7.14 Accountability arrangements for subsidiary companies

The enabling legislation of a Government Board may expressly state whether or not a subsidiary body may be established. This is particularly the case with incorporated bodies.

In cases where the enabling legislation of a Government Board does not provide an express power for a Board to establish a subsidiary, the Board must obtain the prior approval of the relevant portfolio Minister. In these circumstances, the additional approval of the Treasurer might also be required. Those Boards subject to the SBFA Act may require the prior approval of the Treasurer for matters classified as 'other financial arrangements', which include establishing a subsidiary. Similarly, the FA&A Act requires the Treasurer's approval for the formation of a company where the formation involves the use of public moneys.

A Government Board then has a duty to ensure that a subsidiary does not engage in any activity that the Board itself does not have the power to engage in. The Annual Report of the Board must identify any subsidiaries, explain the reason for the establishment of each subsidiary and identify whether any of the directors or executives of the Board also hold office as directors of a subsidiary and if so, the nature and extent of remuneration in respect thereof.

The annual report must also clearly specify the extent of the shareholding of the Government body in each subsidiary and set out the extent of any guarantees, indemnities or other legal or financial commitments made by the Board to any subsidiary as well as the extent of any payments that pass in either direction between the Board and each subsidiary (including, for example, any dividend payments from the subsidiary to the Board and any commission/agency/consultancy/management fees paid by the Board to a subsidiary).

The annual financial statements of the Government Board must be prepared in accordance with the appropriate accounting standards pertaining to the preparation of consolidated group accounts. (Refer also to section 10 of this Guide which deals with Evaluating Board Performance.)

Last reviewed: 17 July, 2009

Last updated: 22 July, 2009

^ to top