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Part 1: AOFM Overview

Role, function, outcome and program structure

The AOFM is responsible for management of Australian Government debt. The AOFM also manages the Government’s cash balances and invests surplus balances in low-risk financial assets, which in recent years has been confined to deposits with the Reserve Bank of Australia (RBA).

The objectives of the AOFM are to:

1.      Meet the Budget financing task while managing the trade-offs between cost and risks for the cash and debt portfolios over the medium-long term;

2.      enable the Government to meet its cash outlay requirements at all times;

3.      operate in the Australian Government Securities (AGS) market in a manner consistent with a responsibility matching its ability to influence the market; and

4.      manage the Australian Business Support Fund (ABSF) and Structured Finance Securitisation Fund (SFSF).

The AOFM’s debt and cash management activities include issuance of Treasury Bonds, Treasury Indexed Bonds and Treasury Notes. To support an efficient operation of markets for Treasury Bonds and Treasury Indexed Bonds, a securities lending facility that allows financial market participants to borrow bonds is maintained by the RBA on behalf of the AOFM.

The AOFM is part of the Treasury portfolio. It is accountable to the Treasurer, the Secretary to the Treasury and through the Treasurer to the Parliament and the public. The AOFM is a listed entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act), maintaining its own accounts and taking responsibility for compliance with the Act separately to the Treasury. AOFM staff are employed under the Public Service Act 1999.

For budgetary purposes, the AOFM’s activities comprise one program directed to achieve the following outcome on behalf of the Australian Government: — “the advancement of macroeconomic growth and stability.”

This is pursued through issuance of AGS; investing on behalf of Government in financial markets (through the ABSF and SFSF programs); and managing the Government’s debt and cash portfolios. The AOFM aims to manage the debt portfolio at least cost, subject to an acceptable level of risk. The AOFM takes account of Government policy objectives in support of the AGS market when planning and executing issuance programs.

Accountable authority

Mr Robert Nicholl, CEO, has been the accountable authority of AOFM for the entire reporting period.

Organisational structure

The AOFM is organised according to a structure that provides segregation of transaction-related duties, based on principles of financial industry best practice. Core operational activities are segregated into three broad areas.

Front Office

The Front Office comprises core operational activities of strategy, markets, and funding. This involves portfolio and global market research (including monitoring and anticipating regulatory impacts on financial markets), investor engagement, liaison with Treasury on debt policy and related financial market issues, conduct of investment programs (ABSF, SFSF), and issuance. The Front Office liaises with Treasury, other departments, and agencies responsible for government programs, the ATO, the RBA, intermediaries, investors, and Australian securitisation market participants. It also monitors global financial markets to judge how execution of AOFM’s financing and portfolio management responsibilities can be best achieved.

Middle Office

The Middle Office comprises enterprise risk, assurance, performance, data, and business systems management and strategy. Associated activities support risk and compliance monitoring and facilitate risk management (including separation of back and front office functions). The Middle Office administers controls in various business critical systems. It maintains databases in support of support monitoring and reporting on AOFM business activities. It also manages broader IT issues through a shared services relationship with Treasury, while maintaining awareness of developing new opportunities in availability of out-sourced IT services.

Back Office

The Back Office comprises accounting services, settlements, administrative support, and workplace support for the CEO. Business operations provide accounting services, transaction settlements and debt payment obligations, procurement advice, and parliamentary liaison support. Administrative functions and support to the Chief Executive sit within a Corporate Development business unit. Communications, information management, and human resources related advice are served by relevant senior staff.