CHAPTER 2
- A BRIEF HISTORY OF THE PORTFOLIO BUDGET STATEMENTS
The Portfolio Budget Statements (PBS)
The PBS are the budget-related papers tabled shortly after
the main budget papers and which contain details of budget initiatives
and explanations of the appropriations for each portfolio. Their purpose,
in the words of the Department of Finance (DoF), is 'to inform Senators
and Members of the proposed allocation of resources to Government programs
by agencies within the portfolio' and specifically, 'the facilitation
of Senators' and Members' understanding of the proposed appropriations'
in the Appropriation Bills under review. They should 'provide sufficient
information, explanation and justification to enable Parliament to understand
the purpose of each item proposed in the Bills'.[1]
Unlike departmental and agency annual reports, which are
signed off by the secretary or head of the department or agency, the PBS
are formally ministerial documents, tabled to meet the respective ministers'
accountability obligations to Parliament.
The PBS are prepared by portfolios following guidelines
issued by DoF. Many portfolios have chafed at the constraints of the recommended
format and of the 'one size fits all' approach, yet most adhere fairly
closely to it - a tribute, perhaps, to the persuasive powers of DoF. In
its 1997-98 guidelines, however, DoF loosened the reins somewhat, stating:
We commend this [recommended format for the PBS] to you,
but it is up to you to decide on the detail to include in your PBS. The
Guidelines are generic, advisory (as distinct from mandatory) and should
be applied with discretion and a view to your own circumstances.[2]
The guidelines are not set in concrete but are revised after
each estimates round, following consultation with portfolios and the Senate
Committee Office. It would be fair to say that the latter body does not
always give the guidelines the attention they deserve, for the very cogent
reason that by then, in the parliamentary program, the caravan has moved
on, other legislation is demanding attention and the next estimates round
is relatively far away. Should there be deficiencies in the guidelines,
therefore, the blame must be shared by ourselves.
How the PBS evolved
The Explanatory Notes era
The first estimates committees were set up in June 1970,
in a 'first systematic attempt to supplement the consideration of any
legislation in the plenary chamber by preliminary enquiry by small committees
of parliamentarians'.[3] Their establishment was, in part at
least, a reaction to the increasing complexity of the Appropriation Bills.
They provided a forum in which departmental officers could respond to
detailed questions of fact, leaving ministers to respond to questions
of policy.
Apart from the Appropriation Bills themselves (or more precisely
now, the Particulars of Proposed Expenditure in respect of the year
xxxx, and the Particulars of Certain Proposed Expenditure in respect
of the year xxxx, that is, the bills with a different cover to allow
them to be discussed before their formal introduction into the Senate)
senators examining the estimates had explanatory documentation provided
to them by ministers. At the first estimates hearing when Estimates Committee
A examined the estimates for the then Department of Supply on 17 September
1970, the minister present, Senator Sir Kenneth Anderson, when
asked if he wished to make an opening statement, replied:
Actually, Mr Chairman, I have an accompanying document which
I propose to circulate with your leave, which gives some explanation in
relation to various items in the Department.[4]
Not all ministers provided such explanatory material but
the practice caught on quickly, with four committees referring to it in
their reports on the examination of the additional estimates in April
1971, albeit mostly with the qualification that they needed the documentation
sooner. As Estimates Committee C reported:
The Committee appreciates the breadth of explanation of
the various items of additional expenditure which has been made available
to it. The Committee is, however, of the opinion that the explanatory
notes would be of much greater value to the Committee were they to be
distributed some two weeks prior to the Committee's examination of Departmental
estimates.[5]
Within a year the estimates committees, while still professing
gratitude for the provision of the explanatory material, were offering
suggestions on its improvement:
the Committee does consider that the value of the explanatory
notes would be enhanced by the addition of a chart outlining the organisational
structure in broad terms. The provision of such a chart would enable senators
to more readily establish the areas within a Department under which the
various heads of expenditure fall.[6]
Criticisms emerged promptly also, with Estimates Committee
B reporting that it was unable to complete its examination of the 1972-73
budget estimates for the Postmaster-General's Department within the appointed
time because the explanations in the explanatory notes relating to a particular
item of expenditure were too brief.[7] In the same round, Estimates Committee
D took exception to the practice of many departments appropriating large
amounts under the item 'Incidental and other Expenditure'.[8]
The growing importance of the explanatory notes as accountability
tools came to be recognised, with Estimates Committee A in its November
1973 report suggesting 'that consideration be given to a procedure that
the explanatory notes be tabled in the Senate so that they may become
public parliamentary documents'.[9] Its persistence with this campaign bore fruit in
1976 when the then Minister for Administrative Services, Senator Withers,
advised the Senate:
the Government has given consideration to the distribution
of departmental explanatory notes, which until now have been made available
only to senators to assist them in their consideration of the annual Estimates.
The Senate will recall that Estimates Committee A ... for the last three
years has recommended that action be taken to make the documents available
for public perusal, thereby making possible a wider consideration of these
most comprehensive and valuable documents and a greater understanding
of the operations of government administration. It has now been agreed
that this should be done, and Senate ministers have been asked to table
in the Senate copies of all explanatory notes relating to the Estimates
...[10]
An emerging issue in the early 1970s was that of standardisation,
given that senators attending more than one estimates committee were in
a position to compare several models of explanatory notes. The Chairmen
of Estimates Committees addressed this question with the assistance of
the Department of Finance and in 1978 reported on an agreed standard format
for the explanatory notes. Departments were to show for each item of each
sub-division of each division the following details: the current estimate;
the previous year's appropriation and expenditure and the percentage difference
between the two; the purpose of the item; general comment; a dissection
of the estimate; and a reconciliation between actual expenditure for the
preceding year and the proposed expenditure. The accompanying DoF guidelines
stressed that the above were minimum requirements and that 'such additional
information that is considered relevant and necessary to satisfactorily
explain the estimate should be provided'.[11]
Two estimates committees (A and E) recorded their appreciation
of the standardisation of the explanatory notes in their reports, with
the former also noting that two agencies (the Department of the Prime
Minister and Cabinet and the Australian Development Assistance Bureau)
had originally presented their notes in the old format.
The impact of program budgeting
In examining the estimates in the 1970s, senators tended
to focus on the use of resources such as travel, consultants, postage,
salaries and so forth, principally because the Appropriation Bills presented
expenditure in a line-item format and thus drew attention to such inputs.
Various reviews of public expenditure[12] promoted a greater focus on the
outcomes of expenditure and in 1984 the then government announced its
intention to trial program budgeting as part of a package of financial
reforms. Program budgeting focuses on the purpose and performance of programs
for which funds are appropriated, allowing more effective scrutiny of
whether objectives are being achieved, and if so, how efficiently. Given
the magnitude of the contemplated change to program budgeting, the Senate
adopted a recommendation of Estimates Committee A, referring to this committee's
predecessor, the Finance and Government Operations Committee, the proposed
changes to the presentation of the appropriations, and the consequential
changes to the content and format of the explanatory notes.[13]
That committee reported twice in 1985,[14] firstly to consider the DoF suggested
format for the explanatory notes for three trial departments and secondly,
to evaluate the experience of the estimates committees which examined
the estimates for those departments using program-based explanatory notes.
The second report was hardly a ringing endorsement of program budgeting:
it pointed out that performance measures could only be developed over
time; that comparative material from previous years was unavailable; that
there were discrepancies between the line-item Appropriation Bills and
the program-budget based documents; and that it was not always clear what
expenditure related to Appropriation Bill No. 2. In broad terms, it deferred
judgment until the problems had been ironed out.
The government confirmed its decision to move to program
budgeting in October 1985. Subsequent estimates committee reports, while
recognising the importance of attempting to concentrate parliamentary
scrutiny on the purpose of government programs and on the efficiency and
effectiveness with which they were carried out, pointed to deficiencies
in the compilation of the explanatory notes. The major complaint was the
discrepancies in the reconciliation between the Appropriation Bills and
the program outlays, though this problem receded as agencies became more
accustomed to the new format. Performance information was frequently criticised
for being overly descriptive. This was one of the triggers which led Estimates
Committee D to recommend that the adequacy of the departmental explanatory
notes and related matters be referred to this committee following the
1989-90 budget estimates round.
In its 1991 report, Estimates Committee Documentation
and Procedures, the committee noted the views of many agencies that
the need for major change to the format of the documentation was limited.
It acknowledged that:
It would be too much to hope that every sub-program in every
set of Explanatory Notes will be described to the complete satisfaction
of all senators. Cases will always arise ... in which presentations by
departments will not meet the expectations of some senators. In part,
this will be because different senators will have different standards,
expectations and levels of involvement in the scrutiny of estimates.[15]
The present committee concurs with that view. It also notes
with interest the lengthy discussion by its predecessor of the difficulties
associated with the presentation of performance information - the practical
difficulties of determining what results should have been, what they actually
were and what it cost to achieve them. Even in the case of quantifiable
results, the challenge for committees considering estimates is to determine
whether performance targets have been set at an appropriate level. The
1991 report expressed doubt as to whether such committees were in a position
to do this:
Much of the background information necessary to make sense
of performance information in Explanatory Notes is available only by further
questioning of departmental officers. But this questioning depends for
its effectiveness on the questioners having already developed an adequate
base of knowledge on which they can frame appropriate questions and from
which they can understand the answers. The vagaries of political life
work against the acquisition of such knowledge by most members of estimates
committees. Nor should it be assumed that senators enter politics intending,
or with the aptitude, to undertake detailed audits of public service operations.[16]
Then as now, the information-gathering role of the estimates
process, together with its overtly party-political character, militate
against a consistent examination of performance information.
The impact of May budgets
The explanatory documentation made available to the estimates
committees continued to evolve, undergoing a name change for the 1991-92
budget to 'Program Performance Statements' (PPS) and again in 1994-95
to 'Portfolio Budget Measures Statements' (PBMS), the latter change coinciding
with the move to a May budget in 1994, and again in 1995-96 to 'Portfolio
Budget Statements'. In this period, the documents were reduced to a B5
format but retained the same yellow covers. The committee suspects the
frequent name changes merely served to confuse, with senators now tending
to refer to the documents more frequently by terms such as 'the little
yellow book' than by name.
The PBMS were remarkably slim volumes, reflecting the 'rationalisation'
required given that performance information relating to the previous budget
would be incomplete in May (the intention was that performance information
be provided in the annual reports and therefore available for examination
when the additional estimates were considered in the spring parliamentary
sittings). October 1994 also saw a change recommended by the committee
in its 1991 report, to the consideration of the estimates by the standing
committees.
The return to an August budget in 1996 was, in the words
of DoF, 'an aberration which complicated the presentation of the PBS'
[17] and one which may also have contributed to the
level of criticism which led to the reference of the format of the documents
to this committee.
The PBS today
The DoF guidelines for the compilation of the PBS are revised
every year, after consultation with the stakeholders. Recent changes have
included a degree of flexibility in the level of appropriation reporting,
the addition of a table of contents, a glossary, a statement of principles
on which the PBS rest, prominent reconciliation tables, and cross-referencing
within the PBS and to other documentation.
In its submission to the committee, DoF also outlined what
it regards as the characteristics of a good PBS under the present guidelines.[18] Broadly speaking, the committee agrees with the
features outlined. It notes, however, that there are two areas in which
representatives of other portfolios have expressed views: the level of
reporting; and the accommodation of legislation committee interest. According
to DoF, the PBS should 'report appropriation information at an appropriate
level (program, subprogram or component) having regard to materiality,
parliamentary and public interest' and should 'have regard to any
advice the Senate Committee staff may have in pinpointing particular areas
within your portfolio that are of interest to the Committee'. Most portfolios
have welcomed the flexibility afforded by the above changes[19] which are intended to address some of the problems
canvassed in the following chapter. The committee notes, however, the
concern expressed in the submission from Industry, Science and Tourism
minister John Moore regarding the 'increasing element of reporting discretion
which ... has the potential to detract from effective scrutiny because
it introduces an element of inconsistency both within, and between, portfolios'.[20] The committee acknowledges the difficulty
of the task of striking the right balance in the PBS guidelines between
providing sufficient flexibility to cater for the reporting needs of diverse
portfolios and providing a degree of standardisation to accommodate senators
using a range of PBS.
In the course of its inquiry, the committee received both
general suggestions about the appropriate focus for the PBS and detailed
suggestions for changes to the PBS and in particular, to the tables they
contain.[21] While the committee was attracted to the rationalisations
suggested, it considered that on balance, a more pressing consideration
was the format the PBS should take under an output-based accrual budgeting
framework and that there was little point in recommending changes for
the one remaining year of program-budgeting-based PBS. As DoF itself has
made suggested changes to its guidelines for the 1998-99 PBS, the committee
has considered them briefly in Chapter 4.
[Return to Table of Contents]
Footnotes:
[1] Department of
Finance, Submission, p. 3.
[2] ibid., p. 5.
[3] Reid GS and Forrest
Martyn, Australia's Commonwealth Parliament 1901-1988, Melbourne
University Press, 1989, p. 360.
[4] Senate Estimates
Committee A Hansard, 17 September 1970, p. 1.
[5] Senate Estimates
Committee C, Report, April 1971.
[6] Senate Estimates
Committee E, Report, November 1971.
[7] Senate Estimates
Committee B, Report, November 1972.
[8] Senate Estimates
Committee D, Report, November 1972.
[9] Senate Estimates
Committee A, Report, November 1973.
[10] Senate Hansard,
25 August 1976, p. 285.
[11] Estimates Committee
Chairmen, Estimates Committees: Report of Chairmen on the Form and
Contents of Explanatory Notes and Staffing of Estimates Committees,
Canberra, 1978 (PP16/1978), p. 2.
[12] See, for example,
House of Representatives Standing Committee on Expenditure, Parliament
and Public Expenditure, 1979; Reid Review of Public Administration,
1983.
[13] Journals
of the Senate, 19 March 1985, p. 92.
[14] Senate Standing
Committee on Finance and Government Operations, Report on Changes in
the Presentation of the Appropriations and Departmental Explanatory Notes,
PPNo. 242/1985; Second Report on Changes in the Presentation of the
Appropriations and Departmental Explanatory Notes, 1985.
[15] Senate Standing
Committee on Finance and Public Administration, Estimates Committee
Documentation and Procedures, 1991.
[16] Senate Standing
Committee on Finance and Public Administration, Estimates Committee
Documentation and Procedures, 1991, p. 55.
[17] Department
of Finance, Submission, p. 2.
[18] ibid., pp.
6-7.
[19] See, for example,
Department of Defence, Submission, p. 2; Department of Social Security,
Submission, p. 4.
[20] Minister for
Industry, Science and Tourism, Submission, p. 2.
[21] See, for example,
Ausaid, Submission.
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