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 Purchasing
- 8 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 activities. The Secretary approves detailed debt management and investment policies, sets operational limits and addresses any breaches of those 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 creation and 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 to the Treasurer on issues pertaining to the management and performance of the 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 2011 were:
- Dr Martin Parkinson PSM, Secretary to the Treasury, Chair (replacing Dr Ken Henry in April 2011);
- Tony Cole AO, Executive Director of Mercer Investment Nominees (Australia) Pty. Ltd., Director of the Northern Territory Treasury Corporation, Chairman of the Melbourne Institute Advisory Board and Trustee Director of Australian Reward Investment Alliance;
- Rob Nicholl, CEO, AOFM (replacing Neil Hyden in January 2011);
- David Martine, Deputy Secretary, Budget Group, Department of Finance and Deregulation;
- Greg Maughan, Consultant;
- Nigel Ray, Executive Director, Fiscal Group, Treasury; and
- Peter Warne, Chairman of the Australian Leisure & Entertainment Property Group, Deputy Chairman WHK Group Ltd, Non Executive Director of ASX Limited and subsidiary companies and Macquarie Group Limited. He is also Chairman St Andrews Cathedral School Foundation Limited, Deputy Chairman Capital Markets Cooperative Research Centre Limited. He is also a Non-Executive Director of Next Financial Limited and the Securities Industry Research Centre of Asia Pacific and a number of other unlisted companies.
The Advisory Board met on four occasions in 2010-11.
Senior management committees
Several senior management committees operate to assist the CEO in the management of the Office and to facilitate communication, coordination and the assessment of risk and compliance management.
An 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 as Chair and senior Business Practice Leaders.
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 Treasury Services, Head of Investor Relations and the Head of Reporting and IT, 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 the CEO as Chair, the Head of Treasury Services, the Director of Financial Risk, the Head of Investor Relations, the Head of Reporting and IT, the Chief Finance Officer 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 Head of Reporting and IT, 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 Treasury Services, the Director of Financial Risk, the Head of Investor Relations, the Head of Reporting and IT, the Chief Finance Officer and the Compliance Manager.
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;
- formal delegations — Financial Management and Accountability (Finance Minister to Chief Executives) Delegation;
- 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 CEO 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;
- a fraud risk assessment and Fraud Control Plan which complies with the Commonwealth Fraud Control Guidelines and includes appropriate fraud prevention, detection, investigation and reporting procedures; and
- the AOFM AML/CTF Program under the Anti-Money Laundering and Counter-Terrorism and Financing Act 2006.
The AOFM Audit Committee is a forum for the review of audit and related issues. It approves the AOFM’s internal audit plan; reviews audit reports and advises on action to be taken on matters raised by AOFM’s auditors; advises on the preparation and review of the AOFM’s financial statements; reviews operational risks and endorses the plans for implementation of fraud controls and awareness training.
The Audit Committee membership at 30 June 2011 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;
- Elizabeth Clegg, Manager, Government Investment, Risk and Debt Policy Unit, the Treasury; and
- Jason Dakin, Manager, Compliance, AOFM.
Invited attendees included the Australian National Audit Office (ANAO), the AOFM internal auditor (Deloitte Touche Tohmatsu) and the AOFM Chief Finance Officer. The AOFM CEO also attends meetings at his discretion.
The Committee met on four occasions during 2010-11.
Since appointing the new internal auditor, Deloitte Touche Tohmatsu, on 19 November 2010 the following reviews were conducted in 2010-11:
- a review of the AOFM’s RMBS investment portfolio, which found that internal controls were operating satisfactorily and provided recommendations to enhance the control environment. All recommendations are being implemented;
- a review of the IT General Controls; findings from this review will be presented during the 2011-12 financial year; and
- a review of the Compliance Risk Framework; findings from this review will be presented during the 2011-12 financial year.
Australian National Audit Office reports
The ANAO’s cross-agency audit on the Protection and Security of Electronic Information held by Australian Government Agencies identified no significant or moderate audit issues in relation to the AOFM. Based on the audit work performed, only one audit finding was applicable to the AOFM. This finding was applicable to all the audited agencies, it required all agencies to review their policies and procedures for completeness.
During 2010-11, 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 AOFM staff are not available to perform key tasks. 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, IT hardware at the business continuity site was upgraded and virtualisation was implemented. These changes provide improved availability and access to production servers. Remote desktop technology was also implemented. This allows the more rapid mobilisation of laptop computers at the business continuity site. Business continuity plans were also updated and tested.
In 2010-11, 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 pursues a build strategy to meet workforce needs. AOFM seeks to employ recent graduates and develop them through on-the-job experience, mentoring, assistance with further professional training and in-house development programs. This approach is tailored to maintain the core professional strength of the AOFM on a continuing basis. The AOFM builds on skills acquired through academic endeavours to develop more specialised skills and experience related to the AOFM’s work requirements. Employees accumulate practical knowledge of financial markets, debt management, public policy and government administration.
Where specialised skills are needed that are not currently available within AOFM, the normal build strategy is not practicable. AOFM may recruit for positions that require such specialised skills.
AOFM provides challenging and interesting work in a professional and dynamic work environment. The relatively small size of AOFM means that staff are better aware of the overall strategies and operations of the AOFM and how the various parts of the organisation work together to complement the output of the Office as a whole. They can experience different aspects of financial markets and transactions and importantly, observe how public policy objectives interact with financial markets and the Government’s financing and investment tasks. Staff are called upon to use a wider range of financial, policy and administrative skills than they might in a larger organisation. As a result they can learn and gain experience over a broad field relatively quickly. Learning is well integrated into job requirements.
A broad-band classification structure allows staff to advance between work levels within classification grades subject to work availability and performance. This can occur without formal competitive selection processes. Promotions across grades are made via merit selection.
The build strategy has been successful in attracting and retaining highly qualified professional staff. For example, the 2011 graduate campaign attracted more than a hundred high quality applicants. In addition, the retention rate for 2010-11 was 92 per cent, with an average of 84 per cent over the previous five years.
Training and development
Staff are encouraged to participate in training and development activities relevant to their work responsibilities. The performance management system is designed to encourage employees to consider development activities each performance cycle. Learning is fostered through on-the-job training, external courses, conferences, workshops and seminars. AOFM also uses staff secondment arrangements (mostly with Treasury) to give staff development opportunities, and to supplement resource needs during anticipated periods of peak work, or for large projects. This also benefits staff being seconded to AOFM.
Over the last five financial years, an average of 75 per cent of staff have participated in training or development supported by the AOFM. During this period, training averaged 3.9 days per full-time equivalent staff member (FTE) per year and the direct costs of training (paid to external parties) averaged $2,416 per FTE per year. In 2010-11, 98 per cent of employees participated in training, 3.3 days per FTE were invested in skill development and $1,640 per FTE was paid to external providers. Payments for training and development activity over the year amounted to 2.5 per cent of direct salary costs.
The AOFM workforce
As at 30 June 2011, the AOFM employed 41.0 full-time equivalent staff under the Public Service Act 1999. Table 1 shows this workforce by broadband classification.
Table 1: Operative and paid inoperative staff as at 30 June 2010 and 2011
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.
Eighty-six per cent of AOFM employees have degree qualifications, with 28 per cent holding higher degrees and 21 per cent double degrees. Thirty per cent have professional qualifications.
Changes to senior management
Mr Neil Hyden retired from the position of CEO on 25 November 2010. Mr Hyden worked in the Australian Public Service for 45 years and spent most of that time in the Treasury. He also spent four years as Executive Director on the Board of the World Bank.
Mr Michael Bath acted as CEO from 26 November 2010 through 23 January 2011.
Mr Rob Nicholl commenced as CEO on 24 January 2011. Mr Nicholl has extensive public policy experience and knowledge of the financial markets, having held the position of Deputy Secretary, Economic and Financial Policy Division, Tasmanian Department of Treasury and Finance. He has also worked as Senior Adviser to the Tasmanian Deputy Premier. Prior to joining the public service, he spent several years in academia, including as Research Fellow at the Department of Economics, University of Tasmania and Lecturer, Department of Economics, University of Alberta, Canada.
Other staffing changes
In addition to the CEO, six ongoing and three non-ongoing employees were recruited during 2010-11. The changes represented turnover in the position of Portfolio Manager-RMBS and increasing capacity in other areas of AOFM. Treasury Services, Reporting and IT, and Financial Risk Groups along with the Compliance Unit benefited from this increased capacity.
Aside from the CEO’s retirement, there were two staff departures during the year. Both employees took up positions in the private sector. For ongoing employees, departures represented 5.5 per cent of average staffing levels in 2010-11 (13.9 per cent in 2009-10).
Employment terms and conditions for all non-SES staff are set by the AOFM Enterprise Agreement 2010-2011. Bargaining for a new three-year enterprise agreement commenced on 13 May 2011 and had not concluded prior to 30 June 2011.
The CEO has his terms and conditions set by the Secretary of the Department of The Treasury through a determination made under subsection 24(1) of the Public Service Act 1999.
Pay rates as at 30 June 2011 are shown in Table 2. These rates were negotiated in the context of the Government’s remuneration policy and take account of relevant market rates. AOFM sets a conservative benchmark against financial services organisations using data provided by the Financial Institutions Remuneration Group. These data cover 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.
Remuneration within the range for the classification depends on individual performance ratings. Performance appraisals balance what is achieved (outputs) with how those results are obtained (behaviours). 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 health-related educational seminars, outdoor fitness programs, and other excercise classes. Flu vaccinations, health assessments, and dietary assistance were also provided in 2010-11. To prevent injuries in the workplace and to enhance the safety of staff, workplace assessments were conducted for all new starters. The desks in the front office were replaced to enable ergonomic adjustments for individual workstations. Counselling and other support is available under an Employee Assistance Program provided by Davidson Trahaire.
There were no compensable injury claims in 2010-11 and no accidents, injuries or dangerous occurrences were reported by employees. One minor incident occurred with a contractor who injured a hand whilst using a tilting meeting room chair. All chairs were inspected for functionality and no defects were identified. Operator training was initiated for contractors using these chairs and no further incidents occurred. 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.
Changes to disability reporting in annual reports
Since 1994, Commonwealth departments and agencies have reported on their performance as policy adviser, purchaser, employer, regulator and provider under the Commonwealth Disability Strategy. In 2007-08, reporting on the employer role was transferred to the Australian Public Service Commission’s State of the Service Report and the APS Statistical Bulletin. These reports are available at www.apsc.gov.au. From 2010-11, departments and agencies are no longer required to report on these functions.
The Commonwealth Disability Strategy has been overtaken by a new National Disability Strategy which sets out a ten year national policy framework for improving life for Australians with disability, their families and carers. A high level report to track progress for people with disability at a national level will be produced by the Standing Council on Community, Housing and Disability Services to the Council of Australian Governments and will be available atwww.fahcsia.gov.au. The Social Inclusion Measurement and Reporting Strategy agreed by the Government in December 2009 will also include some reporting on disability matters in its regular How Australia is Faring report and, if appropriate, in strategic change indicators in agency Annual Reports. More detail on social inclusion matters can be found at www.socialinclusion.gov.au.
During 2010-11, 12 new consultancy contracts were entered into involving total actual expenditure of $319,000. In addition, two ongoing consultancy contracts were active during 2010-11 year, involving total actual expenditure of $159,905. This is summarised in Table 3. Details of consultancy contracts of $10,000 or more let during 2010-11 are provided in Table 4.
Annual reports contain information about actual expenditure on contracts for consultancies. Information on the value of contracts and consultancies is available on the AusTender website www.tenders.gov.au.
|Number of consultancy contracts|
|Expenditure (including GST)|
|Blake Dawson||Provision of independent advice on HR matters||$21,314||Direct sourcing||C|
|Deloitte Touche Tohmatsu||Provision of internal audit services||$378,000||Open Tender||C|
|Hewitt Associates||Advice on remuneration benchmarking||$31,361||Direct sourcing||C|
|Infact Consulting||Advice on treasury systems||$200,362||Open Tender||B|
(a) Explanation of selection process terms
- Open Tender
- A procurement procedure in which a request for tender is published inviting all business that satisfy the conditions for participation to submit tenders. Public tenders are generally sought from the Australian Government AusTender internet site.
- Direct sourcing
- A form of restricted tendering, available only under certain defined circumstances, with a single potential supplier or suppliers being invited to bid 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 AOFM’s purchasing activities are carried out to comply with legislative requirements and Government policy, in particular the Commonwealth Procurement Guidelines (CPGs) (December 2008).
The CPGs are applied to AOFM’s activities through the Chief Executive’s Instructions and supporting internal policy and procedural documentation.
ANAO access clauses and exempt contracts
One contract was let during the reporting period in excess of $100,000 that did not provide for the Auditor-General to have access to the contractor’s premises. The contract was for the syndicated issuance of $1.25 billion of Australian Government debt in September 2010. The AOFM appointed JP Morgan Australia Limited, the Royal Bank of Scotland plc (Australia Branch) and UBS AG (Australia Branch) as Joint-Lead Managers for the issue. The AOFM appointed Merrill Lynch International (Australia) Limited, Citigroup Global Markets Australia Pty Limited, Commonwealth Bank of Australia and Deutsche Bank AG (Sydney Branch) as Co-Managers for the issue. ANAO access clauses were not included in the contracts as the AOFM maintains all relevant information in relation to the issuance. Under this contract, $2.060 million (including GST) was paid.
No contract 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: 14 February 2014