Part 1: AOFM Overview
Role, function, outcome and program structure
The AOFM is responsible for the management of Australian Government debt. The AOFM also manages the Government’s cash balances and invests in low risk financial assets, which in recent years has been confined to term deposits with the Reserve Bank of Australia (RBA).
The objectives of the AOFM are to:
- 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.
- Facilitate government cash outlay requirements as and when they fall due.
- Operate in the Australian Government Securities (AGS) market in a manner consistent with being a credible custodian.
- To capably and efficiently manage the Australian Business Support Fund (ABSF) and Structured Finance Securitisation Fund (SFSF).
The AOFM’s debt and cash management activities include the issuance of Treasury Bonds, Treasury Indexed Bonds and Treasury Notes. To support the efficient operation of the markets for Treasury Bonds and Treasury Indexed Bonds, a securities lending facility that allows financial market participants to borrow bonds is maintained on behalf of the AOFM by the RBA.
The AOFM is part of the Treasury portfolio. It is accountable to the Secretary to the Treasury and to the Treasurer, and through the Treasurer to the Parliament and the public. However, it is a listed entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and maintains its own accounts and is responsible 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 that is directed to achieve the following outcome on behalf of the Australian Government: — the advancement of macroeconomic growth and stability. This is pursued through the effective operation of financial markets by issuing debt and investing in financial assets (through the ABSF and SFSF programs); and managing debt, investments and cash. The AOFM aims to manage the debt for which it is responsible at least cost, subject to an acceptable level of risk. It also takes into account the Government’s policy objectives of supporting the AGS market when planning and executing issuance programs.
Mr Robert Nicholl, CEO, has been the accountable authority of AOFM for the entire reporting period.
AOFM’s business structure remains broadly unchanged from the previous reporting period with its core operational activities segregated into three broad areas.
Portfolio management and transaction assessment and execution are situated within the ‘front office’ — these activities encompass: meeting the financing and cash management tasks through AGS issuance; monitoring and assessing financial market conditions (including investor behaviour); managing the long‑term debt portfolio; assessing and executing investments under the ABSF and SFSF programs; global market research (including monitoring and anticipating regulatory impacts on financial markets); and investor engagement (Funding, Markets and Strategy).
A ‘middle office’ (Enterprise Assurance and Performance) oversights separation of the back and front office functions through maintaining complementary frameworks for enterprise risk and assurance (including audit) and the coordination of outsourced legal services, and compliance with the AOFM’s obligations under relevant legal, regulatory and delegated powers. It also undertakes performance monitoring of the various portfolio and transaction activities.
Business Operations comprise transaction settlements, together with all associated payment obligations and the monitoring and financial statement reporting of the AOFM’s transactions (and balance sheet activity) on behalf of the Australian Government. These activities form what is typically viewed in the financial sector as the ‘back office’ (Accounting Services). This is effectively two separate teams. AOFM governance, corporate related functions and support to the Chief Executive sit within a Corporate Development business unit. Advice on issues regarding the AOFM’s staff development objectives and APS specific issues are provided directly to the Chief Executive through a dedicated role.
This overall structure provides for an appropriate segregation of duties — consistent with financial industry best practice.
AOFM seconded staff members to:
- the Treasury for a 2 month period commencing in October 2019,
- the North Queensland Livestock Industry Recovery Agency for a period of 9 months commencing in March 2019,
- the North Queensland Livestock Industry Recovery Agency for a period of 9 months commencing in December 2019, and
- the North Queensland Livestock Industry Recovery Agency for a period of 6 months commencing in August 2019.