Chapter 1 - Background to the inquiry
Establishment of inquiry
1.1
On 20 June 2006, the Senate referred the following matter to the Finance
and Public Administration References Committee for inquiry and report by 19 October 2006:
The transparency and accountability to Parliament of
Commonwealth public funding and expenditure, including:
- the impact on the Parliament's ability to scrutinise, approve and
monitor proposed and actual expenditure of:
- outcome budget appropriations and reporting.
- Multiple sources of funding including special appropriations, advances
to the Minister for Finance, annual departmental carry-over surpluses, revenue
retained under section 31 of the Financial Management and Accountability Act
1997, special accounts and goods and services tax appropriations, and
- The use of ordinary annual services to fund activities including
non-annual services;
- options for improving the transparency and specificity of budget papers
and related documents; and
- other measures to improve the Parliament's oversight of proposed and
actual Commonwealth funding and expenditure.
1.2
The Committee's terms of reference are reproduced in Appendix 1.
Conduct of the inquiry
1.3
The Finance and Public Administration References Committee had been
required to report by 19 October 2006, but was unable to report by that date
because the committee ceased to exist on 10 September 2006. On 14 August 2006 the Senate had resolved to amend the relevant Orders of the Senate so
that, from 11 September 2006, the separate References and Legislation Committees
would be replaced by one Legislative and General Purpose Committee.
1.4
The Senate also resolved that the newly-established legislative and
general purpose committees should inquire into and report on matters referred
to their predecessor committees that had not been disposed of by those
committees and, in considering those matters, might consider the evidence and
records of those committees relating to those matters. Consequently, from 11 September 2006, the inquiry, with the same terms of reference, was conducted by the Senate
Finance and Public Administration Legislative and General Purpose Committee.
1.5
On 19 October 2006 the Senate granted the Committee an extension of time
to 7 December 2006 to report on the reference. On 5 December 2006 and 6 February
2007 the Senate granted further
another extensions of the
reporting date, to 8 February 2007 and to 1 March
2007.
1.6
The Committee conducted three public hearings on the reference on 8
September, 12 October and 27 November 2006 in Canberra. Lists of witnesses and
of the submissions made to the inquiry may be found in Appendices 2 and 3.
Origin of the reference
1.7
The Commonwealth Budget was presented on the basis of accrual budgeting and in the outcomes/outputs framework
for the first time in the 1999-2000 financial year. It is timely therefore for
the Committee to consider transparency and accountability issues relating to
accruals and to the Budget framework. In addition, in December 2005 the former Finance
and Public Administration References Committee reported on an inquiry into government
advertising and accountability.
1.8
That inquiry raised issues in relation to government accountability to Parliament
for funding and expenditure that were broader in scope than it could be
considered in detail by it.[1] These included matters
arising from the High Court of Australia's majority ruling against the
plaintiffs in Combet v the Commonwealth of Australia.[2]
1.9
The committee recommended that the Senate should refer to it the matter
of the impact of outcome budgeting for appropriations on Parliament's
consideration and approval of government expenditure, and the accountability of
government for such expenditure.[3]
1.10
As reported above, the Senate referred the matter to the Committee
on 20 June 2006.
Report structure
1.11
Chapter 2 sets out the constitutional provisions for
funding and expenditure, historical developments and the current accrual-based
outcomes/outputs framework.
1.12
Chapters 3 and 4 discuss the proliferation of funding
sources. Chapter 3 covers Special Appropriations, Special Accounts, revenue
retained under Section 31 of the Financial Management and Accountability Act
1997 and annual departmental carryovers; Chapter 4 covers tax expenditures,
the advance to the Finance Minister, the Goods and Services Tax and ordinary
annual services.
1.13
Chapter 5 examines measures for improving transparency and
the specificity of budget documents. The key matters addressed are portfolio
budget statements, outcome statements and program-level expenditure
information, accounting standards and treatment of depreciation.
1.14
In Chapter 6, the Committee turns to measures to improve
Parliamentary oversight. These include the role of Senate committees, committee
staff and the Auditor-General, as well as legislative changes.
1.15
Chapter 7 presents the Committee's conclusions and
recommendations.
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