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A Guide to Appropriations - November 2013

Dimensions of Appropriations


There are seven types of appropriation set out in s7A(1) 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 allocated to one of these appropriation types.

Output Expenses

  • Output expenses are the most common type of appropriation. Each appropriation must contain a category (class) of outputs (goods and services) that is to be supplied.
  • Output expense appropriations can be departmental or non-departmental. Departmental output expense appropriations can be revenue dependent.
  • 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.

Establishing and Maintaining Output Classes

When creating, amalgamating or reviewing 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. Aggregation should be at a level that conveys a meaningful understanding of the outputs being reported, that is, not at a level so high as to cover or obscure the key outputs or at a level so low as to result in listings of outputs that are too detailed.
  3. 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. Aggregation of outputs based on the outcomes to which they relate could lead to dissimilar outputs being grouped and could reduce the understandability of reporting information to the reader.
  4. Output class appropriations must be mutually exclusive from all other appropriations so that expenditure can fall into only one output class. If flexibility between output classes is desired then a multi-category appropriation (MCA) can be used (however, each category of outputs within the MCA must be mutually exclusive).
  5. The outputs covered by the scope statement must be controllable by the agency or at least include only actions that the agency has reasonable influence over.
  6. Appropriations must be comprehensive to include all of the goods and services that will be supplied or met by the department. Any costs incurred on outputs that are not within a scope statement will not have been authorised by Parliament and will therefore be unlawful.
  7. A scope statement must be verifiable so that an auditor and Parliament can be sure that a department has not exceeded its authority.
  8. To assist readers 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

  • A category (class) of outputs 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) (definitions of “departmental” and “non-departmental” in s2 PFA 1989).
  • The department's chief executive is responsible for what is achieved with departmental appropriations and can decide whether to make the required outputs in-house or buy them in.
  • 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).

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 (s21 PFA 1989).
  • Expenses incurred under RDAs are limited to 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 readers that the appropriation is an RDA.

Benefits or Related Expenses

  • This appropriation type is used when the Crown wishes to transfer resources (usually to individuals) and does not expect anything directly in return.
  • Scope statements for these appropriations should reference the relevant authority or source of eligibility (whether it is legislation, government policy, or an approvals process) if this source of authority is enduring throughout the year (ie, the scope statement should not reference a policy that is likely to change as this could cause a problem with expenditure falling outside scope, unless restricting scope in this way is the intention).
  • Examples of this appropriation type include social security benefits, student allowances, and education scholarship payments.

Borrowing Expenses

  • Borrowing expense appropriations are used to authorise the payment of interest, other financing expenses on loans, or public securities issued by the Crown.
  • Borrowing expense appropriations can be either departmental or non-departmental, but in practice only Offices of Parliament could have a departmental borrowing expense appropriation due to departments being unable to borrow.
  • The scope statement for a borrowing expense appropriation should reference the purpose of the borrowing.
  • Most borrowing expense appropriations appear in Vote Finance and Vote Revenue.

Other Expenses

  • Other expenses are a residual type of expense appropriation that covers expenditure that is not readily classified as one of the other three expense appropriation types. It should not be used if an appropriation could be classified as one of the other types.
  • Other expenses can be both departmental and non-departmental.
  • Departmental other expense appropriations are rare and primarily used for permanent legislative authorities (PLAs) authorising the payment of salaries for Officers of Parliament, such as the Auditor General and the Ombudsmen.
  • Non-departmental other expenses are more common and include subscriptions for memberships of international organisations and remuneration of statutory office-holders, such as judges, coroners and Public Service chief executives.
  • The requirements for scope statements for other expenses depend on the nature of the expense.
  • If the expense is similar in nature to an output then the principles for output class scope statements should apply.
  • If the expense resembles more of an input, then the scope statement should detail the type of expense and make reference to any entitlement criteria.

Capital Expenditure


  • Departmental capital expenditure funded from a department's balance sheet is authorised by a permanent legislative authority (PLA) under s24(1) of the PFA 1989. Like all other PLAs this appropriation needs to be included in the Estimates.
  • The amount of the appropriation should be the forecast amount to be spent for the budget year rather than an approved amount (as the appropriation is a PLA). This amount is gross (not netted off with reductions in the value of other assets held or disposed of) and must not exceed a department's expected working capital and the proceeds of the sale or disposal of its assets during the year.
  • Should a department require an increase in its working capital, the appropriate mechanism is not to increase the capital expenditure PLA, but to have the necessary capital injection authorised by Parliament in an Appropriation Act (s12A 1989 PFA).


  • Non-departmental capital expenditure appropriations take a more conventional form than departmental capital expenditure appropriations.
  • Appropriations of this type are used to authorise capital expenditure incurred by the Crown (excluding departments) to acquire or develop Crown assets, including the purchase of equity, or making a loan to a person or organisation that is not a department.
  • A scope statement for capital expenditure should provide a description of the asset to be acquired or developed.
  • Common examples of non-departmental capital expenditure appropriations include equity injections for Crown entities, loans to Crown entities, SOEs or parties outside the Crown, and development of physical assets.

Intelligence and Security Departments

  • Due to the sensitive nature of their work the intelligence and security departments have a special type of appropriation (s7(A)(1)(f) PFA 1989).
  • This appropriation type authorises in a single appropriation both expenses and capital expenditure for the New Zealand Security Intelligence Service or the Government Communications Security Bureau.

Multi-Category Appropriations (MCAs)

  • MCAs can be used to provide increased financial flexibility across a number of categories of expenses and non-departmental capital expenditure that all contribute to a single overarching purpose, while preserving transparency about what is achieved with each category of an MCA.
  • An MCA (s7A(1)(g) PFA 1989) consists of two or more categories of:
    • Departmental or non-departmental output expenses.
    • Departmental or non-departmental other expenses.
    • Non-departmental capital expenditure.
  • An MCA must (s7B PFA 1989):
    • be approved by the Minister of Finance, who in conjunction with the appropriation Minister can impose conditions on the transfer of resources between categories of an MCA, and
    • include only categories of expenses or non-departmental capital expenditure that contribute to a single overarching purpose.
  • The amount of an MCA is for the MCA as a whole (the amount of each category of the MCA is a forecast of expenditure).
  • The scope of an MCA is the scope of each of the individual categories of expenses or non-departmental capital expenditure included in the MCA (s9(2)(a) PFA 1989).
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