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 very low risk financial assets, which in recent years has been in the form of term deposits with the Reserve Bank of Australia (RBA).
The objectives of the AOFM are to:
- meet the budget financing task in a cost-effective manner subject to acceptable risk;
- facilitate the government’s ability to meet its cash outlay requirements as and when they fall due; and
- be a credible custodian of the AGS market and other portfolio responsibilities.
The AOFM’s debt management activities include the issuance of Treasury Bonds and Treasury Indexed Bonds. To support the efficient operation of the markets for these debt instruments, a securities lending facility that allows financial market participants to borrow bonds is maintained on behalf of the AOFM by the RBA.
The AOFM’s cash management activities include the issuance of Treasury Notes to meet short-term funding needs.
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. The AOFM is a listed entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act) which requires it to maintain its own accounts. It is responsible for compliance with the PGPA 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 outcome is pursued through the effective operation by issuing debt securities into financial markets, investing in financial assets; and managing debt, investment and cash portfolios. The AOFM aims to manage government debt for which it is responsible at least cost, subject to an acceptable level of risk. The government’s policy objectives at a point in time, and over time of supporting the AGS market in order to maintain ready access to global financial markets, underpin the AOFM’s planned activities from year-to-year.
Mr Rob Nicholl, CEO, has been the accountable authority of AOFM for the entire reporting period.
AOFM’s business structure remains unchanged from the previous reporting period Portfolio and global market research (including monitoring and anticipating regulatory impacts on financial markets), issuance transaction design and execution, and investor engagement, together form what is viewed as ‘front office’ related (Funding, Markets and Strategy).
Business Operations comprise transaction settlements, together with all associated payment obligations and the monitoring and meeting financial reporting requirements in relation to 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).
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 the internal audit function) 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.
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 high standard financial industry protocols.