Determining annual appropriation transfer amounts
Transfer of annual and special appropriations should follow the principle that ‘finances follow function’. Appropriations to be moved are done so on a prioritised basis. See the Machinery of Government Changes Guide for more information.
Details of functions transferred as part of a Machinery of Government (MoG) change are detailed either in correspondence from the Prime Minister or other Ministers or in an amendment to the Administrative Arrangements Orders (AAOs). To identify the annual appropriations to be transferred in a MoG change, and how related appropriations can be accessed, it is important to consider the:
- current year annual appropriations that may need to be transferred, including departmental and administered appropriations, appropriations for payments to states, territories and local government, new administered outcomes, equity injections and/or administered assets and liabilities
- prior year annual appropriations that may need to be transferred, including any amounts withheld under section 51 of the PGPA Act and/or administratively quarantined amounts.
Section 75(4) of the PGPA Act requires that appropriation transfers must not result in:
- a change in the total amount appropriated in the financial year in which the determination is made (section 75(4)(a)), or
- an increase in the total amount appropriated in relation to previous financial years (section 75(4)(b)).
The amount of annual appropriation retained by the transferring entity must not be less than the amount spent by that entity, to avoid an inadvertent breach of section 83 of the Commonwealth of Australia Constitution Act (the Constitution). Particular care should be taken, for example, where prepayments are significant.
Administered appropriations
For administered expenses and specific purpose payments to states and territories, the annual administered appropriations are provided for each entity outcome for a particular financial year. The transfer of unspent balances is subject to the level of appropriations available.
Sufficient appropriations must be transferred to enable the receiving entity’s appropriation to be used for any administered payments from the MoG change date of effect until the next determination will be made (if any). Interim arrangements may be put in place for the transferring entity to continue to assist with administering functions (including making payments) under delegation or authorisation from the receiving entity, however the receiving entity’s appropriation must be used for all administered payments relating to the functions transferred. It is not appropriate for the transferring entity’s appropriations to be used for administered payments for functions that have transferred to the receiving entity.
Departmental appropriations
Departmental appropriations comprise:
- ordinary operating costs (for example, salaries, supplier costs, accruing employee entitlements, and operational expenditure excluding depreciation)
- departmental capital budgets for the replacement of minor assets valued at $10 million or less, as well as costs eligible to be capitalised (for further detail, see RMG-124 Capital budgeting by Commonwealth entities in the general government sector).
In determining the appropriation amounts to be transferred, entities should take account of current-year expenditure incurred by both entities, and any prior-year appropriations held by the transferring entity, to cover liabilities accrued and assets consumed in those years.
Care should be taken when determining the amount of appropriations to be transferred, particularly in relation to asset funding (such as for fit-outs, information and communications technology equipment, systems and software), employee entitlements and appropriations receivable. A ‘step-by-step’ guide for calculating transfer amounts under section 75 of the PGPA Act is included at Calculating annual appropriation transfer amounts. Entities should agree their own detailed calculation approach with each other and then agree work papers with their audit teams.
For equity injections, the transfer amount for unspent appropriations should be determined with regard to the intended use of the appropriation for the transferred function(s), for example, to deliver a specific budget measure, purchase a specific asset or pay-out a specific liability.
Discontinued operations
Where a function is discontinued, the drawdown schedule of the responsible entity should be reduced accordingly. Finance will also put in place withholding/quarantine arrangements for the discontinued function, where appropriate.
If an entity has already drawn down moneys attributable to discontinued operations, a liability should be recognised and revenues from government should be reduced. The liability will be extinguished by making a cash transfer back to the Official Public Account. See the Machinery of Government Changes Guide for more information on banking arrangements.
