The audit examined the financial management of all Special Appropriations in the period 1998-99 to 2002-03, with the exception of those related to Special Accounts and those administered by Government Business Enterprises. The audit objectives were to: identity all Special Appropriations and ascertain which entities are responsible for their financial management and reporting; and assess entities' financial management and reporting of Special Appropriations against the Commonwealth's financial management and reporting frameworks.


  • Australian Customs Service
  • Australian Greenhouse Office
  • Australian Industrial Registry
  • Australian Prudential Regulation Authority
  • Australian Securities and Investments Commission
  • Australian Taxation Office
  • Comcare
  • Department of Environment and Heritage
  • Department of Employment and Workplace Relations
  • Department of Health and Ageing
  • Department of the House of Representatives
  • Department of Prime Minister and Cabinet
  • Department of Veterans’ Affairs
  • Great Barrier Reef Marine Park Authority
  • Insolvency and Trustee Service Australia
  • Office of the Renewable Energy Regulator



The Australian Constitution provides for a Consolidated Revenue Fund (CRF), formed from all revenues and moneys raised or received by the Government. Payments from the CRF are required to be authorised by an appropriation, made by law.

Special Appropriations are made in Acts that deal with particular purposes of spending. In 2002–03, more than $223 billion was spent from the CRF under the authority of Special Appropriations. This represented more than 80 per cent of all appropriation drawings for the year.

The Department of Finance and Administration (Finance) is responsible for developing and maintaining the financial framework for the Commonwealth public sector. For their part, individual Commonwealth entities are responsible for managing particular Special Appropriations. This management responsibility includes: adherence to the requirements of the financial framework and relevant laws; maintaining proper accounts and records on each Special Appropriation; financial reporting on the use of Special Appropriations; and, as appropriate, performance information in annual reports.

Audit objectives and key findings

The audit objectives were to:

  • identify all Special Appropriations and ascertain which entities are responsible for their financial management and reporting; and
  • assess entities' financial management and reporting of Special Appropriations against the Commonwealth's financial management and reporting frameworks.

Special Appropriation stocktake

In terms of the first audit objective, the Australian National Audit Office (ANAO) identified that, during 2002–03, there were 414 Special Appropriations in existence. Each of those appropriations provides a right to spend money from the CRF subject to meeting legislative criteria. In some cases the appropriation is not limited in amount. It is therefore important that there is defined responsibility and accountability for such appropriations and that access to the CRF is withdrawn when it is no longer needed. ANAO concluded that this has not been the case, as follows:

  • A large number of Special Appropriations that entities no longer require remain in existence. In the main, entities do not seek to have unnecessary Special Appropriation clauses repealed.
  • In some instances, entities have obtained more than one appropriation for the same purposes.
  • No entity has accepted responsibility for some Special Appropriations. Conversely, there were also instances where more than one entity claimed to be administering the same payments from the same Special Appropriation. A variation was identified which involved shared responsibility, but in circumstances where accountability arrangements often lacked clarity.

Financial management and disclosure

Appropriation management is not a recent feature of Commonwealth financial management. Since Federation, agencies have been required to: spend strictly within appropriation limits; ensure that amounts are only spent within the purposes of appropriation; maintain accounts and records; control obligations in relation to current and future years' appropriations; and properly report appropriations.

With effect from 1 July 1999, important amendments were made to the Financial Management and Accountability Act 1997 (FMA Act). Under the arrangements in place up to 30 June 1999, Finance operated a central bank account, payment system and appropriation ledger on behalf of all agencies. As part of the July 1999 changes, two key appropriation management responsibilities were devolved from Finance to agencies, namely:

  • legislative controls over who may lawfully draw upon appropriations; and
  • maintenance of accounts and records concerning the use of individual appropriations.

In this context, in relation to the second audit objective, ANAO concluded that widespread shortcomings have existed in the management and disclosure of Special Appropriations. This included the following findings:

  • A number of entities had yet to amend their instructions, procedures and/or delegations to reflect their increased responsibilities although, at the time of this performance audit, some five years had elapsed since the FMA Act changes commenced operation. Subsequent to the ANAO raising this issue with the entities concerned, a significant number have now taken steps to rectify the deficiencies identified.
  • Drawings have been made from the CRF by five entities in reliance on incorrect appropriation authorities. These drawings involved payments of more than $393 million between 1998–99 and 2002–03. In each instance, a valid alternative appropriation was available. This finding highlights the need for proper appropriation controls to be in place at the time the payments are made.
  • Errors were also identified in the reporting and disclosure of Special Appropriation spending. In one instance, an entity disclosed in 2001–02 and 2002–03 a total of $7.2 billion in spending against proposed legislation that had not been passed by the Parliament.
  • Two entities have spent money that was not approved by the Parliament. The instances identified by ANAO involved aggregate funds estimated at some $23 million being improperly drawn over the period examined by ANAO. Of this amount, $6.96 million is estimated to involve breaches of Section 83 of the Constitution. ANAO has been advised that the entities involved are working with Finance to correct the errors and repay the amounts involved.
  • In the five-year period covered by the audit, 21 entities made, but did not disclose as Special Appropriation drawings from the CRF, payments totalling at least $13.1 billion from 11 Special Appropriations. In addition, a further entity did not disclose $26.6 billion in payments from one Special Appropriation, although this non-disclosure was based upon legal advice and the treatment was explicitly described in the 2002–03 financial statements. The treatment was subsequently changed following further legal advice.
  • More than half of all existing Special Appropriations were not appropriately disclosed by the responsible entities in their annual financial statements. While in many instances the non-disclosed Special Appropriations had not been used, the disclosure of unused Special Appropriations should be made to the Parliament and other stakeholders for accountability purposes.

Overall audit conclusion

The sound governance, management and reporting of appropriations requires certainty, clarity and consistency in the application of the Commonwealth's financial management framework. The audit findings indicate that the manner in which the financial framework has been interpreted and implemented has not been consistent with those characteristics. While many of the issues are quite technical, in a legal sense there are important considerations of appropriate accountability, including transparency, in relation to the Parliament. Overall, ANAO considers that there have been significant shortcomings in the financial management of various Special Appropriations.

Given the fundamental importance of appropriations to Parliamentary control over expenditure, changes need to be made to secure proper appropriation management in the Commonwealth. In particular, there has been inadequate attention by a number of entities to their responsibility to ensure that a correct, valid appropriation to support a particular payment has been identified before spending funds from the CRF, and to accurately disclose their use of Special Appropriations.

Achieving the necessary improvements to the management of Special Appropriations will require greater understanding of, and increased care and attention to, legislative requirements and appropriation management practices. In that respect, there is evidence that, in response to ANAO's audit activities, entities have increased their focus on those obligations. In addition, during the course of this audit, Finance issued guidance to Chief Financial Officers1 and provided four Circulars to FMA Act agencies relating to particular aspects of appropriation management by agencies subject to the FMA Act.2

The provision of additional guidance on appropriation management and disclosure, as required, would assist entities to manage and report appropriations in a better and more consistent manner across the Commonwealth. Further work is also required in other areas of appropriation management to provide sufficient assurance about the use of Special Appropriations, including improvements to entity internal controls. To these ends, this report makes six recommendations.

Entity responses

Entities that responded to the draft report agreed to all recommendations. Detailed agency responses are included at Appendix 1. In addition, Finance provided the following summary comment on the report:

Finance notes that the work undertaken by the ANAO in preparing the report has been significant and considers that it will serve to focus agencies' attention on appropriation management.

Finance agrees the recommendations and is taking action to assist agencies to comply more fully with the requirements.

Finance will be proposing clarifications to the disclosure requirements for Special Appropriations set out in the Finance Minister's Orders in order to more effectively explain for the benefit of agencies several of the issues raised in the report.

Finance has provided agencies with a range of guidance on the issue of appropriation management over the past year and has more recently issued Finance Circulars on specific issues raised in the audit. These include:

  • Guidance material (Explanatory Notes) contained in the Finance Minister's Orders (Preparation of Financial Statements);
  • Estimates Memorandum 2003/27, Refresher on Appropriation Framework — Rules: The Commonwealth's Appropriation Framework and Rules;
  • Finance Circular 2004/06, Appropriations and the Consolidated Revenue Fund;
  • Finance Circular 2004/07, Drawing Rights: Payments and Debiting Appropriations;
  • Finance Circular 2004/08, Appropriation for repayments under section 28 of the FMA Act;
  • Finance Circular 2004/09, Net appropriation agreements (section 31 agreements);
  • Finance Circular 2004/16, Appropriation management: responsibilities of agencies; and
  • Finance Circular 2004/17, Appropriations for payment to CAC bodies.

This work provides a strong platform for agencies enhancing their management and disclosure of appropriations.


1 Special Appropriation Disclosure, Accounting Policy Branch, 20 May 2004.

2 Namely: Finance Circular No.2004/06, Appropriations and the Consolidated Revenue Fund, 10 June 2004; Finance Circular No.2004/07, Drawing Rights: Payments and Debiting Appropriations, 2 July 2004; Finance Circular No.2004/08, Appropriation for Repayments under Section 28 of the FMA Act, 11 August 2004; and Finance Circular No.2004/09, Net appropriation agreements (Section 31 Agreements), 11 August 2004.