Page 3209 - Week 09 - Tuesday, 20 August 2019
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As I think have discussed on multiple occasions in budget estimates, there is often a difference between physical completion of a project and financial completion. So it is important that, through the reserve, we are able to strengthen our budget oversight and our financial management by enabling those agencies who have a multi-year capital budget funding allocation to better map out their delivery of capital works.
Agencies are now able to access their capital funding allocation for future years by requesting a capital works advance from this reserve if the capital expenditure in the budget year exceeds their capital budget appropriation. Importantly, to maintain both budget and program neutrality, when an agency accesses the capital works reserve, offsetting reductions would then be made to that agency’s future capital works budget, so there is no net budget or program impact over time. The ability to access future funding through the reserve eliminates the need for agencies to allow for unexpected funding requirements in their estimated expenditure flows. This in turn then leads to more accurate budget estimates and better alignment of budget appropriation and expected program delivery outcomes.
The capital works reserve will not be included in the infrastructure investment program until payments are made to agencies. The reserve will be appropriated on an annual basis and capped at 20 per cent of the total amount appropriated for the capital works program by all appropriation acts for the financial year. Any amount that is undisbursed will lapse at the end of that year. Payment of a capital works advance will only be possible once the Treasurer is satisfied that there is an immediate requirement for access to the capital works advance, considering the requesting agency’s capital works budget for the relevant financial year.
To ensure that there is complete accountability and transparency in the operation of the reserve, the Treasurer provides the Legislative Assembly with a reconciliation of the amounts authorised for payment from the reserve in the quarterly financial statements required under section 26 of the FMA. This reporting provision is in addition to the requirement under section 30F of the Act that there is a report to the Assembly on the status of the capital works program at least every six months.
The reserve is an important improvement to our budgeting practices. It is an effective mechanism for achieving better capital works program estimates whilst, importantly, providing agencies with the cash flow flexibility to achieve the best program and project outcomes across their total capital works spend each year. I commend it to the Assembly.
MR COE (Yerrabi—Leader of the Opposition) (5.21): The opposition has real concerns about the establishment of the capital works reserve, demonstrated when we voted against the changes to the Financial Management Act earlier this year. As the Chief Minister said, the capital works reserve is set at $140 million. We believe that there are already mechanisms within the Financial Management Act to manage transfers or provide funds when required. The capital works reserve is potentially another form of a Treasurer’s advance. If there is an immediate need then we think the Treasurer’s advance is the appropriate mechanism, rather than another $140 million discretionary fund for capital works.
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