Enhancing Budget Transparency and
Accountability
Tim Youngberry
First Assistant Secretary
Financial Reporting and Cash Management

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• Purpose and objective of briefing
• Operation Sunlight
• Implications for Central Budget Management System

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• The Government’s reform agenda to improve the transparency and accountability of the Budget.
• Originally released in 2005 and confirmed as an election commitment by the incoming Government in late 2007.
• A revised Operation Sunlight policy document was released on 9 December 2008 taking into account progress on reforms as well as suggestions for improvement from the review conducted by the then Senator Andrew Murray.
• Details are available at www.finance.gov.au

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Key: Blue = Finance, Tan = Treasury, Yellow = Joint.
Green indicates that that Finance is responsible for overall coordination of Operation Sunlight initiatives.
* indicates integrated implementation
Murray Review recommendations accepted by the Government have been incorporated into Operation Sunlight, along with any consequential changes to coordinating agency roles.

Outcomes framework
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Outcomes Review
• Outcome statements-specify purpose of appropriations
• Outcome statements to meet higher standards of specificity and transparency
• Review has been completed in close consultation with agencies
• Most work has been completed and revised Outcome statements will be included in 2009-10 Budget

Outcomes framework
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Targets/Results
• Increased emphasis on program performance from 2009-10 Budget
• Where possible evaluating agency financial and non-financial results against targets/KPIs at the program level in Portfolio Budget
Statements
• Where possible targets/KPIs will be reported over multiple years in
Portfolio Budget Statements
• Results/trends reported to Government annually in addition to agencies annual reports (commencing from 2009-10)

Outcomes framework
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Appropriation
Descriptions
• More detailed and binding descriptions of the content of appropriations in 2009-10 Portfolio Budget Statements
• Portfolio Budget Statements redesigned 2008-09 budget
• Revised Outcome Statements 2009-10 budget which flow through to appropriation bills
• Explanatory memorandum provided with each set of appropriation bills (introduced with 2008-09 appropriation bills)

Outcomes framework
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Resource
Statement
• Allows readers to move from the agency level view of appropriations through to the expense view in the budgeted financial statements in Portfolio Budget Statements
• Current format presented in 2008-09 Portfolio Budget Statements
– Showed the total resources available from all origins (appropriation types and titles of each special appropriation) and included estimates of prior year amounts available
• Further changes at the outcome level will be made for the 2009-10
Budget

Outcomes framework
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Redesign the
PAES/Annual
Report
• Portfolio Additional Estimates Statements same format as
2008-09 Portfolio Budget Statements
• 2008-09 Annual Report to match 2008-09 Portfolio Budget
Statements
• Further changes in 2008-09 Annual Report to align outcome reporting with Budget reporting

Improving budget papers
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Improving
Budget Papers
• Introduced additional information in Statement 6 (expenses and net capital investment) of 2008-09 Budget Paper No.1
– Included greater break down of trends in functions and subfunctions
• Government to consider ongoing changes in the presentation of Budget Papers as required

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Improving budget papers
Program
Reporting
• 2009-10-Revised program lists in CBMS and Portfolio
Budget Statements
• Financial data for programs to cover the forward estimates period and be published in portfolio budget statements
• Non-financial performance information to be included for programs

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Improving budget papers
Program
Reporting
• Outcomes/programs structure agreed with all agencies
• Financial data to be comprehensive for each program
(including allocation of departmental expenses)
• Changes also to 2009-10 annual reporting
• Should result in better quality submissions to Government for new policy proposals (more evidence based policy)

Output Group 1.1: Infrastructure investment
Administered Items:
AusLink
- AusLink Investment
- AusLink Black Spot Projects
- AusLink Heavy Vehicle Safety
- AusLink Roads to Recovery
- AusLink Strategic Regional
- AusLink Strategic Regional - supplementary
- AusLink improving local roads
- AusLink improving the National Network
- Funding for road projects other than under the AusLink
(National Land Transport) Act 2005
Management of residual issues of former Australian National
Railway Commission
Murray River Bridges - Federation Fund Project
Departmental Outputs:
Output 1.1.1: Infrastructure investment policy and programs
Output 1.1.2: Infrastructure investment coordination
Program Reporting
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EXAMPLE ONLY
2008-09 Budget year
Outcome 1: Assisting the Government to provide, evaluate, plan and invest in infrastructure across industry sectors.
EXAMPLE ONLY
2009-10 Budget year
Outcome 1: Improved infrastructure across Australia through investment in and coordination of transport and other infrastructure.
Program 1.1: Infrastructure investment
Administered Items:
Building Australia Program
- Investment
- Black Spot Projects
- Heavy Vehicle Safety
- Roads to Recovery
- Strategic Regional
- Strategic Regional - supplementary
- improving local roads
- improving the National Network
- Funding for road projects other than under the AusLink
(National Land Transport) Act 2005
Management of residual issues of former Australian National
Railway Commission
Murray River Bridges - Federation Fund Project
Program support
Program 1.2 Infrastructure investment coordination
Program support

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Improving budget papers
Accounting
Harmonisation
• Implementation of AASB1049 Whole of government and general government sector financial reporting
• Harmonised Statement in 2008-09 Budget Paper 1 reduced three sets of financial statements published in previous years’ budget papers to a single set of financial statements
• Harmonisation at agency level progressing. AASB to issue draft standard in first quarter of 2010

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Improving budget papers
GST
• Recognised as a Commonwealth Tax in 2006-07
Consolidated Financial Statements
• All Australian Government Budget and outcome financial reports (and associated measures) now include GST and associated grants to the states/territories as an Australian
Government revenue and expense

Transparency of estimates
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Compact of 1965
• Relates to the allocation of items between appropriation bill 1 (ordinary annual services of the Government) and appropriation bill 2 (not the ordinary annual services of the Government) (and their equivalents)
•
Allocation of items between appropriation bills important for the purposes of sections 53 and 54 of the Australian Constitution
– S 53 in part, states that the Senate may not amend appropriation bills for the ordinary annual services of Government while S 54 states that appropriations for the ordinary annual services of Government shall deal only with such appropriations
•
Appropriation Bill 1 may not be amended by the Senate, but can be rejected. Appropriation Bill 2 may be amended by the Senate
• Government to consider options later in the year

Transparency of estimates
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Quarterly
Reporting
• Government currently publishes consolidated revenue and expense information at Budget time, as part of the Mid Year
Economic and Fiscal Outlook, and through the (audited)
Consolidated Financial Statements
• Government considers current levels of disclosures appropriate

Transparency of estimates
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Publication Dates
• Consideration of reporting timeframes for monthly actuals later this year
• Consideration of reporting monthly actuals against estimated expense/revenue profiles

Budget reporting
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Special Accounts
• Special accounts are a specific type of funding within the
Consolidated Revenue Fund to be used for specific purposes
• Register of Special Accounts included in 2008-09 Budget
Paper 4
• 2009-10 Budget Paper 4 to include estimated opening balances, receipts, payments, adjustments and closing balances

Budget reporting
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Tax Expenditures
• Treasury implementing agreed recommendations from the
May 2008 ANAO performance reportPreparation of the Tax
Expenditures Statement

Budget reporting
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Contingency
Reserve
• Review technical definition of Contingency Reserve in 2009-
10 Budget Paper 1 for readability
• No further changes

Long term and IGR
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Long Term
Modelling
• Finance is developing enhanced capabilities in long term modelling of expenditure estimates
• Enable long term view of program expenditure

Long term and IGR
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CoBH Review
• Charter of Budget Honesty Act is legislation containing the framework for the conduct of Government fiscal policy
• A review of the Charter of Budget Honesty is underway
• Government to consider options later in the year

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Long term and IGR
Intergenerational report
• Government has agreed to amend the Charter of Budget
Honesty Act 1998 to require publication of the IGR once every 3 years

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Improving the financial framework
Net cash funding arrangements
• Change to the calculation of base appropriations to a cash requirements system, not based on accrual expenses
• Expected to be budget neutral
– There will be a change in the timing of when appropriations are received, not the overall amounts
– Funding will be provided in the year in which it is required

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Improving the financial framework
Net cash funding arrangements
• Mostly affects funding for depreciation expenses and other non-cash items – to be removed from “revenue” appropriations and to be replaced with a “capital budget” appropriation
• Asset management and reporting (Capital Budget Statement;
Statement of Asset Movements)

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Improving the financial framework
Net cash funding arrangements
• Introduction of collection development budgets for designated collection institutions’ heritage and cultural assets (no longer funding depreciation expense) (2009-10
Budget)
• Net cash funding for General Government Sector agencies
2010-11 Budget

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Improving the financial framework
Net Cost of
Services
• Change to the presentation of the Income Statement for general government sector non-profit entities to focus on net cost of services rather than profit or loss
• Recognises the nature of public sector activity
• Revised presentation for 2009-10 Portfolio Budget Statements and
2009-10 annual financial statements
• No change for 2008-09 annual financial statements

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(EXISTING) INCOME STATEMENT for Not-For-Profit Reporting Entities for the period ended 30 June 2010
2009-10
$’000
INCOME
Revenue
Revenue from government
Sale of goods and rendering of services
Fees and fines
Interest
Dividends
Rental income
Royalties
Other revenue
Total revenue
Gains
Sale of assets
Foreign exchange
Reversals of previous asset write-downs
Other gains
Total gains
Total Income
EXPENSES
Employee benefits
Suppliers
Grants
Depreciation and amortisation
Finance costs
Write-down and impairment of assets
Foreign exchange losses
Losses from asset sales
Other expenses
Total Expenses
Share of operating result of associates and joint ventures accounted for using the equity method
Surplus (Deficit) before income tax
Income tax expense
Surplus (Deficit)
Surplus (Deficit) attributable to minority interests*
Surplus (Deficit) attributable to the Australian Government
151,482
188,114
-
-
-
-
-
-
339,596
371
-
-
450
821
340,417
113,343
187,041
-
10,245
750
-
-
-
1,236
312,615
-
27,802
5,684
22,118
-
22,118
2008-09
$’000
106,745
166,156
-
42
-
-
-
-
272,943
755
-
3,312
429
4,496
277,439
84,579
152,010
-
13,845
239
232
-
-
71
250,976
-
26,463
17,410
9,053
-
9,053
Net Cost of
Services
(REPLACEMENT) COMPREHENSIVE INCOME STATEMENT (SHOWING NCOS) for the period ended 30 June 2010
EXPENSES
Employee benefits
Supplier
Grants
Depreciation and amortisation
Write-down and impairment of assets
Foreign exchange losses
Losses from asset sales
Finance costs
Other
Total expenses
LESS:
RETAINED INCOME
Revenue
Sale of goods and rendering of services
Fees and fines
Interest
Dividends
Rental income
Royalties
Other revenue
Total retained revenue
Gains
Sale of assets
Foreign exchange
Reversals of previous asset write-downs and impairment
Other gains
Total gains
Total retained income
Net cost of (contribution by) services
Revenue from Government
Share of surplus/deficit of associates and joint ventures accounted for using the equity method
Surplus (Deficit) before income tax on continuing operations
Income tax expense
Surplus (Deficit) after income tax on continuing operations
Discontinued operations: Post-tax operating result and post tax gains and/or losses
Surplus (Deficit) after income tax
Surplus (Deficit) attributable to minority interests
Surplus (Deficit) attributable to the Australian Government
OTHER COMPREHENSIVE INCOME
Changes in asset revaluation reserves
Gains/losses on foreign currency translation
Actuarial gains/losses on defined benefit plans
Gains/losses on available for sale financial assets
Gains/losses on cash flow hedging instruments
2009-10
$'000
2008-09
$'000
113,343
187,041
-
10,245
-
-
-
750
1,236
312,615
84,579
152,010
-
13,845
232
-
-
239
71
250,976
188,114
188,114
188,935
123,680
151,482
27,802
5,684
22,118
371
450
821
-
-
-
-
-
-
-
-
-
-
22,118
-
22,118
-
-
-
-
-
166,156
-
42
-
-
755
-
3,312
429
4,496
170,694
80,282
106,745
-
26,463
17,410
9,053
-
9,053
-
9,053
-
-
-
-
-
-
-
166,198

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Improving the financial framework
AFM
• Advance to the Finance Minister- provision, authorised by the annual Appropriation Acts and made available to the
Finance Minister as a contingency fund, for situations where agencies urgently require funds
• Increased limits in 2008-09
• New report format to be published after end of 2008-09 financial year

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Improving the financial framework
Other
Appropriation
Issues
• Register of standing appropriations included in 2008-09
Budget Paper 4
• Seeking greater clarity on
– Section 32 transfers
– Section 31 (net appropriations) regulations
– Alignment of cash and appropriation treatments of GST for departmental and administered
• Review of loan appropriations

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• Phase One: First Pass Business Case with Government approval to develop a Second Pass Business Case. First Pass Approval for the
Project was received on 24 November 2008
• Phase Two: Development of the Second Pass Business Case.
Finance intends to submit the second pass business case later in calendar 2009
•
Phase Three: Project Build (if business case approved)
– Delivery of the Project as detailed in the Second Pass Business Case

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• The focus of the Redevelopment Project is to deliver a system that enables Finance to meet its core responsibilities to Government for financial management, monitoring and reporting
• Without compromising core requirements, the
Redevelopment Project will enhance the existing system capability for agencies to provide and analyse information submitted to Finance
• The mandate of the Project is to redevelop the financial management system, not financial management policy

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Australian Government Budget and Financial Management Requirements
–
Functional & Non-functional
Functional Requirements
Reporting & Analysis
- Statutory reporting - User-defined reporting - Scenario modelling & analysis
Budget Management
-Financial consolidation
-Estimates
Adjustment
-Baseline
Update
-Actuals
Management
Cash Management
- Cash receipt & drawdown
- Cash monitoring & forecasting
Decision Making
- Budget priority setting
- Government budget strategies & decisions
Application Administration
- User access - Reference data set & chart of accounts - Business rules
Non-Functional requirements
Security Management
User Interface
Application, Integration & Data management
Infrastructure Management

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• Hawari Badri, Branch Manager, Budget Framework Branch
– (02) 6215 2665; hawari.badri@finance.gov.au
• John Trabinger, Branch Manager, CBMS Redevelopment
Project
– (02) 6215 2836; john.trabinger@finance.gov.au