The Constitution, through section 81, provides for one Consolidated Revenue Fund (CRF), formed from all revenues or moneys raised or received by the Executive Government of the Commonwealth. The CRF is ‘self‑executing’. That is, all money paid to the Commonwealth (or any person or organisation acting on behalf of the Commonwealth) automatically forms part of the CRF. Whether or not the Commonwealth has credited the money to a fund or a bank account, the money forms part of the CRF upon receipt by, or on behalf of, the Commonwealth. This covers taxes, charges, levies, borrowings, loan repayments and money held in trust. Section 81 does not deal with the manner in which money that forms the CRF shall be kept, nor does it deal with the keeping and auditing of accounts holding public money.

Section 83 of the Constitution provides that no money shall be drawn from the Treasury of the Commonwealth except under an appropriation made by law. Section 81 provides that all appropriations from the CRF must be for the purposes of the Commonwealth. The ‘Treasury’ of the Commonwealth, mentioned in section 83, equates to the CRF referred to in section 81. Together, sections 81 and 83 provide that there must be an appropriation, made by law, for the purposes of the Commonwealth, before money may be drawn from the CRF. This is a key element of the provisions which safeguard parliament’s control over government spending.

Commonwealth entities are resourced with appropriations from the CRF.  The main two types of appropriations to authorise the spending of money from the CRF are annual appropriations and special appropriations:

• annual appropriations, which are contained in annual Appropriation Acts that provide annual funding to entities to undertake government operations and programmes; and
• special appropriations, which are appropriations established in Acts other than those in annual Appropriation Acts, noting that some aspects may also appear in specific legislative instruments (such as applies to special accounts established under the PGPA Act by disallowable determinations of the Finance Minister).

Special appropriations

A special appropriation is a provision within an Act that provides authority to spend money for particular purposes, for example, to finance a particular project or to make social security payments. Special appropriations account for around three quarters of all government expenditure each year.

A special appropriation is included in a specific Act when it authorises a payment where an entitlement exists, or a payment of a specified amount separately identified in an annual Appropriation Act. Some special appropriations state a maximum amount that is appropriated for the particular purpose. They can be referred to as being ‘limited by amount’. Others do not state a maximum amount but the payment amount has to be calculated according to legislative criteria that determine the amount to be paid.

A number of factors are taken into account in determining whether an annual or special appropriation may be used in particular circumstances. For example, a cash limited appropriation might not be viable for an entitlement-based programme which is demand driven. Generally, a special appropriation may be used when:

• it is desirable to create a legal entitlement which is to be provided to everyone who satisfies specific criteria (for example, the age pension);
• it is necessary to give effect to inter-governmental arrangements by providing a specific amount under stated conditions (for example, Schools Assistance Act 2008 and Local Government (Financial Assistance) Act 1995 );
• it is important to demonstrate the independence of an entity from parliament and the executive by providing for automatic payment of the remuneration of its officeholders (for example, the salaries of judges and the Auditor-General);
• it is considered necessary to demonstrate Australia’s ability to meet its financial obligations independently of parliamentary approval of funds (for example, the repayment of loans); or
• other unique circumstances exist which would be difficult to accommodate in annual Appropriation Bills.

The Administrative Arrangements Order sets out the legislation administered by a minister of state. It is the responsibility of a department to ensure that all special appropriations contained within legislation that is the responsibility of its minister are managed by the department, or are allocated by the minister to other Commonwealth entities within the minister’s portfolio. Nonetheless, entities are able to spend money from special appropriations which are the responsibility of a minister in another portfolio where the appropriate legal measures have been put in place.

Table of Estimated Expenditure from Special Appropriations

Budget Paper No. 4 contains a table showing estimates of expenses for each special appropriation Act for each entity. It is in two parts: the first is a summary table showing the total special appropriations by portfolio; the second shows the estimate for each special appropriation Act for each entity for the Budget year and an ‘Estimated Actual’ figure for the previous year. All amounts in the table are shown under the entities whose ministers are responsible for the special appropriation legislation concerned.

The Agency Resourcing Table presents total special appropriations for each entity by outcome and for each portfolio.

Table of Estimated Cash Flows and Balances for Special Accounts

A special account is an appropriation mechanism that notionally sets aside an amount that can be expended for specific purposes. The amount of appropriation that may be drawn from the CRF by means of a special account is limited to the balance of each special account. Special accounts are not bank accounts. Amounts forming part of the balance of a special account may be held in various ways, such as in the Official Public Account, an entity’s official bank account, or partly in both.

A special account can be established either by the Finance Minister making a determination under section 78 of the PGPA Act, or by legislation as recognised under section 80 of the PGPA Act. A special account determination made by the Finance Minister is a legislative instrument. Both a determination (for a section 78 special account) and legislation (for a section 80 special account) are considered by the parliament before becoming law. The appropriation authority to draw money from the CRF is section 78 or 80 of the PGPA Act, as relevant – rather than the determination or the legislation.

Special accounts may be established when it is clear that other types of appropriations are not suitable. For example, there may be a need for specific transparency, including where activities are jointly funded with other governments.

The determination or Act that establishes a special account specifies the purposes for which the special account may be debited. The establishing determination, and in most cases the establishing Act, also identifies the types of receipts that may be credited to increase the balance of the special account.

Depending on its purpose, a special account may be credited with amounts from annual appropriations, special appropriations, from third parties, by direct legislative provision, or in limited circumstances with investment income.

A chart that lists the special accounts managed by each agency is available on the Finance website. The chart is available on the special accounts  page.

Budget Paper No. 4 includes a table listing estimates for all special accounts, for the Budget year and previous year. The table shows, by portfolio and entity, estimated balances and flows for each special account.

There is an important distinction in the way receipts into special accounts are displayed in the Table of Estimated Cash Flows and Balances for Special Accounts and in the Agency Resourcing Table. The former distinguishes between appropriated and non-appropriated receipts into special accounts, while the Agency Resourcing Table shows only estimates of receipts from sources external to the relevant entity.

The Table of Estimated Cash Flows and Balances for Special Accounts and the Agency Resourcing Table both include estimates of public money that is not held on account of the Commonwealth or for the use or benefit of the Commonwealth.

Annual appropriations

Annual Appropriation Acts provide annual funding for government operations and programmes and also for investment in assets and reduction of liabilities. Bills proposing appropriations for the forthcoming financial year are introduced into parliament on Budget Night and, when passed, fund approximately 25 per cent of all government expenditure for the year.

Section 53 of the Constitution provides that the Senate may not amend proposed laws appropriating money for the ordinary annual services of the government. Under section 54 of the Constitution, a proposed law appropriating money for the ordinary annual services of the government can only deal with such appropriations. Accordingly, the annual appropriations are split into Bills that provide for the ordinary annual services of the government (e.g. Appropriation Bill (No. 1) and those that do not (e.g. Appropriation Bill (No. 2) ). 1

In dealing with what constitutes the ordinary annual services of the government and those which do not, the Senate and the then government worked through this allocation in 1965.  The outcome of these discussions is generally referred to as the Compact.  This allocation was revisited in 1999 to take into account the introduction of accrual budgeting.  The government continues its consultations with the Senate on reviewing the terms of the Compact with a view to clarifying the definition of what constitutes the ordinary annual services of the government.

The services of the four parliamentary departments are not considered to be ordinary annual services of the government. Accordingly, there is a third Budget annual Appropriation Bill, Appropriation (Parliamentary Departments) Bill (No. 1). that proposes appropriations for the parliamentary departments.

A second set of three annual Appropriation Bills is usually introduced during the financial year, called the Additional Estimates Appropriation Bills. These three Bills correspond to the three Budget Appropriation Bills and continue the numbering sequence: Appropriation Bill (No. 3) (i.e. ordinary annual services), Appropriation Bill (No. 4) (i.e. other than ordinary annual services) and Appropriation (Parliamentary Departments) Bill (No. 2). The Additional Estimates Appropriation Bills seek authority from parliament for the additional expenditure of money from the CRF, in order to meet requirements that have arisen since the last Budget. Further annual Appropriation Bills are introduced during the year if required. These further Bills are typically called the Supplementary Additional Estimates Appropriation Bills.

A summary of the Budget appropriations, by portfolio, entity and outcome is provided in Budget Paper No. 4.

Structure of annual appropriations

The annual Appropriation Bills propose specified amounts of appropriation for expenditure by entities to carry out the government’s outcomes.   Those amounts may only be expended on the purposes for which the appropriations are provided and that expenditure must be consistent with relevant legislation and government policy. The Finance Minister is responsible, on behalf of the government, for arrangements by which entities adhere to those requirements.

As mentioned above, appropriations are provided for particular purposes. The purpose of departmental appropriations is to provide money for the annual operating costs of entities. For administered appropriations, those purposes are the outcomes which are shown beside the appropriation amounts. Outcomes are the results, consequences or impacts of government actions.

The purpose and detailed operation of the clauses in the Appropriation Bills are outlined in explanatory memoranda tabled in parliament when the Bills are introduced on Budget Night. Each Appropriation Bill and its Explanatory Memoranda are available at www.budget.gov.au  and also at www.comlaw.gov.au  

Further information on outcomes and on the outcomes framework more generally is available at Performance management .

Appropriation Bill (No. 1)

Appropriation Bill (No. 1) proposes appropriations for activities that are considered to be the ordinary annual services of the government and hence the Bill cannot be amended by the Senate under section 53 of the Constitution. The Bill sets out amounts according to whether they are departmental or administered.

Departmental appropriations are provided to meet costs over which an entity has control. They are the ordinary operating costs of entities. Expenditure typically covered by departmental appropriations include:

• employee expenses
• supplier expenses
• other operational expenses (for example, interest and finance expenses)
• non operating costs (for example, replacement and capitalised maintenance of existing departmental assets valued at $10 million or less).

Departmental appropriations can also include supplementation for work that entities were directed by government to undertake in the previous financial year, but after the last date for the inclusion in the Additional Estimates Bills. Entities are expected to meet the cost of these activities from their existing appropriations, which may then be replenished by a departmental appropriation in the following financial year.

Departmental appropriations are appropriated as a single amount for each entity. The single appropriation represents the cost of entity operations and may be used to make any payment related to the functions of the entity. Appropriation Bill (No. 1) shows a split of that amount across outcomes. The split is notional, providing an indication of the departmental resources that will be required to achieve outcomes. Appropriation is not provided for non-cash costs such as bad debts and write-offs.

For all non-corporate Commonwealth entities, non operating costs, as discussed above, are funded via the Departmental (or Administered) Capital Budget (DCB/ACB) which is used to meet the costs associated with the replacement of minor assets (assets valued at $10 million or less) or maintenance costs that are eligible to be capitalised.  The funding for depreciation, amortisation and make-good expenses was replaced with a DCB in the 2010-11 Budget.

Corporate Commonwealth entities continue to be funded for depreciation, amortisation and make good expenses except for Designated Collecting Institutions (DCI’s) (such as the National Gallery of Australia) where they are not funded for depreciation on their heritage and cultural assets.

Administered appropriation items are those administered by the entity on behalf of the government. They are amounts required to meet the total estimated expenses for administered activities that are expected to be incurred in the budget year. They are normally related to activities governed by eligibility rules and conditions established by the government or parliament such as grants, subsidies and benefit payments. Entities therefore have less discretion over how administered operating costs are incurred. Administered amounts are appropriated separately for outcomes (i.e. the split across outcomes is not notional). In limited circumstances, non operating costs as discussed above are funded via the ACB for the replacement of existing administered assets valued at $10 million or less, and maintenance costs that are eligible to be capitalised.

The detail on appropriations in Appropriation Bill (No. 1) is set out in Schedule 1 to the Bill.

Appropriation Bill (No. 2)

As explained above, Appropriation Bill (No. 2) provides appropriations for matters that are not proposed for the ordinary annual services of the government. It covers both ‘non-operating’ costs and administered amounts for new outcomes which have not previously been approved by parliament, payments direct to local government, and some payments made to or through the states, the Australian Capital Territory (ACT) and the Northern Territory (NT).

Most payments ‘to’ the states are made under the Federal Financial Relations Act 2009 and the related COAG Reform Fund Act 2008. Ongoing payments classified as ‘through’ the states for non-government schools are made under the Schools Assistance Act 2008. Other payments for non-government schools are proposed in Appropriation Bill (No. 2) .

Financial assistance grants for local government continue to be made under the Local Government (Financial Assistance) Act 1995 .

Schedule 1 to Appropriation Bill (No. 2) confers, on the Ministers named, the power to determine:

• conditions under which any payments to and through the states, the ACT and NT and local government authorities may be made
• the amounts and timing of those payments.

The new administered outcomes item in Appropriation Bill (No. 2) requests appropriations in respect of administered outcomes which have not previously been approved by parliament. This requirement is based in the Compact of 1965.

Non-operating costs (sometimes called ‘capital’ costs) included in Appropriation Bill (No. 2) comprise:

• ‘equity injections ’, which are provided to entities to, for example, enable investment in assets to facilitate departmental activities. Equity injections can for example, be used to propose appropriations for new assets and replacement assets usually valued at more than $10 million;
• ‘administered assets and liabilities ’ appropriations, which provide funding for acquiring new administered assets, enhancing existing administered assets and discharging administered liabilities relating to activities administered by entities on behalf of the government.

General Drawing Rights Limits

The Nation-building Funds Act 2008 and the COAG Reform Fund Act 2008 establish special accounts under section 80 of the PGPA Act in relation to funds established by those Acts. 2

The government intends that payments made from the funds will be transparent and subject to parliamentary scrutiny with the aim of ensuring a managed and orderly rate of expenditure. Accordingly, the Nation-building Funds Act 2008 and the Federal Financial Relations Act 2009 provide for mechanisms to specify a maximum limit (called the ‘general drawing rights limit’) on the amount that can be paid out from each fund’s special account in a particular financial year.

The General Drawing Rights Limits for the financial year are included in the text of Appropriation Bill (No. 2). It is important to note that this Bill will not appropriate amounts to be paid from the funds. The intention of specifying general drawing rights limits is to set maximum limits on the amounts that may be covered by drawing rights issued by the Finance Minister for the current year, for the purposes to which the limits apply.

Appropriation (Parliamentary Departments) Bill (No. 1)

The Appropriation (Parliamentary Departments) Bill (No. 1) proposes appropriations for all the departmental, administered and non‑operating costs of the four parliamentary departments.

Period of validity of annual appropriations

Annual appropriations continue to be available to entities until the relevant amount is fully expended or the relevant legislation ceases to provide authority for any unspent amounts to be used.

There are various reasons for enabling appropriations to continue beyond the immediate Budget year.  For example, departmental appropriations provide funding for many of the expected expenses required to carry out activities in the financial year, and those expenses include employee entitlements and accounts payable. As the cash to meet such expenses can be required at times other than when the expenses are incurred, the departmental appropriation remains available until required or repealed.

As the timing of the cash requirements can change after commitments are made, appropriations for non-operating costs also do not lapse and amounts that are unspent at the end of the financial year remain available to be spent in later years.

There can also be situations where entities require extra funding for urgent expenditure for which there is insufficient appropriation. In such cases, Appropriation Bill (No. 1) and Appropriation Bill (No. 2) each contain a clause entitled ‘Advance to the Finance Minister’ (AFM), which enables the Finance Minister to provide the urgent additional appropriation. The AFM provision in Appropriation Bill (No. 1) is limited to a maximum of $295 million and in Appropriation Bill (No. 2) is limited to $380 million.

Details on each amount issued under the AFM are subject to the requirements of the Legislative Instruments Act 2003, though not subject to disallowance, and are published on the Federal Register of Legislative Instruments. An annual report to parliament is prepared on the use of the AFM provision and covers all amounts issued and, in particular, any component of an AFM that may not have been used by the relevant entity in the relevant financial year.

Appropriation (Parliamentary Departments) Bill (No. 1) also contains a clause corresponding to the AFM provided in the other two Acts. Called the Advance to the Presiding Officer (APO), the total that may be issued is limited according to the parliamentary department concerned. As with the AFM provision, the use of the APO is reported in an audited annual report.

All three Budget Appropriation Bills include, for information purposes, a figure for the previous financial year, labelled the ‘Actual Available Appropriation’. It is calculated for each item by adding the amounts appropriated in the previous year’s annual Appropriation Acts, amounts adjusted under provisions of the PGPA Act plus adjustments such as AFMs. In some instances the figure may also be affected by limits applied administratively by the Department of Finance. The Actual Available Appropriation provides a comparison with the appropriation proposed for the budget year. It does not affect the amounts available at law. In some cases there are discrepancies between the sums of items and the totals of the Actual Available Appropriation, due to rounding.

Certain receipts that non-corporate Commonwealth entities may retain

Many non-corporate Commonwealth entities receive money from sources other than in the annual Appropriation Acts, such as payment for goods and services. In most cases, the entity will be entitled to be able to spend those amounts and so such receipts can be taken into account when an entity’s total funding is calculated. However, an appropriation is required before the amounts can be spent. If no appropriation authority is available, the receipts must be remitted to the Official Public Account and cannot be spent by the entity.

Section 74 of the PGPA Act provides that the entity’s most recent departmental item may be increased by an amount of a kind prescribed by section 27 of the PGPA Rule. Therefore, an entity’s departmental item appropriation in Appropriation Bill (No. 1) and Parliamentary Appropriation Bill (No. 1) may be increased during the year by such receipts. In this way, the retained receipts may be spent by the entity under its departmental item appropriation.

Corporate Commonwealth entities may spend certain receipts in accordance with their enabling legislation or constitution. Where a corporate Commonwealth entity collects money for and on behalf of the Commonwealth (for example, taxes and levies) this money is part of the CRF.

Portfolio Budget Statements

The Portfolio Budget Statements (PB Statements) inform members of parliament and the public of the proposed allocation of resources to government outcomes. They also assist the Senate Standing Committees with their examination of the government’s Budget. The PB Statements are tabled in parliament on Budget Night.

The PB Statements contain details of the estimated payments under each of the annual Appropriation Bills and other legislation providing appropriations. In doing this, entities are required to report against the approved list of outcomes and programs for which they are responsible. They also contain details of estimated receipts from other sources, including taxation, customs, excise and receipts from fees and charges collected by entities.

Individual PB Statements are intended to further explain the purposes and planned performance of entities and their contributions towards the achievement of outcomes. Entities also include their programmes’ objectives; financial and non-financial performance, including deliverables; and key performance indicators.

PB Statements also assist in the interpretation of the Appropriation Bills. There is a provision in the Acts that declares the PB Statements to be extrinsic material under paragraph 15AB(2)(g) of the Acts Interpretation Act 1901. As a result, a court may use the PB Statements to decide whether a particular expenditure is consistent with the purpose of the appropriation item.

The appropriation details included in the PB Statements’ tables match the figures in the Appropriation Bills and the relevant amounts included in the tables in Budget Paper No. 4.

Goods and Services Tax

Commonwealth entities generally pay and collect Goods and Services Tax (GST) on the same basis as other Australian entities. The amounts of appropriation shown in the three Appropriation Bills for the Budget year exclude recoverable GST. The appropriations shown therefore represent the net amount that parliament is being asked to allocate to particular purposes. This aligns with the accounting treatment of expenses and assets and the presentation of Budget estimates. Parliament has provided that appropriations be increased by the amount of recoverable GST on payments by Commonwealth entities from all appropriations limited by amount. As a result, there is sufficient appropriation for payments under all such appropriations, provided that the amount of those payments, less the amount of recoverable GST, can be met from the initial appropriation.

1. Although the Senate may not amend a Bill proposing appropriations for the ordinary annual services of the Government, it may request that the House of Representatives amend such a Bill.

2. The Building Australia Fund (BAF), the Education Investment Fund (EIF) and the Health and Hospitals Fund (HHF) are established by the Nation-building Funds Act 2008. The COAG Reform Fund is established by the COAG Reform Fund Act 2008 .