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Box 4. New Zealand: Information required to support the first appropriation act

Based on the draft 2004 Public Finance (State Sector Management) Act approved by HR.

For each vote:

●A summary of the financial activity relating to that vote for the financial year covered by the Appropriation Bill.

●Comparative budgeted and estimated actual figures for the previous financial year.

For each appropriation sought:

●The scope, type and time period of the appropriation, including the vote to which the appropriation relates.

●The maximum level of expense or capital expenditure permitted by the appropriation.

●A concise explanation, including the intended impacts, outcomes, or objectives.

●The minister responsible for the appropriation and the department that will administer it.

●Comparative voted and estimated actual expenses and capital expenditure for each appropriation for the previous financial year; comparative actual expenses and capital expenditure for each of the four financial years that precede the previous financial year.

For each output class appropriation:

●The performance measures and forecast standards to be achieved for each class of outputs.

●The forecast expenses to be incurred for each class of outputs within a multi-class output expense appropriation.

For each department:

●The responsible minister for the department.

●The projected balance of net assets for the department at the end of the financial year.

For permanent legislative authorities:

●Equivalent information about each category of expense or capital expenditure.

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The Minister of Finance must submit to the Speaker of the House any proposals for significant changes to the format or content of the above documentation or other supporting information and the Speaker must present those proposals to the HR. The Minister must consider any comments of the Speaker or any committee of the HR that considered those proposals before putting the proposals into effect.

Medium-term macroeconomic framework and fiscal strategy. The fiscal strategy report (FSR) must be presented with the annual budget. It describes the government’s long-term objectives and its short-term fiscal intentions. The FSR is required to include projections for key fiscal aggregates for a period of ten or more years and an explanation of how these projections accord with the principles of responsible fiscal management. The FSR must also assess the consistency of the long-term objectives with the long-term objectives announced in the BPS. Justification of changes in the government’s long-term fiscal objectives is required by law.

Concerning “short-term” objectives, the FSR must indicate, for the financial year to which the report relates and at least the next two fiscal years, the government’s intentions for total operating expenses, total operating revenues, the operating balance, total debt, and total net worth. The FSR must also justify any departures from the short term intentions expressed in the budget policy statement. If the short-term intentions are not consistent with the principles of responsible fiscal management or with the long-term intentions, the FSR must state the reasons for departure and the approach the government intends to take to ensure consistency, as well as the time period this is expected to take.

The economic and fiscal update must contain economic and fiscal forecasts relating to the financial year to which the appropriation bill relates and to each of the next two financial years and a statement on the impact of tax policy changes, including changes in tax legislation since the last update and proposed changes in tax legislation. The law requires that the economic forecasts include GDP, consumer prices, unemployment and employment, and the current account of the external balance of payments, together with a statement of all significant assumptions underlying them. The law is also specific on the content of fiscal forecasts, which must include the forecast financial statements including a statement of borrowing and “any other statements necessary to fairly reflect forecast financial operations and financial positions at the end of each of the forecast financial years”.

New measures versus existing expenditure policies. Since the FRA requires the government to justify any changes in previously-announced medium-term fiscal policy, there is implicitly a legal requirement for the

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government to assess the impact of new fiscal policy measures from scenarios previously based on “existing policies”.

Performance-related information. To support the Appropriations Bill estimates presented to Parliament, the Minister of Finance must provide information for each appropriation for expenses. This information must contain, inter alia, the performance measures expected to be achieved in relation to any classes of outputs or services with the scope of the appropriations, as well as the intended impacts, outcomes, or objectives of the appropriation.

Chief executives of departments are responsible for the financial performance of their departments. They must ensure that each department provides information on the department’s future operating intentions to the responsible minister. Annual departmental statements of intent (looking forward a period of at least three years) must include a statement signed by the responsible minister that the information contained therein is consistent with the performance expectations of the government. These statements must set out and explain the nature and scope of the department’s functions and intended operations, the specific impacts, outcomes, or objectives that the department seeks to achieve and how the department intends to manage those functions. Extra information for the first of the three financial years includes a set of forecast financial statements including a statement of forecast service performance that describes each class of outputs the department intends to supply.

Tax expenditures, contingent liabilities and fiscal risks. The FRA requires contingent liabilities and fiscal risks to be incorporated into the budget-related documents. Both the BPS and FSR focus on the mediumto long-term implications of a government’s policies and various alternative policy sets. The economic and fiscal update is also required to incorporate to the fullest extent possible all government decisions and other circumstances that have an impact on the fiscal and economic outlook (s. 11). The quantified fiscal impact is to be included in forecast financial statements. Decisions that are not quantifiable must be disclosed in the statement of fiscal risks. If disclosure results in prejudice, compromise or material loss of value, the government may withhold the fiscal impact of the decision. For example, the government may decide to sell an asset, but may not wish to disclose the sum it expects to receive for that asset as this could compromise negotiations over the sale.

4.1.8. Budgets of Parliament and other constitutional bodies

The PFA contains provisions for the preparation of the budgets of the offices of Parliament (s. 17). Prior to the commencement of a financial year, the chief executive of each office of Parliament prepares and submits to the HR