Budget Transparency - Operation Sunlight


Budget Review 2009-10 Index

Budget 2009 10: Budget Transparency

Operation Sunlight

Richard Webb

The Budget papers for 2009–10 contain changes to the presentation of information. The changes were foreshadowed in Operation Sunlight. According to the Department of Finance and Deregulation website:

Operation Sunlight is the Government’s reform agenda to improve the openness and transparency of public sector budgetary and financial management and to promote good governance practices.[1]

Perhaps the most praiseworthy change is the presentation of information at the program level in Portfolio Budget Statements.[2] In the past, some agencies provided information at the program level but others did not. Now, not only is information provided at the program level but the Portfolio Budget Statements include the three forward estimates years at the program level. This is in addition to information for the previous and current budgets as has been provided in the past. For years, Members of Parliament have sought information at the program level and program funding over the forward estimates years. One wonders why this information was not provided before since the information obviously existed.

A second change is the revision of outcomes. A criticism of some outcomes is that they were too vague. On the one hand, this allowed flexibility as to where funds could be allocated. On the other hand, this limited parliamentary scrutiny of spending. The Department of Finance and Deregulation, in conjunction with agencies, has reviewed all outcomes. Readers will judge how successful this exercise has been. One problem that arises when outcomes are revised is that it might be difficult to obtain comparable data for earlier years.

A third change is that Budget Paper no. 4 includes a detailed table listing all special accounts authorised under the Financial and Management Accountability Act 1997. The table shows, by portfolio and entity, estimated balances and flows for the budget year and for the previous year. Again, this is a worthwhile addition.

The presentation of income statements in 2009–10 has changed to show the ‘net cost of services’. The net cost of services is derived by deducting from an agency’s expenses its ‘own source income’. This is income in the forms of revenue from the sale of goods and services, profits from the sale of assets etc. The money appropriated by government is then deducted from the net cost of services to derive the agency’s surplus or deficit, as the case may be.

The rationale for the change is that the net cost of services:

… recognises the nature of public sector activity and the emphasis on the net cost of services to Government.[3]

It is true that the presentation of accounting data as used by the private sector, especially the concept of profit and loss, is not very meaningful for government agencies that are funded mainly by government appropriations. The net cost of services recognises this by highlighting the contribution that agencies can make from their own resources to funding their activities on the one hand, and the contribution from government on the other hand.

It is questionable whether the adoption of net cost of services really adds much. While some readers of budget papers may be interested to know the net cost of services, it is probably of little interest to most readers. Many readers, especially those with no accounting knowledge, would not have any familiarity with the concept. Finally, the revised presentation is complicated compared with the straightforward presentation of past years.



[1].    Australian Government, ‘Operation Sunlight’, Department of Finance and Deregulation website, viewed 18 May 2009, http://www.finance.gov.au/financial-framework/financial-management-policy-guidance/operation-sunlight/index.html

[2].    Australian Government, ‘Portfolio budget statements’, Budget 2009–10 website, viewed 18 May 2009, http://www.budget.gov.au/2009-10/content/pbs/html/index.htm

[3].    Australian Government, Operation Sunlight: enhancing budget transparency, Australian Government, December 2008, p. 18, viewed 18 May 2009, http://www.finance.gov.au/financial-framework/financial-management-policy-guidance/operation-sunlight/docs/operation-sunlight-enhancing-budget-transparency.rtf

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