Post on 18-Dec-2014
description
Financial Management Compliance Framework
(FMCF)
Financial Management Compliance Framework
(FMCF)
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Agenda
Welcome
Overview of the Framework
The new financial management rules
Standing Directions of the Minister for Finance under the Financial Management Act 1994
What should agencies be doing
Using the FMKC website
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Overview of the framework
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Purpose of the FMCF
Provide a mechanism through which government can monitor and review compliance with financial management requirements ie: the Financial Management Package
Provide Portfolio Ministers, Minister for Finance (MfF) and Parliament with assurance that VPS entities have implemented appropriate systems to ensure effective, efficient and responsible financial management of public resources
Clarify responsibilities for ensuring financial management compliance and reporting on compliance (at WoG, Portfolio, Agency levels)
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Key stakeholders
Over 300 public sector agencies listed in the Annual Financial Report (AFR) for Vic government, their CEOs/Secretaries, management and employees
Board & Audit Committee members
Internal Auditors
Victorian Auditor-General
Portfolio Ministers and the Parliament
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Timelines
Phase 1
Framework development
Phase 2
Rules development
Phase 3
Roll out & communication
Phase 4
Compliance & reporting
Aug 01 July 02 Sep 02 Jun 03 1 July 03 16 July 03 July-Aug 03
Jan 04 Jun 04
Framework development commences
Framework endorsed
New rules issued as exposure draft for 3
month comment
period
Rules issued as
final for roll out from 1
July 03
New rules come into
effect
Official launch by Minister
for Finance
End of transition period for
Part 2
End of year 1 implementation
DTF communication across WOG
Entity and department certification
Aug/Sep 04
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3-tier compliance reporting structure
DTF
Minister for Finance
Departments
Portfolio Ministers
VPS Entities
Whole-of-Government Level
Portfolio Level
Entity Level
Accountability rests with individual entities
Issue Rectification, Certification &
Reporting
Support & Monitoring
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Certification process
Standard certification checklist based on the Directions
Signed by Accountable Officer annually
Certification period is 1 July – 30 June
May not correspond to financial year
Certification required by 30 September
Expectation in years one and two that there will be instances of partial compliance and non compliance
Focus should be on moving towards full compliance
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Ongoing Monitoring
DTF will develop a monitoring regime
Regime will include visits to selected entities to
validate certification
review supporting documentation
assess progress of rectification programs
Suggested pilot certification for selected entities in first 6 months of 2004
Late 2004 DTF will commence assurance reviews
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The new financial management rules
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The Directions
Standing Directions of the Minister for Finance
Three high level leading edge financial management principles
Financial Management Governance and
Oversight
Financial code of practice
Financial governance
Financial risk management
Delegations of authority
Internal audit
External audit
Financial Management Structure, Systems,
Policiesand Procedures
Financial management structure
Information technology systems
Education and training
Policies and procedures
Financial Management Reporting
Internal financial management reporting
Reporting requirements in terms of part 7 of the FMA
Other external reporting
Financial performance management and evaluation
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Overview of the Directions
Directions outline high level requirements for financial management, not a detailed prescriptive approach
Elements of the Directions are mandatory, under the headings:
Directions
Procedures
Other elements are advisory and provide guidance in best practice
Part 2 of the Directions are the significant new component, Parts 3 and 4 summarise previous detailed Directions
Six month transition period for full compliance with Part 2 of the Directions
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The Directions
Standing Directions of the Minister for Finance
Three high level leading edge financial management principles
Financial Management Governance and
Oversight
Financial code of practice
Financial governance
Financial risk management
Delegations of authority
Internal audit
External audit
Financial Management Structure, Systems,
Policiesand Procedures
Financial management structure
Information technology systems
Education and training
Policies and procedures
Financial Management Reporting
Internal financial management reporting
Reporting requirements in terms of part 7 of the FMA
Other external reporting
Financial performance management and evaluation
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Financial Governance
Establish robust and transparent financial governance policies and procedures directed to the oversight of its financial management
Major elements include:
review and monitor financial reports of entity, including budgets
set strategic direction
oversight of use of public funds and resources appropriately
oversight of entity’s risk management and financial controls
The Responsible Body can delegate some of its responsibilities, to an Audit Committee, Finance Committee or equivalent
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Financial Governance cont.
Entities must establish an Audit Committee with at least 2 independent members. Exemptions can be sought for this requirement
Factors to consider:
can be remunerated for their role as Director
members should be drawn from the Board
definition of independence in the Directions is guidance but consistent with recent Australian guidance
Where the Responsible Body is a board the Audit Committee must have at lest 3 non-executive directors and a majority of whom are independent
Accountable Officer (AO) and CFAO are not to be members of the Committee
Audit Committees
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Financial Governance cont.
Chairperson of the Audit Committee is to be an independent member and must not be the Chairperson of the Responsible Body
The Committee should have a Charter which is approved by the Responsible Body and formally reviewed at least every three years
Members of the Audit Committee must possess key qualifications
basic financial literacy
knowledge of entities risks and controls
objectivity and independence of judgement
industry knowledge and business experience
adequate time to discharge responsibilities
Qualifications
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Financial Governance cont.
Audit Committee areas of focus:
review Audit Committee Charter against template and other best practice material
review qualifications and skills of Audit Committee members
ensure independence of Audit Committee members
ensure role of Audit Committee consistent with the Rules
assess whether exemption may be appropriate and consider what information required to support exemption
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Financial Risk Management
Assess adequacy of existing risk management activities at organisation against the Directions
Consider minimum required to ensure compliance or partial compliance with financial risk requirements
Focus of activities should be on:
ensuring financial risks have been formally considered in annual planning and budget process
adequate documentation to support identification and monitoring of financial risks’
process in place to review risks on a regular basis to ensure currency and relevance and new risks identified
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Financial Code of Practice
Entities are required to implement and maintain a financial code of practice
Cohesive statement of the entity’s internal processes to ensure probity on financial management
Areas of focus:
prepare a Code before 31 December
get the Code approved by the Audit Committee and the Board
publish the Code to all staff – make sure there is a process to confirm that staff have read and understood the Code
develop monitoring mechanisms for compliance with the Code
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Delegations of Authority
Financial delegations of authority must be established and maintained
Financial delegations must be maintained in a register which is reviewed and approved annually
Appropriate level of detail must be included in the delegations to ensure clarity of responsibility
Major areas of focus:
review adequacy and currency of delegations
update delegations as required before 31 December
consider how delegations promulgated and accessed to staff
verification that delegations are being utilised appropriately
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Internal Audit
Entities must establish and maintain an adequately resourced independent internal audit function
Exemptions may be sought for this requirement
Internal Audit Charter must be developed and approved by the Audit Committee
Annual plan to be based on the entity’s risk profile and be approved by the Audit Committee
Audit Committee will review internal auditor performance and focus of work
Entity should have mechanisms to monitor actions taken to resolve issues raised by internal audit
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External Audit
Entities must establish and maintain a constructive, open working relationship with the Auditor General
Audit Committee and the Auditor General must meet throughout the year to discuss the proposed audit objectives, a briefing of the audit process and discuss the outcomes of the audit
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The Directions
Standing Directions of the Minister for Finance
Three high level leading edge financial management principles
Financial Management Governance and
Oversight
Financial code of practice
Financial governance
Financial risk management
Delegations of authority
Internal audit
External audit
Financial Management Structure, Systems,
Policiesand Procedures
Financial management structure
Information technology systems
Education and training
Policies and procedures
Financial Management Reporting
Internal financial management reporting
Reporting requirements in terms of part 7 of the FMA
Other external reporting
Financial performance management and evaluation
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Financial management structure
Entities must establish an effective internal control system which should:
support the effectiveness and efficiency of operations
deliver reliable internal and external reporting
achieve compliance with laws and regulations
The internal control system will be underpinned by:
financial management team structure
Chief Financial and Accounting Officer (CFAO)
appropriate policies and procedures
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Financial Management Structure cont.
Entity must select a CFAO with the necessary prerequisite skills, qualifications and experience
The key impacts of the new Directions on the CFAO’s will be:
first year gap analysis to assess entity’s compliance
annual certification to the Responsible Body on the financial reports, the entity’s risk profile and the internal control system
sufficient supporting documentation to support certification
ongoing monitoring of entity’s compliance with the Directions
CFAO
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Information technology systems
IT systems must be appropriate to support sound financial management
IT should be adequately resourced by appropriately skilled staff
Areas of focus:
has the organisation got clearly defined IT structure with adequate roles and responsibilities
is there an annual process to review IT needs and requirements
adequacy of DRP and BCP plans – do they exist, are they current and have they been tested recently
focus on management of the IT area particularly around project implementation
adequacy of IT security – evidence that Internal Audit has recently reviewed this area
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Policies and procedures
Policies and procedures must be developed for all key business processes
For smaller entities it would be expected that policies and procedures are documented for all business processes which are critical to their operation
Specific issues to note:
list in the Directions may not be exhaustive
in relation to 3.4.5 Procurement, entities not required to comply with this rule should consider using the Victorian Government Purchasing Board guidelines as a basis for good practice
guidance material available to assist in development or improvement of policies and proceduresG
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Policies and procedures cont.
Major areas of focus:
review existing policies and procedures against FMCF guidelines, identifying gaps and deficiencies
develop plan to review and update policies and procedures over next period
consider which policies and procedures are most important and prioritise
ensure formal sign off and approval for all policies and procedures
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Other areas to consider
Outsourced Financial Services
could include the following:
– investment managers
– outsourced payroll provider
– shared service arrangements
must have the following:
– service level agreement with performance measures and indicators
– mechanisms to review control environment of provider – could be internal audit or letters of assurance
– regular review of performance of provider and costs of service
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Other areas to consider cont.
Training
has the organisation got clearly defined and organised training program
what mechanism exists to ensure that finance staff are getting appropriate training for their role
Chart of Accounts
review adequacy of Chart of Accounts
is there adequate supporting documentation for each account
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The Directions
Standing Directions of the Minister for Finance
Three high level leading edge financial management principles
Financial Management Governance and
Oversight
Financial code of practice
Financial governance
Financial risk management
Delegations of authority
Internal audit
External audit
Financial Management Structure, Systems,
Policiesand Procedures
Financial management structure
Information technology systems
Education and training
Policies and procedures
Financial Management Reporting
Internal financial management reporting
Reporting requirements in terms of part 7 of the FMA
Other external reporting
Financial performance management and evaluation
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Internal financial management reporting
Entities must implement and maintain timely, accurate, appropriate and effective reporting on financial matters for use in management decision making
Management financial reports should include budget v actual analysis
Reports should be reconciled with the general ledger and reviewed by the CFAO or appropriate senior finance staff
Feedback on adequacy of financial reports should be sought from relevant management
Reports should be presented on a timely basis both for internal and external purposes
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Areas of focus for reporting
Internal Reporting
assess the adequacy of management reporting and the KPI’s
ensure appropriate review and approval process
External Reporting
review the 2003 year end reporting process against the Directions and identify any gaps
– approval process with CEO and management
– certification by the CEO and CFO
– meeting timetable for the AG and Parliament
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Financial performance management and evaluation
Entities must develop appropriate financial management performance indicators and monitor performance against these to identify key statistics and trends for use in management decision making
Financial Key Performance Indicators (KPI’s) must be developed by the CFAO and Accountable Officer as appropriate for the entity
KPI’s must be measured, monitored and reported on a regular basis to the Responsible Body
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Exemptions
Exemption Criteria
criteria now on FMKC website
meeting criteria does not automatically mean exemption provided
DTF has final decision and agency must ensure adequate information to support the decision
must be reassessed annually and new request submitted to DTF
Other factors may be considered in decision making:
– public profile
– financial risk
– previous issues not fully resolved
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What should agencies be doing
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What should agencies be doing
Gap analysis of financial management against FMCF
Brief the CEO on FMCF and agency responsibilities under FMCF
Reporting to Audit Committee on current level of compliance
Report to Audit Committee on progress in meeting compliance with the FMCF
Consider role of Internal Audit in validating agency compliance
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Using the FMKC Website
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FMCF and TCF web based tool
Financial Management Compliance Certification
Tax Compliance Certification
Library – FMP
What’s New?
Key events and dates
Issues management
Compliance -
Library
What’s New?
Key events and dates
Issues management
Financial Management Knowledge CentreUsername: doj
Password: fmkcdoj
DTF Web Site
Financial Management Knowledge Centre
(www.fmkc.dtf.vic.gov.au)
Tax Knowledge Centre (www.tkc.dtf.vic.gov.au)
Compliance Monitoring System
(www.cms.dtf.vic.gov.au)
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Financial Management Knowledge Centre
The Library
Legislation, including the Financial Management Package
Standing Directions of the Minister for Finance;
Standing Directions of the Minister for Finance - Guidance Material;
Financial Management Compliance Framework; and
Financial Reporting Directions.
Issues Management System
Resolutions to various issues raised.
Compliance
Financial Management Compliance Framework;
Standing Directions of the Minister for Finance;
Standing Directions of the Minister for Finance - Guidance Material;
Exemption Criteria;
Frequently Asked Questions;
Newsletters;
Seminars/Briefings; and
Purchasing Card Compliance.
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Guidance Material
Guidance materials have been provided on the following areas:
pro forma charters
pro forma policy & procedures
template letters
pro forma financial code of practice
exemption criteria
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Questions ?