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Annual Report 1999-2000

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Entire Document 877kB
Part 1: Overview 96kB
Part 2: 1999-2000 Debt issuance and debt redemption 164kB
Part 3: Portfolio management 99kB
Part 4: Management and accountability 232kB
Part 5: Financial statements 849kB
ANAO - Independent audit report (not available as HTML) 79kB
Part 6: Appendices: Commonwealth Government Securities on issue 583kB
Glossary 51kB
Acronyms 11kB
Index 21kB

Introduction and guide to the report

    This is the first Annual Report of the Australian Office of Financial Management (AOFM) which was established from 1 July 1999 as a prescribed agency within the Treasury portfolio under the Financial Management and Accountability Act 1997. The AOFM assumed responsibility for the Commonwealth's debt management activities, which were previously undertaken within the Department of the Treasury.

    In addition to meeting the annual reporting requirements established by Parliament, the report provides information on the Commonwealth's debt management operations for 1999-2000 which was previously provided in the annual Commonwealth Debt Management report.

    In that regard, the report mainly covers Commonwealth Government securities (CGS) on issue for the Commonwealth and operations in 1999-2000 in relation to that debt. Separate sections of the report provide details of 1999-2000 debt issuance and debt redemption and the Commonwealth's portfolio management in 1999-2000.

    A series of appendices provides statistical information on the stock of CGS on issue for the Commonwealth, the States and the Northern Territory and outstanding Commonwealth investments in CGS and term deposits at 30 June 2000; CGS issued during 1999-2000; the redemption in 1999-2000 of CGS on issue for the Commonwealth; and details of the redemption in 1999-2000 of CGS on allocation to the States and Territories and of their outstanding holdings at 30 June 2000.

    In 1999-2000, human resource management for the AOFM was largely undertaken by the Department of the Treasury under a Service Level Agreement. As appropriate, this report reproduces material on those matters from the Treasury Annual Report, edited to reflect particular AOFM circumstances.

Other sources of information

    This is the only publication currently produced by the AOFM. Information on Commonwealth debt management for previous years is contained in annual Commonwealth Debt Management reports which are available on the Treasury website (www.treasury.gov.au). Also on that website is a monthly data series on movements in CGS outstanding and a data series updated quarterly on the gross outstanding debt of the Commonwealth Government which is published in accordance with the Special Data Dissemination Standards of the International Monetary Fund.

Enquiries

Enquiries regarding this report may be directed to:

Administration Unit
Australian Office of Financial Management
Treasury Building
Parkes Place
CANBERRA ACT 2600
Telephone (02) 6263 3061
Fax (02) 6263 3868

Review by the chief executive officer

    On 1 July 1999, the Australian Office of Financial Management assumed responsibility for the management and reporting of the Commonwealth's net debt portfolio. Previously, these tasks were undertaken by the Debt Management Office within the Department of the Treasury.

    In its first year of operation, the AOFM has successfully undertaken core debt management functions and executed transactions consistent with portfolio benchmark requirements, as well as ensuring the provision of administrative and reporting requirements on a timely basis. These activities were directed at the achievement of the AOFM's outcome objective - to enhance the Commonwealth's capacity to manage its net debt portfolio, offering the prospect of savings in debt servicing costs and an improvement in the net worth of the Commonwealth over time.

The year in review

    A major priority has been to establish, within the AOFM, a debt management function which had previously resided within Treasury, consistent with well established benchmark requirements of a sovereign debt manager. Arrangements were put in place with Treasury which enabled the full complement of staff, previously working within the Debt Management Office, to be employed in the AOFM. In addition, the AOFM established formal service level arrangements with Treasury to ensure a relationship reflecting a professional approach, in particular with respect to the range of administrative and support services which the Treasury currently provides to the AOFM.

    Service and administrative arrangements between the AOFM and the Reserve Bank and between the AOFM and the Department of Finance and Administration were also reviewed. The purpose of the review, and subsequent documentation between the parties, was to ensure clear definition of AOFM accountabilities, along with agreed appropriate performance standards.

    Over the year, a range of new initiatives was undertaken to strengthen the AOFM's existing corporate governance framework, as well as to ensure that these arrangements continue to reflect accepted best practice. These initiatives included the establishment of Liability Management, Audit and Management Committees. This framework and, in particular, the Liability Management Committee, provides a sound platform for the regular review of progress towards meeting the AOFM's outcome objective, as well as ensuring that portfolio and balance sheet risk exposures are maintained within targeted levels.

    In October 1999, the Australian National Audit Office released a performance audit of Commonwealth Debt Management (Report Number 14). A major focus of the review was to assess the effectiveness of the debt management operations. The report recommendations outlined a number of enhancements that would improve the already sound debt management control and reporting framework. A range of these initiatives has already been implemented by the AOFM and it is planned that the outstanding issues will be progressively addressed over the course of the next financial year.

    Through the course of 1999-2000, the AOFM participated in a number of international sovereign debt management forums. Officers also provided technical assistance to other sovereign debt managers, including through hosting international delegations.

The year ahead

    Looking ahead, a number of new initiatives are planned which will enhance the capacity of the AOFM to meet its outcome objective.

    It is expected that the functions and responsibilities of the AOFM's Advisory Board will be confirmed and that formal appointments, from both the public and private sectors, will be made. The establishment of the Advisory Board will further strengthen the existing corporate governance framework. It can also be expected that the AOFM will benefit from the strategic input and insight of individual Board members into a wide range of debt management issues.

    A new Human Resources framework is currently in the process of being developed to address the unique business requirements of the AOFM. A major feature of the new framework will be to enable core competencies to be retained and further developed, as well as to ensure that organisational accountabilities are reflected in individual performance objectives. A major focus of the review is to develop a framework which is consistent with the prudential requirements of a sovereign debt manager.

    The AOFM will be re-locating to new accommodation within the refurbished Treasury Building in January 2001. The planned arrangements reflect the needs of a sovereign debt manager for an infrastructure consistent with professional and commercial management of the Commonwealth's net debt portfolio. The implementation of a new IT infrastructure will also provide a platform for the further enhancement of existing risk management and portfolio reporting systems.

    Over the course of the next year, a major challenge for the AOFM will be to ensure that, along with further developing organisational capabilities, a strong focus is maintained on its key objective to deliver savings in debt service costs - within acceptable risk exposures - to the Commonwealth.

Appreciation

    At the end of the first year of operation as a separate agency, I take this opportunity to acknowledge the contribution by all members of the AOFM's dedicated team. They have demonstrated a high level of commitment and professionalism in establishing the functions of the AOFM over the past year.


    Michael Allen
    Chief Executive Officer

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