8. Appropriations

This section of the guide provides appropriation related guidance on payments to corporate Commonwealth entities (CCEs), special appropriations and acting as an agent. For guidance on the:

  • accounting recognition, treatment and disclosure requirements for annual appropriations to non-corporate Commonwealth entities (NCEs), see RMG-116 Accounting for annual appropriations
  • constitutional basis and parliamentary accountability, legislative framework and administrative processes for annual appropriations, special appropriations and special accounts (including information related to establishing and amending appropriations), see RMG-100 Guide to appropriations.

Appropriation - disclosure

Where an entity is concerned that there is a risk that appropriation may have been spent in breach of section 83 of the Constitution, an appropriate risk assessment must be conducted to determine if a section 83 disclosure is required. A section 83 disclosure is generally required where an entity considers that there is a risk that a breach may have occurred in the reporting period.

In addition, an entity shall disclose the reasons for any material variances between the amounts appropriated or otherwise authorised and the resulting associated expenditures, and any financial consequences for the entity of unauthorised expenditure (Tier 1 reporting: paragraph 39 of AASB 1058 Income of Not-for-Profit Entities (AASB 1058) and AASB 1055 Budgetary Reporting (AASB 1055); Tier 2 reporting: paragraphs 238-241 of AASB 1060).

Payments to corporate Commonwealth entities 

FRR section 42 – Payments to corporate Commonwealth entities

This section of the FRR sets out reporting and disclosure requirements for appropriations where they are received by NCEs on behalf of, and to be paid to, CCEs.

NCEs (typically portfolio departments) may receive appropriations for payment to CCEs in annual Appropriation Acts or other Acts as special appropriations (not including amounts paid to CCEs under other arrangements, such as contractual arrangements).

Upon receipt of a payment from an NCE, a CCE is to recognise the amount as ‘revenue from government’, unless the funding is in the nature of an equity injection based on the appropriation purpose.
A CCE should not recognise a receivable unless that entity has a statutory right to receive the full amount of the appropriation. This statutory right is usually set out in the CCE’s enabling legislation and states that the CCE is to be paid amounts appropriated by the Parliament, or in relation to certain activities administered by the CCE on behalf of the Commonwealth, for example, amounts relating to levies or fees collected on behalf of the Commonwealth.
Where a CCE has a statutory right to receive an appropriation payment from an NCE, before that payment is received, the CCE is to recognise the amount as ‘receivable from government’ at the time it becomes legally entitled to that amount.

Equity injections paid to a CCE are recorded by the relevant NCE (typically the portfolio department) as an adjustment to administered investments. An equity injection received by a CCE, is to be recognised as ‘contributions by owners’, in accordance AASB 1004 Contributions and AASB Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities. For more information, see RMG-123 Designating transfers of assets and liabilities as 'contributions by owners' (equity).

An Appropriation Act provides a portfolio department with the right to draw from the Consolidated Revenue Fund (CRF) to make payments to a CCE. When the money is paid from the portfolio department to the CCE, the appropriation is considered to have been applied – the payment is not a transfer of the right to draw.

Transferring cash from the Official Public Account (OPA) to a CCE’s bank account takes that money out of the CRF and reduces the available appropriation balance, except in cases where the CCE handles public money. CCEs are required to disclose these amounts in accordance with the nature of the payment – this must be by reference to the Appropriation Acts.

Special appropriations 

FRR section 46 – Special appropriations

This section of the FRR sets out disclosure requirements for special appropriations.

Disclosures are required for all special appropriations (that is, whether or not the appropriation has been drawn against). Where a special appropriation has not been drawn against during the reporting period and the comparative period, it should still be reported, as all appropriations are material by nature (section 35 of the FRR). It is up to each entity to determine the appropriate format of disclosure – such as, a table, list or footnote.

Section 77 of the PGPA Act provides special appropriation authority for defined events that involve repayments by the Commonwealth. Where refunds are paid, ‘appropriation applied’ is the total amount drawn.

There may be more than one responsible entity for a special appropriation. Where this is the case, each entity must make disclosures of the amounts they have drawn on.

Section 58 of the PGPA Act provides some entities with the power to invest using:

  • certain special appropriations as delegated by the Treasurer (for example, the Australian Office of Financial Management)
  • special accounts as named in the Finance Minister’s delegation.

Entities that use appropriations to invest under either section 58 of the PGPA Act or a provision in another Act of Parliament (i.e. not the PGPA Act) must disclose the appropriation applied according to whether that investment is from a:

  • special appropriation (section 46 of the FRR)
  • special account (subsection 48(9) of the FRR) – also see Special Accounts.

Entities should include a footnote against the relevant special appropriation disclosing the fair value of the investment made from the special appropriation.

Acting as an agent

FRR section 47 – Disclosures by agent in relation to annual and special appropriations

This section of the FRR sets out disclosure requirements where an entity has paid money out of the CRF on behalf of another entity.

An entity is an agent for a responsible entity, where it has authority to make payments from the responsible entity’s appropriation (that is, the spending entity is an agent).

In this situation:

  • both the agent and the responsible entity disclose the arrangement in their financial statements
  • only the responsible entity records the transactions in its financial management information system.

For cross-referencing purposes, where one or more other entities have drawn from the same appropriation, the entity making the appropriation-related disclosures (that is, the responsible entity) must name those other entities in a footnote to the relevant appropriations note table.

Where an entity receives an amount from another entity, retains it by increasing its appropriation and then pays it to a third party, it is acting on its own behalf and is therefore not acting as an agent.

An entity must have a legislative basis for increasing its appropriations (for example, through section 74 of the PGPA Act).

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