Section 81 of the Constitution creates the Consolidated Revenue Fund (CRF) and requires all Commonwealth receipts to be paid into it. Section 83 of the Constitution requires all payments out of the CRF to be supported by a legal appropriation. Appropriations ‘segregate’ or ‘earmark’ money from within the CRF for the government to use, and allow the Parliament to exercise a level of control over government by attaching conditions according to which funds must be used.
Special appropriations provide funding allocations outside of annual appropriation Acts. Generally they are found in a provision or provisions of an individual Act, rather than in the Appropriation Acts presented to the Parliament each year.
Special appropriations are the dominant appropriation mechanism in Australia. In 2016–17, 77 per cent of spending was appropriated through a special appropriation. In comparison, in 1910 special appropriations accounted for 10 per cent of all Commonwealth payments, and in 1949–50 accounted for 49 per cent.
Commonwealth entities are responsible for the special appropriations listed in either the Acts that the entity is named in, or the Acts they have responsibility for under the relevant Administrative Arrangements Order. The Department of Finance (Finance) has ultimate responsibility for financial accountability, efficiency, governance and financial management frameworks within the Commonwealth Government.
Special Appropriations were selected for audit on the basis of the volume of government payments made through this mechanism. In 2016–17, $353.5 billion of Commonwealth expenses were supported via special appropriation.1 This appropriation type is generally used for government payments which cannot be capped as they are entitlement based (such as social security payments), or meet other criteria as set by government. Unlike annual appropriations, the value of which is considered and agreed by Parliament annually as part of the budget process, special appropriations are only considered once by Parliament and are not brought back for consideration unless legislative policy changes are considered.
The objective of the audit was to examine entity compliance with the regulatory requirements for the establishment and ongoing management of special appropriations.
To form a conclusion against the audit objective, the ANAO adopted the following high level criteria:
- Have appropriate processes and guidance been established, in line with regulatory requirements, for agencies in giving advice to government when a special appropriation is being recommended?
- Do entities have effective arrangements in place for the ongoing management and monitoring of special appropriations in line with regulatory requirements?