Controller update: October 2024
Key messages/Summary
- The Controller function supports the important constitutional control that the Government can only spend money authorised by Parliament.
- Outside the Budget, Parliament typically authorises around 16% additional spending each year. This year is no exception.
- Cabinet approves and controls additional spending in the interim, which is required to be authorised by Parliament through an Appropriation Act.
- Unauthorised expenditure is reported annually in the Financial Statements of the Government.
- The Auditor-General audits financial control systems, statements of financial performance, and statements of unauthorised expenditure as part of his work.
Introduction
This update explains recent events in Parliament’s authorising of public expenditure and our work in monitoring government spending.
Our role
The Controller and Auditor-General is often referred to as the public “watchdog” on government spending. An important part of the watchdog role is the Controller function.
In the Controller role, we provide assurance to Parliament and the public that the Government has spent public money in line with the authority provided by Parliament.
The Controller and Auditor-General carries out his Controller role throughout the year and reports to Parliament after the end of the financial year to 30 June.
Our auditors have recently completed auditing the Government’s financial records and systems for 2023/24. Their work includes confirming the extent to which the Government has spent public money without the required authority. Instances of public money spent without authority are set out in the Financial Statements of Government each year.
How much did Parliament authorise for 2023/24?
When Parliament passed the Appropriation (2023/24 Estimates) Act 2023 for the 2023/24 Budget, it also passed the Imprest Supply (Second for 2023/24) Act 2023. The second Imprest Supply Act gives the Government more flexibility to reprioritise its spending, introduce new spending initiatives between Budgets, and respond to events and other matters that could not be foreseen when the Budget was put together. This is normal practice and happens every year.
Figure 1 shows the amount of spending authority available to the Government in 2023/24 through the Act that authorises the Budget (the Appropriation (Estimates) Act) and the second Imprest Supply Act.1
Figure 1
Comparison of initial and updated Budget, 2023/24 ($ billion)
The Appropriation (Estimates) Act allowed the Government to spend up to $178.2 billion for 2023/24, and the second Imprest Supply Act provided additional between-Budget spending authority of up to $28.5 billion. This increased the maximum amount the Government could spend to $206.7 billion.
As is normal practice, the Government updated its Budget later in 2023/24 and presented the updated Budget to Parliament on Budget Day. In June 2024, Parliament authorised the updated final Budget (of $187.3 billion)2 through the Supplementary Estimates Act.3
Figure 2 shows the amount of spending authority available to the Government as part of the Budget (Estimates) and imprest supply, compared with the updated Budget (Supplementary Estimates) from 2013/14 to 2023/24.
Figure 2:
Comparison of Budget and updated Budget, from 2013/14 to 2023/24 ($ billion)
The total amount of spending authorised by Parliament is the maximum allowable – it does not represent how much the Government actually spent.
Our Controller work for 2023/24
From October to June each year, we monitor the spending of public money to determine whether the Government has spent it in line with the authority provided by Parliament. As part of the Controller work, we examine the financial records and financial systems of government departments to provide assurance that expenditure has been properly authorised. If it has not, we check that the nature and amount of unappropriated expenditure is accurately reported to Parliament and the public.
At the end of September, our auditors completed the audit of the financial statements of government departments and the consolidated Financial Statements of the Government for the year ended 30 June 2024. Confirming the nature and amount of any unappropriated expenditure is an important part of this work.
The Financial Statements of the Government disclose, in the Statement of Unappropriated Expenditure, public money spent during 2023/24 without the correct authority. Each instance of unauthorised expenditure is accompanied by an explanation of how it occurred. We will provide an in-depth report on unappropriated expenditure for 2023/24, and an account of our Controller work, in the Auditor-General’s yearly report to Parliament, in December 2024.
How much did Parliament authorise for 2024/25?
Parliament passed the Budget for 2024/25 on 30 September 2024,4 along with an Imprest Supply Act.5 Both were enacted when they received Royal assent on 1 October 2024.6
The Appropriation Act gives legal authority to the Government’s 2024/25 Budget ($182.2 billion), and the second Imprest Supply Act authorises the Government to spend up to $29 billion in addition to that specified in the Budget (an additional 16%).
Figure 3 shows the amount of spending authority available to the Government for 2024/25 through the annual Appropriation (Estimates) Act and the second Imprest Supply Act. Although the maximum authority is $211.2 billion, it is normal for much of the imprest supply authority to be used to authorise new spending funded from existing appropriations.7 8
Figure 3:
Initial Budget, 2024/25 ($ billion)
How does “imprest supply” work?
In granting imprest supply, Parliament gives the Government freedom to spend public money with fewer restrictions than the Appropriation Act. Unlike appropriations, which are specified by the time period, maximum amount, type of expenditure, and scope of expenditure, the Imprest Supply Act specifies (for 2024/25) only the maximum amount for:
- expenses – $16 billion;
- capital expenditure – $12 billion; and
- capital injections – $1 billion.
However, limits on period, amount, type, and scope are set by Cabinet when imprest supply authority is applied to specific decisions. The Government is required to carefully control its use of imprest supply by applying Cabinet rules. There must be a specific Cabinet decision before the Government accesses the extra spending authority it has available through imprest supply.9 Such decisions approve the use of imprest supply for each particular purpose; set the period, amount, type, and scope parameters; and agree to the changes being included in the updated Budget, as presented in the Supplementary Estimates (see our Controller update for 2 August 2021 for more information).
Figure 4 shows that the provision of imprest supply increased considerably after the outbreak of Covid-19. Since 2019/20, it has steadily reduced as a percentage of the total Budget. At 16% of the Budget, the imprest supply provided for 2024/25 is the same percentage as that provided for 2014/15 – however, the nominal dollar amount has more than doubled over the period 2014/15 to 2024/25.
Figure 4:
Between-Budget imprest supply authority, from 2014/15 to 2024/25
Note: These figures represent the authority provided by the second annual Imprest Supply Act for each year and the third Imprest Supply Act for 2019/20. These Acts “top up” the spending authority provided by the annual Acts that authorise the main Budgets (that is, the Appropriation (Estimates) Acts).
As noted in Figure 2, the Government has updated its Budget every year to reflect new and reprioritised spending. The Government draws on the 16% of additional authority available through imprest supply to authorise this new spending. New spending is always heavily offset against decreases in other appropriations, which is why the updated Budgets over the last 10 years average around 9% higher than the initial Budget. From 2013/14, the average updated Budget was around 3% higher than the initial Budget prior to Covid-19; it then increased to an average of 17% from 2019/20 to 2023/24.
Our Controller work for 2024/25
In October 2024, we will continue our monthly Controller monitoring of public spending against the legislative authority covering 2024/25:
- We will check that spending for the first three months of the financial year was within the limits of the first Imprest Supply Act for 2024/25.
- We will check that any new spending approved by Cabinet remains within the imprest supply limits set by Parliament through the second Imprest Supply Act for 2024/25.
- We will check a sample of changes made to the Government’s budgeted spending (that is, Cabinet minutes and joint Ministers’ approvals) to ensure that the between-Budget changes have been properly approved.
- After spending approval has been given (either through the initial Budget or through Cabinet’s approval of extra between-Budget spending), we will check that the spending is in line with the approvals given.
- We will inform the Government, Parliament, and the public of any government spending that is outside the authority provided by Parliament.
- We will assist parliamentary committees in their scrutiny of government department spending and performance by providing information and advice based on the broader work of our Office.
1: The first Imprest Supply Act for each year provides the Government with authority to spend public money until the Act that authorises the Budget comes into force.
2: It is not unusual for the “final authority” to be less than the “initial authority”. That is because imprest supply represents the upper limit of what Parliament has authorised, while the “final authority” more closely aligns to the final estimated spend for the year.
3: We explain the Supplementary Estimates process in our Controller update of 2 August 2021.
4: The Appropriation (2024/25 Estimates) Act 2024.
5: The Imprest Supply (Second for 2024/25) Act 2024.
6: From 1 July 2024 until 1 October 2024, public expenditure for 2024/25 was authorised through the Imprest Supply (First for 2024/25) Act 2024. This was enacted on 29 June 2024.
7: 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.
8: New between-Budget spending (which requires new authority) is often funded from existing appropriations through “fiscally neutral transfers”. When this happens, the amount of planned government spending does not increase, but increased authority is needed for the new spending.
9: Some decisions may be made jointly by the appropriation Minister and the Minister of Finance.