6.5 Crown revenue, expenditure, assets and liabilities

6.5.1    Definition of Crown

In this section of the Treasury Instructions the term “Crown” is used where revenue, expenditure, assets or liabilities are being managed by a department of the Crown otherwise than for departmental purposes. Such items are also referred to as "non-departmental".

Examples of “Crown revenue” and “Crown expenditure” are taxation revenue and benefit payments. Such revenue and expenditure can be distinguished from departmental revenue or expenditure that relate to, or result from, the supply of outputs by the department.

Similarly, “Crown assets” are those assets that the department manages for the Crown, rather than those assets used by a department for its own purposes. Crown liabilities are those liabilities that a department manages for the Crown, rather than liabilities incurred by the department as part of its normal operating activities. Crown assets and liabilities are not reported in the statement of financial position of the department.

6.5.2    Authority to operate Crown bank accounts

Under section 65R of the Act, the Treasury is responsible for the opening, maintenance and operation of all Crown Bank Accounts.

Where it is appropriate, the Treasury will establish Crown Bank Accounts for use by departments. Departments will be issued with a Notice of Delegation Regarding Crown Bank Accounts to operate these accounts, in accordance with section 65R of the Act (refer also to section 6.6 of these Treasury Instructions, "Banking").

6.5.3    Collection of Crown revenue

Departments collecting revenue for the Crown must:

• bank all such revenue into a Crown Bank Account approved by the Treasury for that purpose;
• operate that Crown Bank Account in accordance with the terms of these Treasury Instructions, and any Notice of Delegation Regarding Crown Bank Accounts issued by the Treasury;
• maintain a management, accounting and information system which will:
  • recognise Crown revenue when it is earned;
  • account for all Crown debtors; and
  • account for all receipts relating to Crown revenue;
• operate an adequate system of internal control in respect of such debtors and revenue;
• ensure adequate procedures are adopted for the collection of these debts;
• provide forecasts to the Treasury of Crown revenue and the consequential cash flows; and
• provide such other information in relation to Crown revenue as the Treasury may from time to time require.

If a remittance is received, which does not constitute full payment, and there are elements of both departmental and Crown revenue, then the money is to be applied to discharge the debt to the Crown first. Where such a remittance includes trust money and cannot be separated from departmental or Crown money, then the ranking (or pro-rated amount where more appropriate) of distribution should be approved by the Treasury.

6.5.4  Disbursement of Crown expenditure

Departments making payments for the Crown (including refunds of Crown revenue) to entities that are not included in the consolidated Financial Statements of the Government must:

• make such payments from a Crown Bank Account approved by the Treasury for that purpose;
• only make such payments directly to the recipient (i.e. not to an agent for subsequent payment to the recipient) unless agreed by the Treasury;
• operate that Crown Bank Account in accordance with the terms of section 6.6 of these Treasury Instructions ("Banking"), any Notice of Delegation Regarding Crown Bank Accounts issued by the Treasury and the delegated authority obtained from the Minister responsible for the non-departmental appropriation that the Crown payment relates to;
• maintain a management, accounting and information system which will:
  • recognise the expenditure when it is incurred;
  • account for all Crown creditors; and
  • account for all payments made on behalf of the Crown;
• operate an adequate system of internal control in respect of such creditors and payments;
• provide forecasts to the Treasury of the Crown expenditure and the consequent cash flows; and
• provide such other information in relation to Crown expenditure as the Treasury may from time to time require.

In considering requests to use an agent for making payments to the recipient, the criteria the Treasury will consider include:

• Cost/benefit analysis demonstrating that the use of an agent is less costly than payments being made directly by the department.
• How the Crown can be assured that the correct recipients are correctly paid. Such assurance mechanisms will vary but should include evidence of processing controls.
• Reconciliations, reporting and management oversight and appropriate recovery procedures from the agent in case of error.
• Additional credit risk as a result of the use of an agent.
• Loss of benefit of the use of money in any period between money being disbursed to the agent and the recipient accepting the money.

The last two criteria may be able to be met through establishing funding arrangements that clear the agency account daily, rather than by providing a float for the agent.

Note that this instruction does not cover payments by departments to Crown entities, for example when the Crown entity is acting as a Crown agent in disbursing grants.