Garnaut Fitzgerald Review of Commonwealth-State Funding

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Chapter 5: Specific Purpose Payments and Overall Payments to the States Natural Heritage Trust The Natural Heritage Trust is a series of environmental and natural resource management projects which has consisted of twenty-three separate SPPs, but will be reduced to four separate programs with the extension of the Trust from 2002–03. The following comments relate to the original arrangements. The Natural Heritage Trust is administered jointly by the Commonwealth Departments of Environment and Heritage (the environmental component) and Agriculture, Fisheries and Forestry (the agricultural component). A variety of State agencies administer the different programs. Projects must comply with a range of general Natural Heritage Trust requirements, including respective Commonwealth–State partnership agreements. These agreements outline each program’s objectives, and describe how they are to be delivered, the outcomes sought, cost sharing arrangements and processes for evaluation and monitoring. States are generally required to match Commonwealth funding dollar for dollar. Project proposals are assessed by technical, regional and State panels. Panel membership must be agreed with the Commonwealth. Regional Assessment Panels advise on local and regional project priorities and on implementation of regional plans. The State Assessment Panel then advises both the State Minister and the Commonwealth Natural Heritage Trust Board on priorities for both regional and community projects and relevant State and national program projects. A Commonwealth Ministerial Board makes the final decision on recommendations. The Natural Heritage Trust criteria have been criticised for not recognising the varying requirements of different regions across the country. It has also been criticised for focusing on outputs (often of questionable long-term value) rather than outcomes. Outcomes focus on the intended impact on a particular group or the entire population whereas outputs are products or services produced or delivered by a department for external customers, which are in line with the broad outcomes. 5.5 Issues States have long considered that SPP arrangements can result in adverse outcomes, particularly where SPP conditions control the use of these funds and also seek to determine States’ own expenditures. Issues include: • a reduction in States’ ability to respond to the needs of their communities in a timely and effective way • a reduction in incentives for States to develop new models of service provision to achieve outcomes more efficiently and effectively • duplication and overlap in administration and expenditure responsibilities between the Commonwealth and the States. FINAL REPORT [70]
Chapter 5: Specific Purpose Payments and Overall Payments to the States Focus on inputs or outputs, rather than outcomes A major problem with SPPs is their focus on inputs and, to a lesser extent, outputs – rather than results or outcomes. The Commonwealth has often sought to limit States from substituting Commonwealth SPP funding for State expenditure on programs by applying restrictive conditions on State inputs. These conditions are usually in the form of ‘maintenance of effort’ and ‘matching’ clauses. The conditions reflect the Commonwealth’s emphasis on the resources associated with SPP programs, rather than with the results of the activity. Matching and maintenance of effort conditions lock a proportion of State funds into particular programs or areas. They do not allow funds to be reallocated to address changing needs. They do not allow savings to be achieved through greater efficiencies or better targeting of the program to needs. Input controls are inappropriate in SPP arrangements given the community interest in accountability is on what is achieved (outcomes) rather than processes and inputs. A 1995 Inquiry by the Commonwealth Joint Committee of Public Accounts, The Administration of Specific Purpose Payments: A Focus on Outcomes, found that input controls in SPP agreements have significant disadvantages. The Inquiry concluded that the Commonwealth’s imposition of these controls and States’ subsequent attempts to minimise their impact are counterproductive, when the Commonwealth and States should be cooperating on the development of shared SPP objectives. Restrictive input controls Restrictive input conditions are usually in the form of maintenance of effort and matching clauses. Maintenance of effort clauses make receiving SPP funds conditional on States maintaining existing levels of expenditure in that area. Matching clauses in SPPs require States to provide their own funds for a program before the Commonwealth will contribute (e.g. dollar-for-dollar). These requirements have a number of disadvantages. • A focus on input controls does not place clients first, particularly for SPPs providing services directly to individuals and groups within the community. • A focus on inputs distracts attention from meeting SPP objectives and does not provide any indication of what is being achieved via the service provision. • Input controls limit incentives for service providers to improve their efficiency, and prevent the redirection of efficiency savings into other areas of expenditure. • Input controls do not allow service providers the flexibility to move funds between program elements within SPPs to ensure that overall objectives are achieved. These restrictions lock a State into expenditure levels in particular areas, even if budget priorities and local requirements change. In some cases States may also be left entirely responsible for a program when Commonwealth attention shifts to a new area. Despite these problems, input controls are often favoured by service delivery agencies in the States (and sometimes in the Commonwealth) because intergovernmental agreements protect these programs from ordinary budget scrutiny. FINAL REPORT [71]
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Review of Commonwealth-State Fundin
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Review of Commonwealth-State Fundin
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TABLE OF CONTENTS CHAPTER 9: Equity
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THE REVIEW COMMITTEE FINAL REPORT [
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EXECUTIVE SUMMARY Overall assessmen
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EXECUTIVE SUMMARY Each State would
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CHAPTER 1: Overview and Summary of
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Page 58 and 59: CHAPTER 4: Allocation of General Pu
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CHAPTER 8: Federal Policy Effects o
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CHAPTER 8: Federal Policy Effects o
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CHAPTER 9: Equity Chapter 1 notes t
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CHAPTER 9: Equity Both SPPs and gen
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CHAPTER 9: Equity Table 9.3 shows t
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CHAPTER 9: Equity 9.3 Horizontal di
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CHAPTER 9: Equity Many ways to rais
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CHAPTER 10: Efficiency and Economic
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CHAPTER 11: Simplicity, Transparenc
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CHAPTER 12: Overall Assessment and
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CHAPTER 13: Commonwealth-State Fina
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APPENDIX A: National Health and Age
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APPENDIX A: National Health and Age
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APPENDIX B: National Education and
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APPENDIX C: National Indigenous Com
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APPENDIX C: National Indigenous Com
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APPENDIX D: Minimum Cost of Governm
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APPENDIX E: Consultation • Local
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APPENDIX E: Consultation • VICRoa
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GLOSSARY Efficiency: allocative eff
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GLOSSARY merit goods (health, educa
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FINAL REPORT [234] GLOSSARY
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BIBLIOGRAPHY Buchanan, JM 2001, Fis
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BIBLIOGRAPHY Government of Victoria
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BIBLIOGRAPHY Watts, RL 1999, Compar
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INDEX E economic activity / growth
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INDEX O other Federations Canada ·
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Garnaut Fitzgerald Review of Commonwealth-State Funding

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