6. Official Bank Accounts and Treasury Management

6.1 Introduction

This Chapter contains instructions for the operation and management of the department’s official bank accounts, including for the opening, operation, reconciliation and closing of accounts. It also contains instructions on cash and treasury management.

The number of official bank accounts maintained by the department should be kept to the minimum required for effective financial management as there are efficiencies to be gained from a smaller number of accounts.

Overseas Finance Managers must ensure that the terms and conditions attached to bank accounts meet the department's requirements and that adequate controls are in place to regulate bank account use and prevent fraud.

6.2 Opening an Official Bank Account

Instructions

  1. The number of official bank accounts should be kept to the minimum required for effective financial management. All posts, wherever possible, should maintain only one local currency bank account.
  2. The CFO, as the Secretary’s delegate under FMA Act section 9, must approve the opening of DFAT bank accounts in Australia and overseas.
  3. Transactions on the new bank account (including payments and bank reconciliations) cannot be posted in SAP until the bank account has been created.

In Australia

  1. In Australia, the department has established all bank accounts necessary for day-to-day operations in accordance with Finance Agency Banking Guidelines.
  2. Official accounts opened and maintained in Australia that are not solely used as settlement accounts (ie bank accounts which always have a zero overnight balance) must include the words "Official Departmental" or "Official Administered Payments" or "Official Administered Receipts in their title.

At Overseas Posts

  1. Finance Managers must ensure that the word “Official” and the post name is included in the title of all official bank accounts (eg Australian Embassy Washington Official Account).
  2. Finance Managers, as the Secretary’s delegate under FMA Act section 8 can enter into arrangements with the bank for the conduct of day to day business.
  3. Finance Managers must not enter into banking arrangements where interest payable by the bank is used to offset bank charges payable by the post.
  4. When the account has been opened, send the following bank account details to the CFO by cable:
    • Name of the bank
    • Branch name and address
    • Account name and number
    • IBAN or routing number (if applicable)
    • SWIFT Bank Identification Code (BIC) code (if applicable)
    • Currency
    • Date the bank account was opened

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6.3 Selecting a Provider for Banking Services

Instructions

  1. Procurement must be undertaken in accordance with Commonwealth and departmental procurement and contracting policy. The FMA Act and Regulations place certain conditions on the approval of spending proposals. Officials undertaking procurement decisions should be familiar with the conditions and instructions outlined in the DFAT Procurement Manual.

In Australia

  1. The CFO is responsible for undertaking procurement processes for banking services.

At Overseas Posts

  1. The Finance Manager is required to refer to the DFAT Procurement Manual and undertake relevant procurement processes where appropriate.

Procedures

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6.4 Closing an Official Bank Account

Instructions

  1. The CFO must approve the closure of any DFAT bank account.
  2. Provide holders of unpresented cheques adequate notice of the impending account closure.
  3. Do not make payments from or deposits to the account after formally requesting the bank to close the account.
  4. Cancel all cheque and deposit books or other actionable procedures (direct credits and payments) and retain for audit inspection.
  5. In Australia, transfer the balance of the account to another DFAT departmental or administered bank account or the Official Public Account.
  6. For overseas posts, transfer the balance of the account to another account at post of the same currency. If this is not possible the Finance Manager should seek advice from the CFO.
  7. Obtain a final bank statement and complete a reconciliation to confirm that the account balance is zero, ensuring the reconciliation includes any bank fees and charges. The final reconciliation of the account is to be held on file.
  8. For overseas posts, the Finance Manager must notify the CFO by cable of the actual account closure within 7 days of closing the account.

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6.5 Overdrafts

This Section covers two types of overdrafts:

Instructions

  1. The work area is responsible for all costs and charges, including interest payable, arising from an overdraft drawing or facility.

Overdraft drawing

  1. Finance Managers must ensure any overdraft drawings are repaid within 30 days.

Overdraft facility

  1. The Finance Manager must obtain the CFO’s approval, as the Secretary’s delegate under FMA Act section 38(1), before entering into an agreement with a bank to establish an overdraft.
  2. The Finance Manager must ensure:
    • An overdraft facility must not exceed AUD 1 million.
    • The overdraft agreement requires the department to repay any money within 90 days.
    • The overdraft facility is only used in situations where funds cannot be transferred from Australia in time for a specific payment (eg the post must make an immediate payment for a consular crisis).
  3. The CFO must:
    • Advise Finance within one week of exercising the delegation.
    • Ensure the total amount of overdraft facilities do not exceed AUD 10 million.
    • Review overdraft facilities, at least annually, and be satisfied of their continuing need.

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6.6 Banking of Money

Instructions

  1. Only deposit public money into an official bank account.  See Definition of Terms for a definition of public money.

  2. The Finance Manager must issue instructions to the Cashier or the Sub-cashier on the frequency of banking money.
  3. Officials must bank money as soon as practicable, but no later than the next banking day or a banking day approved by the Finance Manager, as the Secretary’s delegate under FMA Regulation 17(2).  When deciding a banking day, the Finance Manager should take account of the following factors:
    • Banking should be carried out at least once per week.
    • The amount of collections.
    • Local conditions such as general security conditions, suitable storage facilities, available transport, staff resources, banking hours, the location of the bank, local banking practice, etc
  4. Post may seek an exemption where it is not practical for banking to be completed weekly. A business case should be sent by cable to AS FSB, explaining why the minimum banking requirements are not appropriate.
  5. A Sub-cashier cannot directly bank their collections unless the Finance Manager has approved in writing. Conditions that could lead to this decision are:
    • Where the physical transfer of money to the Cashier involves great risk or difficulty.
    • The Finance Manager is satisfied that no additional risk is incurred in the direct banking process.
    • Adequate controls are in place to ensure that the Sub-cashier’s receipts and the bank deposit slips reconcile.
    • Adequate controls are introduced to ensure that receipts collected by the Sub-cashier are promptly brought to account in SAP.
  6. Prior to banking collections a reconciliation of money received, receipts issued and receipts entered into SAP should be undertaken.  Any discrepancies should be noted by the Cashier's/Sub-cashier's supervisor and followed up promptly.
  7. Record receipts in SAP no later than one working day after the money has been banked.
  8. For instructions on the implementation and use of electronic receipting facilities see FMM Chapter 5.6.

Procedure

Responsibility

Frequency/Conditions

Action

Banking by Cashier or Sub-Cashier
Banking by Another Employee

6.7 Withdrawal of Money

Instructions

  1. Money must not withdraw from a bank unless instructed by an official holding a drawing right to make a payment of money except to:
    • Transfer money between official bank accounts.
    • Establish or reimburse a cash advance.
  2. The Finance Manager must appoint signing officials/electronic signatories in writing. Refer to Chapter 2.
  3. All requests to withdraw money from an official account require the signatures (written or via electronic means) of two officials appointed as ‘cheque signatories’/'electronic signatories'. At least one of the signatories must be an A-based official.
  4. Where electronic payment instructions are sent to an official bank account, two electronic signatures are required. If the bank’s system only provides for one signature, approval to use the system must be sought from the CFO.
  5. Officials must not withdraw money from an official bank account unless the account has sufficient funds or overdraft facility.
  6. If a small post (that is a Category IV post) considers that it would be more operationally efficient to appoint LES as both of the cheque/electronic signatories they must seek the agreement of the CFO to do so. Before the submission is forwarded to CFO the post should have thoroughly examined, tested and documented the effects such a change would have on the integrity of the financial controls operating at the post. The proposal should include a recommendation from the HOM, and set an upper monetary limit to be imposed on the value of the cheques/electronic payments that can be signed by the LES appointed signatories.
  7. For instructions on the implementation and use of electronic withdrawal facilities refer to FMM Chapter 7.

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6.8 Bank Charges and Interest

Instructions

  1. All bank charges and interest paid and bank interest received must be accurately and promptly recorded in SAP.
  2. Bank interest received is administered revenue and cannot be retained by the department.
  3. All interest payable and other charges arising from post's bank account including overdraft facilities approved by the CFO must be debited to the post's cost centre.

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6.9 Funding of Official Bank Accounts

Instructions

  1. Overseas Finance Managers must ensure cash requirements are accurately forecast and cash is requested on a weekly basis unless local banking arrangements make such a frequency prohibitively inefficient.
  2. The CFO must ensure departmental and administered funds are drawn down, in accordance with Finance’s guidelines, to meet the department’s cash requirements.
  3. The CFO is to ensure the departmental cash balance is maintained at the working cash level agreed with Finance.

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6.10 Reconciliation of Bank Accounts

Instructions

  1. Unless the CFO approves otherwise two officials must be involved in the bank reconciliation process:
    • Bank Reconciliation official reconciles the bank account and prepares the reconciliation reports.
    • Bank Reconciliation Certifying official examines and signs-off the reconciliation report to certify that appropriate action has been taken.
  2. Overseas Finance Managers should perform one of these tasks and must seek advice from the CFO where they consider it is not feasible for the tasks to be undertaken by separate officials.
  3. The CFO or Overseas Finance Managers must appoint officials to reconcile bank accounts the work area is responsible for. A sample appointment letter is in the FMM Forms folder.
  4. Officials must have an understanding of the department’s bank reconciliation processes and procedures and should not be directly involved in the operation of the bank account.
  5. The CFO or Overseas Finance Manager is to determine the frequency that bank statements are uploaded to SAP taking account of:
    • The availability of bank statement information from the bank.
    • Risk factors, including confidence in the local banking system, volume and value of transactions processed through the account and the number of cheques issued.
  6. The bank reconciliation report must fully and accurately explain all reconciling items, including transactions not posted from the bank statement, unmatched payments (except for unpresented cheques that are not stale) and unmatched deposits.
  7. The Bank Reconciliation official must reconcile the bank account and prepare the reconciliation reports at least once every calendar month (preferably at same time) in accordance with SAP instructions and Help cards.
  8. The Reconciliation Certifying official must advise the CFO in writing of any reconciling item (except for unpresented cheques that are not stale) older than 3 months.

Procedures

Responsibility

Australia

Officials appointed to undertake bank reconciliations.

Overseas

Frequency/Conditions

Action

6.11 Correspondence with the Bank

Instructions

  1. In Australia, the CFO or AS FSB are responsible for issuing instructions to facilitate the day-to-day operations of the account in accordance with the agreement entered into with the bank.
  2. The Overseas Finance Manager is responsible for issuing instructions to facilitate the day-to-day operations of the account in accordance with the agreement entered into with the bank.

Procedures

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