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Wednesday, 11 December 2002
Page: 7737


Senator CHAPMAN (3:11 PM) —Senator Cook comes into the chamber today and alleges that the government is reversing its accrual accounting initiative. What does he rely on to support his argument? A media beat-up—just as earlier today he relied on a false media beat-up to unfairly attack Minister Coonan in question time. Senator Cook, it is about time that you relied on some facts, rather than media beat-ups, when you come into this chamber and try to argue a case. The fact is that this government is not reversing accrual accounting; it is being maintained. The fact is that accrual accounting provides significant benefits to the government's accounting system.

Let me respond to Senator Cook by providing a few facts in response to his false media beat-up. When the federal government introduced the new accrual based budget system in 1999, there was a firm commitment that the system would be regularly monitored and updated and, in line with this commitment and at the request of the Prime Minister, the government recently conducted a review. In line with that commitment that it made at the time that accrual accounting was introduced, it conducted a review of the budget estimates system and financial framework, aimed predominantly at improving the timeliness of the Commonwealth's financial information.

The review has recommended a number of improvements. Among those is moving to a just-in-time appropriation drawdown system for departmental spending. This will allow closer monitoring of the Commonwealth's cash position and program spending on a regular and timely basis. It has also recommended supplementing the current levels of accrual information in the budget papers with more cash based information. It also recommended centralised reporting of program budgets and actual results, along with monthly projections of anticipated program spending.

These enhancements represent a refinement of the current accrual outcomes and outputs budget framework. They do not represent a radical revamp or an abandonment of accrual accounting. They are, as I said at the outset, in line with the commitment that the government made in 1999, when it introduced the accrual accounting system, that there would be regular reviews and there would be obviously, from time to time, improvements to that system. Importantly, the review recommends those improvements but it does not recommend fundamentally changing the outputs and outcomes accrual framework. It simply recognises that both cash and accrual information is important in fully understanding the Commonwealth's financial and budget position and in taking fully informed budget decisions. Supplementing predominantly accrual information with further cash information will assist both the public and the parliament's understanding of the government's fiscal position.

The recommendations of the review confirm the responsibilities of the chief financial officer of the department of finance in monitoring and managing the Commonwealth's overall expenditure. The outcomes of the review will not result in additional prescription by the department of finance upon other government agencies. The budget will continue to report annually in cash terms and in accrual terms. Of course, it is important to remember that when accrual accounting was adopted, cash reporting was maintained and that has continued right through since 1999.

What this review demonstrates is that the government is committed to periodically reviewing the budgetary framework to assess its ongoing effectiveness and operation following the successful introduction of accrual budgeting in 1999. That is important. This government is about improving its financial management on an ongoing basis, not simply sitting with a system that it introduces when improvements are evident and can be made. That is a direct consequence of its commitment to a review and the outcome of this review.

Additional funding of some $54.4 million will be provided over four years to the department of finance to enhance its human resources and information technology capacities to undertake the additional activities recommended by the review. The current central IT systems are at the end of their useful life and they need replacing, and $18 million over four years has been provided for new systems. The department of finance does not currently have staffing levels to analyse the additional information to be provided by agencies as a result of the review, and $36.4 million of that $54 million is as a consequence of providing those extra staffing levels. I reinforce the point that this is an improvement on accrual accounting, not a reversal of it. (Time expired)