Operation Sunlight Enhancing Budget Transparency and ...

1 Operation Sunlight

Enhancing Budget Transparency and Accountability

1

Tim YoungberryFirst Assistant SecretaryFinancial Reporting and Cash Management

2Overview

• Purpose and objective of briefing

• Operation Sunlight

• Implications for Central Budget Management System

3Operation Sunlight

• 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

http://www.finance.gov.au/

4

ImplementingOperation Sunlight

OutcomeFramework

Transparencyof Estimates

BudgetReporting

Long Termand

IG Reporting

Improving the Financial

Framework

ImprovingBudget Papers

Implement AgreedMurray Recommendations

andIG Reporting


Framework




OutcomeFramework


BudgetReporting

Long Termand

IG Reporting


Framework

SP1.1

Outcomes Review*

SP1.2

Targets / Results*

SP 1.3

Appropriation Descriptions*

SP 1.4

Resource Statement

SP 3.1

Compact of 1965

SP 4.1

Special Accounts

SP 4.2

Tax Expenditures

SP 4.3

Contingency Reserve

SP 5.3

IGR

SP 6.1

Implementing non-cash

SP 6.2

Net Cost of Services

SP 6.3

AFM


SP 2.2

Program Reporting*

SP 2.3

Accounting Harmonisation

Redesign of the PAES / AR

SP 6.4

Other Appropriation

Issues

SP 2.5

Redesign the PAES / Annual Report


andIG Reporting


Framework

SP1.1

Outcomes Review*

SP1.2

Targets / Results*

SP 1.3


SP 1.4

Resource Statement

SP 3.1

Compact of 1965

SP 4.1

Special Accounts

SP 4.2

Tax Expenditures

SP 4.3

Contingency Reserve

SP 5.3

IGR

SP 6.1


SP 6.2


SP 6.3

AFM


SP 2.2

Program Reporting*

SP 2.3



SP 6.4

Other Appropriation

Issues

SP 2.5




OutcomeFramework


BudgetReporting

Long Termand

IG Reporting


Framework

SP1.1

Outcomes Review*

SP1.2

Targets / Results*

SP 1.3


SP 1.4

Resource Statement

SP 3.1

Compact of 1965

SP 3.2

Quarterly Reporting

SP 4.1

Special Accounts

SP 4.2

Tax Expenditures

SP 4.3

Contingency Reserve

SP 5.1

Long Term Modelling

SP 5.2

CoBHReview

SP 5.3

IGR

SP 6.1


SP 6.2


SP 6.3

AFM


SP 2.1

Revamping theBudget Papers

SP 2.2

Program Reporting*

SP 2.3


SP 2.4

GST


SP 3.3

PublicationDates

SP 6.4

Other Appropriation

Issues

SP 2.5




OutcomeFramework


BudgetReporting

Long Termand

IG Reporting


Framework

SP1.1

Outcomes Review*

SP1.2

Targets / Results*

SP 1.3


SP 1.4

Resource Statement

SP 3.1

Compact of 1965

SP 3.2

Quarterly Reporting

SP 4.1

Special Accounts

SP 4.2

Tax Expenditures

SP 4.3

Contingency Reserve

SP 5.1

Long Term Modelling

SP 5.2

CoBHReview

SP 5.3

IGR

SP 6.1


SP 6.2


SP 6.3

AFM


SP 2.1


SP 2.2

Program Reporting*

SP 2.3


SP 2.4

GST


SP 3.3

PublicationDates

SP 6.4

Other Appropriation

Issues

SP 2.5




OutcomeFramework


BudgetReporting

Long Termand

IG Reporting


Framework

SP1.1

Outcomes Review*

SP1.2

Targets / Results*

SP 1.3


SP 1.4

Resource Statement

SP 3.1

Compact of 1965

Quarterly Reporting

SP 4.1

Special Accounts

Tax Expenditures

SP 4.3

Contingency Reserve

SP 5.1

Long Term Modelling

CoBHReview

IGR

SP 6.1


SP 6.2


SP 6.3

AFM



SP 2.2

Program Reporting*

SP 2.3


GST


PublicationDates

SP 6.4

Other Appropriation

Issues

SP 2.5



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.


OutcomeFramework


BudgetReporting

Long Termand

IG Reporting


Framework

SP1.1

Outcomes Review*

SP1.2

Targets / Results*

SP 1.3


SP 1.4

Resource Statement

SP 3.1

Compact of 1965

SP 4.1

Special Accounts

SP 4.3

Contingency Reserve

SP 6.1


SP 6.2


SP 6.3

AFM


SP 2.2

Program Reporting*

SP 2.3



SP 6.4

Other Appropriation

Issues

SP 2.5



andIG Reporting


Framework

Outcomes Review*

Targets / Results*


Resource Statement

Compact of 1965 Special Accounts

Contingency Reserve



AFM


Program Reporting*



Other Appropriation

Issues



Long Term Modelling

5 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

6 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

7 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

8 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

9

• 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

Redesign the PAES/Annual

Report

Outcomes framework

10

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 sub-

functions

• Government to consider ongoing changes in the presentation of Budget Papers as required

Improving budget papers

11

• 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

Program Reporting


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• 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)

Program Reporting


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Program Reporting

EXAMPLE ONLY EXAMPLE ONLY2008-09 Budget year 2009-10 Budget year

Output Group 1.1: Infrastructure investment Program 1.1: Infrastructure investment

Administered Items: Administered Items:AusLink Building Australia Program- AusLink Investment - Investment- AusLink Black Spot Projects - Black Spot Projects- AusLink Heavy Vehicle Safety - Heavy Vehicle Safety- AusLink Roads to Recovery - Roads to Recovery- AusLink Strategic Regional - Strategic Regional- AusLink Strategic Regional - supplementary - Strategic Regional - supplementary- AusLink improving local roads - improving local roads- AusLink improving the National Network - improving the National Network- Funding for road projects other than under the AusLink (National Land Transport) Act 2005

- Funding for road projects other than under the AusLink (National Land Transport) Act 2005

Management of residual issues of former Australian National Railway Commission

Management of residual issues of former Australian National Railway Commission

Murray River Bridges - Federation Fund Project Murray River Bridges - Federation Fund ProjectProgram support

Departmental Outputs:Output 1.1.1: Infrastructure investment policy and programsOutput 1.1.2: Infrastructure investment coordination

Program 1.2 Infrastructure investment coordination

Program support

Outcome 1: Improved infrastructure across Australia throughinvestment in and coordination of transport and otherinfrastructure.

Outcome 1: Assisting the Government to provide, evaluate, planand invest in infrastructure across industry sectors.

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• 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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• 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

GST


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• 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

Compact of 1965

Transparency of estimates

17

• 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

Quarterly Reporting


18

• Consideration of reporting timeframes for monthly actuals later this year

• Consideration of reporting monthly actuals against estimated expense/revenue profiles

Publication Dates


19

• 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

Special Accounts

Budget reporting

20

• Treasury implementing agreed recommendations from the May 2008 ANAO performance report- Preparation of the Tax Expenditures Statement

Tax Expenditures

Budget reporting

21

• Review technical definition of Contingency Reserve in 2009-10 Budget Paper 1 for readability

• No further changes

Contingency Reserve

Budget reporting

22

• Finance is developing enhanced capabilities in long term modelling of expenditure estimates

• Enable long term view of program expenditure

Long Term Modelling

Long term and IGR

23

• 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

CoBH Review

Long term and IGR

24

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

Inter-generational

report

Long term and IGR

25

• 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

Net cash funding arrangements

Improving the financial framework

26

• 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)



27

• 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



28

• 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 Entitiesfor the period ended 30 June 2010

2009-10 2008-09$’000 $’000

Revenue

Revenue from government 151,482 106,745 Sale of goods and rendering of services 188,114 166,156 Fees and fines - -Interest - 42 Dividends - -Rental income - -Royalties - -Other revenue - -Total revenue 339,596 272,943

Gains

Sale of assets 371 755 Foreign exchange - -Reversals of previous asset write-downs - 3,312 Other gains 450 429 Total gains 821 4,496 Total Income 340,417 277,439

EXPENSES

Employee benefits 113,343 84,579 Suppliers 187,041 152,010 Grants - -Depreciation and amortisation 10,245 13,845 Finance costs 750 239 Write-down and impairment of assets - 232 Foreign exchange losses - -Losses from asset sales - -Other expenses 1,236 71 Total Expenses 312,615 250,976

Share of operating result of associates and joint ventures accountedfor using the equity method - -

Surplus (Deficit) before income tax 27,802 26,463

Income tax expense 5,684 17,410

Surplus (Deficit) 22,118 9,053

Surplus (Deficit) attributable to minority interests* - -Surplus (Deficit) attributable to the Australian Government 22,118 9,053

INCOME

(REPLACEMENT) COMPREHENSIVE INCOME STATEMENT (SHOWING NCOS)

for the period ended 30 June 2010

2009-10 2008-09

$'000 $'000EXPENSESEmployee benefits 113,343 84,579 Supplier 187,041 152,010 Grants - -Depreciation and amortisation 10,245 13,845 Write-down and impairment of assets - 232 Foreign exchange losses - -Losses from asset sales - -Finance costs 750 239 Other 1,236 71 Total expenses 312,615 250,976

LESS: RETAINED INCOMERevenueSale of goods and rendering of services 188,114 166,156 Fees and fines - -Interest - 42 Dividends - -Rental income - -Royalties - -Other revenue - -Total retained revenue 188,114 166,198

GainsSale of assets 371 755 Foreign exchange - -Reversals of previous asset write-downs and impairment - 3,312 Other gains 450 429 Total gains 821 4,496 Total retained income 188,935 170,694

Net cost of (contribution by) services 123,680 80,282

Revenue from Government 151,482 106,745

Share of surplus/deficit of associates and joint ventures accounted for using the equity method - -

Surplus (Deficit) before income tax on continuing operations 27,802 26,463 Income tax expense 5,684 17,410 Surplus (Deficit) after income tax on continuing operations 22,118 9,053

Discontinued operations: Post-tax operating result and post tax gains and/or losses - -

Surplus (Deficit) after income tax 22,118 9,053

Surplus (Deficit) attributable to minority interests - -Surplus (Deficit) attributable to the Australian Government 22,118 9,053

OTHER COMPREHENSIVE INCOMEChanges 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 - -

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• 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

AFM


31

• 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

Other Appropriation

Issues


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CBMS Redevelopment• 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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CBMS Redevelopment

• 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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Functional Requirements

Budget Management-Financial consolidation

Cash Management

- Cash receipt & drawdown - Cash monitoring & forecasting

Decision Making

- Budget priority setting- Government budgetstrategies & decisions

Reporting & Analysis

- Statutory reporting - User-defined reporting - Scenario modelling & analysis

Application Administration

- User access - Reference data set & chart of accounts - Business rules

Non-Functional requirements

Australian Government Budget and Financial Management Requirements – Functional & Non-functional

User Interface

Application, Integration & Data management

Infrastructure Management

Arc

hitec

ture

-EstimatesAdjustment-BaselineUpdate

Go

ve

rna

nc

e

-ActualsManagement

Security Management

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Any questions?

Contact Details

• Hawari Badri, Branch Manager, Budget Framework Branch– (02) 6215 2665; [email protected]

• John Trabinger, Branch Manager, CBMS Redevelopment Project– (02) 6215 2836; [email protected]

mailto:[email protected]

mailto:[email protected]

Operation Sunlight Enhancing Budget Transparency and ...

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