There are a few accounting tricks in the Budget.
They are not so much disappearing tricks, but exposure and transparency tricks. You have to be very careful when comparing year-to-year figures and be very wary of statements like, “”We increased health/education/justice spending by X per cent.”
But ultimately, public spending will be more transparent and it will be more difficult for future governments to fudge figures.
The story starts in 1996, when the Carnell Government made a lash (CORRECT) for its own back by introducing accrual accounting. It forced governments to identify and account for every cost in providing a service, especially depreciation. The Government could no longer, for example, just pay the teaching salaries and chalk each year and not worry that the school building was deteriorating, postponing the cost to future generations.
Accrual accounting has meant that last year’s accounting trick in milking Actew is exposed in this Budget and has to be paid for in an open way.
The Government copped a $55 million hiding this year because it does not get the same Actew revenue it got last year.
The Commonwealth’s 3 per cent increase in funding to the ACT pays for $20 million of that, and burns up all the Commonwealth’s extra money for us. And the other $35 million comes from us, not in tax, but in user charges.
Taxes stay within the CPI and election promises at a 1 per cent increase overall.
User charges, on the other hand, go up a whopping 26 per cent. Much of that is the new insurance levy (not a tax, mind you), and most of the rest comes because CanDeliver (the ACT’s new IT provider) will start charging its public and private sector customers.
This Budget, the Government has added three more strands to the lash.
One is called “”comparative pricing” and the other is “”separation of disclosure”.
Comparative pricing is a method to keep government agencies on their toes.
You have to throw out any monomorphic view of the Government, and look at it a number of separate parts which provide services to the central Office of Financial Management. So the centre buys police, education or health services from the agencies.
The central office gives a budget to each agency based on last year’s spending plus some. But instead of giving it a lump sum, it goes back to last year’s spending and makes an assessment of what it would have cost if the agency had used best practice to deliver the service. You compare the price of best practice with the actual price of what the agency delivered.
The best-practice price is determined by bargaining between the central office and the agency using the Australian average as a starting point and looking, where applicable, private-sector costs.
Then the budget is set next year, acknowledging that best practice will not be achieved in one year (if ever) by giving the agency a budget to deliver the services according to best practice plus a subsidy to cover inefficiencies. The subsidy to cover inefficiencies is euphemistically called “”injection for operating requirements”.
For example, a best-practice Budget of $83 million is set for the Canberra Institute of Technology and a $9.6 million injection for operating requirements is added as a subsidy for them not being as smart as they should be. It slowly reduces over subsequent years.
The theory is that inefficiency is exposed.
In practice it will put a lot of pressure on workforces, particularly when looking at work practices, as distinct from raw pay. The former would be seen as an unnecessary subsidy; the latter a necessary Budget allocation.
Further, when the central office gives an agency an injection for operating requirements, it charges interest on it, as a capital charge. This is further incentive for agencies to smarten up their act.
The second strand of the lash was separation of disclosure.
This is a device where agency allocations are separated into those they can do something about (own departmental spending) and those they cannot (territorial spending that is determined elsewhere, by central territory office or by transmission of fixed Commonwealth grants.
Once again, the aim is to expose agency inefficiency, but also reveal where they are not getting enough money to do the job.
The third strand of this Budget’s accounting lash (soon we’ll have a cat ‘o nine tails) is to charge agencies with insurance and superannuation individually. This year the Government attacked unfunded superannuation with a vengeance, providing $200 million over four years. Even with this there will still be a shortfall as the working population ages.
In 1997-98 agencies will cough up $40 million in total to the superannuation fund. That is money they did not have to find last year.
Similarly with insurance. Most government self-insure. But under accrual accounting, that cost has to be assessed and made provision for, so that a future generation of voters does not have to pay when the ACT loses major assets in catastrophes.
Overall, though, the ACT public-sector accounting is probably the most transparent and publicly accessible of the eight governments in the country.