8. Spending Public Money

8.1 Introduction

Public money

Public money includes all money that is in the custody or control of the Commonwealth or any person acting on behalf of the Commonwealth in respect of the custody or control of the money. It includes, but is not limited to, departmental funds, administered moneys and moneys held in a special account.

FMA Act section 44 and FMA Regulations 7 to 12 govern the approval of spending proposals and entering into arrangements.

Spending proposals

“Spending proposal” means a proposal that could lead to entering into an arrangement (eg contract or agreement) or making a public commitment.

Spending proposals include:

Arrangements

“Arrangement” means an arrangement, including contract or agreement, under which money is payable or may become payable other than:

8.2 Preparing a Spending Proposal

Instructions

Simple Proposal

  1. Simple proposals include procurement (to the threshold determined by the work unit), grants, and other payment types (employment related payments and administered payments not of the type covered below in the “complex proposal” section).
Graphic describing generating a simple spending proces: Identify the need and define requirements; Seek in-principle approval from an Approver; Ensure relevant FMM requirements for the proposal are met;  Assess the market to ascertain appropriate sourcing method and seek quotes where appropriate; Seek FMA Regulation 10 authorisation for multi-year commitment or where agreement includes a contingent liability;  Seek formal FMA Regulation 9 approval; Accept quote or submit contact or agreement to FMA Act s44 delegate for signing; Veryfy invoice received against proposal approval. For procurement this means confiming the goods/services have been received;  Enter invoice to PTWS or SAP for payment

Complex Proposal

  1. Complex proposals include procurement (above the threshold determined by the work unit or those valued at or above AUD 80,000), proposals covered by an agreement containing a contingent liability, large value grants and all sponsorship proposals.

Graphic describing generating a complex spending proposal: Identify the need and define requirements; Seek in-principle approval from an Approver; Prepare business case and risk assessment; Ensure relevant FMM requirements for the proposal are met;  Assess the market to ascertain appropriate sourcing method and seek quotes where appropriate; Seek FMA Regulation 10 authorisation for multi-year commitment ;  Seek formal FMA Regulation 9 approval; Undertake sourcing; Seek FMA Regulation 10 authorisation where agreement includes a contingent liability;  Seek approval under FMA Act s44 from an Approver, including approval to include a contingent liability; Accept quote or submit contact or agreement to FMA Act s44 delegate for signing; Veryfy invoice received against proposal approval. For procurement this means confiming the goods/services have been received;  Enter invoice to PTWS or SAP for payment

Procedure

Responsibility

Frequency/Conditions

Action

8.3 FMA Regulation 9 and 10 Approval

The Secretary has delegated the power to approve spending proposals and enter into arrangements to officials occupying designated positions. Details of Approvers are available in the Secretary’s Financial Delegations on the intranet.

Approvers can authorise officials (known as Approver’s Agents) to approve spending proposals for and on their behalf. Refer to FMM Chapter 2 for more information. A sample Approver’s Agent authorisation is in the FMM Forms folder.

In determining who (eg a Minister, departmental official, etc) should approve a spending proposal, an assessment should be made of the level of discretion an Approver will have later in the process without further endorsement by the person who provided the ‘policy’ or ‘in-principle’ approval (see FMM Chapter 8.2). Where there would be no discretion, the Approver should be the person providing the ‘policy’ or ‘in-principle’ approval and they must be aware of their responsibilities under FMA Regulation 9. Approvers are accountable for spending proposals they approve.

Instructions

  1. An arrangement where public money is payable or may become payable must not be entered into unless a spending proposal has been approved under FMA Regulation 9 and Regulation 10 (where applicable). In Australia this approval, except for Purchase Orders, must occur outside of PTWS
  2. A spending proposal may be approved well before the arrangement is entered into (eg it may be prudent to seek approval before a tender is issued). If this occurs the arrangement entered into must be consistent with the terms of the spending proposal. Where the commitment is greater than the amount originally approved a new Regulation 9 and 10 (where applicable) will be required.
  3. Regulation 10 approval may be required for an arrangement where expenditure is payable in future years and / or contains a contingent liability. Guidance on FMA Regulation 10 is attached to this section.
  4. An Approver must not approve a spending proposal unless the Approver is satisfied, after making reasonable enquiries*, that the proposal:
    • Is within the limits of their delegation. An Approver must not approve a spending proposal for the benefit of the Approver
    • Is supported by sufficient uncommitted relevant budget or approved by the appropriate FMA Regulation 10delegate
    • Makes efficient, effective, economical and ethical use of Commonwealth resources (or to the greatest extent possible while ensuring government policies are complied with)
    • Is consistent with Commonwealth and departmental policies and guidelines
    • If the proposal relates to special public money, it must be consistent with the terms under which the money is held by the Commonwealth. Special Public Money is held in the Services for Other Entities and Trust Moneys Special Account and the Consular Services Special Account. (See FMM Chapter 3 for information on payments that can be made from DFAT special accounts).
      * What constitutes ”reasonable enquires” will depend on the nature of the spending proposal and the circumstances in which it will be considered. Approvers will need to exercise their judgement, taking into account the significance and value of the spending proposal and any associated risks or sensitivities. The Approver must be comfortable they have sufficient information to make a defensible decision. An Approver’s Checklist is attached to Chapter 8.3.
  5. The Commonwealth and DFAT policies and guidelines that must be met include, but are not limited to:
    • Commonwealth Procurement Guidelines
    • Commonwealth Grant Guidelines
    • DFAT Procurement Manual
    • GST requirements (refer to FMM Chapter 9.3)
    • engagement of consultants
    • information technology procurement
    • expenditure on official hospitality
    • contingent liabilities, including guarantees, warranties, indemnities and letters of comfort (refer to FMM Chapter 15.7)
    • foreign exchange risk management guidelines (refer to FMM Chapter 17)
  6. For Canberra controlled budget items a spending proposal should also comply with:
    • the policy for charging items against a particular Canberra-controlled budget; and
    • any other limitations advised by the Division/Branch responsible for the budget.
  7. A spending proposal may need to be reconsidered if the actual cost of the proposal exceeds the amount approved, if the arrangement contains a contingent liability or if contract extension or optional year clauses are invoked (if they weren’t considered as a part of the original approvals).
  8. See FMM Chapter 8.2 for an indication of when Regulation 9 or 10 approvals may need to be sought.

Regulation 9 approval by a Minister

  1. Ministers are Regulation 9 Approvers in their own right. Where a Minister is approving a spending proposal, the work area must ensure the Minister is made aware of their statutory obligations under the FMA Regulations. Regulation 10 approval (where applicable) should be provided before the spending proposal is submitted to the Minister.

Standing Offers

A standing offer is an arrangement where one or more suppliers agree to offer goods or services on consistent legal and monetary terms (eg the department enters into a panel arrangement for the provision of training services to divisions).

  1. Regulation 9 approval of a standing offer arrangement is generally required at two stages of the procurement process:
    • The work unit responsible for the standing offer would seek approval before the standing offer was entered into. Where it is not possible to accurately estimate the total expenditure approval can be based on the scope and purpose of the spending proposal (eg the supplier(s) and cost per unit); and
    • A work unit would approve a spending proposal before submitting an order.

Attached agency spending proposals

  1. Attached agency spending proposals that have been authorised by an attached agency official in accordance with the Service Level Agreement do not require approval by a DFAT Approver.

Payments made by Outsiders under section 12 of the FMA Act

  1. An “outsider” means any person other than the Minister, an employee or contractor performing a financial function on behalf of the Commonwealth. Arrangements for outsiders to make payments must be approved by the CFO, as the FMA Act s12 delegate. FSB should be consulted when a work unit is considering such as an arrangement.
  2. The FMA Regulations apply to outsider arrangements authorised under section 12 of the FMA Act. Payments made to the outsider and payments made by the outsider require approval under FMA Regulation 9 and Regulation 10, where applicable.

Documenting Approvals

  1. A spending proposal should provide sufficient information to enable the Approver to be satisfied that the proposal meets the above requirements. The amount of supporting information for each spending proposal will depend on the value of the spending proposal and its associated risk.
  2. Where a proposal has future year commitments approval should be sought from a work unit official with both Regulation 9 and 10 delegations (eg SES officers).
  3. All approvals must be recorded in writing. This can take the form of an electronic approval (email). If an approval cannot be given in writing at the time, the Approver must do so as soon as practicable after the approval has been given but preferably before any public commitment is made.
  4. An approval irrespective of its form must specify the terms of the approval (ie the details of the proposal, the amount approved and the period) the name of the Approver and their position title and the date of approval. The terms of the approval should reflect the significance, value, level of risk and sensitivities associated with the spending proposal.
  5. For grants (including a sponsorship that is treated as a grant – see Chapter 8.7) the basis of the approval (ie the substantive reasons for the approval) in addition to the terms of the approval must be provided.
  6. The minimum supporting documentation required before approver can approve a spending proposal must be in line with DFAT Procurement Manual. This can be also found in Chapter 8.5 under procurement thresholds.
  7. An example Approval Request Minute for a complex spending proposal is included in the FMM Forms folder. The minute is an example only and can be adapted to suit the requirements of individual work units or their Approvers or to the significance, value, associated risks or sensitivities of the spending proposal.

Minimum Spending Proposal Supporting Documentation Requirements

Category Proposal type Documentation
Simple Spending Proposal Procurement valued to $1,000 FMA001 or email or purchase order
Procurement valued at $1,001 to $2,000 FMA001 or email or purchase order. Details of the two verbal quotes obtained must also be provided.
Procurement valued at $2,001 to $9,999 FMA001 or purchase order. Details of the two verbal quotes obtained must also be provided.
Procurement valued at $10,000 to $49,000 Minute or FMA001 or purchase order accompanied by three written quotes
Travel - International Movement requisition
Travel - Domestic Email (prior to movement requisition)
Petty cash claim Petty cash claim form and supporting documentation where applicable
Taxi vouchers – voucher book Minute or FMA001 recording the conditions on use and total approved value for the voucher book. Approval to be sought before ordering the voucher book.
Taxi vouchers – individual vouchers Email or voucher book stub detailing trip destination and estimated trip cost.
Taxi/fuel card held by an Approver Receipt
Other taxi credit based cards and fuel cards Minute or FMA001 seeking a blanket approval on purchase of card recording total value for the life of the card or seeking approval on a periodical basis (ie annually) detailing total value of usage for a specified period
Credit card held by an Approver for transactions up to $1,000 Receipt
Credit card held by an Approver for transactions over $1,000 Receipt (accompanied by the supporting documentation outlined above for the relevant procurement threshold)
Grants awarded under existing grant programs Minute or FMA001 supported by grant application assessment and/or recommendation.
Travellers’ Emergency Loans (TELS)

Loans approved by Post – FMA001 or email

Loans approved by Canberra – FMA001 and/or email, CMIS chronology or cable

Other payment types not requiring procurement action (including recurring payments such as utilities payments, staff remuneration and entitlements, discretionary payments, administered payments other than TELS) Minute or FMA001 supported by the required documentation relevant to the payment type (see the relevant FMM guidance for the spending proposal type for details)
Internal charging journals (including payments for functions and tea/coffee, printing, computer leasing and paper /toner) Email or FMA001 or specially created request form
Complex Spending Proposals Procurement valued at $50,000 to $79,999 Minute or FMA001 or purchase order supported by a business case and risk assessment
Procurement valued at over $80,000 (other than construction services procurement) Minute or FMA001 supported by a business case and risk assessment plus any other documentation relevant to the appropriate stage in the Mandatory Procurement Procedures (see the department’s Procurement Manual for further details)
Procurement valued at over $9,000,000 for construction services Minute or FMA001 supported by a business case and risk assessment plus any other documentation relevant to the appropriate stage in the Mandatory Procurement Procedures(see the department’s Procurement Manual for further details)
One-off grants (grants that are not made under a DFAT grant program, including sponsorship and gifts of public money) Minute or FMA001 supported by a business case and risk assessment

Approver’s Agent Authorisations

  1. Approvers may authorise, in writing, agents to approve spending proposals on their behalf. See Chapter 2.6 for instructions on authorising an Approver's agent. Approver’s Agents must abide by the same conditions and limitations applied to the Approver’s delegation. An Approver’s Agent must not approve a spending proposal for the benefit of the Approver they are acting for or for themselves. Approvers can also attach further limitations to the agent's authorisation in financial and/or type of expenditure terms. Limits in expenditure terms are to be inclusive of any GST payable (ie represent total cost of the proposal). A sample authorisation is in the FMM Forms folder.
  2. Approver’s Agents must also adhere to the instructions above.

Procedure

Responsibility

Frequency/Conditions

Action

Approver’s Checklist

Only where an Approver can answer ‘yes’ to all the questions in the checklist can an approval be granted.

Is the spending proposal within the limits of my delegation or authorisation?
1. Do I have responsibility for the budget that will fund the proposal?
2.

Does the proposal fall within any financial or other limitation on my delegation or authorisation?

Refer to the Secretary’s financial delegations on the intranet.

3. Is there sufficient uncommitted budget available to cover the maximum amount payable under the spending proposal?
4. Am I confident that I am not a direct beneficiary of the proposal?
Does the spending proposal require payments in future years?
5. The spending proposal should be submitted to an official (eg SES officer) with both Regulation 9 and 10 delegations so that both issues can be considered in one document.
Does the spending proposal include a contingent liability?
6.

Regulation 10 approval of a contingent liability is not required if the Approver is satisfied the likelihood of the event occurring is remote (less than 5%) and the most probable expenditure that would need to be made, if the event occurred, would not be material (less than $5 million).

Check the Secretary’s FMA Act s44 delegations because not all Approvers have this power.

7. Contingent liabilities that do not fall into the “remote and not material” category must be approved by a Regulation 10 delegate before the arrangement is entered into.
Am I satisfied that the spending proposal is an efficient, economic, effective and ethical use of Commonwealth resources?
8. Will the outcomes from this spending proposal achieve the best value for the resources used?
9. Will the outcomes from this spending proposal meet the objectives of the department?
10. Is the proposal consistent with the APS Values and Code of Conduct?
11. Does the whole-of-life cost of the proposal and any associated risks represent value for money against the benefits expected?
Is the spending proposal consistent with Commonwealth and departmental policies and guidelines?
12. Has the relevant financial policy guidance outlined in the FMM been followed?
13. If the proposal is being funded from a special account, is the proposal consistent with the terms of the special account determination (see FMM Chapter 3)?
14.

Is the proposal consistent with other policies of the Commonwealth?

Other policies that may be relevant to the proposal are discussed in Finance’s ‘Financial Management Guidance No. 10 Guidance on Complying with Legislation and Government Policy in Procurement’ which can be found in the Finance Policies and Legislation section.

Guide to FMA Regulation 10

When Regulation 10 approval is required

Regulation 10 approval may be required when an arrangement:

Property leases

Approval of property leases by a Lands Acquisition Act (LAA) delegate does not remove the need for Regulation 10 approval. Likewise Regulation 10 approval does not remove the obligations under the LAA to:

When Regulation 10 approval is not required

The following spending proposals do not require FMA Regulation 10 approval:

Regulation 10 delegates

The Secretary’s financial delegation schedule lists the FMA Regulation 10 delegates and the limitations on their delegations. Details can be found on the intranet.

Arrangements that exceed the Secretary’s Regulation 10 delegation and proposals that contain private financing initiatives, must be referred to the Finance Minister (through the CFO) for approval.

Limits on Regulation 10 delegates

Duration of the spending proposal

The time limit applied to Regulation 10 delegations applies from the date Regulation 10 approval was given (ie not from the commencement date of the arrangement).

Relevant budget

Delegates can only approve proposals that are to be funded from budgets for which they have responsibility for. They may also consider proposals using funds formally devolved from other work areas or funding agreed through the BAR, ACF or CCF budget processes.

Type of spending proposal

Proposals that exceed the Forward Estimates period (ie the current year plus 3 years) can only be authorised if they fall into the expenditure categories authorised by the Minister for Foreign Affairs:

If the proposal does not fit into one of the above categories, the Minister’s agreement for the spending proposal must be sought before Regulation 10 approval can be provided.

Contingent liabilities

Where Regulation 10 approval is required, a DFAT delegate can approve arrangements that include contingent liabilities where:

Officials should undertake a risk assessment of the contingent liability (and seek legal advice if necessary) in order to determine the most probable expenditure before seeking the delegate’s approval.

Contingent liabilities that are outside the above limits must be sent to the CFO to review before further action can be taken.

Completing the FMA Regulation 10 templates

Regulation 10 approval request templates have been provided at the FMM Forms folder for:

The templates contain the information the Regulation 10 delegate should require to consider. However, the delegate may request further information that they consider necessary to allow them to evaluate the merits of the request. The following information is provided to assist in completing the templates.

Term of arrangement

Regulation 10 approval will only apply to the term of the arrangement specified. If extension clauses and/or option years are not included in the approval request they must reconsidered by an Approver before the extension or optional year clauses are invoked.

Calculating uncommitted budget

Departmental and Administered Appropriations

The Uncommitted Budget equals the Relevant Budget less Commitments where:

Special Accounts

The uncommitted budget calculated in accordance with the formula for special accounts ensures the uncommitted budget cannot exceed the current balance of the Special Account.

The Uncommitted Budget equals the balance of the Special Account less the net amount already allocated where:

Risk Assessments for contingent liabilities

A risk assessment of the contingent liabilities, conducted in accordance with the department’s Risk Management Toolkit, must be submitted to the delegate when seeking Regulation 10 approval for a contingent liability. The assessment will assist work areas to identify the probability of the contingency crystallising and the most probable scenario where the contingency would crystallise. That information will help calculate the most probable cost to the department if the contingency were to crystallise.

Compliance with Government policy on contingent liabilities

Contingent liabilities are commitments to pay arising from uncertain future events. Contingent liabilities include certain liability caps, guarantees, warranties, indemnities and letters of comfort (GWILOC). While the FMA Regulation 10 delegate is not approving the terms of any GWILOC, they must be assured that any GWILOC has been assessed against the relevant Government policy. A Contingent Liability Compliance Checklist is attached to the request minute for this purpose. At a minimum GWILOCs should include time limits, termination clauses, subrogation clauses and financial limits on liability. Where a GWILOC does not meet these requirements, an assurance must be given to the delegate that the reasons for not complying with the requirements are documented and have been retained. Detailed guidance, including a copy of the Contingent Liability Compliance Checklist and definitions for GWILOCs can be found in Chapter 15.7.

Reporting requirements

The reporting requirements are:

8.4 Entering into arrangements

Ministers are empowered to enter into arrangements under the Constitution. Section 44 of the FMA Act allows agency Chief Executives to commit the Commonwealth. The Secretary has delegated the power to enter into arrangements to agency officials.

Entering into an arrangement is a different action to approving a spending proposal.

Instructions

  1. Approvers must not enter into an arrangement unless the spending proposal has been approved under FMA Regulation 9 and Regulation 10 (where applicable).
  2. If the arrangement contains a guarantee, warranty, indemnity or letter of comfort (GWILOC), the inclusion of the instrument must be approved by a FMA Act section 44 delegate. The inclusion of a GWILOC in an arrangement should only be approved where:
    • the expected benefits, financial or otherwise, are sufficient to outweigh the level and cost of the risk which the Commonwealth would be assuming;
    • the proposal has been assessed in accordance with Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort issued by the Department of Finance and Deregulation (a ‘Contingent Liability Compliance Checklist’ is in Chapter 15 for this purpose); and
    • FMA Regulation 10 approval has been given for the contingent liability created by the instrument by the relevant delegate or the Approver determined Regulation 10 approval was not required because the contingent liability was considered to be remote and not material.
  3. Detailed guidance and definitions for GWILOCs can be found in Chapter 15.7.

Procedure

Responsibility

Frequency/Conditions

As required

Action

8.5 Procurement

Procurement is a process that enables the purchase, lease or rent of materials, services, equipment and construction. Procurement must be undertaken in accordance with current Commonwealth and departmental procurement and contracting policy.

Instructions

  1. Spending proposals must have regard for value for money considerations, the whole-of-life cost of the proposal is to be assessed against the benefits of the procurement. It is also to take into account any GST implications.
  2. Where a spending proposal is assessed and it has been determined that a risk assessment and probity review are warranted, risk management plans are to be developed and implemented for procurements assessed as medium or high risk.
  3. Competitive procurement processes must be used for procurement and potential suppliers must be treated in a non-discriminatory manner. Procurement activities must be conducted ethically and in accordance with the APS Values and Code of Conduct. The reasons for selecting a particular supplier must be documented.

Procurement Thresholds

  1. An appropriate procurement method must be used:
Value Procurement Method (Minimum Requirement)
Under $1,000 Not applicable
$1,001 to $9,999 Two verbal quotes;
$10,000 to $49,999 Three written quotes;
$50,000 to $79,999 Three written quotes supported by a business case and risk assessment
Over $80,000 (property and services) Covered Procurement under the Commonwealth Procurement Guidelines
Over $6,000,000 (construction services) Covered Procurement under the Commonwealth Procurement Guidelines

Prepayments

  1. If a supplier or contractor has offered a discount for paying for a good or service upfront before the goods or services are provided, consideration should be given as to whether the prepayment is efficient, economic, effective, ethical and represents value for money. Particularly, if the benefits of the prepayment outweigh all costs including associated risks. Costs include the interest foregone by the Government for accepting the prepayment which can be calculated using the Reserve Bank of Australia’s cash target rate published daily at http://www.rba.gov.au
  2. When considering a prepayment there is a need to safeguard the department’s interests by vetting a supplier’s financial viability and capacity to deliver the goods or services. It may be appropriate for the supplier to provide performance guarantees.

Special Considerations

  1. Staff undertaking procurement must do so in accordance with the DFAT Procurement Manual, the Department of Finance and Deregulation’s procurement guidance (including the Commonwealth Procurement Guidelines incorporating the Mandatory Procurement Procedures) available from their website at http://www.finance.gov.au/procurement/index.html and other procurement related Administrative Circulars issued from time to time.
  2. Particular attention should be given to ensuring that proposals do not seek to provide funding to a supplier where the supplier:
    • has been named in a report tabled in Parliament by the Director of Affirmative Action as a supplier not complying with the Equal Opportunity for Women in the Workplace Act 1999; or
    • in the opinion of the Director of Equal Opportunity for Women in the Workplace Act 1999, the supplier has failed to make changes in order to comply with the Act (refer to the Employer Performance section of the Equal Opportunity website at www.eowa.gov.au for further information); or
    • the supplier has been named in the consolidated list of reported terrorist persons and/or organisations available at http://www.dfat.gov.au/sanctions.
Contract reporting requirements
  1. All reportable contracts* or purchases must be published on AusTender within 42 days of entering into a contract or purchasing goods or services.
    * Any contract, agency agreement (eg MOU, Heads of Agreement) or purchase (including purchases not related to a written contract) with a GST inclusive value of $10,000 or more procured and used within Australian territory.

Procedure

Responsibility

Frequency/Conditions

Action

Employment related payments include remuneration and entitlement payments, and other allowances and special payments.

Instructions

Remuneration and Entitlement Payments

  1. All remuneration and entitlement payments to employees must be consistent with the relevant governing guidelines and in administrative circulars issued from time to time. Proposals to employ or promote staff under the Public Service Act do not require FMA Regulation 9 or Regulation 10 approval but they be consistent with section 44 of the FMA Act (ie an efficient, effective, economical and ethical use of resources not inconsistent with the policies of the Commonwealth):
    • Payments to A-based employees must be consistent with the Public Service Act, DFAT Collective Agreement and the Human Resources Manual.
    • Payments to Locally Engaged Staff (LES) must be consistent with the relevant LES Conditions of Service document.
  2. All advances of remuneration and entitlement payments (including travel allowances, representation, household maintenance and assistance) must be managed in accordance with Chapter 10 Advances.

Official Travel

  1. Any travel undertaken at government expense is subject to Commonwealth and departmental procurement guidelines and the DFAT travel policy. All travel and travel-related expenditure are governed by conditions of service guidelines outlined in the Collective Agreement, the Human Resources Manual and administrative circulars issued from time to time.
  2. The department uses a contracted travel service provider for ticketing for all departmental travel from Australia. This provider must be used for ticketing all departmental travel organised in Australia. The travel service provider may change from time to time.
  3. If contractual arrangements are entered into with a different travel service provider overseas, the arrangement must be in the department’s best interests and must have regard to departmental contracting guidelines.
  4. Frequent flyer points accrued as a result of official travel may only be used for official purposes. Wherever possible, frequent flyer point credits accumulated through official travel by an employee or family member should be used to offset the cost of any proposed itinerary.
  5. Official travel must be approved by an Approver or Approver's agent. Approvers may specify restrictions to be observed by their agents on the approval of travel. Approvers and agents must not approve their own travel or, in the case of Agents, for the Approver they are acting for.
  6. Travel must be acquitted in accordance with the DFAT travel policy.

Payments Pending Probate

  1. If, at the time of a person’s death, the Commonwealth owes an amount to that person, the CFO, AS FSB, STO Directors, HOMs/HOPs and Overseas Finance Managers may approve payment of the amount to the person whom they consider is eligible to receive the payment. For payments authorised under the Collective Agreement, the delegated Approvers are FAS CMD, AS RPB and Director PSS.
  2. In determining whether such a payment should be approved advice needs to be sought from the department’s legal office and a suitable method of payment needs to be determined. Moreover, in deciding who should be paid, regard must be given to the persons who are entitled to the property of the deceased person under the deceased person’s will or under the law relating to the disposition of the property of deceased persons.
  3. Any claim submitted by a representative of the deceased person should be dealt with as follows:
    • if it is established that the Commonwealth owes an amount to a deceased person the matter should be handled under these instructions; otherwise
    • it should be treated as a claim against the Commonwealth (see Chapter 8.10).

Payments in Special Circumstances relating to APS employment

  1. Under the Public Service Act 1999 section 73 an agency head can make payments relating to APS employment. Examples of types of payments that can be made under this section include payments in lieu of entitlements lost as a result of incorrect advice; the settlement of unfair termination claims; and the payment of compensation following a recommendation by the Merit Protection and Review Agency. Payments may be made under these provisions even where the payments would not be authorised by law or required to meet a legal liability.
  2. All requests for payments under the Public Service Act must be referred to Staffing Branch.
  3. All section 73 payments must be reported in the department’s annual financial statements so details of payments are to be forwarded to FPS.

Reimbursement of minor expenses related to the loss or damage of employee belongings

  1. In cases where an employee’s personal belongings have been lost or damaged through their employment, a payment under normal considerations of of the FMA Act section 44 (an efficient, effective and ethical use of Commonwealth resources) can be considered as a last resort.
  2. All other avenues of reimbursement (including insurance, payments in Special Circumstances relating to APS employment, other discretionary payments) must be ruled out before any payment under of the FMA Act section 44 is considered.
  3. DLB, FSB and Staffing Branch must be consulted on the appropriate avenue to reimburse costs where it is possible a precedent is being set or where the value exceeds $500.

Procedure

Responsibility

Frequency/Conditions

Action

8.7 Grants

Introduction

What is a grant?

FMA Regulation 3A(1) defines a grant as an arrangement for the provision of financial assistance by the Commonwealth:

However, there are various types of arrangements that may provide financial assistance, but are taken not to be grants. FMA Regulation 3A(2) provides a list of these, which includes certain compensation payments, act of grace payments, tax concessions or offsets, certain benefits payable under other legislation (such as payments of entitlements made through the Social Security (Administration) Act 1999), payments made to a State or a Territory under the Federal Financial Relations Act 2009 and payments treated by the Commonwealth as Official Development Assistance.

The grants policy framework

The objective of grants administration is to promote proper use of Commonwealth resources, through collaborating with the non-government sector, to achieve government policy outcomes.

The Commonwealth Grant Guidelines (CGGs) are a legislative instrument issued by the Finance Minister under section 64 of the FMA Act and FMA Regulation 7A. Regulation 7A requires staff members to act in accordance with the CGGs when performing duties in relation to grants administration.

Granting activities can take a variety of forms, including payments made: as a result of competitive or non-competitive selection processes; where particular criteria are satisfied; or on a one-off or ad hoc basis. The CGGs apply to all forms of granting activity.

Grants administration covers all processes involved in granting activities and includes: planning and design; selection and decision-making; the making of a grant; the management of a grant agreement; the ongoing relationship with grants recipients; reporting; and review and evaluation. It also covers a situation where another agency or third party is responsible for the administration of an agency’s granting activity.

References

Commonwealth Grants Guidelines

DFAT granting activity

DFAT grants include:

Instructions

Determining if a financial arrangement is a grant

1. Staff members must document their reasons, based on the substantive purpose and characteristics of the arrangement, for treating a financial arrangement as a grant and attach a copy of the reasons to the spending proposal.

Note: Refer to Finance Circular 2013/01: ‘Grants, Procurements and Other Financial Arrangements’, including the Financial Arrangements Matrix (Attachment B) and the Decision Tree for Financial Arrangements (Attachment C), for information on identifying common financial arrangements and determining which arrangement to use.

Sponsorship

2. Sponsorship can either be a grant or procurement:

Gifts of public money

3. A gift is an unconditional payment whereas other grants require the recipient to undertake expenditure for a specified purpose. Gifts of public money must be treated as grants under the CGGs.

Gifts of DFAT property

4. Gifts of DFAT property are not grants and must be managed in accordance with FMM 13.13.

‘Grants’ to FMA Act agencies

5. Even though ‘grants’ to FMA Act agencies are technically not grants under the CGGs (i.e. a grant is paid to a recipient external to the Commonwealth) staff members must treat these payments as grants to ensure transparency.

Procurement

6. Procurement is the acquisition of goods and services by DFAT for its own use or acquired on behalf of another agency or third party. Where a proposed financial arrangement includes grant and procurement elements (e.g. grant management services), staff members must identify the elements and manage them in accordance with the CGGs or the Commonwealth Procurement Rules.

Arrangements that are not DFAT grants

7. The following arrangements are not DFAT grants:

General requirements

8. When performing duties in relation to grants administration staff members must comply with relevant government policies and legislation, including:

Key principles for grant administration

9. Staff members must consider the following principles when administering grants:

Refer to the CGGs for more information.

Advisory boards

10. Members of advisory boards who provide advice that directly informs a grant approver’s decision about a grant are considered to be DFAT officials and must comply with the FMM and CGGs.

11. Grant administrators should ensure members of advisory boards are aware of their obligations under the CGGs, including declaring conflicts of interest.

Managing grant processes

Grant applications

12. Staff members should not seek information from grant applicants that is collected by other Commonwealth entities and is available to DFAT. In particular, agency staff mustnot request information provided to the Australian Charities and Not-for-profits Commission (ACNC) by an organisation regulated by them.

Staff members should use the search facility at acnc.gov.au to confirm whether an applicant is regulated by the ACNC.

Assessment of grant applications

13. Competitive, merit based selection processes should be used to allocate grants, unless the grant approver has specifically agreed otherwise.

14. It may be appropriate to use non-competitive processes when the number of service providers is very limited and these providers have an established record of delivering the grant funded activities. Where a non-competitive, merit based selection process is planned the reasons why this approach will be used must be documented and signed-off by the grant approver.

15. Grants applications (except for one-off grants) should be assessed against the grant eligibility and assessment criteria that are published on the DFAT web site.

16. There should be a clear separation between the assessment of applications and the approval of grants.

Approval of grants

17. Ministers, the Secretary and DFAT SES officers can approve grants under FMA Regulation 9, however, only the Secretary can approve a gift of public money.

18. A Minister should be requested to approve a grant when it is politically sensitive or the Minister or Cabinet decided that the grant should be provided. Refer to instructions on Supporting Ministers below.

19. Grant approvers must not approve a grant unless they are satisfied that the grant would be a ‘proper use’ of Commonwealth resources (i.e. efficient, effective, economical and ethical use that is not inconsistent with Commonwealth policies).

Refer to FMM 8 on approving spending proposals.

IRGP grants

20. Grant approvers must ensure that only grants are paid from administered IRGP funds. Procurement elements (e.g. provision of grant management services) that form part of the spending proposal can be paid from IRGP departmental funds but must not be paid from administered IRGP funds.

Legislative basis for one-off grants or gifts of public money

21. The legal authority to pay grants relating to public information services and public diplomacy (e.g. IRGP and AICC grants) is provided under 412.003 of FMA Regulation Schedule 1AA ‘Arrangements, Grants and Programs’.

22. Staff members preparing spending proposals for one-off grants or gifts of public money must consult with GCL-DLB to confirm if DFAT has the legal authority to pay the grant. GCL-DLB’s advice must be included in the spending proposal.

Recording the terms and basis of approval

23. Grant approvers must record the terms and basis of their approval in writing:

Preparing grant agreements

24. A grant agreement must be put in place for all DFAT grants, except for gifts of public money.

25. Grant agreement templates for simple/low risk and complex grants are available on the Intranet. GCL-DLB must be consulted if significant changes to the standard agreement are proposed or if intellectual property rights are likely to be an issue for consideration in the grant agreement.

26. Where the grant approver considers that the grant is so straightforward that the low risk agreement is unnecessary the agreement can take the form of a letter or offer or exchange of letters that includes the following minimum information:

GST issues

27. The GST status of the grant must be determined before the grant agreement is entered into.

28. The grant recipient is responsible for determining their GST obligations. Where a recipient is unsure they should be advised to seek professional advice.

29. The grant agreement must clearly state the amount to be paid and whether GST is included:

Reporting requirements

30. When determining whether the recipient needs to provide reports staff members must have regard to information collected by regulators, such as the ACNC. In particular, staff members must not request information that is provided to the ACNC by an organisation regulated by them.

31. Staff members should also apply the proportionality principle (i.e. the volume, detail and frequency of reporting requirements should be proportional to the risks involved and outcomes being sought).

32. Staff members should consider using the National Standard Chart of Accounts (SCOA) when requesting financial information from not-for-profit (NFP) organisations. Benefits in using the SCOA include:

Note: The SCOA and data dictionary is included as an attachment to Finance Circular 2011/03 ‘National Standard Chart of Accounts for reporting by not-for-profit organisations’.

33. Use of the SCOA should not be made mandatory for NFP organisations.

Confidentiality clauses

34. Staff members should ensure recipients are aware that details of grants published on the DFAT website must identify grant agreements that contains any special confidentiality provisions and, if so, provide the reasons why they are included.

Note: Information on reporting of confidentiality provisions is provided at: http://www.finance.gov.au/procurement/procurement-policy-and-guidance/buying/reporting-requirements/reporting-confidentiality/practice.html.

Acquittal and evaluation requirements

35. The recipient must acquit the grant, preferably within 60 days of completing the project.

36. The minimum requirement is for the grant recipient to provide a certification that the grant was spent in accordance with the grant agreement.

37. Financial acquittals (i.e. audited financial statements) should not be required for a low value / low risk grant or where the recipient provides annual audited financial statements to the ACNC.

38. The grant agreement should require the recipient to provide information against performance indicators to assist work areas evaluate the grant.

Entering into grants

39. Before entering into a grant agreement (or making a grant payment where there is no agreement), staff members must ensure they have the authority to do so and the proposal has been approved under FMA Regulations 9 and 10 (where necessary).

Paying a grant

40. A grant must not be paid unless there is a signed grant agreement place (except where the grant is a gift of public money) and the recipient has submitted a valid tax invoice.

41. A grant must only be paid to the organisation or individual that has been awarded the grant.

Grant reporting

Web site reporting

The CGGs require agencies to publish grants on their web site, unless the agency has an exemption from the Finance Minister.

42. If public reporting of a grant would be contrary to the Privacy Act 1988, other statutory requirements, or the specific terms of the grant agreement, staff members must publish as much information as legally possible and must document the reasons for not reporting for audit purposes.

43. Staff members must provide details of new grants to FPT-FSB using the Grants Reporting spreadsheet (via financial.management@dfat.gov.au) within 14 days of the grant agreement being signed by both parties.

Exemption from web site reporting

44. Work areas must consult with AS FSB to determine if an exemption from public reporting should be sought from the Finance Minister.

Reporting to Parliament

45. FPT-FSB must provide details of DFAT grants for reporting under in accordance with Senate Procedural Order 14 (Minchin Report).

Acquittal and evaluation

46. Staff members must ensure grants are properly acquitted (i.e. by certification or financial acquittal) in accordance with the grant agreement.

47. Where the recipient needs to repay grant money the work area must issue an invoice promptly and manage the debt in accordance with FMM Chapter 11.

48. Staff members must ensure recipients provide performance information and that grants are evaluated against grant program objectives.

Record keeping

49. Staff members should ensure that sufficient records are kept to identify:

Supporting Ministers (and Parliamentary Secretaries)

Minister as FMA Regulation 9 approver

Where a Minister exercises the role of a financial approver in relation to a grant, they must be satisfied that the grant would be a proper use of Commonwealth resources.

50. Staff members must ensure that the Minister is provided with written advice on the proposed grant before the Minister makes a decision. Advice on the proposed grant must, at a minimum:

Note: A checklist for briefing ministers on proposed grants is provided at Attachment C of Finance Circular 2013/02: ‘Australian Government Grants: Briefing and Reporting’.

Reporting grants approved by the Minister to be spent in the Minister’s electorate

51. Each time a Minister approves a grant in respect to his or her own electorate, the work area that advised the Minister on the merits of the grant must draft a letter to the Finance Minister for the Minister’s signature and provide a copy to FPT-FSB.

Note: A sample letter to the Finance Minister is provided at Attachment D of Finance Circular 2013/02: ‘Australian Government Grants: Briefing and Reporting’.

This requirement does not apply to Senators or to Members where grants are awarded Australia, state or region-wide on the basis of a formula, and any of those grants fall in the relevant Minister’s electorate.

Annual report of grants approved by the Minister against agency advice

The Minister must report annually (by 31 March for the preceding calendar year) to the Finance Minister on whether they have approved any grants which DFAT recommended be rejected and, if so, outline the basis of the approval for each grant.

52. Where the Minister is required to report a grant approved against DFAT’s advice the work area must provide details of the grant (e.g. a copy of the Ministerial Submission) to FPT-FSB promptly after the Minister’s decision.

53. FPT-FSB must draft the Minister’s annual report, including a ‘nil’ report, to the Finance Minister by 31 March.

Note: A sample report to the Finance Minister is provided at Attachment E of Finance Circular 2013/02: ‘Australian Government Grants: Briefing and Reporting’.

Grant program guidelines

54. Staff members amending the IRGP grant guidelines or developing guidelines for a new grant program must ensure:

55. Staff members must also prepare a risk assessment on the granting activities and grant guidelines and provide a copy of the draft guidelines and risk assessment to the CFO before consulting with Finance and PM&C.

Note: Refer to Estimates Memorandum 2011/19 ‘Process relating to the approval of new or revised grant program guidelines’ for information on the grant program guidelines approval process.

56. Approval of the grant guidelines depends on the outcome of the risk assessment:

Note: A better practice checklist of information which should be included in grant program guidelines is provided at Attachment A of Finance Circular 2013/02: ‘Australian Government Grants: Briefing and Reporting’.

8.8 Sponsorship

Overview

Sponsorship is a business relationship between DFAT and another agency, entity or organisation where there is a reciprocal exchange of benefits between both parties. In effect, in providing sponsorship a party is purchasing the right to associate their name, products or services with another party's service, product or activity.

Sponsorship received by DFAT can be in the form of direct cash subsidies or the provision of services or goods as “in-kind” or “contra” sponsorship. (Goods do not include items that would otherwise be recorded in gift registers.)

Sponsorship provided by DFAT must be treated either as procurement or as a grant under the Commonwealth Grant Guidelines (CGGs).  Refer to Chapter 8.7.

Sponsorship can include cash support or `in-kind' support, including the use of the department's logo. Sponsorship can  include gifts, donations or bequests given where there are documented conditions and an expectation of receiving benefits in return.

Instructions

  1. Sponsorship proposals are only to be undertaken where it is assessed to be appropriate, including where the potential benefits to the department outweigh the costs (including non-financial benefits) and where all risks to the department have been identified and considered.
  2. Action on sponsorship opportunities is not to proceed without the knowledge and support of the relevant SES officer or, where appropriate, the relevant Minister. Only once support is provided can sponsorship opportunities be advertised and/or discussions take place with potential sponsors or sponsorship recipients.
  3. When providing sponsorship, the process must be consistent with the Commonwealth Procurement Guidelines or the Commonwealth Grant Guidelines and must always be transparent. When sourcing sponsorship, it should provide potential sponsors with a genuine opportunity to do business with the department and where possible, it should ensure competition among the potential sponsors.
  4. All sponsorship arrangements must be formalised in writing and signed by both parties. The form of the agreement will depend on the complexity of the arrangements and consideration of the risks, including possible public perceptions of the arrangement. Arrangements for simple/low risk sponsorships can be formalised through an exchange of letters. Very low risk arrangements can be formalised by email.  A formal agreement must be put in place for complex and/or high risk arrangements.  All sponsorship is to be properly recorded and reported as instructed in DFAT’s Sponsorship Policy in attached.
  5. All sponsorship is to be properly recorded and reported as instructed in DFAT’s Sponsorship Policy in attached.

Procedures

Responsibility

Frequency/Conditions

Action

DFAT Sponsorship Policy

This policy has been written with reference to the Australian National Audit Office's (ANAO's) Better Practice Guide on the Management of Corporate Sponsorship 1997, the APS Conduct Guidelines, the NSW Independent Commission Against Corruption (ICAC) Sponsorship in the Public Sector Guide, May 2006, and the Commonwealth Grants Guidelines (CGGs).

What is Sponsorship?

Under this policy, sponsorship is defined as a business relationship between DFAT and another agency, entity or organisation where there is a reciprocal exchange of benefits between both parties. In effect, in providing sponsorship a party is purchasing the right to associate their name, products or services with another party's service, product or activity.

Sponsorship received by DFAT can be in the form of direct cash subsidies or the provision of services or goods as ‘in-kind’ or ‘contra’ sponsorship. (Goods do not include items that would otherwise be recorded in gift registers.) Sponsorship provided by DFAT can include cash support or ‘in-kind’ support, including the use of the department's logo.

Sponsorship provided by DFAT must be treated as either procurement or as a grant. Where the primary purpose of the sponsorship is to procure goods or services then it must be managed in accordance with the Commonwealth Procurement Guidelines, the DFAT Procurement Manual and the guidance on procurement in FMM 8.5. Where the primary purpose of the sponsorship is to provide financial assistance then it must be managed in accordance with the Commonwealth Grant Guidelines and the guidance on grants in FMM 8.7.

What is not Sponsorship?

Sponsorship does not include grants of money, goods or other benefits given for a specified purpose with no expectations of gaining reciprocal benefits. Similarly, sponsorship does not include gifts, donations or bequests that are given with no conditions and with no expectation of receiving benefits in return. It does not include the selling of advertising space, joint ventures or consultancies.

When is Sponsorship not appropriate?

There are a number of recognised benefits from sponsorship but there is also a cost in administering and managing sponsorship arrangements, ie legal advice, managing potential conflicts of interest and reporting, monitoring and evaluating sponsorship contracts. Where potential costs to the department outweigh the benefits (including non-financial benefits) of a sponsorship proposal, the sponsorship proposal should not be undertaken.

A risk assessment must be undertaken on all sponsorship proposals to ensure any risk to the department's reputation is considered. Areas of risk include, but may not be limited to:

the perceived or real risk of the sponsorship agreement being struck with a party whose activities are at odds with the department's and/or the Government's policies and/or objectives, including any of our international commitments;

Guidance on risk assessment can be found in the department's risk management toolkit. In assessing risks, work areas need to consult other relevant areas if the proposal crosses responsibilities. For example, Media Liaison Section needs to be consulted where the arrangement involves dealing with media organisations or media promotion.

The APS Code of Conduct, the Guidelines on Official Conduct of Public Servants and the DFAT Code of Conduct for Overseas Service, are the primary reference points when considering the probity of any proposed sponsorship. There must be no scope for conflicts of interest, actual or perceived. Nor can officials be, or be perceived to be, personally benefiting from any sponsorship arrangement.

In some cases at posts, the sponsorship wishes of attached departments or agencies may differ from the terms of this policy. While respecting the authority of the headquarters of other departments and agencies to make policy for their officers, Heads of Mission, as the senior Australian Government representative in their accredited countries, should ensure that DFAT's standards will apply to any activity carried out by or in the name of their post.

Sourcing Sponsorship

Sponsorship can be raised by calling for expressions of interest in sponsorship opportunities, by making direct approaches to potential sponsors or from sponsors making an unsolicited approach to the department. No matter what avenue is chosen for sourcing sponsorship, the process must always be transparent, it should provide potential sponsors with a genuine opportunity to do business with the department and where possible, it should ensure competition among the potential sponsors. Where DFAT is providing sponsorship then it must be managed in accordance with the relevant guidance/instruction for procurement or grants.

Generally sponsorship should be sought and granted by using broadly based, open processes that are not limited solely to invited sponsors. Competition between sponsors is best generated by publicly advertising sponsorship opportunities. However, it is recognised that it may not always be appropriate or practical to publicly advertise every sponsorship opportunity so in assessing what avenue to take, work areas are to consider:

Where it is deemed inappropriate to publicly advertise a sponsorship opportunity, direct approaches to a number of potential sponsors may be made. The number of approaches made should reflect the scale of the sponsorship proposal and the risks in excluding potential sponsors. To ensure transparency of process, work areas are to document the reasons why a direct approach was considered more suitable under the circumstances, their decision making process and their strategies for addressing any potential probity risks.

In sourcing sponsorship, work areas should provide potential sponsors with a proposal that outlines both the objective of the proposal and the possible benefits on offer. It should also include the criteria that will be used to assess their offers. Benefits on offer could possibly include, but may not be limited to, the following:

The sponsorship benefits that are to be offered should be commensurate with the level of sponsorship, and consistent with other sponsorship arrangements. It is also important that the benefits on offer are carefully valued to ensure that the department does not undersell itself and so work areas can ensure they are receiving `value for money' from the arrangement. It is expected that benefits offered will be met from the work area's existing resources.

In assessing an unsolicited approach from a potential sponsor, work areas are to consider whether:

If the unsolicited approach contains commercial-in-confidence material or ideas that could be subject to intellectual property rights, legal advice should be sought before seeking further expressions of interest from other parties.

Sponsorship Agreements

All sponsorship arrangements must be formalised in writing and signed by both parties. The form of the agreement will depend on whether DFAT is the sponsor, the value of the arrangement, the complexity of the arrangements and/or the risks, including possible public perceptions of the arrangement.

Arrangements for simple/low risk sponsorships can be formalised through an exchange of letters. Very low risk arrangements can be formalised by email.  A formal agreement must be put in place for complex and/or high risk arrangements.

When considering risk in relation to sponsorship consider the source and purpose of the sponsorship and the department’s reputation.  For example, sponsorship provided by a well-known company for $10,000 may in fact be low risk whereas a small amount from a dubious source may be judged as high risk and require the support of a formal contract. DLB is to be consulted at an early stage on the development of sponsorship agreements.

All agreements are, at a minimum, to address the following issues:

* Surplus sponsorship should be returned to the sponsor unless otherwise specified in the sponsorship agreement. If sponsorship is to be retained, when and where it can be used is to be specifically addressed in the agreement.

Work areas need to ensure that the sponsorship agreement does not impose or imply conditions that would limit, or appear to limit, the department's ability to carry out its functions fully and impartially. Sponsorship agreements should also clearly state that a sponsorship arrangement with the department is not a general endorsement of the organisation or its products by the department, and the arrangement must not be promoted or publicised as such.

Where sponsorship involves the department accepting in-kind sponsorship from a sponsor, for example the sponsor is providing a particular product, work areas should ensure that the product is of the type and quality that they require to meet their objectives/needs. Products should not be accepted just because they are offered free of charge.

Who can approve sponsorship?

Action on sponsorship opportunities is not to proceed without the knowledge and support of the relevant SES officer or, where appropriate, the relevant Minister. Only once support is granted can sponsorship opportunities be advertised and/or discussions take place with potential sponsors or sponsorship recipients.

Authorised signatories for sponsorship agreements are:

Financial management processes

Procurement and the financial management of sponsorship arrangements are to be in accordance with the requirements of the FMA Act and Regulations, the Commonwealth Procurement Guidelines, the Commonwealth Grant Guidelines, the department's FMM, the DFAT Procurement Manual.

DFAT receiving sponsorship

Sponsorship obtained in relation to departmental activities/projects may be retained by work areas under FMA Act section 31. There is no retention authority for sponsorship obtained for administered projects. Sponsorship can be retained for activities managed in a special account (eg Australian participation at a World Exposition) only if the special account determination provides for it.

Cash sponsorship

Where DFAT is receiving cash sponsorship in Australia and the sponsorship is a taxable supply under GST legislation, a tax invoice must be issued to the sponsor so that the department meets its GST obligations. If cash is being provided, sponsors need to gross-up the payment to include GST so as to maintain the value of the sponsorship. The tax invoice is to be created using tax code G1.

A taxable supply for GST purposes is a supply for consideration made in the course of carrying on a business which is connected with Australia and the business is registered or required to be registered for GST. Where sponsorship is received by an overseas post and the sponsorship doesn't meet the requirements of a taxable supply, GST does not apply. In this instance tax code GZ should be used in raising the invoice to record the incoming revenue.

When received, cash sponsorship for departmental activities/projects is to be receipted against general ledger code 13045 as an eligible receipt under FMA Act section 31. The Financial Management inbox must be contacted for advice on the appropriate treatment of sponsorship moneys obtained in relation to an administered project.

In-kind sponsorship

In-kind sponsorship must be accounted for in accordance with current Australian accounting standards. The standard requires that contributed services to be recognised only when:

Where in-kind sponsorship is to be recognised a tax invoice must be issued to the sponsor for the total GST inclusive market value using tax code G1. In addition, where the sponsor is registered for GST, DFAT would be entitled to receive a tax invoice from the sponsor to claim back the GST component as there would generally be a taxable supply by both the sponsor and DFAT. The Financial Management inbox should be contacted for advice on the appropriate accounting treatment for recognising the use of the in-kind sponsorship in SAP.

Reporting requirements

All sponsorship received by the department is to be reported through the End of Month processes (schedule 19). In addition, if cash sponsorship is received upfront but the project crosses financial years, the unused cash must be recorded at the End of the Financial Year as unearned income. If not, the receiving work area will need to find offsets in their subsequent year budget.

Where surplus cash sponsorship is to be returned to the sponsor at the end of the term of the agreement and for one reason or another there will be a delay in making the payment, the surplus sponsorship must be recorded in the End of Month schedules as an `accrued expense' (schedule 6).

For large projects or where acquittal reporting is complex, it may be prudent for work areas to seek advice from the SAP Helpdesk on how best to separate sponsorship transactions from other receipts and expenditure (eg. through the use of a specific cost object, such as an internal order or cost centre, to represent the project).

DFAT providing sponsorship

When processing a cash payment, the payment needs to be grossed up to include GST. The expenditure is to be attributed to general ledger code 26015 (for procurement sponsorship) or general ledger code 28565 (for sponsorship grants) and tax code A1 if the entity is registered for GST and issues a tax invoice. If it is made to an overseas entity and the sponsorship doesn't meet the requirements of a taxable supply, tax code AZ is to be used. If for any reason moneys are to be returned, a debt must be raised and an invoice issued to the receiving party in accordance with the Financial Management Manual (FMM) Chapter 11.

If providing in-kind sponsorship in Australia, the goods or service must be valued at its fair/market value in accordance with current Australian accounting standards and the other party must invoice the department for the total GST-inclusive market value. In addition, the entity receiving the sponsorship would be entitled to receive a tax invoice from DFAT to claim back the GST component as there would generally be a taxable supply by both DFAT and the sponsor. The Financial Management Helpdesk should be contacted for advice on the appropriate accounting treatment for recognising the supply of the in-kind sponsorship in SAP.

Management/Evaluation

In addition to ensuring performance indicators are being met in the on-going management of sponsorship arrangements, work areas must also review the terms of the arrangement on an on-going basis. Where there is any change to the terms of an agreement, the amendments to that agreement are to be documented. For example, if payment terms or payment methods are to differ from what has been originally agreed, this change is to be documented. If the agreement is in the form of a contract, the contract is to be revised to reflect the change in terms.

At times the department is requested to provide details of sponsorship. Work areas must be in a position to provide an assessment of the sponsorship arrangements for which they are responsible when requested. Information required could include, but may not be limited to, sponsorship benefits, budgets and expenditure, management and administration costs, and the effectiveness of the agreement in meeting objectives.

For both public accountability and internal planning purposes, work areas are to assess the success of sponsorship arrangements against the objectives they set for them at the end of the sponsorship agreement. The method of assessment will depend on the size of the sponsorship budget, the scale of the sponsored activity and the risks involved. At a minimum work areas are to assess:

8.9 Administered Payments

Overview

Instructions

  1. An administered activity must be approved and budget funding must be granted before making any payments. Administered funds are appropriated to an Outcome for activities that have been approved by the Government. A departmental official must not approve:
    • A payment to a new organisation or for a new activity that has not been approved by the Government
    • A payment to an approved organisation for a purpose (eg contributions to an organisation’s building fund) that was not agreed by the Government
    • Redirect the repayment of money from an organisation to another purpose that was not agreed by the Government (eg an organisation repays Australia’s share of its operating surplus)
  2. Administered payments are subject to the same spending proposal requirements and approvals as other proposals (see FMM Chapter 8.1-8.4).

Government approval for administered payments/activities

  1. Government approval for a new or amended administered payment or activity must be sought through the budget processes as a New Policy Proposal or from the Prime Minister outside of those processes. The Prime Minister will only consider a proposal outside of the normal budget processes if it is urgent and was unforseen.
  2. The government’s approval is also required to offset new or future payments with repayments of administered payments from previous financial years before agreeing to any arrangements.
  3. In seeking approval for a new or amended Administered payment or activity (including using refunds of payments from previous financial years to offset new or future payments), the following requirements are to be met.
    • The proposal must be consistent with the department's Outcomes framework
    • The Chief Finance Officer (CFO) must be consulted before making any submission to Government
    • The proposal must be fully costed, ensuring that it is realistic and consistent with instruction from the Department of Finance and Deregulation (available from FMB - Budget Development Section)
    • The submission and costing is to be cleared with the CFO.

Administered budget funding

  1. Administered budget funding must be obtained before agreeing to or making an administered payment. Administered budget funding is subject to the same external budgeting requirements as the department's operating budget. Budget funding is considered by the Government biannually.

Advance to the Minister for Finance

  1. Additional funding for existing items, or new items approved by the Prime Minister, required outside the normal budget processes is provided from the appropriation through an Advance to the Finance Minister (AFM). AFM applications are considered by the Finance Minister where:
    • The need for the funding is urgent
    • The funding need was unforeseen or has arisen due to erroneous omission or understatement
    • There are insufficient funds against the Outcome to make the payment
    • Funding for new activities outside the budget processes must be approved by the Prime Minister before the Finance Minister can consider any funding request

Redirecting Administered Appropriations

  1. The department can redirect administered funding within an Outcome for activities or purposes that have been approved by the Government. For example, money appropriated to make contributions to International Organisations under Outcome 1 to the United Nations can be redirected to supplement a shortfall in funds to pay Australia’s contribution to the OECD as already agreed to by the government under Outcome 1. FMB (Budget Development Section) is to be advised of budget shortfalls or surpluses for administered payments or activities as soon as they are known.

Administered Appropriations Lapse

  1. Administered appropriations lapse at the end of the financial year. Where an Administered expense has been incurred but the payment has not been issued prior to the end of the financial year (eg an invoice posted in June that has a payment date in July) the Finance Minister may approve the retention of funds under the Appropriation Acts to facilitate the payment. Details of accrued payments are to be provided to FMB (Budget Development Section) on request.
  2. Administered payments reimbursed or repaid in a subsequent financial year also lapse. For example a repayment of an administered payment made in the last financial year cannot be retained in this financial year (see FMM Chapter 3.5 refers).

Travellers’ Emergency Loans Scheme (TELs)

  1. The Traveller’s Emergency Loan Scheme (TELS) issues loans to Australian travellers on a case-by-case basis and only if all attempts to obtain financial assistance from other sources, such as family, friends and other acquaintances have been exhausted. All TELS issued must be approved by the relevant Approver or Approver's Agent and be issued in accordance with instruction provided in the Consular Handbook.

Consular Emergency Services (CES)

  1. The Consular Emergency Services is a facility under which the department can organise services to be provided to Australian travellers overseas in an emergency, where the person is assessed as being in need or whose welfare is under threat but do not have the legal capacity to enter into a legally binding agreement or for whom there is no person with the legal capacity to enter into a legally binding agreement on their behalf (as required in the case of a TEL). For example, Consular Emergency Services funding can be used to fund the repatriation of a minor where an adult cannot be found to take responsibility or to fund the medical evacuation of an unconscious person with life-threatening injuries. The use of the Consular Emergency Services facility must be approved by the relevant Approver or Approver’s Agent and be issued in accordance with instruction provided in the Consular Handbook.

Procedures

Responsibility

Frequency/Conditions

Action

8.10 Discretionary Payments

Discretionary payments include:

The flowchart below provides guidance on what the appropriate discretionary payment may be in a particular circumstance. Payments under s.73 of the PS Act and s.44 of the FMA Act are covered in Chapter 8.6.

Graphic of flowchart showing several circumstances for discretionary grants to be paid. First type of claim: claim received from member of the public; seek legal advice regarding liability. If there is no legal liability but there are special circumstances then it is 'Act of grace' or 'Ex-gratia' grant. If the department could be found liable then it is CDDA or litigation or settlement under Legal Services Directions. Second type of claim: Claim from PS Act employees including LES; Ascertain if insurance coverage available. Manage in accordance with insurer's instructions, or if the claim is not covered by insurance then litigation or settlement under Legal Services Directions, Public Service Act s73 or FMA Act s44

Instructions

Payments made under the Legal Services Direction (Claims against the Commonwealth)

  1. Only claims against the Commonwealth based on a legal right due to the actions or inactions of the Department can be considered under the principles of the Legal Services Directions issued by the Attorney-General.
  2. Claimants must not be given an indication of whether the claim will be supported. All claims must be referred to DLB to ensure that claims are handled in accordance with the Legal Services Directions.
  3. DLB will liaise with the departmental Comcover Liaison Officer to ascertain if the claim is covered under the department’s insurance policy or whether it needs to be reported to Comcover.
  4. For claims in excess of $25,000, advice needs to be sought from the Australian Government Solicitor or a private legal practitioner to determine whether the proposal for a negotiated settlement:
    • Is in accordance with legal principle and practice
    • Makes efficient and effective use of public money
    • Is publicly defensible.
  5. Payments made under the Legal Services Directions are to be approved by an Approver responsible for the relevant work unit budget funding the payment after consultation with the DLB.
  6. Payments made under a negotiated settlement must be made without any admission of liability and without prejudice to the rights of the Commonwealth.
  7. An official must not enter into an arrangement to forgo the department’s right to recover part of a debt as part of a proposed settlement unless the Finance Minister’s delegate has approved the waiving of the debt (see FMM Chapter 11.8).
  8. If claims are unlikely to succeed but the claimant has suffered detriment the matter should be considered under the Compensation for Detriment caused by Defective Administration scheme.

Compensation for Detriment caused by Defective Administration (CDDA)

  1. The Commonwealth scheme for the Compensation for Detriment caused by Defective Administration (CDDA) allows the department to compensate persons who have been adversely affected by the ‘defective’ actions or inaction of the department, but who have no other avenue to seek redress. The scheme provides compensation where no legal liability exists. Payments are approved on the grounds of equity and fairness.
  2. CDDA payments are approved by the Minister for Foreign Affairs (or a person authorised by the Minister) under section 61 of the Constitution. The Approvers for claim determinations are as follows:
Value Approver
For claims of $1,000 and under Director ADL
For claims of $1,001 to $10,000 Legal Adviser, Legal Branch
For claims of $10,001 to $50,000 FAS ILD
For claims of $50,001 to $200,000 Secretary
For claims over $200,000 Minister for Foreign Affairs
  1. All potential claims against the department must be reported as soon as possible to DLB. Work units will need to nominate a suitable officer to assist DLB to examine the circumstances of th e claim.
  2. All claim payments are to be reported in the department’s Annual Financial Statements.

Act of Grace Payments

  1. Act of grace payments are special gifts of money that may be made in any of the following circumstances:
    • To ensure consistency and equity in the impact of government activities
    • If legislation produces unintended, anomalous, inequitable or unacceptable results
    • Where a matter is not covered by legislation, but such legislation is intended to be introduced and the particular case warrants the retrospective application
    • Where there is a moral obligation on the Commonwealth to make a payment
    • As a remedy of last resort
  2. Act of grace payments are made under section 33 of the FMA Act and can only be approved by the Finance Minister or his/her delegate in the Department of Finance and Deregulation. All act of grace payment requests must be submitted to the CFO, for forwarding to the Department of Finance and Deregulation, and be accompanied by a statement of facts as background to the request and a case outlining whether the department supports the request.
  3. Act of grace payments under the Public Service Act are to be referred to Staffing Branch.
  4. All act of grace payments must be reported in the Department’s financial statements.

Ex-gratia Payments

  1. An ex-gratia payment is a payment made as a favour rather than a right. Such payments allow the Australian Government to deliver financial relief at short notice and are generally used as a mechanism of last resort.
  2. Only the Prime Minister or Cabinet can approve ex-gratia payments under section 61 of the Constitution. All requests to the Prime Minister or Cabinet for ex-gratia payments must be prepared in consultation with the CFO.
  3. All ex-gratia payments must be reported in the Department’s financial statements.

Procedure

Responsibility

Frequency/Conditions

Action

8.11 Certification

Instructions

  1. Unless the CFO agrees otherwise, the Finance Manager must appoint, in writing, a Certifying Official to certify payments before they are issued. Refer to FMM Chapter 2 for instructions on appointments.
  2. The Finance Manager may appoint, in writing, additional and/or alternate Certifying Officials where there is a need to do so.
  3. The Finance Manager must undertake and document a risk assessment prior to appointing a Certifying Official who is also appointed the Cashier.
  4. The Finance Manager should provide a letter of instruction to the Certifying Official upon his/her appointment outlining the duties and responsibilities of the function. See Forms and Template for a sample letter of instruction.
  5. Certifying Officials must certify claims for payment in accordance with the instructions in this Manual. Certification involves the confirmation of details of payment (eg the goods / services have been delivered in accordance with the agreement).
    • Certifying Officials are not responsible for the quality of an approval. That is, they may not refuse to certify an account for payment because of doubts they may have regarding the approval of the expenditure. Any such doubts should be brought to the attention of the relevant Approver or Finance Manager and documented. Certifying Officials like all staff, have a duty at common law to report any action or activity that they suspect may be in breach of the law.
  6. Evidence of certification at posts should be maintained for audit inspection as follows:
    • At posts by a Certifying Official signing the Payment Proposal List
    • In Australia certification occurs through approving the payment request in PTWS or directly in SAP. Certification in PTWS and SAP is controlled and identified through user access.
  7. Certifying Officials may certify payments to themselves provided that the payment was not approved by them. Refer to Chapter 8.3 for instructions on approval.
  8. To assist the Certifying Official to efficiently determine whether an account may be paid, Finance Managers could adopt a procedure where the receipt of goods and services is indicated on the face of FMA Forms or invoices.

Procedures

Responsibility

Frequency/Conditions

Action

Finance Managers
Certifying Officials

8.12 Making Payments

Instructions

Payments using personal funds

  1. Officials should only use personal funds to pay for official expenses in exceptional circumstances.

Payments from a cash advance

  1. An employee appointed as the Advance Holder may make payments in accordance with the purpose of the advance.
  2. Advance Holders must ensure that claims have been approved by an Approver/Approver's agent prior to making a payment from a cash advance.
  3. Refer to FMM Chapter 10 for further instructions on advances.

Payments from an official bank account

  1. An employee appointed as a Funds Controller may make payments from an official bank account.
  2. Only verified claims may be paid from an official bank account (refer to Chapter 8.11).
  3. It may be necessary for Funds Controllers to seek confirmation and/or documentation from the sending post for IPOST payments (refer to Chapter 8.15) to confirm that approval and certification have been conducted or where there are concerns about any of the details of the payment.
  4. Where direct debit facilities are used, approval by the Finance Manager (as the drawing right holder) of the use of the direct debit facility fulfils the requirements of approval and certification for the purposes of this Section. Refer to Chapter 7.3 for instructions on electronic payments, including direct debit facilities.
  5. Payments from an official bank account should be made on the due date.
  6. Where an overpayment occurs the supplier becomes a debtor and is subject to normal debt recovery action as described in Chapter 11, Debts.

Payment terms

  1. Commonwealth's standard payment terms are 30 days from the date of receipt of a correctly rendered invoice.

Australian small businesses

  1. Work areas must comply with the Government's policy for on time payment of procurement contracts with Australian small businesses. A 'small business' is an enterprise employing less than the FTE of 20 persons on the day the agreement is entered into.
  2. For payments up to $5 million (GST inclusive) to small business, work areas must adopt maximum payment terms 'not exceeding 30 days' from the date of receipt of a correctly rendered invoice.
  3. For written procurement contracts with small business valued up to $1 million (GST inclusive), interest must be paid on late payments where the amount of interest accrued is greater than $10:
    • Invoice paid between 31 and 60 days after receipt: the work area must pay interest on request from the supplier; and
    • Invoice paid more than 60 days after receipt: the work area must calculate and pay the interest (ie the supplier is not required to submit an invoice) to the supplier.

Payment of interest

  1. The interest payable is calculated using the formula:
    • Unpaid amount x Daily General Interest Charge rate x the number of days from the day after the payment was due up to and including the day the payment is made.
  2. The Australia Business website has an online Late Payment Interest Calculator. The Daily General Interest Charge rate is available from the ATO website.
  3. To pay the late payment interest work areas in Australia should enter the payment through PTWS and posts should process the payment directly through SAP.
  4. Late payment interest must be debited to SAP expense GL code 22507 (Small Business Late Payments Penalty) and the work area's cost centre. GST is not payable on interest when an invoice is issued for the interest only or the work area initiates the payment of interest. Tax code A3 should be used when processing these payments through SAP or PTWS

Policy exemptions

  1. The Government policy for on time payment of Australian small businesses does not apply to:
    • Procurement of real property including leases and licences;
    • Procurements funded from administered appropriations;
    • Procurements where the nature of the goods and services, or the structure of the procurement, would make it impractical for the policy to be applied. This might be the case, for example, where the procurement occurs under standard terms and conditions put forward by the contractor rather than the agency; or
    • Procurements where prior to 1 September 2012 a written contract or standing offer was already in place or in the process of being negotiated.

Procedure

Responsibility

Frequency/Conditions

Action

Payments in Australia
Payments Overseas

8.13 Requests for Procurement and Payment at Other Locations - Form FMA 001

Instructions

Sending Office or Post

  1. An office or post may request another office or post to undertake procurement and payment action on its behalf using a form FMA 001. The request must be approved by an Approver or Approver’s agent at the sending location. This approval will:
    • Specify the maximum amount to be spent
    • Confirm that the spending proposal is an efficient, effective and ethical use of resources not inconsistent with the policies of the Commonwealth
  2. Where an asset is being procured through another location, the sending location should create an asset master record, and record the asset number (instead of the general ledger code) on the form FMA 001.

Receiving Office or Post

  1. The receiving office or post must follow the instructions in this Section relating to procurement and payments and is responsible for:
    • Ensuring that procurement action is in accordance with the procurement guidelines and the terms of the approval from the sending office or post
    • The certification and payment of the account

Procedure

Responsibility

Frequency/Conditions

Action

Sending Office or Post
Receiving Office or Post

8.14 Form FMA 003

This form is to be used for the procurement of ICT equipment funded through the BAR process. Approved funds are managed by ISB.

Instructions

Requesting Office or Post

  1. An office or post must have approved CMP funding via the BAR process before procurement can be undertaken. Although the fund is managed by IPB, the asset must be managed by the post in accordance with the post’s stocktake process
  2. Prior to using this form, the office or post must liaise with Client Services Section (CSS) - GSC to confirm the approved funds, equipment type, etc
  3. The office or post is to raise a FMA003 with all the required fields completed, especially the SAP asset shells created. The form is to be approved by a Finance Manager / or other Approver.
  4. The office or post can only proceed with an IT purchase locally or via Canberra (Multiplex) when CSS approval is granted on the FMA003.

Client Services Section (CSS), IPB

  1. Approval for ICT equipment must be provided be CSS via FMA003 before equipment can be purchased.

Procedure

Responsibility

Frequency/Conditions

Action

Requesting Office or Post
Client Services Section (CSS), IPB

8.15 Request for Payment at Other Locations - IPOST and Global Banker

Instructions

  1. An office or post may request another office or post to make a payment on its behalf using the SAP inter-post (IPOST) facility or the global banker in accordance with SAP instructions. The sending location is to provide documentation on request to the receiving location.
  2. Internal payments, where expenditure is made from one cost centre and receipted to another cost centre, should be approved by an Approver/Approver's agent.
  3. Where an asset is purchased through another location, the sending location should create an asset master record.
  4. Where an office or post requires another office or post to undertake procurement action on its behalf the instructions in FMM Chapter 8.13 are applicable.

Procedure

Responsibility

Frequency/Conditions

Action

Sending Office or Post
Receiving Office or Post

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