Types of government money

Under the NSW Constitution¹, all public money collected, received or held on behalf of the State is part of the Consolidated Fund, except if another Act provides otherwise. The Consolidated Fund is a ledger account.

The Government Sector Finance Act 2018 (GSF Act) provides for money to be held in the Special Deposits Account (SDA) under certain circumstances (see s4.15 of the GSF Act). There are two types of accounts within the SDA, known as a statutory SDA account and a working account.

The SDA does not form part of the Consolidated Fund.

^[1] S39, Constitution Act 1902 (NSW)

Section 4.17 of the GSF Act provides for the establishment of ‘working accounts’ in the SDA. Money in a ‘working account’ is money that the Treasurer has given specific permission to be held outside of the Consolidated Fund. The specific permission required is an authorising instrument that has been signed by the Treasurer.

Legally, money cannot be in the Consolidated Fund and SDA simultaneously. It’s not possible because of the definitions in the Constitution Act and GSF Act.

This is important because the purposes for which the money can be used, the way the money can be used, and the way use of the money can be authorised depends on where the money is recorded. Expenditure of money must be done in a way that is authorised (s5.5 of the GSF Act), and the way expenditure is authorised depends on where the relevant money is recorded. This also affects the delegation required.

Money held in the Consolidated Fund must not be paid out except under authority of an Act (s. 4.6(1) of the GSF Act). This includes under authority of an appropriation, and such authority could be delegated under Div. 9.2 of the GSF Act. There are three main types of appropriation:

• An annual appropriation. Ministers receive an appropriation from Parliament under the authority of the annual Appropriation Act.
• A standing appropriation which provides for ongoing or one-off appropriations under the Consolidated Fund for example the Parliamentary Remuneration Act 1989.
• Deemed appropriations, which are at Section 4.7 of the GSF Act  and provide a way for agencies ‘own source’ receipts to be legally spent from the Consolidated Fund.

Money must not be paid out of an SDA account except for the purposes of the account and under the authority applicable to the account (s4.6(2) of the GSF Act). The authority applicable to the account will be set out in the instrument establishing an account within the SDA. There are broadly two types of accounts within the SDA:

• a statutory SDA - money directed into the SDA under specific enabling legislation that is not the GSF Act. In this case the instrument establishing an account is the enabling legislation.
• working accounts - money directed into the SDA by the Treasurer under section 4.17 of the GSF Act. In this case the instrument establishing an account is the Treasurer’s authorising instrument.

The kinds of money that can give rise to a ‘deemed appropriation’ are prescribed in the Government Sector Finance Regulation 2024 as ‘deemed appropriation money’ (refer to clause 34 of the GSF Regulation). They are money that agencies have traditionally considered ‘own source’ receipts.

There is significant overlap in the kinds of money that can be recorded as ‘deemed appropriation money’ and ‘working account money’ (clause 35 of the GSF Regulation). Money should be recorded as a deemed appropriation unless there is a compelling reason to retain it outside of the Consolidated Fund.

The amount of the deemed appropriation is an amount equivalent to the money that is received or recovered by the agency. The deemed appropriation arises at the time the agency receives or recovers any deemed appropriation money.

See 'Different types of govt money fact sheet' for more information on deemed appropriations.

A working account should only be established when the money for which it is being established cannot or should not be recorded in the Consolidated Fund. Reasons for this may be:

• Bequests from benefactors and supporters, that have been given to a specific agency (rather than the NSW Government as a whole) and may have other legal restrictions on its expenditure
• Money raised through fundraising activities and donations from supporters, for a specific agency or activity.
• Funds received for a specific purpose to be spent for a specific purpose – for example, a levy

Not all kinds of money can be recorded in a working account. The sources of money that are permitted to be recorded in a working account are listed at s35(4) of the GSF Regulations. Money that is permitted to be recorded in a working account is called ‘working account money’.

The GSF Act requires that an Accountable Authority makes an application to the Treasurer, and further requires that the application must be in a form approved by the Treasurer.

When an application is made, the kinds of money that will be recorded in the working account are specified, as are the purposes that money in the account can be used for.

No. Working accounts are ledger accounts and working account transactions are ledger entries both of which are distinct from General Ledger entries in the accounting sector. Working account money does not need to be segregated and can sit in the same bank account as money from the Consolidated Fund.

The GSF Act places reporting requirements on the responsible manager of SDAs, both statutory SDAs and working accounts. Legislative requirements are at Sections 4.16 and 7.8, with further information available on the Treasury website. The referenced provisions relate to financial reporting requirements and other information that needs to be kept for working accounts.

The need for a working account should be assessed by the GSF agency every five years. Treasury maintains central records of working accounts and checks that there is still a reason for maintaining the account. This helps ensure that funds are retained outside of the Consolidated Fund only when necessary.

The GSF Act and Regulations require that the Treasurer dissolve working accounts by written order. The process for agencies to follow is detailed in the policy.

It’s unlikely that your agency has a working account; at 30 June 2024 there were fewer than 10. Most accounts in the SDA are ‘statutory SDAs’ rather than working accounts.

Statutory SDAs are created through their own enabling legislation, and it is in this legislation that authority to operate the account is granted and typically where the permitted sources and uses of funds retained in the account are recorded. Please refer to the fact sheet. If the money you hold in the SDA is the result of legislation, you have a statutory SDA rather than a working account.

If your agency has a working account, your legal and/or finance team should have a copy of the authorising instrument, and the working account should be included in the delegations framework for your agency. You can also check with the Treasury Policy & Budget analyst responsible for your agency.

We would generally expect funds to be recorded as deemed appropriations and available for the general use of the agency. Where an agency receives non-government funds for a specific purpose, a working account may be a more appropriate ledger.

When a working account is established, you need to ensure it is compliant with the relevant legislation, and seek internal legal advice.

The following scenarios provide some illustration of when an agency might consider a working account.

1. An agency undertakes local fundraising activities by their volunteer base, to support local operations. It also receives bequests from time to time.
   
   It may be appropriate that these funds be held in a working account and remain outside the Consolidated Fund, having been raised for a specific purpose. The sources of money that can be recorded in the working account would be restricted to fundraising moneys, donations and requests.

2. An agency is launching a new government initiative to deepen a trading market. The initiative will act as a central counterparty for buyers and sellers to improve market liquidity.
   
   It is appropriate that these funds be held in a working account and remain outside the Consolidated Fund, having been raised for a specific use. The sources and uses of money permitted are broad but restricted to the trading market activities and clearly excludes the rest of the agency’s operations.

3. A new agency has been established to undertake a particular regulatory function. The agency charges market participants for its regulatory services, which part-funds its operations. The agency has its own enabling legislation but the legislation does not establish an account in the SDA.
   
   It may be appropriate that these funds be held in a working account and remain outside the Consolidated Fund, having been raised from non-government funding for a specific use.

4. A GSF Agency provides services to other GSF Agencies, including GSF Agencies within the same cluster, and is expected to recover the cost of providing those services from the other GSF Agencies.
   
   It may be appropriate that these funds be held in a working account and remain outside the Consolidated Fund to ensure that the GSF Agency providing the services can pay the costs of providing those services from the amounts recovered.
   
   The appropriateness of a working account for inter-agency transactions will depend on the specific circumstances of the agency.