Funding the Future: Building Financially Sustainable Agencies

Australia's 2025-26 budget is projecting budget deficits of $42.1 billion with no meaningful improvements in sight over the forward estimates. Demand for government services is greater than ever, and the APS is expected to deliver more whilst boosting both efficiency and overall productivity.

APS staff numbers have increased by 40,000+ compared to the 2021-22 to meet increasing demand and to provide efficient services to the public. Funding for agencies has not necessarily kept pace with this growth. Many agencies have been forced to "dip" into their cash reserves as they run operating deficits year on year. With cash reserves running low and an impending funding cliff, now is the time to focus on core outcomes and how long term financial sustainability can be achieved.

Financial sustainability is not about standing up a recruitment committee to review hiring needs or asking all divisions to find 10% savings as part of the internal budget process. Achieving financial sustainability means the ability for agencies to achieve their outcomes within the funding that is available. This requires a robust and critical prioritisation framework and process to determine what is most mission critical to do in order to achieve outcomes within the funding envelope.

This is easier said than done. It requires organisations to make difficult calls and decide on what is the most important activities/functions that they should spend their funding on and what can no longer be delivered. Organisations expect us as finance leaders to provide advice and guidance.

Having a robust internal budget is the first step, which aims to align funding to priorities and provide the transparency to report back on how the funding is used to achieve those priorities. There are many ways to set a budget from a technical perspective. However, the most important success factor is the people factor. This comes down to:

• Clear governance structure around roles and responsibilities of everyone involved
• Active engagement from Senior Executives
• Strong financial literacy across the organisation.

As CFO and finance professionals, we must show leadership by rethinking the way we allocate funding through the internal budget process and how we engage with business in a more meaningful way to bring them along the journey and to provide the evidence base to support difficult decion making.