Part III: Budget process and reporting
Resource Management and Budget Training
September 2015
1
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Budget process and reporting
Part I: Resource
Management Framework
Part II: PGPA Act –
fundamentals for officials
Part III: Budget process
and reporting
• Commonwealth Resource
Management Framework
• Managing performance
• Budget context
• Risk management
• Budget Framework
• Australian system of
government
• Internal controls
• Planning and budgeting
• Commonwealth governance
arrangements
• Duties of officials
• Monitoring and reporting
• Using public resources
• Appropriations
• Spending relevant money
• PGPA Act
• Rules and policies
• Other relevant legislation
3
Commonwealth Resource Management
Framework
Constitution
PGPA Act
Appropriation
acts
Other
legislation
Policy
Legislative instruments
Entity internal controls
reporting and
evaluation
proper use appropriations
earned autonomy
accountability
planning objectives
and strategies
governance property management transparency
audit
efficiency PUBLIC RESOURCES spending
procurement performance grants management
implementing
and monitoring
risk management cooperation with others
commitments
budgeting and
operational planning
4
Context for the Commonwealth Budget
Part I: Resource
Management Framework
Part II: PGPA Act –
fundamentals for officials
Part III: Budget process
and reporting
• Commonwealth Resource
Management Framework
• Managing performance
• Budget context
• Risk management
• Budget Framework
• Australian system of
government
• Internal controls
• Planning and budgeting
• Commonwealth governance
arrangements
• Duties of officials
• Monitoring and reporting
• Using public resources
• Appropriations
• Spending relevant money
• PGPA Act
• Rules and policies
• Other relevant legislation
5
Commonwealth receipts and payments
General
taxation
Non-tax
revenue
Consolidated
Revenue Fund
6
General Government Sector (GGS)
revenue and expenses ($billion) (BP1)
700
600
500
400
300
Revenue
200
Expenses
100
0
Actuals
backward looking
(records and explanations)
Estimates
forward looking
(forecasts or projections)
7
Underlying cash balance estimates (%GDP)
8
Major fiscal aggregates
Underlying cash balance
(operating receipts) minus
(operating payments) minus
(Future Fund net receipts) minus
(investment in non-financial assets)
• cash measure
• shows whether government has
to borrow from financial
markets to cover its activities
Fiscal balance
(revenue) minus
(expenses) minus
(investment in non-financial assets)
• accrual measure
• shows whether the
government has to borrow
from financial markets to
cover its activities
9
Major fiscal aggregates
Net worth
Net debt
(assets) minus (liabilities)
(interest-bearing debts) minus
(associated financial assets)
• economic measure of
wealth
• common measure of the
strength of government’s
financial position
• used in cash accounting
10
Historical Budget surpluses and deficits
11
Budget Framework
Part I: Resource
Management Framework
Part II: PGPA Act –
fundamentals for officials
Part III: Budget process
and reporting
Constitution
PGPA Act
Appropriation
Other
• Managinglegislation
performance
• Commonwealth
Resource
acts
Management Framework
Entity internal controls • Risk management
• Australian
system of
• Internal
controls
reporting and
planning
objectives
appropriations
proper
use
evaluation
and
strategies
government
accountability
earned autonomy
• Duties of officials
governance property management transparency
• Commonwealth
governance
audit
PUBLIC RESOURCES
efficiency
•
Using
public resources
spending
procurement performance
grants management
arrangements
risk management cooperation with others
relevant
money
commitments • Spending
budgeting
and
implementing
• Appropriations
operational planning
and monitoring
Legislative instruments
Policy
• Budget context
• Budget Framework
• Planning and budgeting
• Monitoring and reporting
• PGPA Act
• Rules and policies
• Other relevant legislation
12
Budget legislation
Australian Constitution
Annual appropriation acts
Charter of Budget Honesty Act
• aims to improve policy outcomes and public scrutiny
• sets planning and reporting requirements
– Budget Papers (BP1 – 4)
– Mid-Year Economic and Fiscal Outlook (MYEFO) report
– Final Budget Outcome (FBO) report
– Pre-election Economic and Fiscal Outlook (PEFO)
– costings for election policies
– intergenerational reports
13
Budget legislation and policy
PGPA Act
• entities required to prepare budget estimates
• performance reporting – financial and non-financial
Section
36
Budget Process Operational Rules (BPORs)
• Cabinet sets rules and timing for each year’s
Budget process
Cabinet Handbook
• Cabinet Secretariat sets the process for preparing
Portfolio Budget Submissions (PBS)
14
Budget documents
Budget papers
•
•
•
•
No. 1 Budget Strategy and Outlook
No. 2 Budget Measures
No. 3 Federal Financial Relations
No. 4 Agency Resourcing
Appropriation bills
Budget related
•
•
•
•
•
Portfolio Budget Statements
Budget Speech
Budget Overview
Budget at a Glance
Ministerial Statements
• Appropriation Bill (No.1)
• Appropriation Bill (No.2)
• Appropriation (Parliamentary Departments) Bill (No.1)
15
Budget tools
Central Budget Management System (CBMS)
• Budget Estimates and Actuals Management (BEAM)
• Budget Policy and Coordination Database (BPCD)
• Appropriations and Cash Management (ACM)
INPACT integrated new policy and costings tracker
• allows Finance to track policies and costings
• captures submissions, NPPs, costing agreements and
Government decisions
16
Budget roles and responsibilities
Prime Minister and Cabinet
• agrees to the Budget process
• approves new revenue and expenditure decisions
Expenditure Review Committee (ERC)
• reviews NPP bids
• recommends to Budget Cabinet which proposals should be
developed for the Budget
Parliamentary Budget Office (PBO)
• prepares costings and analysis on financial or economic
matters, as requested by members of Parliament
17
Budget roles and responsibilities
Central departments (PM&C, Treasury, Finance)
•
•
•
•
manages Budget process (Finance and Treasury)
costs expense, non-tax revenue and capital proposals (Finance)
costs tax revenue proposals (Treasury)
manages Cabinet meetings and approvals for NPPs (PM&C)
Commonwealth entities
• develop NPPs as part of Portfolio Budget Submissions
• update their estimates and actuals for public reporting
18
Budget process and the
resource management cycle
Pre-Budget year
Budget year and
post-Budget year
• monitoring and
adjusting
• reporting
• audit
• fiscal strategy set for
the five Budget years
Reporting
and
evaluation
Planning
objectives
and
strategies
Implementing
and
monitoring
Budgeting
and
operational
planning
• allocation of public
resources over the
coming five years
• Parliament and the
public informed about
these decisions
• appropriations put to
Parliament for
approval
19
Budget process over 3 years
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Pre-Budget Year
Government
sets BPORs and
timing
Government
undertakes
initial strategic
budget planning
Portfolio
minister
proposes policy
priorities to the
PM
ERC considers policy priorities
Portfolio
departments
prepare draft
PBSs
Finance agrees
costings
contained in
draft PBSs
PM decides
which proposals
may be
submitted to
ERC
Portfolio
departments
lodge final PBSs
to Cabinet
Secretariat
ERC considers NPPs contained in
the PBSs
CBMS: pre-ERC
estimates
update
Risk and
assurance
processes
CBMS: Budget
estimates
update
Budget Cabinet
considers NPPs
approved by
ERC
Budget papers
produced
Budget night
(2nd Tuesday)
Budget papers
and
appropriation
bills introduced
to Parliament
Senate
Legislation
Committee
hearings
Appropriation
bills considered
and usually
passed by
Parliament by
end of June
Budget Year
Performance monitoring
MYEFO papers produced
Senate estimates hearings
Additional estimates bills passed by Parliament
(usually by end of April)
Additional Estimates appropriation bills prepared
Supplementary additional
estimates appropriation bills
prepared and introduced to
Parliament, if required
Post-Budget Year
Entities prepare annual reports
(audited by ANAO)
Final Budget
Outcomes (FBO)
published by
Finance
Entities’ annual
reports
published
Consolidated
Financial
Statements
(CFSs) audited
by ANAO and
published by
Finance
Finance Minister provides report
to Parliament on the use of
Advances to the Finance Minister
(AFMs)
Parliament
passes AFM
report (usually
by end of April)
20
Planning and budgeting
Part I: Resource
Management Framework
Part II: PGPA Act –
fundamentals for officials
Part III: Budget process
and reporting
• Commonwealth Resource
Planning
Management Framework
• Managing performance
• Budget context
• Risk management
• Budget Framework
•
• Internal controls
• Planning and budgeting
• Duties of officials
• Monitoring and reporting
objectives and
Australian system
of
strategies
government
• Commonwealth governance
arrangementsBudgeting and
•
operational
Appropriations planning
• Using public resources
• Spending relevant money
• PGPA Act
• Rules and policies
• Other relevant legislation
21
Setting Budget priorities
Process
Purpose
Planning
objectives
and
strategies
Budgeting
and
operational
planning
Indicative
timing
Government agrees the
Budget timeline
Sets the strategic direction for Budget planning September
Ministers submit draft
proposals
Outline draft portfolio proposals for the
coming Budget
September/
October
Estimates updated at
MYEFO
Estimates of spending and revenue are
updated and policy decisions since the last
Budget are reported
October/
November
Budget priorities are set
Expenditure Review Committee reviews
Ministers’ draft proposals and sets priorities
Portfolio department asked to prepare
portfolio budget submissions
Late
November/
December
NPP process begins
22
Where do new policy proposals (NPPs)
come from?
Planning
objectives
and
strategies
Budgeting
and
operational
planning
A few things to remember
• policy landscape is not a blank canvass
• new policy can involve a change to an existing
program or activity
Policies come from
• Government direction, such as election commitments
• entities, through improving core business or new
ideas
• other sources, such as reports produced within or
outside Government
23
Planning
objectives
and
strategies
Costing NPPs
Budgeting
and
operational
planning
Clarify policy context
Cost departmental
Cost administered
Prepare & assess
proposal
Calculate impact on resourcing
and Budget balances
24
Clarify the policy context
Planning
objectives
and
strategies
Budgeting
and
operational
planning
Information government needs to make a
decision about an NPP:
•
•
•
•
•
•
•
•
•
•
•
what is being proposed and why?
does the proposal have authority to come forward?
which entities will be affected?
is there agreement between entities?
how will the proposal be implemented?
how much will it cost?
is legislation required?
what are the risks and how will they be managed?
are there any broader impacts?
have the right people been consulted?
how will performance be measured?
25
Planning
objectives
and
strategies
Cost departmental items
Budgeting
and
operational
planning
Entities & Finance must:
understand the policy:
 expenses (including staffing costs)
 capital (including ICT)
 taxation revenue or non-taxation revenue
assess:
 general costing assumptions and information
 staffing costs and standard on-costs or
overheads
 non-standard operating costs
 operating costs associated with capital funding
protocols
 cost drivers (price/volume)
 options
apply:
 efficiency dividend
 indexation to forward
year costs as required
26
Cost administered items
Planning
objectives
and
strategies
Budgeting
and
operational
planning
Entities & Finance must:
understand the policy:
 expenses
 capital (including ICT and administered assets)
 revenue & non-taxation revenue
assess:
 assumptions behind the key cost drivers
 implementation and evaluation assumptions
 general information and costing data
apply:
 indexation to forward year costs as required
27
Cost capital and ICT
Planning
objectives
and
strategies
Budgeting
and
operational
planning
Entities & Finance must:
assess:
 does proposal require – full business case, gateway
clearance and/or Two-Pass process
 proposal (business case) with lifecycle costing
approach
 as required, seek expert input/assistance to assess
proposal (from Finance)
 operating expenses associated with the proposed capital asset
apply:
 indexation to forward year costs as required
28
Prepare and assess proposal – risk
Planning
objectives
and
strategies
Budgeting
and
operational
planning
Entities must assess the broader impacts that an NPP
could have, consider:
• nature and intent of the proposal
• components that are by nature higher risk
(e.g ICT, remote distance), which require more
detailed assurance processes
• possible impacts on the different sectors, either directly or
indirectly:
– regulatory impacts (consistent with Government’s red tape
reduction agenda)
– families, indigenous, regional areas and small businesses
29
Planning
objectives
and
strategies
Costing sign off
Budgeting
and
operational
planning
Clarify policy context
Cost departmental
Cost administered
Prepare & assess
proposal
Calculate impact on resourcing
and Budget balances
Costing sign-off
Proposal included in portfolio
Budget submission
30
Activity: preparing an NPP
Planning
objectives
and
strategies
Budgeting
and
operational
planning
NPP to build and support schools
in regional and remote areas
(Pages 2-7 of the Activity Book)
31
Planning
objectives
and
strategies
Finalising the Budget
Process
Budgeting
and
operational
planning
Purpose
Indicative
timing
Portfolio Budget
submissions
Departments prepare submissions
January
Department review of
submissions/ pre-ERC
estimates update
Central departments review submissions
ERC review of submissions
To recommend which proposals should be included in
the Budget (Finance Green Briefs inform this process)
March
Pre-budget review
Entities update estimates to reflect ERC’s
recommendations prior to finalising the Budget
April
Budget Cabinet
Special Cabinet meeting to consider and confirm ERC
decisions and agree on final Budget measures
Late April
Budget night
Government announces budget decisions and tables
Appropriation Bills in Parliament.
May
Finance and Treasury agree on costings for all NPPs
Finance prepares briefs for ERC and pre-ERC
estimates update
January/
February
32
Prepare Portfolio Budget submissions
Planning
objectives
and
strategies
Budgeting
and
operational
planning
• prepared on a portfolio basis
• presented to Cabinet by the relevant Minister
• Cabinet Handbook process:
– costings agreed between entity and Finance from relevant
entities and central departments
– exposure drafts of the submission distributed
– coordination comments obtained from relevant entities and
central departments
– final submissions then provided to ERC
33
Expenditure review principles
Appropriateness
Effectiveness
Strategic policy
alignment
Efficiency
Performance
assessment
Integration
Planning
objectives
and
strategies
Budgeting
and
operational
planning
Evidence
34
Planning
objectives
and
strategies
Budget Cabinet
Expenditure Review
Committee decisions
Budgeting
and
operational
planning
Budget Cabinet
Cabinet decisions
35
Budget delivered to Parliament
Planning
objectives
and
strategies
Budgeting
and
operational
planning
36
Budget documents presented on
Budget night
Budget papers
Planning
objectives
and
strategies
Budgeting
and
operational
planning
Budget related
• No. 1 Budget Strategy and Outlook
• Portfolio Budget Statements
• No. 2 Budget Measures
• Budget Speech
• No. 3 Federal Financial Relations
• Budget Overview
• No. 4 Agency Resourcing
• Budget at a Glance
Appropriation bills
• Ministerial Statements
• Appropriation Bill (No.1)
• Appropriation Bill (No.2)
• Appropriation (Parliamentary Departments) Bill (No.1)
37
Planning
objectives
and
strategies
Parliamentary consideration of
Appropriation Bills
Jul
Aug
Jan
Feb
Portfolio departments
prepare draft PBSs
Portfolio
departments lodge
final PBSs to Cabinet
Secretariat
Finance agrees
costings contained in
draft PBSs
Risk and assurance
processes
Sep
Oct
Government sets
timing
Portfolio minister
propose policy
priorities to the Prime
Minister
Government
undertakes initial
strategic budget
planning
Prime Minister
decides which
proposals may be
submitted to ERC
Mar
Apr
May
Jun
CBMS: Budget
estimates update
Budget papers
produced
Senate Legislation
Committee hearings
Budget Night
(2nd Tuesday)
Budget papers and
appropriation bills
introduced to
Parliament
Appropriation bills
considered and
usually passed by
Parliament by end of
June
ERC considers NPPs contained in the PBSs
CBMS: pre-ERC
estimates update
Budgeting
and
operational
planning
Budget Cabinet
considers NPPs
approved by ERC
Nov
Dec
ERC considers policy priorities
38
Monitoring and reporting
Part I: Resource
Management Framework
• Commonwealth Resource
Management Framework
Part II: PGPA Act –
fundamentals for officials
• Managing performance
• Budget context
• Risk management
• Budget Framework
Reporting and
• Australian system ofevaluation • Internal controls
government
• Commonwealth governance
arrangements
Part III: Budget process
and reporting
• Duties of officials
• Planning and budgeting
• Monitoring and reporting
• Using public resources
Implementing • Spending relevant money
• Appropriations and monitoring
• PGPA Act
• Rules and policies
• Other relevant legislation
39
Implementing
& monitoring
Budget year
Jul
Aug
Sep
Oct
Nov
Dec
Performance monitoring
Monthly financial reports
MYEFO papers produced
1 July – budget year
begins
Jan
Additional Estimates appropriation bills prepared
Feb
Mar
Apr
May
Jun
Performance monitoring
Monthly financial reports
Senate estimates hearings
Additional estimates bills introduced to Parliament
(usually passed by end of April)
If required, supplementary additional
estimates appropriation bills prepared and
introduced to Parliament
40
Planning
objectives
and
strategies
Additional annual appropriation Bills
Jul
Supplementary
additional
estimates
Additional
estimates
Budget
Aug
Sep
Oct
Nov
Dec
Budgeting
and
operational
planning
Jan
Feb
Mar
Apr
May
Jun
Bills 1 & 2
Bills introduced
in May
Bills 3 & 4
Bills introduced
February to April
Bills 5 & 6
Bills introduced
in May
41
Discussion:
Performance and updating estimates
Implementing
& monitoring
42
Legislative requirements to report
Reporting
and
evaluation
PGPA Act
• focuses on better information for Parliament and the public
• requires financial and performance reports from entities
• clear line of sight from corporate plans and PBS to
annual reports
• PGPA Financial Reporting Rule
Charter of Budget Honesty Act
• requires budget reporting
Auditor-General Act
• Auditor-General and the ANAO audit entity and company
financial reports
43
Financial and non-financial reporting
Jul
Aug
Sep
•
•
•
•
Pre-budget year:
Jul
Aug
Oct
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Reporting
and
evaluation
Apr
annual forecasts
Budget-related decisions of Government
fiscal outlook for the economy
entity corporate plans and Portfolio Budgets Statements
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Budget
night
May
Jun
Monthly financial statements
Budget year:
Jul
MYEFO / Additional Estimates
Aug
Post-budget year:
Sep
Oct
Final
Budget
Outcome
Entity
annual
reports
Nov
Consolidated
Financial
Statements
• performance monitoring
• updated estimates
• assessment of performance against plans and fiscal
strategy
Dec
Jan
Feb
Mar
Apr
May
Jun
• report performance
• compare actual results to previous estimates
44
End-of-year reporting –
Commonwealth entities and companies
Reporting
and
evaluation
Annual reports
non-corporate Commonwealth entities
corporate Commonwealth entities
Commonwealth
companies
• principal transparency
and accountability
document
• focus on performance –
financial and nonfinancial
• annual performance
statements
• tabled in Parliament
45
Accounting standards and statistics
Reporting
and
evaluation
Reports prepared to Australian Accounting Standards
(plus any modifications in the PGPA Financial Reporting Rule)
Australian Accounting
Standards
Focus on financial
performance,
position and
stewardship over
resources
AASB 1049
Harmonisation
Government Finance
Statistics
Focus on the
government’s
impact on the
economy
46
End-of-year reporting –
Whole of Government
Commonwealth public sector
General government sector (GGS)
non-corporate Commonwealth entities
corporate Commonwealth entities
Commonwealth
companies
Government business
enterprises (GBEs)
Public non-financial corporations
Reporting
and
evaluation
Consolidated
Financial
Statements
• Commonwealth public
sector
• disaggregated financial
information
• prepared by Finance
• audited
Public financial corporations
47
End-of-year reporting –
Whole of Government
General government sector (GGS)
non-corporate Commonwealth entities
corporate Commonwealth entities
Commonwealth
companies
Reporting
and
evaluation
Final Budget
Outcome (FBO)
• General government
sector only
• required by the Charter of
Budget Honesty Act
• prepared by Finance
• not audited
48
Timing of post budget year reports
Jul
Aug
Sep
Entities prepare annual reports (audited by ANAO)
Final Budget
Outcomes (FBO)
published by
Finance
Oct
Entities’ annual
reports published
Nov
Reporting
and
evaluation
Dec
Consolidated
Financial
Statements (CFSs)
audited by ANAO
and published by
Finance
49
Activity: Reviewing reports
Reporting
and
evaluation
(Page 8 of the Activity Book and
supplementary materials)
50
Budget process recap
Pre-budget year
Budget year and
post-Budget year
• monitoring and
adjusting
• reporting
• audit
• fiscal strategy set for
the five Budget years
Reporting
and
evaluation
Planning
objectives
and
strategies
Implementing
and
monitoring
Budgeting
and
operational
planning
• allocation of public
resources over the
coming five years
• Parliament and the
public informed about
these decisions
• appropriations put to
Parliament for
approval
51
Commonwealth Resource Management
Framework
Constitution
PGPA Act
Appropriation
acts
Other
legislation
Policy
Legislative instruments
Entity internal controls
reporting and
evaluation
proper use appropriations
earned autonomy
accountability
planning objectives
and strategies
governance property management transparency
audit
efficiency PUBLIC RESOURCES spending
procurement performance grants management
implementing
and monitoring
risk management cooperation with others
commitments
budgeting and
operational planning
52
Feedback and further information
Commonwealth Resource
Management Framework
• finance.gov.au/resourcemanagement
Australian Government
Budget
• budget.gov.au
Public Management
Reform Agenda
• pmra.finance.gov.au
53