CHAPTER 3
- PROBLEMS WITH THE PORTFOLIO BUDGET STATEMENTS 1996-97 AND 1997-98
Introduction
The PBS and their predecessors have always attracted comment from senators
examining the estimates. The ostensible purpose of the documents is to
assist senators in their examination of the government's budget legislation
in a similar fashion to explanatory memoranda for other legislation. But
the PBS cannot be considered in isolation from the process in which they
play an integral part. The process of determining whether funds should
be appropriated for a particular purpose is a political exercise; the
associated process of holding the government and its departments and agencies
accountable for the quality of their administrative performance can be
even more so and, as a previous chair of this committee has remarked,
the two functions can work at cross-purposes, when 'the temptation to
score political points ... gets in the way of the rational scrutiny of
and feedback on performance'.[1] Given the accretion of other roles such as information
gathering, it can be readily seen that no document could satisfy such
varied agendas.
In retrospect, it is hardly surprising that the PBS for 1996-97 received
the criticism that they did. Apart from the intrinsic difficulty of attempting
to satisfy varied agendas, the documents were beset by specific problems,
including changes necessitated by the temporary reversion to an August
budget and machinery of government alterations emanating from the first
change in government in 13 years.
The committee examined specifically the PBS criticisms raised by individual
senators in the course of the hearings and the collective views expressed
in the estimates reports of the legislation committees for 1996-97 and
1997-98. It concluded that the criticisms fell into three broad categories:
those endemic to the estimates documentation; those specific to a given
year or situation and which were at least partially solved by the passage
of time; and those stemming in major part from the estimates scrutiny
process itself. In this chapter, the committee describes all three, with
a concentration on the endemic problems. In the following chapter, the
committee attempts to consider what lessons can be learnt from this and
previous experience with the PBS to bring to bear on the future format
of documentation to support the Appropriation Bills under accrual budgeting.
Endemic problems
Of the endemic problems, the committee pinpointed the following as meriting
close consideration:
- level of detail;
- where to find matters;
- program structures and level of disaggregation of estimates;
- standardisation across portfolios;
- intra- and cross-portfolio matters;
- Commonwealth-State funding;
- budgeting conventions;
- errors;
- performance information;
- relationship with the annual report, and
- comparisons of expenditure over time.
These problems frequently overlap and are not mutually exclusive. The
examples which follow of where the PBS-senator interface has experienced
difficulties should not be read as a criticism of either side but are
merely illustrative of common difficulties.
Level of detail
One of the most contentious aspects of the PBS is the level of detail
they contain. Portfolios are required to perform a fine balancing act
between providing too much detail and thus being accused of 'snowing'
senators with information, and providing too little, at the risk of being
accused of hiding vital facts. The pre-program budgeting Explanatory Notes
at times attained massive proportions but, as they directly described
resource inputs in an order through which committees could systematically
work, were generally well received. By the early 1990s the PPS, as they
then were, had ballooned out to lengths of more than 500 pages of mainly
narrative in an attempt to depict for each program element its objective,
description, strategies to achieve the objectives, performance information,
resource usage and outcomes. This format was designed to draw senators'
attention to what was achieved by the government moneys expended, and
at what cost. With few exceptions, senators responded - either out of
force of habit or conscious preference - with a continuing interest in
resource use or what was perceived to be misuse.
With the introduction of May budgets in 1994, performance information
for the year was incomplete so was held over to be reported on in annual
reports and thus the PBS were quite dramatically reduced in size. By the
1996-97 and 1997-98 budget estimates round, the pendulum had clearly swung
in the direction of too little detail, as the following comments and exchanges
illustrate:
It is the first time to my memory that we have had to put something on
notice to bring back to the chamber before the appropriation bills can
be passed ... The information is just not there, not only on that issue
but on many other issues[2]
and
Senator Schacht: Is there any document available that explains
the expanded reform program based on the efficiency review?
Vice Adm Barrie: My answer to that would be that the portfolio
budget statements presented for 1997-98 forms the public statement of
the defence reform program at this time.
Senator Schacht: So pages 8, 9, 10, 11, 12, 13, 14 and half of
15 - is that the description?
Vice Adm Barrie: That is correct.
Senator Schacht: I must say that is a pretty skimpy outline of
the reform program based on an efficiency review program which came to
at least two volumes, running into hundreds of recommendations.[3]
Additional detail is regularly sought on matters which, in the colourful
language of Senator Cook, 'stand[s] out like the proverbial outhouse in
the desert'.[4] In that particular case he queried the reason for
an additional $14m in contributions to international organisations, asking,
'Did we join something that I missed, did we pay up arrears or what happened?
Did someone hike their fees?'. Similarly, Senator Schacht noted that in
the 1996-97 PBS of the Communications and the Arts portfolio, an instance
where revenue was expected to exceed appropriations by some $9.6m but
failed to do so by almost $9m, without any explanation for the shortfall,
and requested 'Can you include some explanatory notes, because sometimes
these things are a bit bald in the columns by themselves?'.[5]
The committee considers that, as a general rule, obvious significant
changes in expenditure or outcomes should be explained in the PBS. New
senators in particular tend to seek explanations for variations in outlays,
as Senator Bishop explained in the committee's public hearing.[6] The DoF guidelines on what constitutes a significant
year on year variation are those which involve variations of more than
or equal to 5 per cent of a program's previous year outlays, or variations
of $10m, whichever is the greater. The committee regards this as a workable
starting point, especially when combined with the rider 'whether a variation
is significant or not depends on your judgment, bearing in mind materiality,
parliamentary interest and so on'.[7]
One specific area in which additional detail is increasingly sought is
how agencies intend to meet required savings targets. Agencies approach
the task, and the reporting of it, in various ways, with the following
response to Senator Hogg not being atypical:
the breakdown of the subprograms within DSTO are targets for the subprogram
managers to achieve. I do not micro-manage the detail of this, but we
give some guidelines and say, 'Here is a bottom line which we in DSTO
expect more or less to achieve.' If, for example, we achieve a bit more
on travel savings and a bit less on on information technology, provided
that the differences between expectations and outcomes are not too great,
I do not think anyone will worry.[8]
Another specific area in which senators tend to expect more detail than
is generally provided in the PBS is progress with previous budget measures.
As one department explained in its submission to the committee:
A recent example highlights the disparate type of information sort [sic]
for inclusion in the [PBS]. At the most recent hearing of the Employment,
Education and Training Legislation Committee a Senator raised concerns
during the hearing about the lack of reporting in the PBS of details of
previous budget decisions. While details of previous decisions could be
included this goes to the issue of the reason for producing the PBS document
in the first place. Should the document attempt to be an all encompassing
document or have an agreed focus on forthcoming financial year Budget
issues? To include the level of detail sought by the Senator, whilst possible,
would significantly blur the primary focus of the document in explaining
funding in appropriations and budget measures for the new financial year.[9]
It is arguable that the level of detail so often sought by senators is
inappropriate for the PBS and could not be accommodated within the documents
if they were to remain within usable size bounds. As an Environment, Sport
and Tourism officer responded to Senator Schacht when the latter asked
about actual outlay figures for regional forest agreements, 'if you follow
that line of argument, that document would be 40 times thicker'.[10]
It is unlikely that the question of the level of detail contained in
the PBS will ever be resolved to the complete satisfaction of all senators,
as their expectations are so different. By and large, government senators
of whatever political persuasion want to see the bare minimum of detail
to comply with accountability requirements and to maintain the PBS within
a manageable size both for the senators using them and the departments
and agencies producing them within tight timeframes. Opposition senators
without the resources of departments and agencies to assist them in their
search for information want to see more detailed and more processed information
in the PBS.
The committee notes the practice of some agencies of defending the level
of detail they provide on the grounds that it complies with DoF guidelines.[11] It is the committee's view that agencies have
sufficient scope within the guidelines to determine these matters for
themselves and consequently, they should be prepared to defend their decisions
for themselves, rather than using DoF as an excuse.
A further issue of relevance to the question of the level of detail contained
in the PBS is whether the PBS should be stand-alone documents, or part
of an accountability package comprising annual reports, corporate plans,
audit reports, evaluations et cetera. The committee has firm views on
this matter, namely that the PBS should refer to other relevant documentation
but not attempt to repeat the information unless a failure to do so would
make the point meaningless.
Where to find matters
A perennial difficulty for senators is finding the relevant program or
sub-program or even portfolio responsible for a given subject. The reasons
for their difficulty are many and varied; the reason for their concern
on the other hand is simple - if they are not in the right committee at
the right time, they miss the opportunity to question the relevant minister
or officers.
Machinery of government changes are often responsible for difficulties
encountered here, with, for example, the Federal Bureau of Consumer Affairs
being transferred from the Attorney-General's portfolio to the Industry,
Science and Tourism portfolio following the last election and the Australian
Securities Commission being transferred from Attorney-General's to Treasury.
While the PBS always reflect such changes, sometimes the activity is absorbed
in its new home at a lower level than its previous status and is not so
readily identifiable. In areas of divided responsibility, the PBS have
not, in the past, made it clear which portfolio handles which particular
responsibility. Senator Bolkus, for example, in the last budget estimates
round had to seek advice as to whether Prime Minister and Cabinet or Attorney-General's
was handling the Constitutional Centenary Foundation. The Attorney-General's
1997-98 PBS reflects that the Foundation is at component 3.2.4, within
the sub-program Law Reform of the Community Affairs program; however,
there is a sub-component in the Prime Minister's portfolio included within
1.1.2: Industry Policy - the Federation Fund - which aims to fund major
projects of national significance related to the centenary of federation;
there is also funding for the Centenary of Federation Council within sub-program
1.1, Arts and Heritage Policy, within the Communications and the Arts
portfolio.
The committee is encouraged to see that the draft DoF PBS guidelines
for budget 1998-99 include suggested cross-referencing between related
areas in separate portfolios. If followed, this should go some way towards
eliminating this particular problem.
Governments of all political persuasions have been guilty over the years
of 'burying' potentially sensitive areas. The former National Media Liaison
Service had its funding split between two portfolios and was quite inconspicuous
in the PBS. The Office of Government Information and Advertising featured
only twice in the 1997-98 PBS of Administrative Services, both times in
the 'changes to program structure' note on page 10 and not at all in Program
4, Corporate Services and Information, its new home. In purely financial
terms, the contribution of such sections to the estimates might be insignificant
and value for money difficult to determine but, given the political sensitivity
of their activities, parliamentary scrutiny of process must be both expected
and facilitated to the extent of identifying the activity in the PBS.
Even when information on specific expenditure is included in the PBS,
it is not always readily findable by senators or their staff. An exchange
between senators and officers of the Department of Health and Family Services
on the location by sub-program of specific purpose payments resulted in
the response that the information was in part available on page 302 of
the 1996-97 PBS - to which Senator Neal responded:
I am sure it is there. For those of us who do not spend our whole lives
doing it, it is sometimes difficult for us to make the connection.[12]
There are, of course, many obvious solutions to facilitate the process
of locating the relevant program, sub-program or component under which
a matter falls. The PBS could contain an index. The obvious disadvantage
of this solution is that the documents are already completed under a tight
timeframe and the creation of an index would accentuate the problem; also,
the annual report index should in theory suffice to identify the relevant
sub-program. Another solution, and one which is both frequently adopted
and has the support of the committee, is for the senator to ask the relevant
legislation committee secretariat for guidance. Regrettably, however,
certain senators approach estimates with ambush in mind and dislike flagging
their intentions in advance. The committee was interested to note the
approach of DEETYA which took the proactive step of writing to the relevant
estimates committee in advance of the last budget estimates, suggesting
where it might be appropriate to ask questions on particular topics of
expected interest.[13]
Program structures and level of disaggregation of estimates
One of the inherent difficulties with program budgeting is the
stability of the program structures. Frequent changes to program structure
mean that senators find it difficult to track expenditure from year to
year and occasionally, it must be said, suspect that the changes are made
precisely for that purpose. Mr Stevens of the Department of Communications
and the Arts commented that he did not believe any structure could ever
be set in concrete for years in advance.[14]
While acknowledging the truth of this statement, the committee believes
that frequent major change is unwarranted and, when undertaken, should
be made completely transparent in the ensuing PBS.
The Department of Finance has outlined three broad types of program structures:
the portfolio model, in which the department is program 1 and each other
portfolio agency is treated as a separate program; the generic program
model, in which generic descriptions such as 'administration of justice'
constitute the programs, with individual agencies constituting sub-programs
within those programs; and hybrids. This results in the level of reporting
detail varying across the spectrum for broadly similar agencies, and confusion
amongst senators as to the level of detail to expect. There is added confusion
when program structures are unaligned with organisational structures.
In explaining his reasons for changes to the program structure, Mr Barratt
of the Department of Primary Industries and Energy enunciated an approach
which the committee suspects all senators would like to see more widely
followed:
for ease of reporting to the parliament and discussing estimates at a
hearing like this, it is easiest and most straightforward to align the
program structure with the functional units of the department.[15]
The case of the program structure of the Communications and the Arts
portfolio in 1996-97 illustrated the problems of the generic program structure.
Program 1 was roundly criticised by the committee, being described by
one senator as 'a really very eclectic collection', combining areas pertaining
to both communications and the arts. Senators were clearly more comfortable
with discrete entities such as the National Library of Australia rather
than a concept such as 'Policy, Regulatory and Operational Framework'.
This committee notes that the relevant legislation committee reported
with some relief that a more approachable structure had been developed
for 1997-98. Interestingly, the program whose structure received such
critical attention in the1996-97 budget estimates was identical to that
of the previous year, when it did not appear to present similar problems.
In its report on the examination of the 1996-97 budget estimates,[16]
the Foreign Affairs, Defence and Trade Legislation Committee complained
that its scrutiny of the Foreign Affairs estimates was impeded by the
lack of expenditure information at sub-program level. The department explained
the difficulty it had in disaggregating figures in the Appropriation Bills
into programs because of the wide spread of its programs and the implications
of operating in an overseas environment; further, three quarters of the
budget was used for running costs, rather than projects which could easily
be attributed to sub-programs, and those running costs were fully devolved
to divisions in Canberra and posts overseas. Adding together estimates
from so many sources, therefore, 'involves a considerable margin of subjectivity,
impressionism and uncertainty and the results would be of doubtful utility
in enabling comparisons of multi-year expenditure for 'items' within sub-programs'.[17]
This committee notes that some portfolios, including Finance itself,
no longer disaggregate expenditure below the program level, at least in
the PBS - a tacit admission, perhaps, that despite the best hopes of program
budgeting, attribution below that level is fraught with difficulty. Defence
justified its program-level reporting on the grounds that 'a lower level
of reporting for resource estimates would only serve to complicate and
obscure critical expenditure trends and resource use patterns'.[18]
In this regard, the committee notes with some amusement an exchange between
Senator Cooney and the Auditor-General in the 1997-98 budget round. Senator
Cooney interpreted the PBS as indicating that Mr Barrett had had a reduction
in salary; the senator was reassured by Mr Barrett as follows:
What we have done is allocated the Auditor-General's salary and allowances
over the two subprograms. I suspect there is possibly an allocation problem.[19]
The committee makes no recommendation concerning program structures,
as with the forthcoming move to accrual budgeting, it appears that program
structures will be abandoned in favour of output classes.
Standardisation across portfolios
A standardised format for the Explanatory Notes, as the PBS were then
called, was devised in 1978 because the early estimates committees considered
that it would be helpful for senators moving from one department to the
next. Standardisation of both format and content was the aim of the DoF
guidelines and, broadly speaking, it was achieved. In the spirit of devolution,
however, DoF has in recent times injected a degree of flexibility into
its instructions to portfolios. As Dean Wallace explained:
we have grappled over the years with trying to come to a one-fits-all
type approach but, with the diversity that we have across the Public Service,
it is not possible to do that other than at a fairly high level. Thus
we call these PBS guidelines 'guidelines' and we do not mandate them.
We try to urge people to use judgment, within the framework that is built
there, to suit their own purposes.[20]
Many portfolios supported the call for flexibility in allowing portfolios
to report in a manner appropriate to their size, complexity and particular
circumstances.[21] The committee applauds this belated
recognition that the reporting format should not be mandated at the micro
level for agencies having appropriations of $100m and those having $10b,
those having one or two budget measures to accommodate and those with
48, and highly centralised agencies compared with those having highly
devolved structures.
In reaching this conclusion, the committee is nevertheless mindful of
the fact that senators can and do move between estimates hearings and
not infrequently draw invidious comparisons between the differing presentation
of material. The Environment, Recreation, Communications and the Arts
Legislation Committee in its 1996 report commented on the differences
between the PBS of Communications and the Arts and of Environment, Sport
and Territories; in its 1997 report the Community Affairs Legislation
Committee did the same for the PBS of Health and Family Services and Social
Security. Individual senators too have often voiced their desire for standardisation
in the PBS. As Senator Bishop indicated during the committee's public
hearing on the subject, 'My take ... is that the primary purpose of the
PBS should be the disclosure of information in a clear, concise format
that is consistent across departments' [22] [emphasis added]. He further explained that standardisation
should not be an end in itself, but a means for facilitating cross-analysis
and benchmarking.
In its submission to this committee, the Department of Social Security
commented that the standard of presentation might be covered by the DoF
guidelines so that senators are given documents with a similar 'look and
feel'.[23] While there are arguments in favour
of this approach, the committee considers that matters such as these should
not be mandated but that portfolios should be prepared to consult with
the relevant legislation committee to come to a mutually agreed approach.
In this context, the committee notes the highly favourable reception
accorded the 1997-98 Social Security portfolio PBS,[24] in which the budget measures were
grouped together and described before the sequential examination of the
portfolio programs. Cross-referencing was provided to the specific programs
to which the measures related. The rationale for this move was to assist
readers better to understand the cross-program effects of the budget measures.
To some extent, this duplicates the information contained in Budget Paper
no. 2 and, while applauding the Social Security portfolio's sensible approach
to its own situation, the committee cautions against the expectation that
a similar approach would be as helpful in another portfolio.
Intra- and cross-portfolio matters
One of the difficulties for senators in examining the estimates, as mentioned
above, is firstly ascertaining which portfolio and which program within
it handles a given issue and secondly, being in the right committee at
the right time to question the minister and the officers. Provided that
the matter of concern is a new budget measure, this task is simplified
to the extent that the new Budget Paper No. 2 makes the lines of responsibility
clear. When more detailed performance information becomes available, it
too should assist in this regard. The fact that several legislation committees
may meet at the same time to examine the estimates referred to them has
always been a cause of discontent to senators, but it is difficult to
envisage a parliamentary programming schedule which avoids this.
As an example of the difficulties for senators in covering all bases,
the committee cites the response to a question by Senator Carr on where
in portfolio terms responsibility lay for greenhouse matters:
There is an involvement in one way or another ... within our own portfolio,
not only the Environment Strategies Directorate but ... the Bureau of
Meteorology ... the Antarctic Division ... As to the particular roles
of the different portfolios ... in relation to aspects of climate change
to do with energy or agriculture, it is the Department of Primary Industries
and Energy. In terms of international matters, Department of Foreign Affairs
and Trade ... Department of the Prime Minister and Cabinet is involved
in terms of the central agency role and coordination and relations with
the states ...[25]
Until now, the PBS have been portfolio-specific and have not not alluded
to the fact that other portfolios may be involved in a related part of
the same matter. Justifiably or not, senators suspect that at times diffused
responsibility is a ploy to avoid accountability. Senator Sherry, on finding
both Treasury and Finance had an interest in special purpose payments
to the states, feared getting into a Yes Minister exchange about
which department would provide the figures;[26]
similarly Senator Schacht commented:
The oldest trick in the book is to have people at one estimates committee
say, 'Don't ask us, Senator, go down to the next committee and get them,'
and when you get to them they say, 'Oh no, sorry, it wasn't us. You should
have asked them,' and they have finished.[27]
The committee was encouraged to note the following helpful response by
Minister Warwick Parer to a cross-portfolio question in the examination
of the 1997-98 budget estimates of Industry Science and Tourism:
I think some of it may be a mix of both ANSTO and DPIE. Might I suggest
that when Senator Childs gets a response, rather than just coming back
and saying 'For the rest of your question refer to DPIE,' we get a total
response for him.[28]
Devolution notwithstanding, the committee encourages other ministers
to follow this lead.
In its draft PBS guidelines for 1998-99, DoF has responded to the concerns
of senators by recommending that tables be included of agencies involved
in cross-portfolio budget measures, with the relevant program numbers
and the effect on outlays in the current year and the outyears.[29] If implemented, this should be of considerable
benefit to senators. The committee understands, however, that it may be
impractical for some agencies involved in large numbers of fairly predictable
cross-portfolio measures. They may prefer to address the issue in other
ways.
Commonwealth/State funding
Accountability for programs funded by the Commonwealth but performed
by the States has always been a problematic area, particularly in the
fields of health and education. Senators have been accustomed in the past
to highly structured agreements on the use of Commonwealth money and some
have been distrustful of giving States too free a hand. The current thinking
was enunciated by officers of the Department of Employment, Education,
Training and Youth Affairs:
The Commonwealth is taking what you would describe as a less interventionary
and prescriptive role in the delivery of these programs ... our accountability
requirements ... refer to outcomes. They do not go to how the programs
are delivered.
and
There are ... powerful reasons for broadbanding and rationalisation of
programs ... above all, the reason is that funds can be moved between
programs and assistance customised to the people who need it. This need
not in any way be at the expense of proper accountability mechanisms,
because the reporting can still be by specific outcomes. It is just that
the allocation of funds is not by a specific program.[30]
The committee accepts that we are now in a much more complex budgeting
era than in the days of prescriptive funding arrangements. But at the
same time, the committee is concerned that the inevitable time lag between
outcomes - say, x per cent more Aboriginal children completing secondary
school - and discretionary funding may make the task of ascertaining value
for money an impossible one.
Budgeting conventions
By far the largest stumbling block in the path of understanding the PBS
is an understanding of the way the estimates are put together. Specific
difficulties have included the handling of section 35 receipts, the treatment
of running costs, the handling of the termination of programs, inclusions
and exclusions in asset sales figures, rollovers, and corrections for
past errors. The following exchanges are illustrative of the problems
encountered and are not by any means unique to the portfolios or individual
senators involved.
Senator Schacht and the officers of the Department of Foreign Affairs
and Trade explored the apparent $8m reduction in funding for the market
Australia campaign, a reduction which was finally explained by there being
a 1995-96 sunset clause:
Senator Schacht: Wouldn't it have been useful to put in the paper
here ... a dot paragraph saying that the market Australia program, which
is an $8 million reduction, is taken out because it is a sunset program,
the period of the program had run out and therefore it was an automatic
reduction?
Mr Rigg: That was a measure from several budgets ago; it has nothing
to do with the current year's budget or last year's budget.
Mr Cotton: I think the point is a fair one in terms of presenting
the material to senators in this document. If it is not easily accessible
or understandable, it deserves a bit more additional work and information.[31]
In the first budget round in a new Parliament, but also on other occasions,
some senators will in all probability be encountering the PBS, or the
PBS for a given portfolio, for the first time. Senators' staff may also
be inexperienced in the ways of estimates. The expectation that measures
from several budgets ago will be indelibly etched on everyone's memory
is clearly wrong.
Even highly experienced senators find difficulty in understanding the
conventions of handling the cessation and refunding of programs, as the
following exchange on HIV-AIDS funding illustrates:
Senator Harradine: if you look on page 57, you have got the amount
of significant variations to portfolio outlays 1995-96 to 1996-97, and
an amount of variation, plus or minus. You have got $44,684,000.
Dr Mead: That is because the program was due to come to an end.
The forward estimate from last year was of the order of $6,000 for the
ongoing research commitments. That would have been all, but the program
was continued, so it is a new $44 million.
Mr Podger: The heading is probably not very helpful. The heading
says, 'Significant variations in portfolio outlays: 1995-96 and 1996-97'.
In fact, these are significant variations to the previous estimates. This
$44.6 million is an extension of a program that would otherwise have run
out.[32]
Similarly on environmental funding:
Senator Schacht: At the top of page 19, 'other items', the second
dot point says: Non-recurring provisions relating to the Prime Minister's
21 December 1992 statement on the environment - minus $25 million. The
word non-recurring: does that mean that those programs actually run out
at the end of the 1995-96 financial year? ... How can you claim a saving
when the programs ran out at the end of the year?
Mr Anderson: It is a saving because your forward estimate is reduced
by $25 million.
Senator Schacht: Hang on. If the programs ran out at the end of
four years there is not a saving. I would presume that in the previous
forward estimates the estimates only went to the end of 1995-96.
Mr Anderson: No, sorry. It is a reduction from last year's actual
outlay of $212 million; $25 million has come off that.
Senator Schacht: So the $25 million is off another figure? That
is why these bloody tables are useless.
Senator Hill: Senator, this whole table starts with 1995-96 as
the beginning and then adds increases, subtracts the fines and comes to
a 1996-97 budget. This is not a comparison with the forward estimates,
but a comparison with the previous year's actual.[33]
An exchange between Senator Carr and officers of the Department of Employment,
Education, Training and Youth Affairs highlighted the difficulties experienced
by senators in trying to understand the real costs of government activities.
Mr Hollway explained that running costs were fungible:
Mr Hollway: what you do is notionally allocate [running
costs] to programs in order to allow for the money to be spent ... for
administrative purposes and for staffing ...
Senator Carr: So we cannot necessarily rely upon these budget
statements as a statement of where money will be spent on particular programs?
Mr Hollway: You can rely on these budget statements as
being absolutely rigorous to absolutely the same extent as any other department's
figures and absolutely in line with the Department of Finance guidelines
for these matters. It is not an attempt to prevaricate. It is simply the
way running costs are handled in the Public Service. Unlike program costs
they are not appropriated to a particular program; they are running costs
for the department.[34]
Mr Mutton went on to explain that the 1995-96 attributions of running
costs were based on the part-year experience of 1994-95, and in consequence
there was a flow-on effect in 1996-97 when they adjusted for past errors;
he also pointed to the 'degree of arbitrariness' in attributing certain
costs, such as Comcare premiums, to programs.
In evidence to the committee, Dean Wallace of DoF raised another matter
which inevitably causes confusion in the estimates process. The Appropriation
Bills reflect net appropriations, whereas the expenditure columns show
the gross appropriation for the previous year;
That of itself, when you compare one column with the other, can give
rise to some confusion as to why in particular some appropriations for
the year appear to be perhaps even less than the expenditure for the previous
year. Quite often, the answer is that we have added in section 35 receipts
... to give the full information of what was actually appropriated against
that item for the previous year.[35]
Other budgeting conventions with which senators have encountered problems
include the handling of proceeds from asset sales, the handling of estimates
for programs with an uncertain life-span, the deferral or reallocation
of review funding, inconsistencies even within portfolios in the identification
of variations, the handling of, and limits on, carry-over of running costs,
et cetera.
In order to assist senators with government budgeting practices, officers
from the Department of Finance provide introductory sessions for new senators,
generally in the context of a general purpose induction program. Seminars
for senators, their staff and estimates staff have also been conducted
from time to time, but are rarely well attended. It may be some months
from then that the senators encounter a real estimates round; it may be
years before a particular problem emerges. Reinforcement nearer to the
time of estimates hearings might be helpful and the committee makes some
suggestions as to how this could be provided in the following chapter.
Errors
With the last-minute changes to budgets, the time frame within which
the PBS are produced for tabling is extremely tight, particularly for
Finance and Treasury who are involved in the broader aspects of the budget.
As Mr Evans, Secretary of Treasury, acknowledged, 'There is a problem
with the quality of the documents ... They are not as helpful to the committee
as they could be, because of the timing.'[36]
With such tight timeframes, errors are perhaps inevitable and it is unusual
for a budget to go by without the tabling of corrigenda to the PBS by
at least one portfolio. It is disconcerting when the error is detected
by a senator, however, and only corrected when it is pointed out. A recent
example was when Senator Cook commented on discrepancies between figures
in the 1996-97 and 1997-98 PBS in the summary of outlays for the Foreign
Affairs and Trade portfolio. Ms Hewitt explained how the discrepancy arose:
The difference in the two sets of figures contained in the portfolio
budget statements resulted from an unusual situation in which an amount
of $6 million for the proposed International Development Association (Special
Contribution) Act was included in the 1996-97 budget papers, subject to
the act being passed by parliament. As a result of change in government
policy on special appropriations, the act was not passed by parliament
and technically, therefore, the funds were not appropriated to AusAID
in the 1996-97 budget. The funds were originally included in that set
of budget bills so that the public account would reflect more accurately
the Commonwealth's anticipated liabilities.[37]
In its report on the examination of the estimates, the relevant legislation
committee was critical, not so much of the error but of the fact that
it was only when the error was pointed out that an explanation was provided.[38]
The committee notes that six corrigenda were tabled in the course of
the 1997-98 budget estimates and that more minor errors of the 'gremlins'
kind were detected in the course of the examination of the estimates.
An obvious conclusion to be drawn from the error rate is that, given the
inflexibility of the timing parameters, any changes to the PBS should
be in the direction of simplification.
Performance information
Performance information must be included in departmental and agency annual
reports, which are required to be tabled before 31 October following the
financial year under review. The intention is that performance matters
be examined in the additional estimates rounds in November, as completed
performance information for the current year is unavailable at the time
of a May budget. This hiatus may contribute to the relative lack of interest
shown by senators in performance information.
The PBS guidelines currently call for a statement that performance information
is available at pages xxx of the department's annual report, followed
by a segment on performance forecasts for the coming year, with the following
exhortation:
Briefly discuss the strategies for the program in the coming year. Include
in the discussion the expected overall impact of relevant Budget Measures
mentioned above. Discussion of activities and processes should be kept
to a minimum. This section should concentrate on what is to be achieved,
mentioning performance targets for the coming and subsequent years.[39]
It is in the area of performance forecasts that the present PBS vary
most noticeably in the detail they provide. The Health and Family Services
porfolio has already included performance assessment tables at the sub-program
level for effectiveness, efficiency, quality and equity, where applicable.
Each table lists indicators - for example the private health insurance
participation rate; targets - in this case, 'arrest the decline'; and
sources of information, where applicable. Inevitably, difficulties arise
with the quality indicators for policy-oriented programs, where targets
are simply 'high level of satisfaction' and the source of information,
'feedback from the ministers' offices'. The Industry, Science and Tourism
portfolio has taken a different approach, providing its performance forecasts
in extensive dot point narrative style of activities, an approach that
is widely followed by other portfolios. Treasury also uses the narrative
style, with the Australian Taxation Office including structured narrative
reporting under subheadings such as 'compliance', 'compliance costs',
'community confidence' and 'efficiency and adaptability' and including
service delivery standards from the Taxpayers' Charter.
Generalised narrative performance information can attract the attention
of senators, and not always positively. In the 1997-98 budget round, when
confronted with three pages of performance forecasts for the Civil Law
Division of Attorney-General's, Senator McKiernan questioned, 'How are
we going to be able to measure the efficiency with which these matters
have been addressed during that 12 months? Where is the benchmark on this?'.
Mr Skehill's reply was as follows:
In policy areas, it is generally recognised that it is very difficult
to get any clear quantitative measure of performance. The only way that
we think we can look at progress is to identify within a particular task
those components that are within the control of the department and see
how they have progressed.[40]
In a similar vein, Senator Cooney questioned Treasury officials over
performance indicators such as 'influence on policy outcomes through Cabinet
and other processes', with Mr Cassidy admitting that that was a difficult
thing to gauge.[41]
The implementation of government service charters will introduce a level
of precision to performance information, which the committee welcomes.
It does, however, consider that much thought needs to be given to ensuring
that the performance information as contained in service charters, annual
reports and PBS is consistent.
In 1991, in its report on Estimates Committee Documentation and Procedures,
the then Finance and Public Administration Committee devoted a chapter
to performance information. It noted a common theme in evidence from departments
and agencies, that there was scope for improvement in performance information.[42] At its round table public hearing on 20 June
1997, the present committee received precisely the same evidence.[43] This may not mean that there has been no improvement
in the intervening years, but merely that performance information is and
should be constantly refined.
Since 1991, there have been administrative developments which should
better equip Senate committees for their examination of the estimates.
In 1994, as recommended by this committee, the responsibility for the
examination of the estimates was transferred to the standing committees,
with the intention of allowing for more continuity of both senators and
secretariat staff, and the consequent building up of expertise about the
portfolios under review. Specialist estimates officers were also appointed
to the committees. The stability hoped for has not been achieved, however,
with the membership of all committees changing dramatically in the intervening
years (this committee, for example, has had a 100 per cent turnover of
membership) and with only one of the initial estimates officers still
in the same committee.
The central themes of the committee's 1991 comments on performance information
remain true in 1997. To make sense of performance information requires
an adequate specialised knowledge base from which to frame appropriate
questions and the vagaries of political life work against the acquisition
of such knowledge by most senators. Also, the examination of performance
information does not necessarily accord with the party-political or information-gathering
aspirations of non-government senators in the estimates process.[44] While individual senators may develop
expertise in a given area, it is a random process and no basis for systematic
parliamentary scrutiny.
The existence of performance information in the annual reports has not
attracted significantly more attention in the legislation committees'
examination of the additional estimates than in the past. If the budget
estimates documentation of the Australian states already operating under
accrual budgeting is any guide, the more structured and integral presentation
of performance information should draw more attention to it. Whether this
attention will equate to more rigorous scrutiny awaits to be seen. Dean
Wallace of DoF is optimistic, telling the committee:
Accrual will certainly improve that end of the performance spectrum.
I am not sure that we will ever get to a perfect outcomes measurement
system, because there are so many things outside the budget framework
which contribute to the achievement of outcomes that I do not think we
can isolate, meaningfully, outcomes to a budget measure. All the same,
that is not to disclaim that outcome information and its relationship
with the outputs that are intended to produce certain outcomes should
not continue to be attempted.[45]
Relationship with the annual report
As DoF stressed to the committee in its submission, the PBS provide prospective
information, presenting the budget figures within a program-based structure,
while the annual reports provide retrospective information on program
performance, including the accrual-based financial statements. With the
advent of customer service charters, performance against those standards
will also be published in the annual reports.
This arrangement is less than ideal, having emerged, perforce, with the
1994 advent of the May budget and the consequential lack of full-year
actual figures for budget documentation. In its submission to the committee,
the Department of Employment, Education, Training and Youth Affairs pointed
to the problems such an arrangement can create:
the difficulties experienced by the [Employment, Education and Training
Legislation] Committee may be partly explained by the fact that they were
comparing the 1993-94 Annual Report (the latest available for the
Senate Hearings) with the 1995-96 PBS. In addition, program structure
changes over the three year focus of the documents may have resulted in
some difficulties in comparing figures. This issue is not one that can
be easily addressed given the likely continuation of May Budgets.[46]
The committee notes with approval that the PBS guidelines now encourage
portfolios to provide page references to the relevant sections of the
annual report, thus facilitating access to information in the latter document.
It further notes that most portfolios adhere to the guidelines in this
respect. But as DEETYA pointed out, program structure changes can blur
the linkages.
Apart from the retrospectivity/prospectivity issue there are other potential
pitfalls for senators using annual reports and PBS in tandem. The DoF
guidelines for the PBS allow portfolios the flexibility of reporting at
the level believed appropriate for their size and complexity. The current
guidelines for the annual reports, however, mandate reporting at sub-program
level. This can create some discontinuities in external reporting when
an agency such as Defence, for example, reports resource estimates at
the portfolio and program level in the PBS, in the belief that a lower
level of reporting would both complicate and obscure critical expenditure
trends and resource usage patterns.[47]
The committee notes that the Department of the Prime Minister and Cabinet
is currently reviewing the annual reporting requirements in the light
of the changes accrual budgeting will entail. The committee is inclined
to the view that flexibility should be permitted in relation to the level
of reporting in the annual reports but will reconsider the matter when
the revised guidelines are issued.
Comparisons of expenditure over time
Senators interested in pursuing value-for-money issues frequently require
a longer time frame for comparative purposes than the PBS currently provide.
A number of senators supportive of the mammography screening program,
for example, can be expected to continue to question whether funding is
to be maintained and at what level until such time, eight or more years
into the future, when results may begin to emerge.
Comparative expenditure becomes of particular interest to senators following
a change of government, and with the usual rearrangement of priorities.
An interest in the outcomes of projects established in the previous era
and in their funding arrangements can be expected and the PBS in their
current format do not facilitate this type of interest. Senator Carr,
for example, when questioning where he could find expenditure on English
language outlays, was told, 'Because it is a previous year's budget decision
... it is absorbed in the program so it does not appear as a separately
identified item'.[48]
Similarly, Senator Schacht had difficulties with the performance forecasts
for programs within AusIndustry with which he had been involved in the
previous government:
It is really just a bit of confetti in the description about detail on
budget outcomes and so on. Could you provide us with ... a properly constructed
outlay table of individual programs within AusIndustry. If it is Bizhelp,
Bizlink, Business Angels or NIES, I would like to know what was spent
in 1995-96, what the result of the budget cut of $17 million was, how
it flowed, what the new figure for the year is, the percentage reduction
and the staffing levels that are affected.[49]
In its submission to the committee, the Department of Employment, Education,
Training and Youth Affairs suggested that if detail on previous budget
measures were to be included in the PBS, it would significantly blur the
primary focus of the document in explaining funding in appropriations
and budget measures for the new financial year.[50]
The committee agrees. It can see no justification for the continued separate
identification in the PBS of former new budget measures, however defined,
or of more than current year-budget year-out years comparisons, as a matter
of course. It acknowledges, however, the right of senators to inform themselves
of the progress of those former measures. It advances yet again the notion
it has presented on several previous occasions that if senators wish to
examine the outcomes of previous budget measures in estimates hearings,
they be encouraged to do so in one of three structured ways: by questions
on notice; by notification to the legislation committee secretariat in
advance of the hearing date of the precise matter, so that the portfolio
can provide an officer to respond to questioning in the hearing; or through
the pre-hearing briefing process.
Problems specific to the 1996-97 budget estimates round
As mentioned in the introduction to this chapter, a number of factors
unique to the 1996-97 estimates round may have contributed to the generally
unfavourable reception which the PBS of that year received. The factors
which, in the view of the committee, were of relevance included the following:
- the temporary reversion to an August budget;
- the number of new senators, unfamiliar with the estimates process
and with the use of the PBS (15 senators had not had previous budget
estimates experience);
- extensive machinery of government changes, following the change of
government;
- extensive program changes, following the change of government; and
- the number of former ministers, now on the opposition benches and
trying to come to terms with the PBS without the assistance of departmental
officers.
As Senator Bishop pointed out, when first introduced to the PBS, he found
they failed to provide answers to obvious questions but that a year later,
he found them helpful, a fact he attributed to his having gained experience
in the process rather than to any changes in the documents.[51]
The committee regards the 1996-97 combination of factors as unlikely
to be repeated. The factors which were perhaps most influential were the
change of government and the influx of large numbers of new senators immediately
prior to the estimates. The committee considers that the induction courses
for new senators are helpful but they cannot possibly accommodate equally
well the needs of all participants. New senators and their staff should,
therefore, be given the option of one-on-one briefings with officers from
the Department of Finance to help them become familiar with the budget
process; pre-hearing briefings on portfolio-specific issues within the
legislation committees could also be helpful. The committee is less sanguine
about the efficacy of large-scale workshops, but considers that immediately
following the tabling of the first accrual budgeting PBS, there might
be a case for one for senators, their staff and Senate committee staff.
Problems related to the estimates process itself
Some criticism of the PBS derives from the fact that eight legislation
committees between them cover the appropriations for the 17 portfolios
and four of those committees may meet simultaneously to consider the estimates
within their areas of responsibility. The scheduling of the hearings is
governed principally by the availability of ministers and is, and always
has been, fraught with difficulty. If the PBS fail to identify sufficiently
clearly where the responsibility for a given matter resides, it becomes
a challenge for senators to be in the right place at the right time to
ask questions.
There is little the PBS can do to resolve this dilemma, apart from containing
a logical and clearly outlined portfolio structure, with changes highlighted.
Responsibility lies squarely with senators and their staff to establish
priorities, to inform themselves of the progress of hearings and to be
in the right place at the right time to ask questions.
[Return to Table of Contents]
Footnotes:
[1] Coates, J, 'Parliamentary use
of evaluation data in Program Performance Statements', Australian Journal
of Public Administration, 51(4) 1992, p. 450.
[2] Senate Legal and Constitutional
Legislation Committee, Hansard, 1997, L&C p. 238.
[3] Senate Foreign Affairs, Defence
and Trade Legislation Committee, Hansard, 1997, FAD&T p. 39.
[4] Senate Foreign Affairs, Defence
and Trade Legislation Committee, Hansard, 1996, FAD&T p. 89.
[5] Senate Environment, Recreation,
Communications and the Arts, Hansard, 1996, ERC&A pp. 352-3.
[6] Senator Mark Bishop, Senate
Finance and Public Administration Legislation Committee, Hansard,
p. F&PA 7.
[7] Department of Finance, Guidelines
to the Preparation of the Portfolio Budget Statements 1998-99, p.
25.
[8] Senate Foreign Affairs, Defence
and Trade Legislation Committee, Hansard, 1996, p. FAD&T 462.
[9] Department of Employment, Education,
Training and Youth Affairs, Submission, p. 2.
[10] Senate Environment, Recreation,
Communications and the Arts Legislation Committee, Hansard, 1996,
p. ERC&A 87.
[11] See for example, Senate
Legislation Committee Hansards, 1997, p. F&PA 342; 1996 p.
FAD&T 367.
[12] Senate Community Affairs
Legislation Committee, Hansard, 1996, p. CA 89.
[13] DEETYA, Submission,
p. 1.
[14] Senate Environment, Recreation,
Communication and the Arts Legislation Committee, Hansard, 1996,
p. ERC&A 137.
[15] Senate Rural and Regional
Affairs and Transport Legislation Committee, Hansard, 1997, p.
RRA&T 212.
[16] Senate Foreign Affairs,
Defence and Trade, Report on the estimates, 1996.
[17] Department of Foreign Affairs
and Trade, Submission,[p. 2].
[18] Department of Defence, Submission,
p. 2.
[19] Senate Finance and Public
Administration Legislation Committee, Hansard, 1997, p. F&PA
269.
[20] Senate Finance and Public
Administration Legislation Committee, Hansard, 20 June 1997, p.
F&PA 23.
[21] See, for example, Department
of Defence, Submission, pp. 5-6.
[22] Senate Finance and Public
Administration Legislation Committee, Hansard, 20 June 1997, p.
F&PA 8.
[23] Department of Social Security,
Submission, p. 4.
[24] See, for example, Senator
Knowles, Senate Finance and Public Administration Committee Hansard,
20 June 1997, p. F&PA 5.
[25] Senate Environment, Recreation,
Communications and the Arts Legislation Committee, Hansard, 1996,
p. ERC&A 46.
[26] Senate Finance and Public
Administration Legislation Committee, Hansard, 1996, p. F&PA
251.
[27] Senate Foreign Affairs,
Defence and Trade Legislation Committee, Hansard, 1996, p. FAD&T
256.
[28] Senate Economics Legislation
Committee, Hansard, 1997, p. E 295.
[29] Department of Finance, Guidelines
to the preparation of the 1998-99 Portfolio Budget Statements, p.
27.
[30] Senate Employment, Education
and Training Legislation Committee, Hansard, 1996, p. EE&T
51.
[31] Senate Foreign Affairs,
Defence and Trade Legislation Committee, Hansard, 1996, p. FAD&T
365.
[32] Senate Community Affairs
Legislation Committee, Hansard, 1996, p. CA 116.
[33] Senate Environment, Recreation,
Communication and the Arts Legislation Committee, Hansard, 1996,
p. ERC&A 91.
[34] Senate Employment, Education
and Training Legislation Committee, Hansard, 1996, p. EE&T
10.
[35] Senate Finance and Public
Administration Legislation Committee, Hansard, 20 June 1997, p.
FPA 18.
[36] Senate Economics Legislation
Committee, Hansard, 1996, p. E 59.
[37] Senate Foreign Affairs,
Defence and Trade Legislation Committee, Hansard, 1997, p. FAD&T
373.
[38] Senate Foreign Affairs,
Defence and Trade Legislation Committee, Report on the Estimates,
1997, p. 4.
[39] Department of Finance, Guidelines
to the preparation of the 1998-99 Portfolio Budget Statements, p.
25.
[40] Senate Legal and Constitutional
Legislation Committee, Hansard, 1997, p. L&C 80.
[41] Senate Economics Legislation
Committee, Hansard, 1997, p. E 119.
[42] Senate Finance and Public
Administration Committee, Estimates Committee Documentation and Procedures,
1991, p. 54.
[43] See, for example, Senate
Finance and Public Administration Committee, Hansard, 20 June 1997,
p. 30.
[44] Senate Finance and Public
Administration Committee, Estimates Committee Documentation and Procedures,
1991, p. 55.
[45] Senate Finance and Public
Administration Committee, Hansard, 20 June 1997, p. 37.
[46] DEETYA, Submission,
p. 3.
[47] Department of Defence, Submission,
p. 2.
[48] Senate Employment, Education
and Training Legislation Committee, Hansard, 1997, p. EE&T
244.
[49] Senate Economics Legislation
Committee, Hansard, 1996, p. E 272.
[50] DEETYA, Submission,
p.2.
[51] Senate Finance and Public
Administration Legislation Committee, Hansard, 20 June 1997, p.
F&PA 9.
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