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2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Appropriation (economic security strategy) Bill (No. 1) 2008-2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Finance and Deregulation,
the Honourable Lindsay Tanner MP)
Appropriation (economic security strategy) Bill (No. 1) 2008-2009
General Outline
This explanatory memorandum accompanies Appropriation (Economic Security
Strategy) Bill (No. 1) 2008-2009 (the Bill).
The main purpose of the Bill is to propose annual appropriations from the
Consolidated Revenue Fund (CRF) for the ordinary annual services of the
Government in relation to the Economic Security Strategy.
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. Other annual
appropriations in relation to the Economic Security Strategy that are not
for the ordinary annual services of the Government are proposed in
Appropriation (Economic Security Strategy) Bill (No. 2) 2008-2009.
This Explanatory Memorandum should be read in conjunction with the 2008-
2009 Portfolio Budget Statements (PB Statements) and Portfolio
Supplementary Estimates Statements (PSES). In particular, the PSES contain
details of the appropriations set out in Schedule 1 to the Bill. The
PB Statements were published and tabled with the Appropriation Bill (No. 1)
2008-2009 and Appropriation Bill (No. 2) 2008-2009. The PSES are published
and tabled in the Parliament together with the Bill.
Structure of appropriations in the Bill
The Bill provides for the appropriation of specified amounts for
expenditure by three Australian Government agencies (being those under the
Financial Management and Accountability Act 1997 (FMA Act) on activities
related to the Economic Security Strategy).
Part 1 of the Bill deals with definitions, PB Statements, PSES and the
concept of notional payments. 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 payments to bodies under the
Commonwealth Authorities and Companies Act 1997 (CAC Act body payment
items) (clause 9).
Part 3 of the Bill specifies the ways in which the amounts in Schedule 1
may be adjusted.
Part 4 deals with special accounts and sets out the amount appropriated
under the Act. In addition to the adjustment provisions in Part 3,
clause 14 of the Bill recognises that the appropriations in the Bill may
also be varied by the FMA Act.
Financial Impact
This Bill will appropriate the amounts specified in Schedule 1.
Notes on clauses
Part 1-Preliminary
Clause 1-Short title
This clause specifies the short title of the Bill, once enacted, will be
Appropriation (Economic Security Strategy) Act (No. 1) 2008-2009.
Clause 2-Commencement
Clause 2 provides for the Bill to commence as an Act on the day of Royal
assent.
Clause 3-Definitions
Clause 3 defines the key terms used in the Bill, such as 'administered
item', 'departmental item' and 'current year' (being the financial year
ending on 30 June 2009).
Clause 4-Portfolio Statements
Clause 4 declares that Portfolio Budget Statements (PB Statements) and
Portfolio Supplementary Estimates Statements (PSES) 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
PB Statements and PSES are to provide information on the proposed
allocation of resources to Government outcomes by agencies within the
portfolio. The PB Statements and PSES 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
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 1 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.
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
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 the
provisions in Part 3 of the Bill. Specifically:
. Departmental items may be reduced in accordance with clause 10.
. Administered items may be reduced in accordance with clause 11.
. CAC Act body payment items may be reduced in accordance with
clause 12.
The amounts in Schedule 1 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 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.
. 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, 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-Departmental items
Clause 7 provides that the amount specified in a departmental item for an
agency may be applied for the departmental expenditure of the agency.
Clause 3 defines:
. 'departmental item' to be the total amount set out in Schedule 1 in
relation to an agency under the heading 'Departmental Outputs'; and
. 'expenditure' to be payments for expenses, acquiring assets, making
loans or paying liabilities.
While the departmental outputs 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.
Departmental items involve costs over which an agency has control.
Departmental appropriations can be used to make any payment related to the
functions of the agency. Expenditure typically covered by departmental
items includes employee expenses, suppliers and other operational expenses
(eg, replacement and maintenance of existing departmental assets). There
can also be occasions when an agency, 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).
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. Because the cash to meet expenses such as employee
entitlements can be required at times other than when the expenses are
incurred, the departmental appropriations remain available until required.
The Finance Minister manages the payment from departmental 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.
Amounts appropriated for departmental outputs can be subject to a reduction
process in accordance with clause 10 of the Bill. The reduction
arrangements were first introduced in the Additional Estimates
Appropriations Acts for 2003-2004, to enable appropriations that are no
longer required to be reduced. Under clause 10, the Minister responsible
for an agency may make a written request to ask the Finance Minister to
make a determination to reduce the agency's departmental appropriation.
Clause 8-Administered items
Subclause 8(1) provides for the appropriation of administered expense
amounts to be applied by an agency for the purpose of contributing to the
outcome for an administered item. An administered item is defined in
clause 3 to be the amounts set out in Schedule 1 opposite an outcome for an
agency under the heading "Administered Expenses". Administered expenses are
appropriated separately for outcomes (ie, unlike departmental items, the
split across outcomes is not notional), making it clear what the funding is
intended to achieve. Schedule 1 specifies how much can be expended on each
outcome.
The appropriations for administered items in Schedule 1 represent the
amounts required to meet the total estimated expenses for the administered
outcomes for 2008-2009 in relation to the Economic Security Strategy.
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 or
PSES 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).
Administered expenses are those 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 11 for dealing with administered items
that are not fully expensed or spent during the financial year.
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-CAC Act body payment items
Clause 9 provides for direct appropriations of money for CAC Act bodies to
be paid from the CRF by the relevant department. Clause 9 provides that
payments for CAC Act bodies must be paid to those bodies to be used for the
purposes of those bodies.
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.
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.
Subclause 9(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 9(2) is to
clarify that subclause 9(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.
The full amount of the CAC Act body payments specified in Schedule 1 may be
reduced in accordance with clause 12. Subclause 12(5) provides that
subclause 9(2) does not prevent the CAC Act body payments in Schedule 1
being reduced.
Part 3-Adjusting appropriation items
Part 3 of the Bill includes provisions to reduce the amounts specified in
Schedule 1.
Clause 10-Reducing departmental items
Departmental items remain available until the appropriation is spent or
reduced in accordance with clause 10. 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 a
departmental item if there are government decisions to support that
expenditure. Examples of where clause 10 may be appropriate to reduce a
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 departmental 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.
Paragraph 10(1)(a) enables the Minister responsible for a particular agency
to ask the Finance Minister to reduce a departmental item for that agency.
Paragraph 10(1)(b) enables the Chief Executive of an agency for which the
Finance Minister is responsible to ask the Finance Minister to reduce a
departmental item for that agency. Subclause 10(5) assists readers by
noting that a request under subclause 10(1) is not a legislative instrument
within the meaning of section 5 of the Legislative Instruments Act 2003 (LI
Act).
Subclause 10(2) enables the Finance Minister to make a written
determination to reduce a departmental item. The Finance Minister is not
obliged to act on a request to reduce excess departmental output
appropriations. However, if the Finance Minister does:
. the determination must not be greater than the amount specified in the
request: subclause 10(2);
. the determination may not reduce the departmental item below nil:
subclause 10(3); and
. the departmental item in Schedule 1 will be taken to be reduced in
accordance with the determination of the Finance Minister:
subclause 10(4).
Subclause 10(6) provides that a determination made under subclause 10(2) is
a legislative instrument.
Despite subsection 44(2) of the LI Act, which provides that instruments
made under annual Appropriation Acts are not subject to disallowance,
subclause 10(6) provides that a determination reducing a 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 a
departmental item because any such determination will reduce the amount of
an appropriation authorised by Parliament. Subclause 10(6) also confirms
subsection 54(2) of the LI Act, which provides that instruments made under
annual Appropriation Acts are not subject to sunsetting.
Clause 11-Reducing administered items
Clause 11 provides for amounts of administered items not required in later
years to be extinguished. If the Government then decides that amounts
should be spent in a later financial year, the Government must request
Parliament to appropriate these amounts in future appropriation bills.
Clause 11 limits the amount that may be applied for an administered item to
the amount reported for that item in an agency's annual report.
Subclause 11(1) provides that if the amount published in the annual report
is less than the amount of the item, then the administered item is taken to
be reduced to the amount specified in the annual report. The amount of the
item specified in Schedule 1 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 1 together with any other
adjustments that have been made to that amount.
Subclause 11(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 11(2)(b) is to ensure that the amount published for the
administered item can be corrected if, for example, the amount is erroneous
or requires updating after the annual report is published.
Subclause 11(3) provides that a determination made under subclause 11(2) is
a legislative instrument.
Despite subsection 44(2) of the LI Act, which provides that instruments
made under annual Appropriation Acts are not subject to disallowance,
subclause 11(3) provides that a determination regarding 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
a departmental item because any such determination will reduce the amount
of an appropriation authorised by Parliament. Subclause 11(3) also confirms
subsection 54(2) of the LI Act, which provides that instruments made under
annual Appropriation Acts are not subject to sunsetting.
Clause 12-Reducing CAC Act body payment items
Clause 12 provides a similar process for reducing CAC Act body payment
items to the process for reducing departmental items. Subclause 12(1)
enables a Minister responsible for a CAC Act body, or in the case of a CAC
Act body who the Finance Minister is responsible for, the Secretary of the
Finance Department, to ask the Finance Minister to reduce a CAC Act body
payment for that body. Subclause 12(6) provides that a request under
subclause 12(1) is not a legislative instrument within the meaning of
section 5 of the LI Act.
Subclause 12(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 payments.
However, if the Finance Minister does:
. the determination will not be greater than the amount specified in the
request: subclause 12(2);
. the determination may not reduce the CAC Act body payment item below
nil: subclause 12(3); and
. the CAC Act body payment item in Schedule 1 will be taken to be
reduced in accordance with the determination of the Finance Minister:
subclause 12(4).
Subclause 12(5) clarifies that the full amount that is required to be paid
to a CAC Act body by subclause 9(2) of the Bill may be reduced in
accordance with this clause 12.
Subclause 12(7) clarifies that a determination made under subclause 12(2)
is a legislative instrument.
Despite subsection 44(2) of the LI Act, which provides that instruments
made under annual Appropriation Acts are not subject to disallowance,
subclause 12(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 departmental item because any such determination will reduce the
amount of an appropriation authorised by Parliament. Subclause 12(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 13-Crediting amounts to Special Accounts
Clause 13 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 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 14-Appropriations of the Consolidated Revenue Fund
Clause 14 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-Services for which money is appropriated
Schedule 1 specifies the appropriations proposed for the ordinary annual
services of the Government. Schedule 1 contains a summary table detailing
the total appropriations for each portfolio. A separate summary table is
included for each portfolio together with other tables detailing the
breakdown of the appropriations within each portfolio.
Schedule 1 includes for information purposes a figure for the annual Budget
appropriations (the 'Budget comparator') and a figure for previous
financial year (the 'Actual Available Appropriation'). The Budget
comparator printed in italics under each appropriation amount indicates the
amounts provided by the annual appropriation Acts following the previous
Budget. The Actual Available Appropriation 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.
More details about the appropriations in Schedule 1 are contained in the
PB Statements, PSES and the second reading speech.[pic][pic][pic]