Accountable authorities of Commonwealth entities are required to notify their responsible Minister, as soon as practicable, of any significant issue that has affected the entity or any of its subsidiaries.
“Significant issues” notifiable to the responsible Minister include significant non-compliance with the finance law.
The Finance Minister requires that accountable authorities also notify the Finance Minister of instances of significant non-compliance with the finance law reported to their responsible Minister.
To give effect to this requirement, accountable authorities must notify the Finance Minister of every instance of significant non-compliance with the finance law except where the significant non-compliance involves breaches of the general duties of officials and there is no connection to the management of public resources.
Annual reports must include a statement of any non-compliance issues notified to the responsible Minister during the reporting period and an outline of the action taken to remedy the non-compliance.
What is finance law?
For the purpose of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), ‘finance law’ (as defined in section 8 of the PGPA Act) means:
- the PGPA Act;
- the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule);
- the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (Financial Reporting Rule);
- an Appropriation Act;
- any instrument made under the PGPA Act, such as:
the Commonwealth Procurement Rules
the Commonwealth Grants Rules and Principles
accountable authority instructions issued under section 20A of the PGPA Act
determinations establishing special accounts under section 78 of the PGPA Act
government policy orders issued under section 22 of the PGPA Act
delegations instruments made under sections 107-110 of the PGPA Act.
What is 'significant' non-compliance with the finance law?
The term significant is not defined and carries its natural meaning (that is, noteworthy; important; consequential). It requires the exercise of judgement to determine whether a particular instance of non-compliance is significant.
What constitutes significant non-compliance with the finance law is for the accountable authority to determine based on the specific circumstances, the operating context of the entity, and in consultation with the responsible Minister, as appropriate.
In determining significance, accountable authorities are encouraged to consider:
Materiality
the importance of the issue relative to the entity’s size and operations (including the value and volume of non-compliance)
Occurrence
whether the non-compliance is one-off or systemic, and
Risk
whether the issue is likely to be politically sensitive and the likely or actual impact on the reputation, public perception, financial position or financial sustainability of the entity or that of others (bearing in mind that consequences may be non-financial).
Significant non-compliance with the finance law would generally include:
- high volume, high value and/or systemic instances of non-compliance with the Commonwealth Procurement Rules or the Commonwealth Grants Rules and Principles
- high volume, high value and/or systemic issues reflecting internal control shortcomings (for example, high volume and/or high value non-compliance with internal approval requirements for arrangements and commitments)
- serious fraudulent activity by officials (for example, theft, accounting fraud, making or using false documents)
- serious fraudulent activity by non-officials (for example, independent contractors), reflecting internal control shortcomings or
- non-compliance issues that have impacted, or are likely to impact, on the entity’s financial sustainability, or likely to be of particular parliamentary or public interest.
In addition, this guidance provides several Case studies and a Flow chart that that may be useful in deciding whether to report specific instances of non-compliance.
Officials should also note that non-compliance with the requirements of the finance law may attract a range of criminal, civil or administrative remedies, including under the Public Service Act 1999 and the Crimes Act 1914.
Your entity may also be subject to additional requirements to report fraud under the Commonwealth Fraud and Corruption Control Framework, available on the Attorney-General's Department website. For further information, refer to RMG-201 Preventing, detecting and dealing with fraud and the Commonwealth Fraud and Corruption Control Framework.
What about matters determined not to be 'significant' non-compliance?
Not all matters will be significant enough to warrant reporting. Matters that are not required to be reported include:
- low volumes of instances where grants and procurements are reported late;
- low volumes and/or non systematic instances of non-compliance with the entity's accountable authority instructions;
- minor instances on non-compliance with the duties of officials where the matter is dealt with by management; and;
- inadvertent credit card misuse that is identified by the relevant official and/or the entity's system of internal control and repaid.
While a matter may not be sufficiently significant to report to the responsible Minister and/or the Finance Minister, entities are encouraged to review all incidents of non-compliance as these could indicate internal control problems or systemic issues.
The identification and reporting of non-compliance could also be used as the basis for improving the efficiency and effectiveness of entity internal controls and increasing awareness and understanding of the PGPA framework. For example, non-significant matters could be brought to the attention of the audit committee to gauge the effectiveness of the internal controls of the entity.
Audit committees play a key role in the governance of Commonwealth entities. They support the accountable authority in meeting their duties and responsibilities under the PGPA Act. The PGPA Rule also requires audit committees to review the appropriateness of the accountable authority’s system of internal control. For further information, refer to RMG-202 Audit Committees.
