Budgeting and Funding

Budget Requirements

35. Officials are encouraged to liaise with their Chief Financial Officer (CFO) or relevant financial area to ensure that they are aware of and comply with current Finance Estimates Memoranda covering the Capital Budgeting Policy and the Budget Process Operational Rules (BPORs).
36. Additional information on funding arrangements related to Commonwealth owned and leased property may be provided by Finance from time to time.

Whole-of-Life Costs

37. Whole-of-Life Costs (WoLC) are a key element of budgeting, which must be used in the preparation of business cases for property-related plans and proposals. Section 4.6 of the Commonwealth Procurement Rules provides the cost elements that are included in WoLC.
38. Government and costing requirements for Defence are outlined in the relevant Estimates Memoranda. For additional information, Defence should contact its CFO or relevant financial area. 
39. In relation to property management, WoLC must include:
    1. acquisition;
    2. construction;
    3. lease;
    4. fit-out;
    5. ongoing maintenance; and
    6. other costs incurred over the life time of the property.
40. For the purpose of meeting thresholds, WoLC for the:
    1. Lease Endorsement process includes fit-out costs;
    2. Public Works Committee process includes fit-out costs; and
    3. Two Stage Capital Works Approval Process, excludes fit-out costs.
41. The Goods and Services Tax (GST) must be included within all cost elements of the WoLC estimate, along with an indication of what portion is recoverable/non-recoverable if appropriate.
42. The benefits of WoLC include:
    1. Informed decision-making: WoLC provides the basis for comparing and assessing the options outlined in a Cost Benefit Analysis.
    2. Long-term asset planning: Non-corporate Commonwealth entities (NCEs) are best placed to understand future resource requirements for public works under its control.
    3. Consistent costing approach across options: Costings that are based on common metrics allow for more robust analysis and comparability.
    4. Transparency and accountability: Visibility of the WoLC associated with a proposed investment allows for scrutiny of the project and ensures that decision-makers are able to prioritise the use of public resources. WoLC provides a baseline for considering how best to manage resources and costs over the useful life of the asset.
    5. Robust test of the value of the asset: When comparing it with the opportunity cost of capital, this test allows decision-makers to assess the different priorities, policy outcomes and environment and social factors with the WoLC of the capital investment.

New Policy Proposal

43. The BPORs provide guidance on what constitutes a New Policy Proposal (NPP), including for capital expenditure, and how entities can bring forward an NPP for Government consideration.
44. NPPs for capital works, which are estimated to have a WoLC of $30 million or more (excluding fit-outs), are subject to the Two Stage Capital Works Approval Process. This process includes a Cost Benefit Analysis of options reasonably available to address the entity’s needs, including a preferred approach.
45. Defence maintains a separate approval process for capital works proposals within the Defence Integrated Investment Program, as outlined in the BPORs. For Defence capital works proposals that fall outside this context, the BPORs apply.
46. Officials are encouraged to liaise with their CFO, relevant financial area, or Finance Agency Advice Unit on the NPP process and the BPORs.

Additional Guidance

47. Guidance on accounting for real property is available in Accounting for subsequent expenditure on property plant and equipment – RMG 113.
48. Guidance on accounting for operating leases and lease incentives is available in Accounting for operating lease expenses and incentives – RMG 110.