Report on Performance:Outcome 1

Outcome 1: Informed decisions on government finances and continuous improvement in regulation making

Finance’s core role is to provide the financial information and systems that support government decision making. More recently this role has expanded to include the management of regulation. Finance assists the government to allocate scarce resources between competing priorities and works with the Department of the Treasury in managing the budget process.

Finance played its usual role in assisting the government to prepare the 2010-11 Budget. The need to quickly return the Budget to surplus saw the government keep new expenditure at a minimum and this is reflected in a reduction in aggregate new spending as well as the number of Green Briefs prepared by Finance. Strategic reviews continued to focus on areas of expenditure where efficiency and effectiveness could be improved. A review of the Job Capacity Assessments for Disability Support Pension and employment services was completed with the help of responsible agencies.

Finance also played a key role during 2009-10 in work on major policy initiatives announced by the government. The National Health and Hospitals Network and the National Broadband Network (NBN) were developed drawing on Finance input and expertise.

Maintaining and improving the financial management framework continues to be an important focus of our work. Changes were made to the Financial Management and Accountability Regulations to reduce red tape and new Commonwealth Grant Guidelines were issued to improve the way in which departments and agencies manage grants programs.

Improving the transparency of government finances was also a recurrent theme in 2009-10. Finance helped prepare a Coordinated National Security Budget, prepared the first public report on the Certificate of Compliance with the Financial Management and Accountability Act 1997 (FMA Act) and implemented Operation Sunlight reforms to change the way in which asset depreciation and capital budgets are funded.

Finance continued its outreach activities assisting our neighbours in the Pacific region to improve their control and management of public finances. A further development in this area is the assistance Finance is giving Papua New Guinea to develop a sovereign wealth fund to manage royalties from a new liquefied natural gas development.

The deregulation agenda continued to grow, with productive cross-portfolio partnerships resulting in a streamlining of the regulation of financial product disclosure statements and access to new medical technologies. A pleasing result was also achieved with the Organisation for Economic Co-operation and Development (OECD) finding that Australia is a leader in regulatory management practices. Improvements were made to the Regulation Impact Statement process and initiatives to remove overlap and duplication in a number of key areas of business regulation that have been agreed with the states and territories. This work will be an important source of future national productivity gains.

Finance also advanced some important administrative matters, such as the replacement of the Central Budget Management System (CBMS) and changes to public sector superannuation governance.

A number of Finance’s significant achievements are outlined below. Further information and commentary on Finance’s performance against deliverables and key performance indicators (KPIs) for this outcome is available at Table 1 and the resource statement is at Table 2.

Delivering the 2010-11 Budget

The continuing instability of the global economy remained a challenge for the government in framing the 2010-11 Budget. This required discipline in keeping new expenditure measures to a minimum and the delivery of sufficient savings to meet the government’s fiscal policy objectives. Finance analysed new expenditure proposals, assessed and validated the cost of new expenditure, and contributed to the development of major savings proposals. The fiscal outlook has shown a considerable improvement. The 2010-11 Budget projects a return to surplus in 2012-13. This compares to 2009-10 Budget projections which forecast a halving of the budget deficit by 2012-13 and a return to surplus by 2015-16.

Finance provided advice and support for the Expenditure Review Committee of Cabinet (ERC), the Strategic Priorities and Budget Committee of Cabinet (SPBC), and to the special Budget meeting of the full Cabinet. Finance prepared 77 Green Briefs for ERC and Cabinet, providing policy and savings advice on proposals for the 2010-11 Budget, compared to 134 Green Briefs for the 2009-10 Budget and 104 for the 2008-09 Budget. The department also contributed to 170 briefs for SPBC from September 2009.

Finance worked on 396 expense and capital measures for the 2010-11 Budget, comprising a net $1.3 billion of expenditure over five years. The number and net value of proposals was significantly lower than previous years. In comparison there were 601 measures in the 2009-10 Budget, comprising a net $26.9 billion of expenditure over five years and 633 measures in the 2008-09 Budget comprising a net $18.2 billion of expenditure over five years.

Leading up to the 2009-10 Mid-Year Economic and Fiscal Outlook (MYEFO), Finance worked on 122 expense and capital measures compared to 80 measures for the 2008-09 MYEFO. In total, the department worked on 518 measures in 2009-10 compared to 788 in 2008-09 and 709 in 2007-08.

Finance provided policy briefing and costing analysis of the following major new policy and savings initiatives:

  • National Health and Hospitals Network – $52.1 billion over five years for the government's National Health Reform Plan.
  • Defence – military contribution to the Middle East Area of Operations – $1.3 billion over three years to continue and enhance Australia’s military contribution to international efforts to combat terrorism in Afghanistan and the wider Middle East Area of Operations, including anti-piracy operations off the coast of Somalia.
  • Welfare Payments – a new scheme of income management in the Northern Territory – $410.5 million over six years.
  • Digital Television Switchover – Regional Blackspot Solution – $375.4 million over 12 years to assist commercial and national broadcasters.
  • Pharmaceutical Benefits Scheme – further pricing reform – net savings of $1.9 billion over five years as a result of changes to the way prices are determined for medicines on Formulary 2.
  • Fifth Community Pharmacy Agreement – net savings of $604.4 million over five years as a result of the removal of a number of programs and payments, and by freezing indexation on certain fees and funding pools.
  • Job Capacity Assessment – more efficient and accurate assessments for Disability Support Pension and employment services – net savings of $383.4 million over four years.

Budget advice

Strategic reviews

Finance also continued to focus on strategic reviews of government expenditure. This work helps the government to consider measures to improve the efficiency and effectiveness of programs and services. Finance worked with responsible agencies to provide strategic advice to the government to enable it to make informed decisions on policy strategy and resource allocation.

For example, Finance, with participation from the Department of Education, Employment and Workplace Relations, reviewed the cost-effectiveness of Job Capacity Assessments in assessing people’s work capacity and access to the Disability Support Pension and employment services. Based on the review, the government agreed to streamline and improve the effectiveness of current assessment arrangements, achieving savings of $383.4 million over four years from 1 July 2011.

In 2009-10, the Expenditure Review Taskforce continued to assist the government to improve the efficiency and effectiveness of government programs and services. The taskforce worked with portfolio departments and central agencies to identify budget savings and improvements in the administration and delivery of particular government programs. It wound up its third phase, contributing to savings announced in the 2010-11 Budget in excess of $200 million over the forward estimates.

Coordinated National Security Budget

As part of the 2010-11 Budget, Finance played a central role in informing the government’s consideration of the Coordinated National Security Budget. This work grew out of the strategic policy framework announced by the former Prime Minister in his National Security Statement to the Australian Parliament on 5 December 2008. This framework guides and coordinates effort across the national security community and comprises three elements: priority setting, resource allocation and performance evaluation. Finance, in consultation with the Department of the Prime Minister and Cabinet (PM&C), the Treasury and members of the national security community, compiled a compendium of national security expenditure. The compendium underpinned Cabinet deliberations of new funding proposals to be included in the inaugural budget and was used for reporting expenditure in the government’s budget papers.

National Health and Hospital Network

Finance worked with PM&C, the Treasury and the Department of Health and Ageing to develop the package of reforms that was agreed by Council of Australian Governments (COAG) in April 2010. Under the National Health and Hospitals Network Agreement the states and territories (with the exception of Western Australia) agreed to improve the quality of patient care and increase the engagement of local clinicians. $7.3 billion has been committed over four years for these reforms.

National Broadband Network

Finance worked with the Department of Broadband, Communications and the Digital Economy (DBCDE) on updating the budget estimates to reflect the findings of the National Broadband Network (NBN) Implementation Study. Finance also provided advice on measures to support the Financial Heads of Agreement between NBN Co and Telstra announced on 20 June 2010. These measures included a commitment to establish and contribute funding to a new entity, USO Co and the provision of funding to assist in the retraining and redeployment of Telstra staff. The NBN is discussed further under Outcome 2.

Digital television switchover

Finance worked with DBCDE and the Australian Communications and Media Authority on the development and costing of new measures associated with the switchover from analog to digital television by the end of 2013. These measures, announced as part of the 2010-11 Budget, included the provision of a new digital satellite television broadcasting service, assistance to households to install satellite equipment, and the conversion of a number of self-help television transmission facilities to transmit national broadcasting services in digital format.

Financial management

FMA Regulations – FMA reducing red tape

Following consultations with Australian Government agencies, the FMA Regulations were amended to improve administrative efficiency and reduce red-tape.

The amendments include decoupling the timing of Regulations 9 and 10, so that Regulation 10 agreement (from the Finance Minister for arrangements beyond available appropriations) is not required before the granting of Regulation 9 approval (to approve the proper use of Commonwealth resources). In addition, remote contingent liabilities of a non-material nature are now excluded from the application of Regulation 10 through a new Regulation 10A. As a result, a large number of the routine transactions will benefit from simpler processing requirements.

The changes to the FMA Regulations also allow for the sub-delegation of certain powers and functions of the Finance Minister, and for the sub-delegation of the powers and functions of chief executives, through amended Regulations 24 and 26. The aim is to simplify how the power to make spending decisions is delegated to staff within agencies.

These amendments to the FMA Regulations came into effect from 1 July 2010.

First year of agencies operating under the Commonwealth Grant Guidelines

Commonwealth Grant Guidelines (CGGs) were issued by the Finance Minister with effect from 1 July 2009. The new guidelines establish for the first time a policy framework for grants administration by departments and agencies subject to the FMA Act.

The CGGs set out mandatory requirements for legislation, process and reporting requirements. They also set out seven principles to guide administration including: robust planning and design; an outcomes orientation; proportionality; collaboration and partnership; governance and accountability; probity and transparency; and achieving value for money. They seek to reduce red tape by providing that the key design features of a grants program should be commensurate with the scale, nature, complexity and risks involved.

Gateway developments

Finance continues to assist agencies with the management of high risk projects by facilitating a process of gateway reviews. Thirty-seven reviews were conducted in 2009-10, a small increase over the 34 conducted in the previous year. The Department of Defence (Defence) participated in the process for the first time this year. The gateway process was enhanced with the adoption of a Gate 0 – business need review. This was included as part of the 2010-11 Budget process to assist the finalisation of relevant new policy proposals that meet the size and risk thresholds for a Gateway Review.

Finance’s engagement in the region

Finance continued to play an active role in the Australian Government’s partnerships with neighbouring countries in the Asia-Pacific region to support improved public financial management and budgeting.

Indonesia

During 2009-10, Finance and the Indonesian Ministry of Finance (IMoF) continued their collaboration under the Australia-Indonesia Government Partnership Fund. Three Finance officers worked in the IMoF providing technical assistance in the implementation of planning and budgeting processes, asset management and broader public financial management reform. Thirty-three senior Indonesian officials involved in financial management and budget reform undertook five study tours to Australia during the year, and nine IMoF officials undertook work placements or internships coordinated by Finance.

Pacific region

Ten Finance officers work in Papua New Guinea (PNG) as part of the Strongim Gavman Program (SGP) and four in the Solomon Islands as part of the Regional Assistance Mission to the Solomon Islands.

Under the PNG-Australia Finance Twinning Scheme, short-term development opportunities are provided for staff of Finance and PNG Finance and Treasury Departments to support SGP activities. A twinning scheme was also put in place during the year with the Solomon Islands Ministry of Finance and Treasury. During 2009-10, four Finance, four PNG and two Solomon Islands officials undertook exchanges under these programs.

During February 2010, Finance hosted, in collaboration with the Pacific Financial Technical Assistance Centre, a delegation of Pacific Island Finance Secretaries and other senior officials. The study tour provided the opportunity for the Pacific Island officials to learn from the experiences in public financial management of organisations across the three levels of government in Australia.

Review activity during the year included a peer review of Finance’s capacity development efforts in PNG, Indonesia and the Solomon Islands, undertaken by the United States Department of the Treasury – Office of Technical Assistance. This review found that Finance’s assistance to counterpart agencies was adapted to the specific context of each counterpart’s environment. The effectiveness of programs is also the subject of an annual review process by AusAID and partner governments in each of the countries where Finance staff are deployed.

Regional Co-operation – Papua New Guinea Liquefied Natural Gas Project

Finance has been a key player in the development of institutional arrangements to manage the revenues from a major Liquefied Natural Gas (LNG) project in PNG.

In early December 2009, the governments of Australia and PNG agreed a Joint Understanding on further cooperation on the PNG LNG Project. The project has the potential to transform PNG’s economy and the Australia-PNG bilateral relationship. It is expected to provide some $35 billion in revenue to the PNG Government and landowners over the 30-year project life. Revenue flows are expected to start in around 2013-14. Phase 1 of the project (2015 to 2025) is estimated to have a capital cost of US$18.3 billion dollars.

The joint understanding aims to support effective and transparent governance of the PNG Government’s future petroleum (oil and gas) revenues. Under the joint understanding, the Australian Government will help PNG establish its own sovereign wealth fund. Finance has provided expert advice to the PNG Government on Australian experience in designing and managing sovereign wealth funds and other special-purpose investment arrangements. To date, the dialogue has focussed on:

  • the legislative framework and governance arrangements to establish and operate sovereign wealth funds
  • the application of the International Working Group of Sovereign Wealth Funds’ Generally Accepted Principles and Practices – the ‘Santiago Principles’.
Superannuation reforms

In 2009-10, Finance had a key role in preparing for reforms to the governance and administration arrangements for Australian Government civilian and military superannuation schemes announced by the government on 31 October 2008 and 26 November 2009. These reforms included planning and preparing for the merger of the Australian Reward Investment Alliance, the Military Superannuation and Benefits Board and the Defence Force Retirement and Death Benefits Authority, and the modernisation of the governance structure of ComSuper.

Finance, in consultation with a liaison working group of officials from Defence and executive staff from the civilian and military boards, developed legislation to implement the reforms. The Finance Minister introduced the Governance of Australian Government Superannuation Schemes Bill 2010 and the ComSuper Bill 2010 into the parliament on 4 February 2010. At 30 June 2010, the Bills remained before the parliament.

Transfer of Governors’-General and Judges’ Pensions Schemes

Administration of the former governors’-general pension scheme was transferred to Finance from PM&C on 1 July 2009. It is an unfunded defined benefits scheme, which provides a pension benefit on retirement of 60 per cent of the salary payable to the Chief Justice of the High Court of Australia, less any other government pensions or retiring allowances and surcharge adjustments. The scheme is unfunded and members do not contribute towards the cost of benefits.

The Judges' Pensions Scheme was transferred to Finance from the Attorney-General’s Department on 1 January 2010. It is a defined benefit scheme, which provides a pension benefit of 60 per cent of the appropriate current judicial salary for eligible retired judges. The scheme is unfunded. Members do not contribute towards the cost of benefits.

Superannuation Administration Reform Project

Finance and ComSuper are jointly implementing a range of reforms to the administration of the Australian Government’s superannuation schemes, including outsourcing the administration of the Public Sector Superannuation accumulation plan and improving member superannuation data, IT infrastructure and administration system. These reforms were announced by government on 26 November 2009 based upon a scoping study completed in June 2009. Finance was provided with the necessary funding and has committed a small team, including two staff seconded from ComSuper. In undertaking this work, Finance and ComSuper staff have been consulting employer agencies and the fund trustees and have engaged external advisers to provide specialist advice.

Operation Sunlight

Operation Sunlight is the government’s reform agenda to improve budget transparency and accountability. The agenda was advanced in 2008-09 with the public release on 9 December 2008 of the Review of Operation Sunlight: Overhauling Budgetary Transparency, together with the government’s response.

During 2009-10, Finance implemented a number of further key initiatives under Operation Sunlight. These initiatives address the funding of asset acquisitions, costing election commitments and the CEO Annual Certificate of Compliance.

Net cash

Changes to the appropriations framework were introduced as part of the 2010-11 Budget, reducing the range of expenses funded in the year that the expense is incurred, and instead providing the appropriation when payments are expected to be made. Under the new arrangements:

  • ongoing funding for depreciation, amortisation and ‘make good’ expenses has been replaced by a Departmental Capital Budget for departmental and administered assets for which depreciation funding was previously provided
  • the funding of ‘make good’ expenses will only be provided at the time an agency is required to return assets to their near-original state prior to relinquishing use of those assets.

These changes apply to FMA Act agencies in the general government sector that receive funding from annual appropriations directly or via a special account.

The changes align agencies’ capital budgets with their estimated expenditure patterns. To reflect this, appropriations for depreciation, amortisation and ‘make good’ expenses accumulated since the introduction of accrual appropriations and not spent on replacing assets have been extinguished.

Election costings

The government committed to reviewing the arrangements for the costing of election commitments under the Charter of Budget Honesty Act 1998. In the 2010-11 Budget, funding was provided to the Department of Parliamentary Services, for the Parliamentary Library to assist non-government parties to develop policies in the lead up to federal elections.

First Public Report on Certificate of Compliance – Improving transparency

On 29 January 2010, the Finance Minister tabled the first annual report to the parliament on the Certificate of Compliance process for 2008-09. The preparation of the report and its tabling in the parliament implemented the Australian Government’s undertaking, in response to the Review of Operation Sunlight: Overhauling Budgetary Transparency, to release an aggregate analysis of the certificate results for 2008-09.

Chief executives of FMA Act agencies and directors of Commonwealth Authorities and Companies (CAC) Act bodies in the general government sector are required to report annually on their entity’s compliance with the financial framework and financial sustainability. This is done through a Certificate of Compliance for FMA Act agencies and a Compliance Report for CAC Act bodies. Chief executives and directors are asked to provide their certificate or report to their portfolio minister and to the Finance Minister by 15 October each year.

The purpose of the certificate is to improve compliance with the Commonwealth's financial management framework and to ensure that ministers and presiding officers are kept informed of compliance issues within their portfolios. Three rounds of reporting have been completed since the certificate was introduced in 2006–07.

The 2008-09 report indicated the most common areas of non-compliance related to the commitment, approval and spending of public money. In response to this, Finance delivered in-house training sessions to thirty-seven agencies in various locations in early 2010. Three hundred and fourteen people attended these sessions, with over 85 per cent reporting that the information was relevant and useful.

Completion of the 2008-09 Consolidated Financial Statements

The Australian Government’s 2008-09 Consolidated Financial Statements (CFS) were prepared for the first time in accordance with the whole-of-government requirements of AASB 1049 Whole-of-Government and General Government Sector Financial Reporting. AASB 1049 aims to harmonise the Government Finance Statistics (GFS) and Australian Accounting Standards in a single set of financial statements. The reporting of GFS is in accordance with the Australian Bureau of Statistics GFS Manual. The adoption of AASB 1049 has improved the transparency, reliability and understanding of the financial statements from the Budget to the CFS.

The 2008-09 CFS was signed by the Finance Minister and provided to the Auditor-General on 26 November 2009. On 28 November 2009, the Auditor-General issued an unqualified audit report for the third consecutive year. The statements were tabled in the parliament on 14 December 2009.

The CBMS Redevelopment Project

The CBMS is the whole-of-government ICT system underpinning the budget and financial management of the Australian Government. The current system will reach the end of its useful life by the end of 2012.

The government announced in the 2010-11 Budget that it would redevelop the CBMS with funding drawn from the ICT Business As Usual Reinvestment Fund. This fund was established as part of the Review of the Australian Government's Use of Information and Communication Technology.

A two pass business case process confirmed that a comprehensive redevelopment was the best option considering cost, benefit and risk. The business case considered functional and non-functional requirements, the results of consultation with agencies, industry confirmation that it can deliver the government’s required solution, and an analysis of the budget systems used by the United Kingdom, Canadian and Victorian governments.

The project is subject to ongoing governance and review including the Gateway Review Process.

Implementing the government’s better regulation agenda

Finance provides policy advice on ways to reduce the costs of regulation, provides secretariat and policy support to COAG's Business Regulation and Competition Working Group (BRCWG), and assists government agencies and departments to comply with the government’s Regulatory Impact Analysis requirements.

Regulatory reform at the Commonwealth level

Regulatory reform by the Commonwealth is being progressed on a number of fronts, including through a series of Better Regulation Ministerial Partnerships. These are agreed between the Finance Minister and individual portfolio ministers and focus on improving effectiveness in specific areas of regulation. In 2009-10 the Finance Minister completed partnerships with the Minister for Financial Services, Superannuation and Corporate Law to develop accessible product disclosure statements for financial products such as superannuation and managed investment schemes. The Finance Minister also completed a partnership agreement with the Minister for Health and Ageing to improve the timeliness of patient access to medical technologies and to reduce regulatory costs for the industry. Finance worked with these portfolio departments to undertake this work.

The Finance Minister also announced six new partnerships which will seek to: consolidate Commonwealth anti-discrimination legislation into a single Act; improve regulation of agricultural and veterinary chemicals; rationalise current tariff concession arrangements; reduce the number of visa classes and sub-classes; establish a single security vetting agency for the Australian Government; and transfer the administration of most excise equivalent goods from the Australian Customs and Border Protection Service to the Australian Tax Office. This work is underway and will be progressed during 2010-11.

Finance provided input and support to the OECD’s Review of Regulatory Reform: Australia — Towards a Seamless National Economy. The OECD found that Australia is a leader in its regulatory management practices. The review included commentary on current COAG regulatory reforms. The OECD report and the Australian Government’s response were released on 15 February 2010.

A further focus for regulatory reform has been the comprehensive review of pre-2008 Commonwealth regulation and legislation. In the Updated Economic and Fiscal Outlook in February 2009, the government announced that it would undertake a review of Commonwealth subordinate legislation and other regulation to document those regulations which impose net costs on business and to identify scope to improve regulatory efficiency. Finance has worked closely with all Commonwealth departments on this review.

The review considered over 11,600 legislative instruments. The relevance and operation of groups of instruments were documented and assessed. Specific actions have been identified and will be progressed with portfolio ministers.

During 2009-10, Finance also focussed on reducing administrative ‘red tape’ within the Australian Public Service (APS). These are requirements that the APS places on itself to support a range of administrative obligations. Finance worked with other Commonwealth agencies to better understand the scope of extant internal regulation and to identify prospective reform opportunities where regulation can be simplified without prejudicing necessary control and accountability.

As a substantial source of administrative requirements, Finance has been closely involved in pursuing red tape reform opportunities. Progress has already been made to simplify financial management and reporting with revisions to the Financial Management and Accountability Regulations 1997.

Office of Best Practice Regulation (OBPR)

During 2009-10 the government amended the Regulation Impact Statement (RIS) requirements to achieve a better balance between rigour and practicality. Finance provided advice on the amendments informed by extensive consultation with the business community and government agencies.

Finance issued a revised Best Practice Regulation Handbook (for application from 1 July 2010) which incorporated the new RIS requirements and other amendments to make the handbook more user friendly. Revision of the handbook was tested though consultation with regulating agencies, business, the not-for-profit sector, consulting firms and the general public.

The key changes to the RIS requirements include:

  • Better quality RISs: Department secretaries or heads of agencies (or their deputies) are now required to clear individual RISs before they are submitted to OBPR for final assessment.
  • Greater accessibility: An online register will be used to publish RISs following announcement of a regulatory decision.
  • More effective use of the RIS:Where Cabinet is the decision-maker, a one-page summary will be prepared by the OBPR to assist ministers.

Progress in delivering the Seamless National Economy

Finance provides secretariat and policy support to the COAG BRCWG, which coordinates implementation of COAG’s National Partnership Agreement to Deliver a Seamless National Economy (NP). The NP was agreed by COAG on 29 November 2008 and comprises 27 deregulation priority reforms, eight national competition reforms and commitments by jurisdictions to ongoing reform of regulatory processes. States and territories are eligible for payments of up to $550 million under the NP subject to delivering the deregulation priority reforms in accordance with key milestones.

During 2009-10, Finance supported six BRCWG meetings and assisted the Commonwealth, states and territories to deliver about one third of the 27 priority deregulation reforms under the NP. Reforms that are now operational include: Standard Business Reporting, estimated to save businesses $800 million a year when fully operational; a new national system of weights and measures administered by the Commonwealth; and a national registration and accreditation scheme for much of the health workforce, including dentists and nurses and midwives. Finance also coordinated COAG’s response to the first report on performance under the NP for 2008-09 by the COAG Reform Council. This response was released on 23 February 2010.

APS reform agenda, including service delivery

In September 2009, the Prime Minister established an advisory group to develop a blueprint for reform of the APS. In March 2010, the group presented its report Ahead of the Game: Blueprint for the reform of the Australian Government administration. In its response to this report the government asked Finance to take a lead role in implementing the agenda, along with PM&C, the Treasury and the Australian Public Service Commission.

Finance will lead (or jointly lead) implementation of 11 of the 28 reforms, including improvements to collaboration between citizens and government in policy and service design, reducing unnecessary business regulatory burden, reducing agencies’ internal red tape and reviewing the measures of agency efficiency.

Three key recommendations of the report focus on delivering better services for citizens by simplifying requirements, taking more flexible approaches to service delivery and working in partnership with state, territory and local governments. The Secretary of Finance chairs a Secretaries Committee on Service Delivery and this committee will report to government on a strategy for whole-of-government service delivery by the end of 2010.

A taskforce chaired by Finance will progress the recommendation to reduce internal red tape and a Government 2.0 steering committee will focus on better collaboration between citizens and government.

Amendments designed to improve aspects of the financial framework and governance for Commonwealth agencies were progressed, including the introduction of the Financial Framework Legislation Amendment Bill 2010 into the House of Representatives on 23 June 2010.

Nation-building Funds

In 2009-10, Finance facilitated the authorisation and processing of payments for agreed infrastructure projects totalling $2.3 billion from the Nation-building Funds. These payments comprised of $0.7 billion from the Building Australia Fund for transport and communications infrastructure projects (including for the NBN), $1.3 billion from the Education Investment Fund for education and research infrastructure and $0.3 billion from the Health and Hospitals Fund for health infrastructure projects.

Payments from the Nation-building Funds were made following confirmation that the legislative and policy requirements had been met and that the project milestone to which the payment related had been achieved. Project payments were made from the Funds’ Special Accounts in the Finance portfolio to other Portfolio Special Accounts. The balances of the Nation-building Funds are invested by the Future Fund until they are required to make payments in relation to agreed infrastructure projects.

Performance information and resources for Outcome 1

During 2009-10, Finance met most of the performance targets for the deliverables and KPIs that contributed to Outcome 1. Due to the shift from outputs to programs in the 2009-10 Portfolio Budget Statements a number of deliverables and KPI’s were revised to better reflect the outcome objectives. Additional changes were made in the 2009-10 Portfolio Additional Estimates Statements, programs 1.1 and 1.2.

The general trend has been one of sustained achievement. Where performance did not meet the nominated targets the following actions have been taken:

  • The time taken to provide Monthly General Government Sector financial reports to the Finance Minister has steadily fallen over the last three years but still exceeds the target date for release.
  • While not all agencies achieve compliance with the best practice regulation requirements, the OBPR continues to focus on improving compliance. In particular, in early 2010 the Australian Government agreed to changes to the best practice regulation requirements to encourage greater compliance.
  • While half of the set variance targets between Final Budget Outcome and Budget Estimates were achieved, greater emphasis will be placed on reviewing and, where necessary, adjusting estimates on an ongoing basis throughout the financial year.

The tables below provide a detailed assessment of the department’s performance against 2009-10 Portfolio Budget Statement Outcome 1 performance targets.

Table 1: Performance information for Outcome 1

Outcome 1: Informed decisions on government finances and continuous improvement in regulation making through: budgetary management and advice; transparent financial reporting; a robust financial framework; and best practice regulatory processes.
Program 1.1: Budget, Financial Management and Deregulation

Program Objective

The program contributes to the outcome by advising the Minister for Finance and Deregulation, the Strategic Priorities and Budget Committee of Cabinet (SPBC) and the Expenditure Review Committee of Cabinet (ERC) so they may make informed decisions on government finances and continuous improvement in regulation making through budget advice, transparent financial reporting, a robust financial framework and best practice regulatory processes.

This program also contributes to whole-of-government initiatives to support economic and financial stabilisation programs, and encourage good governance and financial management in Indonesia and Pacific Island states.
Deliverables Key Performance Indicators Results
Budget

Government is well informed by relevant advice founded on robust analysis and by timely and accurate costings.

Advice is relevant, well-founded and useful in decision making.

Costings are accurate and appropriate and meet ERC and budget deadlines for provision of information and analysis.

Achieved. Advice on costings was provided for all ERC and budget Cabinet meetings. Ministers expressed satisfaction with quality and timeliness of the advice provided by the department.

Requests to the department for policy costings were met on a timely basis. During the year, all policy costings were agreed with relevant departments prior to publication.

Budget estimates, process and documentation prepared and delivered in an accurate and timely manner.

Budget estimates, process and documentation delivered in accordance with the requirements and timetable agreed by Cabinet.

Achieved. All  published budget documentation was provided on time and according to timetables agreed by the government. The budget processes complied with the decisions of Cabinet and those specified under relevant legislation (such as the Charter of Budget Honesty Act 1998).

This deliverable was assessed against the delivery of the 2010-11 Budget, the 2009-10 Mid-Year Economic and Fiscal Outlook (MYEFO) and the 2010 Economic Statement.

Effective, timely and appropriate advice to government agencies on budget processes.

Accurate budget estimates targets, measured as follows, after allowing for the effects of policy decisions, movements in economic parameters and changes in accounting treatments:

  • 2.0% difference between first forward year estimated expenses and final outcome.

  • 1.5% difference between budget estimated expenses and final outcome.

  • 1.0% difference between revised estimated expenses at MYEFO and final outcome.

  • 0.5% difference between revised estimated expenses at Budget time and final outcome.

Achieved.
On an accrual basis, the variance was -1.4 per cent (and on a cash payments basis the difference was -1.7 per cent).

Achieved.
On an accrual basis, the variance was -0.4 per cent (and on a cash payments basis the difference was -0.7per cent).

Not Achieved.
On an accrual basis, the variance was -1.4 per cent (and on a cash payments basis the difference was -1.7 per cent).

Not achieved.
On an accrual basis, the variance was -1.1 per cent (and on a cash payments basis the difference was -0.9 per cent).

Financial Management

Support to the Finance Minister in meeting his financial reporting responsibilities under the FMA Act, Charter of Budget Honesty Act 1998, and the Annual Appropriation Acts, through:

  • the development and maintenance of the Finance Minister’s Orders
  • the production of financial data and financial statements for the Australian Government
  • the production of Appropriation Bills
  • the monitoring and reporting of the Australian Government’s cash balances.

Improved governance across government agencies through effective, timely and appropriate advice to government agencies on legislative and financial instruments.

The FMA Regulations were amended with effect from 1 July 2010 to help improve their administrative efficiency and reduce unnecessary red tape.

Financial statements for Budget documentation prepared in an accurate and timely manner.

Achieved. The department finalised the financial statements for budget documentation in accordance with agreed timeframes.

Appropriation Bills accurately reflect funding requirements for all Australian Government decisions.

Achieved. All Appropriation Bills accurately reflect funding in accordance with Australian Government decisions.

Monthly General Government Sector financial reports are timely and accurate.

Not achieved. Finance took an average of 31 days to provide the statements to the minister and 44 days to publish the statements. This was an improvement of 5 days on the average from the 2008-09 financial year. Finance will continue to seek further improvement in 2010-11.

Consolidated financial statements provided by the Finance Minister to the Auditor‑General in accordance with the FMA Act.

Achieved. The department provided the Consolidated Financial Statements to the Auditor-General on 26 November 2009, and the Audit Report was issued on 28 November 2009.

The derived underlying cash balance is provided to government in a timely manner.

Achieved. Finance produced the derived underlying cash balance within five days of the end of the financial year.

The Operation Sunlight agenda of improved budget transparency is implemented to support the Budget process.

Operation Sunlight initiatives improve the transparency of budget information.

The implementation of initiatives under Operation Sunlight is close to completion. The harmonisation of accounting standards at the entity level is the one remaining recommendation to be implemented. 1

Managing the Australian Government’s central banking agreement.

Central banking arrangements are managed effectively and facilitate informed decisions on Australian Government finances.

The Central Banking Agreement between the Reserve Bank of Australia and the Department of Finance and Deregulation was extended for a period of two years on 30 June 2009. The extension covers the period 30 June 2009 to 30 June 2011.

Monitoring the collection of repayments of loans provided to state and territory governments.

Loans are repaid in accordance with the department’s loan schedule. 2

Achieved. All loan repayments scheduled in 2009-10 were received on time.

Governance and Review

The Office of Evaluation and Audit (Indigenous Programs) (OEA) conducts a program of audits and evaluations to support the government to improve the operation and effectiveness of programs for Aboriginal and Torres Strait Islander people.

Government satisfied with the quality and value of evaluations and audits.

OEA has received positive feedback in the formal responses from agencies on evaluation and audit reports completed during the relevant period in 2009.

As noted in the Portfolio Additional Estimates Statement 2009-10, the function of the OEA was transferred to the Australian National Audit Office in December 2009.

Gateway reviews of major projects strengthen the government’s financial position by ensuring the effective and efficient deployment of resources.

Following Gateway Review, high risk major projects of government follow best practice implementation methodologies.

Achieved. Finance surveys Senior Responsible Officials at the conclusion of each Gateway Review and 97% identified that Gateway contributed constructively to their project.

International Governance and Cooperation

Deployment of budget advisory staff to relevant countries as agreed with the governments of these countries.

Improved economic and fiscal stabilisation of Indonesia and Pacific Island states.

Achieved. Finance continued to provide public financial and budget reform advice in Papua New Guinea, Indonesia and the Solomon Islands through targeted public financial management assistance programs under whole-of-government arrangements. As part of its engagement with these development partners, Finance deployed long-term advisers to each country and managed a program of workshops, short-term placements and study tours focusing on budget and financial management reforms.

Better Regulation

Regulation is well designed and targeted.

Compliance by all Commonwealth agencies with the government's best practice requirements for regulatory impact analysis.

Not achieved. The Best Practice Regulation Report 2008-09 was released in November 2009. At the decision making stage, the Australian Government and COAG compliance rates were 85% and 96% respectively. The OBPR will report on compliance for 2009-10 later in 2010.

Regulatory best practice training helps to increase awareness of the best practice requirements and assists departments and agencies comply with the requirements. During 2009-10, approximately 224 officers undertook this training.

During 2009-10, the Australian Government agreed to a number of changes to the Regulation Impact Statement (RIS) requirements. The changes which commenced on 1 July 2010, are aimed at better balancing the rigour and practicality of the RIS process in order to encourage greater compliance.

Unnecessary or poorly designed regulation is reviewed and improved or removed.

Review of pre-2008 subordinate regulation is undertaken, with poorly designed or redundant regulation identified for review or removal.

Achieved. Finance has pursued a broad range of initiatives directed at improving the quality of business regulation. A number of cross-jurisdictional reforms to improve the regulation of national markets have been concluded in close cooperation between the Commonwealth and the states and territories, and others further advanced. A number of Better Regulation Ministerial Partnerships to improve the quality of Commonwealth business regulation are underway, with two completed during the year. The review of pre‑2008 subordinate regulation has been completed and identified at least 465 items of redundant regulation and a series of possible reforms.

Table 1.2: Public Sector Superannuation

Program Objective

This program contributes to the outcome by advising the Australian Government so it may make informed decisions and continuously improve the framework for managing the Future Fund, the Australian Government unfunded superannuation liabilities and associated administered expense items, and developing and advising on superannuation arrangements for Australian Government civilian employees, current and former members of parliament and current and former governors-general.

Deliverables Key Performance Indicators Results
  • Provide policy advice on and manage effectively the Australian Government’s unfunded superannuation liability and associated administered expenses.

  • Provide policy advice on the superannuation arrangements for Australian Government employees.

  • Provide policy advice on the Parliamentary Contributory Superannuation Scheme and managing the scheme in line with industry standards.

  • Provide policy advice on, and manage the superannuation arrangements for current and former governors-general. 3

 

  • Effectiveness of policy advice to the Australian Government on the framework for managing superannuation arrangements for Australian Government civilian employees, current and former members of parliament, and governors-general.

  • Issuing of Parliamentary Contributory Superannuation Scheme statements by 31 December of each year.

  • Parliamentary Contributory Superannuation Scheme members satisfied with the service provision.

Achieved. Minister expressed satisfaction with the quality, timeliness and relevance of Finance’s advice.
Finance issued all members’ statements by 8 October 2009.

Scheme members indicated that they were satisfied with Finance’s service provision.

Manage superannuation rebate of Act of Grace Payments and compensation and legal expenses.

Effective advice to ComSuper in relation to accurate reporting of payments made in relation to Act of Grace Payments and compensation and legal expenses. 4

Achieved. Accurate reporting through ComSuper and effective advice in relation to reconciliation of payments made.

Provide policy advice on the Future Fund, including the investment mandate and other governance matters.

Effectiveness of the policy advice on the Future Fund, including investment mandate and other governance matters.

Achieved. Ministers expressed satisfaction with the quality, timeliness and relevance of Finance’s advice regarding the Future Fund.

Provide options for the future of government superannuation administration resulting from the 2008‑09 scoping study and commence implementation of government decisions. 5

Effectiveness of advice to the Australian Government on future superannuation administration arrangements and commencement of high priority reforms.

Achieved. The Australian Government announced reforms to government superannuation administration on 26 November 2009, and priority projects have commenced.

Judges' Pensions Scheme 6

  • Provide policy advice on the Judges’ Pensions Scheme in line with industry standards.
  • Provide policy advice on, and manage the superannuation arrangements for current and former federal judges and federal magistrates.
  • Issue annual statements to federal judges and Federal Magistrates Scheme members by 31 December of each year. 7

Effectiveness of policy advice to the Australian Government on the framework for managing superannuation arrangements for current and former federal judges and federal magistrates.

Federal judges and Federal Magistrates Scheme members satisfied with the service provision.

Achieved. Minister expressed satisfaction with the quality, timeliness and relevance of Finance’s advice.

Scheme members indicated that they were satisfied with Finance’s service provision.

Table 1.3: Nation-building Funds

Program Objective

The program contributes to the outcome through advising on the Australian Government’s three Nation-building Funds: the Building Australia Fund; the Education Investment Fund; and the Health and Hospitals Fund. This includes advice on the investment mandates, transfers of amounts to the funds, debits for payments to Portfolio Special Accounts and other governance matters.

The three funds provide a financing source to meet the Australian Government’s commitment to Australia’s future by investment in critical areas of infrastructure such as transport, communications, energy, water, education, research and health.

Deliverables Key Performance Indicators Results

Policy advice on the Nation-building Funds, including investment mandates, crediting, payments to Portfolio Special Accounts and other governance matters.

Effectiveness of the policy advice on the Nation-building Funds, including investment mandates, crediting, payments to Portfolio Special Accounts and other governance matters.

Achieved. Ministers expressed satisfaction with the quality, timeliness and relevance of Finance’s advice. Payments to Portfolio Special Accounts were processed in a timely and efficient manner.

Table 2: Resources for Outcome 1

  Budget8
2009-10
$'000
Actual Expenses
2009-10
$'000
Variation
2009-10
$'000
  (a) (b) (a)-(b)
Program 1.1: Budget, Financial Management and Deregulation 
Administered Expenses      
Ordinary Annual Services (Appropriation Bill No. 1)         
Central Banking Agreement 3,000 2,205 795
       
Departmental Expenses      
Ordinary Annual Services (Appropriation Bill No. 1)      
Departmental Program Support      
Budget Advice 56,229 50,194 6,035
Financial Reporting 31,269 23,581 7,688
Financial Framework 19,598 22,246 (2,648)
Office of Evaluation and Audit 2,552 2,056 496
Deregulation and Regulatory Reform 9,789 10,471 (682)
       
Expenses against revenues from other (section 31)      
Budget Advice - 425 (425)
Financial Reporting 620 867 (247)
Financial Framework 3,318 6,670 (3,352)
Office of Evaluation and Audit - 0 (0)
Deregulation and Regulatory Reform - 455 (455)
Total for Program 1.1 126,375 119,171 7,204
       
Program 1.2: Public Sector Superannuation
Administered Expenses      
Ordinary Annual Services (Appropriation Bill No. 1)      
Act of Grace nominal interests 406 310 96
Compensation and legal expenses 500 344 156
Superannuation administration costs 10,484 10,260 224
       
Expenses not requiring appropriation - 2,991 (2,991)
Special Appropriations:      
Governor-General Act 1974 779  866 (87)
Judges' Pensions Act 1968 32,800  33,019 (219)
Parliamentary Contributory Superannuation Act 1948 55,000  53,712 1,288
Superannuation Act 1922 62,461  60,029 2,432
Superannuation Act 1976 3,488,170  3,268,297 219,873
Superannuation Act 1990 2,175,296  2,443,341 (268,045)
Superannuation Act 2005 100  12 88
Same-Sex Relationships (Equal Treatment in Commonwealth Laws - Superannuation) Act 2008 - -
       
Departmental Expenses      
Ordinary Annual Services (Appropriation Bill No. 1)      
Public Sector Superannuation 9,477 9,370 107
       
Expenses against revenues from other (section 31)      
Public Sector Superannuation 971 1,230 (259)
Total for Program 1.2 5,836,444 5,883,781 (47,337)
       
Program 1.3: Nation-building Funds
Administered Expenses      
Special Accounts      
Building Australia Fund Special Account 2,047,942 444,515 1,603,427
Education Investment Fund Special Account 1,313,498 1,253,848 59,650
Health and Hospitals Fund Special Account 468,134 321,099 147,035
Total for Program 1.3 3,829,574 2,019,462 1,810,112
       
Total Expenses for Outcome 1 9,792,393 8,022,414 1,769,979
Departmental 133,823 127,565 6,258
Administered 9,658,570 7,894,848 1,763,722
  2008-09 2009-10  
Average staffing level (number) 635 666  
       

Footnotes:

  1. The development of a standard is the responsibility of the Australian Accounting Standards Board (AASB) and the issue of any standard is subject to AASB due process requirements.
  2. KPI not included in Portfolio Budget Statement 2009-10 or Portfolio Additional Estimates Statements 2009-10.
  3. The administration and policy responsibility for the former Governor-General Pension Scheme transferred from the Department of the Prime Minister and Cabinet to Finance on 1 July 2009.
  4. KPI not included in Portfolio Budget Statement 2009-10 or Portfolio Additional Estimates Statements 2009- 10.
  5. Deliverable and KPI developed after publication of the Portfolio Additional Estimates Statements 2009-10.
  6. The administration and policy responsibility for the Judges’ Pension Scheme transferred to Finance from the Attorney-General’s Department on 1 January 2010.
  7. Correction to deliverable published in the Portfolio Additional Estimates Statement 2009-10: As judges do not pay contributions, statements are issued only on request, usually at such time as they seek information in relation to retirement and/or have retired.
  8. Full-year 2009-10 PAES budget

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