The statutory governance arrangements for the Future Fund and Nation-building Funds are set out primarily in the Future Fund Act 2006 and the Nation-building Funds Act 2008. This core legislation sets out the roles and responsibilities of the Government and of the Future Fund Board of Guardians (Board) and the Future Fund Managemnent Agency (Agency). The Financial Managamenent and Accountablity Act 1997, together with other Commonwealth guidelines, procedures and orders, establishes arrangements for delegations and authorities, spending and the budget accounting of costs, liabilities, income and expenses.
The legislation provides the Government, through the Treasurer and the Minister for Finance and Deregulation, with oversight of the Funds subject to arrangements that establish the independence of the Board. The Government's role includes the appointment of Board members and the establishment of Investment Mandates for each of the Funds. Details of the Board's current members are available here.
The legal framework retains beneficial ownership of the assets of each Fund in the Commonwealth. It also clearly states the purpose of each Fund and makes clear that contributions to the Funds are discretionary.
The Board is responsible for investing the assets of the Funds in accordance with the legislation and Investment Mandates. To assist it in this role, the Board receives recommendations and advice from the Agency which is also responsible for implementing investment decisions.
The Board operates independently from Government. This independence is emphasised in a number of ways, including:
- the expenses of the Funds are met from the assets of the Funds themselves rather than from appropriations through Parliament;
- the Board must be consulted on draft investment directions which must be consistent with the requirements of the legislation. Any submissions the Board makes on a draft direction must be tabled in Parliament. The Investment Mandates for each of the Funds clearly define the risk and return requirements and timeframe for investment activity and the legislation imposes very few limitations on asset allocation, selection of markets and portfolio design on the Board;
- Board members must be drawn from outside Government and must meet the legislated requirements of having substantial expertise and professional credibility in investing or managing financial assets or in corporate governance.
The Board is not involved in advising on macroeconomic management or policy formulation and implementation and so is focused solely on the pursuit of its investment objectives in a commercial manner.
The legislation provides accountability arrangements, including the tabling in Parliament of an annual report and audited financial statements. The Board has also decided to publish quarterly portfolio updates to provide details of the investment activity and performance of the Funds.
Through participation in the International Forum of Sovereign Wealth Funds, the Board supports the Santiago Principles, which establish a framework for governance, accountability and transparency for Sovereign Wealth Funds. The Board fully implements the Santiago Principles and its review of how the Principles are applied is provided in its annual report.
Further information about the statutory and operational governance arrangements, including the development and implementation of the investment program, organisational design matters (such as delegation frameworks, remuneration and human resource management) and the control environment (encompassing financial controls and operational risk and compliance), are provided in the joint Board and Agency annual reports.