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Article Excerpt
[The implementation of the central concepts captured by the final arrangements in ss 81 and 83 of the Australian Constitution has evolved over decades. However, some uncertainty as to their actual content and meaning remains. Significantly, the roles of the High Court of Australia and Parliament have been major forces in the breakdown of Parliament's control of the executive's expenditures, opening the way for the adoption of the current accountability and transparency arrangements. Recent actions by Parliament show that it is re-asserting its control over appropriations. However, this article advocates that the focus should be on expenditure rather than appropriations, taking advantage of the potential accountability and transparency afforded by the recent public administration reforms.]
CONTENTS I Introduction II The Consolidated Revenue Fund III Surplus Revenue IV Appropriations A What Are the Commonwealth's Purposes? B How Precisely Must Those Purposes Be Specified? V Ordinary Annual Services VI Conclusions
I INTRODUCTION
The financial transitional arrangements finally adopted in the Australian Constitution provided for the Commonwealth to take over the collection and control of state customs duties and excise, (1) and then for the Commonwealth to impose uniform customs duties within two years of its establishment. (2) In the period before the Commonwealth imposed uniform customs duties, the Commonwealth was required to pay monthly the balance of the states' customs duties less any expenditure. (3) During the five years after uniform customs duties were imposed, or 'until the Parliament otherwise provide[d]', the Commonwealth was to account to the states, (4) and thereafter make payments to the states of the surplus 'on such basis as [Parliament] deems fair'. (5) Central to this delicate compromise was the maintenance of Parliament's authority over the executive's future expenditure, the Constitution providing in part:
81 All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution.
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83 No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.
This article charts the unresolved tension in this compromise between the Constitution's apparent requirements for parliamentary control over the Australian government's (the executive's) expenditure, (6) and the roles of the High Court of Australia and Parliament in asserting Parliament's apparent constitutional paramountcy in these matters. (7) This analysis is timely as the losing parties in Combet v Commonwealth (8) who challenged various aspects of the Australian government's expenditure on constitutional grounds (9) are now Members of the House of Representatives and of the Australian government, (10) with direct involvement in Parliament's formulation of future Australian government expenditure arrangements. Further, the recently elected Australian government campaigned for much greater disclosure of government financial information, expressly citing loose appropriations and the loss of Parliament's control over expenditure. (11) The analysis presented in this article traces in detail the various decisions of the High Court to illustrate the uncertainty reflected in these decisions and the opportunity this has presented for the Australian government, with Parliament's approval, to undermine Parliament's control over the Australian government's expenditure. Although recent measures in Parliament may address some of these concerns, this article advocates that the focus should be on expenditure rather than appropriations and that this would provide enhanced accountability and transparency of the government's expenditure beyond that afforded by the recent public administration reforms.
Part II of this article considers the Constitution's Consolidated Revenue Fund ('CRF') to illustrate the ambiguous High Court conceptions of the CRF which led Parliament to give to the Australian government the details of the CRF's determination. Part III looks at the Constitution's closely related surplus revenue provisions to illustrate that Parliament, with the support and approval of the High Court, is undermining a key restriction on linking appropriations to the amounts of money actually held by the Commonwealth (and within the CRF). Part IV examines the Constitution's appropriation requirements to illustrate the High Court's apparent preference for Parliament to resolve the detail of appropriations. Part V considers the requirement that Senate amendment of appropriations is limited to those described as not for the 'ordinary annual services of the Government' and how this is now a matter for resolution entirely by agreement between Parliament and the Australian government. Part VI then concludes that Parliament needs to change its focus from the annual appropriation Bills to after-the-event reporting, accountability and transparency arrangements afforded by the recent public administration reforms, and in particular to the linkage between the appropriation Bills (and associated Portfolio Budget Statements), the related financial statements according to the Financial Management and Accountability Act 1997 (Cth) and the Annual Reports according to the Public Service Act 1999 (Cth). Various means of achieving this are discussed.
II THE CONSOLIDATED REVENUE FUND
Section 81 of the Constitution articulates the concepts of '[a]ll revenues or moneys' and 'raised or received' in respect of the 'one [CRF]'. The terms 'revenues' and 'moneys' are critical to the evolution of the modern conception of the CRF. The words in the original draft of the Constitution were 'duties, revenues and moneys'. (12) At the Adelaide Convention the words 'duties' and 'moneys' were removed to make it clear that loan moneys did not go to the CRF. (13) This was confirmed at the Melbourne Convention 'for the same reasons'.
(14) However, the word 'moneys' was again included in the Constitution and the reasons for this inclusion remain unclear. (15) As a consequence, loan moneys were considered to be separate from the CRF (16) so that the Audit Act 1901 (Cth) operated a 'Consolidated Revenue Fund' (17) with a separately accounted Loan Fund (18) and a Trust Fund. (19) The revenues and moneys from different sources were credited under these Audit Act 1901 (Cth) arrangements to the separate 'Consolidated Revenue Fund', Loan Fund and Trust Fund accounts, (20) with each 'component' of the Loan Fund and Trust Fund accounted for separately under comprehensive and centrally controlled ledger arrangements. (21)
These developments in Parliament were paralleled by the High Court's uncertainty over the form of the CRF and establishing when revenues and moneys entered and moneys left the CRF. The High Court first contemplated the CRF in New South Wales v Commonwealth ('Surplus Revenue Case'). (22) There the Old-Age Pensions Appropriation Act 1908 (Cth) and the Coast Defence Appropriation Act 1908 (Cth) appropriated amounts to two Audit Act 1901 (Cth) trust accounts 'for Invalid and Old-Age Pensions' and 'for Harbour and Coastal (Naval) Defence' respectively. (23) The Audit Act 1901 (Cth) also provided an appropriation that satisfied the provision that 'moneys standing to the credit of a Trust Account may be expended for the purposes of the account'. (24) The amounts were credited to these trust accounts but were not disbursed during the financial year of the appropriation. (25) Meanwhile the Surplus Revenue Act 1908 (Cth) provided that 'all payments to Trust Accounts, established under the Audit Act 1901-06, of moneys appropriated by law for any purpose of the Commonwealth shall be deemed to be expenditure', (26) and that these appropriations did not lapse. (27) The issue before the High Court was whether these appropriated but unexpended amounts were a part of the surplus revenue of the Commonwealth and so payable to the states. (28) In deciding that they were not, (29) the majority considered that, in the words of Griffith CJ, the 'Appropriation Act does ... operate as a provisional setting apart or diversion from the Consolidated Revenue Fund of the sum appropriated by the Act.' (30) However, there were different conceptions of exactly how these transactions should be characterised. Griffith CJ and Higgins J considered that the Old-Age Pensions Appropriation Act 1908 (Cth) and the Coast Defence Appropriation Act 1908 (Cth) validly appropriated amounts (or authorised expenditure of amounts) from the CRF, (31) while Barton, O'Connor and Isaacs JJ considered that the Acts appropriated the CRF and that amounts were drawn from the Treasury and paid to the trust accounts. (32)
Later in Northern Suburbs General Cemetery Reserve Trust v Commonwealth ('Cemetery Reserve Case'), (33) the High Court again considered appropriations involving an Audit Act 1901 (Cth) trust account. (34) There the Training Guarantee Act 1990 (Cth) imposed a charge (a tax) on employers of an amount equal to the employer's shortfall of a minimum set training expenditure and incorporated the Training Guarantee (Administration) Act 1990 (Cth). (35) The purpose of the Training Guarantee (Administration) Act 1990 (Cth) was
to increase, and improve the quality of, the employment related skills of the Australian workforce so that it works more productively, flexibly and safely, thereby increasing the efficiency and international competitiveness of Australian industry. (36)
The Training Guarantee (Administration) Act 1990 (Cth) established the Training Guarantee Fund as an Audit Act 1901 (Cth) trust account. (37) Some of the amounts paid to the Commonwealth by employers were then to be paid into this fund, and then used to pay the Commonwealth and the states under separate agreements and in reimbursing employers for overpayments or errors in payments. (38) The issues before the High Court included whether the Training Guarantee (Administration) Act 1990 (Cth) required payments directly to the trust account, bypassing the constitutional requirement of payment into the CRF and then an appropriation from the CRF. (39) Specifically, the Training Guarantee (Administration) Act 1990 (Cth) required 'amounts paid to the Commonwealth under this Act' and 'amounts paid to the Commonwealth for the purposes of the [Training Guarantee] Fund' to be paid into the Training Guarantee Fund trust account, (40) and provided that
money in the [Training Guarantee] Fund may be applied for the purposes of ... reimbursing the Commonwealth ... making payments under training guarantee agreements ... refunding any overpaid amounts or any amounts paid in error. (41) ""
The Audit Act 1901 (Cth) also provided that for trust accounts, such as the Training Guarantee Fund, '[m]oneys standing to the credit of a Trust Account may be expended for the purposes of the account.' (42) In addressing these issues the High Court provided some insights into its conception of the CRF.
The High Court accepted that all the moneys received by the Commonwealth formed part of the CRF and required an appropriation to be disbursed. (43) Further, all the judges considered that there was a valid appropriation from the CRF and that the arrangements set out in the Training Guarantee Act 1990 (Cth) and the Training Guarantee (Administration) Act 1990 (Cth) validly complied with the Constitution. (44) They differed, however, in their conceptions of the mechanics of payments to the CRF and payments through appropriations or actual expenditure. The details of the Cemetery Reserve Case decisions are significant because they reveal the potential breadth of the CRY conception and the broad potential for the Australian government and Parliament to craft appropriation and expenditure arrangements that comply with the Constitution.
The joint judgment in the Cemetery Reserve Case accepted that the moneys forming the CRF could not be separately identified and that the accounting scheme adopted under the Audit Act 1901 (Cth) did not necessarily coincide with the CRF: '[t]here are no fiscally separate moneys which can be identified as constituting each of the three accounts, the Consolidated Revenue Fund, the Loan Fund and the Trust Fund.' (45) The arrangements under the Training Guarantee (Administration) Act 1990 (Cth) were then characterised as payments from employers to the CRF with a standing appropriation in the Training Guarantee (Administration) Act 1990 (Cth) from the CRF to the Training Guarantee Fund fulfilling the requirements of s 81 of the Constitution. (46) The authority to expend the moneys credited to the trust account was then found in either the Training Guarantee (Administration) Act 1990 (Cth) (47) or the Audit Act 1901 (Cth), (48) in order to comply with the requirements of s 83 of the Constitution. (49) Significantly, the joint judgment expressly rejected the plaintiff's contention that the moneys paid under the Training Guarantee (Administration) Act 1990 (Cth) bypassed the CRF, instead accepting that the Training Guarantee Fund was 'something different and apart from the [CRF]'. (50) Unfortunately, the joint judgment was not clear about when the moneys left the CRF, and whether this was on appropriation to the trust account or on exercising the authority to expend.
Dawson J focused on the Trust Fund under the Audit Act 1901 (Cth) and on the Training Guarantee Fund being a Trust Fund trust account. (51) As a consequence, he considered that amounts paid under the Training Guarantee (Administration) Act 1990 (Cth) 'must initially form part of the [CRF] and must therefore, having regard to s 81 of the Constitution, be appropriated to the Trust Fund before they can be regarded as constituting part of that [Trust] Fund.' (52) The distinct and separate nature of the Trust Fund from the CRF was apparent, according to Dawson J, from the decision in the Surplus Revenue Case finding that moneys appropriated out of the CRF to the Trust Fund were not part of the 'surplus revenue'. (53) Once the amounts were appropriated to the Trust Fund, an authority to expend those amounts was then found in the Audit Act 1901 (Cth) trust account standing appropriation. (54) However, his Honour also considered that the Training Guarantee (Administration) Act 1990 (Cth) might itself provide the same authority. (55) Unfortunately, his Honour did not clarify whether moneys left the CRF on crediting the trust account or on expenditure according to the Training Guarantee (Administration) Act 1990 (Cth).
McHugh J traced the historical development of the English Consolidated Fund from its origins as a collection of many separate accounts that had been used to trace the collection of tax and its expenditure for the specific purpose for which it was collected. (56) This model of the Consolidated Fund, according to McHugh J, was then applied as the CRF detailed in s 81 of the Constitution. (57) Hence:
The [CRF] is an abstraction which is descriptive of the totality of moneys received 'by the Executive Government of the Commonwealth' irrespective of where they happen to be held. Once moneys are received by the Executive Government, they become part of the [CRF] by force of s 81 of the Constitution.... [T]he purpose ... is not to ensure that revenue raised by the Commonwealth is held in any particular bank account or at any particular place but to ensure that once moneys are received by the Commonwealth they are not expended except under the authority of Parliament. (58)
McHugh J then held that moneys received under the Training Guarantee (Administration) Act 1990 (Cth) became part of the CRF, and that 'the moneys standing to the credit of the Trust Fund remain part of the [CRF] unless and until they have been appropriated by Parliament'. (59) His Honour then considered that the Training Guarantee (Administration) Act 1990 (Cth) led to a valid appropriation by a combination of directing moneys to the Training Guarantee Fund and then authorising expenditures from that trust account for the 'purposes of the Commonwealth'. (60) Unfortunately, it is not entirely clear whether the moneys ceased to be part of the CRF on appropriation or on some other event such as expenditure.
Meanwhile, Brennan J considered that moneys paid to the Commonwealth 'form part of the CRF from the moment that they are received and that those moneys, though they are immediately credited to the Training Guarantee Fund, remain part of the CRF until they are disbursed'. (61) In short, Brennan J characterised the transaction as an employer payment into the CRF that was then appropriated by the Training Guarantee (Administration) Act 1990 (Cth) with the money leaving the CRF on its disbursement from the Training Guarantee Fund according to the Training Guarantee (Administration) Act 1990 (Cth). (62) His Honour also considered, albeit as 'a question of interest but not of practical difficulty', that the Audit Act 1901 (Cth) provided a valid appropriation 'with little or no work to do'. (63) Relevantly, Brennan J stated that '[a]s it stands, s 81 appears to stamp the character of the CRF on all Commonwealth revenue raised and all moneys received by the Executive Government, irrespective of source', although his Honour did not find it necessary to determine the categories of moneys that formed the CRF (such as revenue receipts and non-revenue receipts including loan payments). (64)
Following the repeal of the Audit Act 1901 (Cth), (65) the Financial Management and Accountability Act 1997 (Cth) (as passed) maintained the distinction between the 'Consolidated Revenue Fund' and the Loan Fund, although all revenues and moneys received by the Commonwealth as 'public money' (66) were to be credited to the 'Consolidated Revenue Fund' (67) (unless it was 'special public money' (68) or overdraft drawings), (69) and any borrowed moneys were to be transferred to the Loan Fund. (70) Amounts from either the 'Consolidated Revenue Fund' or Loan Fund could then be transferred to 'components' of the Reserve Money Fund (71) and the Commercial Activities Fund (72) that were a 'purpose based' replacement for the Trust Fund. (73) The Financial Management Legislation Amendment Act 1999 (Cth) then merged the Loan Fund and the 'components' of the Reserve Money Fund and the Commercial Activities Fund into the single CRF. (74) Significantly, 'special public money' and overdraft drawings ceased to be classed separately and merely formed part of the same common CRF. (75) The 'new' Special Accounts preserved the rights and obligations of the 'components' of the Reserve Money Fund and Commercial Activities Fund, (76) but hypothecated amounts for specific (designated) purposes, supported by an appropriation. (77) In addition to these formal legislative changes, the Australian government also adopted the view that the terms 'raised and received' no longer required amounts to be physically credited to a central ledger before becoming part of the CRF; instead, any amount 'raised and received' automatically became part of the CRF --the 'self-executing CRF'. (78) The 'self-executing CRF' also enabled the use of non-lapsing appropriations so that there was no longer a requirement to set aside amounts from the CRF to another place to avoid lapsing the appropriation each year, (79) and this has been accepted by Parliament in subsequent appropriation Bills. (80)
Despite the ambiguities and uncertainties following the Cemetery Reserve Case (and the Surplus Revenue Case), the Australian government has articulated its conception of the nature and composition of the CRF in the following terms:
* The CRF is 'self-executing'. That is, all revenues or moneys received by the Commonwealth automatically form part of the CRF, whether or not the Commonwealth has credited those moneys to a fund or account which is designated as part of the CRF.
* The CRF includes money borrowed by the Commonwealth and 'trust money', as well as money in the nature of revenue. As a result, an appropriation is required to spend all such money, including that held on trust.
* The wide range of circumstances in which Commonwealth money is raised or received makes it impracticable to identify the precise balance of the CRF at any particular time. (81)
The effect of the Financial Management Legislation Amendment Act 1999 (Cth) and the interpretation of the High Court's decisions by the Australian government (in particular Brennan J's approach in the Cemetery Reserve Case) removed the need for fund accounting through a central ledger (82) and opened the way for accrual budgeting. (83) This was a significant change, perhaps even 'profound', (84) because the focus moved from cash transactions and cash balances to the financial effects of transactions and events when they occur. (85) The consequence has been the fragmentation of the locations and contents of the CRF from a central cash ledger to a multitude of accrual ledgers throughout the Commonwealth. Importantly, Parliament has provided a broad delegation to the Finance Minister through the Financial Management and Accountability Act 1997 (Cth), subject only to disallowance by Parliament, (86) to establish the accounting principles and standards that determine the boundaries and dealings with amounts that comprise the CRF. (87) In effect, Parliament has given over the details of the CRF's determination to the Australian government.
This may have been ameliorated in part with the reporting of cash balances according to the Charter of Budget Honesty Act 1998 (Cth) of moneys actually held by the Commonwealth, (88) and with the reporting of information about the true costs and liabilities incurred by the Commonwealth (such as outstanding employee entitlements). (89) Further, since 2002 the Australian government has also attempted to quantify the cash balances of the CRF, albeit noting that '[t]here is ... no requirement for the [CRF] to be accounted for in any particular form'. (90) The CRF is quantified, 'for practical purposes', as the Australian government's total General Government Sector cash, (91) less the cash controlled and administered by bodies under the Commonwealth Authorities and Companies Act 1997 (Cth), (92) plus 'special public monies'. (93) Parliament appears to have accepted this methodology for calculating the CRF--which is the Australian government's conception of the Constitution's CRF (94)--such that there are significant amounts held by the Commonwealth outside the bounds of the CRF, (95) with the consequential uncertainty about where the boundaries of the CRF may lie at any given point in time. (96) This result undoubtedly owes its beginnings to the High Court's early pronouncement about the surplus revenue and the obviation of the need to precisely define the balance of the CRF. The nature of the surplus revenue is considered next.
III SURPLUS REVENUE
During the five years after uniform customs duties were imposed, and 'until otherwise provide[d]', the Constitution provided for the Commonwealth to account to the states (97) and thereafter make payments to the states 'on such basis as [Parliament] deems fair' of 'all surplus revenue of the Commonwealth'. (98) Significantly, the Constitution did not set out how the repayments of the surplus were to be...
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