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13/05/2026

Part 2 – Investment Governance, Funding & Financing

Choosing an investment instrument and delivery vehicle

When developing investment proposals, Commonwealth entities should consider all viable investment instruments and delivery vehicle options.

  • Investment Instrument - Particular investment used to finance (or support) the upfront costs of the investment (for example, a loan, equity investment, or a guarantee).
     
  • Delivery Vehicle - Particular management and governance structures used to deliver Government investments. Some examples of a delivery vehicle include:
    1. Government Business Enterprises (for example, NBN)
    2. Specialist Investment Vehicles (for example, the Clean Energy Finance Corporation)
    3. Investment fund (for example, the Future Fund)
    4. Partnership with the Private Sector (for example, the Public Private Partnership that was setup to build Defence’s Joint Headquarters) or State and Territory Government.

The assessment of options should be supported by an explanation of the costs, benefits and risks (including legal risks) for the Government’s consideration. This should consider:

  1. alignment with Government policy objectives
  2. the level and type of control the Government may wish to utilise during delivery
  3. the characteristics of different investment instruments or a blend of instruments, including any rights and benefits they may grant
  4. optimising net benefits for Australians and value-for-money.

 

Assessing the market

Proposals should include clear reasoning for intervening in markets and should ensure any intervention does not crowd-out private investments. Proposals should also include an assessment of user funding and consider:

Assessments of investment proposals includes consideration of:

  1. whether any proportion of the proposal can be funded by the direct beneficiaries.
  2. capacity for the proposal to be financed privately, with a proportionate risk allocation subject to the relevant proposal details.

 

Assessing risk in governance, funding and financing

All investment proposals involve a degree of risk, and to achieve its intended objective, it is the responsibility of the Commonwealth entity to ensure an appropriate culture of engaging with risk and risk management throughout the investment lifecycle.

A financial risk signal (high, medium, low) to decision-makers provides a point of comparison for various investment instrument options. Entities are responsible for assessing financial risk and applying signal ratings in line with the relevant Estimates Memorandum.

  1. The Department of Finance is to agree with the application of this rating (consult with your Chief Financial Officer team for the latest Estimates Memorandum on Financial Risk).
  2. A high financial risk rating does not mean a project should not be implemented. It may require additional mitigation additional governance, reporting and management arrangements to safeguard the Commonwealth's investment where risk assessment is high.
  3. The Commonwealth Risk Management Policy requires accountable authorities and officials to establish and maintain appropriate systems and internal controls for risk oversight and management.

Risk reporting helps decision-makers assess the efficacy of the investment proposal. Include a sensitivity analysis for key risks where relevant.

Commonwealth entities are to complete a Risk Potential Assessment Tool (RPAT) to examine the potential risk of an investment proposal to Ministers before seeking Cabinet’s agreement. An RPAT is to be completed for each New Policy Proposal (NPP) with an estimated financial implication of $30 million or above. For guidance on completing RPATs, refer to RMG-107 Risk Potential Assessment Tool. 

When working with delivery partners, including the private sector, this should involve an appropriate allocation of risks with consideration of to the alignment of incentives. 

 

Costing and constitutional risk requirements

Costs to be agreed with the Department of Finance through the costing process for NPPs in line with the Budget Process Operational Rules (BPORs). This includes the projected impacts for Budget metrics including 

  • underlying cash and fiscal balance,
  • net and gross debt, and
  • Public Debt Interest (PDI) over the life of the investment proposal. 

For proposals going through a two-pass consideration process, costs only need to be agreed for the second pass consideration. However, reasonably robust indicative costs are required for the first-pass consideration, unless funding is sought to develop the second-pass business case.

In line with the BPORs, the Australian Government Solicitor within the Attorney-General’s Portfolio is to be consulted on the constitutional basis and legislative risk of the investment proposal to provide a constitutional risk assessment and ensure there is the necessary authority.

 

Go to Part 3 - Investment Implementation
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