CHAPTER 6 – CONCLUSIONS AND RECOMMENDATIONS
Introduction
In its 1997 report, the committee devoted some pages to considering where
senators had found difficulties with the 1996-97 and 1997-98 PBS, which
were on a cash accounting, program-based reporting format. It identified
a number of issues: program structures (the reporting framework); the
level of detail provided; standardisation across portfolios; cross-portfolio
matters; Commonwealth-state funding; budgeting conventions; errors; performance
information; relationship with the annual report; comparisons of expenditure
over time; and where to find matters. Despite the changes to the 1999-2000
PBS, the committee notes that these issues still cause concern. In this
report, the committee has sought to examine the areas in which modest
change might be made to address the more significant of those concerns,
without adversely affecting the integrity of the process.
The reporting framework
The reporting framework is a principal element of the changes to resource
management. Instead of programs, sub-programs and components, we have
moved, broadly speaking, to outcomes, outputs, or output groups then outputs.
Outcomes, being `the results, impacts or consequences of actions by the
Commonwealth on the Australian community' [1]
are ministerially approved, while outputs are the departmental or agency
attempt to achieve those outcomes. In some cases, the agency organisational
structure lent itself, or had been engineered, to roll over, rebadged
but basically unaltered, to meet the new framework. In other cases, wholesale
change occurred, mainly to the reporting framework, however, and not to
the organisational structure of the agency.
Individual senators and legislation committees had a number of problems
with the changed framework. In many cases, discrete agencies and functions
were absorbed into a broader framework and were no longer separately identifiable
in terms of their funding and performance. There appeared, to some senators,
to be no consistency and little logic across portfolios in the level of
detail disclosed in the new frameworks and nor did they necessarily relate
to agencies' organisational structure. And concerns were expressed that
the new frameworks would change too frequently to allow for adequate parliamentary
scrutiny.
The committee acknowleges that these concerns are real, but reiterates
that portfolios are now too diverse to be straitjacketed into a single
framework. One size does not fit all and nor has it done so for
many years. With the devolution of a much greater level of responsibility
to agency heads, agencies may elect to organise themselves as best suits
them and the wider portfolio, within broad DOFA-generated guidelines.
The end result is inconsistency, but the reality is that that inconsistency
is not new. The committee notes a preference expressed for frameworks
which reflect the agency organisational structure. The committee also
notes that DOFA has signalled its intention of conducting an analysis
of portfolio outcomes/outputs frameworks and will produce a best practice
guide. The committee recommends (1) that DOFA publish and regularly
update for as long as necessary a best practice outcomes/outputs framework
guide on its web site.
The committee recognises that it make take some time for the reporting
frameworks to become firmly established and urges patience from all PBS
users while the best structure for each portfolio is devised. In the meantime,
it expects each portfolio to explain clearly and prominently any framework
changes in its PBS and to respond to the extent possible to any request
for financial or performance disaggregations along the previous framework
lines.
The financial tables and statements
The committee accepts that in their new format, the PBS provide a wealth
of useful, detailed information which, if properly understood, would assist
users to understand the Appropriation Bills in the broad. The committee
mentions, however, that only a few of the present 76 senators for whom
the PBS are intended have accounting qualifications and points to the
need for continued assistance for senators in interpreting the financial
information contained in the PBS.
The committee notes a clear preference on the part of senators for a
more detailed breakdown of financial information. The committee is mindful
of the tight timeframes in which the PBS are finalised, a fact attested
to by the numerous and extensive corrigenda tabled to the 1999-2000 PBS.
It makes the following recommendations cautiously, and would be prepared
to accept the later provision of the disaggregated information, if agencies
required additional time to provide it accurately. With the above provisos,
the committee recommends (2) the disaggregation of appropriations
to output level; it recommends (3) the itemising of administered
items; and it further recommends (4) the inclusion of forward estimates
for outcomes and outputs. It expects that DOFA and agencies will monitor
the accuracy of the disaggregated information and if after a reasonable
period of time it becomes apparent that the figures are so imprecise as
to be meaningless, the committee will review its recommendation.
To further assist scrutinising senators, the committee encourages agencies
to provide tables and appropriate explanatory notes regarding significant
variations. Again the tight timeframes might militate against the provision
of this information in the PBS tabled on budget night, but if it can be
provided in the PBS or later, the committee believes it would be well
received.
Not unexpectedly, the accounting changes associated with asset valuation,
asset management, the handling of depreciation moneys and the introduction
of a capital use change were not well understood and provoked much questioning
in estimates hearings. While the committee accepts DOFA's assurance that
it will follow up with material agencies cases in which their expenses
or revenues are inconsistent with budget predictions or significantly
different from comparative figures, it recommends (5) that this
information should be disclosed in a suitable publicly available document.
The committee is of the view that much greater use could be made of notes
to the financial statements and in particular, it recommends (6) that
the opening and closing asset values and amount and application of capital
use charge expected should be explained here. The committee also suggests
that DOFA may wish to consider a separate identification of CUC in its
whole of government financial reports.
The level of detail provided
No PBS, of whatever size, could accommodate all the information demands
placed upon it. Some senators use the estimates process to pursue individual
or constituent interests of a highly specific kind, which could not be
expected to be contained in explanatory memoranda for Appropriation Bills.
Others are highly aware of the type of information available and know
to ask specifically for more than is provided.
It may well be preferable for the PBS to be relatively succinct but accurate
documents, supplemented by specific material provided for pre-hearing
briefings of legislation committees. To counter the suggestion that this
subverts the transparency of the estimates process, the committee suggests
that any such briefing material be published in the legislation committees'
additional information volumes and, in cases in which the information
is transmitted electronically, be made available on the committees' web
pages.
Standardisation across portfolios
Consistency in budget documentation has not been a reality since line
item appropriations were discontinued, but it is nevertheless a desirable
quality in the eyes of senators. As Senator West lamented in the Health
and Aged Care portfolio estimates, `I am looking at about four or five
... PBS and not one of them is the same'. [2]
As noted above, with the principle of devolution in action, and the outcomes/outputs
framework being generated within broad parameters at portfolio level,
framework consistency has gone for good, it would seem. This committee
believes that this is a belated recognition of the diversity of portfolios
and is one issue on which the clock should not be turned back.
In other areas, however, the PBS do consistently follow the DOFA guidelines.
Broadly speaking the same table structure appears in each; outcomes and
outputs are described in each at a level appropriate for each portfolio
and the performance indicators by which progress is to be assessed are
outlined and will be reported on in annual reports.
The highlighting of budget measures early in the PBS has been in response
to requests from legislation committees in the past and, as it is well
liked, the committee is pleased to see it continue, duplication with Budget
Paper No. 2 notwithstanding.
Performance information
In reporting at this time, the committee is aware that the 1999-2000
accountability loop has not been closed and will not be closed until the
1999-2000 annual reports are tabled. It notes that some portfolios only
produced generalised indicators although most provided specifics along
the lines suggested by the DOFA guidelines. The committee has noted concerns
expressed about some of the performance indicators provided and will examine
both the reporting against them and their examination in the additional
estimates round before it reports again on this theme.
The committee recommends (7) that, in the short term, the
ANAO consider the development of a `best practice' performance information
guide and in the longer term – but no later than 2002-2003 –
the ANAO consider across-the-board performance information audits.
Conduct of estimates hearings
While the mechanics of accrual budgeting is not fully understood by senators,
the committee encourages the continuation of the practice of pre-hearing
budget estimates briefings, addressing technical matters, of legislation
committee members by portfolio representatives. The committee notes that
not all committees and not all members avail themselves of these excellent
briefings but encourages portfolios to continue to offer them, as there
will eventually be new committee members who may wish to avail themselves
of the offered assistance.
The committee recommends (8) that any explanatory briefing
documentation proferred at legislation committee pre-hearing briefings
for budget estimates be incorporated in the relevant legislation committee's
additional information volumes and published on the committee's web site,
if relevant.
And the committee recommends (9) again that legislation
committees continue to report in each budget estimates report on the adequacy
of the PBS provided for their use and in each additional estimates report
on the performance information examined.
DOFA's role
While the committee believes DOFA is to be congratulated on the successful
implementation of the 1999-2000 accrual budget in an outcomes/outputs
framework, it notes that the process was not without a number of teething
troubles. Agencies cited in particular conflicting advice and the late
provision of advice. DOFA has acknowledged that it can do more
to facilitate best practice financial reporting and has indicated to the
committee that it intends to establish a `centre of excellence' in accounting
advice, to facilitate agency discussion on PBS and accrual budgeting matters,
and to provide an analysis of the outcomes/outputs frameworks. [3]
The committee notes too DOFA's commitment to make the PBS guidelines available
to agencies six months before the budget.
The committee welcomes these moves, which should assist agencies in their
PBS production. Ultimately, however, as DOFA has reiterated, responsibility
for the achievement of outcomes and the management of performance against
outputs rests with agencies themselves.
Continuing scrutiny
In view of the evolving nature of both the reporting frameworks and the
accrual information provided in the financial tables, and in view of the
fact that the first accrual budgeting cycle has not been completed with
the tabling of the 1999-2000 annual reports, the committee indicates its
intention to maintain a watching brief over the PBS and to report again
after every budget estimates round, for as long as the need persists.
Warwick Parer
Chairman
Footnotes
[1] DOFA, Specifying Outcomes and Outputs,
1998, p. 13.
[2] Senate Community Affairs Legislation Committee,
Hansard, 31 May 1999, p. 7.
[3] Senate Finance and Public Administration
Legislation Committee, PBS Submissions, p. 134.
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