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Types of Appropriation

The Public Finance Act lists six types of appropriation:

Types of Appropriation
1   Output expenses (including Multi-Class Output Appropriations) eg, policy advice; management of contracts; police, health or educational services; revenue-dependent expenses; department-to-department transfers
2   Benefits or other unrequited expenses eg, unemployment benefit; pensions; tax credits; housing assistance; student allowances
3   Borrowing expenses eg, debt servicing costs; interest on (tax) equalisation and reserve accounts
4   Other expenses eg, restructuring costs; litigation costs; loss on sale of fixed assets; overseas development assistance; grants; remuneration for statutory officers
5   Capital expenditure eg, increase in investment in a department, Crown entity or SOE (eg, to increase its output capacity or improve its efficiency); purchase or development of assets
6   Expenses and capital expenditure incurred by intelligence and security departments eg, total expenses and capital expenditure of intelligence and security departments

Appropriations are further divided into departmental and non-departmental appropriations, limiting who receives payment. Output expenses are typically for a single ‘class' (a grouping of similar outputs). Multi-class output expenses (MCOA) can, however, be used to group dissimilar outputs (eg, that contribute to particular outcomes).

Ensuring Money Gets to Parliament's Intended Recipient

Careful appropriation ensures funding is spent as Parliament, Cabinet and the Minister intended. Clarity protects agencies against claims of misuse.

  • Crown Entities: The Ministry of Culture and Heritage is paid to monitor Crown entities under a departmental Output Expense. Crown entities are funded under a non-departmental Output Expense. Funding for sportspeople is ‘ring-fenced' in a non-departmental Other Expense.
  • Science: Policy and purchase advice is procured as a departmental Multi-Class Output Appropriation (MCOA). Funding destined for research institutions is protected in non-departmental Output Expenses.

Welfare Payments: The Ministry of Social Development disburses benefits to entitled persons. Benefit payments themselves are funded separately as Benefits and Other Unrequited Expenses.

The Introduction section of the main Estimates and the Treasury's ‘Guide to Appropriations' provide more detailed information on the appropriation framework, including departmental and non-departmental appropriations, multi-class output appropriations (MCOA), department-to-department appropriations (DDA), multi-year appropriations (MYA), revenue-dependent appropriations (RDA) and permanent legislative authority (PLA).

Scope Statements

Scope statements limit what an appropriation of any type can be used for. Scope statements are more specific about what is being funded and, by contrast, what cannot be funded under the appropriation.

Scope statements must stand alone as clear statements of what expenses or capital expenditure can be incurred on. Legally, they are read without reference to appropriation titles or other material in the estimates. In practice, however, good organisation and clear titles help readers to make sense of the complex information being presented.

A good scope statement constrains what expenditure can be authorised, without restricting use of funding for its intended purposes. Careful drafting is required to achieve this balance.

A few examples of scope statements from the Estimates:
Output Expense

Audit & Assurance Services (M78)

This appropriation is limited to the performance of audit and related assurance services as required or authorised by statute for smaller entities such as reserve boards.

Multi-class Output Appropriation (MCOA)[16]

Domestic Biosecurity Risk Management MCOA (M7)

Biosecurity Incursion response and long-term pest management: This output class is limited to the assessment, containment and eradication of suspected risk organisms within New Zealand.

Domestic Biosecurity Surveillance: This output class is limited to domestic biosecurity surveillance activities.

Benefits & Other Unrequited Expenses

Invalid's Benefit (M63)

Provision of means-tested income support for people who are totally blind, or permanently and severely restricted in their ability to work, and paid in accordance with criteria set out in the Social Security Act 1964.

Capital Expenditure

Acquisition and Development of Properties under the Housing Act 1955 (M37)

This appropriation is limited to acquiring, developing and modernising properties under the Housing Act 1955.

Further specificity on what is being funded is provided in the ‘Information Supporting the Estimates'. Supporting information includes specific output measures and standards for each appropriation, against which performance is assessed in retrospect.

Output measures for prisons, for example, include mean and maximum numbers of inmates, number of escapes, assaults and self-harm (etc), and numbers of health assessments, drug tests and prisoners escorted to court. Intermediate outcomes, such as number of assaults, are used as quality indicators to measure trends.

Amount of Expenditure

Appropriation authorises expenditure up to a maximum level. Less is spent when a government's objectives can be achieved at lower cost. All types of appropriations can be changed in the Supplementary Estimates. Transfers and any increases in appropriations are usually made in an Appropriation (Supplementary Estimates) Bill. However, in addition, section 26A of the Public Finance Act allows a ‘once a year' increase in an output appropriation by up to five percent. Such financial transfers can only occur if the total amount appropriated for all output expense appropriations in the Vote is not exceeded and it must be authorised by the Governor-General by Order in Council.

Most appropriations are limited to dollar amounts. Revenue Dependent Appropriations for departmental output expenses can, however, be incurred up to the level of revenue earned from parties other than the Crown.

During a civil defence, health or public safety emergency, expenses can be incurred without appropriation under section 25 (2) of the Public Finance Act.[17] Imprest supply is normally used to respond to emergencies.

When Parliament gives authority for resources to be used for a particular purpose, Parliament must have confidence that those resources will be used only for that purpose. Ministers need Parliament's authority to transfer resources between different appropriations.


  • [16]Each output class within an MCOA must have its own scope statement.
  • [17]In 2011, section 25(2) was invoked to respond to the Christchurch earthquake. Section 25 spending was limited by requiring all departments to use existing appropriations where possible (spending was within the scope statement, etc), and limiting the use of section 25 to cover action ‘required as part of the immediate response’ or ‘incurred automatically’ (eg, reimbursement of 60% of the cost to local authorities of re-establishing critical underground infrastructure). As needs became clearer over time, section 25 expenditure and capital expenses were limited to particular agencies and purposes. Section 25 expenditure was reported to the Treasury so it could be controlled, budgeted for, and Gazetted. Later on, it was reported in financial statements and included in an Appropriation Bill for confirmation by Parliament.
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