Dimensions of Appropriations

Type

There are six types of appropriation set out in section 7 of the PFA 1989. Every expense or item of capital expenditure incurred by the Crown (other than a loss as a result of a measurement or an operating loss by a body owned by the Crown) must be categorised into one of these appropriation types.

Output Expenses

• Output expenses are the most common type of appropriation. Each appropriation must contain a class of outputs (goods and services) that is to be supplied.
• There is significant variation within the output expense appropriation type. Output expense appropriations can have a single output class or multiple output classes, be departmental or non-departmental, be revenue dependent or be from department to department.
• Most departments will administer multiple departmental output expenses and therefore it is important to think of these appropriations working together as a set of appropriations as well as individual appropriations in their own right.

Multi Class Output Appropriations (MCOA)

• The Minister of Finance can agree that more than one specified class of outputs be supplied under a single appropriation. This is known as a Multi Class Output Appropriation (MCOA) (s 7(3) (b) PFA 1989).
• MCOAs are used to give the responsible Minister ongoing discretion over the mix of outputs across two or more classes of outputs within the period of the appropriation. Such discretion is most commonly used when the output classes contribute to a common outcome or use a common or closely related set of inputs and processes.
• If an MCOA is used, the Estimates and the information supporting the Estimates must contain a separate scope statement for each individual output class within the MCOA and an explanation of why the outputs have been grouped together in one appropriation. (s 7(4) PFA 1989)
• All MCOA titles must include MCOA at the end to inform users that the appropriation is a MCOA.
• An example of a current MCOA is the accountability reviews appropriation in Vote Education Review Office.

Establishing and Maintaining Output Classes

When creating, amalgamating or evaluating an output class, or a set of output classes, thought should be given to the following principles for good output classes:

1. An output class should have an external focus. The scope statement must relate to the final goods and services that are produced, not intermediate goods and services, a performance specification, or a description of the process used to create them.
2. It should cover goods and services that are similar in nature. Dissimilar goods and services should NOT be included in the same output class even if they contribute to the same outcome, are used by the same people, produced in the same location or represent an organisation’s structure.
3. Output class appropriations must be mutually exclusive with all other appropriations so that expenditure can fall into only one output class. If flexibility between output classes is desired then a multi class output appropriation (MCOA) can be used (however each output class within the MCOA must be mutually exclusive).
4. The outputs described by the scope statement must be controllable by the agency or at least include only actions that the agency has reasonable influence over.
5. Appropriations must be comprehensive to include all of the goods and services that will be supplied or met by the department. Anything that is not within a scope specification will not be authorised by Parliament and therefore unlawful.
6. A scope statement must be verifiable so that an auditor and Parliament can be sure that a department has not exceeded its authority.
7. To assist users a scope statement of an output class appropriation should be informative.

A discussion of scope in general follows on page 11.

Departmental v Non-departmental

• An output expense appropriation can either be supplied by a department (in which case it is labelled a departmental output expense) or to, or on behalf of, the Crown (in which case it is labelled a non-departmental output expense) (section 7(3)(a) PFA 1989).
• The department Chief Executive has the decision making rights in respect to departmental appropriations, in particular whether to make in house or buy in the required outputs.
• Non-departmental output expense appropriations are where Ministers have decided to use a supplier other than a department to provide an output. Most commonly these appropriations fund Crown entities and non-governmental organisations (NGOs).

Department-to-department Appropriations (DDA)

• Departments may incur output expenses for, or on behalf of, another department if this is agreed by the two departments (s 20 PFA 1989). This is referred to as a department-to-department appropriation (DDA).
• The department incurring expenses on behalf of the other requires no further appropriation but must return any revenue earned from the supply of the outputs not utilised toward the cost of the particular output back to the department administering the original appropriation.
• DDAs may be used to reduce barriers to collaboration between departments by reducing the time and amount of effort required to obtain/adjust appropriations and by allowing the commissioning department to retain full control of the resources it is responsible for providing.
• DDAs are not limited to bilateral arrangements. They could also be used by one department to co-ordinate and manage the work of several departments working together to provide an integrated service to a third party or alternatively to pool together contributions from several departments to enable another department to provide a specific service to or on behalf of those departments.
• All titles for this type of appropriation must include DDA at the end to inform users that the appropriation is a DDA.

Revenue Dependent Appropriations (RDA)

• Revenue dependent appropriations (RDAs) allow departments or Offices of Parliament to incur expenses in supplying a specified class of outputs that are not paid for directly by the Crown. (s 21 PFA 1989).
• RDAs are limited by the amount of revenue that is earned by a department or Office of Parliament from other departments or entities other than the Crown during the period of the appropriation.
• A proposed revenue dependent appropriation must be approved by the Minister of Finance prior to being presented in the Estimates.
• All titles of this type of appropriation must include RDA at the end to inform users that the appropriation is an RDA.
• There are currently 4 examples of RDAs. They are listed in a summary table at the beginning of the Estimates.