Commonwealth Budget Process

1 Commonwealth Budget Process Central Budget Management System (CBMS) Redevelopment Project Financial Management Group Department of Finance and Deregulation

2 The CBMS Redevelopment Project The Government announced in the 2010-11 Budget that it will comprehensively redevelop the CBMS. The cost to redevelop the CBMS will be met from the ICT Business As Usual Reinvestment Fund, established as part of the Review of the Australian Government s Use of Information and Communication Technology.

3 What is the CBMS? The CBMS is the core whole-of-government ICT system underpinning the budget and financial management of the Australian Government The CBMS system supports the Government in the management of: Recording of Government decisions; Budget Estimates updates; Monthly Estimates Profiles; Appropriation and Cash Management; and Monthly and Annual Reporting. The CBMS is not an internal budget or financial management information system for Agencies.

4 Why is the CBMS being Redeveloped? Current system is reaching the end of its useful life Improved access to information to guide economic and fiscal management Support the identification of opportunities for re-allocation of funding to other priority areas and allow better monitoring and forecasting of fiscal performance Provide Government with more responsive and flexible policy analysis of program performance Deliver new initiatives such as Operation Sunlight in a more cost effective and timely manner

5 Market Approach It is the intention of Finance to separately procure: 1. COTS software products 2. A systems integration (SI) provider to implement the COTS solution 3. Ancillary services, such as legal, probity, strategic business advisory services and assurance services have been or are being sourced through panel arrangements

6 Market Approach To include Proof of Concept of proposed COTS Selected provider will be fully accountable for delivering the CBMS COTS Solution Open RFT for software products that will deliver functions to support the CBMS Selection based on assessment of EOC response Implementation of CBMS Expression of Capability to provide implementation services Select RFT implementation services Related Services

7 Participation No restriction on participation in either market approach Information provided by respondents to one process which is relevant to the other process may be shared and evaluated in both processes. A description of the type of information that may be shared will be given in the relevant market documentation.

8 Indicative Procurement Timetable Q1 FY10/11 Q2 FY10/11 Q3 FY10/11 Q4 FY10/11 COTS RFT Requirements released and budget processes Info Response Responses to RFT Shortlist COTS Implementer EOC Implementer RFT Evaluate Response POC / Negotiation / Due Diligence Issue EOC Response Evaluate Response Finalise Contract Preferred COTS Responses to EOC Commence evaluation Response Contract signed Evaluate Response

9 Tender Reminders The Request for Tender (RFT) will contain rules of lodgement. Please read and understand the rules for lodgement. - Timeframes - Minimum content and format Please note Finance share John Gorton Building with another Government Department

10 Purpose of today s presentation Briefing on Budget Processes: To ensure that respondents to any of the market approaches have a good understanding of the Budget processes Please note Finance reserves the right to vary the draft requirements or adopt different requirements in any subsequent procurement process which may follow Prospective tenderers are to rely only on the requirements as published any subsequent RFT Discussion will not cover procedural aspects of the procurement process. www.finance.gov.au information pertaining to the CBMS and its redevelopment is available on Finance s web site Any comments on the draft requirements should be provided in writing to: CBMSRedev@finance.gov.au

11 Overview PART 1 CBMS Requirements The Financial Management Framework Organisation of Government Activities Key Stakeholders and Participants The Australian Government Budget Process Including Major Publications and Reports Reference Data Set PART 2 Illustrative Fiscal Example

Governance Architecture Australian Government Budget and Financial Management Requiremen ts Functional & Non-functional 12 Functional Requirements Reporting & Analysis - Statutory reporting - User-defined reporting - Scenario modelling & analysis Budget Management -Financial consolidation -Estimates Adjustment -Baseline Update -Actuals Management Cash Management - Cash receipt & drawdown - Cash monitoring & forecasting Decision Making - Budget priority setting - Government budget strategies & decisions Application Administration - User access - Reference data set & chart of accounts - Business rules Non-Functional requirements Security Management User Interface Application, Integration & Data management Infrastructure Management

13 The Financial Management Framework Commonwealth of Australia Constitution Act 1901 Appropriation Acts Charter of Budget Honesty Act 1998 Financial Management and Accountability Act 1997 (FMA Act) Commonwealth Authorities and Companies Act 1997 (CAC Act) Plus additional guidance / conventions as determined by the Government of the day.

14 Organisation of Government Activities

15 Structure of Public Sector Total public sector Public financial corporations (PFCs) Total non-financial public sector (Includes the Reserve Bank of Australia and other borrowing authorities) General government sector (Government departments and agencies that provide non -market public services and are funded mainly through taxes) Public non-financial corporations (Provide goods and services to consumers on a commercial basis, are funded largely by the sale of these goods and services and are generally legally distinguishable from the governments that own them)

16 Key Stakeholders and Participants Central Agencies Agencies in the General Government Sector Public Corporations Reserve Bank of Australia Parliament and the General Public Australian Bureau of Statistics Audit Bodies

17 The Australian Government Budget Process The specifics of the budgeting cycle are determined by the government of the day. Three Phases: Prioritising Delivery Reporting/Reviewing

18 Budget Cycle and Major Publications

28 The Australian Government Budget Cycle & Major Publications The Budget Process is an iterative process that occurs continually throughout the year. Additional updates/appropriation bills can be produced throughout the cycle. Examples: PEFO 2007 (Pre-Election Economic and Fiscal Outlook) UEFO 2009 (Updated Economic and Fiscal Outlook) Appropriation (Tsunami Financial Assistance) Bill 2004-2005 Appropriation (Drought and Equine Influenza Assistance) Bill (No.1) 2007-2008 It is expected that the CBMS solution will be flexible to cater for any changes to the budget process and timetable including the frequency and timing of estimates updates.

29 Reference Data Set

30 Questions?

33 Flow of information between functions An Illustrative Fiscal Update New policy N P P Activity 1 NPP 1 Decision Making M e a s u r e A c tiv itie s 2-6 B u d g e t Update & Approp Bills 2.1 Annual Estimates 2.4 Finance Consolidation Annual Budget Appropriation limit adjustment 4 R e p o r tin g a n d A n a ly s is A c tiv ity 9 D a ily C a s h M a n a g e m e n t 3 Cash Management Activity 7 Set Profile 2.2 Monthly Profile 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is B u d g e t c o m p a r is o n A c tiv ity 8 S e t A p p r o p U n its 3 Cash Management 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is C a s h tr a n s fe r s to /fr o m OPA reporting 4 R e p o r tin g a n d A n a ly s is Activities 10-11 Actuals Reports 2.3 A c tu a ls M a n a g e m e n t A n n u a l r o llo v e r Activities 12-13 Mid - Y e a r B u d g e t U p d a te 2.1 Annual Estimates 2.4 F in a n c e C o n s o lid a tio n 2.4 F in a n c e C o n s o lid a tio n A n n u a l b u d g e t Appropriation limit adjustment A n n u a l r o llo v e r 4 R e p o r tin g a n d A n a ly s is Parameter update B u d g e t v a r ia tio n A c tiv itie s 1 7-1 8 A n n u a l R e p o r tin g 2.3 A c tu a ls M a n a g e m e n t 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is A c tiv ity 1 6 O n g o in g C a s h M a n a g e m e n t & M o n th ly R e p o r tin g 3 Cash Management 2.3 Actuals Management 2.4 Finance Consolidation 4 R e p o r tin g a n d A n a ly s is 4 R e p o r tin g a n d A n a ly s is A c tiv ity 1 4 P r o file U p d a te 2.2 Monthly Profile 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is Budget comparison Cash transfers to /from OPA reporting A c tiv ity 1 5 A d d itio n a l Estimates Bills 3 Cash Management 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is

34 Illustrative fiscal example Government agrees to a new policy proposal (NPP) to fund a new drug under the Pharmaceutical Benefits Scheme. The policy is a multi-year funding arrangement scheduled to commence in the next year (2011-12) and is the responsibility of the Department of Health and Ageing.

35 Illustrative fiscal example The following set of activities follows the development of a new program through a full budget cycle. It is not in reference to any specific new program occurrence, rather it is a hypothetical to illustrate the process. In a normal budget estimates update, this example would be one of hundreds of decisions and thousands of adjustments entered by agencies which build on existing budget estimates. The sample tables in this example are for illustrative purposes to demonstrate data-flows. They do not indicate any preference for what data-entry should look like. This example is not exhaustive. Decisions will not always follow this exact path.

36 Activity 1: New Policy Proposal

37 Activity 1: NPP Measure created A Measure code and a Measure description are assigned: Measure Code: MC0001 Measure Description: A new drug under the Pharmaceutical Benefits Scheme (PBS). The financial impact of our example decision:

38 Activities 2-6: Budget Update: Estimates and Appropriations

39 Activity 2: Preparation for Budget Update The CBMS Reference Data Set is updated to create a new program for the Department of Health and Ageing and its associated mappings.

40 Activity 3: Budget Update - Estimates data entry The Department of Health and Ageing will enter their budget variations to reflect the new policy proposal.

41 Activity 4: Consolidation & Reporting The program s financial results will be aggregated with all other general government sector agency programs and any related-entity amounts eliminated to produce Sector-level financial statements. These will become the budget tables in the various Budget Papers.

42 Activity 4: Consolidation & Reporting

43 Activity 4: Consolidation & Reporting Budget Paper No.1: Statement 3: Fiscal Strategy and Outlook.

44 Activity 4: Consolidation & Reporting Budget Paper No.2: Budget Measures.

45 Activity 5: Appropriations The validated budget estimates (per Activity Three) are also used to determine the appropriation amounts included in the Appropriation Bills.

46 Activity 6: Budget Completion Once approved, the budget papers and appropriation bills are sent to the printers. The Budget Update is closed and archived.

47 Activities 7-8: Monthly Profile and Appropriation Cash Limits

48 Activity 7: Monthly Profile At the conclusion of the Budget Updates the Department of Health and Ageing is to phase their budget estimates for 2011/12 by month (on a YTD basis).

49 Activity 8: Appropriation Cash Limits The appropriations included in the appropriation bills become the initial appropriation limits against which the Department of Health and Ageing can drawdown funds. The Department's spending on the new pharmaceutical benefits scheme program will be limited to the amount given in the measure and passed in the appropriation bill.

50 Activity 9: Daily Cash Management

51 Activity 9: Daily Cash Management Once the appropriation is available, the Department of Health and Ageing is entitled to drawdown funds from the Official Public Account (OPA) in order to make payments under the pharmaceutical benefits scheme program.

52 Activities 10-11: Annual Actuals and Monthly Actuals Reporting

53 Activity 10: Previous Year s Actuals Reporting The financial results for 2010-11 are published. As the new policy initiative for funding of a new drug does not commence until 2011-12, there will be no reporting of actual results for this program yet. However the audited statements will be rolled over into the estimates and all estimates rolled forward one year. The annual reporting and rollover process is described in more detail in Activities 17 & 18.

54 Activity 11: Monthly Reporting Each month, the Department of Health and Ageing are required to submit their actual year-to-date (YTD) financial results into CBMS.

55 Activities 12-13: MYEFO

Activity 12: MYEFO data entry 56 At certain points during the budget year, the Department of Health and Ageing is required to update its multi-year budget estimates including the pharmaceutical benefits scheme program.

57 Activity 13: Mid-year budget update - Consolidation and reporting MYEFO Part 3: Fiscal strategy and outlook

58 Activities 14-15: Profile Variances and Additional Estimates

59 Activity 14: Update Monthly Profile Prior to entering its revised budget profile, the three initial months are pre-populated with actual results. This is done by CBMS. The Department of Health and Ageing must then profile the remainder of the year, based on the updated budget estimate at MYEFO

60 Activity 15: Additional Estimates The Mid-year update may also include an update to the appropriation bills (Additional Estimates).

61 Activity 16: Ongoing Cash Management & Reporting

62 Activity 16: Ongoing Cash Management & Reporting Monthly reporting of actual continues throughout the year. The budget estimates may also be updated a number of times (generally but not necessarily limited to Pre-ERC and before any election (PEFO) prior to the next budget update.

63 Activities 17-18: Annual Reporting and Rollover into Budget Estimates An Illustrative Fiscal Update New policy N P P Activity 1 NPP 1 Decision Making M e a s u r e A c tiv itie s 2-6 B u d g e t Update & Approp Bills 2.1 Annual Estimates 2.4 Finance Consolidation Annual Budget Appropriation limit adjustment 4 R e p o r tin g a n d A n a ly s is A c tiv ity 9 D a ily C a s h M a n a g e m e n t 3 Cash Management Activity 7 Set Profile 2.2 Monthly Profile 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is B u d g e t c o m p a r is o n A c tiv ity 8 S e t A p p r o p U n its 3 Cash Management 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is C a s h tr a n s fe r s to /fr o m OPA reporting 4 R e p o r tin g a n d A n a ly s is Activities 10-11 Actuals Reports 2.3 A c tu a ls M a n a g e m e n t A n n u a l r o llo v e r Activities 12-13 Mid - Y e a r B u d g e t U p d a te 2.1 Annual Estimates A n n u a l r o llo v e r 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is Parameter update B u d g e t v a r ia tio n A c tiv itie s 1 7-1 8 A n n u a l R e p o r tin g 2.3 A c tu a ls M a n a g e m e n t 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is A c tiv ity 1 6 O n g o in g C a s h M a n a g e m e n t & M o n th ly R e p o r tin g 3 Cash Management 2.3 Actuals Management 2.4 Finance Consolidation 4 R e p o r tin g a n d A n a ly s is 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is A n n u a l b u d g e t A c tiv ity 1 4 P r o file U p d a te 2.2 Monthly Profile 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is Budget comparison Appropriation limit adjustment Cash transfers to /from OPA reporting A c tiv ity 1 5 A d d itio n a l Estimates Bills 3 Cash Management 2.4 F in a n c e C o n s o lid a tio n 4 R e p o r tin g a n d A n a ly s is

64 Activity 17: Annual Actuals reporting At the conclusion of the financial year, the Department of Health and Ageing must submit preliminary and then audit cleared financial statements for inclusion in the Final Budget Outcome and Consolidated Financial Statements.

Activity 17: Annual Actuals reporting 65 Final Budget Outcome

Activity 17: Annual Actuals reporting 66 Consolidated Financial Statement

67 Activity 18: Rollover into Budget Estimates At the completion of the audited financial statement process, the actual program results are rolled into the budget estimates and the estimates rolled forward one year.

68 Feedback www.finance.gov.au information pertaining to the CBMS and its redevelopment is available on Finance s web site Any comments on the draft requirements should be provided in writing to: CBMSRedev@finance.gov.au