Part 3: Management and Accountability
- 1 Corporate governance
- 2 Audit
- 3 Business continuity arrangements
- 4 Judicial decisions
- 5 Management of human resources
- 6 Consultants
- 7 Assets management
- 8 Purchasing
- 9 ANAO access clauses and exempt contracts
The Secretary to the Treasury provides general oversight of the AOFM’s activities and is responsible for advising the Treasurer on Government policy relating to debt management and investment. The Secretary approves detailed debt management and investment policies, sets operational limits and addresses any breaches of limits. In discharging his responsibilities, the Secretary is advised by the AOFM Advisory Board.
The Chief Executive Officer (CEO) of the AOFM is responsible for the day to day management and direction of the AOFM. The CEO exercises powers delegated by the Treasurer and the Secretary for debt issuance, investment, portfolio management and management of the AOFM’s staff. The CEO has final responsibility for all aspects of the financial management of the Office (which is separate from the financial management of the Treasury as the AOFM is a prescribed agency under the Financial Management and Accountability Act 1997). The AOFM reports regularly to the Treasurer on its portfolio, prepares an annual report for presentation to Parliament and provides information about its activities on its website.
AOFM Advisory Board
The AOFM Advisory Board provides advice to the Secretary on debt management policy and the operational strategy and performance of the AOFM. The Board does not possess executive powers or decision making authority. The Advisory Board members as at 30 June 2010 were:
- Dr Ken Henry AC, Secretary to the Treasury (Chair);
- Tony Cole AO, Executive Director of Mercer (Australia) Pty. Ltd., Director of the Northern Territory Treasury Corporation and Chairman of the Melbourne Institute Advisory Board;
- Neil Hyden, Chief Executive Officer, AOFM;
- David Martine, Deputy Secretary, Budget Group, Department of Finance and Deregulation;
- Greg Maughan, Consultant;
- Nigel Ray, Executive Director, Fiscal Group, Treasury; and
- Peter Warne, Non-Executive Director of Next Financial Limited and the Securities Industry Research Centre of Asia Pacific. Chairman of the Australian Leisure & Entertainment Property Group and St Andrews Cathedral School Foundation Limited. He is also a Director of ASX Limited and subsidiary companies, Macquarie Group Limited, WHK Group Ltd, Capital Markets Cooperative Research Centre Limited and a number of other unlisted companies.
The Advisory Board met on three occasions in 2009-10.
Senior management committees
Several senior management committees operate to assist the CEO in the management of the Office and to facilitate communication and coordination.
The Executive Committee coordinates the overall management of the Office, including consideration of strategic issues, coordination of priorities, financial management, organisational arrangements and resource management. Its membership comprises of the CEO, the Head of Compliance and Reporting, the Chief Finance Officer, the Director of Financial Risk, the Head of Treasury Services and the Head of Investor Relations.
Asset and Liability Committee
The Asset and Liability Committee advises the CEO on operational debt policy and financial risk management issues. The committee reviews policy and operational settings, deal execution and market conditions. Its membership comprises of the CEO, the Director of Financial Risk, the Head of Compliance and Reporting, the Head of Investor Relations and the Head of Treasury Services, together with other senior staff with relevant functional responsibilities.
Human Resources Committee
This committee advises on the management of human resources, including employment policies, training and development, recruitment, performance management and remuneration. It consists of members of the Executive Committee and the Human Resource Manager.
Information Technology Steering Committee
This committee oversees current and planned information technology projects and operations. Its membership comprises of the CEO (Chair), the Chief Finance Officer, the Head of Compliance and Reporting and the IT Manager.
Operational Risk and Compliance Committee
This committee manages operational risks. It recommends and determines compliance priorities and control procedures and oversees the identification, categorisation and prioritisation of operational risks. Its membership comprises of the CEO, the Head of Compliance and Reporting, the Director of Financial Risk, the Head of Investor Relations, the Chief Finance Officer and the Head of Treasury Services, together with other senior staff with relevant functional responsibilities.
Other elements of the governance framework
Other elements of the AOFM’s governance framework include:
- formal delegations and authorisations from the Treasurer of powers under various Acts that provide the legal authority for the AOFM’s debt management and investment activities;
- policies, including a Balance Sheet Policy, Credit Policy and Liquidity Policy, and operational limits, approved by the Secretary to the Treasury;
- Chief Executive Instructions and internal financial delegations by the Chief Executive Officer under the Financial Management and Accountability Act 1997;
- a Contract Management Policy, which provides guidelines for managing contractual relationships with suppliers of goods and services based on Australian Government legislative requirements and best practice principles; and
- a fraud risk assessment and Fraud Control Plan which comply with the Commonwealth Fraud Control Guidelines and include appropriate fraud prevention, detection, investigation and reporting procedures.
The AOFM Audit Committee is a forum for the review of audit and related issues. It endorses the AOFM’s internal audit plan, reviews audit reports and advises on action to be taken on matters raised in them, advises on the preparation and review of the AOFM’s financial statements, reviews operational risks and oversees the development and implementation of fraud controls and awareness training.
The Audit Committee membership at 30 June 2010 comprised:
- Peter Warne, independent member of the AOFM Advisory Board (Chair);
- David Lawler, former Group Auditor, Financial Controller of Institutional Banking and Executive General Manager of the Commonwealth Bank of Australia. Audit Committee member of the Defence Materiel Organisation, the Australian Trade Commission, the Australian Agency for International Development, the Australian Sports Anti-Doping Authority and National ICT Australia;
- Katrina Di Marco, Manager, Government Investment, Risk and Debt Policy Unit, the Treasury; and
- Andrew Johnson, the Head of Compliance and Reporting, AOFM.
Invited attendees included the Australian National Audit Office (ANAO), the AOFM internal auditor (PricewaterhouseCoopers) and the AOFM Chief Finance Officer. The Chief Executive Officer also attends meetings at his discretion.
The Committee met on four occasions during 2009-10.
In addition to the regular annual audit review of internal operational controls and information technology controls, the internal auditor, PricewaterhouseCoopers, completed the following reviews in 2009-10:
- a review of the AOFM’s settlements and investment management activities, which found that the AOFM has a robust control environment;
- a review of the Quantum upgrade project found that the AOFM has a robust project governance and management process in place over the Quantum upgrade project with no significant observations noted;
- a review of the methodology and documentation associated with the Fraud Control Plan, including the risk register, fraud risk assessment and fraud control plan found that the AOFM has a robust fraud control environment; and
- a review of the AOFM’s yield curve methodology found the AOFM’s curve methodology to be appropriate. Minor differences in valuations were noted, but were considered not material.
Australian National Audit Office reports
The ANAO’s annual report on the Interim Phase of the Audit of Financial Statements of General Government Sector Entities for the Year Ending 30 June 2010 identified no significant or moderate audit issues. Based on the audit work performed, it concluded that internal controls were operating satisfactorily to provide reasonable assurance that the Office could produce financial statements free of material misstatement.
During 2009-10, the ANAO did not conduct any other cross-agency audits which involved the AOFM.
Business continuity arrangements
The AOFM has business continuity and pandemic plans to ensure that its critical activities can continue in the event of a major disruption or influenza pandemic. These include the provision of back up arrangements that can be implemented when the AOFM’s office accommodation is not able to be used or when staff are immobilised. There is also an information technology (IT) disaster recovery plan which sets out the processes required to restore critical IT-reliant functions in the aftermath of a significant disruption. During the year, the range of AOFM IT applications and systems accessible at the business continuity site was extended. Business continuity plans were also updated and tested.
In 2009-10, no matters relating to the AOFM were the subject of judicial proceedings, tribunal hearings or consideration by the Ombudsman.
Management of human resources
Meeting workforce needs
The AOFM aims to meet its workforce needs primarily through the recruitment of recent graduates and their subsequent development through on-the-job experience, mentoring, assistance with further academic studies and in-house training. This approach is designed to maintain the core professional strength of the AOFM on a continuing basis. It allows people with strong academic achievements to develop specialised skills and experience related to the AOFM’s work requirements and to expand their knowledge of financial markets and debt management, and also of public policy and administration.
Other staff are recruited to meet specific staffing needs, particularly for positions that require specialised skills and experience that are not currently available within the Office.
The Office provides challenging and interesting work in a professional work environment with opportunities for learning and career development. A broad-banded classification structure allows staff to advance between work levels within classification grades subject to work availability and performance without formal competitive selection processes. Promotions across grades are made via merit selection. This strategy has been successful in attracting and retaining highly qualified professional staff. The retention rate for 2009-10 was 89 per cent, with an average of 83 per cent over the previous five years.
Training and development
Eighty-three per cent of AOFM staff have degree qualifications, with 17 per cent holding higher degrees and 22 per cent double degrees. Thirty-one per cent have professional qualifications. Staff are encouraged to participate in training and development activities to develop their work skills and enhance their career prospects. Learning is fostered through on-the-job training, external courses, conferences, workshops and seminars.
Over the last five financial years, an average of 72 per cent of staff have participated in training or development supported by the Office. During this period, training averaged 4.3 days per full-time equivalent staff member (FTE) per year and the direct costs of training (paid to external parties) averaged $2,752 per FTE per year. In 2009-10, 61 per cent of employees participated in training, 5.6 days per FTE were invested in skill development and $3,250 per FTE was paid to external providers. Payments for training and development activity over the year amounted to 4.6 per cent of direct salary costs.
The AOFM workforce
As at 30 June 2010, the AOFM employed 34.2 full-time equivalent staff under the Public Service Act 1999. Table 1 shows this workforce by broadband classification.
Note: AOFM broadband classifications are nominally linked to Australian Public Service classifications as follows: AOFM1 corresponds to APS1 to APS4, AOFM2 corresponds to APS5 to EL1, AOFM3 corresponds to EL2 and AOFM4 covers higher level EL2.
Two staff were located overseas during the year to support capacity building in sovereign debt management in Papua New Guinea and the Solomon Islands under the Strongim Gavman Program and the Regional Assistance Mission to the Solomon Islands respectively.
Changes to senior management
The AOFM employed Ian Clunies-Ross as Head of Investor Relations in July 2009.
Other staffing changes
Five ongoing employees were recruited during 2009-10. The new Investor Relations Unit took two of these, two were employed in the Compliance Unit and one in the Finance team. There were five staff departures during the year. For ongoing employees, departures represented 13.9 per cent of average staffing levels in 2009-10 (3.4 per cent in 2008-09).
During the year the AOFM negotiated an enterprise agreement with all non-SES staff which was approved by Fair Work Australia. The AOFM Enterprise Agreement 2010-2011 came into effect on 2 June 2010. All Australian Workplace Agreements, common law contracts and Section 24(1) determinations under thePublic Service Act 1999 for non-SES staff ceased operating on that date. Employment terms and conditions are now based on the enterprise agreement, with remuneration outcomes based on job classification and performance.
The CEO is employed under an Australian Workplace Agreement with the Treasury.
Staff remuneration (Table 2) is now set under the AOFM Enterprise Agreement. In negotiating the Agreement, management follows the Government’s policy requirements relating to the remuneration. It also takes account of market rates for conservative financial services organisations using data provided by the Financial Institutions Remuneration Group. This data covers a wide range of public and private sector financial institutions, including banks, corporate treasuries and State debt management agencies. Mercer Human Resource Consulting provided independent advice in applying the data to the AOFM.
|Classification||30 June 2010|
Remuneration within the range for the classification depends on individual performance ratings. Performance appraisals assess outputs achieved and behaviours in producing those outputs. However, performance-linked bonuses are not paid.
Non-salary benefits provided to staff principally comprise superannuation and support for professional development through studies assistance, short courses and payment of job-relevant professional society membership fees. A mobile phone, Blackberry or laptop computer may be provided where there is a business need. Executive remuneration is reported in Note 12 of Part 4: Financial statements.
Occupational health and safety
Occupational health and safety services are provided by the Treasury under a Service Level Agreement. The Office has one Health and Safety Representative who assists employees in accord with Health and Safety Management Arrangements and the Occupational Health and Safety Act 1991.
Staff members have access to a number of ongoing health activities, including posture and flexibility, yoga, Tai Chi, Pilates and aerobics classes. Flu vaccinations, health assessments, and health information were also provided in 2009-10. To prevent injuries in the workplace and to enhance the safety of staff, workplace assessments were conducted for all new starters. Counselling and other support is available under an Employee Assistance Program provided by Davidson Trahaire.
There were no compensable injury claims in 2009-10 and no accidents, injuries or dangerous occurrences were reported. The Office was not the subject of any directions under section 45 of the Occupational Health and Safety Act 1991 and received no notices under this Act.
Australian Government Disability Strategy
The AOFM follows The Treasury Workplace Diversity Program 2009-2012 and The Treasury Disability Action Plan 2009-2012 in line with the Australian Government Disability Strategy to help eliminate, as far as possible, discrimination on the grounds of disability.
During 2009-10, the AOFM entered into four new consultancy contracts. In addition, two ongoing consultancy contracts were active during the year. New and ongoing consultancy contracts over the last three years, and expenditure on them, are summarised in Table 3. Details of consultancy contracts of $10,000 or more let during 2009-10 are provided in Table 4.
|Number of consultancy contracts|
|Expenditure (including GST)|
|Consultant name||Description||Price||Selection process(a)||Justification(b)|
|Australian Government Solicitor||Legal Advice||$19,782||Direct sourcing||B|
|INFACT Consulting||Advice on Treasury systems||$79,900||Direct sourcing||B|
(a) Direct sourcing — one supplier (or a limited number of suppliers) is approached directly because of their unique expertise and/or their special ability to supply the goods and/or services sought.
(b) Justification for decision to use consultancy:
A — Skills currently unavailable within agency.
B — Need for specialised or professional skills.
C — Need for independent research or assessment.
The physical assets of the AOFM are managed in accordance with policies and procedures set out in the AOFM’s Chief Executive Instructions. The assets are predominantly computers, office equipment and leasehold improvements.
The AOFM’s policy and procedures on purchasing goods and services comply with legislative requirements and Government policy, in particular the requirements in the Commonwealth Procurement Guidelines (December 2008).
ANAO access clauses and exempt contracts
Six contracts were let during the reporting period that did not provide for the Auditor-General to have access to the contractor’s premises. These contracts were for the syndicated issuance of $4 billion of Australian Government debt in September 2009. The AOFM appointed Deutsche Bank AG Sydney Branch, RBS Group (Australia) Pty Limited and UBS AG Australia Branch as Joint-Lead Managers for the issue. Citigroup Global Markets Australia Pty Limited, JP Morgan Australia Limited and Westpac Banking Corporation Limited were appointed as Co-Managers. ANAO access clauses were not included in the contracts as the AOFM maintains all relevant information in relation to the issuance. Under these contracts, $6.6 million (including GST) was paid.
No contract in excess of $10,000 (including GST) or standing offer has been exempted from being published in the Purchasing and Disposals Gazette on the basis that it would disclose exempt matters under the Freedom of Information Act 1982.
Last updated: 5 February 2014