Explanatory Statement
Appropriation Act (No. 1) 2007-2008, Section 11 – Advance to the Finance Minister
The instrument to which this explanatory statement relates
This explanatory statement relates to an instrument (the instrument) entitled “Advance to the Finance Minister – Section 11 of Appropriation Act (No. 1) 2007-2008”, dated 27 July 2007 and numbered 2 of 2007-2008.
The legislative authority under which the instrument is made
The Advance to the Finance Minister is a provision authorised by the annual Appropriation Acts and made available to the Finance Minister as a central contingency fund to provide urgent funding to agencies throughout the financial year.
In Appropriation Act (No. 1) 2007-2008, the Advance to the Finance Minister is provided for under section 11. This section indicates that amounts can be issued from the Advance to the Finance Minister, up to a limit of $175 million, if the Finance Minister is satisfied that:
(a) There is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, in Schedule 1 (which sets out the amounts appropriated); and
(b) The additional expenditure is not provided for, or is insufficiently provided for, in Schedule 1:
(i) Because of an erroneous omission or understatement; or
(ii) Because the additional expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Bill for this Act before that Bill was introduced into the House of Representatives.
Exercise of the provision via the issue of a determination, has effect as if Schedule 1 of Appropriation Act (No. 1) 2007-2008 were amended to make provision for the additional expenditure specified in the determination.
In an instrument dated 12 February 2003, the Finance Minister has authorised the person holding the position of SES Band 2, Financial Reporting and Cash Management Division in the Department of Finance and Administration to exercise the power provided for under section 11 of Appropriation Act (No. 1) 2007-2008.
Purpose of the instrument
The instrument determines that the Administered Expenses – Outcome 9 appropriation for the Department of Health and Ageing in Appropriation Act (No. 1) 2007-2008 be increased by $3,204,267.
Background
The background to the instrument is provided in the application made by the Department of Heath and Ageing for funding from the Advance to the Finance Minister. The application is reproduced below.
APPLICATION FOR FUNDS - ADVANCE TO THE FINANCE MINISTER 2007-2008
Agency: Department of Health and Ageing
Appropriation: Appropriation Act (No. 1) 2007-2008
Description: Administered expenses – Outcome 9
Description of Outcome: Private Health – A viable private health industry to improve the choice of health services for Australians
Source of Available Funds | 2005-2006 | 2006-2007 | 2007-2008 |
$ | $ | $ | |
Appropriation Act (No. 1) | - | 8,065,000 | 11,840,000 |
Appropriation Act (No. 3) | - | - | - |
Savings | - | (200,000) | - |
Prior Year Section 8 Retention | - | - | - |
TOTAL FUNDS AVAILABLE | - | 7,865,000 | 11,840,000 |
|
|
|
|
TOTAL EXPENDITURE | - | 3,428,510 | 11,753,482 |
|
|
|
|
TOTAL UNSPENT FUNDS | - | 4,436,490 | 86,518 |
Funds Required: $3,290,785
Funds Currently Unspent: $86,518
Amount required from AFM: $3,204,267
AFM Category:
Appropriation Act (No. 1) 2007 –2008 Part 3 11 (1) (b) (ii)
Explanation of requirements from AFM:
In 2006-07, $4.4m of expenses were incurred by Outcome 9 for media advertising that required payment within the standard terms of the Commonwealth - ie early July 2007. The available funds from the 2007-08 appropriation have been used to pay those liabilities.
In addition, additional payments have been made in early July 2007 to meet other media advertising commitments. A total of $11.8 million of payments have already been made in July 2007, however, a further $3.3 million of payments are required to be made by the end of July 2007 to meet contract commitments.
Completion of the 2006-07 Section 8 determination will not occur in sufficient time to provide funds to meet the required payment dates for the remaining $3.3 million of liabilities. It is estimated that the 2006-07 Section 8 determination will provide $4.4 million in appropriation to meet 2006-07 liabilities. The balance of the estimated 2006-07 Section 8 retention ($1.1 million) can be made available in the normal course of events to meet later payment commitments, however, the Department seeks $3.3 million of these funds immediately to make the required payments.
The payments for contract obligations cannot be delayed as this would be outside the standard terms of trade and penalties would apply for late payment.
Urgent:
The Department is required to make payments of $3.3 million by the end of July 2007 in accordance with the contract and insufficient funds are currently available to allow this to occur. As at 26 July 2007, the Department has funding available of $86,518.
Late payments could affect the credibility of the Commonwealth and penalties will apply for late payment.
Unforeseen:
The Department did not anticipate the short time-frame for payment and therefore did not request additional appropriations or make advance payments in 2006-07.
Signed By Assistant Secretary – Budget Branch
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NAME: (block capitals please) | LINDA POWELL |
SIGNATURE: |
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DATE: | 27/07/07 |