Part 3: Management and Accountability
- 1 Corporate governance
- 2 Audit
- 3 Business continuity arrangements
- 4 Judicial decisions
- 5 External reports on agency operations
- 6 Management of human resources
- 7 Consultants
- 8 Purchasing
- 9 ANAO access clauses and exempt contracts
The Secretary to the Treasury (Secretary) has responsibility for specific authorities over 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, approves policy limits and addresses any breaches of those limits. In discharging his responsibilities, the Secretary is advised by the Chief Executive Officer (CEO) and the AOFM Advisory Board.
The CEO of the AOFM is responsible for the day‑to‑day management and direction of the AOFM. The CEO exercises powers authorised 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 AOFM (which is treated separately from the financial management of the Treasury as the AOFM is a prescribed agency under the Financial Management and Accountability Act 1997 (FMA Act)). The AOFM reports to the Treasurer on issues pertaining to the management and performance of the portfolio, prepares this annual report for presentation to the 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 2014 were:
- Dr Martin Parkinson PSM, Secretary to the Treasury, Chair;
- Rob Nicholl, CEO, AOFM;
- Rosemary Huxtable, Deputy Secretary, Budget Group, Department of Finance;
- Paul Bide, Consultant;
- Carol Austin, Consultant;
- Nigel Ray, Executive Director, Fiscal Group, the Treasury; and
- Peter Warne, Consultant.
The Advisory Board met on three occasions in 2013‑14.
Senior management committees
Several senior management committees operate to assist the CEO in the management of the AOFM and to facilitate communication, coordination and the assessment of risk and compliance management.
The Executive Group advises the CEO on policies and procedures governing the conduct of AOFM operations. Its activities include the review and assessment of the AOFM’s risk exposures; monitoring compliance obligations; determining and monitoring the implementation of HR policies; overseeing and advising the CEO on significant work health and safety matters; overseeing the corporate planning process, including internal and aggregate resourcing needs; and advising the CEO on significant corporate matters as they may arise.
Portfolio Strategy Meeting
During 2013‑14, regular Portfolio Strategy Meetings were conducted with the purpose of advising the CEO on operational debt policy and financial risk management issues, as well as reviewing deal execution and general financial market conditions. Its membership comprises of the CEO, Director of Financial Risk, Head of Treasury Services, Head of Investor Relations and Head of Reporting and Information Technology (IT), together with other senior staff holding relevant functional responsibilities.
Cash Management Meeting
A meeting is held each week to review the Government’s cash position and short to medium term cash flow projections including expected funding needs. The meeting is attended by the CEO, Head of Treasury Services, Director of Financial Risk, Head of Investor Relations, together with other staff from the Treasury Services Unit with responsibility for cash management.
Information Technology Steering Committee
The Information Technology Steering Committee advises the CEO on overall IT system design, structure and security, and monitors IT service availability and security related incidents. It also oversees current and planned IT projects and operations. Its membership comprises of the CEO, Head of Reporting and IT, Chief Financial Officer, Financial Risk Practice Leader, IT Security Advisor, and IT Technical Specialist.
The Security Committee performs an oversight role in respect of security management within the AOFM. Its membership comprises of the CEO, Agency Security Advisor, and IT Security Advisor. The head of the Treasury Security Team is invited to attend ex officio to assist in security harmonisation.
Other elements of the governance framework
Other elements of the AOFM’s governance framework include:
- formal delegations, authorisations and directions from the Treasurer of powers under various Acts that provide the legal authority for the conduct of the AOFM’s debt and cash portfolio management and related investment activities;
- formal delegations from the Minister for Finance through the Financial Management and Accountability (Finance Minister to Chief Executives) Delegation 2013;
- formal delegations from the CEO to staff through the Chief Executive Instructions and internal financial delegations;
- financial risk policies, including an Annual (Debt Management) Remit approved by the Secretary;
- annual corporate and business group plans to support delivery of the AOFM’s outcome and programme as stated in the 2013‑14 Treasury Portfolio Budget Statement;
- human resource policies and procedures to establish the expectations and obligations of staff in relation to values, ethics and performance;
- enterprise risk and assurance frameworks, including an enterprise risk register and compliance assurance plan to support oversight of the management of risks, operation of controls and compliance with obligations; and
- a fraud risk assessment and fraud control plan that comply with the Commonwealth Fraud Control Guidelines and include appropriate fraud prevention, detection, investigation reporting and data collection procedures and processes.
The AOFM has taken all reasonable measures to optimise the management of risks, including to minimise the risk of fraud. Risks are managed within a risk appetite and tolerances established under the Enterprise Risk Management (ERM) framework. This is achieved through the implementation of a framework of internal policies (for matters including, but not limited to, procurement, security and conflicts of interest), internal controls, and within a culture that embraces a heightened level of mindfulness and awareness of the AOFM’s obligations and commitments, consistent with the AOFM’s governance and legislative frameworks.
The AOFM Audit Committee reviews, monitors and recommends improvements to the risk management, internal control and financial reporting processes. Through quarterly meetings, it oversees the audit and assurance programmes, making its assessments based on the information and reports it receives from the AOFM and auditors.
Key activities during 2013‑14 included:
- reviewing the operation of the AOFM’s risk and internal control environments, including implementation of the ERM framework and enhancement of the Assurance framework;
- endorsement of the AOFM’s 2013‑14 internal audit plan;
- monitoring actions taken by the AOFM in response to matters raised by auditors and other assurance providers;
- advice on the preparation and review of the AOFM’s financial statements;
- monitoring progress of major agency projects; and
- reviewing the AOFM’s Public Governance, Performance and Accountability Act 2013 transition readiness.
Membership as at 30 June 2014 comprised:
- Peter Warne, independent member of the AOFM Advisory Board (Chair);
- David Lawler, independent member;
- Matthew King, General Manager, Financial and Facilities Management Division, Corporate Strategy and Services Group, the Treasury (from March 2014); and
- Samantha Montenegro, Chief Risk and Compliance Officer, AOFM.
Other representatives from the Treasury included Robert Ewing (November 2013 meeting).
The Audit Committee met on four occasions during 2013‑14.
External observers at audit committee meetings included the Australian National Audit Office (ANAO) and its outsourced provider (KPMG), and the AOFM’s internal auditor (Deloitte Touche Tohmatsu until November 2013, and PricewaterhouseCoopers from December 2013). The AOFM Chief Financial Officer is an invited attendee. The AOFM CEO regularly attends meetings.
Internal audit coverage is determined using a structured approach to provide comfort around significant risks, processes, systems and regulatory requirements where assurance is determined to be a priority for that period. The Audit Committee endorses the internal audit strategy for CEO approval.
The AOFM’s internal auditors undertook the following audits during 2013‑14:
- contract management;
- a post‑implementation review of retail exchange trading of Commonwealth Government Securities (CGS);
- human resources (operational and payroll);
- debt issuance, confirmation and settlements processes; and
- a post‑implementation review of retail exchange CGS registry services.
Internal audit concluded that the control environment within the AOFM was mature, as demonstrated by the nature and type of findings reported. Recommendations made were aimed at enhancing the efficiency and design of the current control environment. The internal auditors also found that the AOFM had appropriate processes in place to ensure that audit recommendations were actioned in a timely manner. At 30 June 2014, recommendations had either been implemented or were in the process of being implemented in accordance with agreed timelines.
Business continuity arrangements
The AOFM has comprehensive business continuity and pandemic plans to ensure that its critical activities can continue in the event of a major disruption or the outbreak of a pandemic. These arrangements include the provision of back up of full IT and related business services 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. Business continuity plans were updated and tested during 2013‑14.
In addition to business continuity plans, there is also an IT disaster recovery plan which sets out the processes required to restore critical IT‑reliant functions in the aftermath of a significant disruption; and an Emergency Procedures Manual to provide for incidents including, but not limited to, those articulated in the Government’s Protective Security Policy Framework.
In 2013‑14, no matters relating to the AOFM were the subject of judicial proceedings, administrative tribunal hearings or consideration by the Commonwealth Ombudsman.
External reports on agency operations
There were no reports in 2013‑14 on the operations of the AOFM by the Auditor‑General (other than the report on financial statements); a Parliamentary committee; or the Commonwealth Ombudsman.
Management of human resources
Meeting workforce needs
The AOFM was created with a view to building a specialised agency focused on financial operations employing targeted skills in both investment and debt management. The AOFM people systems were designed to stabilise this niche workforce and align it with the wider financial industry. So, although a public sector entity, the AOFM operates in, and orientates its work to, the finance sector. The core business of the AOFM requires close interface with financial market participants and wholesale financial market intermediaries. Financial market operations and concepts affect all roles in the AOFM and these skills contribute to the AOFM’s success.
Eighty‑six per cent of AOFM staff have degree qualifications, with 23 per cent holding higher degrees and 19 per cent holding double degrees. Forty‑two per cent have professional qualifications related to their role with the AOFM. The retention rate for 2013‑14 was 93 per cent, with an average annual retention rate of 91 per cent over the previous five years.
The AOFM is developing a workforce plan to meet medium‑term strategic challenges. The plan will be completed and implemented during the next reporting period.
Training and development
The AOFM performance management system sets the main framework to consider training and development activities during each performance cycle. In 2013‑14, all staff participated in some form of internal or external training and $4,307 per full-time equivalent (FTE) was paid to external providers for the period. Of the 4.6 days per FTE invested in skill development, 2.5 days per FTE were external courses, 0.5 days were invested in study, and the balance was spent on training in‑house. Including participant time, the AOFM’s commitment to training and development activity in 2013‑14 represented 4.7 per cent of gross salary.
The AOFM workforce
At 30 June 2014, the AOFM employed 39.7 FTE staff under the Public Service Act 1999. Table 1 shows this workforce by broadband classification.
Note: AOFM broadband classifications are 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.
Three staff were involved in overseas missions during the year and of these, one was still on deployment at the end of 2013‑14. Two positions were staffed to support capacity building in sovereign debt management in Papua New Guinea and the Solomon Islands. These positions are arranged under the Strongim Gavman Program and the Solomon Islands Economic and Public Sector Governance Program respectively.
Changes to senior management
There were no changes to senior management.
Other staffing changes
Four ongoing staff were recruited during 2013‑14. This represents replacement for staff turnover.
There were three staff departures during the year, two of whom were ongoing staff. All of these staff took up positions in the private sector, and two of them went to roles elsewhere in the finance industry. Staff departures represented 7.0 per cent of average staffing levels in 2013‑14 (7.2 per cent in 2012‑13, and 14.2 per cent in 2011‑12 — this latter figure was misreported last year).
All non‑SES staff have terms and conditions set by the AOFM Enterprise Agreement 2011‑2014 which was negotiated under the Australian Public Service Bargaining Framework.
The CEO has his terms and conditions set by the Secretary through a determination made under subsection 24(1) of the Public Service Act 1999.
Pay rates as at 30 June 2014 are shown in Table 2. These rates are set in accordance with the enterprise agreement and take account of relevant market rates. The AOFM set 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. AON Hewitt provided independent advice in applying the data to the AOFM.
|Classification||30 June 2013|
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 study assistance, short courses and payment of job‑relevant professional society membership fees. A mobile phone, Blackberry, laptop, or other mobile device may be provided where there is a business need. Executive remuneration is reported in Note 13 of Part 4: Financial Statements.
Work health and safety
Health, wellbeing and safety services are provided by the Treasury under a Service Level Agreement. The AOFM has one Health and Safety Representative who assists staff in accordance with the Work Health and Safety Act 2011.
Work health and safety is a standing agenda item at Executive Group meetings.
Flu vaccinations and health assessments were made available to staff in 2013‑14. Counselling and related support is available under an Employee Assistance Programme provided by Optum. Additional online resources are provided to all staff to assist with safety and health promotion.
There were no compensable injury claims in 2013‑14.
There have been no notices or investigations under Part 10 of the Work Health and Safety Act 2011.
The National Disability Strategy 2010‑2020 sets out a 10 year national policy framework to improve the lives of people with disability, promote participation and create a more inclusive society. A high level two‑yearly whole‑of‑government report will track progress against each of the six outcome areas of the Strategy and present a picture of how people with disability are faring. The first of these reports will be available in late 2014, and can be found at www.dss.gov.au.
During 2013‑14, eleven new consultancy contracts were entered into involving total actual expenditure of $162,664. In addition, four ongoing consultancy contracts were active during 2013‑14, involving total actual expenditure of $91,287. This is summarised in Table 3.
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 at www.tenders.gov.au.
The AOFM engages consultants where it requires specialist expertise or when independent research, review or assessment is required.
Prior to engaging consultants, the AOFM takes into account the skills, experience and resources required for the task, the skills available internally, and the cost‑effectiveness of engaging external expertise. The decision to engage a consultant is made in accordance with the FMA Act and related regulations, including the Commonwealth Procurement Rules (CPRs), and relevant internal policies.
|Number of consultancy contracts|
|Expenditure (including GST)|
The AOFM’s purchasing activities comply with legislative requirements and Government policy, in particular the CPRs.
The CPRs are applied to the AOFM’s activities through the Chief Executive Instructions and supporting internal policies and procedures.
ANAO access clauses and exempt contracts
Three contracts were 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.
One contract was for the syndicated issuance of $2.1 billion of Australian Government Treasury Indexed Bonds (August 2035) in September 2013. The AOFM appointed Westpac Banking Corporation, Deutsche Bank AG (Sydney Branch) and Merrill Lynch (Australia) Futures Ltd as joint‑lead managers for the issue.
The second contract was for the syndicated issuance of $5.9 billion of Australian Government Treasury Bonds (April 2033) in November 2013. The AOFM appointed ANZ Banking Group Ltd, Citigroup Global Markets Australia Pty Ltd and UBS AG (Australia Branch) as joint‑lead managers for the issue. The AOFM appointed Deutsche Bank AG (Sydney Branch), J.P. Morgan Australia Ltd and Westpac Banking Corporation as co‑managers for the issue.
The third contract was for the syndicated issuance of $7.0 billion of Australian Government Treasury Bonds (April 2026) in March 2014. The AOFM appointed Westpac Banking Corporation, Deutsche Bank AG (Sydney Branch), Citigroup Global Markets Australia Pty Ltd and UBS AG (Australia Branch) as joint‑lead managers for the issue.
ANAO access clauses were not included in the contracts as the AOFM maintains all relevant information in relation to the contracted services. Under these contracts, $24.75 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: 31 October 2014