relevant
current government financial and legal requirements, including but not limited to:
– Intergovernmental Agreement on Federal Financial Relations (and other written
agreements between the Commonwealth, States and Territories);
– the COAG Reform Fund Act 2008;
– the Financial Management and Accountability Act 1997 (and Regulations, particularly
Regulations 9 & 10);
– the Federal Financial Relations Act 2009;
– Federal Financial Relations Circulars; and
– Australian Accounting Standards.
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