Controller update: What do you know about Supplementary Estimates?

2 August 2021: Each year, the Government passes a Bill that updates the Budget for spending that wasn’t included in the initial Budget. This Bill is usually passed in June, and this year it increased the 2020/21 Budget by $20.1 billion.


As part of our commitment to informing New Zealanders about accountability in the public sector, from time to time we publish updates on matters of interest arising from our Controller work.

The Supplementary Estimates is an important, but not so well known, part of the way in which Parliament authorises Government spending.

When the Government introduced the Budget in May 2021 for the year ahead (2021/22), it also introduced a second Bill – the Supplementary Estimates Bill – which asked Parliament to approve an extra $20.1 billion of spending1 for the then current year (2020/21). It is normal for the initial Budget to be updated through this process. It happens every year, under every government.

In recent years, the increases made during the year to the initial Budget have ranged between $0.9 billion and $4.8 billion. Because of the size of this year’s increase ($20.1 billion – a 15% increase), we thought it useful to explain more about this process to the public.

This update explains how changes to the Budget are scrutinised and approved, and the Controller and Auditor-General’s role in monitoring these approvals.

Key points

  • All governments can move funding around and even increase spending between Budgets. This is normal practice, and it happens every year. It is done within defined limits and according to strict rules, and Parliament needs to approve any changes to the Budget.
  • The Supplementary Estimates Bill enables the Government to advise Parliament about how it has updated its initial Budget, with changes to spending levels and any new areas of spending.
  • Parliament examines the Supplementary Estimates each year, after they have been presented on Budget Day. However, the changes to the current year’s Budget in the Supplementary Estimates are examined in less depth than the Budget for the forthcoming year, and Parliament’s scrutiny of the changes happens after most of the extra spending has already been spent.
  • Updates to the Budget normally result in an increase of 1-5% through the Supplementary Estimates. This year, it was about 15%, largely a direct result of the Government’s response to the Covid-19 pandemic (see Figure 1).

How Budgets get updated

The Government’s annual Budget is put together during the several months before May each year. Much can change between April/May of one year and 30 June of the following year. The Government cannot foresee all the spending it will need during the forthcoming financial year. It also needs some flexibility to reprioritise its spending during the year, as circumstances change.

All governments move funding around during the year. This is done within defined limits and according to strict rules. These movements, which can include significant increases in budgeted spending, are often made public. However, they are not presented to the public or Parliament as a single and complete package until the following Budget Day, when the Supplementary Estimates are presented.

The Supplementary Estimates Bill enables the Government to advise Parliament how it has updated its initial Budget for changes to spending levels and areas of new spending. Although Parliament has already approved extra between-Budget spending (through imprest supply), the Government needs to seek “appropriation” for that spending before the end of the financial year.2 This is provided through the Supplementary Estimates Act.

Figure 1 shows that the amounts of increases to the initial Budgets for 2019/20 (net increase of $39.6 billion) and 2020/21 (net increase of $20.1 billion) were unusual.3 They mainly reflect the funding available for the Government’s Covid-19 response.

Figure 1
Seven-year comparison of initial and updated Budget ($ billion)

Figure 1: Seven-year comparison of initial and updated Budget ($ billion)

Limited scrutiny of the Supplementary Estimates

The Finance and Expenditure Committee, a Parliamentary select committee, examined the Supplementary Estimates for 2020/21 on 2 June 2021 and reported back to the House on 10 June 2021. The House passed the Supplementary Estimates Bill on 22 June 2021, and the legislation was enacted on 24 June 2021 when it received Royal assent. This authorised the Government’s updated Budget for 2020/21.

Unlike the Vote-by-Vote examination Parliamentary committees give to the Budget for the forthcoming year,4 the Finance and Expenditure Committee’s examination of the Supplementary Estimates considers all the changes to the Votes together. As a result, they are examined in less depth than the Budget for the forthcoming year.

This examination includes a public hearing that discusses major changes to the Budget. Officials are often required to provide written responses to the Committee’s questions in the following weeks because it isn’t practicable for officials to be able to respond to all questions about all Votes.

The Committee’s Report to the House on its examination is usually briefer than the reports on the “main” Estimates for the forthcoming year.

Scrutiny after the money has been spent

By the time the Supplementary Estimates are scrutinised, usually around early June, most of the money that was not in the initial Budget for the current year has already been spent.

So how does the Government get Parliament’s approval for this supplementary spending? At the same time as the initial Budget is passed into law, another Act5 is passed that allows for a limited amount of spending over that in the initial Budget. This is known as “imprest supply”, and it means that the Government can legally increase its spending between Budgets, in advance of receiving appropriation from Parliament for that spending.

Imprest supply gives the Government considerable freedom to spend public money without much restriction6 and without Parliament scrutinising it before it is spent. All changes, including new spending using imprest supply, are later included in the Supplementary Estimates of Appropriations, which effectively update the original Budget.

This means that, although Parliament authorises additional “between-Budget” spending before it is spent,7 it is advised of, scrutinises, and approves the detail of the updated Budget (by way of appropriations) after it has been spent.

Rules to control the new spending

In providing the Government with the freedom to spend money between Budgets (changes to spending levels and any new spending) without scrutinising it before it is spent, Parliament expects the Government to manage that money carefully and responsibly. The Government does this by applying Cabinet rules.

There must be a specific Cabinet decision before the Government accesses the extra spending it has available through imprest supply. This decision approves the use of imprest supply for each particular purpose and agrees to the changes being included in the updated Budget.8 In this way, Cabinet controls how and when the Government uses the Parliamentary authority to spend more public money than was included in the Government’s initial Budget.

How the Government is held to account for the extra spending

After the end of the financial year, when government departments have published their annual reports (which we audit), Parliamentary committees can ask about how the extra Budget has been applied and what any extra spending has achieved.

Our role

  • Each month, we check a sample of changes made to the Government’s budgeted spending to ensure that the between-Budget changes have been properly approved;
  • Each month we check that any new spending approved by Cabinet remains under the imprest supply limit set by Parliament;
  • Once spending approval has been given (either through the initial Budget or through Cabinet’s approval of extra between-Budget spending), we check that the spending is in line with the approvals given;
  • We draw any government spending that is outside the authority provided by Parliament to the attention of the Government, Parliament, and the public; and
  • We assist Parliamentary committees in their scrutiny of government department spending and performance by providing information and advice based on the work we have carried out during the year.

We will continue to monitor the Government’s spending on its Covid-19 response, and we note that the Treasury is now publishing information on its website about how much has been spent and in which areas. As part of our wider work programme, we will continue to carry out work on specific aspects of the Government’s Covid-19 response, such as the vaccination programme, and the shovel-ready projects.

1: For simplicity, we use term “spending” to mean “expenditure” and the term “spend money” to mean “incur expenditure”.

2: Appropriations are authorities from Parliament that specify what the Crown may incur expenditure on (specific areas of expenditure). Most appropriations specify limits in terms of the type of expenditure (such as operating or capital expenditure), what it can be used for, the maximum amount, and the time period.

3: It is a “net” increase because some areas within Votes have decreased while others have increased.

4: A Vote is a grouping of one or more appropriations that are administered by a department. Votes generally take the name(s) of the portfolio(s) of the Appropriation Minister(s).

5: The second Imprest Supply Act for the year.

6: The Explanatory Note for the Imprest Supply Bill specifies the main components of the expected between-Budget spending. The resulting Act does not restrict the spending but specifies spending limits for expenses, capital expenditure, and capital injections. The limits specified in the Imprest Supply (Second for 2020/21) Act 2020 were a maximum of $36 billion for expenses, a maximum of $18.5 billion for capital expenditure, and a maximum of $2 billion for capital injections.

7: That is, through the second Imprest Supply Act for the year.

8: Government departments must gain approval to (1) increase an existing, or establish a new, appropriation through the next Supplementary Estimates Bill and (2) incur expenditure in the meantime under the authority provided by Parliament through the Imprest Supply Act.