Controller update: September 2023
Introduction
This update explains recent events in Parliament’s authorising of public expenditure and our work in monitoring government spending and providing assurance to Parliament and New Zealanders.
Our role
The Controller and Auditor-General is often referred to as the public “watchdog” on government spending. An important part of the watchdog role is the Controller function.
In this Controller role, we provide assurance to Parliament and New Zealanders that the Government has spent public money in line with the authority provided by Parliament.
The Controller and Auditor-General carries out his Controller role throughout the year and reports more fully to Parliament after the end of the financial year to 30 June.
Our auditors are currently auditing the Government’s financial records and systems. Their work includes confirming the extent to which the Government has spent public money without the required authority.
How much did Parliament authorise for 2022/23?
When Parliament passed the Appropriation (2022/23 Estimates) Act 2022 for the 2022/23 Budget, it also passed the Imprest Supply (Second for 2022/23) Act 2022. The second Imprest Supply Act gives the Government more flexibility to reprioritise its spending, introduce new spending initiatives between Budgets, and respond to events and other matters that could not be foreseen when the Budget was put together. This is normal practice and happens every year.
Figure 1 shows the amount of spending authority available to the Government in 2022/23 through the Act that authorises the Budget (the Appropriation (Estimates) Act) and the second Imprest Supply Act.1
Figure 1
Comparison of initial and updated Budget, 2022/23
The Appropriation (Estimates) Act allowed up to $160 billion for 2022/23, and the second Imprest Supply Act provided additional between-Budget spending authority of up to $28.5 billion. This increased the maximum amount the Government could spend to $188.5 billion.
As is normal practice, the Government updated its Budget later in 2022/23 and presented the updated Budget to Parliament on Budget Day. In June 2023, Parliament authorised the updated, final Budget (of $178.8 billion)2 through the Supplementary Estimates Act.3
The total amount of spending authorised by Parliament is the maximum allowable – it does not represent how much the Government actually spent.
Our Controller work for 2022/23
From October to June each year, we monitor the spending of public money to determine whether the Government has spent it in line with the authority provided by Parliament. As part of the Controller work, we examine the financial records and financial systems of government departments to provide assurance that expenditure has been properly authorised. If it has not, then we check that the nature and amount of unappropriated expenditure is accurately reported to Parliament and New Zealanders.
Since 30 June, our auditors have been auditing the financial statements of government departments and the consolidated Financial Statements of the Government for the year ended 30 June 2023. Confirming the nature and amount of any unappropriated expenditure is an important part of this work.
We will complete our audit of the Financial Statements of the Government by 30 September 2023. As required by the Public Finance Act 1989, those Statements will include, in the Statement of Unappropriated Expenditure, disclosure of any public money spent during 2022/23 without the correct authority. We provided our Controller half-year update on unappropriated expenditure in March 2023.
How much did Parliament authorise for 2023/24?
Parliament passed the Budget4 for 2023/24 on 22 August 2023, along with an Imprest Supply Bill.5 Both were enacted when they received Royal Assent on 24 August 2023.6
The Appropriation Act gives legal authority to the Government’s 2023/24 Budget ($178.2 billion), and the second Imprest Supply Act authorises the Government to spend up to $28.5 billion in addition to that specified in the Budget (an additional 16%).
Figure 2 shows the amount of spending authority available to the Government for 2023/24 through the annual Appropriation (Estimates) Act and the second Imprest Supply Act. Although the maximum authority is $206.7 billion, it is normal for much of the imprest supply authority to be used to authorise new spending funded from existing appropriations.7, 8
Figure 2
Initial Budget, 2023/24
How does “imprest supply” work?
In granting imprest supply, Parliament gives the Government freedom to spend public money with fewer restrictions than the Appropriation Act. Whereas appropriations are specified by the time period, maximum amount, type of expenditure, and scope of expenditure, the Imprest Supply Act specifies (for 2023/24) only the maximum amount for:
- Expenses – $16 billion;
- Capital expenditure – $11.5 billion; and
- Capital injections – $1 billion.
However, limits on period, amount, type, and scope are set when imprest supply authority is applied to specific decisions. The Government carefully controls its use of imprest supply by applying Cabinet rules. There must be a specific Cabinet decision before the Government accesses the extra spending authority it has available through imprest supply.9 Such decisions approve the use of imprest supply for each particular purpose, set the period, amount, type, and scope parameters, and agree to the changes being included in the updated Budget, as presented in the Supplementary Estimates (see our Controller update for 2 August 2021 for more information).
Figure 3 shows that the provision of imprest supply increased considerably after the outbreak of Covid-19. Since 2019/20, it has steadily reduced as a percentage of the total Budget. At 16% of the Budget, imprest supply provided for 2023/24 is the same as it was for 2014/15 – however, the nominal dollar amount has doubled over that period.
Figure 3
Between-Budget imprest supply authority, from 2014/15 to 2023/24
Note: These figures represent the authority provided by the second annual Imprest Supply Act for each year and the third Imprest Supply Act for 2019/20. These Acts “top up” the spending authority provided by the annual Acts that authorise the main Budgets (that is, the Appropriation (Estimates) Acts).
Our Controller work for 2023/24
In October 2023, we will continue our monthly Controller monitoring of public spending against the legislative authority covering 2023/24:
- We will check that any new spending approved by Cabinet remains within the Imprest Supply limits set by Parliament through the second Imprest Supply Act for 2023/24.
- We will check a sample of changes made to the Government’s budgeted spending (that is, Cabinet minutes and joint-Ministers’ approvals) to ensure that the between-Budget changes have been properly approved.
- After spending approval has been given (either through the initial Budget or through Cabinet’s approval of extra between-Budget spending), we will check that the spending is in line with the approvals given.
- We inform the Government, Parliament, and New Zealanders of any government spending that is outside the authority provided by Parliament.
- We will assist parliamentary committees in their scrutiny of government department spending and performance by providing information and advice based on the broader work of our Office.
1: The first Imprest Supply Act for each year provides the Government with authority to spend public money until the Act that authorises the Budget comes into force.
2: It is not unusual for the “final authority” to be less than the “initial authority”. That is because imprest supply represents the upper limit of what Parliament has authorised, whereas the “final authority” more closely aligns to the final estimated spend for the year.
3: We explain the Supplementary Estimates process in our Controller update of 2 August 2021.
4: The Appropriation (2023/24 Estimates) Act 2023.
5: The Imprest Supply (Second for 2023/24) Act 2023.
6: From 1 July 2023 until 24 August 2023, public expenditure for 2023/24 was authorised through the Imprest Supply (First for 2023/24) Act 2023. This was enacted on 29 June 2023.
7: Appropriations are authorities from Parliament that specify what the Crown may incur expenditure on (specific areas of expenditure). Most appropriations specify limits in terms of the type of expenditure (such as operating or capital expenditure), what it can be used for, the maximum amount, and the time period.
8: New between-Budget spending (which requires new authority) is often funded from existing appropriations through “fiscally neutral transfers”. When this happens, the amount of planned government spending does not increase, but the authority needed for the new spending does.
9: Some decisions may be made jointly by the appropriation Minister and the Minister of Finance.