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Appropriation (Parliamentary Departments) Bill (No. 1) 2009-2010

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2009

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

 

Appropriation (Parliamentary Departments) Bill (No. 1) 2009-2010

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

(Circulated by the authority of the Minister for Finance and Deregulation,

the Honourable Lindsay Tanner MP)

 



Appropriation (Parliamentary Departments) Bill (No. 1) 2009-2010

General Outline

1                     This explanatory memorandum accompanies Appropriation (Parliamentary Departments) Bill (No. 1) 2009-2010 (the Bill).

2                     The main purpose of the Bill is to make annual appropriations from the Consolidated Revenue Fund (CRF) for expenditure in relation to the Parliamentary Departments. Appropriations for the Parliamentary Departments are not for the ordinary annual services of the Government.

3                     This Explanatory Memorandum should be read in conjunction with the 2009-2010 Portfolio Budget Statements (PBS) for the Parliamentary Departments which contain details of the appropriations set out in Schedule 1 to the Bill. The PBS are published and tabled in the Parliament together with the Bill.

Structure of appropriations in the Bill

4                     The Bill provides for the appropriation of specified amounts for expenditure by the Parliamentary Departments.

5                     Part 1 of the Bill deals with definitions, the interpretative role of the PBS and the concept of notional payments.

6                     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), administered assets and liabilities items (clause 9) and other departmental items (clause 10).

7                     Part 3 of the Bill specifies the ways in which the amounts in Schedule 1 may be adjusted. In addition to the adjustment provisions in Part 3, clause 15 of the Bill recognises that the appropriations in the Bill may also be varied by the Financial Management and Accountability Act 1997 (FMA Act).

8                     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 15, of the Bill, which provides that the CRF is appropriated as necessary for the purposes of the Bill, recognises that the appropriations in the Bill may also be varied by the FMA Act.

Financial Impact

9                     This Bill will appropriate the amounts specified in Schedule 1.



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 (Parliamentary Departments) Act (No. 1) 2009-2010 .

Clause 2—Commencement

2                     Clause 2 provides for the Bill to commence as an Act on the day on which it receives Royal Assent.

Clause 3— Definitions

3                     Clause 3 defines the key terms used in the Bill, such as “administered item”, “departmental item” and “current year”. Each Parliamentary Department is an agency for the purposes of the FMA Act.

Clause 4—Portfolio Statements

4                     Clause 4 declares that PBS 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 PBS is to provide information of the proposed allocation of resources to outcomes of an FMA Act agency. The PBS 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

5                     Clause 5 ensures that payments between agencies result in a reduction of the available 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.

6                     Clause 5 provides that these notional payments between agencies are to be treated as if they were real payments. The effect is that when a notional payment 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

7                     Clause 6 sets out the total of the appropriations in the Bill. Importantly, the amounts in Schedule 1 may be adjusted under the provisions in Part 3 of the Bill. Specifically :

·          Departmental items, administered assets and liabilities items and other departmental items may be reduced in accordance with clause 11.

·          Administered items may be reduced in accordance with clause 12.

·          Items may be increased by a payment from the advance to the responsible Presiding Officer in accordance with clause 13.

8                     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 a Parliamentary Department 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 a mounts recovered by a Parliamentary Department 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 a Parliamentary Department , 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—Departmental items

9                     Clause 7 provides that the amount specified in a departmental item for a Parliamentary Department may be applied for the departmental expenditure of the Parliamentary Department. Clause 3 defines:

·          ‘departmental item’ to be the total amount set out in Schedule 1 in relation to a Parliamentary Department under the heading “Departmental Outputs”; and

·          ‘expenditure’ to be payments for expenses, acquiring assets, making loans or paying liabilities.

10                 While the departmental outputs in Schedule 1 are divided between outcomes, the different amounts against outcomes are notional. The total appropriation for departmental expenses represents the departmental item.

11                 Departmental items involve costs over which a Parliamentary Department has control. Departmental appropriations can be used to make any payment related to the functions of the Parliamentary Department. Expenditure typically covered by departmental items includes employee expenses; suppliers; and other operational expenses (eg, replacement and maintenance of existing departmental assets).

12                 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 reduced in accordance with clause 11 of this Bill. 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.

13                 The Finance Minister manages the payment from departmental items by the Parliamentary Departments 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.

14                 Amounts appropriated for departmental outputs can be subject to a reduction process in accordance with clause 11 of the Bill. Under clause 11, the responsible Presiding Officer for a Parliamentary Department may make a written request to ask the Finance Minister to make a determination to reduce a Parliamentary Department’s departmental appropriation.

Clause 8—Administered items

15                 Subclause 8(1) provides for the appropriation of administered expense amounts to be applied by a Parliamentary Department 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 a Parliamentary Department 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.

16                 The appropriations for administered items in Schedule 1 represent the amounts required to meet the total estimated expenses for the administered outcomes for 2009-2010.

17                 The purposes for which each administered item can be spent are set out in subclause 8(2). Subclause 8(2) provides that where the PBS 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.

18                 Administered expenses are those administered by a Parliamentary Department . 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.

19                 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

20                 Clause 9 provides amounts in Schedule 1 to acquire new administered assets, enhance existing administered assets and/or discharge administered liabilities relating to activities administered by the Parliamentary Departments. Administered assets and liabilities appropriations are provided for functions managed by a Parliamentary Department. Administered assets and liabilities items can also be applied for any outcomes of a Parliamentary Department.

21                 Clause 11 ensures that Parliamentary Departments only have access to the amount of appropriation required to fund activities in the year. Amounts appropriated for administered assets and liabilities items can be subject to a reduction process in accordance with clause 11 of the Bill. Under clause 11, the responsible Presiding Officer for a Parliamentary Department may make a written request to ask the Finance Minister to make a determination to reduce an administered assets and liabilities item of a Parliamentary Department.

22                 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 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

23                 Clause 10 appropriates departmental non-operating appropriations in the form of equity injections, loans or previous years’ outputs, over which the Parliamentary Departments also exercise control. This clause provides that the amount specified in other departmental items for a Parliamentary Department may be applied for the departmental expenditure of the Parliamentary Department. 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.

24                 Other departmental items are not expressed in terms of a particular financial year and do not automatically lapse. Other d epartmental items are available until they are spent or reduced in accordance with clause 11. 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 an other d epartmental item can be subject to a reduction process in accordance with clause 11 of the Bill.

25                 The Finance Minister manages the payment from other department items by Parliamentary Departments 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.

Part 3—Adjusting appropriation items

Clause 11—Reducing departmental items, administered assets and liabilities items and other departmental items

26                 Departmental items, administered assets and liabilities items and other departmental items remain available until the appropriations are spent or reduced in accordance with clause 11. This clause enables the responsible Presiding Officer of a Parliamentary Department 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. Parliamentary Departments should only spend all of a departmental item if there are government decisions to support that expenditure. Examples of where clause 11 may be appropriate to reduce one of these items 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 authority to spend the funds;

·          efficiency savings result in a program costing less than expected; or

·          a program is abolished before the appropriation is expended.

27                 Subclause 11(1) enables the responsible Presiding Officer for a Parliamentary Department to ask the Finance Minister to reduce one of these items for that Parliamentary Department . Subclause 11(5) assists readers by noting that a request under subclause 11(1) is not a legislative instrument.

28                 Subclause 11(2) enables the Finance Minister to make a written determination to reduce one of those items. 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 11(2);

·          the determination may not reduce the item below nil: subclause 11(3); and

·          the item in Schedule 1 will be taken to be reduced in accordance with the determination of the Finance Minister: subclause 11(4).

29                 Subclause 11(6) provides that a determination made under subclause 11(2) is a legislative instrument.

30                 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 11(6) provides that a determination reducing an item under subclause 11(2) 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(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 12—Reducing administered items

31                 Clause 12 provides a process for amounts of administered items not required during the financial year 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.

32                 Clause 12 limits the amount that may be applied for an administered item to the amount reported for that item in a Parliamentary Department’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 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 adjustments that have been made to that amount.

33                 Subclause 12(2) retains a power for the Finance Minister to determine that an amount published in the financial statements of a Parliamentary Department 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 administered item can be corrected if, for example, the amount is erroneous or requires updating after the annual report is published.

34                 Subclause 12(3) provides that a determination made under subclause 12(2) is a legislative instrument.

35                 Despite subsection 44(2) of the LI Act , which provides that instruments made under annual Appropriation Acts are not subject to disallowance, subclause 12(3) provides that a determination reducing 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 an administered item because any such determination will reduce the amount of an appropriation authorised by Parliament. Subclause 11(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 13—Advance to the responsible Presiding Officer

36                 Clause 13 provides an advance to the responsible Presiding Officer for each of the Parliamentary Departments to be allocated where he or she is satisfied that there is an urgent need for expenditure during the 2009-2010 financial year, for which Schedule 1 does not provide a sufficient appropriation.

37                 Subclause 13(1) establishes the criteria that the responsible Presiding Officer must be satisfied about before he or she may determine to add an amount from the advance to an item of a Parliamentary Department. The responsible Presiding Officer will only consider issuing an amount under subclause 13(1) if he or she is satisfied there is an urgent need for expenditure that is not provided for, or is insufficiently provided for, in Schedule 1 because of an omission or understatement or because of unforeseen circumstances. Generally the other appropriation adjustment options in Part 3 of the Bill or under sections 30 to 32 of the FMA Act must have been exhausted before the responsible Presiding Officer will make a determination under subclause 13(2).

38                 Subclause 13(2) enables the responsible Presiding Officer to make a determination to allocate an amount out of the advance to an item in Schedule 1, to a new item not already in Schedule 1, or to a new outcome. Subclauses 13(3) to (5) cap the amounts that can be allocated from the advance to each of the Parliamentary Departments.

39                 Subclause 13(6) provides that a determination under subclause 13(2) is a legislative instrument, which must be tabled in Parliament but is not subject to disallowance or sunsetting.

40                 Disallowance of a subclause 13(2) determination could frustrate the purpose of clause 13 which is to provide additional appropriations for urgent expenditure. Parliament authorises the advance to the responsible Presiding Officer under clause 13 so that there is an amount available to cover any potential urgent requirements that may arise. A subclause 13(2) determination will not require any additional appropriations to be authorised by Parliament. A subclause 13(2) determination also differs from a ministerial determination under clause 11 or 12. Determinations under those clauses will reduce the amount of an appropriation approved by Parliament. As noted above, those other determinations therefore will be subject to disallowance.

41                 A subclause 13(2) determination is not subject to sunsetting provisions because the amount allocated from the advance to the responsible Presiding Officer will be extinguished when it is spent. Further, if the determination did expire after a period, then the recipient of the money paid from the advance to the responsible Presiding Officer would be liable to repay that money as if the amount had not been appropriated in the first place.

Part 4—Miscellaneous

Clause 14—Crediting amounts to Special Accounts

42                 Clause 14 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 15—Appropriations of the Consolidated Revenue Fund

43                 Clause 15 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

44                 Schedule 1 specifies the services of the Parliamentary Departments for which amounts will be appropriated. Schedule 1 contains a summary table detailing the total appropriations for the Parliamentary Departments and separate tables that break down the appropriations for each Parliamentary Departments.

45                 Schedule 1 includes for information purposes a figure for the previous financial year, labelled the ‘Actual Available Appropriation’. That figure is printed in italics under each appropriation amount to provide a comparison with the proposed appropriations. The Actual Available Appropriation does not affect the amounts available at law.

46                 More details about the appropriations in Schedule 1 are contained in the Budget Papers and the PBS.