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Statement 6 presents estimates of general government expenses, net capital investment and capital appropriations in 1999-2000, the Budget year and forward years. In last year's budget, capital estimates were presented as a separate statement. Capital information is now presented in this statement in aggregate in Part II and under each portfolio in Part III.
The general government overview sections in Part I and Part II discuss trends in aggregate expenses and capital, with a particular focus on explaining major variations since the 1999-2000 Budget. Expenses are categorised as either departmental or administered expenses. Departmental expenses are those expenses that are within the control of the relevant agency, whereas administered expenses are those expenses agencies administer on behalf of the Government.
Part III discusses expenses and capital movements by portfolio. The emphasis is on analysing major trends in terms of measures and other variations. A general description of each portfolio is also presented.
Tables and Data
The data shown in all tables are prepared on an accrual basis in accordance with applicable Australian Accounting Standards, including Australian Accounting Standard 31 Financial Reporting by Governments (AAS31), except as identified in Note 1 to Statement 4.
The tables in Part III show expenses by portfolio for all material agencies. These expenses are at the agency level and have not been consolidated to eliminate transactions between agencies. In this form, the expenses show the consumption of resources by each individual agency.
Expenses shown for material agencies reflect the expenses of those agencies in accordance with accounting standards and as disclosed in their operating statements. They do not include payments of the capital use charge to the Budget, as these payments are in the nature of dividends, which should not be treated as expenses.
Expenses represent the full costs of an activity, as opposed to direct cash costs. Recording estimated expenses rather than estimated cash transactions is in accord with international best practice in government budgeting and consistent with worldwide private sector practices. Budgeting in this fashion reflects more accurately the full cost of achieving the Government's objectives, eliminates distortions associated with the timing of certain payments and provides a better basis for assessing inter-generational equity.
The general government sector expenses are based on a system of rolling forward estimates consolidated by the Department of Finance and Administration (DOFA), largely from estimates supplied by other agencies. There are 44 material agencies in the general government sector, which comprise more than 99 per cent of the Budget. A full set of estimates is maintained for each of these agencies. The estimates of a large number of very small agencies in the sector are not material from either an accounting or budgeting point of view. These are referred to in the Budget as small agencies, and only limited estimates information is maintained to avoid placing an undue administrative burden on them.
As owner, the Government is responsible for ensuring that agencies have access to new capital when additional investment is required to deliver outputs efficiently and competitively, having regard to the cost of capital. Agencies, on the other hand, are responsible for the stewardship of the Government's investment, particularly in ensuring that the value of the Government's investment is not diminished over time. Normally this requires that agencies ensure that revenues cover all expenses, including depreciation.
This statement encompasses two concepts of capital - net capital investment and capital appropriations.
Net capital investment reflects the change in the balance sheet value of non-financial assets (property, plant and equipment, for example). Capital investment may be funded by:
- internal funds, which can be comprised of:
cash from operations;
capital appropriations made by the Government in preceding years; and
sales of agency assets; or
- capital appropriations.
A capital appropriation is the means by which the Government provides capital funding to its agencies. Capital appropriations can be used for a variety of purposes, such as investing in financial and non-financial assets, and reducing liabilities. There are several forms of capital appropriation:
- capital appropriations for departmental purposes, being:
equity injections, which are a direct injection of cash into an agency to fund departmental investments, where the Government earns a return on its investment in the form of a dividend and/or improved performance; or
loans, where the Government provides cash to an agency to fund departmental investments that is repayable with interest by the agency;
- administered capital appropriations, which are for activities administered by agencies in their fiduciary capacity on behalf of the Government and which comprise equity injections, loans or carryovers; and
- as a transitional arrangement for departmental items, appropriation of previous years carryovers. Under running cost arrangements prior to the introduction of the Accrual Budgeting Framework, agencies might have received additional funding for appropriations not expended in the previous year. To avoid a distortion of price in future years, it was decided that carryovers of running costs would be made available to agencies in the form of a specifically identified equity injection.
The Contingency Reserve is the means of ensuring that the aggregate estimates are robust and based on the best information available at the time of publication. A more detailed discussion of the Contingency Reserve is contained in Part III of this statement.
Portfolio Budget Statements
Further information on material agencies' expenses, capital movements, major outputs, administered items and small agencies may be found in the respective Portfolio Budget Statements.