Banking and Management of CRF money (RMG 413)

1. All NCEs and CCEs undertake transactional banking using a range of banking services and payment methods to transact their ordinary business.
2. CCEs are able, in their own name, to hold money and enter into an agreement with a bank. NCEs are able to:
   • manage cash for and on behalf of the Australian Government, in accordance with government policies and related requirements
   • maintain transactional bank accounts in Australia and, with specific approval from the Minister for Finance (Finance Minister), can maintain transactional bank accounts overseas.

3. Such accounts must not be operated for primarily earning interest or investment returns.
4. Under certain situations, NCE’s may enter into an arrangement with a person, who is not an NCE official or a minister, to use or manage Commonwealth money (by receiving, having custody of or spending money) as an agent of the Commonwealth. Money held by an agent, for and on behalf of the Commonwealth:
   • forms part of the CRF for the purposes of section 81 of the Constitution
   • is referred to, at section 105 of the PGPA Act, as ‘other CRF money’.

5. Under section 53 of the PGPA Act, the Finance Minister, on behalf of the Commonwealth:
   • may enter into an agreement with a bank to conduct Australian Government banking business including to open and maintain bank accounts
   • must open and maintain a central bank account with the Reserve Bank of Australia (RBA).

6. The primary central bank account of the Australian Government is the Official Public Account (OPA) – part of set of bank accounts called the Official Public Account Group.
7. Section 53 of the PGPA Act requires NCE bank accounts in Australia to be opened and maintained with the RBA or an authorised deposit-taking institution (ADI). The Public Governance, Performance and Accountability (Finance Minister to Accountable Authorities of Non-Corporate Commonwealth Entities) Delegation 2014 delegates authority, under section 53 of the PGPA Act, to the accountable authority of each NCE.
8. Under section 8 of the PGPA Act, ‘relevant money’ is money that is standing to the credit of any bank account of the Commonwealth or a corporate Commonwealth entity (CCE), or money that is held by the Commonwealth or a CCE. Under section 55 of the PGPA Act, ministers or entity officials are obligated to bank relevant money promptly and in accordance with any rules made under the section.
9. Sections 19-21 of the PGPA Rule support section 55 of the PGPA Act by specifying when relevant money must be banked, and when it is not required to be banked.

Appropriations and cash

10. Under the Constitution:
    • all revenues or moneys raised or received by the Commonwealth shall form one CRF, to be appropriated for the purposes of the Commonwealth, in the manner prescribed by the Constitution
    • no money is to be drawn from the CRF except under an appropriation made by law.

11. The CRF is a notional concept, established in section 81 of the Constitution, to represent all Commonwealth money.

12. Drawing money from the CRF without a valid appropriation in law would breach the Constitution. An appropriation is an entitlement in an Act for the government to spend money. When an appropriation is provided, it is:
    • expressed in terms of expenditure for specific purposes
    • managed by NCEs to make payments for the specified purposes on behalf of the government and to pay for their own operating expenses.

13. Records of appropriations and money collected by the NCE are maintained in the CBMS, by the relevant NCE and Finance. For more information, see RMG 100.

14. Under subsection 53(3) of the PGPA Act, the Commonwealth’s central bank account must be maintained with the RBA.
15. The RBA provides a facility to manage the OPA Group, the aggregate balance of which represents the government's daily cash position. Finance manages this facility on behalf of the Australian Government.
    • Central banking includes managing the daily consolidation of Australian Government cash in the OPA and transferring cash from the OPA to entity bank accounts. Figure 1 illustrates the cycle of money moving between the OPA and entity bank accounts.

Figure 1: The movement of money between the OPA and entity bank accounts

17. Transferring money in this way facilitates the consolidation of Commonwealth cash.

Central cash management roles

18. The following entities have central cash management roles:
    • The Australian Office of Financial Management (AOFM), in the Treasury portfolio, is responsible for ensuring the government’s cash needs are met and is required, by ministerial direction, to maintain a cash balance in the OPA Group. The AOFM achieves this by:
      • managing government debt and investment
      • issuing Treasury bonds and Treasury notes to fund the government’s cash needs
      • investing cash in short-term investments, such as RBA term deposits. 
         
    • Finance transfers amounts from the OPA at the request of entities to their transactional bank accounts, to meet their cash requirements. Finance also monitors the implementation of related government policies.
    • The RBA oversees the Australian payments system, which encompasses a wide variety of individual payment methods. These methods include electronic funds transfer between bank accounts, payment cards, cheques and high-value corporate payments.
19. All entities manage cash to make payments and receipt cash they receive. Bank accounts are used to manage payments and receipts.

Interbank cash transfers

20. The RBA maintains the OPA and also:
    • holds accounts for ADIs, called Exchange Settlement Accounts (ESA)
    • owns and operates the Reserve Bank Information and Transfer System (RITS) through which transactions across ESAs occur.
21. When an entity maintains a bank account with another ADI (ie other than with the RBA), a cash transfer between that ADI’s ESA and the RBA’s ESA is an interbank cash transfer. Interbank payment obligations in Australia are settled using RITS.
22. RITS payments are settled on a real-time gross settlement basis, with processing and settlement taking place in real time (continuously).

Central Budget Management System

23. The CBMS is used to manage the flow of financial information between Finance and entities to facilitate cash and appropriation management, the preparation of budget documentation and financial reporting.
24. Finance transfers money from the OPA to the entity’s bank account. For cash to be made available to an entity, the entity must submit a request in the CBMS for cash against a specific appropriation.

25. Under section 19 of the PGPA Rule, officials who receive bankable money are to deposit that money in a bank either by the next banking day or within the period prescribed in the accountable authority’s instructions. The discretion provided to accountable authorities under section 19 of the PGPA Rule allows them to take into account organisational or operational matters that may affect the prompt banking of money – also see When money is not required to be banked.
26. A banking day is a day that the bank is open for business (ie not on a weekend or public holiday in the place where the money is received). This accommodates locational issues such as:
    • entities operating in regional and remote areas of Australia or overseas
    • the differing dates of state, territory or regional public/bank holidays across Australia.

27. Section 20 of the PGPA Rule provides an exception to section 19 requirements, for the deposit of relevant money in a bank where an official receives money for carrying out an activity of the entity.

When money is not required to be banked

28. There are certain circumstances where money is not bankable, including where the:
    • entity’s bank will not be accept the money
    • accountable authority considers that it is not economically viable to bank the money.

29. Under section 21 of the PGPA Rule, if relevant money is not bankable it does not need to be banked, but it must be managed in accordance the instructions issued by the entity’s accountable authority.

30. If circumstances change so that the money no longer falls into the category of money that is not bankable, then the money becomes bankable and is subject to section 19 of the PGPA Rule.

31. Sometimes the most effective and efficient way for an NCE to achieve its purposes will be to enter into an arrangement with a person outside the Commonwealth to use or manage money that belongs to the Commonwealth, for and on behalf of the Commonwealth. In this situation, the person acts as an agent of the Commonwealth and they are not directly subject to the PGPA Act or PGPA Rule.
32. An agent receives and holds money that belongs to the Commonwealth, generally for short periods of time, before remitting that money to the Commonwealth. Money held by an agent, for and on behalf of the Commonwealth:
    • forms part of the CRF for the purposes of section 81 of the Constitution
    • is referred to, at section 105 of the PGPA Act, as ‘other CRF money’.

Other CRF money is not ‘relevant money’

33. Other CRF money occurs when a person who is not an official of an NCE or a minister, uses or manages Commonwealth money (by receiving, having custody of or spending money) as an agent of the Commonwealth.
34. Under the PGPA Act, other CRF money is money that forms part of the CRF, other than ‘relevant money’ or any other money of a kind prescribed by section 29A of the PGPA Rule (section 105 of the PGPA Act). PGPA Act and PGPA Rule requirements that apply to relevant money do not apply to other CRF money.
35. The requirements relating to an agent’s management of other CRF money are principally addressed through the NCE’s contractual arrangement, which must address the requirements detailed at section 29 of the PGPA Rule.

36. Money paid to another person so that it ‘belongs to’ that person (eg wages, salaries, superannuation contributions or payments to suppliers in consideration for goods and/or services) is not other CRF money. Such payments are to people or organisations that are not acting as an agent of the Commonwealth with respect to the money.

Establishing other CRF arrangements

37. The PGPA Act provides a mechanism for an NCE to engage a person or organisation outside of the Commonwealth (an agent) to use or manage money belonging to the Commonwealth on behalf of the Commonwealth (section 105 of the PGPA Act and section 29 of the PGPA Rule).
38. Under section 29 of the PGPA Rule, the accountable authority of an NCE is to ensure that any arrangement entered into, that relates to the use or management of other CRF money, must:
    • promote the proper use and management of the other CRF money
    • be in writing, for the purposes of accountability and transparency, and to minimise risks
    • be banked as soon as is practicable after receipt
    • require the agent of the Commonwealth to keep proper records in relation to other CRF money in such a form that will allow them to be conveniently and properly audited – the Commonwealth and the Commonwealth Auditor-General will typically be given right of access to all records, there may also be freedom of information requests
    • require any interest earned on the money to be remitted in full to the Commonwealth, based on the best cash outcome for the Commonwealth, balanced against any risks including a requirement about the timing and frequency of any remittance of the other CRF money to the Commonwealth – encouraging other CRF money to remain in an external bank account for the shortest reasonable period of time
    • include requirements for payment of other CRF money to a third party (eg to a grant recipient), setting out the timing and frequency of those payments.

When to establish other CRF money arrangements

39. An official who has the power to enter into other CRF money arrangements must:
    • exercise that power with the degree of care and diligence that a reasonable person would exercise in the same position (section 25 of the PGPA Act)
    • act honestly, in good faith and for a proper purpose (section 26 of the PGPA Act).

40. This means that NCE officials are to be aware of and comply with the directions or instructions of their accountable authority, including to promote the proper use and management (ie efficient, effective, economical and ethical) of other CRF money by persons outside the Commonwealth.
41. Under the PGPA Act and PGPA Rule, other CRF money arrangements cannot be used to ‘outsource’ entity obligations to a third party (eg an NCE’s obligations to report on procurements or grants). Section 29 of the PGPA Rule establishes the minimum requirements (for control, accountability and transparency) that must be included in all other CRF money arrangements.

Prior considerations for other CRF money arrangements

42. Careful consideration by NCE officials is required before entering into an arrangement that would generate other CRF money, including:

Table 1: Checklist - considerations for other CRF money arrangements

43. The examples below show the key issues to be consider before establishing other CRF money arrangements for a grants program or for the ordinary services of government.

Appropriations applicable to other CRF arrangements

44. The collection and expenditure of other CRF money will need to be credited and debited to an existing appropriation. It is important that an entity is able to accurately identify which appropriation will support an other CRF arrangement.
45. For cases where no appropriation exists, section 105(3) of the PGPA Act provides a special appropriation for the expenditure of other CRF money. However, this is a very limited appropriation which is only available if:

• the expenditure is in accordance with any requirements prescribed by the PGPA Rules
• the Finance Minister is satisfied that the expenditure is not authorised by another appropriation. The Finance Minister has not delegated this power.

46. The examples below demonstrate the applicable appropriations to support other CRF money arrangements for the sale of Commonwealth property by an agent, and for payments by an agent.

Legal authority for other CRF money arrangements

47. The power for the accountable authority of an NCE to enter into, vary or administer an arrangement generally comes from legislation:
    • section 23(1) of the PGPA Act
    • section 32B of the FF(SP) Act, or
    • other specific legislation.

48. The accountable authority can delegate power to enter into arrangements to an NCE official and may or may not include directions in that delegation. Officials must not enter into, vary or administer any arrangements unless they are authorised to do so.
49. For further information on entering into, varying or administering an arrangement, see RMG 400.