There is a range of processes in place which ensure that money spent on the public’s behalf is effective, efficient and in the best interests of all Victorians.

9.1 Sources of Revenue

The Victorian Government raises revenue and also receives revenue from other sources. Revenue is raised from taxes such as land and payroll tax, the sale of goods and services, and other revenue sources such as investment income, fees and fines.

The Victorian Government receives revenue from the Commonwealth Government. This consists of ‘tied’ and ‘untied’ grants. Tied grants (Specific Purpose Payments) are provided under certain agreed conditions, for example, that they are spent on nominated services as agreed with the Commonwealth. Untied grants are mostly funded from the Goods and Services Tax which is collected by the Commonwealth and then distributed to the states and territories.

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9.2 Appropriation Bill

The Constitution provides that the Lower House is the source of all legislation involving the expenditure of government revenue. The passage of the annual Victorian budget must be initiated in the Legislative Assembly. The budget is reflected in the Appropriation Bill which is passed annually and provides the key mechanism through which Parliament authorises the expenditure of public money. It provides appropriation authority to the Treasurer, who applies the appropriations based on agreed outputs and targets specified in the budget papers.

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9.3 Budget Papers

The Government’s primary account is the consolidated fund that receives all revenue raised by and granted to the state, and from which amounts are appropriated by Parliament for specific purposes. The consolidated fund, together with the trust fund, forms the public account. All payments from it must be authorised by Parliament.

Each year in May, the Government publishes the budget papers, including the Appropriation Bill, which detail projections of Government income and expenditure for the coming financial year. They also outline the current financial position of the state.

Some material published in the budget papers is required by law. Additional material is also included for the information of Members of Parliament and the public. The Government of the day determines how many budget papers there are and what additional material is included in them. In recent years the Government has published a number of supporting documents and five principal budget papers:

  • Budget Paper No. 1: Treasurer’s Speech commends the Appropriation Bills to Parliament and highlights the Government’s key initiatives and priorities;
  • Budget Paper No. 2: Strategy and Outlook provides details of the Government’s overall high-level strategy for the coming year;
  • Budget Paper No. 3: Service Delivery focuses on output and service delivery by departments; and
  • Budget Paper No. 4: State Capital Program lists the capital programs and projects currently underway.
  • Budget Paper No. 5: Statement of Finances contains general government financial information, departmental financial statements and reporting of government finance statistics.

The budget is preceded by an extensive process within Government overseen by the Expenditure Review Committee of Cabinet. This process determines both the overall level of expenditure and the amounts to be allocated to competing priorities. Parliament appropriates most of the money in the budget for outputs (mainly services provided by Government) and additions to the net asset base (mainly capital works).

The Victorian Government also produces a mid-cycle review of the annual budget. The budget update provides revised estimated financial statements. This includes the projected outcome for the end of the current financial year and revised estimates for the forward years. This is generally released in December each year.

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9.4 Financial Management

The Financial Management Act 1994 administers the use of public money and the accountability processes and secondary legislation with which departments and public entities must comply. The purposes of the Financial Management Act are to:

  • improve financial administration of the public sector;
  • make better provision for the accountability of the public sector; and
  • provide for annual reporting to Parliament on the operations and financial statements of public sector bodies.

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9.5 Procurement

Procurement is an essential part of the public sector’s financial management system. It is crucial that there are rigorous processes to ensure a high level of probity and accountability in procurement and to ensure that fair processes are in place to guarantee that public money is being spent in the most efficient and effective way.

The Victorian Government Purchasing Board (VGPB) is established under the Financial Management Act and provides leadership in the procurement of government goods and services. The VGPB has developed a range of policies that apply to the procurement activities of government departments and some agencies.

The VGPB has accredited departments, through their accountable officer, to assume responsibility for purchasing. The delegation of the VGPB’s powers through accreditation requires departments to comply with VGPB policy and to establish an Internal Procurement Unit (IPU). The VGPB and IPUs assess requisitions in line with the Financial Management Act and VGPB procurement policies. Each department’s IPU has the delegated responsibility to oversee the procurement process and to approve requisitions within its accreditation limits.

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