While Australians are a famously relaxed bunch, governments are typically held to a higher standard - especially when it comes to decisions around expenditure. After all, if taxes are “what we pay for civilised society”,1 it’s only fair to expect the Commonwealth Government to act lawfully and prudently when it comes to spending taxpayer money.
This is especially so with inflation currently running at 7% per annum, the Reserve Bank of Australia having raised interest rates on 12 occasions across the last 14 months to June 2023 and Australians of all walks feeling the pinch as a result.
Throw in the commencement of the new National Anti-Corruption Commission and it’s timely for Commonwealth public officials to take a moment and refresh their understanding of the Commonwealth’s financial framework.
The Commonwealth’s financial framework has numerous elements extending past core financial management rules, through to the duties and obligations of public officials, entity performance metrics and formal reporting requirements to name just a few. The framework is owned by the Finance portfolio and given effect through primary legislation, other legislative instruments, policy documents, internal notes and guidance.
Understanding this framework is important, both because it underpins the broader budgetary and appropriations process for the Commonwealth, and because of the potential consequences of non-compliance. For example, failure to adhere to requirements could render certain expenditure under programs or grants, invalid, potentially invoking debt recovery or waiver processes and risking substantial reputational and financial loss for the Commonwealth.
This note focuses on two key aspects of the broader framework – the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the appropriations process.
The PGPA Act establishes a system of governance and accountability for Commonwealth entities (including non-corporate Commonwealth entities like departments, Commonwealth corporate entities and Commonwealth companies). This includes how these entities are to use and manage public resources. The PGPA Act also facilitates other key governance instruments like the Commonwealth Procurement Rules, Grant Guidelines and Whole of Government procurement policies.
The PGPA Act further establishes a performance and transparency framework across Commonwealth entities requiring them to meet high standards of governance, performance and accountability through regular reporting to Parliament.
A number of explicit obligations attach to the accountable authorities of Commonwealth entities (for example, secretaries of departments) and to public officials (for example, Australian Public Service staff) when it comes to expenditure of public money. Relevantly, this includes requirements to govern the entity in a way that promotes the proper use and management of public resources2 and to act with due care and diligence3 among others.
Compliance with these obligations is designed to ensure public resources are used efficiently, effectively and ethically. Non-compliance with PGPA Act requirements, in addition to potentially negative employment consequences for at-fault individuals, can cause severe reputational damage to the Commonwealth entity in question, a loss of confidence amongst taxpayers and could have the collateral effect of undermining (and in some instances invalidating) good policy decision making by the Commonwealth.
Under section 81 of the Constitution, all revenues or moneys raised or received by the Commonwealth are to form one Consolidated Revenue Fund (CRF). This money is to be appropriated for the purposes of the Commonwealth, in the manner prescribed by the Constitution. Under section 83 of the Constitution, money from the CRF may only be drawn through appropriation made by law.
Combined, what these provisions ultimately mean is that drawing money from the CRF without a valid appropriation would be unlawful.
Importantly, while a valid appropriation allows for money to be taken out of the CRF, it does not necessarily allow for that money to be spent on anything. In essence, it’s permission to take the money out of the wallet but not permission to spend it on anything.
To authorise expenditure, in all but a few exceptional circumstances, authority in the form of legislation supported by a Constitutional head of power is also required.
Proposed Commonwealth Government expenditure that is not supported by a valid appropriation and legislative authority ultimately risks invalidity and the aforementioned legal, reputational and financial fallout for the Government.
The Commonwealth Financial Framework is a dynamic, evolving regime. Key legislative components such as the PGPA Act (and the many other instruments to which it relates) can be amended by Parliament or modified by ministers to reflect government priorities and societal expectations.
Commonwealth entities should be cognisant of the expectations surrounding their conduct and the changing environment in which their work takes place. Public officials should ensure systems are set up to ensure continued adherence to the Commonwealth Financial Framework, both in order to avoid adverse consequences and in recognition of the broader duty to taxpayers.
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