finance circular no. 2012/01 - retained agency receipts web viewagency banking and opa ... by any...

Finance CircularNo. 2012/01

Retained Agency Receipts(s. 31 of the FMA Act and r. 15 of the FMA Regulations)

Key pointsThis circular:

provides guidance on the operation of section 31 of the Financial Management and Accountability Act 1997 (FMA Act) and regulation 15 of the Financial Management and Accountability Regulations 1997 (FMA Regulations);

applies to all Agencies subject to the FMA Act;

replaces Finance Circular 2008/07; and

is available on the Finance website at http://www.finance.gov.au/publications/finance-circulars/index.html

ContentsForeword...........................................................................................................................2Guidance............................................................................................................................3

What are ‘retained Agency receipts’?...............................................................................................3Kinds of receipts that may be retained.............................................................................................3Ten receipts for departmental activities that may be retained.........................................................3Three additional Agency receipts that may be retained....................................................................7Receipts that cannot be retained and conditions..............................................................................8

Operational requirements................................................................................................11How to identify the most recent departmental item?.....................................................................11Tips for keeping track of receipts....................................................................................................11Retainable amounts that are incorrectly remitted to the OPA........................................................11Agency banking and OPA banking...................................................................................................12When is a departmental item increased?........................................................................................12When is revenue recognised?.........................................................................................................12Accounting and reporting................................................................................................................13

Cost Recovery receipts vs Retained Agency receipts.........................................................14

Attachment 1: Frequently asked questions..................................................................................16

Attachment 2: Key Concepts – terms and abbreviations...............................................................17

Attachment 3: Extracts of relevant legislation..............................................................................19

Finance Circular 2012/01 of 23 Department of Finance and Deregulation

http://www.finance.gov.au/publications/finance-circulars/index.html


http://www.comlaw.gov.au/Series/F1997B02816

http://www.comlaw.gov.au/Series/F1997B02816

http://www.comlaw.gov.au/Series/C2004A05251


Foreword

Foreword

This circular includes operational guidance on the following matters:

receipts relating to paid parental leave; receipts within the definition of specified cash;

receipts relating to trusts or trust-like arrangements; an Agency’s inability to increase its departmental appropriation by debiting an

administered appropriation that it manages; a determination made by the Minister for a scheme under regulation 15;

amounts received in advance of providing a good or service (i.e. unearned revenue); and differences between receipts collected under the Government’s Cost Recovery policy and

receipts retained under regulation 15.

Receipts received by an Agency are public money. The management of public money is a fundamental part of an Agency’s day-to-day activities and it is essential that all officials and their Ministers are aware of their legal and policy obligations in relation to public money.

The primary legal obligations for managing appropriations and public money arise from the Australian Constitution and these are further set out in the FMA Act and the FMA Regulations. Guidance on managing appropriations is available on the Finance website, for example in Finance Circulars. Further guidance is in Budget Paper No. 4, which is available on the Central Budget website and in Estimates Memoranda, which are available from the Knowledge Management menu of the Central Budget Management System (CBMS).

Questions on managing public money should be directed to your Agency’s corporate finance area in the first instance, and subsequently if necessary, to the designated Agency Advice Unit (AAU) within Finance. Questions relating to this Finance Circular may be sent to the Special Appropriations and Banking Policy Section at [email protected].

Julia SissonActing Assistant SecretaryAppropriations and Cash Management BranchFinancial Management Group10 July 2012


mailto:[email protected]

http://www.budget.gov.au/



http://www.comlaw.gov.au/Details/C2004C00469

Guidance

Guidance

What are ‘retained Agency receipts’?

1. Retained Agencies receipts are certain kinds of money received by an Agency that it may retain and spend by adding the amounts to its departmental appropriation. Section 31 of the FMA Act enables an Agency to increase its most recent departmental item by the kinds of receipts that are prescribed in regulation 15 of the FMA Regulations.

2. When a departmental item is increased by a retained Agency receipt, the Agency should be mindful of the requirements of section 44 of the FMA Act, which requires Chief Executives to ensure the proper use of Commonwealth resources. This means that all resources managed by an Agency (including retained Agency receipts) must be used efficiently, effectively, economically and ethically, and in a manner that is not inconsistent with the policies of the Commonwealth.

Kinds of receipts that may be retained

3. Regulation 15 includes two tables (at subregulation 15(2) and 15(3) respectively), which together set out thirteen kinds of receipts that Agencies may retain and spend under their departmental appropriation. Commencing at paragraph 6, all thirteen kinds of receipts are explained in this circular. Regulation 15 also includes conditions (at subregulations 15(4) to 15(9)), which an Agency must apply to each receipt to establish if the amount may be retained. Guidance on applying these conditions commences at paragraph 34.

4. The main difference between the two tables is that receipts prescribed in the first table do not include amounts that have been debited by an Agency from an administered appropriation that it manages. This condition is in subregulation 15(5) and more explanation is provided at paragraph 40.

Ten receipts for departmental activities that may be retained

5. Subregulation 15(2) provides the first table and this lists ten kinds of amounts that may be retained, if those amounts are received in relation to carrying out departmental activities.

Subregulation 15(2), Item 1An amount that offsets costs in relation to an activity of the Agency that receives it

6. This item enables an Agency to retain a receipt that offsets costs in relation to an Agency activity. Examples of offsetting amounts include receipts received:


Guidance

for services provided by an Agency;

for selling or hiring out goods (including leasing out goods); in advance of meeting an obligation to provide a good or service;

for providing Agency staff to speak at another entity’s seminar (to offset costs such as staff time, travel or accommodation);

from employees to offset salary sacrifice services provided by the Agency; from employees, consultants or contractors to offset the use of Agency facilities such as

car parking, telephone or a photocopier; from Comcare to offset amounts passed on to employees;

from royalties and licence fees to offset Agency costs to develop a product; in relation to a staff member attending jury duty. (Depending on the state or territory, a

juror may receive payment for jury duty and pay this amount to the Agency to offset salary costs while away from work.);

to offset costs for conducting litigation or dispute resolution; for sub-leasing excess building space to a café. (Please note that a building managed by

an Agency as an administered asset does not usually generate receipts in relation to departmental activities.); and

as repayments or refunds of amounts which were earlier paid by the Agency using its most recent or a former departmental appropriation. For further advice on managing repayments see Finance Circular 2011/04 "Repayments by and to the Commonwealth".

Subregulation 15(2) Item 2An amount that is a sponsorship, subsidy, gift, bequest or a similar contribution

7. This item enables an Agency to retain an amount received explicitly to support an Agency’s departmental activities. Examples of such amounts include:

money (distinct from goods) received from sponsors, for an Agency to run a seminar or for an Agency to participate in a trade show;

employment subsidies, for example a monetary subsidy for an Agency to participate in a program that encourages the engagement of particular groups of people, such as staff involved in national security activities or defence reserve activities; and

gifts of money or bequests. (See also the following guidance on trusts and similar arrangements.)

8. Sponsorships, gifts, bequests or similar contributions received without the express purpose of contributing to the Agency’s departmental activities are amounts received for the Commonwealth as a whole and these amounts should be remitted to the OPA as administered receipts.

Subregulation 15(2) Item 3An amount that relates to a trust or a similar arrangement

9. This item enables an Agency to retain an amount which is held on behalf of another person, such as in a trust or trust-like arrangement. Such amounts may be managed as part of an Agency’s departmental appropriation. It not necessary to use a Special Account to manage


http://www.finance.gov.au/publications/finance-circulars/2011/04.html

Guidance

amounts held on trust. An adequate level of separation can usually be provided by managing such amounts using a separate general-ledger in the Agency’s accounts and records and/or a separate bank account.

10. Money received in relation to a trust or a similar arrangement forms part of the CRF and is public money. Please refer to the FMOs available on the Finance website for the reporting requirements for assets held on trust.

11. Before entering into trust-like arrangements, an Agency should become aware of the equity requirements for trusts, and the potential financial and other implications for the Commonwealth. In such cases, the Agency should obtain suitable legal advice and if necessary, also liaise with the Legislative Review Branch, in Finance, which can be contacted at [email protected] .

12. Agencies are not encouraged to establish formal trusts under a Trust Deed or a trust instrument, or to accept trust like responsibilities unless it is expressly in the Commonwealth’s interest to do so, having regard to the resourcing and management issues. Complexities can arise for such arrangements, particularly if a trust or bequest requires an Agency to perform services outside its legislated powers. This can arise, for example, where a trust agreement purports to oblige an Agency to invest a principal amount and earn returns or interest (including on bank accounts). In such cases, the Agency can only invest that amount if an officer in the Agency has been delegated the power to invest public money by the Finance Minister under section 39 of the FMA Act. In the absence of such a delegation an Agency would potentially be taking on obligations that it could not meet.

13. In the event that an amount held on trust can be invested in accordance with section 39 of the FMA Act, then item 3 in the table of subregulation 15(2) enables an Agency to increase its most recent departmental item by any interest or return received from the investment.

Subregulation 15(2) Item 4An amount that is a monetary incentive or rebate in relation to a procurement arrangement

14. This item enables an Agency to retain amounts received as incentives or rebates when procuring goods or services. Before accepting such amounts, an Agency should consider any implications for receiving value for money in the particular procurement and for the proper use of public money (as required by section 44 of the FMA Act).

15. Examples of incentives and rebates that may be retained under this item include:

fuel tax rebates; and

cash bonuses that accompany the purchase of a good or service (such as cash vouchers from manufacturers of electrical goods).

Subregulation 15(2) Item 5An amount that is an insurance recovery



http://www.finance.gov.au/financial-reporting-and-accounting-policy/index.html

Guidance

16. This item enables an Agency to retain an amount received as a payout from an insurer in relation to departmental activities. Examples of such payouts include:

ComCover payouts for departmental activities; and

insurance arrangements for overseas departmental activities.

Subregulation 15(2) Item 6An amount that is in satisfaction of a claim for damages or other compensation

17. This item enables an Agency to retain an amount received, in relation to departmental activities, as a result of negotiated compensatory settlements, court awarded costs or contractual provisions. It does not include penalties or punitive amounts, which are not compensatory and should be remitted to the OPA as administered receipts. Examples of amounts that may be retained include:

compensatory out-of-court settlements; and compensatory court awarded costs.

Subregulation 15(2) Item 7An amount that relates to an employee’s leave (including paid parental leave)

18. This item enables an Agency to retain an amount received relating to an employee’s leave entitlements, for example amounts received:

under the Paid Parental Leave scheme (which commenced on 1 January 2011); and accumulated leave entitlements from a former employer of an Agency employee.

Subregulation 15(2) Item 8An amount that is specified cash

19. This item enables an Agency to retain cash obtained in its physical form. Examples of specified cash are as follows:

amounts of cash obtained using a Commonwealth credit card to pay for Agency expenses (for example, stationery or consumables); and

cash floats obtained on credit (such as for an Agency shopfront or overseas post).

20. In relation to the banking of specified cash, Agencies are required to act in accordance with Note 3 to subregulation 17(2) of the FMA Regulations which provides that: “Chief Executives may approve other banking days for particular kinds of money (for example specified cash). These days may be determined in Chief Executive Instructions.”

Subregulation 15(2) Item 9An amount that relates to the sale of minor departmental assets of the Agency that receives the amount

21. This item enables an Agency to retain amounts that are received from the sale of minor departmental assets. A minor departmental asset is defined in subregulation 15(9) as “an asset for which the original purchase price was $10 million or less”. Examples of minor


Guidance

departmental assets include vehicles, furniture, fittings and specialist research or military equipment. Subregulation 15(7) applies a maximum annual cap to retaining such receipts; for further explanation please see paragraph 45 of this circular.


Guidance

Subregulation 15(2) Item 10An amount received in relation to an application to the Agency under the Freedom of Information Act 1982 (FOI Act)

22. This item enables an Agency to retain amounts that are received in relation to fees charged for processing applications under the FOI Act. In charging such fees, Agencies are required to consult the appropriate provisions of the FOI Act. For example, this Act currently permits charges to process an application but does not permit the charging of an application fee.

Three additional Agency receipts that may be retained

23. The table in subregulation 15(3) lists three additional amounts that an Agency may retain. These receipts are not limited to amounts received by an Agency from conducting departmental activities (unlike the amounts prescribed in the table in subregulation 15(2)).

24. The three receipts listed in subregulation 15(3) are subject to conditions in subregulations 15(4) and 15(6). Receipts retained under a determination made by the Finance Minister under item 3 of the table in subregulation 15(3) are also subject to subregulation 15(8) and any additional conditions set out in the relevant determination.

Subregulation 15(3) Item 1An amount that relates to GST

25. This item enables an Agency to retain amounts that are:

related to GST (as collected by the Agency when selling goods or providing services); or

as refunds of GST related credits, received from the Australian Taxation Office (ATO).

26. This item provides for an ATO refund related to an Agency’s departmental activities or administered activities. However, in practice:

- for departmental activities, GST qualifying amounts are paid using departmental appropriation and a related ATO refund may be retained under this item; whereas

- for administered activities, GST qualifying amounts are usually paid using section 30A of the FMA Act (which provides to increase a limited appropriation to pay a GST qualifying amount). When section 30A is used, a related ATO refund should be remitted to the OPA (using the receipt type Repayment of GST Annotation).

27. A receipt that relates to GST is not a tax within the meaning of subregulation 15(4).

Subregulation 15(3) Item 2An amount that is debited from a Special Account in accordance with the purposes of the Special Account

28. This item provides to retain an amount that has been debited from a Special Account. It includes Special Accounts that are managed by other Agencies or the debiting Agency.


Guidance

29. The debiting provisions for a particular Special Account are set out in the legislative instrument or Act which established the Special Account. These are available from Comlaw or from the Finance Chart of Special Accounts, which is available on the Finance website.

Subregulation 15(3) Item 3An amount that relates to the operation of a scheme determined in writing by the Minister for this item

30. This item provides for the Finance Minister to determine other amounts that may be retained by an Agency. Such determinations are disallowable legislative instruments under section 42 of the Legislative Instruments Act 2003 and are published on the Federal Register of Legislative Instruments, as part of the ComLaw website.

31. Schemes that were determined under regulation 15 prior to 1 January 2011 were preserved when regulation 15 was amended, however, these former determinations are not legislative instruments and are only available from the Finance website.

32. To request such a determination, the relevant portfolio Minister needs to write to the Finance Minister. The relevant Agency, however, should first liaise with the Special Appropriations and Banking Policy Section, in Finance, at [email protected].

33. Receipts that an Agency may retain under such a determination are subject to conditions in subregulations 15(4), 15(6) and 15(8) and also any conditions in the particular determination.

Receipts that cannot be retained and conditions

34. Subregulations 15(4) to 15(8) provide conditions that apply to the amounts prescribed in regulation 15. Each of the conditions is explained in this section.

35. Receipts that an Agency may not retain must be remitted to the OPA as administered receipts. If an Agency is unable to determine whether an amount is of a kind prescribed in regulation 15, then the Agency should record the receipt as an administered receipt. The Agency’s accounts and records can be adjusted if the receipt is later determined to be retainable (see guidance at paragraph 52).

36. Section 81 of the Australian Constitution provides that all money raised or received by the Commonwealth forms part of the Consolidated Revenue Fund (CRF) and can be appropriated for the purposes of the Commonwealth. Section 83 of the Constitution requires that once money is part of the CRF, no money may be spent unless under an appropriation made in law. This means that all money received by an Agency must be remitted to the OPA, as an administered receipt, unless the Agency manages an existing appropriation which is able to be legally increased by the amount collected.

37. Generally, there are only three situations that enable an existing appropriation to be increased by an amount received by an Agency, these are:



http://www.finance.gov.au/financial-framework/financial-management-policy-guidance/relevant-Agency-receipts.html

http://www.comlaw.gov.au/Browse/ByTitle/LegislativeInstruments/Current



http://www.finance.gov.au/financial-framework/financial-management-policy-guidance/special-accounts.html

Guidance

the Agency’s departmental item, in accordance with the provisions of section 31 of the FMA Act and regulation 15 of the FMA Regulations;

a Special Account appropriation, if the legislated crediting provisions of the particular Special Account provide for the type of receipt collected; and

a current-year administered item, if a repayment is received by the Commonwealth is consistent with the provisions of section 30 of the FMA Act.

Subregulation 15(4)

38. This subregulation provides that a tax, levy, fine or penalty is not a receipt that an Agency may retain under section 31. The authority to collect such amounts is generally provided for in legislation and the amounts are collected as revenue for the Commonwealth as a whole. Examples of such amounts include an amount received as interest on a late payment and a court-awarded fine or penalty (an amount which is not compensatory).

39. This item is applied to the ten receipts types in the table in subregulation 15(2) and also to the three receipts types in the table in subregulation 15(3).

Subregulation 15(5)

40. Subregulation 15(5) prohibits an Agency from increasing its departmental item with an amount listed in the table in subregulation 15(2), if that amount was debited by the Agency from an administered item that it manages.

41. If an amount is debited from an administered item that is managed by another Agency, then such an amount may be retained by the receiving Agency, so long as the receipt is consistent with one of the categories in subregulation 15(2). This enables Agencies to provide goods and services to each other on a fee-for-service basis.

42. The condition in this item must be applied by an Agency to the ten receipts types in the table in subregulation 15(2).

Subregulation 15(6)

43. Subregulation 15(6) provides that a receipt may not be retained if a departmental item has already been appropriated for the Agency in relation to the amount received. This provision prevents the Agency from being appropriated for an activity more than once.

44. The condition in this item must be applied by an Agency to the ten receipts types in the table in subregulation 15(2) and also to the three receipts types in the table in subregulation 15(3).

Subregulation 15(7)

45. This subregulation sets conditions that must be applied to amounts received from the sale of minor departmental assets, under item 9 of the table in subregulation 15(2).

46. In a financial year, an Agency may retain up to a maximum of five per cent of the Agency’s cumulative annual departmental appropriation. The following considerations apply:


Guidance

a minor departmental asset is defined in subregulation 15(9) to be an asset for which the original purchase price was $10 million or less;

the cap of five per cent may be calculated from sale proceeds after offsetting related costs (such as auction fees) under item 1 of subregulation 15(2);

to calculate its cumulative annual departmental appropriation for a financial year, an Agency should consult the consolidated Appropriation Acts for that year, which are available on ComLaw at www.comlaw.gov.au; and

once an Agency’s cumulative departmental appropriation in a year has been increased by five per cent with receipts of this kind, then further receipts of this kind in the same financial year should be remitted to the OPA, as administered receipts.

Subregulation 15(8)

47. For increased transparency in the financial framework, subregulation 15(8) provides that a determination made by the Finance Minister, under item 3 of the table in subregulation 15(3), is a legislative instrument under section 42 of the Legislative Instruments Act 2003. Such instruments are published on the Federal Register of Legislative Instruments, as part of the ComLaw website.

Subregulation 15(9)

48. This subregulation defines the following:

an administered item as “an administered item in an Appropriation Act”; and

a minor departmental asset as “an asset for which the original purchase price was $10,000,000 or less”.




http://www.comlaw.gov.au/

Operational requirements


How to identify the most recent departmental item?

49. Agencies are generally appropriated a departmental item each year. In some instances, however, the most recent departmental item for an Agency may be in a prior financial year.

50. A departmental item is appropriated in an Appropriation Act. The most recent departmental item for an Agency is the amount appropriated as such in the relevant Appropriation Act. The Appropriation Acts may be viewed on ComLaw database at www.comlaw.gov.au. Appropriation Acts may be made when resourcing is required, however, in most years departmental items are provided in Appropriation Act (No. 1), Appropriation Act (No. 3) and Appropriation Act (No. 5).

Tips for keeping track of receipts

51. The following approaches may assist an Agency to identify whether amounts collected may be retained:

keeping track of amounts retained from the sale of minor departmental assets, so that it does not exceed the five per cent limit set out in subregulation 15(7);

keeping track of departmental costs so it can match the offset amount retained under subregulation 15(2). Please refer to the guidance at paragraph 59 entitled When is the revenue recognised?;

undertaking regular internal reconciliations to keep track of its retained receipts. This may be used by the Agency to inform its annual Certificate of Compliance report under the financial management framework; and

Agency documents that identify policy authorities and fee structures based on Government policies, such as Cost Recovery.

Retainable amounts that are incorrectly remitted to the OPA

52. At times, some Agencies remit amounts to the OPA as administered receipts, when the amounts may be retained under section 31. An amount remitted to the OPA as an administered receipt is not available to an Agency, unless drawn under the authority of an appropriation.

53. Once an amount is remitted to the OPA and recorded in ACM as an administered receipt, it cannot be drawn from the OPA without a legal authority. Identifying the amount as a prescribed receipt under section 31 of the FMA Act identifies the authority for the Agency to draw that amount and spend it as part of its departmental appropriation.


http://www.comlaw.gov.au/


54. To rectify an incorrect remittance to the OPA, an Agency should amend its accounts and records and process an ACM receipt journal that identifies the receipt type as Section 31. Such a journal entry identifies the amount as a prescribed receipt that an Agency may retain and increases the Agency’s available departmental appropriation that the Agency may draw down from the OPA.

Agency banking and OPA banking

55. Retained Agency receipts must be deposited into an Agency’s Official Departmental Receipts and Payments Account. Queries regarding Agency bank accounts may be directed to the Special Appropriations and Banking Policy Section at [email protected]

56. For cash management reasons, a working cash limit is applied to Agency bank accounts. The limit is agreed between each Agency and its designated AAU within Finance. Accumulating retainable receipts in an Agency bank account may take that bank account balance above the agreed working cash limit. If this occurs, the Agency should reduce the bank balance by remitting amounts to the OPA (and record the receipt in ACM as Section 31). These remittances remain as available departmental appropriation for the Agency to draw at a later date, as required.

57. To obtain agreement on a new working cash limit, an Agency should contact its relevant AAU in Finance. The AAU will advise the OPA Administration Team to effect the new limit.

When is a departmental item increased?

58. A departmental item is increased by an amount in accordance with subsection 31(2) at the time an entry recording the receipt is made in the accounts or records of the Agency. This timing is provided for under subsection 32A(4) of the FMA Act. After being recorded by the Agency, such amounts may be spent against the departmental item.

When is revenue recognised?

59. An Agency may receive a payment from an entity in advance (a prepayment) of delivering a departmental activity (e.g. good and/or service). In accordance with accounting standards, prepayments should be entered in an Agency’s accounts and records as:

a) an increase in unearned revenue liability; and

b) an increase in cash at bank.

As the activity is delivered, the Agency should record the:- expenses to be funded by its departmental appropriation and reduce its cash at

bank balance when these are paid; and

- matching revenue and reduce its unearned revenue liability (in accordance with the FMOs).




Amounts held by the Agency that are excess to costs should be:

- repaid, if this was agreed with the entity; or

- remitted the OPA as an administered receipt.



60. In most instances, unearned revenue would relate to item one of subsection 15(2), which provides to offset costs. To a lesser extent, unearned revenue may relate to other items prescribed in regulation 15, such as a sponsorship received for a conference or trade show that is yet to occur.

Accounting and reporting

61. Retained Agency receipts are reported in the following financial and Federal Budget documents:

Portfolio Budget Statement (PBS) - An Agency must report retained Agency receipts in their annual PBS. Please see the annual guidance for preparing a PBS, which is issued by Finance.

Budget Paper 4 (BP4) - Finance prepares the annual BP4 and includes ‘Agency/CAC receipts’ for Agencies in the Agency Resourcing Table.

Financial statements - An Agency must report retained Agency receipts in its annual financial statements, in accordance with the FMOs available on the Finance website.


http://www.finance.gov.au/financial-reporting-and-accounting-policy/index.html

Cost Recovery Receipts

Retained Agency Receipts (s31)

Cost Recovery receipts

Cost Recovery receipts vs Retained Agency receipts62. Retained Agency receipts include amounts prescribed in regulation 15(2) item 1, to offset

costs in relation to an Agency’s departmental activities. In some cases, these amounts are subject to the Government’s Cost Recovery policy (‘cost recovery receipts’). This overlap is illustrated in the diagram below:

63. The Australian Government Cost Recovery Guidelines is available on the Finance website. The main characteristics of cost recovery arrangements are:

Agencies require an explicit Government policy authority (agreement from Cabinet or the Prime Minister) to undertake an activity on a cost recovery basis. This includes, in most circumstances, imposing a charge which is set out provided in legislation, such as application fees for registrations or approvals.

most cost recovery activities occur on a continuing basis. There is a well established demand for such activities from non-government users.

Agencies are usually appropriated by Government to deliver cost recovery activities and related fees and charges collected are remitted to the OPA. In such cases, the receipts collected are costs recovery receipts and not Retained Agency receipts.

significant cost recovery activities (where an Agency has total cost recovery receipts greater than $5 million) are required to be documented in a Cost Recovery Impact Statement, which is published on the Agency’s website.

64. If an Agency collects money to recover the costs of an activity and (a) the Agency does not have Government policy authority to deliver the activity in accordance with the Cost Recovery Guidelines and (b) the annual revenue from this activity is close to or exceeds the abovementioned significance threshold on a regular basis (for example, for 5 out of the past 10 years or for 3 out of the past 5 years), then the Agency should seek Government policy authority to undertake the activity in accordance with the Cost Recovery Guidelines.

65. The main differences between cost recovery receipts and retained Agency receipts are as follows:

cost recovery receipts include fees and charges received in relation to an Agency’s departmental or administered activities. Whereas, retained Agency receipts relate to departmental activities only.


http://www.finance.gov.au/publications/finance-circulars/2005/09.html#FMG_4

Cost Recovery receipts

cost recovery receipts are collected from the non-government sector as amounts for the provision of goods and services (including regulation). Whereas, retained Agency receipts that offset costs include amounts collected from the non-government sector as well as from other Agencies and entities subject to the CAC Act.

cost recovery receipts may need to be reported separately in annual financial statements. If such amounts are also retained Agency receipts, the Agency would need to meet the reporting requirements for both types of receipts.

66. Receipts that are both cost recovery receipts and also Retained Agency receipts, include:

receipts generated by an activity that is funded from existing Agency resources and for which the Government has directed that costs be recovered. That is, the Agency has not been appropriated by the Government to deliver the activity; however, the Government has directed that costs be recovered in accordance with the Cost Recovery policy.

67. Receipts that are not cost recovery receipts and are Retained Agency receipts, include:

receipts received from the provision of ad-hoc or one-off goods and services, which may offset costs but do not have an explicit Government policy authority, do not constitute cost recovery charges. For example, Austrade provides tailored trade, investment and education services to Australian businesses and education providers on a fee-for-service basis. As these services are not provided on a regular basis and do not have Government policy authority in accordance with the Cost Recovery policy, receipts from these activities are not considered cost recovery charges, however, they are retained by Austrade under section 31 of the FMA Act.

68. For further information or any queries regarding the Cost Recovery policy, please liaise with the Cost Recovery Team, in Finance, at [email protected] .



Attachment 1:

Frequently asked questions

1 ) C a n I u s e s e c ti o n 3 1 t o r e t a i n a r e p a y m e n t t h a t r e l a t e s t o a n a m o u n t p a i d u s i n g a d e p a r t m e n t a l i t e m i n a p r i o r y e a r ?

Answer: Yes, repayments related amounts paid earlier under a departmental item should be retained using section 31 pursuant to item 1 of the table in subregulation 15(2) as ‘an amount that offsets costs’. This enables the Agency’s most recent departmental item to be increased. (Repayments related to departmental appropriation should not be re-credited under section 30 of the FMA Act as this would increase a prior year’s departmental item, which unnecessarily contributes to a build up of old and unspent departmental appropriations.)

2 ) C a n I u s e s e c ti o n 3 1 t o r e t a i n e x p e n s e s r e l a t e d t o d i s p o s i n g o f p r o p e r t y f o u n d o n C o m m o n w e a l t h p r e m i s e s ?

Answer: Yes. An amount to offset expenses for storage, maintenance and disposal may be retained. This is provided for under section 41 of the FMA Act and regulation 23 of the FMA Regulations, which relate to the disposal of property found on Commonwealth premises.

The proceeds from disposing of property found on Commonwealth premises should be treated as administered receipts. If a claim to the property is later recognised and the Commonwealth is required to repay an amount to the claimant, then section 28 of the FMA Act provides a special appropriation to make a repayment, where the Agency has no appropriation for the repayment.

3 ) C a n I u s e s e c ti o n 3 1 t o r e t a i n m o n e y t h a t r e l a t e s t o a n A g e n c y s o c i a l c l u b ?

Answer: Yes. Where a social club is part of an Agency or controlled by an Agency, the amounts collected in relation to social club activities may be retained by the Agency under section 31. An Agency could consider such amounts to be receipts under subregulation 15(2) item 1, in relation to offsetting costs.

4 ) C a n I u s e s e c ti o n 3 1 t o r e t a i n c o s t r e c o v e r y r e c e i p t s ? Answer: Yes, but not in all circumstances. Depending on how the cost recovery arrangement has been designed, cost recovery receipts can be retained by an Agency either under section 31 or by utilising a Special Account. In most circumstances, cost recovery revenue must be remitted to the OPA. An additional reporting requirement in preparing financial statements is that cost recovery revenue needs to be reported by activity in a note to an Agency’s annual financial statements.


Attachment 2:

Key Concepts – terms and abbreviationsThe following terms and abbreviations have been used in this Finance Circular:

administered item is an appropriation, which is administered by an Agency on behalf of the Government. The term is defined in section 3 of the Appropriation Act (No. 1) 2011-2012 as an amount set out in Schedule 1 opposite an outcome for an Agency under the heading ‘Administered’.

administered receipt is an amount of public money that is collected by an Agency on behalf of the Commonwealth. The amount is not controlled by the Agency and must be remitted to the OPA as an administered receipt.

Agency means a Department of State or a Department of the Parliament (including persons allocated to the Department by the Financial Management and Accountability Regulations 1997 (FMA Regulations)), or any agency prescribed under the FMA Regulations (see section 5 of the FMA Act; FMA Regulations 4-5; and Schedule 1 of the FMA Regulations).

allocated official means a person outside the Commonwealth who performs a financial task and temporarily becomes an official of the FMA Act agency while they are undertaking that financial task. They are temporarily “allocated” to that agency (see FMA Regulation 4). As an “allocated official”, they are subject to all the requirements of the financial management framework that apply to all officials, including the FMA legislation, the policies of the Commonwealth and the relevant agency’s Chief Executive’s Instructions (CEIs).

If a person outside the Commonwealth is involved with the receipt, custody or payment of public money under an agreement authorised under section 12 of the FMA Act, they do not temporarily become an official (i.e. an allocated official), as that task is not a financial task under FMA Regulation 3.

appropriation is defined in section 5 of the FMA Act as an authority under law to draw money from the Consolidated Revenue Fund, whether or not the law concerned uses the word ‘appropriation’ or ‘appropriated’.

Appropriations and Cash Management (ACM) is a module contained within CBMS, which is used to assist in the management of appropriations and cash.

Commonwealth authorities are bodies corporate that are established by legislation for a public purpose, and which hold money on their own account (that is, for their own purposes). Commonwealth authorities are subject to the Commonwealth Authorities and Companies Act 1997 (CAC Act). Section 31 of the FMA Act does not apply to Commonwealth authorities.

Commonwealth companies are incorporated under the Corporations Act 2001 and controlled by the Commonwealth. Commonwealth companies are also subject to the CAC Act. Section 31 of the FMA Act does not apply to Commonwealth companies.

Central Budget Management System (CBMS) is the system used to manage the flow of financial information between Finance and Australian Government entities to facilitate cash and appropriations management, the preparation of budget documentation and financial reporting.

Consolidated Revenue Fund (CRF) is established by section 81 of the Australian Constitution.

Cost Recovery receipts are receipts related to arrangements that are subject to the Australian Government’s Cost Recovery Guidelines. The receipts are collected through the imposition of charges to the non-government sector for the provision of government goods and services (including regulation).


departmental item is an appropriation, which is used by an Agency for expenditure over which an Agency has control. The term is defined in section 3 of the Appropriation Act (No. 1) 2011-2012 as the total amount set out in Schedule 1 in relation to an Agency under the heading ‘Departmental’.

departmental receipt is an amount of public money that is collected by an Agency in relation to its departmental activities. The amount is controlled by the Agency and may be retained under section 31 of the FMA Act.

Finance means the Department of Finance and Deregulation.

Finance Minister’s Orders for Financial Reporting (FMOs) outline the requirements for the preparation of financial reports for Australian Government entities. The FMOs are produced each year and have the force of law under the FMA Act.

official means a person who is in an agency or is part of an agency (see section 5 of the FMA Act). This includes an individual who is allocated to an agency, including those temporarily allocated (i.e. an allocated official).

Official Public Account (OPA) means the Commonwealth’s principal bank account within the OPA Group of Accounts (the Commonwealth’s settlement accounts) held with the Reserve Bank of Australia.

public money means:

a) money in the custody or under the control of the Commonwealth; or

b) money in the custody or under the control of any person acting for or on behalf of the Commonwealth in respect of the custody or control of the money;

including such money that is held on trust for, or otherwise for the benefit of, a person other than the Commonwealth (see section 5 of the FMA Act).

Public money includes Australian currency, foreign currency and cheques in any currency. Public money can be appropriated by Parliament and is raised by or on behalf of the Commonwealth through taxes, borrowings, loan repayments, rebates, levies, fees and other means. Money held on trust by the Commonwealth and money found on Commonwealth premises is also public money.

The FMA Act and Regulations apply to all money held or controlled by FMA Act agencies, irrespective of whether the money is provided through the Federal Budget, a special appropriation or raised by the agency, such as through cost recovery.


Attachment 3:

Extracts of relevant legislation

The following boxes below contain extracts of sections 31 and 32A of the FMA Act and regulation 15 of the FMA Regulations. The effect of the legislation is that:

under section 31, an Agency’s most recent departmental item may be increased by an amount equivalent to that received as a receipt prescribed in regulation 15; and

under section 32A(4), the increase to a departmental item takes effect when an entry recording the amount is made in the accounts or records of the Agency.

Financial Management and Accountability Act 1997

Section 31 - Retaining prescribed receipts(1) This section applies if an Agency receives an amount of a kind

prescribed by the regulations for the purposes of this section.

(2) The amount specified in the most recent departmental item for the Agency is taken to be increased by an amount equal to the amount received by the Agency.

Note: See section 32A for when the increase takes effect.

(3) In this section:

departmental item means a departmental item in an Appropriation Act.

Section 32A - Recording of amounts in accounts and records (extract)

Relevant Agency receipts

(4) The increase to an amount in accordance with subsection 31(2) takes effect at the time an entry recording the receipt of the amount mentioned in subsection 31(1) is made in the accounts and records of the Agency concerned.


Financial Management and Accountability Regulations 1997

Regulation 15 – Prescribed receipts that an Agency may retain (Act s 31)

(1) This regulation sets out kinds of amounts for subsection 31 (1) of the Act.

Note: If an Agency receives an amount mentioned in this regulation, subsection 31 (2) of the Act provides that the amount specified in the most recent departmental item for the Agency is taken to be increased by an amount equal to the amount received by the Agency.

(2) Subject to sub-regulations (4) to (6), amounts in the following table are kinds of amounts to which subsection 31(1) of the Act applies if an amount of that kind is received by an Agency in relation to the Agency’s departmental activities.

Item Amount________________________________________________________________________________________________________________

1 An amount that offsets costs in relation to an activity of the Agency that receives it

2 An amount that is a sponsorship, subsidy, gift, bequest or a similar contribution

3 An amount that relates to a trust or a similar arrangement

4 An amount that is a monetary incentive or rebate in relation to a procurement arrangement

5 An amount that is an insurance recovery

6 An amount that is in satisfaction of a claim for damages or other compensation

7 An amount that relates to an employee’s leave (including paid parental leave)

8 An amount that is specified cash

9 An amount that relates to the sale of minor departmental assets of the Agency that receives the amount

10 An amount received in relation to an application to the Agency under the Freedom of Information Act 1982

________________________________________________________________________________________________________________

(3) Subject to subregulations (4) to (6), amounts in the following table are also kinds of amounts for which subsection 31(1) of the Act.

Item Amount________________________________________________________________________________________________________________

1 An amount that relates to GST

2 An amount that is debited from a Special Account in accordance with the purposes of the Special Account

3 An amount that relates to the operation of a scheme determined in writing by the Minister for this item

________________________________________________________________________________________________________________

(4) Despite sub-regulations (2) and (3) and any other provision of these Regulations or another legislative instrument, an amount


that is a tax, levy, fine or penalty is not an amount of a kind prescribed for subsection 31 (1) of the Act.

(5) If:

(a) an amount of the kind mentioned in an item of the table in sub-regulation (2) is received by an Agency; and

(b) the amount has been debited from an administered item appropriated for the Agency;

the amount is not an amount of a kind prescribed for subsection 31(1) of the Act.

(6) An amount received by an Agency is not an amount of a kind prescribed for subsection 31 (1) of the Act if a departmental item has been appropriated for the Agency in relation to the amount received by the Agency.

(7) For item 9 of the table in subregulation (2), if the total of the amounts of the kind mentioned in the item received by the Agency in the financial year, after offsetting costs in relation to the sale of the minor departmental assets, reaches 5% of the Agency’s cumulative annual departmental appropriation for the financial year, any further amount of that kind received by the Agency in the financial year is not an amount of a kind prescribed for subsection 31 (1) of the Act.

(8) A determination for item 3 of the table in subregulation (3) is a legislative instrument.

(9) In this regulation: administered item means an administered item in an Appropriation Act. minor departmental asset means an asset for which the original purchase price was $10 000 000 or less.

Links to Comlaw: FMA Act: http://www.comlaw.gov.au/Details/C2011C00073FMA Regulations: http://www.comlaw.gov.au/Details/F2011C00030


http://www.comlaw.gov.au/Details/F2011C00030

http://www.comlaw.gov.au/Details/C2011C00073

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