You're responsible for directing and monitoring your entity's financial performance and complying with the law.
To do this, you must understand Victoria's financial management framework.
The framework is a range of laws that require your entity to:
Your board must ensure your entity’s structure, management and operations work together to comply with the framework.
Your entity is accountable to your Minister for its financial management and reporting.
Under the Constitution Act 1975, Parliament may enact laws authorising the government to impose taxes and receive and spend money.
Some state entities (such as schools) get most or all their funding from government.
Other entities (such as water authorities) charge for goods or services, then hold and spend the money they raise or pay dividends back to government.
In addition to the Constitution Act 1975, there are 3 main Victorian laws that underpin financial management:
There are also specific laws that apply to a particular entity or class of entities. These may provide powers or impose responsibilities that vary from those set out in the 3 main laws.
Your board must ensure your entity complies with these laws in all relevant cases.
Commonwealth law may also apply to your entity, such as:
In some cases, Commonwealth law may override a state law that would otherwise apply. In other cases, both Commonwealth and state law can apply simultaneously.
The Australian Constitution says that if there is an inconsistency between applicable Commonwealth and state laws, Commonwealth law prevails.
It’s the responsibility of your board and entity management to identify and ensure compliance with all State and Commonwealth laws that apply to your entity.
The FMA and its subordinate legislation are the foundation of Victoria’s financial management framework.
The FMA governs budget processes and sets out many entities’ obligations for:
The Department of Treasury and Finance (DTF) administers the FMA. It supports the Treasurer and Assistant Treasurer to account to Parliament for:
State-controlled companies formed under the Corporations Act 2001 (Commonwealth) may not be subject to the FMA.
But even if not subject to the FMA, the Corporations Act 2001 (Commonwealth) still requires these companies to report annually and imposes other financial governance and management obligations.
Your entity is also likely to be required to comply with subordinate legislation under the FMA:
The main subordinate legislation your board may need to know about and comply with are the:
The Standing Directions may also require your entity to apply other financial management frameworks and policies.
These include:
| The asset is | Which supports entities to |
|---|---|
| Asset Management Accountability Framework | Develop strategies, standards and processes to manage their assets. |
| Victorian Government Risk Management Framework | Meet minimum requirements for managing risk. |
| Ministerial Directions and Instructions for public construction procurement | Procure public construction works and services including meeting tendering, probity and contracting requirements. |
| The Victorian Government Purchasing Board’s procurement policies | Govern the procurement of most goods and services. |
| Pricing for value guide | Know what fees to charge for their services. |
| Investment principles for discretionary grants | Develop or re-shape discretionary grant programs. |
| Sponsorship policy | Guide them on providing and receiving commercial sponsorships. |
| Gifts, benefits and hospitality policy | Advise them on what to do when they give or receive gifts, benefits or hospitality. |
All revenue collected by the Victorian executive government is paid into the Consolidated Fund, set up under the Constitution Act 1975 and the Financial Management Act 1994.
However, the law authorises some money to remain outside the Consolidated Fund, such as revenue raised by entities that have their own powers under law to collect, retain and spend money. For example, water corporations.
An Appropriation Act authorises money to be drawn for a specific purpose from the Consolidated Fund.
Appropriation Acts authorise the Treasurer to fund departments and some entities, such as Court Services Victoria and IBAC.
Some entities are funded through a department’s appropriation instead of the entity having its own separate appropriation under an Act.
If your department funds your organisation, your board and management will need to work with them on your budget and performance management processes.
This Act provides authority for the Victorian Auditor-General to:
The Auditor-General is also authorised by the Corporations Act 2001 (Commonwealth) to be an auditor for companies formed under that Act. For example, state-owned companies.
This Act sets standards for good governance in the Victorian public sector.
It requires entities to provide financial and non-financial information to ministers or the Premier upon request (the FMA also includes similar powers).
The Borrowing and Investment Powers Act 1987 gives some entities the power to:
You need adequate financial literacy to:
Strong financial governance and scrutiny in the public sector supports the efficient use of public resources.
It promotes well-informed, strategic decision-making and protects against corruption.
Your board must establish and maintain effective financial governance for your entity. To do this, your board must:
You must also oversee other financial governance matters for which the CEO is responsible, such as:
To support your board in its oversight and assurance role you must set up:
The audit committee is normally a sub-committee of your board. Members must have appropriate skills and experience. It may include external expertise.
Its role is to support your board to review your entity’s:
The audit committee also:
Read more about audit committee governance.
Your board must set up and maintain an internal audit function to provide assurance to your audit committee and board.
Its role is to ensure that your entity addresses any risks that would prevent the entity meeting its objectives.
The internal audit function also identifies areas where your entity can improve its efficiency and performance.
To maintain its independence, the internal audit function needs to functionally report on audit activities to your board’s audit committee
The internal audit function can have:
Your board must ensure the function:
The internal audit function must prepare, maintain and implement:
The audit plan and work program must audit anything at risk from fraud, corruption and loss.
The internal audit function must work with:
For the audit committee, the function must give them a report on how effective and efficient your entity’s financial, reporting and internal systems and processes are.
For your portfolio department secretary, the function must assist them to improve how your entity manages financial risk.
Your entity’s 3 financial governance positions are:
Your portfolio department and the Department of Treasury and Finance have supporting roles.
The Standing Directions require your board to ensure that your entity meets its objectives in a financially efficient way.
Your board must:
Your CEO’s responsibilities are to:
An internal control system sets all the processes and rules to ensure that resources are properly managed and recorded.
This is different to the internal audit function which tests those controls and checks to ensure they are effective.
The CEO must assure your board on the integrity of your entity’s:
They must also confirm your entity complies with attestation requirements in your annual report and any laws and standards.
Your CFO’s responsibilities are to:
The CFO must assure your board’s audit committee and the CEO that reports on your entity’s financial position and operating results:
They also make sure your entity has effective systems and controls for financial management, performance and sustainability.
Your portfolio department’s responsibilities are to:
Your portfolio department can’t direct or control your entity on its performance or statutory functions.
Your portfolio department secretary and your CFO must provide information to each another.
This helps your portfolio department to support and monitor your entity.
DTF’s responsibilities are to:
DTF does this by:
Your board should ensure your entity acts in a way that is accountable and transparent.
You need to ensure your entity upholds high standards for how it reports on:
This demonstrates that public resources are being used properly and effectively.
Each year your entity must assess and attest it complies with all relevant requirements in:
Your entity must also disclose any areas it hasn’t complied with. Any material compliance deficiencies must be disclosed publicly in your entity’s annual report.
Your entity must give your portfolio department a compliance report in September.
It sets out what your entity has or hasn’t complied with and any related risks.
Your portfolio department must give DTF a compliance summary in October.
It sums up what the department and its entities have or haven’t complied with.
DTF reports to the Assistant Treasurer in December about:
Your board’s internal audit function must do a detailed compliance review of all relevant requirements of the Standing Directions and FMA over the period listed in your internal audit plan.
At a minimum, this must occur over a 3-to-4-year period.
Your entity must prepare an annual report every year that complies with:
These laws say what your entity needs to report on for declarations, accounting treatments and disclosures.
The annual report comprises a report of operations and audited financial statements.
Your entity must publish its annual report on either its own public website or your portfolio department’s website. You should ensure that the annual report is timely and accurate, published in an accessible manner and easy to comprehend.
For most entities (those who have a 30 June financial year balance date), tabling of annual reports in Parliament normally occurs by 31 October or the first Parliamentary sitting date thereafter each year.
Your entity, CEO and Chief Financial Officer must give any financial-related information to:
This supports government decision-making, risk management and reporting.
The law also says your entity must give information to your portfolio department secretary if they need it.
This helps them advise the minister on whether your entity is fulfilling its responsibilities.