WHOLE-OF-GOVERNMENT FINANCIAL MANAGEMENT

Whole-of-Government Financial Reporting

Monthly accrual reporting has enabled Finance to undertake a more robust analysis of the long-term sustainability of Government finances. Monthly reporting establishes the nexus between Budget estimates and actual results, thus leading to better financial management across the Commonwealth.

Under the accrual budgeting framework, agencies are now responsible for their own estimates management. Finance is still required to ensure the integrity and accuracy of these estimates from a whole-of-government perspective. This year the Department streamlined and further developed quality assurance processes for estimates. It employed a greater level of scrutiny by using additional information, such as detailed asset and liability information in the balance sheet, which is available as part of the accrual budgeting process.

In early October 2000, the Government tabled in Parliament its 1999–2000 Consolidated Financial Statements prepared by Finance. This significant achievement compared favourably with Australian corporate practice, with the Commonwealth producing its final audited financial statements—the most extensive in the Southern Hemisphere—ahead of most major private organisations.

Finance is on schedule to meet its target of supplying a full set of audited Consolidated Financial Statements for the General Government Sector within 100 days of the end of the financial year.

DAYS TO COMPLETE COMMONWEALTH FINANCIAL STATEMENTS

Ownership Advice

The accrual budgeting and reporting framework has further enabled the Ownership Analysis Unit (OAU) to enhance Finance's ownership role over the past 12 months through improved oversight of liquidity management, financial performance and capital funding decisions.

Over the course of the year, the OAU provided advice to the Government on both the Capital-use Charge (CUC) and the Commonwealth Property Principles' hurdle rate. The review of the CUC found that its introduction has led to greater transparency on pricing decisions, with the Government now better able to compare the price of agency outputs with equivalent outputs produced both within the public sector and in the private sector.

The OAU has developed a number of financial performance benchmarks. These benchmarks have enabled Finance to compare the performance of agencies against their budgets, each other and the private sector.

Furthermore, to improve decision-making on capital funding proposals, the OAU has developed new guidance material. Agencies are now better informed on how to develop business cases for capital injections, and staff within Finance have improved tools with which to analyse these proposals.

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Shareholder Advice

The Commonwealth Shareholder Advisory Unit (CSAU) provides strategic advice to the Minister for Finance and Administration on the commercial performance of the Commonwealth's investment in the 13 Commonwealth Government Business Enterprises (GBEs) and the 15 non-GBE public trading and finance enterprises. The Commonwealth's diverse portfolio of businesses plays a vital role in sectors such as telecommunications, health care and transport infrastructure. The commercial success of these enterprises contributes to the Australian economy and provides significant returns to the Commonwealth.

During 2000–01, the CSAU continued to undertake strategic analysis of Commonwealth businesses and their industry sectors with a view to enhancing shareholder value. The CSAU provided the Minister with timely and focused commercial analysis of corporate plans, operational performance and significant investment proposals. Further to this, the CSAU also considered the fundamental structure of these businesses, ranging from dividend policy to capital structure.

As with any shareholder, the Commonwealth seeks to understand and manage risks arising from its investments. The CSAU proactively advised on such risks and their management. The CSAU continued to ensure that those enterprises formally designated as GBEs operate under a robust corporate governance framework, through ongoing review of the Commonwealth's GBE governance and accountability arrangements.

New Initiatives—Private Financing Unit

In the 2001–02 Budget, the Government announced the formation of a Private Financing Unit (PFU) within Finance.

The PFU will advise agencies on appropriate assessment procedures for handling private financing proposals, and provide expert advice to the Government on specific proposals. The Unit will also develop policies and methodologies and issue guidance materials to Commonwealth agencies. Its core focus will be on assessing the value for money arising from potential private financing proposals, compared to traditional best practice procurement solutions.

The PFU will provide a concentrated level of expertise and bring a whole-of-government perspective to potential proposals.

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Specialist Accounting Advice

As reported in the 1999-2000 Department of Finance and Administration Annual Report, Finance established an Accounting Centre of Excellence (ACE) in 1999.

The ACE clarified a number of important accounting issues during 2000–01, including reviewing the accounting treatment of transactions administered by agencies and authorities on behalf of Government. This led to significant changes in accounting disclosure requirements for administered items, providing for the disclosure of administered assets, liabilities, revenues and expenses as separate notes to the primary financial statements. This will result in a simplified and more relevant report on administered items in financial statements issued by Government agencies in 2001–02.

The 2001–02 PBS were prepared in a format consistent with draft 2001–02 Finance Minister's Orders (FMOs) prepared by the ACE. This will enhance the comparability of actual financial reporting for 2001–02 with the Budget estimates for that year. The Minister signed the FMOs on 24 May 2001. To provide agencies and authorities with as much lead time as possible, the FMOs were released earlier than in previous years.

The Minister issued a new FMO, drafted by the ACE, requiring that Commonwealth agencies whose staff move to other Commonwealth agencies or authorities make a payment to the gaining entity to cover the transferring employee's accrued annual and long service leave. This new arrangement will enhance the flexibility of staff movements, and ensure that the appropriate agency or authority meets accrued employee entitlement liabilities. These arrangements came into force on 1 July 2001.

The ACE also undertook a review of the fair value methodology for valuing non-current assets, leading to improvements to the Fair Value Standard issued by the Australian Accounting Standards Board.