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

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Commonwealth Resource Management Framework Introduction Commonwealth Resource Management Framework Legislative instruments Policy Entity internal controls reporting and evaluation planning objectives and strategies budgeting and operational planning implementing and monitoring PUBLIC RESOURCES accountability governance performance risk management appropriations procurement proper use commitments efficiency earned autonomy spending grants management property management transparency audit cooperation with others Appropriation acts PGPA Act Other legislation Constitution

What are public resources? Introduction What are public resources? Relevant property property owned or held by the Commonwealth or a corporate Commonwealth entity includes real property, personal property and 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

Part II: Use of public resources

Accountability and performance Section learning objectives Learning objective: understand key elements of governing an entity, e.g. proper use, achievement of purposes, and financial sustainability Learning objective: understand aspects of proper use, i.e. efficiency, effectiveness, economy and ethics Learning objective: understand components of the performance management framework, their source within the PGPA Act and their place in the resource management cycle — these include corporate plans, portfolio budget statements, annual reports and annual performance statements Learning objective: understand the outcomes and programmes framework

Accountability for use of public resources Accountability and performance 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 Learning objective: understand key elements of governing an entity, e.g. proper use, achievement of purposes, and financial sustainability Section 16

Entity internal controls Accountability and performance Entity internal controls may be in the form of: accountable authority instructions or operational guidelines address risks associated with using and managing public resources e.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 Learning objective: understand the definition of risk and risk management, and how it relates to an entity’s internal controls

Proper use of public resources Accountability and performance 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 Effective produces the desired result, i.e. entities’ purpose 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 Learning objective: understand aspects of proper use, i.e. efficiency, effectiveness, economy and ethics Must balance the 4 Es – one is not more important than the others

Purposes of an entity Will be: Accountability and performance 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 Learning objective: understand where to find the purpose of an entity

Outcomes and programmes Accountability and performance Outcomes and programmes Appropriation Act 1 Appropriation Act 2 Special Appropriations Appropriations What the government wants to achieve Outcome statement Learning objective: understand how the outcomes and programmes framework supports the purposes of an entity Programme Programme Programme Deliverables Reporting to parliament

Outcomes and programmes Accountability and performance Outcomes and programmes Appropriation Act 1 Appropriation Act 2 Special Appropriations Outcome statement Learning objective: understand how the outcomes and programmes framework supports the purposes of an entity Activities to achieve intended outcomes Programme Programme Programme Deliverables Monitoring and reporting outcomes Reporting to parliament

Framework for managing performance Accountability and performance 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 Learning objective: understand components of the performance management framework, their source within the PGPA Act and their place in the resource management cycle — these include corporate plans, portfolio budget statements, annual reports and annual performance statements Rules and guidance are in development

Components of the Performance Framework Accountability and performance Components of the Performance Framework Australian Government’s key priorities and objectives Annual reports Planning objectives and strategies Budgeting and operational planning Implementing and monitoring Reporting and evaluation KPIs Annual performance statements Corporate plans KPI monitoring Portfolio Budget Statements Learning objective: understand components of the performance management framework, their source within the PGPA Act and their place in the resource management cycle — these include corporate plans, portfolio budget statements, annual reports and annual performance statements Line of sight - planning , implementing and reporting

Role of performance information Accountability and performance 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 Learning objective: understand components of the performance management framework, their source within the PGPA Act and their place in the resource management cycle — these include corporate plans, portfolio budget statements, annual reports and annual performance statements

Activity: outcome statements Accountability and performance Activity: outcome statements Objective: review a concrete example of an outcome statement to help participants better understand the performance framework

Risk management Section learning objectives Learning objective: recall the definition of risk and risk management, and describe how it relates to an entity’s internal controls Learning objective: recall key elements of risk management within the PGPA Act, including the duty to establish and maintain systems of risk management and internal control Learning objective: list typical risks that entities may face and explain how they are managed Learning objective: outline the role and principles of the Commonwealth Risk Management Policy

Duty to manage risk and maintain controls Risk management Duty to manage risk and maintain controls Your accountable authority is required to establish and maintain appropriate systems of risk oversight and management and internal control Section 16 Legislative instruments Policy Entity internal controls reporting and evaluation planning objectives and strategies budgeting and operational planning implementing and monitoring PUBLIC RESOURCES accountability governance performance risk management appropriations procurement proper use commitments efficiency earned autonomy spending grants management property management transparency audit cooperation with others Appropriation acts PGPA Act Other legislation Constitution Learning objective: recall key elements of risk management within the PGPA Act, including the duty to establish and maintain systems of risk management and internal control

What is risk? The effect of uncertainty on objectives Risk management What is risk? 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 Learning objective: recall the definition of risk and risk management, and describe how it relates to an entity’s internal controls

What is 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 Learning objective: recall key elements of risk management within the PGPA Act, including the duty to establish and maintain systems of risk management and internal control

Commonwealth Risk Management Policy 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 Commonwealth entities encouraged to have regard to the policy and to align own risk frameworks Learning objective: outline the role and principles of the Commonwealth Risk Management Policy

Fundamental of 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 Learning objective: outline the role and principles of the Commonwealth Risk Management Policy

Strengthening risk management practices Establish a risk management policy Establish a risk management framework Define responsibility for managing risk Embed systematic risk management into business processes Develop a positive risk culture Communicate and consult about risk Understand and manage shared risk Maintain risk management capability Review and continuously improve the management of risk Learning objective: outline the role and principles of the Commonwealth Risk Management Policy

Activity: Use of credit cards Risk management Activity: Use of credit cards Learning objective: use case study of credit card use to help participants recognise the link between risks and internal controls — i.e. internal controls are in place to treat risks.

Spending relevant money Section learning objectives Learning objective: understand the definition of commitments and arrangements Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority Learning objective: understand when additional legislative authority may and may not be required Learning objective: understand the role and requirements for compliance reporting

Key concepts: commitments and arrangements Spending relevant money 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 Learning objective: understand the definition of commitments and arrangements

Key concepts: committing relevant money Spending relevant money 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. Learning objective: the key things officials should consider before committing relevant money

Before committing relevant money Spending relevant money Before committing relevant money Consider your duties as an official To 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 money e.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 gain an advantage or cause detriment Section 25 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority Section 26 Sections 27-28

Before committing relevant money Spending relevant money Before committing relevant money 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 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority Section 23

Before committing relevant money Spending relevant money Before committing relevant money 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 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority

Before committing relevant money Spending relevant money Before committing relevant money Consider the operating environment and internal controls 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 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority

Before committing relevant money Spending relevant money Before committing relevant money 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 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority

Procurements and grants Spending relevant money 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 similar information on Commonwealth grants Learning objective: understand what the importance of procurement and grants to Government programmes

What is a procurement? A procurement is: Not a procurement: Spending relevant money 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 Learning objective: understand what constitutes a procurement

What is a grant? A grant is: Not a grant: Spending relevant money 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 Learning objective: understand what constitutes a grant

Procurement and grant rules Spending relevant money 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 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority

Commonwealth Procurement Rules Spending relevant money 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 Learning objective: understand the value for money principle for Commonwealth procurement and how it is achieved

Government procurement policies Spending relevant money 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 Learning objective: understand types of whole-of-government arrangements

Commonwealth Grant Rules and Guidelines Spending relevant money 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 Learning objective: How the CGRGs apply to grants administration

Commonwealth Grant Rules and Guidelines Spending relevant money Commonwealth Grant Rules and Guidelines 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 Learning objective: How the CGRGs apply to grants administration

Commonwealth Grant Rules and Guidelines Spending relevant money Commonwealth Grant Rules and Guidelines 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 Learning objective: understand what constitutes a grant

Before committing relevant money Spending relevant money Before committing relevant money 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 Reporting to parliament Special Appropriations Outcome statement Programme Deliverables Appropriation Act 2 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority

Before committing relevant money Spending relevant money Before committing relevant money 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 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority

Spending relevant money 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 Learning objective: understand what to consider before spending relevant money, i.e. applicable rules and guidance, internal controls, delegated authority, consistency with purposes, sufficient appropriation and legislative authority

Activity: spending proposal Spending relevant money Activity: spending proposal Objective: walk participants through the six spending considerations with a sample proposal

Managing relevant property Learning objective: understand the responsibilities in relation to managing relevant property

Types of relevant property Managing relevant property 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 Learning objective: understand the different types of relevant property Commonwealth entities use or manage

Commonwealth Property Management Framework Managing relevant property 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 Learning objective: understand when to apply the Commonwealth Property Management Framework, i.e. applies to non-corporate Commonwealth entities for leasing, building, owning, and disposing

Entering leases risk based framework Managing relevant property Entering leases risk based framework e.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 Learning objective: understand when to apply the Commonwealth Property Management Framework, i.e. applies to non-corporate Commonwealth entities for leasing, building, owning, and disposing

Compliance reporting compliance report Learning objective: understand the role and requirements for compliance reporting

What is being certified? Compliance reporting What is being certified? compliance report 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  Learning objective: understand the role and requirements for compliance reporting

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 Learning objective: understand the role and requirements for compliance reporting further compliance reporting guidance is in development

Wrap up

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Further information Department of Finance Australian Government Budget 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