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2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Appropriation Bill (No. 6) 2008-2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Finance and
Deregulation,
the Honourable Lindsay Tanner MP)
Appropriation Bill (No. 6) 2008-2009
General Outline
1. This explanatory memorandum accompanies Appropriation Bill (No. 6) 2008-
2009 (the Bill).
2. The main purpose of the Bill is to propose appropriations from the
Consolidated Revenue Fund (CRF) for services that are not the ordinary
annual services of the Government in addition to those provided in the
2008-09 Budget and additional estimates.
3. Appropriations for the ordinary annual services of the Government must
be contained in a separate bill to other appropriations in accordance with
sections 53 and 54 of the Australian Constitution. Consequently, the Bill
proposes appropriations that are not for the ordinary annual services of
the Government. Annual appropriations that are for the ordinary annual
services of the Government are proposed in Appropriation Bill (No. 5) 2008-
2009. Together Appropriation Bill (No. 5) 2008-2009 and Appropriation Bill
(No. 6) 2008-2009 are termed the Supplementary Additional Estimates
(No. 2) Appropriation Bills.
4. This Explanatory Memorandum should be read in conjunction with the
various portfolio statements. In particular:
. the Portfolio Supplementary Additional Estimates Statements No. 2 (PSAES
No. 2), which contains details on the appropriations set out in Schedule 2
to the Bill, that are published and tabled in Parliament together with the
Bill;
. the 2008-2009 Portfolio Budget Statements (PB Statements) that were
published and tabled in Parliament in relation to the Appropriation Bill
(No. 1) 2008-2009 and Appropriation Bill (No. 2) 2008-2009;
. The Portfolio Supplementary Estimates Statements (PSES) that were
published and tabled in Parliament in relation to the Appropriation
(Economic Security Strategy) Bill (No. 1) 2008-2009 and Appropriation
(Economic Security Strategy) Bill (No. 2) 2008-2009;
. the Portfolio Additional Estimates Statements (PAES) that were published
and tabled in Parliament in relation to Appropriation Bill (No. 3) 2008-
2009 and Appropriation Bill (No. 4) 2008-2009; and
. the Portfolio Supplementary Additional Estimates Statements (PSAES) that
were published and tabled in the Parliament in relation to the
Appropriation (Nation Building and Jobs) Bill (No. 1) 2008-2009 and
Appropriation (Nation Building and Jobs) Bill (no. 2) 2008-2009.
Structure of appropriations in the Bill
5. The Bill provides for the appropriation of specified amounts for
expenditure by Australian Government agencies.
6. Part 1 of the Bill deals with definitions, the role of the various
portfolio statements, and the concept of notional payments.
7. Part 2 of the Bill proposes appropriations to make payments of the
amounts in Schedule 2 for State, ACT, NT and local government items
(clause 7), administered items (clause 8), administered assets and
liabilities items (clause 9), and other departmental items (clause 10).
8. Part 3 of the Bill specifies the ways in which the amounts in Schedule 2
may be adjusted by reduction.
9. Part 4 deals with credits to Special Accounts (clause 15) the conditions
that apply to payments of State, ACT, NT and local government items
(clause 16) and sets out the amount appropriated under the Act. In
addition to the adjustment provisions in Part 3, clause 17 of the Bill
recognises that the appropriations in the Bill may also be varied by the
Financial Management and Accountability Act 1997 (FMA Act).
Financial Impact
10. This Bill will appropriate the amounts specified in Schedule 2.
Notes on clauses
Part 1-Preliminary
Clause 1-Short title
1. This clause specifies the short title of the Bill, once enacted, will be
Appropriation Act (No. 6) 2008-2009.
Clause 2-Commencement
11. Clause 2 provides for the Bill to commence as an Act on the day of
Royal Assent.
Clause 3-Definitions
12. Clause 3 defines the key terms used in the Bill, such as 'administered
item', 'other departmental item', 'State, ACT, NT and local government
item' and 'current year' (being the financial year ending on 30 June
2009).
Clause 4-Portfolio Statements
13. Clause 4 declares that various portfolio statements are extrinsic
material 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 the Bill in accordance with subsection 15AB(1) of the AI Act. The
purpose of the portfolio statements is to provide information on the
proposed allocation of resources to Government outcomes by agencies within
the portfolio. The PB Statements, PSES, PAES, PSAES and PSAES No. 2
provide information, explanation and justification to enable Parliament to
understand the purpose of each appropriation proposed in the Bill.
Clause 5-Notional payments, receipts etc
14. Clause 5 ensures that payments between agencies result in a debit to
the appropriation to the paying agency. For example the payments of the
amounts in Schedule 2 of the Bill from one FMA Act agency to another do
not require an appropriation. However, for reasons of financial discipline
and transparency, the practice has arisen for these payments between
agencies to be treated as though they required an appropriation, and to
debit an appropriation when such payments are made.
15. Clause 5 provides that these notional transactions between agencies are
to be treated as if they were real transactions. The effect is that when a
notional transaction takes place, the paying agency must debit the
appropriation made to it by Parliament. For constitutional purposes this
means that the real appropriation made by Parliament is extinguished by
the amount of the notional payment.
Part 2-Appropriation items
Clause 6-Summary of appropriations
16. Clause 6 sets out the total of the appropriations in Schedule 2 of the
Bill. Importantly, the amounts in Schedule 2 may be adjusted under the
provisions in Part 3 of the Bill. Specifically:
. States, ACT, NT and local government items and administered items may
be reduced in accordance with clause 12.
. Administered assets and liabilities items and other departmental items
may be reduced in accordance with clause 13.
17. The amounts in Schedule 2 of the Bill may further be adjusted in
accordance with sections 30 to 32 of the FMA Act. Specifically:
. Items may be increased by the reinstatement of amounts that an agency
is repaid, in accordance with section 30 of the FMA Act. The re-
crediting or reinstatement authorised by section 30 can result in the
total amount paid from the CRF in gross terms exceeding the amount
specified in an item.
. Items may be adjusted by amounts recovered by an agency 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 2 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 2.
. Departmental items may be increased to take into account certain other
amounts received by an agency, if those receipts are prescribed by the
Financial Management and Accountability Regulations 1997, in
accordance with section 31 of the FMA Act.
. Items may be adjusted to take into account the transfer of functions
between agencies, in accordance with section 32 of the FMA Act. It is
possible that adjustments under section 32 may result in new items
and/or outcomes being created in an Appropriation Act. It might also
result in amounts being shifted between Appropriation Acts.
Clause 7-State, ACT, NT and local government items
18. Clause 7 provides administered appropriations for financial assistance
to the States, ACT, NT and local governments. State, ACT, NT and local
government items are appropriated separately for outcomes, making it clear
what the funding is intended to achieve. The amount specified in
Schedule 2 for an outcome may be applied by an agency for the purpose of
making payments to any of the States, ACT, NT or local government
authorities for the purpose of achieving that outcome.
19. Clauses 7 and 16 delegate Parliament's power under section 96 of the
Constitution to impose terms and conditions on payments of financial
assistance to the States to the responsible Ministers listed in Schedule 1
of the Bill. Schedule 1 also lists the Ministers who may determine the
amounts and timing of those payments. There is a process in clause 12 for
dealing with State, ACT, NT and local government items that are not fully
expensed or spent during the financial year.
20. The Finance Minister manages payments from State, ACT, NT and local
government items by agencies through the issuing of drawing rights in
accordance with sections 26 and 27 of the FMA 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
21. Subclause 8(1) provides for the appropriation of new administered
expense amounts to be applied by an agency for the purpose of contributing
to the outcome for an agency. An administered item is defined in clause 3
to be an amount set out in Schedule 2 opposite an outcome for an agency
under the heading "New Administered Expenses". New administered expenses
are appropriated separately for outcomes, making it clear what the funding
is intended to achieve. Schedule 2 specifies how much can be expended on
each outcome. They are proposed when an agency is to carry out new
administered activities for a new outcome.
22. The purposes for which each administered item can be spent are set out
in subclause 8(2). Subclause 8(2) provides that where the PB Statements,
PSES, PAES, PSAES or PSAES No. 2 indicate a particular activity is in
respect of a particular outcome, then the amount in the administered item
is taken to contribute to achieve the outcome. The outcomes are not,
however, necessarily tied to the existence of a particular agency (eg,
abolishing a department will not effect the valid operation of an
appropriation for an administered item for an outcome of that department,
because the purpose of the appropriation does not depend on the existence
of the department).
23. New administered expenses are administered by an agency on behalf of
the Government (eg, certain grants, benefits and transfer payments). These
payments are usually made pursuant to eligibility rules and conditions
established by the Government or Parliament. Specifically:
. administered items are tied to outcomes, departmental items are not;
. administered items must be spent in accordance with rules and
conditions established by Government or Parliament; and
. there is a process in clause 12 for dealing with administered items
that are not fully expensed or spent during the financial year.
24. The Finance Minister manages payments from administered items by
agencies through the issuing of drawing rights in accordance with
sections 26 and 27 of the FMA 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-Administered assets and liabilities items
25. Clause 9 provides amounts in Schedule 2 to acquire new administered
assets, enhance existing administered assets and/or discharge
administrative liabilities relating to activities administered by agencies
on behalf of the Government. Administered assets and liabilities
appropriations are provided for functions managed by an agency on behalf
of the Government. Administered assets and liabilities items can also be
applied for expenditure for the purpose of contributing to achieving any
outcome specified for the Agency in the Appropriation Acts listed in
clause 9(1)(a) to (j) inclusive.
26. Amounts appropriated for administered assets and liabilities items can
be subject to a reduction process in accordance with clause 13 of the
Bill.
27. The Finance Minister manages payments from administered assets and
liabilities items by agencies through the issuing of drawing rights in
accordance with sections 26 and 27 of the FMA Act. Drawing rights control
who may spend money from appropriations, and they allow for conditions and
limits to be set by the Finance Minister (or the Finance Minister's
delegate) in relation to those activities.
Clause 10-Other departmental items
28. Clause 10 appropriates departmental non-operating appropriations in the
form of equity injections, loans or previous years' outputs, over which
the agency also exercises control. This clause provides that the amount
specified in other departmental items for an agency may be applied for the
departmental expenditure of the agency. In short:
. 'equity injections' can be provided to agencies to, for example,
enable investments in new capacity to produce departmental outputs;
. 'loans' can be provided to agencies when an investment to produce
future departmental outputs is expected to result in a direct return
such as an efficiency saving (these are generally not formal loans
established in contracts); and
. 'previous years' outputs' appropriations can be used to restore
appropriations used to deliver departmental outputs in a previous year
(eg, when a decision is made to implement a new activity after the
date for inclusion in the additional appropriation bills). Expenditure
on such activities are met initially from existing appropriations
which are then replenished by the previous years' outputs
appropriations in future appropriation bills.
29. Other departmental items are not expressed in terms of a particular
financial year and do not automatically lapse. Other departmental items
are available until they are spent. For example, equity injection
appropriations provide funding for the full costs of acquiring new assets
some of which might not be incurred until a later financial year. Amounts
appropriated for other departmental items can be subject to a reduction
process in accordance with clause 13 of the Bill.
30. The Finance Minister manages the payment from other department items by
agencies through the issuing of drawing rights in accordance with
sections 26 and 27 of the FMA Act. Drawing rights control who may spend
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 11-CAC Act body payment items
31. Clause 11 provides for direct appropriations of money for CAC Act
bodies to be paid from the CRF by the relevant department. Clause 11
provides that payments for CAC Act bodies must be paid to those bodies to
be used for the purposes of those bodies.
32. A CAC Act body is defined in clause 3 to be a Commonwealth authority or
Commonwealth company within the meaning of the CAC Act. Many CAC Act
bodies receive funding directly from appropriations. However, these bodies
are legally separate from the Commonwealth and as a result, do not debit
appropriations or make payments from the CRF.
33. CAC Act body payments will be initiated by requests to the relevant
portfolio agencies from the CAC Act bodies. The Finance Minister manages
appropriations for CAC Act bodies through the issuing of drawing rights in
accordance with sections 26 and 27 of the FMA 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. CAC Act bodies will hold the
amounts paid to them on their own account.
34. Subclause 11(2) provides that if a CAC Act body is subject to another
Act that requires amounts appropriated by Parliament for the purposes of
that body to be paid to the body, then the full amount of the CAC Act body
payment must be paid to the body. The purpose of subclause 11(2) is to
clarify that subclause 11(1) is not intended to qualify any obligations in
other legislation regulating a CAC Act body, where that legislation
requires the Commonwealth to pay the full amount appropriated for the
purposes of the body.
35. The full amount of the CAC Act body payments specified in Schedule 2
may be reduced in accordance with clause 14. Subclause 14(5) provides that
subclause 11(2) does not prevent the CAC Act body payments in Schedule 2
being reduced.
36. Clause 11 is not operative at the time of tabling as no appropriations
for payment to CAC Act bodies have been provided. However the provision is
retained if required for future CAC Act body payments.
Part 3-Adjusting appropriation items
37. Part 3 of the Bill includes provisions to reduce the amounts specified
in Schedule 2.
Clause 12-Reducing State, ACT, NT and local government items and
administered items
38. Clause 12 provides for amounts of State, ACT, NT and local government
items and administered items not required at the end of the current year
to be extinguished. If the Government then decides that the amounts should
be spent in a later financial year, it must request Parliament to
appropriate these amounts in future Appropriation Acts.
39. Clause 12 limits the amount that may be applied for those items to the
amount reported in an agency's annual report. Subclause 12(1) provides
that if the amount published in the annual report is less than the amount
of the item, then the relevant item is taken to be reduced to the amount
specified in the annual report. The amount of the item specified in
Schedule 2 of the Bill may be increased or reduced by the other clauses of
Part 3 of the Bill or in accordance with sections 30 to 32 of the FMA Act.
The amount in the annual report must therefore be compared with the amount
for the item in Schedule 2 together with any adjustments that have been
made to that amount.
40. Subclause 12(2) retains a power for the Finance Minister to determine
that an amount published in the financial statements of an agency is taken
to be the amount specified in his or her determination. The power in
paragraph 12(2)(b) is to ensure that the amount published for the item can
be corrected if, for example, the amount is erroneous or requires updating
after an agency's annual report is published.
41. Subclause 12(3) provides that a determination made under
subclause 12(2) is a legislative instrument.
42. Despite subsection 44(2) of the Legislative Instruments Act 2003
(LI Act), which provides that instruments made under annual Appropriation
Acts are not subject to disallowance, subclause 12(3) provides that a
determination reducing a State, ACT, NT and local government items or an
administered item is subject to disallowance in accordance with section 42
of the LI Act. Parliament retains the power to disallow a determination to
reduce one or more of these items because the determination will reduce
the amount of an appropriation authorised by Parliament. Subclause 12(3)
also confirms subsection 54(2) of the LI Act, which provides that
instruments made under Appropriation Acts are not subject to sunsetting.
Clause 13-Reducing administered assets and liabilities items and other
departmental items
43. Administered assets and liabilities items and other departmental items
remain available until the appropriation is spent or reduced in accordance
with clause 13. This clause enables the Chief Executive of an agency to
comply with his or her obligations under section 44 of the FMA Act to
promote the efficient, effective and ethical use of any surplus
appropriations. Agencies should only spend all of an administered assets
and liabilities item or other departmental item if there are government
decisions to support that expenditure. Examples of where clause 13 may be
appropriate to reduce an administered assets and liabilities item or an
other departmental item include:
. an excessive amount of appropriation was made in error;
. an amount is reclassified and appropriated again under another kind of
appropriation (eg, where an amount appropriated as departmental is to
be reclassified as administered and a new administered appropriation
is provided). The existing appropriation remains legally available
even though there is no Government authority to spend the funds;
. efficiency savings result in a program costing less than expected; or
. a program is abolished under Government policy before the
appropriation is expended.
44. Paragraph 13(1)(a) enables the Minister responsible for an agency to
ask the Finance Minister to reduce an administered assets and liabilities
item or an other departmental item for that agency. Paragraph 13(1)(b)
enables the Chief Executive of an agency for which the Finance Minister is
responsible to ask the Finance Minister to reduce an administered assets
and liabilities item or an other departmental item for that agency.
Subclause 13(5) assists readers by noting that a request under subclause
13(1) is not a legislative instrument within the meaning of section 5 of
the LI Act.
45. Subclause 13(2) enables the Finance Minister to make a written
determination to reduce an administered assets and liabilities item or an
other departmental item. The Finance Minister is not obliged to act on a
request. However, if the Finance Minister does:
. the determination must not be greater than the amount specified in the
request: subclause 13(2);
. the determination may not reduce the item below nil: subclause 13(3);
and
. the item in Schedule 2 will be taken to be reduced in accordance with
the determination of the Finance Minister: subclause 13(4).
46. Subclause 13(6) provides that a determination made under
subclause 13(2) is a legislative instrument.
47. Despite subsection 44(2) of the LI Act, which provides that instruments
made under annual Appropriation Acts are not subject to disallowance,
subclause 13(6) provides that a determination reducing an administered
assets and liabilities item or other departmental item is subject to
disallowance in accordance with section 42 of the LI Act. Parliament
retains the power to disallow a determination to reduce one or more of
these items because any such determination will reduce the amount of an
appropriation authorised by Parliament. Subclause 13(6) also confirms
subsection 54(2) of the LI Act, which provides that instruments made under
Appropriation Acts are not subject to sunsetting.
Clause 14-Reducing CAC Act body payment items
48. Clause 14 provides a similar process for reducing CAC Act body payment
items to the process for reducing departmental items. Subclause 14(1)
enables a Minister responsible for a CAC Act body, or in the case of a CAC
Act body for which the Finance Minister is responsible, the Secretary of
the Finance Department, to ask the Finance Minister to reduce a CAC Act
body payment item for that body. Subclause 14(6) provides that a request
under subclause 14(1) is not a legislative instrument within the meaning
of section 5 of the LI Act.
49. Subclause 14(2) enables the Finance Minister to make a written
determination to reduce a CAC Act body payment item. The Finance Minister
is not obliged to act on a request to reduce excess CAC Act body payment
appropriations. However, if the Finance Minister does:
. the determination will not be greater than the amount specified in the
request: subclause 14(2);
. the determination may not reduce the CAC Act body payment item below
nil: subclause 14(3); and
. the CAC Act body payment item in Schedule 2 will be taken to be
reduced in accordance with the determination of the Finance Minister:
subclause 14(4).
50. Subclause 14(5) clarifies that the full amount that is required to be
paid to a CAC Act body by subclause 11(2) of the Bill may be reduced in
accordance with this clause 14.
51. Subclause 14(7) clarifies that a determination made under
subclause 14(2) is a legislative instrument.
52. Despite subsection 44(2) of the LI Act, which provides that instruments
made under annual Appropriation Acts are not subject to disallowance,
subclause 14(7) provides that a determination reducing a CAC Act body
payment item is subject to disallowance in accordance with section 42 of
the LI Act. Parliament retains the power to disallow a determination to
reduce a CAC Act body payment item because any such determination will
reduce the amount of an appropriation authorised by Parliament.
Subclause 14(7) also confirms subsection 54(2) of the LI Act, which
provides that instruments made under annual Appropriation Acts are not
subject to sunsetting.
Part 4-Miscellaneous
Clause 15-Crediting amounts to Special Accounts
53. Clause 15 provides that if the purpose of an item in Schedule 2 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 FMA Act by a determination of the
Finance Minister (section 20) or another Act (section 21). The
determination or Act that establishes the Special Account will specify the
purposes of the special account.
Clause 16-Conditions etc. applying to State, ACT, NT and local government
items
54. Clause 16 deals with Parliament's power under section 96 of the
Australian Constitution to provide financial assistance to the States.
Clause 16 delegates the power to the responsible Ministers listed in
Schedule 1 of the Bill, by providing the Ministers named in Schedule 1
with the power to determine:
. conditions under which payments to the States, the ACT and NT and
local councils may be made: paragraph 16(2)(a); and
. the amounts and timing of those payments: paragraph 16(2)(b).
55. Subclause 16(4) provides that determinations made under subclause 16(2)
are not legislative instruments, because these determinations are not
altering the appropriations approved by Parliament. Determinations under
subclause 16(2) will simply determine how appropriations for State, ACT,
NT and local government items will be paid. The determinations are issued
when required. However, payments can be made without either determination.
56. Although financial assistance is provided to the ACT, NT and local
government authorities without reference to section 96, those payments are
administered in the same way. Therefore the Ministers identified in
Schedule 1 may set the amounts and timing and impose terms and conditions
on those payments. Subclause 16(5) also notes that clause 16 will not
limit the powers of the Commonwealth under section 96 of the Constitution
to provide financial assistance to a State which is not appropriated by a
State, ACT, NT and local government item.
Clause 17-Appropriations of the Consolidated Revenue Fund
57. Clause 17 provides that the CRF is appropriated as necessary for the
purposes of the Bill. Significantly this clause notes that the amounts
appropriated by the Bill may be affected by the FMA Act, in particular
sections 30 to 32 of the FMA Act (see clause 6).
Schedule 1-Payments to or for the States, ACT, NT and local government
58. In accordance with clause 16, Schedule 1 lists the Ministers
responsible for determinations on payments to or for the States, ACT, NT
and local government.
Schedule 2-Services for which money is appropriated
59. Schedule 2 specifies the services for which amounts will be
appropriated by the Bill. Schedule 2 contains a table which lists the
total amounts for each portfolio and a summary table with further detail
for each portfolio. A separate summary table is included for each
portfolio together with other tables detailing the breakdown of the
appropriations for each agency.
60. Schedule 2 includes for information purposes a figure for the annual
Budget and Supplementary appropriations (the Budget comparator) and a
figure for previous financial year (the Actual Available Appropriation
comparator). The Budget comparator printed in italics under each
appropriation amount indicates the amounts provided by the annual
appropriation Acts on the occasion of the previous Budget plus the amounts
provided since that Budget by the supplementary estimates appropriation
Acts. The Actual Available Appropriation comparator printed in plain type
under each appropriation amount provides a full year comparison with the
proposed appropriations. Neither figure affects the amounts available at
law.
61. More details about the appropriations in Schedule 2 are contained in
the PSAES No. 2 and the second reading speech.[pic][pic][pic]