Section 19 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) requires, among other things, that accountable authorities of Commonwealth entities notify their responsible Minister of any significant issue that has affected or may affect the entity.
However:
- if a Commonwealth entity has enabling legislation, then subsection 19(1) applies only to the extent that compliance with that subsection is not inconsistent with compliance with that legislation; and
- section 19 is subject to any Commonwealth law that prohibits disclosure of particular information.
The Finance Minister requires that accountable authorities of Commonwealth entities notify the Finance Minister of any significant non-compliance with the finance law by their entities also 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 reported to their responsible Minister, 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.
Reporting breaches of duties to the Finance Minister
The PGPA Act (sections 25 to 29) imposes a set of general duties for officials of Commonwealth entities. Where a breach of one or more general duties of officials occurs that is considered to be significant, it must be reported to the Finance Minister where there is also a connection to the management of public resources.
In determining whether there is a connection between the breach and the management of public resources, relevant considerations are likely to include:
- whether there is a link between the breach and the proper use (that is, efficient, effective, economical and ethical) of public resources (that is, relevant money, relevant property and/or appropriations);
- whether the breach reflects shortcomings in the effectiveness of internal controls or systems of risk oversight and management.
For example, while the misuse of information to obtain a benefit may constitute a breach of a general duty of officials (and potentially fraud) and may be reportable to the responsible Minister where it constitutes significant non-compliance, it would not need to be reported to the Finance Minister under section 19 of the PGPA Act unless there was a connection to the management of public resources.
Fraudulent activity by non-officials (for example, independent contractors who have not been prescribed as officials) may also constitute significant non-compliance with the finance law, for example, where there has been a failure to establish and maintain an appropriate system of internal controls.
Process for reporting significant non-compliance
When to report?
The responsible Minister must be notified of significant non-compliance as soon as practicable after the accountable authority becomes aware of the issue.
What constitutes as soon as practicable will vary with circumstances and may depend on the nature and risk associated with an instance of significant non-compliance.
The timing of the reporting to the Finance Minister is expected to align with the timing of notifications provided to the responsible Minister.
Fraud may have significant consequences for the entity. Therefore, accountable authorities are encouraged to report suspected fraud that may be significant at an early stage, even where investigations may be ongoing (it is not necessary to report sensitive details). This is to support the provision of sufficient information to support ministers in discharging their responsibilities as members of the government accountable to Parliament and the community, including managing and reporting on Commonwealth spending and risk management (including financial and reputational risks).
Format for reporting to the responsible Minister and the Finance Minister
The format in which an entity notifies the responsible Minister of significant issues is for the accountable authority to determine, in consultation with their responsible Minister, as appropriate.
The Finance Minister is to be notified in writing in line with entities’ internal procedures for addressing a minister other than your portfolio minister.
When notifying the responsible Minister and the Finance Minister, accountable authorities are encouraged to include a description of the nature of the non-compliance with the finance law as it relates to the entity. Accountable authorities are also encouraged to describe the remedial action taken, or proposed to be taken, by the entity to ensure that the effects of the non-compliance have been addressed. This may include the use of measures designed to prevent or reduce similar non-compliance occurring in the future.
If a matter of non-compliance occurs that affects two or more entities, then each entity’s accountable authority would need to determine whether the non-compliance is a significant matter affecting their entity, and whether to notify their minister. One entity informing a minister of a non-compliance matter would not absolve the accountable authority of another entity from notifying their responsible Minister of the same matter if it were considered significant for their entity.
When reporting fraud to the Finance Minister, a high level description is sufficient (sensitive details are not necessary).
[Entity] has identified [number] instances of potential fraud which are currently under investigation. The investigation involves [insert brief description, for example, possible misuse of a Commonwealth credit card over an extended period of time. The quantum of money involved is yet to be determined, however the issue may attract media attention].
Once reported, the accountable authority is not required to provide progress updates on the matter to the Finance Minister (including once the investigation has concluded). However, the Finance Minister may choose to follow up with the relevant entity to follow the progress.
The accountable authority would be expected to have processes and systems in place to ensure that an appropriate record of what has been advised to the minister is kept, which would assist the entity in meeting annual reporting requirements under the PGPA Rule.
The Model letter to the Finance Minister provided below may be used as a guide when preparing letters to the Finance Minister.
Model letter to the Finance Minister
This model letter is aimed at assisting accountable authorities and officials supporting accountable authorities in notifying the Finance Minister of instances of significant non-compliance with the finance law. The model is provided as a guide only. Accountable authorities may choose to develop their own approach or use only part of this model.
Generally, letters will be addressed from the accountable authority or the responsible minister, noting that it may be easier for accountable authorities to brief the responsible Minister and to correspond with the Finance Minister at the same time.
Dear Minister,
In accordance with section 19 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), I am writing to you to advise you of significant non-compliance with the finance law that has affected [entity].
The entity has identified [number] cases of significant non-compliance with the finance law:
1. [Description of the significant non-compliance with the finance law]
2. [Description of the significant non-compliance with the finance law]
3. [Description of the significant non-compliance with the finance law]
A summary of the instances of non-compliance with the finance law and the actions taken to remedy the non-compliance is provided [below/in an attachment].
In addition, the entity will report this breach in its 20XX-XX annual report as required by the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule).
Yours sincerely,
