1 Part II: Use of Public Resources Resource Management and Budget Training November 2014

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Part II: Use of Public Resources

Resource Management and Budget TrainingNovember 2014

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Resource Management and Budget Training — Part II

Contact and acknowledgement information

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Commonwealth Resource Management Framework

Introduction

Legislative instruments Policy

Entity internal controls

reporting and evaluation

planning objectives and strategies

budgeting and operational planning

implementing and monitoring

PUBLIC RESOURCES

accountabilitygovernance

performancerisk management

appropriations

procurement

proper use

commitments

efficiency

earned autonomy

spendinggrants management

property management transparencyaudit

cooperation with others

Appropriationacts

PGPA Act Otherlegislation

Constitution

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What are public resources?

Introduction

Relevant property • property owned or held by the

Commonwealth or a corporate Commonwealth entity

• includes real property, personal propertyand intellectual property

Relevant money• money held as cash or in a bank account

by the Commonwealth or a corporate Commonwealth entity

Appropriations• authority to draw money from

the Consolidated Revenue Fund

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• Commonwealth Resource Management Framework

• The Australian system of government

• Appropriations• The PGPA Act• Rules, policy and guidance• Other legislation

Part I: The Resource Management Framework

Part II: Use of public resources

Part III: The Budget process

• The Budget Framework• Planning and budgeting• Implementing and monitoring

• Reporting and evaluation

• Accountability and performance

• Risk management• Spending relevant money• Managing relevant property• Compliance reporting


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Accountability and performance

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Accountability for use of public resources


Your accountable authority is required to govern your entity in a way that promotes:

• proper use and management of public resources • the achievement of the purposes of your entity• the financial sustainability of your entity

Your accountable authority will establish internal controls to ensure these things occur and that officials comply with the finance law

Section

15

Section

16

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• may be in the form of: accountable authority instructions or operational guidelines

• address risks associated with using and managing public resourcese.g. abuse, error, mismanagement, fraud

• align closely with internal financial delegations and authorisations

• provide clear instructions on the internal requirements, policies and rules that officials must consider and comply with

Accountable Authority Instructions

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Proper use of public resources


Efficient• most suitable resources being used

to deliver the best results• e.g. consider unit costs or other ways

of achieving the particular purposes and objectives

Economical• avoids waste• focus on level of resources applied to

deliver results• generally the best cost option to

deliver the expected results

Ethical• consistent with the core beliefs and

values of society• manages conflicts of interest and

personal bias

Effective• produces the desired result,

i.e. entities’ purpose and objectives

Must balance the 4 Es – one is not more important than the others

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Purposes of an entity


Will be:• for a statutory entity, generally the entity’s statutory objectives

and functions• for many non statutory entities (e.g. departments) will align ‑

with the Administrative Arrangements Order• for all entities, the corporate plan will be required to reflect the

purposes of the entity

For appropriation and budgetary purposes entities will establish outcomes and programmes to facilitate the achievement of their purposes

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Outcomes and programmes


Appropriation Act 1

Reporting to parliament

Special Appropriations

Outcome statement

Programme Programme Programme

Deliverables

Appropriation Act 2Appropriations

What the government wants to achieve

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Outcomes and programmes


Appropriation Act 1



Outcome statement


Deliverables

Appropriation Act 2

Activities to achieve intended outcomes

Monitoring and reporting outcomes

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Framework for managing performance


The PGPA Act sets the framework for managing performance in a sustainable way, entities must:

• prepare corporate plans • prepare budget estimates• keep performance records• measure and assess performance • prepare annual performance statements

– included in annual reports.

Enhancements are currently being made to the Commonwealth Performance Framework for 2015-16.

Sections

35-39

Rules and guidance are in development

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Components of the Performance Framework


KPIs

Corporate plans

Portfolio Budget

Statements

KPImonitoring

Annual reports

Annual performance statements

Line of sight - planning , implementing and reporting

Planning objectives

and strategies

Budgeting and

operational planning

Implementing and

monitoring

Reporting and

evaluation

Australian Government’s key priorities and objectives

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Role of performance information


Monitoring, reporting and evaluating performance information helps to:

• support government decision-making in planning and allocating resources across competing priorities

• contribute to whole-of-government programme and service delivery improvements

• improve the effectiveness and efficiency of government programs

• provide early warning about emerging problems

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Activity: outcome statements


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Risk management

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Duty to manage risk and maintain controls

Risk management

Your accountable authority is required to establish and maintain appropriate systems of risk oversight and management and internal control

Section

16

Legislative instruments Policy


reporting and evaluation

planning objectives and strategies

budgeting and operational planning

implementing and monitoring

PUBLIC RESOURCES

accountabilitygovernance

performancerisk management

appropriations

procurement

proper use

commitments

efficiency

earned autonomy

spendinggrants management

property management transparencyaudit

cooperation with others

Appropriationacts

PGPA Act Otherlegislation

Constitution

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What is risk?

Risk management

• The effect of uncertainty on objectives

• Includes an effect is a deviation from the expected either positive or negative. Risk is often expressed in terms of a combination of the consequences of an event (including changes in circumstances or knowledge) and the associated likelihood of occurrence

Commonwealth Risk Management Policy

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What is risk management?

Risk management

• coordinated activities to direct and control an organisation with regard to risk

• based on sound judgement and best information available

• should inform all financial decisions

Establish the context

Risk assessment Identify the risks

Analyse the risks

Evaluate the risks

Treat the risks

Communicate and consult

Monitor and review

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Commonwealth Risk Management Policy

Risk management

• principles based• sets out risk management attributes for

entities to meet government expectations• non-corporate Commonwealth entities

required to have regard to the policy and to align own risk frameworks

• corporate Commonwealthentities encouraged to haveregard to the policy and to align own risk frameworks

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Fundamental of risk management

Risk management

• structured and linked to the strategic business objectives set out in an entity’s corporate plan

• an integral part of the entity’s overarching governance, financial, assurance and compliance frameworks

• tailored to the entity’s needs and proportionate to its risks

• dynamic with a focus on continual improvement and maintaining better practice

• managed transparently with the accountable authority:• accountable for the entity’s risks• responsible for risk being managed by those

best able to control the risks

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Strengthening risk management practices

Risk management

1. Establish a risk management policy

2. Establish a risk management framework

3. Define responsibility for managing risk

4. Embed systematic risk management into business processes

5. Develop a positive risk culture

6. Communicate and consult about risk

7. Understand and manage shared risk

8. Maintain risk management capability

9. Review and continuously improve the management of risk

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Activity: Use of credit cards

Risk management

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Spending relevant money

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Key concepts:commitments and arrangements


Commitments include: • undertaking an activity or entering an arrangement

that results in an obligation to pay relevant money

Arrangements include:• contracts, agreements, deeds or understandings• MOUs, standing offers and grant agreements• commitments with a contingent liability

• may give rise to a cost as a result of a future event

e.g. indemnities, guarantees or warranties containing a contingent liability

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Key concepts:committing relevant money


Consideration before committing relevant money:

• your general duties as officials

• who has authority to commit the money

• the internal controls in your entity

• the rules or policies that may apply, in particular whether the commitment will be a procurement or a grant

• whether the commitment is consistent with the purposes of your entity

• what records must be kept.

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Before committing relevant money


Consider your duties as an officialTo commit relevant money officials must:

• exercise care and diligence e.g. have you taken reasonable steps, given the nature,

significance, value and context of the proposed commitment?

• act honestly, in good faith and for proper purpose when using relevant moneye.g. is the proposed commitment:

• consistent with finance law?• consistent with the aims and operations of your entity?

• not use your position or information to gainan advantage or cause detriment

Section

26

Section

25

Sections

27-28

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Determine who has authority to commit relevant money:• accountable authorities have authority to:

approve commitments of relevant money enter into, vary and administer arrangements relating to the

affairs of your entity, on behalf of the Commonwealth or their entity.

• the authority comes from: for non-corporate Commonwealth — PGPA Act

— other legislation for corporate Commonwealth entities — the enabling

legislation and/or the separate legal personality of the entity

Section

23

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Officials can be delegated or authorised to commit relevant money:

• for non-corporate Commonwealth entities – accountable authorities can delegate (or authorise)the power to approve a commitment of relevant money under s23(3) of the PGPA Act

• for corporate Commonwealth entities s23(3) of the PGPA Act is not applicable – officials can be authorised to commit relevant money on behalf of the entity.

Officials who are authorised or delegated the power in s23 of the PGPA Act, must comply with:

• s18 of the PGPA Rule and• directions or instructions from your accountable authority

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Consider the operating environment and internalcontrols in your entity

e.g. Accountable Authority Instructions or operational guidelines

Internal controls should:• provide instructions on the internal requirements and well as any

other rules or policies that may apply

e.g. whether the proposed commitment will be a proper use of money, i.e. balance whether the proposal will be efficient, effective, economical and ethical (not just focus on one of these elements to the exclusion of others)

• address the risks associated with the use of relevant money

• clarify any other requirements that apply

Accountable Authority Instructions

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Consider the type of financial arrangement and the other requirements the may apply?

For example are you:• purchasing goods and services for the

Commonwealth (procurement)

• providing financial assistance to non-government individuals or organisations to achieve government policy objectives (grants)

• making discretionary payments (e.g. act of grace)

• making some other form of payment

Rules

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Procurements and grants


Every year the Commonwealth spends:• around $40 billion by procurements• around $30 billion by grants

Procurement statistics from AusTender (for 2012-13):• Around 67,854 contracts (over $10k) reported• Approx 11,460 suppliers• Over 70% of contracts are below $80k (but

over 95% of contact value is over $80k) • Small medium enterprise represent 55% by

volume and 32% by value

Grants.gov.au is being established to collect similarinformation on Commonwealth grants

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What is a procurement?

A procurement is:• the Commonwealth purchasing goods and/or services that assist

the Commonwealth in achieving its own goals• the whole process of procuring goods and/or services

Not a procurement:• a grant• an investment• a sale by tender• a loan• a statutory/ministerial appointment• employee engagement

Some Government policies apply to procurements


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What is a grant?

A grant is:• an arrangement for provision of financial assistance • by the Commonwealth or on behalf of the Commonwealth• relevant money or other CRF money to be paid• intended to assist recipient to achieve goals• intended to help address policy objectives• may have terms or conditions for recipient

Not a grant:• a procurement• an act of grace of payment or

compensation payment • an investment • an employee engagement


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Procurement and grant rules


Two main types of spending are regulated by rules made under the PGPA Act:

• Commonwealth Procurement Rules (CPRs)

• Commonwealth Grant Rules and Guidelines (CGRGs)

Some Government policies also apply to procurement

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Commonwealth Procurement Rules

• supports the government’s social and economic policies

• core principle is value for money achieved by: encouraging competition proper use of public resources accountability and transparency

• incorporates Australia's international obligations


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Government procurement policies

Apply to non-corporate Commonwealth entities, e.g:• Public Private Partnership principles• Legal Services Directions• Protective Security Policy Framework • Whole-of-government procurement arrangements:

ICT procurement motor vehicle leasing and travel service office machines, stationery and office supplies government advertising training and professional development

• Commonwealth Fraud Control Guidelines


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Commonwealth Grant Rules and Guidelines

Part 1 outlines the mandatory requirements • establish and document whether a proposed activity

is a grant• have regard to the seven key principles for grants administration• develop grant guidelines for all new (or significantly changed)

granting activities• advise your minister on requirements of the PGPA Act and

CGRGs• record, in writing, the basis for a decision to award a grant• provide written advice to your minister, where they exercise the

role of an approver• report individual grants awarded on your website


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Part 2 sets seven grants administration principles officials should apply to ensure:

• robust planning and design• collaboration and partnership with stakeholders• proportionality by balancing:

the complexity of the grant activity requirements of the grant recipient risks for beneficiaries and the Commonwealth

• the most efficient and effective use of inputs to achieve outcomes for beneficiaries

• value with relevant money• governance and accountability for all parties• probity and transparency


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Grants administration involves:• planning and design• selection and decision-making• making of a grant• management of grant agreements• ongoing relationship with grants recipients• reporting, review and evaluation


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Consider whether proposed spending consistent with the purposes of your entity?

• what outcome is your entity is seeking to achieve?

• how will you measure whether the proposed spending is meeting those outcomes?

Appropriation Act 1



Outcome statement


Deliverables

Appropriation Act 2

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Record approvals• An approval to commit relevant money must be

recorded (in writing or electronically)

• The particulars of the approval will depend on the scope of the commitment

• Your entity’s internal controls should clarify the record you are required to keep depending on the item, costs, parties, timeframes and risk associated with the proposal

PGPA Rule

18

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Recording approvals


Ministers can approve certain commitments (e.g. grants)

If you assist a Minister to consider and approve a commitment you must advise the Minister on:

• the proposed arrangement• the requirements of the PGPA Act and relevant rules (e.g. CGRGs)• any selection process

This is so your Minister:• can be satisfied the proposal is a proper use of the money• approve any grants are consistent with the rules

Must keep a record of the approval

Section

71

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Activity: spending proposal


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Managing relevant property

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Types of relevant property


Real property:• land • buildings or objects fixed to that land

Personal property:• all other (movable) property, eg. equipment, vehicles

Intellectual property:• rights to creations of the mind, e.g. the coat of arms

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Commonwealth Property Management Framework

Covers leasing, building, owning and disposing

Combination of legislation, policy and guidance

Applies to non-corporate entities

Principles:• value for money• property management planning• efficient and effective design• appropriate accountability measures• cooperative Commonwealth property

management measures


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Entering leases

• risk based frameworke.g. accountable authorities delegated power to grant indemnities

where: risk is remote (less than 5%) and expenditure would not be significant (less than $30m)

• entities must consider whether proposed lease will be a proper use of public resources

• must comply with government policies e.g. Finance Secretary Lease Endorsement process


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Compliance reporting

compliancereport

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What is being certified?


Based on the entity’s internal control mechanisms, management, and audit committee advice, the accountable authority is required to certify that the entity has complied with:

• PGPA Act• PGPA rules• appropriate delegations

compliancereport

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Purpose of compliance reporting


• improve compliance with the PGPA framework• keep ministers informed of compliance issues within

their portfolios• assist entities to address issues with internal controls• assist Finance to identify issues with the resource

management framework• assist the evaluation of the PGPA Framework required

by the PGPA Act

further compliance reporting guidance is in development

compliancereport

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Wrap up

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Questions and feedback

Wrap up

? Excellent Very good Good Average Poor

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Further information

Department of Finance• finance.gov.au

Australian Government Budget• budget.gov.au

Public management reform• pmra.finance.gov.au

Resource Management and Budget training• finance.gov.au/resource-management/training

http://www.finance.gov.au/

http://budget.gov.au/

http://www.pmra.finance.gov.au/

http://www.finance.gov.au/financial-framework/training/fmb-program.html

Documents

1 Part II: Use of Public Resources Resource Management and Budget Training November 2014