Banking and Management of CRF money (RMG 413)

All non-corporate Commonwealth entities (NCEs) and corporate Commonwealth entities (CCEs) undertake transactional banking using a range of banking services and payment methods to transact their ordinary business.

Corporate Commonwealth entities are able, in their own name, to hold money and enter into an agreement with a bank.

Non-corporate Commonwealth entities 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.

Such accounts must not be operated for primarily earning interest or investment returns.

Under certain situations, non-corporate Commonwealth entities’ may enter into an arrangement with a person, who is not an non-corporate entity 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’.

Under section 53 of the Public Governance, Performance and Accountability Act 2013 (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).

The primary central bank account of the Australian Government is the Official Public Account (OPA) – part of a set of bank accounts called the Official Public Account Group.

The PGPA Act requires non-corporate Commonwealth entity bank accounts in Australia to be opened and maintained with the RBA or an authorised deposit-taking institution (ADI) under section 53. The Public Governance, Performance and Accountability (Finance Minister to Accountable Authorities of non-Corporate Commonwealth Entities) Delegation (Finance Minister's Delegations) delegates authority, under section 53 of the PGPA Act, to the accountable authority of each non-corporate Commonwealth entity.

The delegation can be found on the PGPA legislation, associated instruments and policies page under Tools and templates in the right-hand menu

Section 54 of the PGPA Act states that the rules may prescribe matters relating to banking by CCEs. Section 18A of the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) sets out the requirements for CSC with regards to banking in Australia. The rules do not currently prescribe banking requirements for any other 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. ‘Relevant money’ is money that is standing to the credit of any bank account of the Commonwealth or a corporate Commonwealth entity, or money that is held by the Commonwealth or a corporate Commonwealth entity, under section 8 of the PGPA Act. 

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.

Section 81 and section 83 of the Constitution specify that:

• 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.

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

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 non-corporate Commonwealth entities to make payments for the specified purposes on behalf of the government and to pay for their own operating expenses.

Records of appropriations and money collected by the non-corporate Commonwealth entity are maintained in the CBMS, by the relevant non-corporate Commonwealth entity and Finance.

Central Banking

Under subsection 53(3) of the PGPA Act, the Commonwealth’s central bank account must be maintained with the RBA.

Central banking includes managing the daily consolidation of Australian Government cash in the OPA and transferring cash from the OPA to entity bank accounts.

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 Cash Management

Central cash management involves the overnight consolidation and investment of whole of government bank account balances, including the bank account balances of all NCEs and specific CCEs. Through this process, government funds are brought together (that is, consolidated) each night in the OPA Group, which includes the OPA (central bank account).

Under the Finance Minister’s Delegations, agreements must provide for processes to be in place to allow Commonwealth cash held in Australia to be consolidated each day within the Official Public Account held with the Reserve Bank of Australia. This includes compliance with sweeping, transfer and reporting requirements as set out in the Commonwealth Banking Protocols - Core Requirements.

The below figure illustrates the cash flow connectivity between NCE bank accounts, the OPA, the central bank (that is, the RBA) and the AOFM.

Central cash management roles

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 
• Finance transfers amounts from the OPA at the request of entities (and in compliance with the Appropriation Acts) 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.

All entities manage cash to make payments and receipt cash they receive. Bank accounts are used to manage payments and receipts.

Interbank cash transfers

The RBA maintains the OPA and also:

• holds Exchange Settlement Accounts (ESA) for ADIs
• owns and operates the Reserve Bank Information and Transfer System (RITS) through which transactions across ESAs occur.

When an entity maintains a bank account with another ADI (that is, 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.

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

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.

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.

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.

A banking day is a day that the bank is open for business (that is, 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.

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.

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.

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 with the instructions issued by the entity’s accountable authority.

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.

Sometimes the most effective and efficient way for a non-corporate Commonwealth entity 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.

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’.