On this page, you will find

  • How the Financial Management Act 1994 affects a public entity
  • How a board must comply with the Financial Management Act 1994
  • How the Audit Act 1994 applies to public entities

Who is this page for?

  • Board members
  • Executives

There is a large body of Acts of Parliament that apply to a public entity in Victoria, including legalisation emphasising stewardship.

Financial Management Act 1994

Most public bodies under the Financial Management Act 1994 would be public entities under the Public Administrative Act 2004.

If the Financial Management Act applies to a public entity, the board must fulfil a list of requirements including keeping proper financial accounts, risk management, audit requirements, financial reporting, annual reporting to parliament and responding to ministerial requests for information. The board must have a financial code of practice relating to the probity of financial management. The board must note and implement the requirements set out in the Directions of the Minister for Finance.

The objectives of the Financial Management Act include (s. 1) are to:

  • improve financial administration of the public make better provision for the accountability of the public provide for annual reporting to parliament on the operations and financial statements of public sector bodies.

The Department of Treasury and Finance website contains all documents relating to the Financial Management Package, Financial Management Act, regulations, Minister for Finance standing directions and other financial management documents.

If uncertain about what a specific public entity needs to do to comply with the Financial Management Act, visit the Department of Treasury and Finance website.

The Financial Management Act affects a public entity in the following ways:

Administrative Arrangements

  • The chief executive officer (CEO) of a public entity is the accountable officer under the Financial Management Act. The CEO must appoint a chief finance and accounting officer (CFAO) whose duty is to receive money and make payments (ss.42 and 43). The public entity must maintain an assets register and develop, implement and review a risk management strategy (s.44B). The Minister for Finance can decide to grant indemnities, with or without payment, to a public entity that is a state company or statutory authority or to its directors (ss.40C and 40D).

Accountability Requirements

  • The chief executive officer must keep proper accounts and records of transactions that explain the finances of the public entity (s.44).
  • The chief executive officer must provide the portfolio minister or the Minister for Finance with any financial information they ask for (s.44A).
  • As soon as practicable after the end of each financial year, the public entity must prepare a report of its operations for the year and the chief executive officer must cause to be prepared the financial statements for the public entity (s. 45).
  • The chief executive officer must deliver the financial statements to the Auditor-General within eight weeks after the end of the financial year (or calendar year where reporting is on a calendar year basis) unless the public entity is exempt from having accounts audited by the Auditor-General.
  • The public entity must submit the report of its operations to the Auditor-General as soon as practicable after it is prepared (s.45).
  • The portfolio minister tables the financial statements and the report of operations in each house of parliament within a set time frame (s.46).
  • The Minister for Finance can ask for additional information to that which has been included by the chief executive officer to be included in the financial statements (s.48).
  • The portfolio minister can ask for additional information to be included in both the financial statements and the report of operations (s.51).
  • The Minister for Finance can, if it is in the public interest, direct the public entity to prepare and submit within four weeks, financial statements and other information for any part of a financial year (s.52).
  • A State Owned Corporations Act corporation may be subject to a similar requirement regarding its annual financial statements and annual report (s.53A).
  • The public entities subject to these requirements are listed on the Department of Treasury and Finance website. The Minister for Finance may issue written directions about any of the matters about which regulations can be made under the Act (s. 8).

Compliance with the Financial Management Act

The board must ensure that:

  • the chief executive officer (CEO) has designated a public entity employee as the chief finance and accounting officer (CFAO)
  • the CEO and CFAO have systems in place to keep proper accounts and financial records generally, a system for promptly preparing and auditing the annual financial statements, an assets register, and a system for the timely preparation of the public entity’s annual report
  • the CEO and CFAO have effective systems in place to receive, record, implement and monitor directions issued to the public entity, or to the public sector generally, by the Minister for Finance
  • it obtains, at least annually, the written assurances of the CEO and CFAO that the mandatory requirements in the standing directions of the Minister for Finance are being observed by the public entity and a report from them detailing how this is being achieved
  • a financial code of practice relating to the probity of financial management is implemented and maintained
  • unless the public entity is exempt, an audit and risk management committee is in place and that it meets the requirements of the standing directions of the Minister for Finance regarding its constitution and mode of operation
  • the audit and risk committee has approved an internal audit charter as required by the standing directions of the Minister for Finance
  • the board’s risk management program includes a financial risk management program that satisfies the requirements of the standing directions of the Minister for Finance
  • the board has in place a system of financial delegations that meets the requirements of the standing directions of the Minister for Finance
  • the CEO and CFAO have systems in place to receive and respond promptly to requests for financial and other information from the portfolio minister or the Minister for Finance
  • it considers whether the public entity needs to make submissions to the Minister for Finance to seek indemnities for either the public entity or members and, if so, arrange for the necessary submissions to be prepared and dispatched.

Audit Act 1994

The Audit Act 1994 applies to almost all public entities within the definition of a ‘public body’. Note that an advisory committee does not need to be audited under this Act, even though it is classed as a public entity. Also, informal advisory committees that are not classed as public entities do not need to be audited under this Act.

The Audit Act is concerned with efficient and effective financial and performance audits in the Victorian public (s.1). The objectives of the Audit Act include:

  • determining whether financial statements prepared in the Victorian public present fairly the financial position and financial results of operations of authorities and the state
  • determining whether authorities are achieving their objectives effectively, economically, efficiently and in compliance with legislation
  • monitoring wastage of public resources or any lack of probity or financial prudence in the management or application of public resources.

The Auditor-General audits the financial statements of each public entity at least once a year. The Auditor-General expresses a written audit opinion on the financial statements to the public entity and give a copy of each audit opinion on the financial statements of the public entity to both the portfolio minister and the Minister for Finance.

The public entity pays audit fees to the Consolidated Fund as determined by the Auditor-General.

The Auditor-General can compel the presence of a person from the public entity to answer questions, possibly on oath, and provide documents that help the Auditor-General carry out functions under legislation. The Auditor-General can conduct any audit necessary to determine whether a public entity is achieving its objectives effectively, economically and in compliance with legislation.

The Auditor-General can report to parliament on any one or more of the audits carried out.

Compliance with the Audit Act

The board must ensure that:

  • it has an active audit and risk management committee (or committees) as required under the Financial Management Act.
  • the audit and risk management committee and the public entity’s internal auditors develop and maintain a constructive and professional relationship with the Auditor-General’s office
  • the public entity administers a well targeted program of internal financial and compliance audits so that there are no surprises when the Auditor-General conducts an audit of the public entity
  • staff at all levels are aware of the function, procedures and powers of the Auditor-General when the Auditor-General is conducting an audit of the public entity.
  • there is a protocol that is widely understood by staff relating to co-operation and liaison with the Auditor-General’s staff who are engaged in an audit of the public entity (subject to the Auditor-General’s power to question any person who may be of assistance in conducting the audit, these protocols would identify public entity staff who are authorised to speak with the auditors and any processes to prepare for that assistance)
  • immediate attention is given by the board’s audit and risk management committee to any audit opinion relating to a public entity audit received from the Auditor-General and that the audit and risk management committee reports to the board on any implications for the public entity, at the earliest opportunity
  • immediate attention is given by the board’s audit and risk management committee to any report by the Auditor-General that mentions the public entity and that the audit and risk management committee provides a copy of the Auditor-General’s report to the board and considers the report and its implications for the public entity at the earliest opportunity.