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.

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.

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.

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.

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.

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.

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).

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

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.

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.