CO (99) 7
30 June 1999
FINANCIAL DELEGATIONS AND DELEGATION LIMITS FOR RESPONSIBLE MINISTERS AND DEPARTMENTAL CHIEF EXECUTIVES
Summary of Key Points
- Departmental chief executives have full financial authority, within the constraints of the Public Finance Act 1989, to expend departmental cash, or incur departmental expenses or liabilities, except in the following four areas:
- publicity expenses;
- compensation or damages in settlement of claims;
- ex gratia expenses; and
- the purchase, development or lease of fixed assets.
- From 1 July 1999 the financial delegation limit for the purchase or development of departmental fixed assets will be $7 million for departmental chief executives, and $15 million for Responsible Ministers. The same limits will also apply to operating leases for the use of fixed assets, if the assets are to be leased for more than a year. There are no changes to other financial delegation limits.
- All proposed expenses or financial commitments that exceed a financial delegation limit require specific Ministerial or Cabinet authorisation. Any subsequent variations to expenses or financial commitments also need specific authorisation, except variations for the purchase, development or lease of fixed assets that, in aggregate, do not exceed 10% of the value of the initial authorisation (and are within a certain dollar limit).
Introduction
- This circular sets out details of the financial authorities, and limits to those authorities, that Cabinet
has agreed to delegate to Responsible Ministers1 and departmental chief executives. This includes specific limits
for defined areas of financial commitment, expense, or expenditure that Cabinet considers present a high level of
risk for the Government.
- All proposed expenses or financial commitments above these delegated limits require specific Ministerial or Cabinet authorisation. The authorisation process is an internal control mechanism for the Crown, and is quite distinct from the statutory authority granted by Parliament through the appropriation process (without which any expenditure of public money is illegal).
- The changes in financial delegations and limits in this circular come into effect from 1 July 1999. The circular replaces Cabinet Office Circular CO(96)11, issued on 11 October 1996.
- The changes introduced in this circular will not apply retrospectively. However, the circular will apply to all new variations on existing projects for the purchase or development of departmental fixed assets. It will also apply to changes or additions to existing fixed asset projects and operating leases for fixed assets.
Financial Delegations and Delegation Limits
- Within the bounds imposed by the specific terms of:
- any appropriations granted by Parliament; and
- any agreement to supply outputs negotiated with a Vote Minister or third party client; and
- any direction given by the Minister of Finance or the Responsible Minister under section 33(2) of the Public Finance Act 1989;
a departmental chief executive shall have full delegated authority to expend cash, or incur departmental expenses or liabilities, except the following:
- publicity expenses;
- compensation or damages for settlement of claims;
- ex gratia expenses; and
- the purchase, development or lease of fixed assets.
- This delegation, and the limits relating to it, applies to departmental operations only. It does not apply to non-departmental (Crown) expenses, expenditures or capital injections, for which a formal delegation to act must always be sought from the relevant Vote Minister.
- The specific financial delegation limits that apply to these four types of expenses,
expenditures, or financial commitments are set out in the attached Schedule. All delegation limits are GST inclusive, except where GST is not applicable.
- Further information relating to the delegation limits that apply to the purchase,
development, or lease of departmental fixed assets can be found in the attached Appendix.
- In exercising the financial authority delegated to them, Responsible Ministers or departmental chief executives are to ensure that all associated costs of a proposal have been included. Requests for approvals must include the total cost of a proposal (including all sub-contracts).
- In emergency or special circumstances, the Secretary to the Treasury, in conjunction with the departmental chief executive, may approve up to the delegation limit of the Responsible Minister.
Agency Specific Financial Delegations
- The financial delegation policy and limits set out in this circular will apply to all departments, unless Cabinet approves a specific delegation policy for that department. Where a departmental chief executive has received a specific delegation from Cabinet that differs from that set out in the attached Schedule, the specific delegation will continue to apply. Cabinet can also authorise a Responsible Minister to negotiate changes to a departmental chief executive's financial delegation within whatever parameters Cabinet considers appropriate.
Sub-Delegation
- Any financial delegations given, or able to be given, to a departmental chief executive under the terms of this circular may be sub-delegated to one or more officers of the department. Any sub-delegation by a chief executive is to be made in writing and is to be specific as to the limits of the delegated authority, the type of expense, expenditure or financial commitment the delegation covers, and the time period of the delegation.
Expenses or Liabilities that are incurred in Foreign Currencies
- Where a department proposes to incur expenses or liabilities in foreign currency, all applications for Ministerial or Cabinet authorisation must include a full statement of the currencies and amounts involved. All conversions of proposed expenses or liabilities to NZ dollars should be made at the relevant forward exchange rate (if forward cover has been taken) or at the conversion rate current at the time of application.
Operation of the Financial Delegations Procedure
- As set out in section 33 of the Public Finance Act 1989, the departmental chief executive is responsible to the Responsible Minister for the financial management and financial performance of their department.
- No financial commitments or expenses are to be incurred, project commenced, settlement offered, or order placed unless delegated financial authority exists, or has been specifically authorised by the Responsible Minister or Cabinet, consistent with the terms of this circular. Before exercising or seeking financial authority, departmental chief executives must put in place adequate internal processes to ensure that proposals have been fully and accurately costed.
- All requests for financial authority are to be supported by firm, up-to-date estimates of proposed financial commitments or expenses, giving a full description of the proposal, project, or order to be placed. Estimates are to be qualified if any uncertainty exists about the amounts. Capital projects should be supported by appropriate planning documents, such as a business case and the department's strategic business plan. The estimated time span of the project and proposed project management and monitoring arrangements should also be identified.
- Where Cabinet authorisation is required, a paper should be prepared in consultation with the Treasury for the Responsible Minister to submit to the relevant Cabinet committee. The Treasurer and/or Minister of Finance might also need to be consulted. Departments may apply for financial authority at the same time as they request any change to appropriations or departmental baselines that might be required. For reasons of risk or uncertainty, however, Cabinet will not necessarily grant financial authority at the time an appropriation or baseline change is approved.
- Departmental chief executives must seek an additional financial authority promptly where it becomes clear that an approved financial authority is likely to be exceeded. An additional or revised authority should also be sought where there is a proposed change to the scope of the work.
Promulgation
- Departmental chief executives are responsible for ensuring that all appropriate people within the department have access to this circular, and any other documents relating to the financial delegations under which the department operates.
Further Information
- Any enquiries should, in the first instance, be directed to your Treasury Vote analyst.
Marie Shroff
Secretary of the Cabinet
