Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Appropriation (economic security strategy) Bill (No. 2) 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. 2) 2008-2009
General Outline
This explanatory memorandum accompanies Appropriation (Economic Security
Strategy) Bill (No. 2) 2008-2009 (the Bill).
The main purpose of the Bill is to propose annual appropriations from the
Consolidated Revenue Fund (CRF) for services that are not the ordinary
annual services of the Government in relation to the Economic Security
Strategy.
To comply with sections 53 and 54 of the Australian Constitution, proposed
annual appropriations for the ordinary annual services of the Government in
relation to the Economic Security Strategy are contained in a separate
bill, Appropriation (Economic Security Strategy) Bill (No. 1) 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 2 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 one Australian Government agency (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 2 such as for the State, ACT, NT
and local government items (clause 7).
Part 3 of the Bill specifies the ways in which the amounts in Schedule 2
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 17 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 2.
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. 2) 2008-2009.
Clause 2-Commencement
Clause 2 provides for the Bill to commence as an Act on the day of the
Royal assent.
Clause 3-Definitions
Clause 3 defines the key terms used in the Bill, such as 'administered
assets and liabilities item', 'administered item', 'CAC Act body payment
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
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 is 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 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.
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 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.
. CAC Act body payment items may be reduced in accordance with
clause 14.
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, 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
Clause 7 provides administered appropriations for financial assistance to
the States, ACT, NT and local governments. 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.
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.
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
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
the amounts set out in Schedule 2 opposite an outcome for an agency under
the heading "Administered Expenses". As with administered items in
Appropriation (Economic Security Strategy) Act (No. 1) 2008-2009, the
administered expenses in the Bill are appropriated separately for outcomes
to make clear what the funding is intended to achieve. Schedule 2
specifies how much may be expended on each outcome.
The appropriations for administered items in Schedule 2 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.
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
Clause 9 provides amounts in Schedule 2 to acquire new administered assets,
enhance existing administered assets and/or discharge administered
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 any
outcomes of the agency (ie. the outcomes in the Bill or Appropriation
(Economic Security Strategy) Act (No. 1) 2008-2009).
Amounts appropriated for administered assets and liabilities items can be
subject to a reduction process in accordance with clause 13 of the Bill.
Under clause 13, the Minister responsible for an agency may make a written
request to ask the Finance Minister to make a determination to reduce an
item of an agency.
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
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.
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.
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
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 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 from the CAC Act
bodies. The Finance Minister manages payments from CAC Act body payment
items by agencies through the issuing of drawing rights under 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. CAC Act bodies hold the amounts paid to them on their own
account
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 other 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 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.
Part 3-Adjusting appropriation items
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
Clause 12 provides for amounts of State, ACT, NT and local government items
and administered items not required in later years 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.
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.
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.
Subclause 12(3) provides that a determination made under subclause 12(2) is
a legislative instrument
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
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.
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.
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).
Subclause 13(6) provides that a determination made under subclause 13(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 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 of these item
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
Clause 14 provides a similar process for reducing CAC Act body payment
items to the process in clause 13 for reducing administered assets and
liabilities items and other departmental items. Subclause 14(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 14(6) assists readers by noting that a request
under subclause 14(1) is not a legislative instrument within the meaning of
section 5 of the LI Act.
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 payments.
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).
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.
Subclause 14(7) provides that a determination made under subclause 14(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 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 because the 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
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
Clause 16 delegates Parliament's power under section 96 of the Constitution
to provide financial assistance to the States to the responsible Minister
listed in Schedule 1 of the Bill. Clause 16 provides 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).
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.
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
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
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
Schedule 2 specifies the appropriations for services other than the
ordinary annual services of the Government. Schedule 2 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 2 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 2 are contained in the PB
Statements, PSES and the second reading speech.[pic][pic][pic]