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2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
APPROPRIATION BILL (NO. 5) 2014-2015
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Finance,
Senator the Honourable Mathias Cormann)
Table of Acronyms and Defined Terms
AAO Administrative Arrangements Order
Act (No. 1) Appropriation Act (No. 1) 2014-2015
Act (No. 3) Appropriation Act (No. 3) 2014-2015
AFM Advance to the Finance Minister
AI Act Acts Interpretation Act 1901
CAC Act Commonwealth Authorities and Companies Act 1997
Commonwealth An entity as defined in section 10 of the PGPA Act
entity
CRF Consolidated Revenue Fund
Finance Minister Minister for Finance
FMA Act Financial Management and Accountability Act 1997
GST Goods and Services Tax
LI Act Legislative Instruments Act 2003
MoG Machinery of Government
non-corporate Non-corporate Commonwealth entities as defined in
entities the PGPA Act or the High Court
PGPA Act Public Governance, Performance and Accountability
Act 2013
PGPA (C&T) Act Public Governance, Performance and Accountability
(Consequential and Transitional Provisions) Act
2014
PGPA Rules Public Governance, Performance and Accountability
Rule 2014
portfolio Portfolio Budget Statements, Portfolio Additional
statements Estimates Statements and Portfolio Supplementary
Additional Estimates Statements
Explanatory Memorandum to Appropriation Bill (No. 5) 2014-2015 1
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Outline
Appropriation Bill (No. 5) 2014-2015
General Outline
1 This Explanatory Memorandum accompanies Appropriation Bill (No. 5)
2014-2015 (the Bill).
2 The main purpose of the Bill is to propose appropriations from the
Consolidated Revenue Fund (CRF) for the ordinary annual services of the
Government in addition to amounts appropriated through the Appropriations Acts
that implemented the 2014-2015 Budget and the 2014-2015 Mid-Year Economic
and Fiscal Outlook.
3 Appropriations for the ordinary annual services of the Government must be
contained in a separate Bill from other appropriations in accordance with
sections 53 and 54 of the Australian Constitution (the Constitution). Other annual
appropriations that are not for the ordinary annual services of the Government are
proposed in Appropriation Bill (No. 6) 2014-2015. Together these Bills are
termed the Supplementary Additional Estimates Appropriation Bills.
4 The Portfolio Supplementary Additional Estimates Statements are published
and tabled in the Parliament in relation to the Bill. This Explanatory
Memorandum should be read in conjunction with the various 2014-2015 portfolio
statements (being the Portfolio Budget Statements that accompanied the
2014-2015 Budget, the Portfolio Additional Estimates Statements and the
Portfolio Supplementary Additional Estimates Statements) which contain details
on the appropriations set out in the Schedules of the Bills.
5 Importantly, the Bill has been drafted to take account of the Public
Governance, Performance and Accountability Act 2013 (PGPA Act), which came
into effect on 1 July 2014 and replaces the Financial Management and
Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and
Companies Act 1997 (CAC Act). As part of the transition of the Acts
appropriating money, the Bill includes notes to provide clarity around provisions
within the FMA Act that continue to operate until the completion of the actions
involved.
Structure of appropriations in the Bill
6 The Bill provides for the appropriation of specified amounts for expenditure
by Australian Government entities, primarily being non-corporate Commonwealth
entities (non-corporate entities) under the PGPA Act. These entities were
previously Agencies under the FMA Act or bodies under the CAC Act and
transitional amendments were made to the 2012-2013, 2013-2014 and 2014-2015
Appropriation Acts to replace references to or reliance on provisions in the FMA
and CAC Acts with equivalent provisions in the PGPA Act.
7 During the transition, it is important that Australian Government entities,
whether classified or recognised as an Agency under the FMA Act, a
Explanatory Memorandum to Appropriation Bill (No. 5) 2014-2015 2
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Outline
Commonwealth authority or Commonwealth company under the CAC Act, or a
Commonwealth entity under the PGPA Act, continue to have access to such
resources as has been appropriated under the relevant Appropriation Acts as
intended by Parliament.
8 Part 1 of the Bill deals with definitions, the interpretative role of the
portfolio statements and the concept of notional transactions. Part 2 of the Bill
proposes appropriations to make payments of the amounts in Schedule 1 for
departmental items (clause 7), administered items (clause 8) and corporate entity
items (clause 9). Part 3 of the Bill specifies the way in which the amounts in
Schedule 1 may be adjusted.
9 Part 4 deals with credits to special accounts (clause 11), provides for
amounts to be appropriated as necessary (clause 12), and specifies when the Bill
ceases to be in force (clause 13). In addition to the adjustment provision in Part 3,
clause 12 of the Bill recognises that the appropriations in the Bill may also be
varied by both the PGPA Act and the FMA Act, as it continues to apply due to the
Public Governance, Performance and Accountability (Consequential and
Transitional Provisions) Act 2014 (PGPA (C&T) Act).
Financial Impact
10 The Bill, if enacted, would appropriate the amounts specified in Schedule 1.
Explanatory Memorandum to Appropriation Bill (No. 5) 2014-2015 3
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Statement of compatibility with human rights
Statement of compatibility with human rights
1 The Bill seeks to appropriate money for the ordinary annual services of the
Government.
2 Accordingly, this Appropriation Bill performs an important constitutional
function, by authorising the withdrawal of money from the Consolidated Revenue
Fund for the broad purposes identified in the Bill.
3 However, as the High Court has emphasised, beyond this, the Appropriation
Acts do not create rights and nor do they, importantly, impose any duties.
4 Given that the legal effect of Appropriation Bills is limited in this way, the
Appropriation Bill is not seen as engaging, or otherwise affecting, the rights or
freedoms relevant to the Human Rights (Parliamentary Scrutiny) Act 2011.
5 Detailed information on the relevant appropriations, however, is contained
in the portfolio statements.
Explanatory Memorandum to Appropriation Bill (No. 5) 2014-2015 4
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Notes on clauses
Notes on clauses
Part 1--Preliminary
Clause 1--Short title
1 This clause specifies that the short title of the Bill, once enacted, will be
Appropriation Act (No. 5) 2014-2015.
Clause 2--Commencement
2 Clause 2 provides for the Bill to commence as an Act on the day of the
Royal Assent.
Clause 3--Definitions
3 Clause 3 defines the key terms used in the Bill, such as "administered item",
"corporate entity", "non-corporate entity", and "departmental item".
Clause 4--Portfolio statements
4 Clause 4 declares that the portfolio statements are relevant documents under
paragraph 15AB(2)(g) of the Acts Interpretation Act 1901 (AI Act) that may be
used to ascertain the meaning of certain provisions in accordance with
subsection 15AB(1) of the AI Act. Paragraph 15AB(2) of the AI Act effectively
provides that the material that may be considered in the interpretation of a
provision of an Act includes any document that is declared by the Act to be a
relevant document.
5 The purpose of the portfolio statements is to provide information on the
proposed allocation of resources to Government outcomes by Commonwealth
entities within each portfolio. The portfolio statements provide information to
enable Parliament to understand the purpose of appropriations proposed in the
Bill. The term "portfolio statements" is defined in the Bill, at clause 3, to mean the
Portfolio Budget Statements (that accompanied the Appropriation Bills tabled at
the last Budget), the Portfolio Additional Estimates Statements (that accompanied
the Appropriation Bills tabled at the last Additional Estimates) and the Portfolio
Supplementary Additional Estimates Statements (tabled with the Bill).
Clause 5--Notional transactions between entities that are part
of the Commonwealth
6 Clause 5 ensures that payments between non-corporate entities result in a
debit from the appropriation for the paying non-corporate entity. For example, the
payments of the amounts in Schedule 1 from one non-corporate entity to another
do not require, in a constitutional sense, an appropriation, because both
non-corporate entities operate within the CRF. However, for reasons of financial
discipline and transparency, the practice has arisen for these payments between
non-corporate entities to be treated as though they required an appropriation, and
Explanatory Memorandum to Appropriation Bill (No. 5) 2014-2015 5
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Notes on clauses
to debit an appropriation when such notional payments are made. This is
consistent with section 76 of the PGPA Act.
7 Clause 5 provides that notional transactions between non-corporate entities
are to be treated as if they are real transactions. Notional transactions, therefore,
require the debiting of an appropriation made by Parliament. When a
non-corporate entity makes a payment, whether to another non-corporate entity or
another part of the same non-corporate entity (such as a different "business unit"
within the entity), it is to be treated as a "real" payment.
8 This means that the appropriation made by Parliament is extinguished by the
amount of the notional payment, even though no payment is actually made from
the CRF. Similarly, a notional receipt in such a situation is to be treated by the
receiving non-corporate entity (where relevant) as if it were a real receipt. This
does not mean every internal transfer of public money involves a notional
payment and receipt.
Part 2--Appropriation items
Clause 6--Summary of appropriations
9 Clause 6 sets out the total of the appropriations in Schedule 1 of the Bill.
Importantly, the amounts in Schedule 1 may be adjusted under Part 3 of the Bill.
10 The amounts in Schedule 1 of the Bill may be adjusted further in accordance
with sections 30A and 31 of the FMA Act, which continue to apply due to the
Public Governance, Performance and Accountability (Consequential and
Transitional Provisions) Act 2014 (PGPA (C&T) Act), as well as sections 74 and
75 of the PGPA Act. Specifically:
Appropriations may be adjusted by amounts recoverable by an Agency (or
non-corporate entity) from the Australian Taxation Office for Goods and
Services Tax (GST), in accordance with section 30A of the FMA Act. The
amounts specified in Schedule 1 exclude recoverable GST. The
appropriations shown represent the net amount that Parliament is asked to
allocate to particular purposes.
Section 30A has the effect of increasing an appropriation by the amount of
the GST qualifying amount arising from payments in respect of the
appropriation. As a result, there is sufficient appropriation for payments
under an appropriation item, provided that the amount of those payments,
less the amount of recoverable GST, can be met from the initial amount
shown against the item in Schedule 1. Section 30A also applies to notional
transactions between and within non-corporate entities.
Departmental items may be increased to take into account certain other
amounts received by a non-corporate entity, if those receipts are prescribed
by the Public Governance, Performance and Accountability Rule 2014
(PGPA Rule), in accordance with section 74 of the PGPA Act. Section 74 of
the PGPA Act permits non-corporate entities to retain certain types of
Explanatory Memorandum to Appropriation Bill (No. 5) 2014-2015 6
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Notes on clauses
receipts by adding them to their most recent departmental item or other type
of appropriation in an Appropriation Act when prescribed. For example,
PGPA Rule 27 prescribes amounts that offset costs in relation to the
activities of a non-corporate entity and amounts that relate to an employee's
leave (including amounts received under the paid parental leave scheme that
was established on 1 January 2011).
Items may be adjusted to take into account the transfer of functions between
non-corporate entities, in accordance with section 75 of the PGPA Act. It is
possible that adjustments under section 75 may result in new items and/or
outcomes being created in an Appropriation Act.
Clause 7--Departmental items
11 Clause 7 provides that the amount specified in a departmental item for a
non-corporate entity may be applied for the departmental expenditure of the
non-corporate entity. Clause 3 defines:
"departmental item" to be the total amount set out in Schedule 1 in relation
to a non-corporate entity under the heading "Departmental"; and
"expenditure" to be payments for expenses, acquiring assets, making loans
or paying liabilities.
12 While the departmental items in Schedule 1 may be divided between
outcomes, the different amounts against outcomes are notional. The total
appropriation for departmental expenses represents the departmental item.
13 Departmental items involve costs over which a non-corporate entity has
control. Departmental appropriations can be used to make any payment related to
the functions of the non-corporate entity including on purposes covered by other
items whether or not they are in the Act for an entity. Expenditure typically
covered by departmental items includes employee expenses, suppliers and other
operational expenses (e.g. interest and finance expenses).
14 There can also be occasions when a non-corporate entity, such as a portfolio
Department, needs to cover matters in relation to other areas of the Government.
Examples can include whole-of-Government activities or a portfolio Department
assisting with the formation and initial costs of a new portfolio body (for which
the Department might later be reimbursed). Another example would be where
government has decided to implement shared services arrangements, and one
non-corporate entity is providing corporate services assistance to another
non-corporate entity.
15 Since 2010-2011, departmental items have included amounts specifically to
meet costs associated with the acquisition and capitalised maintenance of
departmental assets valued at $10 million or less. Departmental items also include
supplementation in circumstances when non-corporate entities were directed by
government to undertake additional responsibilities in the previous financial year.
This applies when the direction was given, or a decision to propose further
Explanatory Memorandum to Appropriation Bill (No. 5) 2014-2015 7
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Notes on clauses
Appropriation Bills is made, in a timeframe within which it is not practicable to
include the expected expenses in a further Appropriation Bill for that financial
year.
16 Generally, non-corporate entities are expected to meet the cost of
additionally directed activities from their existing appropriations, which may then
be replenished by a departmental appropriation in the following financial year.
17 Departmental items are not expressed in terms of a particular financial year
and do not automatically lapse. Departmental items are available until they are
spent, or the Act through which they were appropriated is repealed or sunsets.
Because the cash to meet expenses can be required at times other than when the
expenses are incurred, the departmental appropriations remain available until
required.
18 The Minister for Finance (Finance Minister) manages the payment from
departmental items by non-corporate entities using a discretionary power under
section 51 of the PGPA Act. Section 51 allows the Finance Minister to manage
the timing and the amount of appropriated money to be made available to a
Commonwealth entity, except as required by law.
19 Until 30 June 2015, the Finance Minister may also manage payments
through the issuing of drawing rights in accordance with sections 26 and 27 of the
FMA Act, which continue to apply because of Part 2 of Schedule 2 to the
PGPA (C&T) Act. Drawing rights control who may spend money from
appropriations, and allow for conditions and limits to be set by the Finance
Minister (or the Finance Minister's delegate) in relation to those activities.
Clause 8--Administered items
20 Subclause 8(1) provides for the appropriation of administered amounts to be
applied by a non-corporate entity for the purpose of contributing to the outcome
for a non-corporate entity. An "administered item" is defined in clause 3 to be the
amounts set out in Schedule 1 opposite an outcome for a non-corporate entity
under the heading "Administered". Administered amounts are appropriated
separately for outcomes, so, unlike departmental items, the split across outcomes
is not notional. This helps to make it clear what the funding is intended to achieve.
Schedule 1 specifies how much can be expended on each outcome.
21 The appropriations for administered items in Schedule 1 represent the
amounts required to meet the total estimated expenses for the administered
outcomes for 2014-2015.
22 The purposes for which each administered item can be spent are further set
out in subclause 8(2). Subclause 8(2) provides that where the portfolio statements
indicate a particular activity is in respect of a particular outcome, then expenditure
on that activity is taken to be expenditure for the purpose of contributing to
achieving that outcome.
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Notes on clauses
23 Administered items are those administered by a non-corporate entity on
behalf of the Government (e.g. certain grants, benefits and transfer payments).
These payments are usually made pursuant to eligibility rules and conditions
established by the Government or the Parliament. Specifically, administered items
are tied to outcomes (departmental items are not).
24 The Finance Minister manages the payment from administered items by
non-corporate entities using a discretionary power under section 51 of the PGPA
Act. Section 51 allows the Finance Minister to manage the timing and the amount
of appropriated money to be made available to a Commonwealth entity, except as
required by law.
25 Until 30 June 2015, the Finance Minister may also manage payments
through the issuing of drawing rights in accordance with sections 26 and 27 of the
FMA Act, which continue to apply because of the PGPA (C&T) Act. Drawing
rights control who may spend money from appropriations, and allow for
conditions and limits to be set by the Finance Minister (or the Finance Minister's
delegate) in relation to those activities.
Clause 9--Corporate entity items
26 Clause 9 provides for direct appropriations of money for corporate entities
to be paid from the CRF by the relevant Department. Clause 9 provides that
payments for corporate entities must be used for the purposes of those entities.
27 A "corporate entity" is defined in clause 3 to be a corporate Commonwealth
entity or a Commonwealth company within the meaning of the PGPA Act. Many
corporate entities receive funding directly from appropriations. However, these
entities are legally separate from the Commonwealth, and as a result, do not debit
appropriations or make payments from the CRF.
28 Corporate entity payments are initiated by requests to the relevant portfolio
Departments from the corporate entity. The Finance Minister manages
appropriations for corporate entities through a discretionary power to control the
timing and amount made available under section 51 of the PGPA Act, except as
required by law.
29 Until 30 June 2015, the Finance Minister may also manage payments
through the issuing of drawing rights in accordance with sections 26 and 27 of the
FMA Act, which continue to apply because of the PGPA (C&T) Act. Drawing
rights control who may spend money from appropriations and allow for
conditions and limits to be set by the Finance Minister (or the Finance Minister's
delegate) in relation to those payments. Corporate entities hold the amounts paid
to them on their own account.
30 Subclause 9(2) provides that if a corporate entity is subject to another Act
that requires amounts appropriated by Parliament for the purposes of that entity to
be paid to the entity, then the full amount of the corporate entity payment must be
Explanatory Memorandum to Appropriation Bill (No. 5) 2014-2015 9
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Notes on clauses
paid to the entity. The purpose of subclause 9(2) is to clarify that subclause 9(1) is
not intended to qualify any obligations in other legislation regulating a corporate
entity, where that other legislation requires the Commonwealth to pay the full
amount appropriated for the purposes of the entity.
31 In addition to the annual appropriations, some corporate entities may also
receive public money from related entities such as a portfolio Department and
from special appropriations managed by those Departments. Many corporate
entities also receive funds from external sources.
Part 3--Advance to the Finance Minister
Clause 10--Advance to the Finance Minister
32 Section 10 of the Appropriation Act (No. 1) 2014-2015 (Act (No. 1))
enables the Finance Minister to provide additional appropriations for items when
satisfied that there is an urgent need for expenditure and the existing appropriation
is inadequate. This additional appropriation is referred to as the Advance to the
Finance Minister (AFM). Subsection 10(3) of Act (No. 1) provides that the total
amount that can be determined under the AFM provision is $295 million.
33 Clause 10 of the Bill provides that irrespective of the amounts issued from
the AFM before the commencement of the Bill, the amount available under
section 10 of Act (No. 1) will be restored to the original amount of
$295 million. The provision has been added to the Bill to ensure that there will be
sufficient scope to provide amounts from the AFM for the remainder of the
financial year.
34 Subclause 10(1) specifies that if the Finance Minister has determined under
subsection 10(2) of Act (No. 1) to increase an amount in Schedule 1 of
Act (No. 1) from the AFM, then that amount is to be disregarded when the Bill
commences. From the date this Bill commences as an Act the total amount that
can be determined under the AFM will again be $295 million.
35 Subclause 10(2) prevents appropriations for the same expenditure from both
the AFM and the Bill. Subclause 10(2) ensures that if Schedule 1 of the Bill
provides an amount for a particular expenditure and, prior to the commencement
of the Bill, the Finance Minister determines an amount from the AFM under
section 10 of Act (No. 1) for the same expenditure (the advanced amount), then
the appropriation in the Bill will be reduced by the amount of the advanced
amount. The appropriated amount cannot be reduced below nil. For example, if
the Bill provides $20 million for a grants programme and an advanced amount of
$5 million is determined by the Finance Minister under Act (No. 1) for a
particular grant payment under that programme, then the amount appropriated by
the Bill, once enacted, will be reduced by $5 million (i.e. appropriating only
$15 million for the grants programme).
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Notes on clauses
36 The Finance Minister may continue to make determinations under
subsection 10(2) of Act (No. 1) to add an amount from the AFM to an item of a
Commonwealth entity if the criteria in subsection 10(1) of that Act are satisfied.
Part 4--Miscellaneous
Clause 11--Crediting amounts to special accounts
37 Clause 11 provides that if the purpose of an item in Schedule 1 is also the
purpose of a special account (regardless of whether the item expressly refers to the
special account), then amounts may be debited against the appropriation for that
item and credited to the special account. Special accounts may be established
under the PGPA Act by a determination of the Finance Minister (section 78) that
is disallowable by Parliament or by another Act (sections 79 and 80). The
determination or Act that establishes the special account will specify the purposes
of the special account.
Clause 12--Appropriation of the Consolidated Revenue Fund
38 Clause 12 provides that the CRF is appropriated as necessary for the
purposes of the Bill. Significantly, this clause means that there is an appropriation
in law when the Act commences. That is, the appropriations are not made or
brought into existence just before they are paid, but when the Royal Assent is
given. This clause indicates that the amounts appropriated may be affected by the
PGPA Act and the FMA Act (as it continues to apply because of the
PGPA (C&T) Act), in particular sections 30A and 31 (see clause 6), after the Bill
receives the Royal Assent.
Clause 13--Act ceases to be in force
39 Clause 13 provides that the Bill, once enacted, will cease to be in force at
the start of 1 July 2017. As the Appropriation Acts will sunset, there is no longer a
requirement for the reduction of appropriations during the year. As such, the
reduction sections that applied previously are no longer required (e.g. section 10
of Appropriation Act (No. 5) 2013-2014) and have been excluded from this Bill.
Schedule 1--Services for which money is appropriated
40 Schedule 1 specifies the appropriations proposed for the ordinary annual
services of the Government. Schedule 1 contains a summary table which lists the
total amounts for each portfolio. A separate summary table is included with
further detail for each portfolio, with other tables detailing the appropriations for
each Commonwealth entity.
41 Schedule 1 includes, for information purposes, the amount appropriated in
Act (No. 1) and Appropriation Act (No. 3) 2014-2015 (Act (No. 3)), which is
printed in italics and labelled as "Actual Available Appropriation (italic figures)--
2014-2015". The amount printed as the Actual Available Appropriation is an
estimate that does not affect the amount available at law.
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Notes on clauses
42 Schedule 1 also includes, for information purposes, a figure for the previous
financial year printed in light figures labelled the "Actual Available Appropriation
(light figures)--2013-2014". That figure provides a comparison with the proposed
appropriations for entities receiving appropriations. It is calculated for each item
by adding the amounts appropriated in the previous year's annual Appropriation
Acts, amounts adjusted under certain provisions of the PGPA Act and FMA Act
(as they continue to apply due to the PGPA (C&T) Act) plus adjustments such as
AFMs. In addition, where an entity's outcome structure has changed since the last
Appropriation Act, only ongoing outcomes are shown in the Bill. In some
instances the figure may also be affected by limits applied administratively by the
Department of Finance.
43 The Actual Available Appropriation is an estimate that does not affect the
amount available at law. For these reasons, the Actual Available Appropriation
figures may be different from the sum of amounts provided in earlier
Appropriation Acts.
44 More details about the appropriations in Schedule 1 are contained in the
portfolio statements and the second reading speech for the Bill.
Machinery of Government changes
45 Since the commencement of Act (No. 1), there have been changes to
Departments and Commonwealth entities pursuant to the Machinery of
Government (MoG) changes from the Administrative Arrangements Order (AAO)
of 23 December 2014.
46 On 23 December 2014, the Governor-General in Council acting on the
Prime Minister's recommendation under section 64 of the Constitution renamed
the Departments of State in the first column to the names in the second column:
Before 23 December 2014 From 23 December 2014
Department of Education Department of Education and Training
Department of Industry Department of Industry and Science
47 These AAOs were implemented through section 75 determinations. The
determination altered references to the names of Departments and Outcome 3 of
the Department of Education and Training in Schedule 1 of Act (No. 1) to reflect
these AAOs.
48 The MoG changes also resulted in the transfer of legislative responsibility
and related functions between various Commonwealth entities. Full details of the
MoG changes as expressed in the 23 December AAO can be found at
http://www.dpmc.gov.au/pmc/publication/administrative-arrangements-order-
made-23-december-2014.
49 These changes were reflected in Act (No. 3), and are also reflected in this
Bill.
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