Overview: Tasmania's Financial Management Framework

General Government Sector FinancialManagement LegislationThe key legislation underpinning the financial managementof the Tasmanian General Government Sector, includes: the Financial Management Act; the Charter of Budget Responsibility Act; the Constitution Act; Appropriation Acts; and the Audit Act.Financial Management ActThe key features of the Financial Management Act are, to: provide for the management of the public financesof the State in an economical, efficient and effectivemanner consistent with contemporary accountingstandards and financial practices; establish minimum requirements for the supportingstatements required in respect of Bills forAppropriation Acts; provide authority for the Treasurer to manageappropriations under certain circumstances and toreport supplementary estimates to Parliament; provide authority for an Accountable Authority todraw money from the Public Account; establish the responsibilities of the AccountableAuthority of an Agency with regard to the financialmanagement of the Agency; require the Treasurer to provide quarterly and annualfinancial reports to Parliament in relation to theGeneral Government Sector and the Public Account; require the Accountable Authority of an Agencyto provide annual audited financial statements toParliament for the relevant Agency; and provide for the Treasurer to issue instructions inrespect of the principles, practices and procedures tobe observed in the financial management of all agencies.Application of the ActThe Financial Management Act applies to allGeneral Government Sector agencies scheduledin the Act. This includes government departmentsand offices, State authorities and legislative agencies.The Financial Management Act does not apply toentities that are Government Business Enterprises orState‑owned Companies.The Financial Management Act allows the Treasurer todetermine that the Act, or a specific provision of the Act,does not apply to an Agency. Similarly, the Treasurer maydetermine that the Act is to apply to an entity that is notscheduled in the Act.While the Financial Management Act suspends thefinancial management provisions contained in theenabling legislation of an Agency scheduled in the Act,the Treasurer may vary the effect of this by stipulatingthat specific provisions will not be suspended. Throughthese mechanisms, the Treasurer has determined thatthe financial management provisions in the enablinglegislation of some State authorities scheduled inthe Act have been preserved and the governance,oversight and accountability roles of the governingbodies of these authorities remain unchanged. TheseState authorities are subject to some provisions of theFinancial Management Act, including the requirementto undertake the financial management of an Agencyin a manner that is consistent with the principles ofsound fiscal management defined in the Charter ofBudget Responsibility.The Public AccountUnder the Financial Management Act, the Public Accountof the State comprises: receipts and expenditure of the General GovernmentSector, that do not form part of a Specific PurposeAccount or an Agency Trust Account; and any Specific Purpose Accounts established underthe Act.Specific Purpose Accounts established by the Treasurerin accordance with the Financial Management Act areheld within the Public Account. These accounts set asidefunds to be applied for specific purposes approved bythe Treasurer and are administered by the Agency that isnominated by the Treasurer.The Financial Management Act also enables the Treasurerto establish Agency Trust Accounts for the receipt ofmoney that is to be held in trust by the Government. Themoney standing to the credit of an Agency Trust Accountcan only be applied for the purposes of the trust to whichthe money relates. Agency Trust Accounts are held outsideof the Public Account, which recognises the nature of themonies and the limited, if any, discretion for expenditure ofthe funds.Figure 2 provides a diagrammatic overview of the receiptsinto, and expenditure from, the Public Account.8OVERVIEW TASMANIA’S FINANCIAL MANAGEMENT FRAMEWORK

Figure 2: Public Account Receipts and ExpenditurePublic Account Receipts All money received by an AgencyAny receipts determined by the TreasurerAll money from the Australian GovernmentAll money from sale of lands or other propertyAll money from borrowingsMoney from repayments of advances and loansOther money, excluding money to be held in trustMoneyreceived tobe held inTrustPUBLIC ACCOUNTincludingSpecific Purpose AccountsAgencyTrustAccountsMoneywithdrawnfor thepurposes ofthe TrustPublic Account Expenditure Annual Appropriation Acts – Operating Services andCapital Services expenditure. Financial Management Act – expenditure fromSpecific Purpose Accounts and expenditure in accordancewith approved variations to appropriations. Other Acts – Reserved by Law expenditure.OVERVIEW TASMANIA’S FINANCIAL MANAGEMENT FRAMEWORK9

Public Account ReceiptsThe Financial Management Act requires that all receiptsof the State are to be credited to the Public Account.This includes: all money received by the Treasurer in repayment ofadvances or loans made, or money borrowed, for thepublic purposes of the State under an Act; all money borrowed for the purposes of anAppropriation Act; all money received from the AustralianGovernment, such as Goods and ServicesTax Revenue, Specific Purpose Payments andNational Partnership Payments; all money received by the Treasurer from the sale oflands or other property belonging to the State; all money received by an Agency, such as receiptsfrom the sale of goods and services, or collection offees, fines and royalties; and any other receipts determined by the Treasurer,including State taxation and returns from governmentbusinesses.Other money held by the State or an Agency for aperson other than the State or an Agency, must alsobe paid into the Public Account. This excludes moneyreceipted to an Agency Trust Account.Public Account ExpenditureThe Financial Management Act supports the fundamentalconstitutional principle that only Parliament can authorisethe appropriation of public money. The majority ofexpenditure from the Public Account is authorisedby annual Appropriation Acts, such as the Acts thatsupport the annual State Budget, and SupplementaryAppropriation Acts.In addition to annual Appropriation Acts, standingappropriations contained in other Acts authoriseexpenditure from the Public Account. Expenditureauthorised in this way is generally referred to asReserved by Law expenditure.The Financial Management Act provides authorityfor the Treasurer to manage appropriations from thePublic Account during a financial year under certaincircumstances, including: transferring appropriations to make good a deficiencyin a purpose of appropriation from savings effected inanother purpose of appropriation; providing amounts to meet unforeseen and necessaryexpenditure;10 adjusting appropriations for variations in AustralianGovernment grants; providing amounts for necessary expenditure in casesof an emergency, with authority from the Governor;and providing for unexpended appropriations to be rolledover and issued and applied from the Public Accountin the following financial year.The Financial Management Act also provides for theTreasurer to approve the expenditure of monies fromSpecific Purpose Accounts as part of the developmentof the annual Appropriation Act. The Treasurer mustreport the estimated receipts to, and expenditurefrom, Specific Purpose Accounts to Parliament in theBudget Papers. After an Appropriation Act is given RoyalAssent, the Financial Management Act authorises theTreasurer to vary the estimated receipts and expenditurein relation to each Specific Purpose Account.Under the Financial Management Act, the AccountableAuthority of an Agency can only draw money fromthe Public Account in accordance with a Treasurer’sExpenditure Control Authority, the estimatedexpenditure approved by the Treasurer from SpecificPurpose Accounts or any other written law.Accountable Authority ResponsibilitiesUnder the Financial Management Act, the AccountableAuthority of an Agency is the person responsible for theefficient, effective and economical financial managementof the Agency. The Accountable Authority is scheduled inthe Act alongside each Agency.The Financial Management Act requires the AccountableAuthority to undertake the financial management of anAgency in a manner consistent with the principles ofsound fiscal management as defined in the Charter ofBudget Responsibility Act.The Financial Management Act also sets outparticular financial management responsibilities ofAccountable Authorities, including: ensuring that expenditure by the Agency is inaccordance with the law; ensuring the effective and efficient use of resources inachieving the Government’s objectives; ensuring appropriate stewardship is maintained overthe assets of the Agency and the incurring of liabilitiesof the Agency; ensuring that the Agency’s financial managementprocesses, records, procedures, controls and internalmanagement structures are appropriate;OVERVIEW TASMANIA’S FINANCIAL MANAGEMENT FRAMEWORK

ensuring the custody, control and management of, andaccounting for, all public property, public money, otherproperty and other money in possession of, or underthe control of, the Agency; ensuring the proper collection of all money payableto, or collectable under, any law administered by theAgency; conducting reviews, at times determined by theTreasurer, of fees and charges collected by or payableto the Agency; and ensuring compliance by the Agency with this Act orany other written law.Treasurer’s InstructionsThe Financial Management Act provides that theTreasurer may issue instructions in respect of theprinciples, practices and procedures to be observed inthe financial management of all agencies. The Treasurer’sInstructions issued under the Financial Management Actare included within the meaning of written law.An Accountable Authority, with the exception ofthe Accountable Authority of a Legislative Agency, isrequired to comply with the Treasurer’s Instructions.Treasurer’s Instructions do not apply to aLegislative Agency, but the Accountable Authority ofa Legislative Agency may comply with the Treasurer’sInstructions at their discretion.Financial Management Better Practice Guidelines havebeen developed to assist Accountable Authorities andresponsible officers with their financial managementresponsibilities, including compliance with the Treasurer’sInstructions.DelegationsThe Financial Management Act enables the Treasurerto delegate, to a Minister or the Secretary of theDepartment of Treasury and Finance, any of theTreasurer’s functions and powers under the Act.The delegation must be made by instrument in writing,specifying the functions and powers delegated.The framework for the delegation of the Treasurer’spowers and functions to the Secretary aims to maximiseadministrative and operational efficiency and minimisethe delegation of matters that are considered to be of apolicy nature.Despite any delegation made by the Treasurer under theFinancial Management Act, the Treasurer may continue toperform or exercise all or any of the functions or powersdelegated.The Financial Management Act also authorises anAccountable Authority to delegate any of their functions orpowers under the Act, other than the power of delegation.Charter of BudgetResponsibility ActThe Charter of Budget Responsibility Act establishesa Charter of Budget Responsibility that provides aframework to improve fiscal policy outcomes. A keyelement of the framework is the requirement for a fiscalstrategy statement. The purpose of a fiscal strategystatement is to establish a benchmark for evaluating theGovernment’s fiscal performance and to increase publicawareness of the fiscal policies of the Government andOpposition parties.A fiscal strategy statement is, to: specify the long‑term objectives within whichbudgets will be framed; specify the key fiscal measures against which fiscalpolicy will be set and assessed; specify the fiscal objectives and targets for the Budgetyear and the following three financial years; and identify how the fiscal objectives and strategicpriorities relate to the principles of sound fiscalmanagement.A fiscal strategy statement is to be based on theprinciples of sound fiscal management.The principles of sound fiscal management are, to: manage the State’s finances responsibly for thewellbeing of all Tasmanians; provide for the future for the next generation ofTasmanians; prepare for unexpected events by building a robustfinancial position; improve services to Tasmanians by building a strongeconomy and efficiently allocating public resources togain the maximum community benefit; formulate spending and taxation policies thatensure a reasonable degree of equity, stability andpredictability; and ensure transparency and accountability in developing,implementing and reporting on fiscal objectives.The Charter of Budget Responsibility also requires: regular reports to provide for the assessment of theGovernment’s fiscal performance; the publication of a Pre-Election Financial OutlookReport under certain circumstances; and a process for costing the election policies of partiesrepresented in the House of Assembly.OVERVIEW TASMANIA’S FINANCIAL MANAGEMENT FRAMEWORK11

Constitution ActThe Constitution Act determines many of thefundamentals of Tasmania’s parliamentary democracy,including the monetary powers of Parliament. In relationto financial matters, the Constitution Act:The purposes of appropriation are classified by Agency,Appropriate Minister and Services. Services are furtherclassified as: Operating Services, which means the ordinary annualservices of the Government; and defines Appropriation Act as an Act that authorisesthe issue and application of any money from thePublic Account to meet: Capital Services, which means:–– the cost of the ordinary annual services of theGovernment;–– a loan authorised by law.–– expenditure on public works or any propertyrequired for public purposes; or–– the making of a loan authorised by law; provides that Appropriation Acts shall not authorisethe appropriation of money for a period longer thanone year; requires that a Bill for the appropriation of anymoney, or for the imposition of a tax, rate, duty, orimpost, shall originate in the House of Assembly; provides that the House of Assembly shall notappropriate any money unless the purpose of theappropriation is recommended to the House ofAssembly by the Governor; provides that the Legislative Council may not amend aprovision of a Bill for an Appropriation Act related tothe ordinary annual services of the Government or anIncome Tax Rating Act or a Land Tax Rating Act; provides that the Legislative Council may not amend aBill to insert any appropriation of moneys, or imposeor increase any burden on the people; and provides that the Legislative Council may return aMoney Bill to the House of Assembly requestingamendment of the Bill.Appropriation ActsThe Constitution Act and the Financial Management Actprovide the legal framework to support the State’sappropriation process.Through an Appropriation Act, Parliament authorisesthe Treasurer, in respect of a financial year, to issue a sumof money from the Public Account and apply that sumfor the purposes specified in the Schedule to the Act.–– public works or property required for publicpurposes; orThe Financial Management Act requires a Bill for anAppropriation Act to be accompanied by a statement inthe Budget Papers showing, for the Budget year, the totalamounts of: estimated receipts of the Public Account; estimated expenditure from the Public Account; and the major General Government Sector financialstatements, prepared in accordance withAustralian Accounting Standards.Annually, on Budget day, the Treasurer presents twoBills to Parliament for Appropriation Acts, which aresupported by the Budget Papers. The first Bill is forthe appropriation for the services of the Government.The second Bill is for the appropriation for the servicesof the Government in respect of the Parliament andStatutory Offices.Parliament may also pass Supplementary AppropriationActs authorising the Treasurer to issue money fromthe Public Account for expenditure for new purposesnot contained in a Budget Appropriation Act. Further,Supply Appropriation Acts may be passed to providean appropriation for the first two months of the comingBudget year so the normal operations of government cancontinue until the Budget Appropriation Acts are in place.Audit ActThe Audit Act provides for the appointment of anAuditor‑General for the State to provide an independentview of the financial and operational performance ofState entities. The Act sets out the Auditor‑General’sfunctions, mandate and powers. Under the Audit Act,the Auditor‑General is required to undertake audits andprovide an audit opinion in respect of financial statementsof State entities and determine compliance of State entitieswith relevant legislation and accounting standards.The Auditor‑General is also required to prepare anaudit report on the Public Account Statements and theTreasurer’s Annual Financial Report. All audits must becompleted within specified timeframes.12OVERVIEW TASMANIA’S FINANCIAL MANAGEMENT FRAMEWORK

State BudgetState Budget ProcessDevelopment of the BudgetThe Government produces a State Budget annually.The date of the tabling of the Budget in Parliament issubject to annual determination by the Government.In recent years, the timing has generally been in late May.Development of the Budget generally commences with anupdate to existing revenue and expenditure estimates, forthe coming Budget year and the following three years (theForward Estimates period). The updated estimates, theGovernment’s Fiscal Strategy and policy priorities providethe context for the Government to consider proposedBudget initiatives and other measures.It is through the Budget process that the Governmentestablishes and communicates resource allocations forthe Budget year and sets the direction of its finances overthe medium term.The Budget process is continuous and consists of multiplestages. The stages of the process are representeddiagrammatically below.Agencies, on behalf of the appropriate Minister, prepare aBudget submission, including proposed Budget initiatives,for consideration by Budget Committee (a sub‑Committeeof Cabinet). Agency Budget submissions are preparedwithin the context of the Government’s Budget position,policy priorities, demand for services, and feedbackreceived from the community as part of the Government’sCommunity Consultation process.Development ofthe BudgetOngoingParliamentaryReviewManagingthe BudgetAnnualParliamentaryReviewMonitoringthe BudgetOVERVIEW TASMANIA’S FINANCIAL MANAGEMENT FRAMEWORK13

Following Budget Committee consideration, the Budgetis finalised by Cabinet and Accountable Authoritiesare advised of their Agency’s Budget allocation forthe coming Budget and Forward Estimates period.Accountable Authorities provide relevant agencyinformation to the Department of Treasury and Financefor inclusion in the Budget Papers. Treasur

The introduction of the Financial Management . Act 2016, effective from 1 July 2019, is a significant reform that modernises the financial management of Tasmania's General Government Sector. The Financial Management Act replaces existing legislation, introduces a new structure for the Public Account and