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Examples of Appropriations from the Main Estimates

This section presents extracts from appropriations for multiple Votes, with brief commentary on points of interest. Examples are representative. No attempt is made to cover the full range of uses of each appropriation type. Examples from the current Budget can be found at: www.treasury.govt.nz.

Scope statements in the left hand column limit what expenses can be incurred.[18] This is followed by the current year's Budget and expected actual expenses. Next year's Budget is proposed on the far right column.

  2009/10 2010/11
Titles and Scopes of Appropriations by Appropriation Type Budgeted
$000
Estimated
Actual
$000
Budget
$000

Departmental Output Expenses

     

Information and Administrative Services to the Judiciary and New Zealand Parole Board (M18)

This appropriation is limited to the provision of information about offenders to victims of crime, the Judiciary and the New Zealand Parole Board, and the provision of administrative, financial and secretariat services to the New Zealand Parole Board.

54,245 53,914 63,538

Management of Third Party Custodial Services (M18)

This appropriation is limited to preparing for and managing contracts for the provision of custodial services by third parties.

1,000 1,000 12,900

The first item funds a standard output expense (advice from the Judiciary and the Parole Board, respectively, on sentencing and release from prison). The second item funds advice on, and contract management of, outsourced prison services. The Information Supporting the Estimates provides more detailed information on the price, quantity and standards of departmental output classes.

  2009/10 2010/11
Titles and Scopes of Appropriations by Appropriation Type Budgeted
$000
Estimated
Actual
$000
Budget
$000

Departmental Output Expenses

     
Prison-based Custodial Services MCOA (M18) 702,973 693,491 754,383

Custody of Remand Prisoners

This output class is limited to the provision of custodial services for remand prisoners (people awaiting trial and offenders convicted but not yet sentenced).

150,103 147,683 172,704

Custody of Sentenced Prisoners

This output class is limited to the provision of custodial services for offenders sentenced to imprisonment.

552,870 545,808 581,679

In the above example, a departmental Multi-Class Output Appropriation (MCOA) is used to purchase custodial (prison) services from the Department of Corrections. MCOA includes dissimilar outputs that contribute to similar outcomes.

Purchase (contracting) and provider (prison) expenses are in separate appropriations giving Parliament information on where money is expected to be spent and helping delivery and purchase agents focus on cost and value for money. As the ‘make or buy' decision (even for private prisons) is with the Chief Executive of Corrections, outsourced prison costs are appropriated as departmental output expenses. The Information Supporting the Estimates for the relevant output class has separate performance measures for public and private prisons.

Each output class in an MCOA includes a scope statement and cost but the maximum expenditure limit is set by the total for the whole MCOA. Within the MCOA, Ministers can transfer funding between output classes.

  2009/10 2010/11
Titles and Scopes of Appropriations by Appropriation Type Budgeted
$000
Estimated
Actual
$000
Budget
$000

Departmental Output Expenses

     

Income Support and Assistance to Seniors (M63)

This appropriation is limited to paying New Zealand Superannuation and social security entitlements (including administering related international social security agreements) and providing advice to help older people maintain independence and social participation; and administering international social security agreements relating to non-superannuitants.

34,439 34,439 34,667

Benefits and Unrequited Expenses

     

New Zealand Superannuation (M63)

Provision of an income for people who have reached the qualifying age of 65 years and fulfil the residency requirements, as provided for in the New Zealand Superannuation and Retirement Income Act 2001.

8,306,504 8,287,230 8,822,221

While the costs of managing the distribution of pensions is a (departmental) output expense, appropriation of superannuation payments as Benefits and other Unrequited Expenses indicate the total payments to be made to superannuitants.

  2009/10 2010/11
Titles and Scopes of Appropriations by Appropriation Type Budgeted
$000
Estimated
Actual
$000
Budget
$000

Departmental Output Expenses

     

Revenue Collection, Accounting and Debt Management (M21)

The provision of services relating to receipt and processing of revenues owing from import tariffs, goods and services tax and excise-equivalent duties on imported goods and excise duty on domestically manufactured fuel, tobacco and alcohol products.

3,620 3,620 -

Non-Departmental Other Expenses

     

Change in Doubtful Debt Provision (M21)

Provisioning of Doubtful Debts on Customs Crown Revenue.

2,000 2,000 2,000

Many agencies collect money owed to the Crown. This includes duties, fees, fines, levies and taxes. As discussed already, money collected on behalf of the Crown is Crown revenue, not departmental revenue. Appropriation to departments covers only revenue management and collection services.

Bad debts and impairment under GAAP (IFRS) in relation to Customs revenue relate to the Crown and are therefore covered above by Non-Departmental Other Expenses.

  2009/10 2010/11
Titles and Scopes of Appropriations by Appropriation Type Budgeted
$000
Estimated
Actual
$000
Budget
$000

Departmental Output Expenses

     

Services to New Zealand Parole Board (M18)

Provides for services to the New Zealand Parole Board relating to the provision of administrative, financial and secretariat services.

6,464 5,938 -

The Parole Board has statutory independence in its decision-making but is not a separate legal entity from the Crown. The Department of Corrections hosts the Parole Board and provides administrative services, so support services to it are a departmental expense. Had the Parole Board's quasi-judicial functions been established instead in an Independent Crown Entity, output expenses would be appropriated as Non-Departmental Output Expenses.

  2010/11 2011/12
Titles and Scopes of Appropriations by Appropriation Type Budgeted
$000
Estimated
Actual
$000
Budget
$000

Non-Departmental Output Expenses

     

National Land Transport Programme - Demand Management and Community Programmes PLA (M72)

The estimated amount to be spent on activities under the National Land Transport Programme, as authorised by sections 9 (3) and (4) of the Land Transport Management Act 2003.

- - 1,792,653

Expenses of meeting statutory obligations are funded under Permanent Legislative Authority (PLA). PLAs continue in effect until revoked by Parliament. Parliament is reminded it has mandated the activities and is given an updated forecast of expenditure. Scope statements therefore refer to the relevant section of the authorising legislation.

The above PLA is one of two in Vote Transport that are authorised under sections 9 (3) and (4) of the Land Transport Management Act 2003.

Departmental capital expenditure is also appropriated as a PLA (second example below).

  2009/10 2010/11
Titles and Scopes of Appropriations by Appropriation Type Budgeted
$000
Estimated
Actual
$000
Budget
$000

Non-Departmental Borrowing Expenses

     

Debt Servicing PLA (M31)

This appropriation is limited to the payment of borrowing expenses for the Crown's New Zealand-dollar and foreign-currency debt, authorised by section 60(1)(b) of the Public Finance Act 1989.

2,288,836 2,288,836 3,058,421
Total Non-Departmental Borrowing Expenses 2,288,836 2,288,836 3,058,421

Debt is managed centrally and departments cannot raise debt. So a major non-departmental appropriation to Vote Finance covers interest expenses.

  2009/10 2010/11
Titles and Scopes of Appropriations by Appropriation Type Budgeted
$000
Estimated
Actual
$000
Budget
$000

Departmental Capital Expenditure

     

Department of Corrections - Capital Expenditure PLA (M18)

This appropriation is limited to the purchase or development of assets by and for the use of the Department of Corrections, as authorised by section 24(1) of the Public Finance Act 1989.

268,129 268,129 250,937
Total Departmental Capital Expenditure 268,129 268,129 250,937

Non-Departmental Capital Expenditure

     

Asian Development Bank PLA (M31)

This appropriation is limited to capital expenditure by New Zealand as a member of the Asian Development Bank Agreement, authorised by section 3 of the International Finance Agreements Amendment Act 1966.

- - 71,000

Departmental capital expenditure is appropriated as PLA, as departments can use depreciation funding held on their balance sheets and the proceeds of the sale or disposal of assets to purchase or develop assets (section 24(1) of the Public Finance Act). Capital injections may also be made eg, to fund new facilities (below).

Capital expenditure is also appropriated to meet international obligations.

Details of Net Asset Schedule 2009/10
Estimated Actual
$000
2010/11
Projected
$000
Explanation of Projected Movements in 2010/11
Opening Balance 2,029,498 2,140,709 2009/10 Supplementary Estimates opening balance reflects the audited results as at 30 June 2009.
Capital Injections 281,082 100,876 The Department received additional funding for two new drug treatment units, implementation of double bunking phase two (Northland and Auckland Women) and Mt Eden phase one, meeting higher demand in Community Probation and Psychological Services and capital transferred from 2009/10. In addition, the Department also received new funding for the establishment of Whare Oranga Ake and Mt Eden Phase Two (Stage Two), as part of decisions made under Budget 2010.
Capital Withdrawals (169,871) (22,840) The Department is partially self-funding capital expenditure previously received for decisions made as part of the Mt Eden -Redevelopment Project and returned some funding received for the implementation of double bunking at five prisons.
Closing Balance 2,140,709 2,218,745  

As the amount of a department's net assets is not permitted to exceed the most recent projected balance of net assets at the end of the financial year (as set out in an Appropriation Act), Parliament exercises a level of control over the size of a department's balance sheet.

Net movements in assets also get declared. This example shows much of FY 2009/10's new capital requirements being offset by the return of capital to the Crown, resulting in lower capital charges being levied on the agency.

New Zealand's output-based appropriation and spending controls allowed successive governments to more than halve debt as a proportion of Gross Domestic Product and maintain debt at low levels until the 2008 recession.

Notes

  • [18]On a day-to-day basis the Controller confirms that spending conforms to appropriations. Further confirmation is provided by audit at the end of the financial year.
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