Australia - Budget and Budget System

Australia

The first stage of the public finance management reform in Australia began in 1983 with the advent of the Labor government, whose main desire was to implement large-scale social reforms that required significant expenditures. As a result, there was a need to restructure public spending. At the same time, in 1983, the Financial Management Improvement Program (FMIP) was adopted as part of a broader strategy for reforming the public sector.

In the mid-1980s. there was a review of priorities in the sphere of expenditures, which allowed to eliminate the aggregate budget deficit and achieve a surplus. At the first stage, the reform included the implementation of a methodology for developing a budget based on regularly updated estimates, as well as increasing requirements for program objectives and reporting on the results of their implementation. Within the framework of the budgetary process, there was a strict rule that ministries could not submit proposals for expenditures if they did not simultaneously submit proposals for their savings. As a result, it was possible to achieve significant budget savings.

The second stage of the reform was in the 1990s. and was characterized mainly by the orientation towards the widespread introduction of commercial principles into public administration, in particular, in the budgetary process. The main goal of the budget reform in Australia has been and remains to increase the efficiency of the use of public resources, as well as to increase the responsibility of bodies providing services to the population, while giving them greater flexibility in decision-making.

The beginning of the modern stage of the budget reform is associated with the creation in 1996 of the National Audit Commission (URL: finance.gov.au/publications/archive-of-publications/ncoa/execsum.htm), whose main tasks were:

1) evaluation of the state of public finances;

2) development of a methodology for the introduction and development of budgeting principles by objectives for departments and agencies;

3) identifying duplicate functions to provide services to the population between the levels of the central government and the territorial authorities, and also to prevent the resulting double financing.

The basis for the audit by the National Audit Commission was based on the following principles:

a) the state should work effectively in conditions of using limited resources. The state ultimately loses the ability to achieve the goals of social policy because of the need to constantly remove the shortcomings of the organization of public finance management;

b) the most preferable for society is the approach in which the state would be engaged in providing exactly those services that no one else can provide;

c) effective public administration will increase Australia's competitiveness in the world.

The Commission developed rules that are necessary to achieve effective use of public finance:

a) the objectives of the state should be clearly defined, results-oriented, and their achievement must be verifiable;

b) it is necessary to minimize the discrepancy between the goals of government programs;

c) the activities of public authorities should be directed to the solution of problems of the appropriate level if possible (national authorities should be decided by the Australian authorities, regional and local level tasks - regional and local authorities).

During the period from 1996 to 1999, The main changes in the public financial management system were implemented, based on the recommendations of the National Audit Commission. In particular, the Law on State Audit of 1901 was replaced by a number of the following laws governing the activities of government departments and companies:

1) The Public Financial Management and Reporting Act (FMAAct, 1997);

2) The Law on Executive Authorities and Companies of Australia (CAC Act, 1997);

3) The Law on the Auditor General (Auditor-General Act, 1997).

Thus, the management of public finances was organized on the basis of a clear division of responsibility between authorities of different levels.

In Australia, the Charter of Budget Honesty Act (URL: treasury.gov.au/contentitem.asp?NavId=012&ContentID=70) was approved in 1998, an analog of the laws on budgetary responsibility adopted earlier in the UK and New Zealand. The Charter is a legislative act that establishes legal standards with regard to fiscal policy transparency and accountability and imposes a formal responsibility to the public administration for the results of activities in the fiscal sphere.

Other key reforms were implemented in 1999-2000. and included: the introduction of the accrual method in the budget process in order to ensure full accounting of obligations when pricing for public goods and services, managing results-based finance, and increasing the responsibility of agency managers for achieving agency performance (which was, in particular, , is fixed in the Law on State Services, 1999).

One of the innovations was the conclusion of special performance agreements between the heads of agencies and profile ministers. Such an agreement contains key goals and objectives for the activities of not only the head of the agency, but also the agency as a whole.

Until 1996, Australian agencies were required to provide annual portfolio evaluation plans, assessing the achievement of program results within their competence over the past five years. In 1996, there was an introduction of mandatory state expertise of all programs based on the adjusted indicators. The results of each examination are submitted to the Minister of Finance. The Ministry of Finance of Australia (URL: finance.gov.au/), in cooperation with the National Audit Service (URL: anao.gov.au/), issued a special review of best practices on the use of information obtained on results.

The next innovation in the budgetary process was the introduction of a budgeting method based on regularly revised estimates, according to which the amount of financing of existing programs is already contained in the prospective estimates approved during previous budget cycles and are automatically included in the basic budget. Thus, the subject of discussion of the Government are the changes and improvements made to the basic budget. As a result, the emphasis in the budget preparation process was postponed from the revision of the amount of funding for each program to improve the principles of its development.

The introduction of another rule - the consolidation of budget items in ministries, allowed to use budgetary funds more economically and efficiently and to stop spending practices at the end of the year for any purposes in order to avoid their loss, with the introduction of a provision allowing to transfer unspent budget funds for the next year.

In the course of the budget reform in Australia, there was widespread adoption of commercial principles in the public sector, among which:

- the establishment of market prices for goods and services of public institutions;

- the introduction of competition elements among public service providers;

- the transfer of budgetary allocations to the consumer agencies, which have the right to pay for services from the supplier agencies;

- providing an opportunity for public institutions to purchase the necessary resources from private, rather than state, suppliers.

Throughout the reform process, the Australian Government has sought to transfer a significant number of functions to provide services to the public in the private sector. Due to this, employment in the public sector from 1990 to 1997 significantly reduced.

After assessing the positive effect of the fiscal reform of the 1990s, the Australian government recognized the need for regular reviews of the achievements of the budget reform. In 2002, for example, a review of the procedures and the draft budget was carried out, the purpose of which was, first of all, to provide more timely and accurate information in the preparation of the budget, as well as provision of public services with everything necessary to fulfill this condition.

The main recommendations in the Survey were:

- shifting the focus toward obtaining information about the implementation of programs;

- providing more detailed and timely information necessary for preparing the budget;

- Expansion of activities to assess the performance of agencies;

- ensuring the compliance of information systems with increasing requirements to the quality of information;

- raising the qualifications of employees of the Ministry of Finance and agencies.

The Recommendations of the Survey were approved by the Australian Government in 2002, including the right of the Ministry of Finance to refine the information provided by agencies in preparing the budget in order to guarantee its quality and timeliness.

Each ministry and agency must clearly define the goals, objectives, and measurable results of its activities, which form the basis of the two documents compiled by the departments:

1) Portfolio budget statement, the main purpose of which is to inform the Australian Parliament about the allocation of resources in accordance with the goals set by the government (URL: budget.gov.au/2008-09/content/pbs/html /index.htm);

2) report on the use of budget funds at the end of the year (annual report).

The main users of information provided by departments are the two core committees of the Australian Parliament: the State Budget and Audit Committee (JCPAA) and the Finance and Public Administration Committee (SCFPA).

The Ministry of Finance is responsible for the implementation of methodological support for the implementation of policies aimed at the result of all state structures. The Ministry of Finance publishes special guidelines for preparing reports on the results of using budgetary funds provided to the parliament.

The orientation of public financial management on the achievement of the final results has developed significantly over the past two decades, since the implementation of the basic principles of program-targeted planning in the budget process within the framework of the FMIP. Today, the information collected includes a comprehensive and detailed reporting, based on the method of charging, on planning and results achieved for each agency and ministry in terms of the types of services provided.

At present, the evaluation of the effect of using information on results in the process of making budget decisions is ambiguous. The budget reform has led to the fact that each agency provides full information on the use of budget resources and the results achieved. However, it is believed that information on results is not fully used in the budget process. Therefore, it is planned to increase the emphasis on the use of information on results, as well as to introduce the practice of reviews of budget decisions to develop new options for budget reform.

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