6 Operating instructions applying to departments as defined in the Public Finance Act 1989
6.1 Financial responsibility of Chief Executives
The Act makes departmental Chief Executives responsible for the financial management, financial performance and financial sustainability of their departments (section 34 of the Act) and specifies their responsibilities in respect of non-departmental activity administered by the department (section 35 of the Act).
Chief Executives are responsible for operating their own accounting and management systems and establishing day to day procedures to support those systems.
Specific responsibilities, which must be addressed by Chief Executives, include:
- financial reporting requirements;
- the system of internal control;
- financial management and financial performance of any bodies, activities or statutory offices that are funded by way of an appropriation administered by the department and that are not natural persons or separate legal entities;
- banking, receipt and payment systems;
- accounting systems;
- control over asset acquisition, utilisation and disposal;
- purchasing, contracting and tendering procedures;
- risk management;
- travel policies and procedures;
- personnel policies and procedures; and
- foreign exchange exposure management.
A number of publications have been developed to assist departmental Chief Executives with the development and maintenance of appropriate accounting policies and systems. Departments can obtain these publications from the Treasury website.
The Chief Executive's responsibilities must be carried out within the parameters of legislation and Government policy. The requirements of the Act, the State Sector Act 1988, Treasury Instructions, Minister of Finance Instructions and any other legislation or regulations governing the operations of the department must be complied with. These requirements may result in departments having responsibilities to parties other than the Crown. Government policy, as set out in Cabinet decisions, Ministerial direction, or agreements between the Chief Executive and the Responsible Minister (as defined by the Act) may also impact on the manner in which the Chief Executive meets his or her responsibilities. Cabinet Office circulars limiting departmental chief executives' authority to approve certain types of departmental spending (with spending in excess of those limits requiring approval of the responsible Minister or of Cabinet) are a specific example of Cabinet decisions that impact upon financial management within a department.
In addition to responsibilities associated with the financial management of the department, the Chief Executive may be responsible for incurring expenditure, collecting revenue, or managing assets and liabilities on behalf of the Crown, or for managing trust money on behalf of the Treasury (which manages it for the Crown). Financial delegations from the Minister responsible for an appropriation to the Chief Executive are a specific example of Cabinet decisions that impact upon the financial management of activities a department manages on behalf of the Crown (i.e. non-departmental activities).
