1. 1 Operation Sunlight Enhancing Budget Transparency and Accountability 1 Tim Youngberry First Assistant Secretary Financial Reporting and Cash Management

2. 2 Overview Purpose and objective of briefing Operation Sunlight Implications for Central Budget Management System

3. 3 Operation 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.auwww.finance.gov.au

4. 4 Implementing Operation Sunlight Outcome Framework Transparency of Estimates Budget Reporting Long Term and IG Reporting Improving the Financial Framework Improving Budget Papers Implement Agreed Murray Recommendations and IG Reporting Improving the Financial Framework Improving Budget Papers Implement Agreed Murray Recommendations 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. Implementing Operation Sunlight Outcome Framework Transparency of Estimates Budget Reporting Long Term and IG Reporting Improving the Financial 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 4.3 Contingency Reserve SP 6.1 Implementing non-cash SP 6.2 Net Cost of Services SP 6.3 AFM Improving Budget Papers 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 Implement Agreed Murray Recommendations and IG Reporting Improving the Financial Framework Outcomes Review* Targets / Results* Appropriation Descriptions* Resource Statement Compact of 1965 Special Accounts Contingency Reserve Implementing non-cash Net Cost of Services AFM Improving Budget Papers Program Reporting* Accounting Harmonisation Redesign of the PAES / AR Other Appropriation Issues Redesign the PAES / Annual Report Implement Agreed Murray Recommendations Long Term Modelling

5. 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. 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. 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. 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. 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. 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. 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 Improving budget papers

12. 12 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 Improving budget papers

13. 13 Program Reporting

14. 14 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 Accounting Harmonisation Improving budget papers

15. 15 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 Improving budget papers

16. 16 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. 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 Transparency of estimates

18. 18 Consideration of reporting timeframes for monthly actuals later this year Consideration of reporting monthly actuals against estimated expense/revenue profiles Publication Dates Transparency of estimates

19. 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. 20 Treasury implementing agreed recommendations from the May 2008 ANAO performance report- Preparation of the Tax Expenditures Statement Tax Expenditures Budget reporting

21. 21 Review technical definition of Contingency Reserve in 2009- 10 Budget Paper 1 for readability No further changes Contingency Reserve Budget reporting

22. 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. 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. 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. 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. 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) Net cash funding arrangements Improving the financial framework

27. 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 Net cash funding arrangements Improving the financial framework

28. 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 Net Cost of Services Improving the financial framework

29. 29 Net Cost of Services

30. 30 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 Improving the financial framework

31. 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 Improving the financial framework

32. 32 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

33. 33 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

34. 34 Functional Requirements Budget Management -Financial consolidation Cash Management - Cash receipt & drawdown - Cash monitoring & forecasting Decision Making - Budget priority setting - Government budget strategies & 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 Architecture -Estimates Adjustment -Baseline Update Governance -Actuals Management Security Management

35. 35 Any questions? Contact Details Hawari Badri, Branch Manager, Budget Framework Branch –(02) 6215 2665; hawari.badri@finance.gov.auhawari.badri@finance.gov.au John Trabinger, Branch Manager, CBMS Redevelopment Project –(02) 6215 2836; john.trabinger@finance.gov.aujohn.trabinger@finance.gov.au