3.4 How does the Commonwealth provide and fund its services?

The Commonwealth develops policy, delivers services and enforces laws through a range of portfolios, departments, agencies and other bodies.

How a government structures its affairs reflects the priorities of the government of the day, as well as conventions and constitutional requirements.

In particular:

  • Portfolios reflect broad subject areas of responsibility assigned to Commonwealth ministers under the Administrative Arrangements Order.
  • Departments are the arms of the executive government responsible for advising, administering and overseeing Commonwealth Government policy. Core departmental functions typically include advising on policy, administering programmes, preparing legislation and coordinating portfolio‑wide activities and budgets. Departments also play a key role in supporting the portfolio minister to undertake his or her responsibilities – for example the Department of Agriculture.
  • Agencies and authorities are separate bodies within a portfolio with specific functions and structures that are of a different or specialist nature, sometimes requiring a degree of independence from government. Activities commonly include service delivery, regulation and enforcement – for example the Australian Fisheries Management Authority.
  • Commonwealth companies and other bodies include bodies under the Commonwealth Authorities and Companies Act 1997. These bodies are not legally or financially part of the Commonwealth and hold money on their own account (for example, the Grains Research and Development Corporation in the Agriculture Portfolio, and other entities such as the Australian Broadcasting Corporation and NBN Co Limited in the Communications Portfolio).

Current structures

There are currently 16 federal government portfolios. Within these portfolios there are 194 entities, including departments, agencies, authorities and companies. In addition, there are around 700 other bodies including boards, committees and councils that the Commonwealth supports.

As illustrated below, there are seven portfolios that could be considered ‘core’ to the Commonwealth Government (to the extent there is no overlap with the States). Examples include Defence, Immigration, Foreign Affairs and Trade, and the Treasury.

There are nine portfolios of significant importance to the community, where responsibilities are largely shared with the States. Examples include Industry, Health and Education.

Within portfolios there are multiple entities that carry out specific functions. For example, the Treasury Portfolio includes 18 entities, such as the Australian Taxation Office, the Royal Australian Mint and the Australian Bureau of Statistics.

The Health Portfolio has the largest number of separate entities including the National Blood Authority, Organ and Tissue Authority and the Australian Institute of Health and Welfare.

A brief, high-level overview of the 16 Commonwealth portfolios is outlined in Section 4 of the detailed Appendix to this report.

Depending on the activity, there may be an appropriate governance reason for a separate entity rather than a government department to undertake specific functions.

With a total of 194 Commonwealth entities delivering services and providing policy advice there are significant risks of duplication and overlap, causing unnecessary complexity and a lack of accountability.

In terms of the size and structure of the Commonwealth Public Service, Australia’s current arrangements and number of portfolios and entities is not significantly different to comparable countries. See Table 3.2 below. But when the other bodies are included and along with the overlap with the States real problems of waste and inefficiency emerge.

Table 3.2: Comparison of size of government between similar systems


Departments of State

Special Entities

Other Agencies

Public & Crown Corporations

Total Bodies

New Zealand






United Kingdom


















Source: OECD National Accounts at a Glance 2012; IMF World Economic Outlook 2013; Australian Department of Finance (2013), New Zealand State Services Commission (2013); Gov.UK (2013); Government of Canada (2013); R. Gregory The challenging quest for governmental accountability in New Zealand (2012).

Chart 3.5: Commonwealth portfolios

This chart shows, diagrammatically, the Commonwealth portfolios organised into three categories: core federal responsibilities and two categories that are shared with the States (the economic sphere and the social services sphere).

Source: National Commission of Audit.

Management of Commonwealth funds

The Commonwealth Government has a well established financial framework to ensure its departments, agencies and companies are held to a high standard in managing taxpayer funds.

Section 81 of the Constitution provides that all revenues or monies raised or received by the executive government of the Commonwealth shall form one revenue fund. This is the Consolidated Revenue Fund.

Section 83 provides that no money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.

Together sections 81 and 83 provide that there must be an appropriation, made by law, for the purposes of the Commonwealth, before money may be drawn from the Consolidated Revenue Fund.

This is a key element of the provisions which safeguard Parliament’s control over government spending.

Government entities are resourced with appropriations from the Consolidated Revenue Fund. They are subject to overarching rules regulating their financial activities, covering governance arrangements, resource management, auditing and accountability.

Government agencies may use such funds as ‘departmental expenses’ or ‘administered expenses’.

Departmental expenses are generally costs departments control, including employee salaries and supplier charges.

Administered expenses are administered by a department or agency (including grants, subsidies and benefit payments set by eligibility rules and conditions established by the government and Parliament). Departments have less discretion over how administered expenses are incurred.

Of total Commonwealth spending in 2013-14, some $360 billion (or 88 per cent) comprised administered expenses with less than $50 billion (or 12 per cent) categorised as departmental expenses.

The Australian Public Service

The Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997 regulate the financial activities of government.

The first Act sets out the financial, accountability and audit obligations of agencies and departments. It requires efficient, effective and ethical management of public resources and appropriate accounts and records of the receipt and expenditure of public money.

The second Act sets out obligations on Commonwealth statutory authorities and companies in which the Commonwealth has at least a direct controlling interest. It also specifies reporting and audit obligations for directors of authorities; standards of conduct for officers of authorities; and the requirement that wholly-owned Commonwealth companies keep ministers and Parliament informed of their activities.

The Public Governance, Performance and Accountability Act 2013 is scheduled to replace these Acts from 1 July 2014. It is intended to modernise and simplify the current arrangements, based on four key principles:

  • government should operate as a coherent whole;
  • uniform duties should apply to all resources handled by Commonwealth entities;
  • public sector performance is more than financial; and
  • engaging with risk is a necessary step in improving performance.

This Act is intended to reinforce an apolitical public service that is efficient and effective. It provides a legal framework for the employment and management of Australian Public Service employees and defines the powers and responsibilities of agency heads, the Public Service Commissioner and the Merit Protection Commission.

The Australian Public Service currently employs around 165,000 people under the Public Service Act 1999 plus an additional 150,000 or so employed separately, including military personnel and employees in Commonwealth statutory authorities and companies.