Portfolio Budget Statements
Table of Contents

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.

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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.