The audit objective was to assess the effectiveness of the Parliamentary Budget Office in conducting its role since being established in July 2012.

Summary

Introduction

1. There has been a growing trend, both in Australia and internationally, to examine the adequacy of fiscal management, government forecasting, and transparency of public expenditure, and to provide for greater independence in the process of costing election commitments.1 The International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD) explain this trend, in part, as being influenced by the Global Financial Crisis in 2007–08. It has led to an increasing number of independent specialist research and analytical offices being established with varying mandates, functions and authority. Australia’s Parliamentary Budget Office (PBO), which began operation in July 2012, is one of 10 such offices established in OECD countries since 2007.

Background to the establishment of Australia’s PBO

2. In Australia, the merits of establishing an independent fiscal policy analysis body had been raised by various political parties since at least 2005. However, it was not until August 2010 that, as part of the formation of the then minority Government, the Agreement for a Better Parliament specified that a Parliamentary Budget Office would be established.

3. Subsequently, in November 2010, the Joint Select Committee on the Parliamentary Budget Office (the Joint Select Committee) was established to report on the appropriate mandate for the PBO; the nature of the information needed by the Parliament; and the role and adequacy of current institutions in providing this information. The committee also considered the operation of similar offices in other jurisdictions, and the contribution of the Departments of the Treasury (Treasury) and Finance (Finance) in undertaking policy costings through the Charter of Budget Honesty Act 1998 (the Charter of Budget Honesty). The Charter of Budget Honesty provides a framework for the conduct of government fiscal policy, and among other things, sets out the arrangements for election policy costings to be prepared by Treasury or Finance during the caretaker period for Federal elections.2

4. The Joint Select Committee tabled its report in Parliament on 23 March 2011, and the then Government agreed in full to 23 of the 28 recommendations, and in principle to the other five. Recommendations included the functions of the PBO; and amendments to the election costings provisions of the Charter of Budget Honesty. Legislation was prepared, with the second reading speech to the Bill describing the PBO as an:

... important new institution that will further strengthen Australia’s fiscal and budget frameworks. It will bring greater accountability and transparency to policy costings processes, particularly during election periods. And it will ensure that no party or member of parliament will have an excuse to avoid the scrutiny of its policy costings. It will ensure that the Australian public can be better informed about the costs of election policy proposals before they cast their vote at the election.3

5. Legislation establishing the PBO received royal assent on 4 December 20114, and the PBO began operation on 23 July 2012 with the appointment of the Parliamentary Budget Officer. The PBO is one of four parliamentary departments supporting the Australian Parliament, and in 2013–14, the PBO had budgeted program expenses of $7.7 million and as at April 2014, had 35 staff.

Purpose and functions of the PBO

6. The Parliamentary Service Act 1999 states that the PBO’s purpose is to inform the Parliament by providing independent and non‑partisan analysis of the budget cycle, fiscal policy and the financial implications of proposals. The Joint Committee of Public Accounts and Audit (JCPAA) is the PBO’s oversight body, and is responsible for: approving the appointment of the Parliamentary Budget Officer; considering the operations and resources of the PBO; and reporting to Parliament on relevant matters relating to the PBO. The Parliamentary Budget Officer is not subject to direction in the performance of the following six functions specified by the Parliamentary Service Act 1999:

  • outside the caretaker period for a general election, to prepare policy costings on request by Senators and Members, with requests and responses to be kept confidential if directed by the requestor;
  • during the caretaker period, to prepare costings of publicly announced policies on request by authorised members of parliamentary parties5;
  • to prepare responses (other than policy costings) to requests relating to the budget by Senators and Members, with requests and responses to be kept confidential if directed by the requestor;
  • to prepare submissions to parliamentary inquiries on request;
  • after a general election, to report on election commitments of designated parliamentary parties6; and
  • to conduct self‑initiated research on the budget and fiscal policy settings.

7. As mentioned above, outside of the caretaker period, parliamentarians can elect that their requests remain confidential. At the time of establishment, documents prepared by the PBO that related to confidential requests were exempt from access under the Freedom of Information Act 1982 (FOI Act), but documents held by Commonwealth agencies were not specifically exempted. A legislative amendment to protect the confidentiality of these records from freedom of information requests received royal assent on 4 December 2012. A further legislative amendment, passed in June 2013, allowed the PBO the same access to Australian Taxation Office data as Treasury for compiling budget revenue estimates.

8. The PBO’s capacity to perform its functions is heavily reliant on its ability to access information (both data and costing models used to cost policies). Access to information from Commonwealth agencies is facilitated by the Australian Government Protocols governing the engagement between Commonwealth bodies and the Parliamentary Budget Officer (the Protocols), and the Memorandum of Understanding between the Parliamentary Budget Officer and the heads of Commonwealth bodies in relation to the provision of information and documents (the MoU).

International comparison

9. Internationally, specialist budget offices such as Australia’s PBO are collectively known as Independent Fiscal Institutions (IFIs), and there are some key contrasts between their mandates.7 Most have a role in preparing or assessing macroeconomic assumptions and analysing long‑term fiscal sustainability. However, of the 17 IFIs in OECD countries, six have no role in monitoring compliance with fiscal rules (Australia, Canada, Korea, Mexico, the Netherlands and the United States); two have no role in macroeconomics (Australia and the Slovak Republic); and only two prepare election policy costings (Australia and the Netherlands).

Audit objective, criteria and scope

10. The audit objective was to assess the effectiveness of the Parliamentary Budget Office in conducting its role since being established in July 2012.

11. In order to form a conclusion against this audit objective, the ANAO adopted the following high level criteria:

  • effective governance and administrative arrangements were established, to support the delivery of services to the Parliament;
  • sound and timely processes facilitated the conduct of the PBO’s key functions within and outside of the caretaker period; and
  • performance was monitored, reviewed and reported.

12. The audit focused on the functions of the PBO including arrangements in place to prepare costings, and whether these arrangements had been consistently followed. The audit did not independently cost any of the policies, or other work costed by the PBO but did consider the views of Treasury and Finance in relation to PBO policy costings that were subsequently prepared for the 2014 Budget process.

13. This audit has been conducted under subsection 15(1) of the Auditor‑General Act 1997.8 In conducting this audit, the Australian National Audit Office (ANAO) was mindful of the Parliamentary Service Act, which allows the JCPAA to request an independent review of the operations of the PBO, to be completed within nine months after a general election. The ANAO briefed the JCPAA on the planning for this audit—its objective, criteria and expected tabling date (planned for completion within nine months of the general election held on 7 September 2013).

14. In conducting the audit, the ANAO was aware of the Government’s National Commission of Audit and its terms of reference, which included identifying options for strengthening Commonwealth budgeting arrangements, incorporating an examination of the role of the PBO. The Commission’s report was released publicly on 1 May 2014. The report contained a recommendation for the Government to adopt a high‑level fiscal strategy with fiscal rules which set out how a fiscal strategy will be achieved (Recommendation 1). With reference to the PBO, the Commission recommended that the PBO reports the Government’s progress against the fiscal rules following the release of the Final Budget Outcome each year (Recommendation 2). The Government has not yet responded to these recommendations, however, the additional function for the PBO suggested in Recommendation 2 would be consistent with one of the four key features of effective IFIs identified by the IMF, and with the functions performed by 11 of the 17 OECD countries’ IFIs.

Overall conclusion

15. Prior to the establishment of the PBO in July 2012, there was no independent body in Australia that specialised in the research and analysis of fiscal policy for the Federal Parliament. At this time, there were also limited resources for non‑government political parties, individual and independent members of parliament to have policies costed outside of the caretaker period for a general election. The establishment of the PBO was expected to: help level the playing field for all parliamentarians by providing non‑partisan access to policy costings (outside of and during the caretaker period), budgetary and fiscal policy analysis; and improve the transparency of Australia’s budgetary frameworks.

16. Since commencing operation in July 2012, the PBO has effectively undertaken its statutory role and is already well regarded as an authoritative, trusted and independent source of budgetary and fiscal policy analysis. The PBO has made a significant contribution to levelling the playing field for all parliamentarians. Stakeholders9 consulted during the course of this audit all agreed that, for the first time, all parliamentarians have access to independent policy costing and information request services during all periods of the parliamentary cycle. In addition, parliamentary and peer group stakeholders viewed the costings prepared by the PBO as being of high quality, and those involved in the costing process agreed that the PBO was professional to deal with. These stakeholders also agreed that the PBO’s work has improved the transparency around election commitments, and facilitated a more informed public debate about budgetary matters that has the potential to increase as the PBO releases further information and the public becomes better educated about these topics.

Establishment and governance of the PBO

17. The PBO was established at a time in the Federal election cycle when an election had to be held by November 2013, but could be held earlier. Consequently, the PBO had a limited timeframe of about two months (from establishment in July 2012 to accepting requests for work in September 2012) in which to implement the necessary governance and administrative arrangements to be in a position to respond to requests for policy costings and information from parliamentarians. In the expected intense period of activity before the forthcoming election, implementation planning was important and key elements were incorporated into the PBO’s first annual work plan, released on 12 October 2012.

18. Liaison with Treasury and Finance occurred frequently during the establishment of the PBO. The PBO advised the ANAO that of particular importance for the PBO was access to the information holdings of these departments, and arrangements for coordinating the policy costings workload during the caretaker period to avoid duplication.10 Temporary staff were seconded (the majority already experienced in fiscal analysis and policy costings from working at Treasury and Finance) and permanent recruitment commenced in late 2012. In preparation for the peak workload of the 2013 election period, the PBO’s internal business plans (prepared for January to June 2013) appropriately incorporated planning for a ‘surge’ capacity. Strategies included the flexible deployment of PBO staff across work areas, the use of contractors, and preparatory training for staff.

19. Despite the intense period of activity leading up to the 2013 Federal election, the PBO has established, or is in the process of finalising, appropriate governance and administrative arrangements. Self‑initiated process improvements are underway and the PBO has also taken steps to ensure the security of its data and information technology (IT) systems but the associated governance documentation is yet to be finalised. The PBO’s monitoring and reporting of its performance is also well established.

The PBO’s access to information

20. Unlike some IFIs, the PBO does not have statutory information gathering powers, and relies instead on agreements with government and key government agencies (the Protocols and the MoU). By late September 2012, the PBO had finalised the MoU with Treasury, Finance and 22 other agencies that facilitated access to the information sources necessary for conducting its research and analysis.

21. For the period from September 2012 to April 2014, the PBO made 679 requests for information from 52 Commonwealth agencies. The median response time was nine business days, with 18 responses taking more than 51 business days.11 The length of time taken by an agency to respond to the PBO depends on a number of factors, including the ease of extracting historical data, other work priorities, the complexity of the request and how many other requests the agency has at the time. In the ANAO’s interviews with officers representing 20 of the agencies that are signatories to the MoU, all reported adhering to the intent of the Protocols. However, there were instances where agencies could not provide certain data (as they did not hold that data, or historical data would have taken too long to collate) and where extensions to timeframes were necessary. In these circumstances, the PBO modified its requests to obtain such information as was possible in the timeframe.

22. The PBO advised the ANAO that to date, it has been able to access the information it needs under the Protocols and the MoU, although on occasion there have been long delays. However, the PBO does not have access to the details of provisions for individual items included in the Contingency Reserve.12 The Secretary of the then Department of Finance and Deregulation decided that providing such information would be contrary to the public interest. As a mitigating measure, the PBO has issued guidance stating that all PBO costings are prepared in the absence of this information. While this constraint only affected two policy costings in preparing the 2013 Post‑Election Report13, the likelihood remains that the PBO may not be able to determine the net budget impact of certain policies in the future because it does not have access to this information.

23. Agencies interviewed by the ANAO said their relationship with the PBO was positive. Nevertheless, agencies did raise an issue about the PBO’s approach to requesting information, in circumstances where the requestor stipulated confidentiality. In these instances, agencies were concerned that they may not be providing the most relevant information because the full details of the request were not known. Nine agencies felt that their responses would be better tailored and more accurate if the PBO had explicitly identified how the information sought would be used, and four agencies expressed concern about subsequently being expected by government to deliver programs within the amount costed by the PBO, even where the costing was inaccurate because of imperfect data.

24. While there is no legislative requirement prohibiting the PBO from disclosing the potential use of the information being requested14, and the Protocols and MoU require strict non‑disclosure by agencies of requests made by the PBO, the arguments in favour of confidentiality reflect the importance of the PBO maintaining confidence among its primary clients—parliamentarians.15 Parliamentary stakeholders‘ feedback to the ANAO emphasised the importance of confidentiality to their policy development processes, confirming that this strengthens the PBO’s capacity to provide assistance to parliament; allows costings to occur in a considered manner; and subsequently improves the policy debate. One party commented that it recognised the confidentiality of the PBO’s information requests created a risk of the PBO producing less accurate costings, but on balance, the party would be more concerned if this confidentiality was relaxed with agencies. The feedback from agencies referred to above nevertheless underlines the benefits of the PBO providing sufficient context in relation to each information request to position agencies to provide the most appropriate information in response to requests, while being respectful of maintaining the confidentiality of the policy proposal where this has been requested.

Policy costings

25. An important component of policy development is the analysis of the costs and benefits of a range of approaches to the policy’s design. Policy costings often form part of this analysis, and by their nature, costings are an estimate at a point in time that can be sensitive to variables such as assumptions, data quality, behavioural impacts, and dates of implementation. An important point of consideration for the Joint Select Committee was the consistency of PBO, Treasury and Finance costings. In this context, the ANAO observed that the PBO actively seeks to align its costing methodologies and data with these departments through regular updates of costing models and data sets. The PBO also includes a reliability rating in all costings, as an assessment of the risk that the actual costs will differ from those calculated.16

26. The PBO’s early administrative arrangements included developing and implementing processes to work with agencies to obtain information, and to prepare policy costings outside of and during caretaker periods. On 28 August 2012, guidance on the PBO’s policy costing function was released, with the PBO accepting requests from this date. In this context, from September 2012 to April 2014, there have been 1101 requests for costings or information17 made by parliamentarians, and the PBO has completed 969 requests (103 of those requests were withdrawn, leaving 29 requests outstanding at the time of preparing this report). PBO data shows that the average time taken to complete these requests has improved from 55 business days for requests received to the end of September 2012, to 7.2 days for those received before the end of October 2013.

27. During a Senate Finance and Public Administration Legislation Committee hearing in February 2013, the Parliamentary Budget Officer reported that he was encouraging parliamentarians to submit any policy costing requests well in advance of the caretaker period.18 The ANAO’s analysis of the PBO’s costing data shows there was a peak of 326 costings and requests for information prior to the caretaker period. All of these were completed by polling day. Many of these requests were updates to previous costings, and this enabled the PBO to more rapidly complete them during the caretaker period. If the PBO had been faced with a significant number of new costing requests during the caretaker period, for which it had no costing models or data, the same outcome would have been very challenging, if not impossible, to achieve. The inclusion of the PBO, along with Treasury and Finance, in providing costings during the caretaker period also influenced the balance of departmental workloads in relation to formal requests. For the 2010 election, Finance prepared 129 of the 144 total costings and Treasury prepared 15. In 2013, Finance prepared 76 costings, Treasury prepared three costings and the PBO prepared 85 costings.19

28. The ANAO’s analysis of PBO data also shows broad uptake of PBO services by parliamentarians, with the Coalition and the Australian Greens making the most requests in the lead up to the election (500 requests and 404 requests respectively outside of the caretaker period). There were also 12 requests made by individual parliamentarians (independent member or private members) for the same period.20

29. The PBO follows the Charter of Budget Honesty Policy Costing Guidelines (Charter Guidelines) when preparing a costing.21 These specify the inclusion of agency administrative expenses where requested and feasible, although the PBO advised the ANAO that it makes a judgement about the inclusion of administrative expenses for each policy. This assessment focuses on whether or not those costs are significant in the context of implementing that specific policy, and not on whether the agency is able to absorb those costs within its existing budget. If administrative expenses are not considered to be significant in relation to the implementation of that policy, they may not be included, or be assumed to be covered by existing agency resourcing. The PBO also advised that an exception to this approach would be where the specification that costs are to be absorbed by the agency is made by the party holding government (as occurred for some costings prepared for the 2013 Post‑Election Report). For some confidential costings, the PBO may not be able to discuss any aspect of these expenses with the agency. However, the PBO advised that it does consult with agencies particularly where it considers that a proposal includes significant IT costs. Results of the ANAO’s examination of 126 PBO costings prepared outside the caretaker period22 showed that in 27 per cent of the sample (34 of the 126 requests) the PBO’s treatment of administrative expenses differed from the request made (either including or excluding these expenses).23

30. The ANAO has commented in various reports about the challenges to policy implementation that agencies face, and that a government’s policy agenda relies not only on the provision of sound policy advice but on the effective implementation of new programs.24 One of the essential elements of program implementation is to understand the administrative expenses needed to support the implementation process, particularly where they are significant. There can be a subsequent decision taken about an agency’s capacity to absorb administrative expenses, and the PBO is not always in a position to be able to assess this. In the interests of transparency, there is a strong argument for always separately including both administrative expenses (where significant to the implementation of the policy) and program funds (where applicable) in a costing as this would fairly present the full cost of implementing a proposal to the parliamentarian who made the request.

31. A related matter is the capacity of the PBO to advise parliamentarians on broader policy design considerations. Treasury and Finance provide policy advice to government outside of the caretaker period, including proposing and analysing policy options. In contrast, the PBO advised that it does not provide policy advice because its mandate is to provide independent and non‑partisan analysis, and providing policy advice could bring the PBO’s impartiality into question. However, the PBO does meet with requestors to clarify aspects of the policy, or seek additional information to complete the costing.25 The PBO’s practice has been to prepare costings on the basis of the parameters provided by the requestor, and not to provide advice and feedback on the merits, or feasibility, of the policy or its parameters. In practice, where some caution has been required the PBO has added a caveat. For example, in the costing of a major savings initiative (the Coalition‘s election policy Reduce Public Service headcount by 12,000 through natural attrition) the PBO included the following caveat:

A tight constraint on both the engagement of new ongoing staff and re‑engagement of non‑ongoing staff will be required for this policy to be implemented through natural attrition without recourse to additional redundancy payments.26

32. Parliamentary and peer group stakeholders interviewed by the ANAO confirmed the value of informal discussions about proposed policies with the PBO. Such discussions help to improve the policy development process by allowing: more iterative policy development; more reliable cost estimates; and the comparison of costs when different policy parameters were proposed.

33. Another matter raised by stakeholders was the timing of the release of policy costings during the 2013 caretaker period. The Charter of Budget Honesty specifies that requests for policy costings made before polling day during the caretaker period for a general election must be made public as soon as possible.27 In 2013, the Government’s Economic Statement28 was released on 2 August 2013, two days before the start of the caretaker period on 5 August 2013. As the Coalition’s policies had been previously costed by the PBO in the lead up to the election, the Coalition was able to resubmit its costings to be updated for the new economic statement in this two day period. The public release provision of the Charter of Budget Honesty did therefore not apply to the Coalition’s election policies and the Coalition chose to release the costings just prior to polling day. This tactical decision had the effect of reducing the time available for scrutiny of the costs of the Coalition’s election platform. Such an approach was consistent with the provisions of the Charter of Budget Honesty, and the Parliamentary Service Act. Nevertheless, some stakeholders commented that this ran counter to the trend for greater transparency that had been fostered by the establishment of the PBO.

34. The ANAO compared the costings for the election commitments of incoming governments for the 2007, 2010 and 2013 elections with the corresponding Budget papers. While a smaller proportion of policy costings were varied in the corresponding Budget papers in 2007 and 2010 than in 2013 (43 per cent, 30 per cent and 58 per cent respectively), the average variance was lower in 2013 (24 per cent variance compared with 54 per cent variance in 2007 and 2010). The range of variances was also lower for 2013 (between 2 to 261 per cent in 2013 compared with 1 to 536 per cent in 2007). These figures would suggest that policies costed during the 2013 election period were more comparable with Budget figures than the previous election period costings. That said, care needs to be taken in making this comparison, as differences between governments, and a range of costing variables (such as assumptions, data quality, behavioural impacts, and dates of implementation) will affect the final policies (and their costs) that went forward to respective budgets. Nevertheless, the greater comparability of PBO costings to the 2014–15 Budget figures may have been influenced by political parties’ access to the PBO in the year leading up to the election, allowing for greater refinement of policies.

The Post‑Election Report of Election Commitments and other functions

35. In addition to its costing of individual policy measures, the PBO has also contributed to improving the transparency of budgetary and fiscal matters through its Post‑Election Report of Election Commitments (Post‑Election Report); and by publishing self‑initiated research. The Post‑Election Report was a major achievement and the first time the effect of all major parties’ election platforms on the budget had been publicly released. Peer group stakeholders interviewed by the ANAO were generally positive about the report in providing transparency around election commitments, but commented that the report had little publicity and this could have reduced the report’s impact.

36. Parliamentarians also considered the report to be an achievement, but feedback to the ANAO on the process was mixed. One political party reported satisfaction with the process, but another party reported concern at the compressed preparation time (the report has to be released 30 days after the end of the caretaker period), and also the extensive detail that was given in the report to costing assumptions for individual policies.

37. The PBO has also released three research papers, covering the structural budget balance, historic government spending trends, and trends in Australian Government receipts.29 Parliamentary and peer group stakeholders interviewed by the ANAO agreed that the PBO’s work facilitated a more informed public debate, and there is the potential for this to increase as the PBO releases further information and the public becomes better educated about these topics. Stakeholders also commented that there is an opportunity for the PBO to take on a greater educative role of the Parliament and the media about Budget and fiscal matters.

Concluding comments

38. For a new organisation with an important statutory mandate to provide the Parliament with independent and non‑partisan analysis of the budget cycle, fiscal policy and the financial implications of proposals, the PBO has been effectively established and performed its role creditably, as indicated in paragraph 16 above. In performing this role, the PBO has received good cooperation from the Treasury, Finance and other Commonwealth agencies.

39. The ANAO has made one recommendation to improve the transparency of agency administrative expenses, where applicable, in policy costings as part of the full costs of implementing policy proposals. The approach taken by the PBO to include agency administrative expenses on a case by case basis when policies are costed, raises the question about the completeness of the information available to the requestor. Including these administrative expenses in all costings (where significant to the implementation of the policy) would fairly present the full cost of implementing a proposal, and its administrative and program components, to the parliamentarian who made the request.

40. The ANAO has also identified a limited number of administrative improvements for the PBO to consider going forward, including: providing sufficient context in relation to each information request to position agencies to provide the most appropriate information in response.30 Additionally, the audit highlighted issues of a policy nature that may warrant further consideration:

  • to date the PBO has generally been able to access the information it needs without statutory information access powers. However, one of the OECD‘s recommended principles for IFIs is to have information access guaranteed in legislation.31 The absence of statutory information access powers for the PBO means that there is an inherent risk that this ready access that has been available could be constrained in the future. In this context, the issue of the lack of access by the PBO to the composition of the Budget’s Contingency Reserve on public interest grounds could also be considered;
  • Australia’s PBO has nearly two years’ experience, and since its establishment there are now evolving international perspectives on the mandates and functions of IFIs.32 The Government’s National Commission of Audit has also recommended an additional function for the PBO—reporting the Government’s progress against a new set of fiscal rules33—and this would be consistent with one of the four key features of effective IFIs identified by the IMF, and with the functions performed by 11 of the 17 OECD countries’ IFIs.

41. These issues of a policy nature are matters for consideration, as appropriate, by the JCPAA (given its statutory oversight role in relation to the PBO), the Government and/or the Parliament. The ANAO’s mandate does not extend to commenting on the merits of government policies.

Summary of responses to the proposed report

42. The Parliamentary Budget Officer provided the following response, with the formal response at Appendix 1:

On behalf of the management and staff of the PBO I wish to record our appreciation of the cooperative and thoughtful approach adopted by your officers in conducting the first performance audit of the PBO.

The comprehensive nature of the audit and the thoroughness with which it was undertaken provide me with a high level of assurance that our governance arrangements and processes are sound and that the PBO is meeting its obligations to the Australian Parliament. I appreciate the constructive suggestions in the report for further improving the PBO’s processes.

I agree with the recommendation that the PBO include in all costings, estimates of administrative expenses, where significant. This will improve transparency by separately identifying significant administrative expenses in costings of policies that are specified as capped amounts. This is consistent with the approach that we take to separately identifying significant administrative expenses in costings of other policies.

43. The ANAO also provided an extract of the report to Treasury and Finance. Neither of those agencies had comments on the extract provided. Their responses are also included at Appendix 1.

Recommendation

Recommendation No. 1

Para 3.34

In the interests of greater transparency, the ANAO recommends that the Parliamentary Budget Office includes in all costings, estimates of administrative expenses, where significant.

 

PBO response: Agreed.

Footnotes

[1] Joint Select Committee on the Parliamentary Budget Office, Inquiry into the Proposed Parliamentary Budget Office, March 2011, p. 7.

[2] The caretaker period is the period preceding an election for the House of Representatives. It begins at the time the House of Representatives is dissolved and continues until the election result is clear or, if there is a change of government, until the new government is appointed.

[3] Commonwealth, Parliamentary Debates, House of Representatives, Parliamentary Service Amendment (Parliamentary Budget Officer) Bill 2011, Second reading, 24 August 2011, W Swan MP, p. 9142.

[4] The Parliamentary Service Amendment (Parliamentary Budget Officer) Act 2011 amended the Parliamentary Service Act 1999, the Charter of Budget Honesty Act 1998, and the Freedom of Information Act 1982 to establish the PBO and the office of Parliamentary Budget Officer.

[5] These requests and costings are to be made public, consistent with those prepared under caretaker period costing provisions of the Charter of Budget Honesty by Treasury and Finance.

[6] In June 2013, the Parliamentary Service Amendment (Parliamentary Budget Officer) Act 2013 expanded the PBO’s mandate to include the requirement for reporting on the election commitments of designated parliamentary parties. Other amendments made by this Act are discussed in paragraph 2.42.

[7] The OECD has avoided setting a strict definition for IFIs because of the variation in mandates, functions and authority between these offices. OECD, OECD Principles for Independent Fiscal Institutions, Working party for Senior Budget Officials, OECD Network of Parliamentary Budget Officials and Independent Fiscal Institutions, 12 February 2013, p. 3.

[8] Under subsection 15(1) of the Auditor‑General Act 1997, the Auditor‑General may at any time conduct a performance audit of an agency.

[9] The ANAO interviewed representatives of the Coalition, the Australian Labor Party, the Australian Greens and Mr Andrew Wilkie MP, as well as Prof. Peter Shergold AC, Mr Len Scanlan, Mr Geoff Carmody, Mr Chris Richardson and Mr John Daley.

[10] Treasury’s and Finance’s mandates to prepare policy costings comes from the Charter of Budget Honesty. The PBO’s mandate comes from the Parliamentary Service Act 1999, but is aligned with guidelines issued by Treasury and Finance for preparing policy costings during the caretaker period.

[11] The timeframes for agencies to respond to requests for information (urgent within five days, routine within 10 days, and during the caretaker period within three days) are indicative, and agencies can negotiate timeframes with the PBO. Under the Charter Policy Costing Guidelines, the PBO endeavours to complete costings within five days.

[12] The Contingency Reserve is an allowance included in the aggregate expenses of the budget to reflect anticipated events that cannot be assigned to individual programs in the preparation of the Budget estimates—see Statement 6 of Budget Paper 1. The Reserve is designed to ensure that aggregate estimates are as close as possible to expected outcomes and is not intended to be a general policy reserve. The Reserve is not specifically mentioned in either the Protocols or the MoU.

[13] The two costings were: Regional Cooperation to Combat People Smuggling (Coalition) and Safer pathways for refugees policy, refugee health and end immigration detention (Australian Greens). As the former Government had included costs for operating the processing facilities on Nauru in the Contingency Reserve, the PBO was not aware of the quantum of the allowance made and, as a consequence, the potential savings from the non‑operation of that facility in these two instances.

[14] Section 64V (3) of the Parliamentary Service Act states that the PBO is not prevented from disclosing information related to a request for the purpose of complying with the request.

[15] In a United Kingdom study of pre‑election costing processes in Australia and Ireland, confidentiality was seen as critical in encouraging parties to become more transparent about policy costs, as parties must be confident that details will not be leaked until they are ready to release the information. Institute for Government, Pre‑election Policy Costing Mechanisms in Australia, Whitehall in year Five of the Coalition: Lessons from Elsewhere, 19 March 2014, United Kingdom, pp. 16–17.

[16] The PBO’s costing reliability indicators are based on an assessment of the quality of data sources and the predictability of the behaviour of the party to which the policy will apply. These correspond to the ratings used by Treasury in the 2012 Tax Expenditures Statement. At the time of preparing this report, the PBO was reviewing its reliability ratings.

[17] The PBO’s data from July 2012 to September 2013 records requests, and does not differentiate between a costing request or an information request from a parliamentarian (that is, a request other than a costing request).

[18] The PBO could more readily update the costing with the latest budget report (the Pre‑election Economic and Fiscal Outlook) if the PBO had costed that policy previously, and would likely have the models and much of the data needed.

[19] This comparison needs to be read with some caution, as prior to the caretaker period the Government may seek costings and advice from these agencies at any time.

[20] The ANAO’s feedback from parliamentarians identified that independents may increase their usage of the PBO in the future, as agreements with the former government gave them access to more resources at that time.

[21] The Parliamentary Service Act requires the PBO to follow the Charter Guidelines if the Parliamentary Budget Officer has not issued his/her own written principles. At the time of preparing this report, the Parliamentary Budget Officer had not issued his own costing principles.

[22] The 126 costings were part of a larger indicative sample of 240 costings examined by the ANAO.

[23] Agencies consulted by the ANAO raised issues in relation to the apparent non‑inclusion of administrative expenses, such as for systems development or tender processes, in some policy costings. The ANAO’s analysis of the 92 costings that had documentation included in the PBO’s Post‑Election Report of Election Commitments, showed that 43 had agency administrative expenses included, 26 did not, and 23 could not be assessed (due to there being no mention of the expenses, the policy being for the termination of a program, or the explanation was unclear).

[24] For example: ANAO, Audit Report No.9 2010–11, Green Loans Program; and Audit Report No.12 2010–11, Home Insulation Program.

[25] Due to time constraints during the caretaker period, the PBO advised the ANAO that it had greater flexibility outside of the caretaker period to meet with requestors.

[26] PBO, Post‑election report of election commitments—2013 general election, Commonwealth of Australia, 18 October 2013, p. 198.

[27] Clause 31(1) of the Charter of Budget Honesty Act 1998.

[28] The Economic Statement is a budget document that provides an update of the Government’s economic forecasts and key fiscal aggregates.

[29] The PBO paper on Trends in Australian Government receipts: 1982–83 to 2012–13 was released on 15 April 2014, after the ANAO’s interviews with stakeholders.

[30] The concluding comments of Chapters 2 to 5 of this report contain further suggestions such as: finalising governance documentation and reviewing key performance indicators to better demonstrate the PBO’s effectiveness; seeking formal feedback from agencies about the process for requesting information; and documentation of quality control decisions.

[31] OECD, OECD Principles for Independent Fiscal Institutions, Working party for Senior Budget Officials, OECD Network of Parliamentary Budget Officials and Independent Fiscal Institutions, 12 February 2013, p. 7.

[32] For example, information contained in: OECD, OECD Principles for Independent Fiscal Institutions, Working party for Senior Budget Officials, OECD Network of Parliamentary Budget Officials and Independent Fiscal Institutions, 12 February 2013; OECD, Independent Fiscal Institutions in Government at a Glance 2013, OECD Publishing, p. 99; and IMF, The Functions and Impacts of Fiscal Councils, 16 July 2013.

[33] The issue of whether the PBO should be given statutory information access powers (mentioned above) is also relevant to this proposal.

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