Guide to appropriations-RMG 100

First published: 25 January 2017

Introduction

Appropriations are laws made by the Australian Parliament. The Commonwealth cannot spend money without an appropriation. Spending money without an appropriation is a breach of section 83 of the Constitution. There are two main categories of appropriations: annual appropriations and special (or standing) appropriations.

A special appropriation is a provision within an Act (that is not an Annual Appropriation Act) that provides authority to spend money for particular purposes, for example, to finance a particular project or to make social security payments. Special appropriations account for around three quarters of all government expenditure each year.

The annual Appropriation Acts detail annual appropriations provided to Commonwealth entities. The Acts take precedence over details in CBMS, Portfolio Budget Statements/Portfolio Additional Estimates Statements and annual reports:

Appropriations ...read more!

Appropriations

Appropriation Acts (No.s 1, 3, 5, 7, 9, etc), and other Appropriation Acts for the ordinary annual services of the government, provide funding for:

  • departmental operating costs, including the cost of replacing some existing assets
  • departmental capital; and
  • administered outcomes that have been previously authorised by parliament.

Appropriation Acts (No.s 2, 4, 6, 8, 10, etc), and other annual appropriation Acts for other services, provide funding for services other than the ordinary annual services of the government, this includes:

  • departmental non-operating costs (equity injections)
  • administered non-operating costs (administered assets and liabilities)
  • administered operating costs that fall within an outcome not previously authorised by parliament (new administered outcomes); and
  • some payments to the states and territories.

Parliamentary Appropriation Acts (No.s, 1, 2, 3, etc) provide funding for the four parliamentary departments to continue operating.

An approval can only be given to spend relevant money if:

  • there is an available appropriation entitlement; or
  • for commitments beyond the Budget year, in accordance with the relevant internal controls of an entity (e.g., Accountable Authority Instructions).

Unspent annual appropriations do not lapse at the end of each Budget year. These appropriations remain available until spent, or the appropriation authority sunsets. Annual Appropriation Acts typically sunset (i.e., cease to have effect) three years after they are passed by parliament. Officials are recommended to familiarise themselves with the sunset dates (if any) of all appropriation legislation that provides funding to their entity. At the time the legislation sunsets, any unspent entitlements are no longer available to the Commonwealth entity to spend. There can be no ‘negative’ appropriations.

Commonwealth entities can request to reallocate entitlements between activities that are funded by Appropriation Act items, in accordance with the Budget Process Operational Rules. (For more information, see Part 4 of RMG-001 Commonwealth Resource Management Framework Companion.)

Contacts for further information:

Appropriations: Constitutional background

Summary

Sections 81 and 83 of the Australian Constitution set out the rules for payments of money made by the Commonwealth. In short, no money is to be expended from the Consolidated Revenue Fund (CRF) except by means of an appropriation, made by the Parliament. An appropriation specifies purposes for which money may be spent, and may specify conditions under which payments are to be made, such as who is to be paid and how much in specific circumstances. Drawing money from the CRF beyond the scope of a valid appropriation would constitute a breach of section 83.

Section 81 provides for one CRF, formed from all revenues or moneys raised or received by the Executive Government of the Commonwealth. The CRF is ‘self‑executing’. That is, all money paid to the Commonwealth (or any person or organisation acting on behalf of the Commonwealth) automatically forms part of the CRF. Whether or not the Commonwealth has credited the money to a fund or a bank account, the money forms part of the CRF upon receipt by, or on behalf of, the Commonwealth. This covers taxes, charges, levies, borrowings, loan repayments and money held in trust. Section 81 does not deal with the manner in which money that forms the CRF shall be kept, nor does it deal with the keeping and auditing of accounts holding public money.

Section 83 of the Constitution provides that no money shall be drawn from the Treasury of the Commonwealth except under an appropriation made by law. Section 81 provides that all appropriations from the CRF must be for the purposes of the Commonwealth. The ‘Treasury’ of the Commonwealth, mentioned in section 83, equates to the CRF referred to in section 81. Together, sections 81 and 83 provide that there must be an appropriation, made by law, for the purposes of the Commonwealth, before money may be drawn from the CRF. This is a key element of the provisions which safeguard parliament’s control over government spending.

Commonwealth entities are resourced through appropriations from the CRF. The main two types of appropriations to authorise the spending of money from the CRF are annual appropriations and special appropriations:

  • annual appropriations, which are contained in annual Appropriation Acts that provide annual funding to entities to undertake government activities and programs; and
  • special appropriations, which are appropriations established in Acts other than those in annual Appropriation Acts, noting that some aspects may also appear in specific legislative instruments (such as special accounts established under the PGPA Act by disallowable determinations of the Finance Minister).

Annual appropriation legislation

Section 53 of the Constitution provides that the Australian Senate may not amend proposed laws appropriating money for the ordinary annual services of the government. Under section 54 of the Constitution, a proposed law appropriating money for the ordinary annual services of the government can only deal with such appropriations. Accordingly, the annual appropriations are split into Bills that provide for the ordinary annual services of the government (e.g. Appropriation Bills (No.s 1, 3, 5, etc) and those that do not (e.g. Appropriation Bills (No.s 2, 4, 6, etc)).

In dealing with what constitutes the ordinary annual services of the government and those which do not, the Senate and the then government worked through this allocation in 1965. The outcome of these discussions is generally referred to as the Compact. This allocation was revisited in 1999 to take into account the introduction of accrual budgeting. The government continues its consultations with the Senate on reviewing the terms of the Compact with a view to clarifying the definition of what constitutes the ordinary annual services of the government.

The services of the four parliamentary departments are not considered to be ordinary annual services of the government. Accordingly, there is a third Budget annual Appropriation Bill, Appropriation (Parliamentary Departments) Bill (No. 1), that proposes appropriations for the parliamentary departments.

A second set of three annual Appropriation Bills is usually introduced during the financial year, called the Additional Estimates Appropriation Bills. These three Bills correspond to the three Budget Appropriation Bills and continue the numbering sequence: Appropriation Bill (No. 3) (i.e. ordinary annual services), Appropriation Bill (No. 4) (i.e. other than ordinary annual services) and Appropriation (Parliamentary Departments) Bill (No. 2). The Additional Estimates Appropriation Bills seek authority from parliament for the additional expenditure of money from the CRF, in order to meet requirements that have arisen since the last Budget. Further annual Appropriation Bills are introduced during the year if required. These further Bills are typically called the Supplementary Additional Estimates Appropriation Bills.

A summary of the Budget appropriations, by portfolio, entity and outcome is provided in Budget Paper No. 4 – Agency Resourcing.

Contrasting annual and special appropriations

The key differences between an annual appropriation and a special appropriation are: the expenditure purposes, the level of ongoing Parliamentary scrutiny, the amount that may be drawn from the CRF, and the time period in which the amount may be drawn. This is summarised as follows:

  • an annual appropriation provides a limited amount of funding, which is intended to be meet expenses in a specific year. After three years, any unspent appropriation ceases, as the enabling Annual Appropriation Acts automatically cease three years after the date of commencement. Because new annual Appropriation Bills are introduced by Government to the Australian Parliament twice (or more) each year, Parliament is able to regularly review Government spending.
  • most special accounts provide a limited amount of funding, which is available for an unlimited time period, unless or until the special account sunsets. Special accounts made by a determination of the Finance Minister sunset after 10 years. Parliament does not have the opportunity to revise the terms of the special account after it has been established (except by legislative amendment).
  • most special appropriations provide an unlimited amount of funding, which is available for an unlimited time period. Parliament does not have the opportunity to revise the terms of the special appropriation after it has been established (except by legislative amendment).

When is an annual appropriation used?

Entities should endeavour, where possible, to design activities and programs so that funding requirements can be managed with an annual appropriation. This is the default appropriation type for all proposed Government spending (the Constitution refers to annual appropriations as funding for “ordinary annual services of Government”). A decision to fund a Government activity by using an annual or special appropriation is most often informed by the implementation design of a particular proposal. Early in the process of designing a program that may require establishing or amending a special appropriation, entities are advised to consult Finance guidance and discuss the circumstances with Finance officials. Email contact may be made by using special.appropriations@finance.gov.au.

Annual appropriations have an advantage over special appropriations, of enabling the Government to consider expenditure priorities as part of the annual Budget cycle. Annual appropriations also provide the Parliament with a more regular opportunity to scrutinise the Government’s new and ongoing spending activities.

When is a special appropriation used?

Government activities and programs that are delivered using a special appropriation usually involve expenditure over a long period of time, which can result in large cumulative costs. Therefore, careful consideration is required before proposing a special appropriation. Like all appropriations, special appropriations set out two matters in law: the authority to draw amounts from the CRF and the expenditure purposes for the amounts drawn. These matters are set out in the relevant legislation that establishes a special appropriation. As a general principle, any legislation authorising expenditure should require that decision-makers administer the related Government activity with funds approved in the Budget, and provide an appropriate means by which available appropriation can be rationed if necessary (such as by adjustments to eligibility criteria, grant levels, or deferment of payment).

It is not possible to provide a categorical list of when a special appropriation or special account might be suitable because most activities involve unique policy considerations and tailored implementation processes. A special appropriation may be established when an annual appropriation is unsuitable to deliver a particular Government activity. The use of a special appropriation is considered on an individual case basis.

Entities are encouraged to read the Legislation HandbookExternal link icon issued by the Department of the Prime Minister and Cabinet. Paragraph 5.63 provides an indicative list of six broad categories of legislation whose purposes may be appropriate to fund by means of a special appropriation.

Before proposing the establishment of a new special appropriation, entities need to balance considerations of: fiscal impact, Government policy, stakeholder expectations and implementation models. Some specific examples are:

  • welfare benefits paid under the Social Security (Administration) Act 1999;
    • The intent is to establish legal requirement for a payment to be made when a person or an entity meets eligibility criteria set out in legislation.
  • rehabilitation payments made under the Military Rehabilitation and Compensation Act 2004;
    • The timing or amount of payments are unpredictable and therefore, cannot be specified in annual Appropriation Acts.
  • urgent payments made under the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008;
    • Payments are made in extraordinary circumstances such financial crises or natural disasters and the criteria for an Advance to the Finance Minister cannot be satisfied (such as large amounts for natural disaster relief).
  • payments to or through a state or territory government, under the Federal Financial Relations Act 2008 or the Australian Education Act 2013);
    • Implementing inter-governmental agreements.
  • payments of salaries to judges, the Governor-General and the Auditor-General; and
    • To demonstrate the independence of a statutory office holder from Parliament and the Executive by providing for the payment of remuneration.
  • the repayment of loans or certain contributions to international organisations.
    • To demonstrate Australia’s ongoing financial commitment as being independent of parliamentary approval of funds (in annual Appropriation Acts).

Additional considerations for using a special appropriation include:

  • the timing of an activity;
    • If an activity is unlikely to be ongoing or the funding is not material, then using a special appropriation may be difficult to justify.
  • unique circumstances, which would be very difficult to accommodate within annual appropriations Acts; and
  • additional transparency.
    • Where the authority to undertake certain Government functions and the appropriation to carry those functions are in the same Act.

It is important to note that satisfying one or more of these conditions does not necessarily mean that a special appropriation should be established. The use of a special appropriation is a matter for careful policy consideration.

The amount that may be drawn from the CRF

To draw money from the CRF beyond the scope of a valid appropriation constitutes a breach of section 83 of the Constitution. Entities are responsible for understanding the legal provisions of each appropriation that they manage. Any payments made using an appropriation must be consistent with the purpose and conditions of the appropriation.

Any amounts recorded as a credit to (increase) the balance of a special account must be consistent with the crediting clauses of the special account. If an amount appropriated as an annual administered item is to be credited to a special account, then this must occur during the financial year in which the amount was appropriated. The available appropriation for a special account is identified in an entity’s accounts and records. Entity accounts and records that show a negative balance for a special account must be checked for accuracy. A negative special account balance may indicate an administrative error or that the entity has spent more than the appropriation limit.

Government decision making on allocations made in the annual Budget is dependent on good quality estimates. The good management by entities of appropriation estimates is therefore critical. The reliability and accuracy of information published in the annual Budget Papers depends on good quality budget estimates. This is particularly important for special appropriations, as around 70 to 80 per cent of Commonwealth expenditure is funded through special appropriations. Many programs funded through special appropriations are demand driven and the related estimates are prepared using funding models that are managed by the responsible entity. Such models generally include price and volume variables and certain behavioural and elasticity variables. Good management of the estimates for such programs requires ongoing dialogue between the managing entity and Finance, to reflect changes in such variables in the course of implementing programs, and as actual expenditure may vary from estimated expenditure. The estimates for most special accounts largely represent amounts that are expected to be received from external entities. Entities should therefore regularly update the estimates for special accounts and variations should be discussed with the relevant Agency Advice Unit (AAU) in Finance.

Entities are required to maintain records for estimated and actual expenditure for all appropriations that they manage. Such records must be kept within the entity’s financial management information system (FMIS) and within the central budget management system (CBMS). The Cash Management module of CBMS is used to record the appropriated amount that may be drawn from the Official Public Account (OPA) under each appropriation and the actual amount that has been drawn under each appropriation. To assist with the management of an appropriation, an entity may decide to establish sub-ledgers within its FMIS, for example, where a special account is used for a variety of discrete projects or for increased transparency. Such sub-ledgers are not recorded in CBMS. Crediting an amount to a special account balance or debiting an amount from a special account balance takes legal effect at the time the entry is made in the accounts and records of the entity, not when this is reflected in CBMS.

It is not necessary for an entity to operate a bank account that is dedicated to a specific appropriation, outside of the standard Administered Receipts, Administered Payments and Departmental Receipts and Payments head bank accounts that all NCEs must maintain if they receive annual appropriations. Money that is held under trust law may be required to be banked in a separate bank account by the deed. If an entity decides to operate one or more dedicated bank accounts, then for transparency in records, the bank account names may include reference to the appropriation.

Amounts that are drawn from the OPA against an appropriation are drawn into and expended from an entity bank account. (A special account is not a bank account, but a special appropriation mechanism and the balance of a special account indicates the limit of the available appropriation. An appropriation balance is legal concept and is not the same as a bank account balance.)

Reviewing and abolishing special appropriations

Entities need to periodically review the need to retain individual special appropriations and special accounts. Entities are encouraged to abolish special appropriations and special accounts that are no longer used or which can be replaced by annual appropriations. For example, if in a financial year zero expenditure is reported for an appropriation, then the entity should review the ongoing need for the appropriation and liaise with its AAU in Finance or the Special Appropriations team by email, special.appropriations@finance.gov.au.

Section 83 breaches and risk assessments for special appropriations or special accounts

In certain circumstances – relating to processes where an entity makes payments from a special appropriation or special account, based on administrative assessments of eligibility and/or quantum – an entity may potentially breach section 83 of the Constitution, by making a payment that is not supported by law. This includes circumstances where an administrative error such as a duplicate payment occurs, even if that overpayment can be recovered. It also includes circumstances where payments are made in reliance of information provided by external parties (e.g., from recipients of welfare payments) that was incorrect, incomplete, misleading or fraudulent.

  • It is the responsibility of an entity’s management to consider the resources required to implement the government’s objectives and the entity’s outcomes and purposes, and to address any risks identified, including constitutional risks. It is highly recommended that entity officials or the accountable authority consult the entity’s audit committee when considering issues involving medium or higher risk of breaching section 83.

There is a higher risk of such breaches in instances where a disconnect exists between the requirements or preconditions imposed by legislation (including subordinate legislation such as regulations, rules or legislative instruments) and the administrative or practical processes implemented by an entity to make payments from a special appropriation or special account. For example, where the relevant legislation requires certain knowledge of specific information but the process for approving and making a payment accepts information that may be, in fact, based on an assumption. For example, payments may be calculated by an official or an administrative system, perhaps based on assumptions and estimates, whereas the statutory provision regulating the entitlement to the payment may require a greater level of specificity in determining whether a payment should be made in the first place and, if so, the amount of that payment.

Many entities include a note in their annual reports identifying actual or potential section 83 risks.

Finance can assist entities to assess the likely risk of a section 83 breach (having regard to legal advice from the Australian Government Solicitor (AGS)) and to take action to reduce the risk to an appropriate level.

What would a breach look like?

While section 83 breaches can occur in payments made from the annual Appropriation Acts, most of the risks identified to date relate to payments made from special appropriations, including special accounts, where there is a high level of specificity in the legislation or preconditions placed on payments. Given the limited level of specificity in annual Appropriation Acts, the risk of a section 83 breach is generally considered low for these appropriations. However, there may be some annual appropriations that fund payments which are subject to specific statutory preconditions on how those payments must be made. In these instances, the entity should consider reviewing these arrangements.

To determine whether or not a particular payment or class of payments is in breach of section 83, it is necessary to look at the circumstances of the payment, the relevant appropriation and how the relevant appropriation relates to any statutory provisions regulating an entitlement to that payment.

Given that processes for assessing eligibility and making payments vary widely between entities, it is recommended that entities assess each process, in light of the circumstances of the payment and the interaction of the relevant statutory provisions. The interaction of statutory provisions may involve multiple pieces of legislation (including subordinate legislation), that could be managed by other entities. As such, entities will need to take a collaborative approach in such circumstances. Departments of State will also need to consider any special appropriations that may relate to payments made to corporate Commonwealth entities or Commonwealth companies.

Breaches of section 83 do not have a materiality threshold, nor do they necessarily involve serious instances of financial mismanagement. They could result from minor administrative errors, they could involve small amounts or they could involve fraudulent payments or payments made in bad faith. A breach could also occur where a payment is made in good faith or based on the best information available at the time of the payment. While most special appropriations and special accounts are administered in nature, breaches apply equally to special appropriations and special accounts that are departmental in nature.

What is significant to determining whether there are potential breaches of section 83, is the scope of the authority provided by the Parliament in the legislation (and potentially additional provisions in subordinate legislation). There is a higher risk of a breach of section 83 where the legislation prescribes preconditions for a payment being made.

Potential breaches can take many forms, including:

  • a payment or over-payment is made as a result of an error, including payments made based on incorrect or inaccurate information used in assessing payment eligibility.
  • a payment is made despite certain preconditions (as set in statutory provisions regulating an entitlement to the payment) not being fulfilled. For example, the legislation only allows a payment to be released once specific information is provided to the Commonwealth, but a Department of State releases the payment after receiving insufficient information.

Possible Exceptions

In some cases, legislation may include provisions that acknowledge imperfect information and allow for payments to be made based on estimates, or allow for the recovery of over-payment through explicit recovery or adjustment mechanisms. For example, the provisions in the legislation may extend the appropriation to cover any excess amounts paid out in error or based on the information provided at the time. This demonstrates that Parliament, in passing the legislation, explicitly recognised the lack of certainty in the process and explicitly allowed for it in the legislation. Explanatory materials for the legislation could also make reference to the lack of certainty in the process. For example, the A New Tax System (Family Assistance) Act 1999 establishes a scheme that allows family allowance payments to be made on the basis of the estimated income of the payee. In this sense, the scheme explicitly acknowledges that eligibility will be assessed based on an estimate of a person's future income and recognises that any over payments will be adjusted as part of that person's annual income tax assessment. Such statutory mechanisms do not completely remove the risk of a section 83 breach from occurring and an assessment of the associated process should still be undertaken. However, they do mitigate some of the risk as the legislation allows for a level of uncertainty in the operating environment.

In some cases, section 83 may not have been breached. As discussed above, section 83 is breached where a payment is made for a purpose that is not authorised by legislation, or for an amount which exceeds that provided for in the relevant appropriation. For example, where an entity makes a duplicate payment to an individual or third party, under a contractual arrangement that is supported by a generally worded special appropriation or special account), the duplicate or double payment is unlikely to be in breach of section 83. For example:

  • Entity A is authorised to make a payment to individual y for the provision of services under a contractual arrangement. The contractual arrangement is supported by a generally worded special appropriation. Two payments are made to individual y for the provision of one service, and the relevant legislation (including subordinate legislation) does not make provision for duplicate payments or administrative errors, and there is no alternate appropriation source to support the duplicate payment. In this case, the duplicate payment is unlikely to have breached section 83, as it was made for a purpose within the general wording of the special appropriation. Further, as the payment was made under a contractual arrangement, supported by the relevant special appropriation, the duplicate payment would generally lead to a contractual right of recovery, typically enforced though general contract law or equitable mechanisms.

Self-assessment by entities

It is recommend that entities that manage special appropriations identify:

  1. whether all the requirements specified in the relevant special appropriations are reflected in internal systems, including references to the relevant provision of an Act, and also in similar terms in the Commonwealth Budget Management System;
  2. the circumstances under which any relevant legislation (including subordinate legislation such as regulations) authorises particular payments (i.e. how specific are the provisions on the making of payments, and do they provide for over payments in error?);
  3. whether the legislation provides that money is only appropriated according to those specific provisions; and
  4. whether the controls over the payment processes adopted by the entity (or entities where legislation spans more than one entity and/or portfolio) match what is required in the legislation?

The specific statutory requirements are important in assessing the legitimacy of a payment. An appropriation (or other statutory mechanism regulating the payment) might describe a payment as contingent upon certain mandatory preconditions. Where preconditions have been prescribed in legislation, the conditions must be strictly complied with. Where payments have been made without fulfilling statutory requirements, entities may need to obtain legal advice on whether another appropriation can support the payments. Where there is no clear alternative appropriation source, the entity should urgently consult Finance and consider if it is appropriate to cease making payments. In these instances, it is likely to be necessary to implement a new process for making payments (that aligns with the legislation) or seek to amend the legislation (to align with the process).

The following flowchart is designed to help entities assess the potential risk of a section 83 breach. The flowchart helps to assess whether the risk of a section 83 breach is low, medium or high. Entities need to adopt review processes within their entities that are commensurate with the level of risk. Legislation and/or processes that are complex or assessed as medium or higher risk should attract an assessment processes with an appropriate level of rigour.

After answering the questions in steps 1–3 of the flowchart, entities should undertake the action relevant to the assessed level of risk. For processes assessed as medium risk, we recommend entities perform and document a desktop analysis of all relevant legislation and/or processes. The assistance of the entity’s in-house legal area (or external legal service where necessary), would support analysis of the requirements provided in legislation and the processes designed to help ensure requirements are met. This includes known incorrect payments already identified by entity systems and determining whether they involve potential breaches of section 83. Where there are gaps in the design of the administrative processes, compared with the legislation, the risk is automatically considered as a higher risk and a formal mapping process is to be undertaken.

The formal mapping process would identify the specific preconditions in legislation, and assess how these interact with the processes currently in place. Where the process is inconsistent with legislation, the entity should consult with Finance about seeking legal advice on risks of contravening section 83. Finance will work in consultation with the Attorney-General’s Department (AGD) and AGS. Legal advice needs to be reflected in the mapping process and used to support any remedial action identified.

Where processes have been assessed as either medium or high risk, the entity should consider whether to address the risk by changing the administrative processes and/or, if necessary, by proposing a change to the relevant legislation. In many cases, a legislative solution will need to be informed by a detailed understanding of where the administrative processes could fail to meet the legislative conditions. As part of this process entities should also identify and inform Finance of any special appropriations that are no longer required and therefore can be repealed. Should it be necessary to amend the relevant legislation, entities must consult with Finance at the earliest possible time. It is an entity’s responsibility, in consultation with their internal legal areas (where available), to determine if there is a need to seek advice from AGS prior to progressing legislative amendments.

Responsibilities

Entities need to consider the appropriate resourcing and oversight to be allocated to this ongoing task. To promote a robust assessment of an entity’s processes and adequate advice to the Chief Executive, entities should seek audit committee review of the self-assessment process. Entities’ internal legal areas, where available, or external legal providers where they are not, could also be used in the assessment process to help interpret how legislation aligns with an entity’s processes.

When assessing payments and/or administrative processes, entities may find that the interaction of relevant statutory provisions spans multiple pieces of legislation (including subordinate legislation), that could be managed by other entities. For example, one entity may be responsible for a special appropriation or special account, while one or more separate entities make payments from it, such as occurs in payments for social welfare. In such cases, it will be necessary for the entities involved to work collaboratively to assess the administrative processes and legislative requirements for relevant payments.

Legal advice coordinated through Finance

Finance centrally coordinates the seeking of legal advice on section 83 breach issues in consultation with AGD. This allows key aspects of the advice to be shared across government (where appropriate), with an aim of minimising the amount of advice required, and assisting entities to address potential risks. Entities need to forward copies of any legal advice obtained on this matter to Finance. This will help create a consistent approach, and reduce duplication, to potential breaches of section 83. Entities can contact Finance regarding the seeking of legal advice on section 83 issues, PMRA@finance.gov.au.

Other actions

In addition to the guidance above, entities have other options available to help deal with uncertainty surrounding section 83 and potential breaches in relation to special appropriations and special accounts. Some suggested approaches include entities:

  • Developing reports that detail the risk profile of each payment process funded by special appropriation or special account, the internal assessments undertaken and any remedial action adopted, and provide them to Finance. This will help provide a sound basis for any future whole-of-government legislative reviews undertaken by Finance and/or AGD and provide a clear audit trail for the entity’s audit committee and auditors.
  • Adopting standard form words for inclusion in the Appropriation Note included in the annual financial statements. For further reference, ANAO includes a section in its audit report called “Report on other Legal and Regulatory Matters”. Finance has also distributed proposed standard words to all CFOs of portfolio Departments of State.
  • Undertaking risk assessments of conditions contained within special appropriations and special accounts together with a sampling program to demonstrate whether or not a potential breach of the Constitution exists. The sampling approach should be discussed with the audit committee.
  • Tasking their audit committees with evaluating the design of process controls, and making any modifications necessary to provide assurance that future payments can be made in compliance with the constitutional and legal frameworks. The Model AAIs provided by Finance may be a useful reference guide.

Finance can also work with officials to develop long-term solutions to section 83 issues.

Contact for information: Annual.Appropriations@finance.gov.au for annual appropriations, Special.Appropriations@finance.gov.au for special appropriations and special accounts, and PMRA@finance.gov.au for section 83 and other Constitutional matters.

Special appropriations: background

Summary

A special appropriation (also known as a standing appropriation) is included in a specific Act (other than an Annual Appropriation Act) when it authorises a payment where an entitlement exists, or a payment of a specified amount separately identified in an annual Appropriation Act. Some special appropriations state a maximum amount that is appropriated for the particular purpose. They can be referred to as being ‘limited by amount’. Others do not state a maximum amount but the payment amount has to be calculated according to legislative criteria that determine the amount to be paid. 

A number of factors are taken into account in determining whether an annual or special appropriation should be used in particular circumstances. For example, a cash limited appropriation might not be appropriate for an entitlement-based program which is demand driven. The below list is not exhaustive, but provides examples of when a special appropriation may be more suitable than an annual appropriation:

  • it is desirable to create a legal entitlement which is to be provided to everyone who satisfies specific criteria (for example, the age pension)
  • it is necessary to give effect to inter-governmental or industry arrangements by providing a specific amount to certain persons or bodies under stated conditions (for example, the Schools Assistance Act 2008 and the Local Government (Financial Assistance) Act 1995)
  • it is important to demonstrate the independence of an entity from parliament and the executive by providing for automatic payment of the remuneration of its officeholders (for example, the salaries of judges, statutory officeholders, and the Auditor-General)
  • it is considered necessary to demonstrate Australia’s ability to meet its financial obligations independently of parliamentary approval of funds (for example, the repayment of loans); or
  • it is necessary to transfer the balance of a special account being ceased to a receiving body (can be a corporate Commonwealth entity, Commonwealth company or entity outside the Commonwealth); or
  • implementing transitional arrangements, in particular, as part of the restructuring of bodies within and/or outside of the Commonwealth.

Where a special appropriation is proposed for other circumstances, this should be discussed with the relevant Agency Advice Unit as part of the policy development and costings process. Please note that the Finance Minister must be consulted on all Bills containing special appropriations, and measures contained in a Bill must have policy approval at the appropriate level. For further information on the policy approval process as well as the legislation process, please see the following:

 

The Administrative Arrangements Orders External link icon sets out the legislation administered by a minister of state. It is the responsibility of a department to ensure that all special appropriations contained within legislation that is the responsibility of its minister are managed by the department, or are allocated by the minister to other Commonwealth entities within the minister’s portfolio. Nonetheless, entities are able to spend money from special appropriations which are the responsibility of a minister in another portfolio where the appropriate legal measures have been put in place.

Chart of Special Appropriations

The Chart of Special Appropriations lists all special appropriations (not including special accounts or appropriations that increase the balance of special accounts), that are managed by non-corporate Commonwealth entities. The Chart is intended to assist officials in the effective management and reporting of special appropriations. Each special appropriation listed on the Chart is hyperlinked to its legal instrument on the Commonwealth’s legislation database (the Federal Register of Legislation) External link icon. The Chart is updated whenever a new special appropriation is created, an old one is abolished, or when the administration of a special appropriation changes. If you are aware of a change that has been made to a special appropriation that is not reflected in the latest version of the Chart, please advise the Special Appropriations Team.

Reporting 

The Finance publication Budget Paper No. 4 – Agency Resourcing, produced as part of the annual Budget process, contains a table, the Table of Estimated Expenditure from Special Appropriations, which shows estimates of expenses for each special appropriation Act for each Commonwealth entity. It is in two parts: the first is a summary table showing the total special appropriations by portfolio; the second shows the estimate for each special appropriation Act for each entity for the Budget year and an ‘Estimated Actual’ figure for the previous year. All amounts in the table are shown under the entities whose ministers are responsible for the special appropriation legislation concerned. The Agency Resourcing Table presents total special appropriations for each entity by outcome and for each portfolio.

Contact for information: special.appropriations@finance.gov.au

Special appropriations: special accounts

Summary

A special account is a limited special appropriation that notionally sets aside an amount that can be expended for listed purposes. The amount of appropriation that may be drawn from the CRF by means of a special account is limited to the balance of each special account at any given time. Special accounts are not bank accounts. Amounts forming part of the balance of a special account may be held in various ways, such as in the Official Public Account, an entity's official bank account, or partly in both.

A special account can be established either by the Finance Minister making a determination under section 78 of the PGPA Act, or by legislation as recognised under section 80 of the PGPA Act. A special account determination made by the Finance Minister is a legislative instrument. Both a determination (for a section 78 special account) and legislation (for a section 80 special account) are considered by parliament before becoming law. The appropriation authority to draw money from the CRF is section 78 or 80 of the PGPA Act, as relevant – rather than the determination or the legislation. Special accounts may be established when it is clear that other types of appropriations are not suitable. For example, there may be a need for specific transparency, including where activities are jointly funded with other governments. The determination or Act that establishes a special account specifies the purposes for which the special account may be debited. The establishing determination, and in most cases the establishing Act, also identifies the types of receipts that may be credited to increase the balance of the special account.

Depending on its purpose, a special account may be credited with amounts from annual appropriations, special appropriations, from third parties, by direct legislative provision, or in limited circumstances with investment income.

Some special accounts sunset (i.e., cease in effect) after a set period of time after their establishment. Officials are recommended to familiarise themselves with the sunset dates (if any) of all appropriation legislation that provides funding to their entity. At the time a special account ceases, any unspent balance is no longer available to the Commonwealth entity to spend. There can be no ‘negative’ special account balances.

The Department of Finance has issued the following Estimates Memorandum to assist officials to manage amounts related to a special account, and record transactions in the Central Budget Management System. To obtain a copy, contact your Chief Financial Officer (CFO) area or Agency Advice Unit (AAU) in Finance:

  • EM 2017/47 – Special Accounts: Policy, Guidance and the Central Budget Management System (CBMS).

Chart of Special Accounts

The Chart of Special Accounts lists all special accounts managed by portfolio departments. The Chart is intended to assist officials in the effective management and reporting of special accounts. Each special account listed on the Chart is hyperlinked to its most recent legal instrument on the Commonwealth’s legislation database External link icon. The Chart is updated whenever a new special account is created, an old one is abolished, or when the administration of a special account changes.

Overview on special accounts

Understanding special accounts is assisted by understanding the appropriation of Commonwealth money. The requirement to appropriate money is specified in the Australian Constitution; sections 81, 82 and 83 refer:

  • All money held by the Commonwealth, collectively forms the Consolidated Revenue Fund (CRF).
  • Money in the CRF must be used for Commonwealth expenditure.
  • Spending Commonwealth money requires an appropriation in law.

In law, there are two types of appropriations: annual appropriations (made in Appropriation Acts) and special appropriations (made in other Acts).

What is a special account?

A special account is:

  • an appropriation mechanism;
  • used to set aside an amount of money in the CRF for specific Commonwealth payments.

The word ‘mechanism’ is used to describe that a special account itself is not an appropriation, instead it is a mechanism to increase or decrease an existing special appropriation. That existing special appropriation is provided in section 78 or section 80 of the PGPA Act.

  • All payments made against a special account are authorised by the special appropriation in either section 78 or section 80. Therefore, special accounts are managed as a subset of special appropriations.

Setting aside money in the CRF is known as hypothecating revenue or ring‑fencing money. An example is levies collected and set aside to fund services to an industry. No policy or law compels using a special account to implement initiatives. The type of appropriation used to fund an initiative is a government decision. The Chart of Special Accounts identifies the number of special accounts in existence and the entity that manages each.

Which entities can manage a special account?

An NCE can manage a special account and the accountable authority of the NCE is accountable for that special account (accountable authority is defined in the PGPA Act section 11 refers). A CCE can manage a special account for and on behalf of an NCE. However, a CCE cannot manage a special account used to make payments to that CCE. This is because a special account appropriates Commonwealth money and “a CCE is legally separate from the Commonwealth” (PGPA Act section 11 refers).

Why use a special account?

Special accounts are established on a case-by-case basis, as considered by the Finance Minister. The advantage of using a special account in one circumstance can be a disadvantage in another, as shown below.

Advantages of a special account

  1. Longer lasting appropriation - A special account remains available until the establishing legislation is repealed. Annual appropriations cease after three years.
  2. Narrower spending purposes Payment purposes are specified in legislation that establishes a special account. Whereas, the purposes for annual appropriations are broader and based on Outcomes stated in each NCE’s PBS.

Disadvantages of a special account

  1. More administration and reporting - estimated and actual spending is administered and reported by both the NCE and by Finance in consolidated whole-of-government reporting.
  2. Narrower spending purposes - Expenditure is limited to specific payment purposes set out in legislation. Whereas the payment purposes for annual appropriations are based on broad entity functional Outcome statements.

Myths about special accounts

The legislated provisions for a special account do not authorise an NCE to:

  1. manage non-Commonwealth money
    Consistent with the Australian Constitution, all money held by the Commonwealth, forms part of the CRF and that money is used for Commonwealth expenditure.
  2. establish an entity
    A special account does not provide legal or financial independence from the managing NCE.
  3. transfer accountability for spending
    Special accounts used for expenditure on statutory office holders, advisory boards and advisory committees must be managed by the accountableNCE. The expenditure is consolidated in the managing NCE’s financial statements.
  4. operate a departmental loss
    An operating loss occurs if an NCE’s departmental expenses are more than departmentalrevenue in the same financial year. As special accounts are designed to allow a balance to increase over years, special accounts used for departmental expenditure increase the risk of a departmental operating loss. Government approval is required to report an operating loss. For more guidance, consult the relevant AAU or the Budget Process Operating Rules (BPORs).
  5. spend more than agreed estimates
    Government approval is required to spend more than agreed estimated expenditure, even if a revised amount would remain within the balance of a special account or remain within an agreed estimated envelope across years. (In the BPORs, the latter is termed ‘a movement of funds’ across financial years.) Spending more than agreed estimates would increase government expenditure.
  6. recover costs by charging
    Recovering costs by charging for goods and services requires a Government policy decision (generally a Cabinet decision). A policy to charge is legislated in an Act. Charging must be consistent with the Australian Government Charging Framework. For guidance, contact the Charging Team in Finance (ChargingPolicy@finance.gov.au).
  7. raise revenue
    Raising revenue by investing money requires authorisation in an Act or a written delegation from the Minister for Finance of authority in the PGPA Act. The legislation establishing a special account does not provide authority to invest the balance of that special account. For more information, see the section ‘Interest and Investing’ below.

How is a special account established?

Consistent with the PGPA Act, special accounts can be established in two ways:

  1. a determination made by the Minister for Finance being tabled in the Parliament as a disallowable legislative instrument (section 78 of the Act); and
  2. a Bill introduced in the Parliament by any Minister (section 80 of the Act).

The relevant portfolio Minister must seek written agreement from the Minister for Finance to establish, vary or revoke a special account. This requirement is consistent with the Legislation Handbook. Portfolio Ministers must seek agreement from the Minister for Finance to include or amend a special account in a Bill. In preparing instructions for drafting special account provisions in a Bill, the NCE must liaise with the Special Appropriations Team in Finance before drafting instructions are finalised.

If a Bill contains a special appropriation or a special account, it is standard practice of the Office of Parliamentary Counsel (OPC) to seek Finance comments before the Bill is finalised. To allow sufficient time for to review such Bills, the Special Appropriations Team in Finance will require advice from the instructing NCE on policy authority for each appropriation drafted in a Bill.

Finance officials cannot provide ‘officer level’ support for a policy proposal that seeks agreement to establish a special account. The appropriate order is to first seek government agreement to expenditure on initiatives. If expenditure is agreed, annual appropriations is the default method to fund initiatives. To implement the policy, if annual appropriation is not suitable, then the portfolio Minister can consult the Minister for Finance on alternative appropriation methods.

  • Draft ministerial correspondence to the Minister for Finance can be sent to Finance for review of technical accuracy. Please liaise with the Special Appropriations Team in Finance by emailing Special.Appropriations@finance.gov.au.

The legislative process to establish a special account can be lengthy. The relevant NCE is advised to contact Finance at an early stage and at least two parliamentary sitting periods in advance of when payment are required to be made using a special account. Please liaise with the Special Appropriations Team in Finance.

Establish with an Act or a Legislative Instrument?

If implementing a government function authorised in an Act requires a special account, then OPC generally advise that special account be established in the same Act. Where there is no function related Act, a determination can be made by the Minister for Finance to establish a special account. A special account determination (to establish, vary or revoke a special account) must be tabled for six days in each House of the Parliament, during which time either House may disallow the special account. If no disallowance motion is passed, on the seventh day, the determination takes effect as a legislative instrument under the Legislation Act 2003.

Questions to consider for a new special account

If considering a new special account, the NCE is encouraged to address the following questions in consultation with the Special Appropriations team in Finance:

  1. When does the special account need to be in place?
    (As informed by when related receipts or payments are expected to be managed.)
  2. What is the portfolio function or activity for which a special account is proposed?
  3. How would a special account enhance managing that activity?
  4. Why is an annual appropriation not suitable to manage the activity?
  5. Would the special account be used for administered or departmental expenditure?
  6. For a departmental activity, can it be managed using the Retainable Receipts provisions in section 74 of the PGPA Act and section 27 of the PGPA Rule?
  7. For how long would a special account be required?
Officials can request that Finance provide a flow chart with the steps and criteria to consider when thinking about requesting the Finance Minister establish a new special account by determination: the "Indicative Guide to the consideration of establishment of new Special Accounts". Note that a proposed special account that fulfils all the listed criteria is not guaranteed to be established, as this is entirely at the discretion of the Finance Minister.

How does a special account work?

The kinds of payments allowed to be made using a special account will be specified in the instrument or Act establishing that special account. These specifications are known as debiting clauses or expenditure purposes.

The kinds of money raised allowed to be set aside with a special account will always be specified in the instrument used to establish the special account and will usually be specified in the Act, if an Act was used to establish the special account. These specifications are known as crediting clauses or crediting provisions.

References to debits and credits for a special account refer to increases or decreases of the appropriation balance and not withdrawals or deposits to a bank account.

Legislative and policy authority is required to spend from the balance of a special account. Legislative spending authority will be in the special account establishing legislation and also in the PGPA Act, which limits spending to the special account balance. Within that balance, policy authority limits spending by up to the expenditure estimate agreed by government.

Amounts equal to government approved expenditure estimates, for the current financial year, are held as cash in the Official Public (bank) Account (OPA) and/or cash in an NCE managed bank account. The entire balance of a special account is generally not held as cash (only amounts required to make foreseeable payments).

Amending the crediting or debiting purposes of a special account requires both government policy authority and legislative amendments. The NCE should liaise with the Special Appropriations Team in Finance (Special.Appropriations@finance.gov.au).

The balance of a special account

Crediting amounts increases the balance of a special account. Debiting amounts decreases the balance. The balance increases or decreases at the time a transaction is recorded in the accounts and records of the accountable NCE; subsections 78(7) and 80(4) of the PGPA Act refer.

  • The balance of a special account is identified from the internal accounts and records of the accountable NCE.

The balance of a special account must be accurately recorded in the NCEs internal accounts and records and also in CBMS (PGPA Act section 36 refers). The timing of recording transactions is likely to result in an NCE’s accounts and records being more up-to-date than data in CBMS.

  • If the balance is recorded as a negative amount in the NCE’s records or in CBMS, this is likely to indicate a recording error and should be checked for accuracy.
  • Entities are reminded that if special account-related amounts are held in a bank account and are not required for immediate spending, they should be remitted back to the OPA (at least monthly). These amounts remain available for withdrawal when required.

Sources of amounts for crediting to a special account balance (subject to related legislation) include:

  1. Receipts collected from:
    • outside the Commonwealth;
    • other NCEs;
    • CCEs.

Annual or special appropriations managed by the NCE that manages the special account, for example refer to:

    • annual Appropriation Acts Nos. 1 & 2, section 11;
    • the Act establishing the purposes of a special appropriation.
  1. An initial or subsequent credit to a special account (if specified in the instrument or Act that established the special account);
  2. If authorised in an Act, a Ministerial determination or direction, examples are:
    • Building Australia Fund Special Account: Nation-Building Funds Act 2008, section 15;
    • Financial System Stability Special Account: Banking Act 1959, section 70E;
    • The Fuel Indexation (Road Funding) special account: Fuel Indexation (Road Funding) Special Account Act 2015, section 7.

If a special account was credited or debited by a clerical mistake (inconsistent with the spending purposes), the transaction can be reversed in records, so that the balance is not changed by virtue of a clerical mistake. The NCE is advised to hold relevant supporting documentation and discuss such cases with its internal auditors. If a special account is debited and payments are made that are inconsistent with the legislated debiting purposes, this would breach section 83 of the Constitution.

Know your obligations!

To manage a special account, officials will require a thorough understanding of related government policies and legal provisions. For further assistance with:

  1. appropriation payment purposes, consult the legislation;
  2. policy authority to spend, consult the relevant AAU in Finance;
  3. government policies for managing expenditure estimates and Budget processes, consult EMs (available in CBMS) or the relevant AAU.
  4. NCE procedures and protocols, consult internal delegations, directions, approved business processes such as Accountable Authority Instructions and the Chief Financial Officer.
  5. special accounts or special appropriations policies, contact the Special Appropriations Team at special.appropriations@finance.gov.au.

Entities are encouraged to contact the Australian Government Solicitor for legal advice on special accounts. The Legal Services Directions applicable to all NCEs, require that Finance must be consulted before, during and after seeking legal advice on appropriations. For special accounts liaise with the Special Appropriations Team.

Machinery of government (MoG) changes

Administrative Arrangement Orders (AAOs) are used to allocate responsibilities to Ministers. When an AAO lists ‘matters dealt with by the Department’ and a special account is involved, the Chief Executive Officer of the receiving NCE becomes responsible for managing the special account, effective as of the AAO date. This applies to special accounts established by an Act or an instrument.

To continue operations when MoG changes occur, an option for the receiving NCE is to request the former NCE to continue managing related receipts and payments on its behalf (including on an interim basis). In such cases, the receiving NCE must provide the former NCE with appropriate delegations and authorisations.

If a MoG change results in the one special account supporting ‘matters dealt with by’ more than one NCE, an immediate option is for the special account to be managed across NCEs.

  • Each NCE can manage its portion of the special account expenditure estimates and financial statement reporting. This is consistent with the longstanding approach of several NCEs using the same special appropriation - e.g. the special appropriation in section 77 of the PGPA Act, that is used to make repayments.
  • If ministers decide that separate special accounts be established for the NCEs involved, this can be progressed at the next available parliamentary sitting period.

Instruments that establish special accounts specify the accountable authority of the responsible NCE. When a special account is transferred to implement MoG changes, it is not necessary to amend the establishing instrument to name the new responsible NCE. This is because Part 5 of the Acts Interpretation Act 1901 provides for the establishing instrument to continue and to be read in the name of the receiving NCE.

How long does a special account last?

A special account lasts until its provisions (in an instrument or Act) are repealed.

  1. Please note that instrument-established special accounts sunset automatically after ten years – please see the Sunsetting for special accounts section below for further information.

Entities are encouraged to revoke special accounts that have fulfilled their use or that can be replaced with annual appropriations. For example, if a special account is reported with a zero balance or no receipts and payments for two or more financial years, this could signal a need to review the special account and the managing NCE should liaise with the Special Appropriations Team (Special.Appropriations@finance.gov.au).

Sunsetting for special accounts

Sunsetting is a term to describe the automatic repeal of legislative instruments; the Legislation Act 2003, section 50 refers. Instruments that establish or amend special accounts are subject to sunsetting. A list of instruments that are scheduled to sunset is tabled in the Parliament by Attorney‑General, 18 months ahead.

A legislative instrument sunsets on the earlier of 1 April or 1 October in the tenth year after being registered on the Federal Register of Legislation (a public database). The sunset date for an instrument can be identified by viewing the instrument on the Federal Register of Legislation.

Instruments used to revoke a special account are exempt from sunsetting because as soon as the revocation has taken effect, the instrument is self-repealing under section 48A of the Legislation Act 2003.

In limited circumstances, the sunset date for an instrument can be deferred by the Attorney‑General issuing a deferral certificate under section 51 of the Legislation Act 2003. Section 51 provides two bases for a deferral; both recognise if other legislative processes are unlikely to conclude before the sunset date. Deferrals are limited to either 6 or 12 months and must be requested by the Minister for Finance. If an NCE anticipates requiring a deferral, it must liaise with the Special Appropriations team in Finance.

Six months before a special account instrument is scheduled to sunset, in consultation the managing NCE, Finance assesses if a new special account is necessary for the ongoing management of the related activity. For further advice on this, please email the Special Appropriations Team (Special.Appropriations@finance.gov.au). If Finance and the managing NCE agree that a new special account is appropriate to manage the activity, then at least two parliamentary sittings before the sunset date, the portfolio Minister must write to the Minister for Finance to request a new special account.

This lead time is required to ensure sufficient time for determinations to be made by the Minister for Finance, registered on the Federal Register of Legislation and tabled in each House of the Parliament for a six-day disallowance period after which the determination takes effect. At times, the disallowance period spans across parliamentary periods. Furthermore, after taking effect and before the sunset date, the managing NCE must transfer the balance from the sunsetting special account to the new special account, in order to ensure the appropriation is not extinguished.

If a sunsetting special account is used to manage an ongoing departmental activity, it may be appropriate to transfer the special account balance to annual departmental appropriation and no longer use a special account. This can be done by the portfolio Minister writing to seek the Finance Minister’s agreement (under section 74 of the PGPA Act and section 27 of the PGPA Rule) to transfer the special account balance before it sunsets to the NCE’s annual departmental item appropriation. For further guidance on this, consult the Special Appropriations Team.

For a special account established by a legislative instrument, expenditure estimates cannot go beyond 10 years. If the related activity is ongoing beyond 10 years, the forward estimates will need to be recorded against another appropriation.

Funds or Foundations

The terms fund and foundation are financial concepts and are not defined in the PGPA Act. These terms are used to implement initiatives involving money being set aside and in some cases, money being raised by investing. Special accounts are often used to give effect to initiatives that involve such concepts. Examples include:

  1. Future Fund Special Account; and
  2. Anzac Centenary Public Fund Special Account.

Investment and Interest

It is not a standard operation for most NCEs to raise revenue by investing money or earning interest on money held in bank accounts. NCEs that are required to invest or earn revenue are authorised to do so in:

  1. function enabling legislation, such as the Future Fund Management Agency (Future Fund Act 2006) and the Australian Financial Security Authority (Bankruptcy Act 1966); or
  2. written delegation by the Minister for Finance.

Spending any revenue raised requires an appropriation. While a special account provides an appropriation, the legislation establishing a special account does not authorise investing money or earning bank account interest. Such authorisation must be sought by the portfolio Minister writing to the Minister for Finance.

  1. Investment authority is provided to the Minister for Finance in section 58 of the PGPA Act. This authority may be delegated if required.
  2. Authority to maintain bank accounts is provided to the Minister for Finance in section 53 of the PGPA Act. This authority has been delegated to each NCE, with accompanying directions that require interest on bank accounts to be earned by the Commonwealth at a central level. The directions can be amended if required.

For further advice on investing and earning interest contact the Finance AAU or Governance Team (GovernanceTeam@finance.gov.au).

If an NCE manages a special account and it is required to raise revenue on the balance of that special account, the portfolio Minister must write to Minister for Finance to seek a delegation of the investment authority in section 58 or an amendment to the banking direction for the delegation of section 53.

Where a special account has been established, instead of providing investing or banking authorities, in some cases the government has approved supplementary annual funding to credit to the special account. Such supplementation is called an Interest Equivalency Payment (IEP). IEP amounts are provided in annual Appropriation Acts. Receiving supplementary appropriation is not a reason to establish a special account.

  • For further advice on IEPs, consult EM 2017/47 – Special Accounts: Policy, Guidance and the Central Budget Management System (CBMS). The Special Appropriations Team is also available to answer queries (Special.Appropriations@finance.gov.au).

Trust-like arrangements

Before entering into a trust or trust-like arrangement, it is important to understand the legal, financial and other implications for the Commonwealth. NCEs are encouraged to obtain policy authority (a decision of Cabinet or the Prime Minister) before entering into such an arrangement. If an NCE holds money on trust for a non-Commonwealth entity (such as an individual, company or non-government organisation), that money forms part of the CRF. Therefore, an appropriation is required to spend the money, including repaying a trust benefactor.

A special account is not necessary to manage money held on trust. For example, money held on trust to undertake departmental activities can be managed using departmental appropriation and the provisions in section 74 of the PGPA Act and section 27 of the PGPA Rule (see guidance on Retained receipts).

Entities are discouraged from establishing a trust (under a trust deed or a trust instrument) or accepting trust-like responsibilities unless it is expressly in the Commonwealth’s interest to do so. For further advice and in particular before entering a trust relationship that obliges investing money, it is recommended that the NCE consult its AAU and the Public Management Reform Team in Finance (PMRA@finance.gov.au).

Legal trusts are established under state and territory laws and usually require money to be held ‘separately’. This separation can be satisfied by an NCE maintaining a separate bank account to manage money held on trust as part of its annual departmental appropriation. Additional transparency can be provided in the NCE’s annual report.

Financial reporting

Annual financial reporting for a special account is as follows:

  1. estimated expenditure is reported in NCE Portfolio Budget Statements (PBS);
  2. estimated expenditure is reported in Budget Paper No. 4 (BP4);
  3. actual expenditure is reported in NCE Financial Statements and the government Consolidated Financial Statements (CFS).

NCE’s must maintain special account expenditure estimates, transactions and balances in internal accounts and records, and also in CBMS (PGPA Act section 36 refers). To ensure central government records are correct, CBMS is to be updated as soon as is practicable to reflect the NCE’s internal accounts and records. This is important because CBMS data is used to prepare government Budget Papers and the CFS.

For guidance to prepare the PBS, refer to the Finance website page entitled Portfolio Budget Statements and Portfolio Additional Estimates Statements. For guidance to maintain financial records and prepare financial statements, refer to the Finance website page entitled Reporting and Accounting, the PGPA Financial Reporting Rule and associated guidance, Australian Accounting Standards and your CFO and support staff.

The estimated balances and cash flows for special accounts, across all Commonwealth entities, for the upcoming financial year, are included in Budget Paper No. 4 – Agency Resourcing. The final balances and cash flows for special accounts, across all Commonwealth entities, for the financial year ended 30 June, are provided in the report entitled Special Accounts Balances and Cash Flows Report. There is an important distinction in the way receipts into special accounts are displayed in the Table of Estimated Cash Flows and Balances for Special Accounts and in the Agency Resourcing Table. The former distinguishes between appropriated and non-appropriated receipts into special accounts, while the Agency Resourcing Table shows only estimates of receipts from sources external to the relevant entity. The Table of Estimated Cash Flows and Balances for Special Accounts and the Agency Resourcing Table both include estimates of public money that is not held on account of the Commonwealth or for the use or benefit of the Commonwealth.

Transactions that are made by individual Commonwealth entities, using special accounts, are disclosed in the relevant entity’s annual financial statements. These statements are available on the relevant entity’s website. The transactions of the whole Australian Government are consolidated and disclosed in Finance’s Consolidated Financial Statements

Special Accounts Balances and Cash Flows Report

 

Commonwealth Consolidated Financial Statements

2013-14

2012-13

2011-12

Contact for information: special.appropriations@finance.gov.au

Special appropriations: repayments by the Cth (section 77)

Summary

A non-corporate Commonwealth entity (entity) can use the special appropriation contained in section 77 of the PGPA Act to repay money collected and processed as general government revenue (i.e. the amount was remitted to the Official Public Account (OPA) as an administered receipt). The special appropriation can only be used by an entity if the entity has no other appropriate appropriation to make the repayment (for example, if an entity received an overpayment and credited it to an annual departmental appropriation item in accordance with section 27 of the PGPA Rule, then the entity will make the repayment from that departmental appropriation item. If, on the other hand, the entity remitted the overpayment to the OPA as an administered receipt, then it may use section 77 to make the repayment).

Examples of repayments that may be made using the special appropriation in section 77 include: 

  • returning a bond, a security deposit or an amount found on Commonwealth premises
  • returning an overpayment to the Commonwealth
  • repaying an amount to a related third party (such as the executor of a deceased person's estate); and
  • repaying an amount that was credited to a departmental item or a special account and no balance is available for the respective appropriation to make the required repayment.

The Department of Finance has issued the following Estimates Memorandum to assist officials to manage repayments. To obtain a copy, contact your Chief Financial Officer (CFO) area or Agency Advice Unit (AAU) in Finance:

  • EM 2018/28 - Repayments made using the special appropriation in s77 of the PGPA Act.

Contact for information: special.appropriations@finance.gov.au

Annual appropriations: background

Summary

Annual Appropriation Acts provide annual funding for government operations and programmes and also for investment in assets and reduction of liabilities. Bills proposing appropriations for the forthcoming financial year are introduced into parliament on Budget Night and, when passed, fund approximately 25 per cent of all government expenditure for the year.

The annual Appropriation Bills propose specified amounts of appropriation for expenditure by entities to carry out the government’s outcomes. Those amounts may only be expended on the purposes for which the appropriations are provided and that expenditure must be consistent with relevant legislation and government policy. The Finance Minister is responsible, on behalf of the government, for arrangements by which entities adhere to those requirements.

Appropriations are provided for particular purposes. The purpose of departmental appropriations is to provide money for the annual operating costs of entities. For administered appropriations, those purposes are the outcomes which are shown beside the appropriation amounts. Outcomes are the results, consequences or impacts of government actions.

The purpose and detailed operation of the clauses in the Appropriation Bills are outlined in explanatory memoranda tabled in parliament when the Bills are introduced on Budget Night. Each Appropriation Bill and its Explanatory Memoranda are available at www.budget.gov.au External link icon and also at www.legislation.gov.au External link icon. Further information on outcomes and on the outcomes framework more generally is available at Managing Performance.

Appropriation Bill (No. 1)

Appropriation Bill (No. 1) proposes appropriations for activities that are considered to be the ordinary annual services of the government and hence the Bill cannot be amended by the Senate under section 53 of the Constitution. The Bill sets out amounts according to whether they are departmental or administered.

Departmental appropriations are provided to meet costs over which an entity has control. They are the ordinary operating costs of entities. Expenditure typically covered by departmental appropriations include: 

  • employee expenses
  • supplier expenses
  • other operational expenses (for example, interest and finance expenses)
  • non operating costs (for example, replacement and capitalised maintenance of existing departmental assets valued at $10 million or less). 

Departmental appropriations can also include supplementation for work that entities were directed by government to undertake in the previous financial year, but after the last date for the inclusion in the Additional Estimates Bills. Entities are expected to meet the cost of these activities from their existing appropriations, which may then be replenished by a departmental appropriation in the following financial year.

Departmental appropriations are appropriated as a single amount for each entity. The single appropriation represents the cost of entity operations and may be used to make any payment related to the functions of the entity. Appropriation Bill (No. 1) shows a split of that amount across outcomes. The split is notional, providing an indication of the departmental resources that will be required to achieve outcomes. Appropriation is not provided for non-cash costs such as bad debts and write-offs.

For all non-corporate Commonwealth entities, non-operating costs, as discussed above, are funded via the Departmental (or Administered) Capital Budget (DCB/ACB) which is used to meet the costs associated with the replacement of minor assets (assets valued at $10 million or less) or maintenance costs that are eligible to be capitalised. The funding for depreciation, amortisation and make-good expenses was replaced with a DCB in the 2010-11 Budget.

Corporate Commonwealth entities continue to be funded for depreciation, amortisation and make good expenses except for Designated Collecting Institutions (DCI’s) (such as the National Gallery of Australia) where they are not funded for depreciation on their heritage and cultural assets.

Administered appropriation items are those administered by the entity on behalf of the government. They are amounts required to meet the total estimated expenses for administered activities that are expected to be incurred in the budget year. They are normally related to activities governed by eligibility rules and conditions established by the government or parliament such as grants, subsidies and benefit payments. Entities therefore have less discretion over how administered operating costs are incurred. Administered amounts are appropriated separately for outcomes (i.e. the split across outcomes is not notional). In limited circumstances, non operating costs as discussed above are funded via the ACB for the replacement of existing administered assets valued at $10 million or less, and maintenance costs that are eligible to be capitalised.

The detail on appropriations in Appropriation Bill (No. 1) is set out in Schedule 1 to the Bill.

Appropriation Bill (No. 2)

As explained above, Appropriation Bill (No. 2) provides appropriations for matters that are not proposed for the ordinary annual services of the government. It covers both ‘non-operating’ costs and administered amounts for new outcomes which have not previously been approved by parliament, payments direct to local government, and some payments made to or through the states, the Australian Capital Territory (ACT) and the Northern Territory (NT).

Most payments ‘to’ the states are made under the Federal Financial Relations Act 2009 and the related COAG Reform Fund Act 2008. Ongoing payments classified as ‘through’ the states for non-government schools are made under the Schools Assistance Act 2008. Other payments for non-government schools are proposed in Appropriation Bill (No. 2).

Financial assistance grants for local government continue to be made under the Local Government (Financial Assistance) Act 1995.

Schedule 1 to Appropriation Bill (No. 2) confers, on the Ministers named, the power to determine:

  • conditions under which any payments to and through the states, the ACT and NT and local government authorities may be made
  • the amounts and timing of those payments. 

The new administered outcomes item in Appropriation Bill (No. 2) requests appropriations in respect of administered outcomes which have not previously been approved by parliament. This requirement is based in the Compact of 1965.

Non-operating costs (sometimes called ‘capital’ costs) included in Appropriation Bill (No. 2) comprise: 

  • equity injections’, which are provided to entities to, for example, enable investment in assets to facilitate departmental activities. Equity injections can for example, be used to propose appropriations for new assets and replacement assets usually valued at more than $10 million;
  • administered assets and liabilities’ appropriations, which provide funding for acquiring new administered assets, enhancing existing administered assets and discharging administered liabilities relating to activities administered by entities on behalf of the government. 

General Drawing Rights Limits

The Nation-building Funds Act 2008 and the COAG Reform Fund Act 2008 establish special accounts under section 80 of the PGPA Act in relation to funds established by those Acts. The government intends that payments made from the funds will be transparent and subject to parliamentary scrutiny with the aim of ensuring a managed and orderly rate of expenditure. Accordingly, the Nation-building Funds Act 2008 and the Federal Financial Relations Act 2009 provide for mechanisms to specify a maximum limit (called the ‘general drawing rights limit’) on the amount that can be paid out from each fund’s special account in a particular financial year.

The General Drawing Rights Limits for the financial year are included in the text of Appropriation Bill (No. 2). It is important to note that this Bill will not appropriate amounts to be paid from the funds. The intention of specifying general drawing rights limits is to set maximum limits on the amounts that may be covered by drawing rights issued by the Finance Minister for the current year, for the purposes to which the limits apply.  Appropriation (Parliamentary Departments) Bill (No. 1).

The Appropriation (Parliamentary Departments) Bill (No. 1) proposes appropriations for all the departmental, administered and non‑operating costs of the four parliamentary departments.

Period of validity of annual appropriations

Annual appropriations continue to be available to entities until the relevant amount is fully expended or the relevant legislation ceases to provide authority for any unspent amounts to be used (for example, if the Act providing the entitlement sunsets after a particular date).

There can be situations where entities require extra funding for urgent expenditure for which there is insufficient appropriation. In such cases, Appropriation Bill (No. 1) and Appropriation Bill (No. 2) each contain a clause entitled ‘Advance to the Finance Minister’ (AFM), which enables the Finance Minister to provide the urgent additional appropriation. The AFM provision in Appropriation Bill (No. 1) is limited to a maximum of $295 million and in Appropriation Bill (No. 2) is limited to $380 million. Details on each amount issued under the AFM are subject to the requirements of the Legislation Act 2003 External link icon, though not subject to disallowance, and are published on the Federal Register of Legislative Instruments. An annual report to parliament is prepared on the use of the AFM provision and covers all amounts issued and, in particular, any component of an AFM that may not have been used by the relevant entity in the relevant financial year.

Appropriation (Parliamentary Departments) Bill (No. 1) also contains a clause corresponding to the AFM provided in the other two Acts. Called the Advance to the Presiding Officer (APO), the total that may be issued is limited according to the parliamentary department concerned. As with the AFM provision, the use of the APO is reported in an audited annual report.

All three Budget Appropriation Bills include, for information purposes, a figure for the previous financial year, labelled the ‘Actual Available Appropriation’. It is calculated for each item by adding the amounts appropriated in the previous year’s annual Appropriation Acts, amounts adjusted under provisions of the PGPA Act plus adjustments such as AFMs. In some instances, the figure may also be affected by limits applied administratively by the Department of Finance. The Actual Available Appropriation provides a comparison with the appropriation proposed for the budget year. It does not affect the amounts available at law. In some cases, there are discrepancies between the sums of items and the totals of the Actual Available Appropriation, due to rounding.

Contact for information: AMTMail@finance.gov.au

Adjusting annual appropriations

Summary

The annual appropriation acts, the PGPA Act and government policy contain mechanisms for adjusting annual appropriations. New or updated government decisions can require changes to annual appropriations in three ways: 

1. Increasing annual appropriations

Increases to annual appropriation can be provided during the course of a financial year, or for the next financial year, where existing appropriations are inadequate and reallocation within the appropriation type is not possible. Existing appropriations must first be considered. What appropriations are available? For example, departmental – all years; administered – all years, within the same outcome. Contact your AAU for further information.

Current Financial Year

The best mechanism to provide additional appropriation in the current year is based on when the additional appropriation will be called on. Will the additional appropriation be required before or after the next round of Appropriation Bills (Additional Estimates)?

Before Additional Estimates

Thought needs to first be given to re-prioritisation of current appropriations. If that is not possible, an Advance to the Finance Minister (AFM) may be appropriate.

After Additional Estimates

Include in estimates update for MYEFO or early pre-ERC for current year outlays

Next Financial Year

Include estimates in pre-ERC or Budget rounds in CBMS.

2. Moving annual appropriations between entities

Appropriations most often need to be moved in response to transfers of functions, for example a new Administrative Arrangements Order. As “finances follow functions”, entities will need to establish the amount of appropriations relating to the transferring function.

Timing of moving appropriations

Appropriations that need to be moved are done so on a prioritised basis, with section 75 legislative instruments required for urgent transfers. (For more information, see Machinery of Government changes.) Entities must first consider when will the gaining entity need additional appropriation to make payments for the new function?

Current Year Appropriations

Appropriations to support payments – immediate to 2 weeks

Thought needs to first be given to re-prioritisation of current appropriations. If that is not possible, an AFM may be appropriate. An AFM provides urgent appropriation where existing appropriations are inadequate, with details for the AFM application provided by entity CFOs.

Appropriation to support payments – between 2 weeks and Additional Estimates

Section 75 of the PGPA Act provides for appropriations to be transferred when a function is moved from one entity to another. (For more information, see Machinery of Government changes.)

Appropriation to support payments – after Additional Estimates

Include in estimates update for MYEFO or early pre-ERC rounds in CBMS for current year outlays.

Prior Year Appropriations

Entities will need to assess the amount of prior year appropriations that relate to payments for the transferred function.

These amounts are included in estimates update for MYEFO or early pre-ERC rounds in CBMS

3. Reducing annual appropriations

Appropriations most often need to be reduced in response to government decisions to implement saving initiatives, or to reduce annual administered appropriation items.

Quarantine – preventing inadvertent drawdowns

Where a government decision means policy authority to spend has changed, quarantines can be placed over the relevant annual appropriation, which provides an administrative control preventing inadvertent drawdowns. AAU Directors can request quarantines be put in place.

Contact for information: AMTMail@finance.gov.au.

Advances to the Finance Minister (AFM)

Summary

The Advance to the Finance Minister (AFM) is a provision in the annual Appropriation Acts which enables the Minister for Finance (Finance Minister) to provide additional urgently needed appropriation to entities for expenditure in the current year. The Finance Minister may only agree to issuing an AFM if satisfied that there is an urgent need for expenditure that is either not provided for or has been insufficiently provided for in the existing appropriations of the entity. The Finance Minister provides the additional appropriation by means of a determination.

The annual Appropriation Act for the parliamentary departments includes a provision that enables the Presiding Officer(s) to issue urgently required appropriation for the four parliamentary departments to the relevant extent set out in the legislation, called the Advance to the responsible Presiding Officer (APO).

Before issuing a determination to increase an entity’s appropriation item, the Finance Minister must be satisfied that the legislative criteria set out in the annual Appropriation Acts are met. The legislative criteria are generally worded along the following lines:

  • Amounts can be issued under the AFM if the Finance Minister is satisfied that:
    • there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, in the Schedules:
      • because of an erroneous omission or understatement; or
      • because the additional expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Appropriation Bills before those Bills were introduced into the House of Representatives.
  • The Appropriation Acts have effect as if the Schedules were amended, in accordance with a determination of the Finance Minister, to make provision for so much (if any) of the expenditure as the Finance Minister determines. 

The amounts that can be issued under the AFM provisions are limited to amounts identified in the annual Appropriation Acts. Advances under Appropriation Act No. 1 are limited to $295 million, whilst advances under Appropriation Act No. 2 are limited to $380 million.Where these limits are close to being exhausted, or are likely to be exhausted, provision will be made in the Additional Estimates Appropriation Acts for these limits to be restored to the original amounts, irrespective of amounts that had been issued before the commencement of these Acts. This will ensure that there are sufficient amounts within the AFM for the remainder of the financial year.

If the Additional Estimates Bills provide for expenditure, and amounts are issued under the AFM provisions prior to the commencement of the Bills (ie. upon receiving Royal Assent) for the same expenditure, the amounts appropriated in the Acts for this expenditure will be reduced by the amounts advanced. This will prevent appropriations for the same expenditure being provided from both the AFM and the Additional Estimates Appropriation Acts.

AFM criteria

1. Urgent need for expenditure
In this context, “urgent” is not a specific term. In interpreting whether additional expenditure is urgent one can apply ordinary English usage to the term. Generally, for there to be an urgent need for expenditure in the current year, an entity must have exhausted, or be close to exhausting, all available appropriation under the relevant item.

  • "Urgent need” means there is a ‘pressing or compelling’ need to make a payment of money before the end of the financial year that cannot be delayed until the passing of the next annual Appropriation Bills.
  • "Current year” refers to the financial year ending on 30 June as defined in the relevant Appropriation Act.
  • "Close to exhausting” means that an entity expects to exhaust its available appropriation within two weeks.
  • "Available appropriation” means:
    • unspent amounts available from all the relevant annual Appropriation Acts for the item, held within either an entity’s bank account(s) or the Official Public Account.
    • amounts that have been quarantined within the Appropriations and Cash Management (ACM) module of the Central Budget Management System (CBMS), eg. declared savings, movement of administered funds into later years;
    • relevant receipts of the kind prescribed by section 74 of the PGPA Act; and
    • relevant appropriation amounts transferred under section 75 of the PGPA Act following a transfer of function.

Where Additional Estimates or Supplementary Appropriation Bills provide for expenditure, and payment of this expenditure is required prior to the anticipated commencement of these bills, entities are encouraged to take care in determining the amounts sought from the AFM. An AFM will not be issued for amounts that have been accrued and require payment at a later point in time when there will be sufficient appropriation available.

Some examples of where an urgent need for expenditure could be demonstrated include:

  • insufficient appropriations are available to make grant payments or settle accounts that are either on hand or expected to be received (taking into account due dates for payment); and
  • insufficient appropriations are available to enable the payment of salaries/wages.

All requests for AFMs must be made in writing and have Ministerial support. Applications for an AFM are to be accompanied by a schedule of payments explaining the timing of the relevant expenditure. Entities are recommended to consider including other supporting documentation as appropriate, in order to support the request for additional appropriation.

ACM must reflect what an entity has recorded in its own accounts and records regarding the status of appropriations. Prior to submitting an application for an AFM, entities must check ACM to confirm the balance of unspent appropriations.

2. Expenditure
Expenditure can be separated into two different categories; either expenditure that is ‘not provided for’ or expenditure that is ‘insufficiently provided for’. In applying for an AFM, entities must be able to explain why the expenditure they believe is required in the current year was either not provided for, or was insufficiently provided for in the most recent annual appropriation Acts.

The phrase ‘not provided for’ means that a new type of expenditure is to be made, which was not included in the most recent Appropriation Bills introduced to parliament. For example, an entity or outcome might not have been included or no equity injections provided. The phrase ‘insufficiently provided for’, on the other hand, applies when an existing appropriation amount for a particular purpose exists but that the amount is insufficient. For example, an insufficient amount was appropriated for an outcome or equity injection.

Some reasons why additional expenditure was either ‘not provided for’ or was ‘insufficiently provided for’, could include:

  • Erroneous omission or understatement
    • Erroneous omission: as the term suggests, this criterion covers situations where amounts have been omitted in error. Some examples are where:
      • an error was made resulting in provision for the expenditure not being included in the most recent Appropriation Bills introduced to parliament.
      • an error was made resulting in provision for the expenditure being included in the most recent Appropriation Bills introduced to parliament under the wrong appropriation item or outcome.
    • Erroneous understatement: this criterion may be considered when appropriation has been provided for a purpose but is insufficient to meet the expenditure required. Generally, this would apply when appropriation funding is insufficiently provided for due to an error. An example is where:
      • an error was made in determining the amount of expenditure provided for in the most recent Appropriation Bills introduced to parliament. Whilst the expenditure was foreseen, the actual expenditure required exceeds the amount estimated. This could result from the use of incorrect information, or not taking into account certain information, when estimating the level of expenditure required.
  • Unforeseen expenditure
    Appropriations for expenditure may not have been provided for or insufficiently provided for because the need was unforeseen. The AFM provision makes clear that for the proposed expenditure to be considered ‘unforeseen’ it must be expenditure that was not within the contemplation of the government when the Appropriation Bills were introduced to parliament. Therefore the expenditure was either not provided for at all in the Appropriation Bills, or was insufficiently provided for in the Appropriation Bills simply because the need for the expenditure or an increase in the amount of expenditure was unknown at the time of the introduction of the Appropriation Bills to parliament.

    The most common situation to which the unforeseen criterion applies is when a decision to expend money is made by the government after the Appropriation Bills are finalised. Other examples could include:
    • uncertainty in relation to the timing of a payment, i.e., if expenditure was expected to take place in the following financial year, but is then required in the current financial year after it is too late for it to be included in the Appropriation Bills.
    • where the expenditure was foreseen, the actual amount of expenditure required exceeds the amount estimated. This could result from factors beyond an entity’s control, such as significant changes to activity levels for a demand driven program or significant changes in the exchange rate.

The Finance Minister’s Exclusive Power and Ultimate Discretion

The Finance Minister can only issue an AFM determination if satisfied that the relevant criteria are fully met. Requesting entities must therefore explicitly address those criteria in their AFM request and ensure that all relevant details are included.

Once it is clear that all criteria are met the Finance Minister is nonetheless not obliged to issue an AFM determination or to issue a determination for the amount requested. Among matters, the total amount of AFM that may be issued in a financial year is limited and the Finance Minister may wish to consider the possibility of issuing further AFM determinations in the year.

Role of entity officials

When is an AFM sought?
Officials first need to assess whether the legislative criteria for an AFM can be satisfied. However, officials are to advise their Agency Advice Unit (AAU) in Finance as early as possible if an application for an AFM appears likely. This enables forward planning and early consultation. Following consultation with the AAU, entities need to ensure that any amounts quarantined within ACM, such as for declared savings or the movement of administered funds, are reinstated, if possible, to allow access to those amounts. Only after all available appropriations have been exhausted, or are close to being exhausted, will an AFM be likely to be relevant.

The entity then liaises with their AAU in the first instance to discuss the proposal. Incomplete or inaccurate information could delay the process of having the application considered by the Finance Minister. Entities are advised to consult with their AAU as soon as it is known that an AFM may be required.

How to address the criteria?
The entity’s explanation of their AFM requirements specifically and separately addresses the relevant legislative criteria without reference to other documents and with no assumption of knowledge. The entity needs to ensure the application is error free as it will be included as part of the Explanatory Statement, that will be lodged with the Determination on the Federal Register of Legislative Instruments External link icon. Exclude any reference to a Cabinet decision number or any other confidential information. Such information is provided separately.

When addressing the urgency criterion, entities need to consider and state the reasons why payment is urgent and cannot be delayed. Common reasons for urgency are that government policy requires the payment before a certain date or that contractual obligations bind the Commonwealth to make the payment before a certain date. Entities do not need to assess the financial position of the intended recipient of the payment when considering if the expenditure is urgent, although that can be relevant if delayed payment would prejudice achievement of a government policy. Nonetheless, entities must also consider factors which would allow payment to be delayed. For example, the terms of a contract might not require payment for 30 days after presentation of an invoice. The relevant consideration is when the cash payment must be made. The timing of recognition of an expense in an entity’s financial statements is not a relevant consideration. Thus, although an expense is recognised in one financial year, AFM will not be issued if the cash payment can be made from an available appropriation in the following financial year.

When an AFM request for additional appropriation under an Appropriation Act results from several unforeseen factors, each factor would preferably be separately identified and quantified as specific dollar amounts.

Generally speaking, an AFM will only be issued to meet accounts at hand, i.e. due for payment within 30 days. However, if an entity is close to exhausting its available appropriations and needs to make a series of small payments over an extended period before appropriation from the next set of Appropriation Acts is available, an AFM can be issued for a single amount that covers all of those payments. The need to make such a series of payments must be substantiated e.g. by a contractual payments schedule or by a list of outstanding grant applications. Such estimates must take into account any other anticipated sources of appropriations within the projected time frame (e.g. relevant receipts under section 74 of the PGPA Act).

What is the applications process?
The relevant entity is to consult with the AAU and the Annual Appropriations team where an AFM is being considered (AMTMail@finance.gov.au). Once an entity has confirmed with the AAU and the Annual Appropriations team that it appears that an AFM may be required, and it appears that the legislative criteria may be satisfied, the Annual Appropriations team can send the AFM application form to the entity for completion.

After the AFM application form has been completed, the entity is to send the draft form along with supporting documentation to the Annual Appropriations team and their AAU for consideration. Following the entity addressing all the comments of the AAU and the Annual Appropriations team, the entity needs to arrange to have the application form signed by the designated Chief Financial Officer.

The Annual Appropriations team can assist officials prepare relevant documentation to ensure ministerial support for the AFM.

Entities need to be aware that expenditure in excess of appropriation is a breach of section 83 of the Australian Constitution. Accordingly, as the issue of AFMs is governed by legislation, and there is no guarantee that a particular application will be approved, access to appropriation will not be provided in advance of the Finance Minister’s approval.

List of AFMs issued

Advances to the Finance Minister in the 2017-2018 financial year
Appropriation Act (No. 1) 2017-2018

Portfolio

Advances Provided

Further Information

 

$

 

Australian Bureau of Statistics

122,000,000.00

Details External link icon

 

122,000,000.00

 

There were no Advances to the Finance Minister issued in the 2016-2017 financial year.

Advances to the Finance Minister in the 2015-2016 financial year
Appropriation Act (No. 1) 2015-2016

Portfolio

Advances Provided

Further Information

 

$

 

Australian Electoral Commission

101,237,000.00

Details External link icon

 

101,237,000.00

 

There were no Advances to the Finance Minister issued in the 2014-2015 financial year.
There were no Advances to the Finance Minister issued in the 2013-2014 financial year.

Advances to the Finance Minister in the 2012-2013 financial year
Appropriation Act (No. 1) 2012-2013

Portfolio

Advances Provided

Further Information

 

$

 

Education, Employment and Workplace Relations

24,117,394.97

Details External link icon

Health and Ageing

107,000,000.00

Details External link icon

Families, Housing, Community Services and Indigenous Affairs

91,017,000.00

Details External link icon

Health and Ageing

12,500,000.00

Details External link icon

Health and Ageing

2,200,000.00

Details External link icon

Regional Australia, Local Government, Arts and Sport

4,632,500.00

Details External link icon

 

241,466,894.97

 

Advances to the Finance Minister in the 2011-2012 financial year
Appropriation Act (No. 1) 2011-2012

Portfolio

Advances Provided

Further Information

 

$

 

Education, Employment and Workplace Relations

33,242,205

Details External link icon

Education, Employment and Workplace Relations

14,327,392

Details External link icon

Families, Housing, Community Services and Indigenous Affairs

5,561,983

Details External link icon

Families, Housing, Community Services and Indigenous Affairs

17,610,000

Details External link icon

Regional Australia, Local Government, Arts and Sport

6,000,000

Details External link icon

Regional Australia, Local Government, Arts and Sport

6,200,000

Details External link icon

 

82,941,580

 

Advances to the Finance Minister in the 2011-2012 financial year
Appropriation Act (No. 2) 2011-2012

Portfolio

Advances Provided

Further Information

 

$

 

Prime Minister and Cabinet

41,881,000

Details External link icon

 

41,881,000

 

Advances to the Finance Minister in the 2010-2011 financial year
Appropriation Act (No. 1) 2010-2011

Portfolio

Advances Provided

Further Information

 

$

 

Prime Minister and Cabinet

30,701,000

Details External link icon

Families, Housing, Community Services and Indigenous Affairs

14,159,000

Details External link icon

Finance and Deregulation

5,100,000

Details External link icon

Prime Minister and Cabinet

7,500,000

Details External link icon

Prime Minister and Cabinet

3,130,000

Details External link icon

 

60,590,000

 

Reporting

The Finance Minister tables an annual report in parliament on the use of the AFM. The annual report will disclose all AFM amounts issued during the financial year. It will include detail on the amounts issued, the reasons for the AFM being issued, the amounts spent and reasons for amounts not being spent. These reports are also published on the Finance website. Entities also report on their use of the AFM provision in their annual reports when discussing program and/or financial performance.

The AFM reports of the Finance Minister can be found on the Finance Publications website.

Determinations under the AFM provisions are legislative instruments are registered in accordance with the Federal Register of Legislative InstrumentsExternal link icon.

Contact for information: AMTMail@finance.gov.au.

Receipts to increase annual appropriations (section 74)

Summary

Corporate Commonwealth entities may spend certain receipts in accordance with their enabling legislation or constitution. Where a corporate Commonwealth entity collects money for and on behalf of the Commonwealth (for example, taxes and levies) this money is part of the CRF.

Many non-corporate Commonwealth entities receive money from sources other than in the annual Appropriation Acts, such as payment for goods and services. As a general rule, amounts received by an entity must be returned to the CRF, and an appropriation is required before the amounts can be spent. If no appropriation authority is available, the receipts must be remitted to the Official Public Account and cannot be spent by the entity.

If the receipt is of a kind prescribed in section 27 of the PGPA Rule for the purposes of section 74 of the PGPA Act, then an entity can add that prescribed receipt to its most recent departmental appropriation item. Section 74 of the PGPA Act provides that an entity’s appropriation item may be increased by an amount of a kind prescribed by section 27 of the PGPA Rule. In this way, the retained receipts may be spent by the entity under one of its existing appropriation items.

Note these receipts differ from cost recovery activities, where revenue collected must be returned to the Consolidated Revenue Fund.

A non-corporate Commonwealth entity can collect receipts from various sources. Section 74 and 74A of the PGPA Act enables an entity to spend some of those receipts by authorising that certain appropriations may be increased with specific types of receipts and repayments. Where an amount collected cannot be retained, it must be remitted to the Official Public Account and cannot be spent. Section 27 of the PGPA Rule prescribes the kinds of receipts that can be retained under section 74 and 74A of the PGPA Act. Examples of the kinds of receipts that are prescribed by PGPA Rule section 27 include an amount received: 

  • for services provided by the entity
  • for selling or hiring out goods (including leasing out goods)
  • as accumulated leave entitlements of an employee (received from a former employer)
  • as GST-related receipts collected when selling goods and services, in order to pay net GST owed to the Australian Taxation Office (ATO)
  • as GST-related refunds from the ATO (if section 74A of the Act was not used to pay the related GST qualifying amounts)
  • related to a trust or similar arrangement; and
  • as a repayment of some or all of an amount that was earlier paid.

For more information, see RMG-307 Retainable Receipts.

Contact for information: receipts@finance.gov.au.

Portfolio Budget Statements

Summary

The Portfolio Budget Statements (PB Statements) inform Members of Parliament and the public of the proposed allocation of resources to government outcomes. They also assist the Senate Standing Committees with their examination of the Government’s Budget. The PB Statements, Budget Papers, Annual Appropriation Bills (Nos. 1 and 2) and Appropriation (Parliamentary Departments) Bill (No. 1) are tabled in the Parliament on Budget Night, the second Tuesday in May of each year.  The Bills require that the PB Statements be taken into account when interpreting the appropriated items in the Schedules.

The PB Statements contain details of the estimated payments under each of the annual Appropriation Bills and other legislation providing appropriations. In doing this, entities are required to report against the approved list of outcomes and programs for which they are responsible. They also contain details of estimated receipts from other sources, including taxation, customs, excise and receipts from fees and charges collected by entities. The appropriation details included in the PB Statements’ tables match the figures in the Appropriation Bills and the relevant amounts included in the tables in Budget Paper No. 4.

Individual PB Statements are intended to further explain the purposes and planned performance of entities and their contributions towards the achievement of outcomes. Entities also include their programs’ objectives; financial and non-financial performance, including deliverables; and key performance indicators.

PB Statements also assist in the interpretation of the Appropriation Bills. There is a provision in the Acts that declares the PB Statements to be extrinsic material under paragraph 15AB(2)(g) of the Acts Interpretation Act 1901. As a result, a court may use the PB Statements to decide whether a particular expenditure is consistent with the purpose of the appropriation item.

PB Statements are prepared by those Commonwealth entities which receive funding through the annual Appropriation Acts (either directly or through a portfolio department). Finance has issued the following guidelines on the format and printing of the PB Statements:

Excel and Word templates are downloadable from the Central Budget Management System, or contact your Chief Finance Officer (CFO) Unit to obtain a copy.

Financial data and footnotes for the 2018-19 PB Statements will be made available after the Budget has been released at http://www.data.gov.au External link icon to assist those who wish to analyse the financial information published in the PB Statements.  The website also has financial data from the 2014-15 PB Statements and PAES.

Requirements for performance information in PB Statements – Finance Secretary Direction

The Finance Secretary has issued the following Direction, effective 24 February 2016, under Section 36(3) of the PGPA Act. The Direction sets out the requirements for performance information included in PB Statements.

Previous year's version

Portfolio Additional Estimates Statements 

The Portfolio Additional Estimates Statements (PAESs) inform the Parliament of changes to the proposed allocation of resources since the Budget.  The PAES, annual Appropriation Bills (Nos. 3 and 4) and Appropriation (Parliamentary Departments) Bill (No. 2) are tabled in the Parliament usually in mid-February each year.

The annual Appropriation Bills (Nos. 3 and 4) and Appropriation (Parliamentary Departments) Bill (No. 2) require that the PBS be taken into account when interpreting the appropriated items in the Schedules.

Not all portfolios prepare a PAES. Only those entities for whom the government has agreed to change funding through the Appropriation Bills listed in the previous paragraph need produce a PAES. Finance has issued the following guidelines on the format and printing of the PAES:

Last year's version of the PAES guidance is available for reference when entities prepare annual reports:

Contact for information: Budget_Framework@finance.gov.au

Taxation of entities (including GST)

Summary

Under the Australian Constitution, liability for Commonwealth taxes cannot extend to the Commonwealth or to a Commonwealth entity. Nevertheless, Commonwealth entities generally pay and collect Goods and Services Tax (GST) on the same basis as other Australian entities.

A framework has been implemented for the Commonwealth, underpinned by the "The New Tax System" legislation, to make Commonwealth entities subject to taxation on a notional basis. The A New Tax System (GST, Luxury Car Tax and Wine Tax) Direction 2015 External link icon replaced the Finance Minister's (A New Tax System) Directions 2005 and continues to give effect to the parliament’s long standing intention that Commonwealth entities are to be notionally liable to pay certain taxes. The Direction applies only to entities that cannot be made liable to taxation by a Commonwealth law, for example non-corporate Commonwealth entities such as departments of state which are legally part of the Commonwealth. Additional information about the GST and indirect tax reforms is available at the Australian Taxation OfficeExternal link icon.

Appropriations and reporting

The amounts of appropriation shown in the three Appropriation Bills for the Budget year, in entity annual reports, the Commonwealth Consolidated Financial Statements, and records in CBMS, all exclude recoverable GST. The appropriations shown therefore represent the net amount that parliament allocates to particular purposes. This aligns with the accounting treatment of expenses and assets and the presentation of Budget estimates.

Parliament has provided that appropriations be increased by the amount of recoverable GST on payments by Commonwealth entities from all appropriations limited by amount. As a result, there is sufficient appropriation for payments under all such appropriations, provided that the amount of those payments, less the amount of recoverable GST, can be met from the initial appropriation.

Other relevant legislation on GST appropriations management includes: 

  • Section 74A of the PGPA Act, which authorises a non-corporate Commonwealth entity (entity) to increase certain appropriations with a specific Goods and Services Tax (GST) related amount. 
  • Section 27 of the PGPA Rule, which supports the operation of section 74 of the PGPA Act, prescribes two further types of GST-related receipts that may be retained by increasing certain appropriations. 

An entity can rely on the two mentioned provisions of the PGPA Act (sections 74A and 74) to manage the following GST-related amounts: 

  • section 74A of the PGPA Act to pay GST qualifying amounts; and
  • section 74 of the PGPA Act (as supported by section 27(2A) of the PGPA Rule, to retain two types of GST-related receipts:
    • amounts collected when selling goods and services (in order to pay net GST owed to the Australian Taxation Office (ATO)); and
    • GST refunds from the ATO (to the extent that section 74A was not used to increase an appropriation to pay the related GST qualifying amount; section 27(8) refers). 

Other taxes, fees and charges 

Under the Inter-Governmental Agreement on the Reform of Commonwealth-State financial relations, the Commonwealth, States and Territories agree the taxes and compulsory charges that are outside the scope of the GST. A copy of the list of taxes, fees and charges that are not subject to the GST is available on the Treasury website External link icon. The agreed list of taxes and regulatory charges that are outside the scope of the GST will be subject to on-going review and adjustment as necessary in consultation with the Ministerial Council for Commonwealth-State Financial Relations. The Treasury is the central point of contact for Commonwealth entities.

Contact for information: pmra@finance.gov.au.

Foreign exchange risk management

Summary

The Australian Government's foreign exchange risk management policy has been in place since 1 July 2002. This policy applies to all Commonwealth entities in the general government sector (GGS). The policy applies to both departmental and administered funding.

Foreign exchange risk is the risk that an entity's financial performance or position will be affected by fluctuations in the exchange rate between the Australian dollar and other currencies. The overarching principle of the policy is that GGS entities are responsible for the management of their foreign exchange risks. However, the entities must not act to reduce the foreign exchange risk that they would otherwise face in the course of their business arrangements.

To assist GGS entities in managing foreign exchange risk, Finance has published Finance Circular 2006/06, which introduces revised guidance on the policy, and Financial Management Guide No. 2: Australian Government Foreign Exchange Risk Management Guidelines, which provide in-principle guidance to entities, and may also be used as a benchmark to assess entities' foreign exchange risk management practices. 

Contact for information: forex@finance.gov.au.

Machinery of Government (MoG) changes

Summary

The terms ‘machinery of government changes’ (MoG changes) and ‘administrative re-arrangements’ are interchangeable and are used to describe a variety of organisational or functional changes affecting the Commonwealth.

Some common examples of MoG changes are:

  • changes to the Administrative Arrangements Order (AAO) following a Prime Ministerial decision to abolish or create a Commonwealth entity or to move functions/ responsibilities between Commonwealth entities
  • movement of functions into, or out of, the Australian Public Service.

The Australian Public Service Commission, in conjunction with Finance has developed Implementing Machinery of Government (MoG) changes Guide External link icon as a source of practical guidance to help entities implement MoG changes. The guide provides:

  • an overview of the MoG process
  • protocols for resolving the transfer of resources
  • principles and approaches for planning and implementing MoG changes, including a timeframe for key events
  • guidance on financial management and people management
  • advice on managing physical relocations, information, records, data and taxation
  • information on setting up a new entity.

The information below complements the Machinery of Government (MoG) changes Guide.

Delegations of Powers

Accountable authorities need to consider which delegable powers in the PGPA Act and PGPA Rule they may want to delegate and what limits will apply on a risk management basis immediately.  Accountable authorities of non-corporate Commonwealth entities (NCEs) can delegate the following powers, functions or duties under the PGPA Act to officials within the entity (in accordance with s110(1)(a)):

  • power to approve commitments, enter into, vary and administer arrangements (section 23 of the PGPA Act)
  • power to establish advisory boards (section 24 of the PGPA Act)
  • duty to prepare budget estimates for the entity (section 36 of the PGPA Act)
  • duty to establish an audit committee for the entity (section 45 of the PGPA Act)
  • duty to prepare the annual report for the entity (section 46 of the PGPA Act)
  • duty to prevent, detect and deal with fraud (section 10 of the PGPA Rule)
  • duty to recover debts (section 11 of the PGPA Rule).

Accountable authorities of NCEs can sub-delegate the following powers in the PGPA Act to officials that are delegated to them by the Finance Minister (in accordance with s110(1)(b), (5) and (6)):

  • power to use credit cards to borrow (section 56 of the PGPA Act)
  • power to grant certain indemnities, guarantees or warranties on behalf of the Commonwealth (section 60 of the PGPA Act)
  • power to modify terms and conditions for amounts owing to the Commonwealth (section 63 of the PGPA Act)
  • power to authorise a gift of relevant property (section 66 of the PGPA Act)
  • power to repay amounts paid to the Commonwealth (section 77 of the PGPA Act)
  • power to authorise payment of an amount owed to a person at time of death (section 25 of the PGPA Rule).

Officials (and officials in other entities who are assisting with the transfer of functions) need to familiarise themselves with the delegation of the Accountable Authorities’ powers under the PGPA Act and Rule.  This is important for officials, particularly those who are based outside of the ACT or at Australia’s international posts.

Also, if as a result of MoG changes, an entity gets a new responsible Minister or accountable authority or is gaining or transferring functions, then the Chief Financial Officers of the transferring and gaining entities review the internal delegations to ensure delegations and limits are provided to the appropriate officials.  Staff in an entity that is transferring functions need to have their delegations reviewed to ensure that they no longer deal with matters that have transferred to another entity.

For further information on the PGPA Act and the current PGPA Delegation from the Finance Minister, see www.finance.gov.au/resource-management/pgpa-legislation/.

Special Appropriations

NCEs can manage special appropriations because appropriations allow money to be spent that is within the Consolidated Revenue Fund (CRF). Given that corporate Commonwealth entities (CCEs) manage money outside the CRF, CCEs can manage a special appropriation on behalf of an NCE.

The Chief Executive of the gaining portfolio department will be responsible for the special appropriation, unless legislation allocates the special appropriation to a specific official or an entity other than the portfolio department.  A portfolio Minister may choose to allocate management of a special appropriation to any relevant entity in his or her portfolio and in such instances the portfolio Minister is recommended to write to advise the Minister for Finance.

The gaining entity will need a new CBMS item created for the special appropriation before it can request cash from the Official Public Account.  To create the CBMS item, the gaining agency can obtain a CBMS request form (available from the Knowledge Management section of CBMS and submit the form to the relevant AAU in Finance.

Once the CBMS item is created for the gaining entity by Finance, the gaining entity will need to enter Budget estimates against that item in BEAM and request the relevant AAU to agree the estimates. Once the estimates are agreed by the AAU, the AAU will request the OPA Administration and Banking Policy team in Finance (OPAAdmin@finance.gov.au) to enter the available cash amount in ACM. Finance will ensure that the CBMS adjustments entered net off across the transferring and gaining entities.

Special Accounts

A NCE can be the accountable authority for a special account.  This is on the basis that a special account provides access to an appropriation which enables the spending of money that is within the CRF. Given that CCEs manage money outside of the CRF, CCEs can manage a special account on behalf of an NCE.

When an AAO transfers ‘matters dealt with by the Department’ and those matters are supported by a special account, the relevant special account is transferred effective of the date of the AAO. This applies to special accounts established either by a legislative instrument or by an Act.

The Chief Executive of the relevant gaining portfolio department will be responsible for the special account, unless legislation allocates the special account to a specific official or an entity other than the portfolio department. The portfolio Minister may choose to allocate management of a special account to any relevant entity in his or her portfolio and in such instances the portfolio Minister is advised to write to advise the Minister for Finance.

If the establishing instrument or Act for a transferring special account needs to be amended or extinguished, the portfolio Minister is advised to write to the Minister for Finance to seek agreement to the amendment.

  • For a legislative instrument established special account (consistent section 78 of the PGPA Act), the process is a new legislative instrument made by the Minister for Finance.
  • For an Act established special account (consistent with section 80 of the PGPA Act), the process is an amendment Bill introduced by the portfolio Minister.
  • In such instances, the managing entity is encouraged to liaise with Finance as soon as possible and before preparing ministerial correspondence (Special.Appropriations@finance.gov.au).

The gaining entity will need a new CBMS item created for the special account before it can request cash from the Official Public Account.  To create the CBMS item, the gaining agency can obtain a CBMS request form (available from the Knowledge Management section of CBMS) and submit the form to the relevant AAU in Finance.

Once the CBMS item is created for the gaining entity by Finance, the gaining entity will need to enter Budget estimates against that item in BEAM and request the relevant AAU to agree the estimates. Once the estimates are agreed by the AAU, the AAU will request the OPA Administration and Banking Policy team in Finance (OPAAdmin@finance.gov.au) to enter the available cash amount in ACM. Finance will ensure that the CBMS adjustments entered net off across the transferring and gaining entities.

Information Technology

Take a principled approach

The principles from Part 2 of the APSC Guide underpin and guide the management of ICT during MoG changes and are to be applied consistently across entities.  This means that entities need to:

  • Ensure discussions and actions around ICT changes are guided by the APS Values and the APS Code of Conduct
  • Engage relevant stakeholders in decision making, recognising the full range of additional functions being added to or leaving entities
  • Keep staff informed of ICT decisions regarding MoG changes, being sure to use common messages for staff
  • Conduct options analysis in a manner consistent with current whole-of-government ICT policies, such as COTS/GOTS policies, and seek to facilitate the adoption of agreed whole-of-government solutions. See www.finance.gov.au/agict/
  • Aim to identify and adopt better practices and higher maturity processes and technology across government where cost effective
  • Ensure ICT changes are forward looking and informed by considerations of the current and emerging strategic directions for entities, the Government and technology
  • Identify and take opportunities to deliver more value to the business and improve service delivery
  • Manage ICT risks to minimise business impact and maintain business continuity.

Governance

What is common to MoG arrangements is the immediate need for strong, agile and fit for purpose governance to implement the new ICT arrangements.  The governance model ideally will focus (initially) on the strategic alignment of ICT with new business and the management of new risks.  Quickly it will be expected to:

  • ensure new investment in ICT delivers value to the business
  • provide oversight to ICT resource management; and
  • once past the initial MoG implementation, provide oversight of the performance measurement of ICT.

The governance body can draw on relevant subject matter expertise as required, have clear traceability of decisions that are taken and include a reasonable dispute resolution process.  To be effective, the governance body must have empowered and informed representatives from each entity who are able to quickly make operational decisions and escalate relevant strategic and business related decisions to the entity executive as required to facilitate a smooth MoG change.  The body is recommended to meet regularly and have outcomes and decisions minuted for reference.

One such model is to have a MoG ICT Coordination Group that reports to the entity executive.

Planning

The implementation of a MoG change will require ICT initiatives that span short, medium and longer term timeframes.  The governance group will need agree on a process for scoping, prioritising and endorsing ICT investments and initiatives.

The extent and timing of the required ICT initiatives are informed by the business value of the proposed initiative prioritised by:

    1. the presentation of the department to internal and external stakeholders, e.g. public facing services and the Ministers’ offices
    2. communication and collaboration enablers within the department, e.g. ICT network, email, and intranet portals; and
    3. internal administrative business processes.

Existing ICT projects may need to be reviewed for relevance and re-prioritised.  It may be necessary to suspend, close or amalgamate existing projects.

During the course of the MoG change implementation, disaster recovery and business continuity plans will need to be reviewed and updated.


Entity experience — Department of Climate Change and Energy Efficiency (DCCEE):

With the abolition of DCCEE it was the case that many projects underway were no longer viable.  The early review of those projects and the deferral or halting of them minimised the possibility of wasted expenditure. DCCEE also recommends that consideration be given to partially constructed assets to lessen any chance of impairment.

ICT Checklist items for consideration

The items listed below are listed alphabetically for ease of reference.  Unless otherwise specified the items listed below cover the abolition and/or establishment of an entity, and the major transfer of functions as a result of a MoG change.  Where available, contact details for further information have been provided.

Assets

Entity asset registers will be an important tool in managing the transfer of portable assets such as laptops, desktops, mobile devices, printers, servers and software licenses, particularly once staff are identified and start to depart to their gaining entity.

  • Entities need to give consideration to:
    • Providing staff with clear direction of which assets may be transferred and how that transfer will take place.
    • Undertaking a stocktake and registering the items allocated to staff identified for transfer and those assets allocated for retention and/or disposal.
    • Assessing the need to acquire new software licences.
    • Document the transfer and/or disposal of these assets for audit purposes.


Entity experience — Department of Education, Employment and Workplace Relations (DEEWR):

DEEWR found that when identifying the cost of the applications it was important to state whether the funding provided is for the cost of the licenses and the software maintenance or is it just the maintenance.

Having an updated list of the costs of the software and whether the licenses are yearly renewals or if they are perpetual licenses is vital as this will change the calculation basis. It will also determine if you are giving enough funding for the cost of the licenses and the software assurance or if it is just the software assurance and if the license can be transferred.

Entity experience — DCCEE:

DCCEE found that the expertise and assistance of a software assurance provider was an advantage

Business and corporate systems

Similar to asset splits, entities must determine the most effective arrangements for IT systems that support business programmes and areas such as financial management, human resources, and information/records management.

Be clear on systems to be transferred and kept, particularly for software licences, databases and support infrastructure.

Consider current whole-of-government policy and services as discussed above.

When the transferring entity is leaving behind applications development then it is important that the two departments are able to agree on what is to be capitalised.

Consider where scripts may need to be developed to transfer data between systems.

Consider training requirements for staff that will be using new systems.

Entity experience — DCCEE:

Corporate systems become commodities that are needed by both departments and each department is likely to seek quite quickly to a) take over the system for their proportion of the department, and b) preserve the information the system contains to enable a record of actions taken etc.

Consideration is given as to system ownership and copying of the instances may be necessary to enable each entity to access the relevant pre-MoG data and then determine how each respective entity wishes to proceed.

In RET’s case a read only copy was taken of the Slipstream Instance and TechnologyOne instance and access was granted for users that required it.  New RET staff were then added to the existing RET production instances.

The infrastructure that each instance resides on is also likely to need resolving for overall ownership.

Contracts and procurement

Contractual arrangements that are in place in the former department need a number of activities undertaken fairly quickly: 

  • Where the contract needs to continue then a novation to one of the departments (even as an interim arrangement) needs to occur to enable continued service provision.
  • Identification of which department can best continue with each individual contract and novation/notification then occurs.
  • Identification of contracts that are no longer required and termination/decoupling processes commenced with legal advice where necessary.

For the following coordinated procurement arrangements contact Finance’s ICT Procurement or ICT Strategic Sourcing at ICTProcurement@finance.gov.au or (02) 6215 1597 for assistance:

  • Microsoft Volume Sourcing Arrangements
  • Data Centre Facilities and Migration Services Panels
  • ICT Hardware and Associated Services Panel
  • Internet Based Network Connection Services Panel
  • Telecommunications Management  Panel
  • Telecommunications Mobile Panel
  • Telecommunications Invoice Reconciliation Services Panel
  • Australian Government Telecommunications Arrangement
  • Cloud Services Panel
  • Australian Government Internet Gateway Reduction Program

For any entity master contract changes related to major office machines (MOMs), contact the MOMs Help Desk at MOMContract@finance.gov.au or (02) 6215 2264 for assistance.

Directory services/email arrangements

Arranging the transfer of directory information and creating new logins will be a high priority area for access to most business and corporate systems.

The transfer will be dependent on the availability of the new organisational structure.

Clear guidelines are required on email export, outlining what entities must deliver and what data format is expected for imports/exports.

It’s important to confirm a list of affected staff, and the historical data to be provided in relation to electronic email and archives.

Where necessary divert electronic mail, subject to a review of potential security issues. 


Entity experience — DEEWR:

For the Innovation MoG, DEEWR provided mailbox PSTs and Enterprise Vault archives. Innovation then imported their email data. DEEWR also provided RAS access for some staff who continued to work on joint projects, as they still required access to DEEWR mailboxes and applications to perform their duties.

DEEWR continued to divert electronic mail once staff had moved for a period of six months.

Websites, Services and Domain names

Entities will need to make timely changes to public-facing websites and domain names to reflect organisational changes, new programmes and policies, and to provide redirection for any programmes or functions that have moved.

If the MoG change results in a new or redesigned public-facing service the Digital Service Standard External link icon must be applied.

If new hosting services are required, the Australian Government Cloud Computing Policy requires entities to consider adopting public cloud services where they are fit for purpose and provide value for money. Also see the Shared services/hosting arrangements section below.

Entities affected by MoG changes need to consider the registration of new domain names or transfer of existing domain names if: 

  • the entity is being established or renamed — if a gov.au domain name is required to support entity website and/or email functions, an application for the registration of a new domain name needs to be submitted
  • the entity is being abolished — existing domain name/s supporting entity website and/or email functions will need to be transferred or deleted. The gaining entity needs to submit an application to manage an existing domain name
  • a major function (initiative/programme etc) is being transferred — existing domain name/s supporting the initiative website and/or email functions will need to be transferred. Consideration as to how the content is to be divided and re-hosted or removed needs to be given. Once agreed by entities involved, the gaining entity needs to submit an application to manage an existing domain name. 

For further information refer to the Government Domain Names website: domainname.gov.au or contact dna@dto.gov.au.

Government online services

To update your entity information and contacts for online services you use, please refer to the following:

  • australia.gov.au — email web.team@digital.gov.au to update any pages on australia.gov.au External link icon that relate to your entity.
  • AusGovBoards — contact info@ausgovboards.gov.au or (02) 6215 1529 to update Australian Government board data for portfolios.
  • directory.gov.au — portfolio updaters email updater@finance.gov.au with a list of MoG changes required for the Australian Government online directory.
  • GovDex — please coordinate with your GovDex community administrator(s) for any communities relevant to your entity to add, remove or change membership.
  • govspace.gov.au blog sites — email govspace@finance.gov.au with details of the govspace website including URL to have the MOU updated to reflect the MoG change.

GovCMS — please contact govcms@finance.gov.au to update MOU’s, contact details and technical contacts.

Network services

Entities need to assess the ICT infrastructure requirements associated with the MoG change. It may be necessary to install communications cabling in new accommodation. New or changed requirements for long-haul communication links have a lead time and so need to be arranged early in the process to facilitate data transfer.

For the following government network services please contact Finance’s GNSB Service Desk to update your entity details on (02) 6215 1800 or servicedesk-GNSB@finance.gov.au

  • Government Administrative Voice Network (GAVN) — enables cost free telephone calls between government entities within Canberra via ICON infrastructure
  • Intra Government Communications Network (ICON) — provides secure point-to-point fibre connection between buildings in Canberra
  • Parliamentary Television (Parl TV) — provides entity access to Department of Parliamentary Services  television content via ICON infrastructure
  • Ministerial Communications Network (MCN) — supports over 200 sites nation-wide providing data carriage, secure voice, video and fax services to ministers, parliamentary secretaries and their host departments
  • TelePresence — provides secure, high definition, digital video conferencing across a range of Australian locations, including Parliament House, Commonwealth Parliament Offices located in each state and territory, departments of premiers and first ministers in the states and territories as well as numerous entity sites around Canberra
  • Data Carriage Service — utilises the MCN to enable transmission of data to connect geographically diverse locations across Australia. GNSB offers a straight-forward service for unsecured data carriage and a managed service to carry data up to PROTECTED level
  • FedLink — enables secure communications between Australian Government entities across the public infrastructure for data classified up to the PROTECTED level.
Outward facing contracts

Call centres, public telephone numbers, switchboard numbers and all publicly published email addresses will require your determination as to their continued need.

Agreed messaging and scripts need to be provided to switchboard operators as soon as is viable.

Parliamentary workflow

By June 2016, 40 NCEs will transition to the whole-of-government Parliamentary Workflow Solution (PWS) hosted by the Department of Education and Training (DET) External link icon. Other non-corporate Commonwealth entities who wish to implement a parliamentary workflow solution are required to implement the WOAG PWS, or seek to opt-out via submission through the Secretaries’ ICT Governance Board.  The 40 entities due to transition have been provided with a timetable for their transition.

As functions are transferred during a MoG change, there will be a need to re-evaluate the size of both the losing and gaining entities to determine the correct charging (or fee for service) regime — this will be negotiated with Finance.

Affected entities will work with DET to facilitate the transfer of entity data, at a cost to the entity.

Records management and archiving

Entities will need to consider the archiving of existing websites if: 

  • the entity is being abolished — the existing website may need to be archived with the National Archives of Australia; or
  • a major function (initiative/programme etc) is being transferred — the existing website may be considered for online archive by the developing entity and/or archiving with the National Archives of Australia (NAA)External link icon

For website archiving information, see the Recordkeeping section of the Web Guide at www.webguide.gov.au/recordkeeping/External link icon or contact the NAA at recordkeeping@naa.gov.au.

Security

The physical security around information systems must be in compliance with the Protective Security Policy FrameworkExternal link icon and the Information Security ManualExternal link icon. Areas to consider include: 

  • Updating access control lists for rooms/buildings for staff moving in both the gaining and transferring entities
  • Recovering staff passes by the transferring entity and issuing new ones by the gaining entity
  • If necessary updating security clearance information by gaining and transferring entities and advising the Australian Government Security Vetting Agency (AGSVA) — note that such information is normally part of an entities HR or business IT systems
  • Consider any additional requirements in relation to higher security clearances and where compartment briefings are involved.
Service desks

Thought must be given to final service desk arrangements and arrangements while entities are in transition.

Service desk software, processes and procedures will need to be reviewed and updated to reflect changes to IT systems and software.  Clear communication to staff will assist in minimising any confusion about which service desk to contact.

Shared drives

Shared drives are likely to be a primary information repository used by each entity in different ways.  If the parts of the former entity reside on the same network there is likely to be dual requirements from each entity for access of different levels.

Shared services/hosting arrangements

Where there is a need to establish an ongoing arrangement for the provision of services between entities, managing expectations around the nature of the relationship is critical.

In particular, there is a need to establish a common understanding and agreement that the relationship is one of collaboration and cooperation between entities, as distinct from a commercial contractual arrangement.

Decisions on product and service delivery need to be based on a sound evaluation of a supporting business case rather than the preference by an individual entity to exercise direct control over the product or service delivery.

Establish an understanding or agreement of the cost recovery mechanism up front early in the MoG process.

Investing in the development of internal ICT costing models and a better understanding of baseline business model (ICT internal benchmarking) can assist negotiations around future service delivery.

When providing funding for applications that are hosted by the original entity it is advisable to develop metrics to support use of the hosting capacity. 

Entity experience — DCCEE:

On the abolition of DCCEE, the entity which comprised approximately 700 employees plus contractors was divided between the Department of Resources Energy and Tourism (DRET) and the then Department of Industry, Innovation, Science, Research and Tertiary Education (Innovation) with roughly one third of staff moving to RET and the remainder to Innovation.

At the time of the MoG the former DCCEE’s ICT delivery model comprised core ICT Components being sourced via PM&C with platform hosted services provided by Fujitsu. The Fujitsu platform hosted services included the majority of DCCEE’s business applications and almost all websites.

Added complications for the DCCEE MoG experience was that RET was, at the time, sourcing its core ICT Services from Innovation. Additionally the Innovation network did not have sufficient capacity to absorb any increase of the size of the DCCEE systems. The eventual ICT outcomes of the MoG were:

  • DCCEE users that became part of Innovation (66%) remained on the PMC ICT Network at Nishi
  • All pre-MoG RET users were migrated away from the Innovation Network and were consolidated onto the PMC Network with the DCCEE users that became part of RET (34%)
  • Shared drives identification of the required DRET components that were needed meant that copies of the relevant data could be moved onto the refreshed DRET Network
  • Innovation users continue to have access to the original DCCEE G: drive data on a case by case basis with relevant approvals.

Entity experience — DEEWR:

DEEWR found that the variances in technologies used across government departments mean that any transition of system may require new technologies in the receiving environment, or re-development of the systems into technologies supported in the receiving department. Both of these options have significant cost/resource impacts

Whilst the technical directions and product choices of departments may be similar, the differences in configuration, versions, and implementations of the products require significant analysis to determine the preferred models.

The linking of the networks was key to enabling further integration in establishing the “One DEEWR ICT environment”. This linking was still problematic due to a range of technical issues

Social media presence

Entities must review their social media presence on Facebook, Twitter, entity blogs and consultative sites to determine if they need to be discontinued, redirected or transferred. 

For discontinued accounts, it is suggested to keep the accounts active but make them hidden, or change the profile, and communicate why they are no longer used — this approach will prevent others from poaching the account and using it for their own purposes. 

Ensure discontinued accounts meet archive requirements.  See www.naa.gov.au/records-management/agency/digital/socialmediaExternal link icon for more information.

Last updated: 18 October 2018