Key advice update No. 1, 2014
Authorisations
Purpose of this document
This key advice update aims to support public sector agencies comply with the Standing Directions of the Minister
for Finance (Directions).
Agencies have raised a number of issues or questions regarding establishing and maintaining financial
authorisations (or financial delegations), which are addressed in this update on the requirements of
Direction 2.4 Authorisations.
Who is subject to the requirements of Direction 2.4?
Direction 2.4 applies to all agencies subject to the requirements of the Financial Management Act 1994.
What is a financial authorisation?
Direction 2.4 requires public sector agencies to establish and maintain financial authorisations covering overall
financial management and the creation of financial obligations (including contingent liabilities).
A financial authorisation enables the holder to incur expenditure on behalf of an agency (e.g. through contractual
arrangements) or make a payment or disbursement on behalf of the agency.
A financial authorisation is issued to a position and the holder of the position must be an agency employee. An
employee acting in a position has the authority of that position. Therefore, mechanisms must be in place to
ensure the continuous and efficient running of the agency in the absence of a holder of an authorised position.
Can a financial authorisation be granted to a contractor or consultant?
No. Direction 2.4 specifically requires financial authorisations to be given to specific positions (rather than
individuals) and to agency employees. Mandatory procedure (i) excludes contractors and consultants from
holding a financial authorisation.
Limiting financial authorisations to commit public monies to employees (as opposed to contractors and
consultants) is an essential principle of public sector accountability and a valid risk management tool. This
limitation aims to minimise the risk of fraud, conflicts of interest (whether real or perceived) and the misuse of
public resources.
The premise of the Direction is that it is more likely an agency has greater control over employees than
contractors. For example, employees must comply with the Victorian Public Service Code of Conduct and other
Victorian Government policies. Whereas the State’s control over a contractor depends on contract provisions,
which may vary across agencies.
What are the limits placed on granting financial authorisations?
The application of Direction 2.4 for ‘Departments’ and ‘section 16(1) Offices’ as specified in the Public
Administration Act 2004 has been updated with the introduction of the Victorian Government Purchasing Board
(VGPB) framework.
The following table summarises who may confer financial authorisations and the different limits placed on them
for public sector agencies:
Entity type
Limits imposed on financial authorisations by Direction 2.4
Departments that
have transitioned to
Victorian
Government
Purchasing Board’s
(VGPB’s) policy
framework
Who can confer a financial authorisation?
and
S16 (1) Offices under
the Public
Administration Act
2004
The Responsible Body is able to confer any limit for a financial authorisation on any officer
(i.e. employee) directly.
For Departments, the Responsible Body is the Minister, or Ministers jointly if there is more
than one.
For section 16(1) Offices, the Responsible Body is the Minister for the time being administering
the enabling legislation.
How many financial authorisations can be conferred and to what financial limit?
There is no limit to the number of financial authorisations that can be conferred.
A financial limit must be set for each financial authorisation.
The words ‘any limit’ are not to be interpreted as allowing an ‘unlimited’ conferral.
Example: A Responsible Body (i.e. the Minister) may confer the following delegations Employee A (Accountable Officer) - $100 million, Employee B - $10 million and Employee C $50 million.
The conferred limit is the maximum an officer/employee can approve for each financial
transaction.
See Diagram 1.
Can the Responsible Body sub-delegate the power to give financial authorisations?
Yes.
For Departments, the Responsible Body may delegate to the Accountable Officer (Secretary)
the power to give financial authorisation to a position up to but not exceeding $10 million.
For a section 16(1) Office, the Responsible Body may delegate to the person with the functions
of a public service body head the power to give financial authorisation to a position up to but
not exceeding $10 million.
Example: An Accountable Officer with a $10 million delegation may confer the following
delegations - (Position A - $10 million, Position B - $10 million and Position C - $5 million).
See Diagram 1.
Can the Responsible Body delegate any other responsibilities under Direction 2.4?
Yes.
The Responsible Body may delegate to the Accountable Officer some or all of their
responsibilities under Direction 2.4 except the power to give financial authorisations
exceeding $10 million.
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Entity type
Limits imposed on financial authorisations by Direction 2.4
Departments that
have not
transitioned to the
VGPB’s framework
(applicable up to
December 2014)
The former Direction 2.4 requirements remain in force until a Department has transitioned to
VGPB’s framework.
Who can confer a financial authorisation?
The Responsible Body is able to confer any limit on a departmental officer (e.g. authorise an
employee to spend up to a designated amount).
How many financial authorisations can be conferred and to what financial limit?
There is no limit to the number of financial authorisations that can be conferred.
A financial limit must be set for each financial authorisation. The words ‘any limit’ are not to
be interpreted as allowing an ‘unlimited’ conferral.
The conferred limit is the maximum an officer/employee can approve for each financial
transaction.
Can the Responsible Body sub-delegate the power to give financial authorisations?
Yes.
The Responsible Body may delegate to the Secretary (i.e. Accountable Officer) the power to
give financial authorisations to a position, but not exceeding the accreditation limit
applicable (as determined by the VGPB’s purchasing accreditation of that Department).
Can the Responsible Body delegate any other responsibilities under Direction 2.4?
Yes.
The Responsible Body may delegate to the Secretary (i.e. Accountable Officer) some or all of
the powers and responsibilities given to the Responsible Body by Direction 2.4, except the
power to give financial authorisations exceeding the accreditation limit applicable.
Entity type
Limits imposed on financial authorisations by Direction 2.4
Public Sector
Agencies (other than
Departments or
Section 16(1)
Offices)
Who can confer a financial authorisation?
The Responsible Body is able to confer any limit on a position (e.g. authorise an employee to
spend up to a designated amount).
The Responsible Body is the board, or in the absence of a board, the person or body that is
charged with the oversight of the public sector agency’s operations.
How many financial authorisations can be conferred and to what financial limit?
There is no limit to the number of financial authorisations that can be conferred.
There is no specified financial maximum limit set for each financial authorisation. When
setting an appropriate maximum limit for the agency, the Responsible Body should take into
account the agency’s size, function and risk profile.
A financial limit must be set for each financial authorisation. This limit is the maximum an
employee can approve for each financial transaction.
Example: The Responsible Body may confer the following delegations - Employee A - $50
million, Employee B - $20 million, Employee C - $5 million and Employee D - $1 million.
Diagram 1 Financial authorisation for
Departments and s16(1) Offices
Responsible Body
(Minister)
Directly confer an authorisation with a limit
Employee C
$10m
Employee B
$50m
Delegate power to give
financial authorisations up to $10m
Employee A
(eg. Accountable
Officer/Public
service body Head)
$100m
Accountable Officer of
Department or
‘public service body
Head’ of s16(1) Office
Each financial authorisation
to a max limit of $10m
Position A
$10m
Position B
$10m
Position C
$5m
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What are the other Direction 2.4 requirements relating to financial authorisations?
The following requirements specified by Direction 2.4 for the creation, exercise and management of financial
authorisations are applicable to all public sector agencies (i.e. including Departments and section 16(1) Offices).
In summary, the Directions provide that:






the Responsible Body must give clear financial authorisations to specific positions;
a financial authorisation is to cease immediately following a change in the name of a specified position or a
substantial or material change in its duties;
a register of financial authorisations must be established and maintained, and legal requirements for
document retention and record keeping must be observed (including audit trails);
internal controls must not be compromised in the case of a specified position having more than one financial
authorisation assigned to it;
the Responsible Body must annually review the register of financial authorisations (categories and types) and
make any necessary changes; and
a financial authorisation cannot be sub delegated (except as specified above by the Responsible Body in
Departments and section 16(1) Offices).
What should a register of financial authorisations contain?
Direction 2.4 requires an agency to establish and maintain a register of financial authorisations.
The content of the register should support the requirements of Direction 2.4 and this is likely to include:
 a list of positions holding financial authority for each transaction type (e.g. financing, investing and
operational);
 dollar caps for each transaction or financial authorisation type;
 a list of staff names holding the positions with financial authority (this list should be regularly updated and
communicated to all relevant staff including the holders of the financial authorisation and the Chief Finance
and Accounting Officer); and
 specimen signatures for each holder of an authorised position (public sector agencies that have advanced to
electronic procurement should ensure financial authorisation processes are met in an adequate electronic
form that can be audited).
What happens to financial authorisations when there is a significant organisation restructure?
In the event of a significant restructure of a public sector agency (for this purpose ‘total restructure’ means a
restructure affecting 50 per cent or more of the positions in the public sector agency), both the Responsible Body
and Accountable Officer should be informed of implications for financial authorisations and the financial
authorisations reassessed and reapproved within one calendar month.
As a matter of good practice, public sector agencies should also adopt processes to ensure that financial
authorisations are reassessed and reconfirmed within one calendar month of changes in the Responsible Body or
Accountable Officer.
What is the process for remaking financial authorisations within Departments following machineryof-government changes?
Following the announcement of machinery-of-government changes, Departments should endeavour to facilitate
the making of new authorisations to ensure they are in place from the effective date of the proposed changes.
For Departments, the Responsible Body (who confers the financial authorisations) is the Minister or the Ministers
jointly if there is more than one Minister for that Department. Accordingly, in a Department with multiple
portfolio Ministers, a financial authorisation must be conferred ‘jointly’ by all of its respective Ministers.
A financial authorisation may be conferred ‘jointly’ by having each Minister sign the one instrument of
authorisation (i.e. the same document). Alternatively, each Minister could provide separate written
authorisations by signing a counterpart copy of the instrument of authorisation.
Equally, when remaking financial authorisations, each relevant Minister could sign the one instrument of
authorisation or provide separate written authorisations by signing a counterpart copy of the instrument of
authorisation.
If an instrument of authorisation is being signed in counterpart, it should expressly state that it is to be (or can
be) signed in counterpart by the relevant Ministers. Departments should also advise their Ministers that each
portfolio Minister has been provided with a counterpart copy for signature.
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