January tpp Establishing and Monitoring the Performance of NSW Government Residual Entities. Policy & Guidelines Paper

Transcription

1 January 2016 tpp Establishing and Mnitring the Perfrmance f NSW Gvernment Residual Entities Plicy & Guidelines Paper

2 Gvernance Framewrk applying t NSW Gvernment Residual Entities Preface Fllwing a majr asset sale r restructure, it is ften the case that a number f residual assets, liabilities and functins remain with the State. This plicy and guidelines paper prvides a Gvernance Framewrk cvering matters that shuld be cnsidered in the establishment, peratin and reprting f entities created t hld these residual assets, liabilities and functins. This paper refers t such entities as residual entities. The paper includes appendices detailing the respnsibilities f the: Residual Entity Officer Transactin Prject Directr in relatin t residual matters and Residual Entities Transactin Residual Entity Wrk Stream These appendices are presented fr use by fficers within NSW Treasury and ther agencies. They have been develped t be used bth during a transactin prcess t establish a residual entity and in the pst-transactin perid t ensure that the entities functins are perfrmed. This paper is substantially an peratinal guide t assist fficers frm within NSW Treasury and ther public sectr agencies t address issues assciated with residual entities. Rb Whitfield Secretary NSW Treasury January 2016 Treasury Ref: TPP16-01 Nte General inquiries cncerning this dcument shuld be initially directed t: Jim Dawsn, Executive Directr, Cmmercial Assets Tel: , r jim.dawsn@treasury.nsw.gv.au This publicatin can be accessed frm the Treasury s website New Suth Wales Treasury page i

3 Gvernance Framewrk applying t NSW Gvernment Residual Entities Cntents Page Preface Intrductin 1 The existing Residual Entities 1 Establishing a Residual Entity 3 Legal and Plicy Issues 3 Cnsultatin 5 Resurcing Arrangements 5 Funding Arrangements 6 Financial reprting 7 Preparatin f financial accunts 7 Audit f financial accunts 8 Publicatin f financial accunts 8 Cntingent Assets and Liabilities 8 Handver Reprting 9 Operatin 10 Appintment f a Residual Entity Officer 10 Risk management 10 Appendix 1: Respnsibilities f the Residual Entity Officer 11 Appendix 2: Respnsibilities f the Transactin Prject Directr in relatin t residual matters and Residual Entities Appendix 3: Respnsibilities f the Transactin Residual Entity Wrk Stream Acrnyms used in this dcument 14 Further infrmatin 14 New Suth Wales Treasury page ii

4 Gvernance Framewrk applying t NSW Gvernment Residual Entities Intrductin Fllwing a majr asset sale r restructure, it is ften the case that a number f residual assets, liabilities and functins may remain with the State. In many, thugh nt necessarily in all instances, the mst apprpriate way t manage these situatins will be t establish a specific purpse entity. This plicy and guidelines paper uses the term residual entities (RE) t refer t such entities. On 2 March 2015, Ernst & Yung prvided the Treasury Audit and Risk Cmmittee with the Audit f the cmpliance and rganisatinal respnsibilities f Tier 3 Entities (the audit reprt). This audit reprt recmmended the develpment f a gvernance framewrk that cvers the lifecycle f Tier 3 entities. This paper respnds t that audit reprt recmmendatin by prviding an utline f the matters that are t be cnsidered and determined when establishing a new Tier 3 entity. Tier 3 entities (T3Es) are small entities that typically are created t hld residual assets, liabilities and functins that remain with the State fllwing a majr asset sale transactin r agency restructuring 1. Nt all REs that result frm a transactin are categrised as T3Es. Fr example, the Waste Assets Ministerial Crpratin is mre substantive in nature and is nt categrised as a T3E. Similarly, the Energy Assets Ministerial Hlding Crpratin has recently been reclassified frm a T3E t a Tier 2 entity. As the audit reprt s findings are generally applicable t all REs, whether T2Es r T3Es, this paper s Gvernance Framewrk and Operatins Manual draw heavily upn the audit reprt. Just as ne asset transactin differs frm anther, the purpse and functins f each RE als differ. As a result it is nt pssible t prpse a ne-size-fits-all prescriptin fr each RE. This paper, hwever, prvides a checklist f matters cncerning residual assets, liabilities and functins that shuld be cnsidered and determined during a transactin prcess, and pst-transactin if an RE is established. 1 The exceptin is the Liability Management Ministerial Crpratin, which was nt created fr residual purpses. New Suth Wales Treasury page 1

5 Gvernance Framewrk applying t NSW Gvernment Residual Entities The Existing Residual Entities The fllwing table lists the NSW Gvernment REs, as at 1 December 2015: Entity Liability Management Ministerial Crpratin (LMMC) State Rail Authrity Residual Hlding Crpratin (SRARHC) Ltteries Assets Ministerial Crpratin (LAMC) Energy Assets Ministerial Hlding Crpratin (EAMHC) 2 Prts Assets Ministerial Hlding Crpratin (PAMHC) and its subsidiaries: Prt Btany Lessr Pty Ltd Prt Kembla Lessr Pty Ltd Prt f Newcastle Lessr Pty Ltd 3 Purpse Created in 2002 t manage the General Gvernment Liability Management Fund, which hlds financial assets t ffset unfunded superannuatin liabilities. Held $58 millin in assets as at June Created in 2007 by renaming the residual State Rail Authrity and putting it under the Treasurer s cntrl. Its sle purpse is t hld sme rlling stck crss-brder leases that were nt transferred t ther agencies (such as RailCrp) in the 2000s. Created in 2010 as part f the NSW Ltteries transactin. Has nt been used and remains drmant. Created t hld residual assets, rights and liabilities stemming frm the electricity generatin transactins and the electricity netwrk transactins. Key respnsibilities include dust diseases liabilities and receiving mnies frm insurance claims. Recently reclassified as a T2E. Created t perfrm the State s lessr rle as part f the lng-term leases f the prts in Key respnsibilities include administering prperty matters t d with the lease (e.g. develpment cnsents, subdivisins) and envirnmental liabilities. The NSW Treasury website includes a listing f the residual entities and ther entities which frm the Treasury cluster ( 2 3 EAMHC, which was included in Ernst & Yung s 2015 audit reprt n T3Es, has been reclassified as a Tier 2 entity. Nt included in the 2015 internal audit. New Suth Wales Treasury page 2

6 Gvernance Framewrk applying t NSW Gvernment Residual Entities Establishing a Residual Entity Residual entities are typically established by enabling legislatin. Fr asset sale transactins, enabling legislatin is usually develped prir t the transactin thrugh a specific wrkstream led by the Treasury General Cunsel. The Prject Directr f the transactin must cnsider and, where apprpriate, establish a transactin residual issues wrkstream t fcus n the management f residual issues including the establishment f any new REs (a Transactin RE wrkstream). If the Prject Directr determines that such a wrk stream is nt required, the reasns fr such a determinatin must be clearly dcumented, as must the Prject Directr s prpsed alternative mechanisms fr cnsidering and respnding t residual issues fr the transactin. In establishing an RE, careful cnsideratin needs t be given t several matters, including: Legal and Plicy issues Resurcing Arrangements Funding Arrangements Financial Reprting Handver Reprting Operatin f the RE, including risk management, the RE s functins and the appintment f an RE Officer. Just as the purpse and functins f each RE differ, s t will the appraches t each f the abve issues. Fr instance, the apprach taken when establishing a cmmercial, peratinal entity is likely t vary frm that taken in establishing a passive, nn-cmmercial entity. Legal and Plicy Issues As REs are generally established by enabling legislatin, many f the imprtant decisins relating t the RE s functins and administratin will be determined during the prcesses t develp the enabling legislatin. Typical cnsideratins are listed belw. The list is nt meant t be exhaustive. The Transactin RE wrkstream shuld: cnsider and determine the RE s bjectives, functins and pwers. The enabling legislatin fr transactin-related REs tends t include a fairly standard set f functins including: hlding assets transferred t the RE r acquired by it carrying n business activities related t RE assets, such as levying charges ther transactin-related functins that may be prescribed by regulatin. cnsider the market in which it perates and determine whether the RE is t be a cmmercial agency. cnsider the need fr any entity-specific pwers, such as cmpulsry acquisitin pwers. New Suth Wales Treasury page 3

7 Gvernance Framewrk applying t NSW Gvernment Residual Entities cnsider and determine whether the RE is t be cmmercial/fr-prfit r nn-cmmercial/nt-fr-prfit. It shuld als cnsider and determine assciated reprting and mnitring arrangements which will apply t it (e.g., whether the entity is t be subject t the Cmmercial Plicy Framewrk r the Financial Management Framewrk r neither). cnsider and determine the crprate structure f the RE. Tw main ptins are a Ministerial crpratin r a Crpratins Act cmpany. In respect f the cmpany ptin, the Transactin RE wrkstream shuld cnsider and determine issues such as: Directrs duties and liabilities; indemnities; the number and identity f the directrs; public fficer and cmpany secretary; and ASIC reprting requirements. cnsider and determine the RE s crprate gvernance arrangements, including whether the RE will: be under the directin and cntrl f a Minister have a Bard (gverning r advisry) have a Chief executive fficer a delegatin frm the Minister t the Treasury (inside r utside f the legislatin) t manage the RE s affairs have emplyees (via secndment, engagement f cntractrs r emplyment f its wn staff), and whether the prvisins f the Gvernment Sectr Emplyment Act 2013 apply. cnsider and determine whether the RE is t be explicitly guaranteed by Gvernment r whether the Gvernment is t prvide a letter f cmfrt (r similar arrangement) t the RE and/r its directrs. cnsider and determine the pint at which reprting bligatins under the Public Finance and Audit Act 1983 (PFA Act) are triggered. The audit reprt recmmends that Legal Cunsel shuld review whether the enabling legislatin can include a clause which prvides that reprting bligatins under the PFA Act are nt activated until the financial year in which the RE begins t hld assets, rights and/r liabilities. cnsider and determine whether the RE needs a special depsits accunt. The 2015 internal audit recmmends this be cnsidered in the drafting f the enabling legislatin n a case-by-case basis. The ptential need fr a special depsits accunt wuld depend upn the extent t which the RE has substantive financial affairs that are best managed utside f the Cnslidated Fund. cnsider and determine whether the enabling legislatin shuld include an ablitin clause if, fr example, it is knwn that the RE is t have a finite life. The 2015 internal audit recmmends that this shuld be cnsidered as part f the legislative drafting prcess. cnsider and determine whether the RE needs brrwing, investment r ther pwers under the Public Authrities (Financial Arrangements) Act 1987 (PAFA Act). New Suth Wales Treasury page 4

8 Gvernance Framewrk applying t NSW Gvernment Residual Entities cnsider and determine whether the RE needs t: prepare financial statements and, if s, wh is t sign them be audited by the Auditr-General publish an Annual Reprt cnsider and determine whether the RE shuld be scheduled as a statutry bdy r department under the PFA Act. (This is further discussed in the Reprting sectin). cnsider and determine the applicatin f Gvernment accunting cnsideratins t the RE, particularly whether it is t be cnslidated int the State s accunts and, if s, int which sectr (general gvernment, Public Trading Enterprise r Public Financial Enterprise). As a general rule, the accunting treatment reflects the level f Gvernment cntrl ver the RE. Fr example, if a Minister has cntrl f the RE, then it wuld be cnslidated int the State s accunts. Typically, an RE will be classified in the general gvernment sectr as there is n market fr its functin/activities. The Prject Directr f the Transactin, in cnsultatin with the General Cunsel and ther parties as apprpriate, is respnsible fr ensuring that the abve matters are determined. Cnsultatin It is imprtant that the Prject Directr ensures that cnsideratins relating t accunting, the PFA Act and the PAFA Act be dealt with in cnsultatin with Treasury s Fiscal Estimates and Financial Reprting Divisin. It is vitally imprtant that the Prject Directr ensures that Fiscal Estimates and Financial Reprting Divisin is advised prmptly when a new RE is t be established t arrange fr classificatin by self-determinatin (r a frmal classificatin frm the Australian Bureau f Statistics fr cmplex, cntrversial classificatins). The Prject Directr shuld ensure that Crwn Financial and Management Accunting Branch is advised prmptly when a new RE is t be established particularly if Crwn Branch is required t prepare the accunts. The Prject Directr shuld cnsider the degree f cnsultatin apprpriate with ther parts f Treasury, including Cmmercial Assets Branch and Fiscal Entities and Gvernance Branch, as well as with the Auditr General. New Suth Wales Treasury page 5

9 Gvernance Framewrk applying t NSW Gvernment Residual Entities Resurcing Arrangements When establishing new REs, resurcing arrangements must be cnsidered. Every RE shuld have an fficer wh has management and peratinal respnsibility fr ensuring that the RE s functins are carried ut apprpriately. Typically, REs d nt have their wn staff and are resurced by Treasury staff, r ther public sectr fficers, as part f their day-t-day duties. It is imprtant t clarify as early as pssible the issue f wh is respnsible fr each RE, within Treasury r ther Gvernment agency. Where REs are created as a result f asset sale transactins, the Prject Directr is respnsible fr ensuring that residual functins are carried ut by an apprpriate persn. Fr a perid f apprximately 12 mnths pst-transactin, a senir fficer r persn frm the Transactin team shuld retain respnsibility fr residual matters, including REs. The 12-mnth transitin perid will include bedding dwn new prcesses and prcedures regarding the gvernance, peratin and reprting fr any new REs. Fllwing the transitin perid and when residual transactin matters are perating n a steady-state basis, the nminated fficer respnsible fr the RE n an nging basis will assume respnsibility (see Operatin sectin belw). In sme instances it may be apprpriate t invite the invlvement f staff frm ther areas f Gvernment with specific skills such as prperty management, risk management r cntaminatin management expertise. If this apprach is adpted, the nature f the administrative / cmmercial arrangement between Treasury and the ther area(s) f Gvernment need t be cnsidered. Ptential arrangements include: service level agreements management agreements a prtcl r Memrandum f Understanding inter-agency fee-fr-service payments inter-agency cst reimbursement. The Prject Directr is respnsible fr establishing resurcing arrangements fr the residual functins, in cnsultatin with and with assistance frm ther parts f Treasury, as apprpriate. Funding Arrangements Csts assciated with residual tasks may include staffing, cntractrs, legal csts and adviser fees. Ptential funding arrangements t cver such csts include: absrbing csts within existing budgets seeking Budget supplementatin authrised deductins frm the transactin prceeds, r funding frm the transactin Budget. A distinctin may ptentially be drawn between residual tasks specifically related t the Transactin (e.g. ne-ff tasks that the State undertakes t perfrm pst cmpletin, staff csts assciated with the prpsed 12-mnth transitinal perid), and business-as-usual tasks that will be nging in nature, which will require an nging funding surce. New Suth Wales Treasury page 6

10 Gvernance Framewrk applying t NSW Gvernment Residual Entities The Prject Directr is respnsible fr establishing funding arrangements fr the residual functins, in cnsultatin with and with assistance frm ther parts f Treasury, as apprpriate. Financial Reprting The establishment f an RE shuld cnsider whether financial accunts fr the RE need t be prepared n an nging basis. The Crwn Slicitr s Office has advised that an RE must prepare financial accunts if the RE is: a statutry bdy r a department fr the purpses f the PFA Act under the cntrl f a department (r the Minister r an fficer f the Department), even if it is nt frmally listed as a statutry bdy r a department. This suggests that, in mst instances, it wuld be apprpriate fr an RE t prepare financial statements. The Prject Directr is respnsible fr ensuring that: the issue f whether financial accunts are needed is cnsidered in the RE s establishment phase an explicit decisin is made up-frnt the reasns fr the decisin are clearly dcumented. It is als necessary t cnsider wh will sign ff the accunts fr the RE. Fr Crpratins Act cmpanies, it is the directrs respnsibility t sign the accunts. Fr Ministerial crpratins, the department head is the apprpriate signatry, as per sectin 45F the PFA Act. This is the persn wh exercises the functins f the CEO and is the Secretary f the Treasury fr the existing REs, by virtue f a delegatin frm the Treasurer (dne either in the enabling legislatin r as a separate delegatin utside f the legislatin). The Prject Directr is respnsible fr ensuring that the issue f wh has respnsibility t sign ff the financial accunts is cnsidered in the RE s establishment phase. This can be dne by: putting in place a delegatin (either as part f the enabling legislatin r utside f it) frmally appinting smene as CEO, r having the psitin f department head in respect f the residual entity scheduled in a PFA regulatin the Directrs f Ministerial r Crpratins Law cmpanies. The Prject Directr is respnsible fr ensuring that an explicit decisin n wh has respnsibility t sign ff the accunts is made up-frnt and the reasns fr the decisin are clearly dcumented. New Suth Wales Treasury page 7

11 Gvernance Framewrk applying t NSW Gvernment Residual Entities Preparatin f financial accunts Treasury s Crwn Financial and Management Accunting (CFMA) Branch is respnsible fr accunting and financial reprting fr REs, including preparing the financial statements. With the exceptin f LMMC, CFMA s rle is generally an accunting, reprting and CFO-style rle, nt an peratinal management rle. The RE Officer is respnsible fr guiding and instructing CFMA, as apprpriate. The cntent f the financial accunts will be determined with reference t the handver reprt(s), insfar as it relates t matters such as accunting, disclsure f cntingent liabilities and valuatin f residual assets and liabilities. Audit f financial accunts The PFA Act requires the Auditr-General t audit a department s financial accunts. If an RE is a department fr the purpses f the PFA Act, the Auditr-General must audit its accunts. The RE Officer is respnsible fr ensuring that the Auditr-General audits the RE s accunts, as apprpriate. Publicatin f financial accunts Publicatin f the financial accunts is anther issue which shuld be cnsidered when an RE is established. If an RE is scheduled under Schedule 2 f the PFA Act, it must prepare and publish annual reprt. Hwever, while nt all REs are listed in Schedule 2, their financial statements, fr reasns f transparency and sharing f infrmatin, are published in the Annual Reprts fr Crwn related entities. The Prject Directr is respnsible fr ensuring that, at the establishment phase, cnsideratin is given t whether an RE shuld publish an Annual Reprt and arrangements made as apprpriate. Cntingent Assets and Liabilities It is imprtant that cntingent assets r liabilities are adequately identified and reprted in the RE s accunts and the Ttal State Sectr accunts, as apprpriate. Each year CFMA issues a request fr advice as t what shuld be reprted in the State accunts in this regard. It is the respnsibility f the RE Officer (transitinal r nging as the case may be) t respnd t CFMA, as required. New Suth Wales Treasury page 8

12 Gvernance Framewrk applying t NSW Gvernment Residual Entities Handver Reprting Fr majr asset transactins, the Prject Directr is respnsible fr ensuring that frmal handver dcumentatin is prepared at the cnclusin f the transactin. The Prject Directr is als respnsible fr defining t whm and when the handver is t take place. In many instances, it may be apprpriate fr the Transactin team t retain respnsibility fr mnitring the RE s management until such time as the transactin team is disbanded. Typically, the handver reprts are prepared by the Transactin team and/r the relevant advisers t the transactin, such as accunting/tax, legal and envirnmental advisers. The handver reprts shuld cver matters such as: Changes resulting frm the transactin The accunting implicatins f the transactin fr relevant entities including the sale entity, residual entity, Crwn Entity and thers as apprpriate, plus the impacts at the General Gvernment and Ttal State Sectr levels Legal structure Funds flw at cmpletin Classificatin f new entities Gvernance and wnership arrangements fr the residual entity Obligatins, cntingencies, liabilities/assets arising frm the transactin dcuments Risks Regulatry framewrks and nging relatinships (intra-gvernment and with the new private sectr party) Rles and respnsibilities f State agencies pst-transactin Summaries f key transactin dcuments. New Suth Wales Treasury page 9

13 Gvernance Framewrk applying t NSW Gvernment Residual Entities Operatin The Treasury fficer with management and peratinal respnsibility fr the RE ( the RE Officer ) is respnsible fr ensuring that the RE s functins are carried ut apprpriately. In practice, the RE Officer is likely t be a NSW Treasury fficial but there is n requirement that this is the case. Appintment f a Residual Entity Officer There are a number f ways t appint an RE Officer. T date, in recgnitin f the differing natures f the varius REs, Treasury has appinted RE Officers ften with specific transactin experience. An alternative apprach wuld be t appint a single individual respnsibility fr all the REs t the same part f Treasury. The rle f the RE Officer is utlined in Appendix 1. Risk Management The RE Officer s primary bjective is t ensure that residual risks t the State are apprpriately mnitred, managed and acted upn. The risks that need t be managed will be set ut in the handver reprts prepared as part f the transactin. At a high level, the risk management task invlves: Ensuring psitive bligatins n the State are being discharged. Transactins can result in the State r a gvernment agency giving cntractual undertakings t a private sectr party that it will undertake certain tasks within a defined perid f time. In sme instances, it will be a matter fr the RE Officer t initiate and drive the necessary wrkstream. In thers, it will be mre a matter fr the RE Officer t ensure that an agency is perfrming its bligatins. Oversight and management f the financial perfrmance f the entity. REs smetimes hld significant assets and liabilities (e.g. dust diseases liabilities and ffsetting assets). The RE Officer is respnsible fr ensuring, in cnsultatin with Treasury s Financial Estimates and Financial Reprting Directrate, that a risk management strategy and apprpriate risk management cntrls are in place and are fllwed. Mnitring f emergent r unknwn risks. Fllwing a transactin, the State may have rights r bligatins that manifest nly in respnse t events that were unfreseen at the time f the transactin. Fr example: indemnities that apply if liabilities arise in respect f pre-existing cntaminatin step-in r ther rights/bligatins that may apply in circumstances such as frce majeure, inslvency r lessee nn-perfrmance. The RE Officer is respnsible fr mnitring these risks t the extent pssible. New Suth Wales Treasury page 10

14 Gvernance Framewrk applying t NSW Gvernment Residual Entities Appendix 1: Respnsibilities f the Residual Entity Officer The RE Officer s primary bjective is t ensure that residual risks t the State are apprpriately mnitred, managed and acted upn. The RE Officer is respnsible fr all r many f the fllwing tasks: ensuring that the psitive bligatins n the State are being discharged. ensuring, in cnsultatin with Treasury s Financial Estimates and Financial Reprting Directrate, that a risk management strategy and apprpriate risk management cntrls are in place. mnitring emergent r unknwn risks t the extent pssible. ensuring that the RE s functins are carried ut apprpriately. While the RE Officer is nt expected t be expert in all matters in respect f the RE, s/he is respnsible fr ensuring that the issues are adequately addressed, including by seeking specialist input as required. ensuring that the RE s functins are carried ut apprpriately. Day-t-day tasks assciated with that respnsibility are likely t include: Perfrming the State s and/r RE s pst transactin functins such as lessr cnsents, exercising cmpulsry acquisitin pwers as needed, prcessing changes t the leased area r the lease itself as apprpriate (such as surrender and re-grant t prvide fr new tenants), assisting with the management f native title claims Management f the relatinship with the private sectr peratr, including ensuring that it cmplies with its bligatins, such as insurance requirements and the preparatin f envirnmental management plans Managing claims under indemnities, e.g., dust disease r cntaminatin liabilities Exercising step-in rights and requiring/reviewing frce majeure cure plans, if needed Respnding t requests fr infrmatin, assisting with bedding dwn new peratinal arrangements between the successful bidder and Gvernment agencies, and clarifying parties pst-transactin respnsibilities State Budget reprting/versight and ther Treasury analyst-type functins, with assistance frm CFMA as apprpriate. The persn respnsible fr entering data int Treasury s n line entry system (TOES) is t be determined n a case-by-case basis Guiding and instructing CFMA, as apprpriate, as it prepares the RE s financial accunts Each year CFMA issues a request fr advice as t what shuld be reprted in the State accunts in this regard. The RE Officer is respnsible fr ensuring a respnse t CFMA s annual request fr advice n cntingent assets and liabilities and what shuld be reprted in the State accunts; Ensuring that the Auditr-General audits the RE s accunts, as apprpriate Crprate gvernance functins including, fr example, perfrming rles such as cmpany directr, public fficer, crprate secretary and CEO, as apprpriate, r ensuring that thse rles are filled Regulatry cmpliance (e.g. ASIC returns, Audit Office requirements); Overseeing the preparatin f statutry accunts Keeping the Treasury Executive apprpriately infrmed f any matters f relevance. The RE Officer is nt expected t be an expert n all the abve matters in respect f the RE. Hwever, s/he is respnsible fr ensuring that these issues are adequately addressed, including by seeking specialist input as required. New Suth Wales Treasury page 11

15 Gvernance Framewrk applying t NSW Gvernment Residual Entities Appendix 2: Respnsibilities f the Transactin Prject Directr in relatin t Residual Matters and Residual Entities The Prject Directr f the Transactin must cnsider and, where apprpriate, establish a Transactin Residual Entity wrkstream t fcus n residual issues including the establishment f any new REs (a Transactin RE wrkstream). If the Prject Directr determines that such a wrk stream is nt required, the reasns fr such a determinatin must be clearly dcumented as must the Prject Directr s prpsed alternative mechanisms fr cnsidering residual issues fr the transactin. The Prject Directr, in cnsultatin with the General Cunsel and ther parties as apprpriate, is respnsible fr ensuring that the matters cnsidered by the Transactin Residual Entity wrkstream (see Appendix 3) are determined. The Prject Directr is t ensure that cnsideratins relating t accunting, the PFA Act and the PAFA Act be dealt with in cnsultatin with Treasury s Fiscal Estimates and Financial Reprting Divisin. The Prject Directr is t ensure that Fiscal Estimates and Financial Reprting Divisin is advised prmptly when a new RE is t be established t arrange fr classificatin by self-determinatin (r a frmal classificatin frm the Australian Bureau f Statistics fr cmplex, cntrversial classificatins). The Prject Directr is t ensure that Crwn Financial and Management Accunting Branch is advised prmptly when a new RE is t be established particularly if Crwn Branch is required t prepare the accunts. The Prject Directr shuld cnsider the degree f cnsultatin apprpriate with ther parts f Treasury, including Cmmercial Assets Branch and Fiscal Entities and Gvernance Branch, as well as with the Auditr General. The Prject Directr is respnsible fr ensuring that residual functins are carried ut by an apprpriate persn. A senir persn frm the transactin team shuld retain respnsibility fr residual matters, including REs, fr a perid f 12 mnths pst-transactin. The Prject Directr is respnsible fr establishing resurcing arrangements fr the residual functins, in cnsultatin with and with assistance frm ther parts f Treasury, as apprpriate. The Prject Directr is respnsible fr establishing funding arrangements fr the residual functins, in cnsultatin with and with assistance frm ther parts f Treasury, as apprpriate. The Prject Directr is respnsible fr ensuring that: the issue f whether financial accunts are needed is cnsidered in the RE s establishment phase; an explicit decisin is made up-frnt; and the reasns fr the decisin are clearly dcumented. The Prject Directr is respnsible fr ensuring that the issue wh is t sign ff the financial accunts is cnsidered in the RE s establishment phase, and fr ensuring that an explicit decisin n wh is t sign ff the accunts is made up-frnt and the reasns fr the decisin are clearly dcumented. Fr majr asset transactins, the Prject Directr is respnsible fr ensuring that frmal handver dcumentatin is prepared at the cnclusin f the transactin. The Prject Directr is respnsible fr defining t whm and when the handver is t take place. The Prject Directr is respnsible fr ensuring that, at the establishment phase, cnsideratin is given t whether an RE shuld publish an Annual Reprt and arrangements made as apprpriate. New Suth Wales Treasury page 12

16 Gvernance Framewrk applying t NSW Gvernment Residual Entities Appendix 3: Respnsibilities f the Transactin Residual Entity Wrkstream The Transactin RE wrkstream shuld cnsider and determine: the RE s functins and pwers, including any entity-specific pwers, such as cmpulsry acquisitin pwers whether the RE is t be cmmercial/fr-prfit r nn-cmmercial/nt-fr-prfit. It shuld als cnsider and determine assciated reprting and mnitring arrangements which will apply t the RE (e.g., whether the entity is t be subject t the Cmmercial Plicy Framewrk r the Financial Management Framewrk r neither) whether the RE will: be under the directin and cntrl f a Minister have a Bard (gverning r advisry) have a Chief Executive Officer a delegatin frm the Minister t the Treasury (inside r utside f the legislatin) t manage the RE s affairs have emplyees secnded t it and, if s, frm where. the RE s crprate structure. Tw main ptins are Ministerial crpratin r Crpratins Act cmpany. In respect f the cmpany ptin, the Transactin RE wrkstream shuld cnsider and determine issues such as: Directrs duties and liabilities; indemnities; the number and identity f the directrs; public fficer and cmpany secretary, and ASIC reprting requirements. whether the RE is t be explicitly guaranteed by Gvernment r whether the Gvernment is t prvide a letter f cmfrt (r similar arrangement) t the RE and/r its directrs. the pints at which reprting bligatins under the Public Finance and Audit Act 1983 (PFA Act) are triggered. whether the RE needs a special depsits accunt. whether the enabling legislatin shuld include an ablitin clause. whether the RE needs brrwing, investment r ther pwers under the Public Authrities (Financial Arrangements) Act 1987 (PAFA Act). whether the RE needs t: prepare financial statements and, if s, wh is t sign them be audited by the Auditr-General publish an Annual Reprt whether the RE shuld be scheduled under the PFA Act as a statutry bdy r department. the applicatin f Gvernment accunting cnsideratins t the RE, particularly whether it is t be cnslidated int the State s accunts and, if s, int which sectr. It is imprtant that cnsideratins relating t accunting, the PFA Act and the PAFA Act be dealt with in cnsultatin with Treasury s Accunting Plicy Branch and CFMA. It is very imprtant that CFMA be advised prmptly when a new RE is t be established, particularly if CFMA is required t prepare the accunts. New Suth Wales Treasury page 13

17 Gvernance Framewrk applying t NSW Gvernment Residual Entities Acrnyms used in this dcument: CEO Chief Executive Officer CFO Chief Financial Officer CFMA Crwn Financial and Management Accunting EAMHC Energy Assets Ministerial Hlding Crpratin GSE Act Gvernment Sectr Emplyment Act 2013 LMMC Liability Management Ministerial Crpratin LAMC Ltteries Assets Ministerial Crpratin PAFA Act Public Authrities (Financial Arrangements) Act 1987 PFA Act Public Finance and Audit Act 1983 PAMHC Prts Assets Ministerial Hlding Crpratin RE Residual entities SRARHC State Rail Authrity Residual Hlding Crpratin T3Es Tier 3 entities Further infrmatin Fr further infrmatin and assistance, cntact: Jim Dawsn Executive Directr, Cmmercial Assets Tel: jim.dawsn@treasury.nsw.gv.au). New Suth Wales Treasury page 14