Throw off the appropriation shackles

Overspending an appropriation is a serious performance issue for any public sector leader or organisation. But the combination of robust approval and monitoring processes and poorly designed appropriations can make things difficult. So what are the opportunities to make appropriations much easier to live with?

Appropriations are important for the operation of government. They provide authority for the Government to spend public money. They must be approved by an Act of Parliament and are subject to parliamentary scrutiny. Responsibility for each appropriation is assigned to a Minister and must be administered by a department.  
Existing appropriation structures, however, are often criticised.  

• “They limit our ability to reprioritise funding” - small appropriations with restrictive scope statements can make it difficult to shift funding.
• “The compliance and administration costs are too high” – the effort needed to meet management, accountability and transparency requirements increases with the number and complexity of appropriations. 
• “They make it difficult to manage costs” – a large number of appropriations increases complexity and makes it difficult to manage input costs and maximise the value of spend. 

All of these criticisms are valid. However there are ways to reduce the downsides (and perhaps even make them helpful!): 

• Multi-Category Appropriations (MCAs) – these group together a number of separate appropriations that contribute to a single overarching purpose. This increases financial flexibility by allowing Ministers to shift funding across categories within the MCA provided that total approved funding is not exceeded.   
• Multi-year Appropriations (MYAs) – approval can be given for appropriations to span two or more years where the outputs are well defined but the timing of expenditure is uncertain. This increases flexibility around when expenditure can be incurred and reduces administration processes that would otherwise be needed to shift funding between years.  
• Reduce the number of appropriations – consolidating appropriations that contribute to a similar purpose will reduce the number of appropriations. This will increase financial flexibility, make it easier to manage input costs while also reducing compliance and administration costs. 
• Simplify appropriations -  scope statements are often overly specific and performance measures can be too many or too complicated. Simplification will further reduce compliance and administration costs.  

Of course making changes to your appropriations is not as easy as it sounds! There is a process to go through and a timetable to meet. Any proposed changes will need the support of Ministers and Treasury, and be approved by Parliament. If you want to change your appropriations for the next financial year, you need to start now and aim to have your proposals to Ministers and Treasury by the end of November.     
But it can be done and many departments are reaping the rewards. Make appropriations work for you (not the other way round).