Advance to the Finance Minister – section 12 of Appropriation Act (No. 1) 2004-2005 (No. 4 of 2004-2005) (DOTARS)

Administered by Department of Finance

Legislation au F2005L02024 Not in force Legislative Instrument

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Explanatory Statement

 

Appropriation Act (No. 1) 2004-05, Section 12 – 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 12 of Appropriation Act (No. 1) 2004-05”, dated 29 June 2005 and numbered 4 of 2004-2005.

The legislative authority under which the instrument is made

The Advance to the Finance Minister (the Advance) is a central contingency fund to provide urgent appropriation to agencies through the year where existing appropriation proves insufficient or a new appropriation is required. The Advance is authorised by the annual Appropriation Acts.

In Appropriation Act (No. 1) 2004-05, the contingency fund is provided for under section 12. 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 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 because:

(i)               Of an erroneous omission or understatement; or

(ii)               The additional expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Appropriation Bills before those Bills were introduced into the House of Representatives.

Exercise of the provision, via the issue of a determination, has effect as if Schedule 1 to  Appropriation Act (No. 1) 2004-05 were amended to make provision for the additional expenditure specified in the determination.

In an instrument dated 12 February 2003, the Minister for Finance and Administration 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 12 of Appropriation Act (No. 1) 2004-05.

Purpose of the instrument

The instrument determines that the administered expenses, Outcome 1 appropriation item for the Department of Transport and Regional Services in Appropriation Act (No. 1) 2004-05 be increased by $60,896,093. 

Background

The background to the instrument is provided in the application made by the Department of Transport and Regional Services for funding from the Advance to the Finance Minister.  The application is reproduced below.


APPLICATION FOR FUNDS - ADVANCE TO THE FINANCE MINISTER 2004-05

 

Agency:  Department of Transport and Regional Services 

Appropriation:  Appropriation Act (No. 1) 2004-05

Description:  Administered Expenses – Outcome 1

Description of Outcome:     A better transport system for Australia 

Source of Available Funds

2002-03

2003-04

2004-05

 

$

$

$

Appropriation Act No. 1

167,880,000

175,005,000

183,557,000

Appropriation Act No. 3

20,048,000

17,640,000

19,797,000

Appropriation Act No. 5

0

471,759,000

0

Retention from previous years

-

-

5,143,919.51

TOTAL FUNDS AVAILABLE

187,928,000

64,404,000

208,497,919.51

TOTAL EXPENDITURE

162,378,442

645,999,882

165,708,063.58

TOTAL UNSPENT FUNDS

25,549,558

18,404,118

42,789,855.93

 

Funds Required:   $ 103,685,948.84

Funds Currently Unspent:  $ 42,789,855.93

Amount required from AFM:  $ 60,896,092.91

AFM Category:  Appropriation Act (No. 1) 2004-05 Part 3 12 (1)(b)(ii)

Explanation of requirements from AFM:

This administered expense appropriation for Outcome 1 provides for a range of programmes, including: the Airport Lessee Companies – reimbursement of parking fees, Aviation security enhancements; Bass Strait Passenger Vehicle Equalisation Scheme; implementation of noise amelioration for Sydney and Adelaide Airports; contributions to various national and international organisations; Payment Scheme for Airservices Australia’s Enroute Charges; Remote Air Services Subsidy Scheme; Sydney West Airport – rental properties; Tasmanian Freight Equalisation and Wheat Freight Schemes; and the upgrade of the Mainline Interstate Railway Track programmes.

On 23 June 2005, the Government decided to provide a one-off grant to the Australian Rail Track Corporation of $100 million in 2004-05. Also, it is anticipated that invoices totalling up to $3.7 million for other administered programmes funded from the same appropriation will be processed before the end of the financial year which relate mainly to the three Tasmanian programmes. As DOTARS currently only has $42.8 million available, it is unable to make these payments, which total $103.7 million, and it is therefore seeking $60.9 million from the Advance to the Finance Minister to meet the shortfall.

 



Urgent:

The Government has decided to provide a one-off grant to the Australian Rail Track Corporation of
$100 million in 2004-05. DOTARS has insufficient remaining appropriation to make this payment and it therefore has an urgent need for cash to make up the deficit. The payments relating to the other items within the outcome, totalling up to $3.7 million must also be paid prior to 30 June because of programme commitments. In total, given that payments of $103.7 million must be made before the end of the financial year; an approval of $60.9 million from the Advance is required.

Unforeseen:

The need for the expenditure to occur arose as a result of the Government’s decision on 23 June 2005 to make an additional payment of $100 million to the Australian Rail Track Corporation in 2004-05. As that decision did not occur until after the finalisation of Appropriation Bill (No. 5) 2004-05, it was not possible to include this amount in that bill and the expenditure was therefore unforeseen.

 

Notes on the instrument

The instrument provides that the appropriation item listed in column 1 for the Department of Transport and Regional Services be increased by the amount listed in column 3.  The instrument specifies that the additional amount is provided for the purpose of providing a one-off grant to the Australian Rail Track Corporation. 

Overview

The Appropriation Act (No. 1) 2004-05 was enacted to provide for the appropriation of funds for the Commonwealth of Australia for the financial year 2004-05 and for related purposes. This Act addresses the need for a contingency fund that can provide urgent appropriations to agencies where existing appropriations are insufficient or new appropriations are required. The Advance to the Finance Minister, authorised under Section 12 of the Act, serves as this contingency fund, enabling the Finance Minister to issue additional appropriations up to a limit of $175 million if certain conditions are met. These conditions include the existence of an urgent need for expenditure that is not provided for or is insufficiently provided for in the appropriation schedules, and the additional expenditure being unforeseen due to an erroneous omission, understatement, or unforeseen circumstances after the last practicable day to include it in the appropriation bills. The policy objective of this Act is to ensure that the Commonwealth can meet urgent and unforeseen expenditure needs effectively, thereby maintaining the operational capacity of government agencies. The instrument, dated 29 June 2005, authorises an increase in the administered expenses, Outcome 1 appropriation item for the Department of Transport and Regional Services by $60,896,093 to cover urgent payments, including a one-off grant to the Australian Rail Track Corporation and other commitments. This provision was necessitated by the urgent need to make payments that were unforeseen at the time of the appropriation bill's finalisation, highlighting the critical role of the Advance to the Finance Minister in managing fiscal contingencies.

Scope and Application

The Advance to the Finance Minister, as authorised by section 12 of the Appropriation Act (No. 1) 2004-05, serves as a central contingency fund to provide urgent appropriation to agencies when existing funds prove insufficient or when new appropriations are necessary. The Act allows for an advance of up to $175 million to be issued to the Finance Minister if there is an urgent need for expenditure not adequately covered in Schedule 1 of the Act due to erroneous omissions, understatements, or unforeseen circumstances that arose after the appropriation bills were introduced. The issuance of funds from this advance effectively amends Schedule 1 to include the additional expenditure. The exercise of this provision is delegated to the SES Band 2 officer in the Financial Reporting and Cash Management Division of the Department of Finance and Administration, as per a 2003 instrument. In this specific case, the instrument increases the administered expenses for Outcome 1 of the Department of Transport and Regional Services by $60,896,093 to cover urgent payments including a $100 million grant to the Australian Rail Track Corporation and other commitments such as the Bass Strait Passenger Vehicle Equalisation Scheme and the Tasmanian Freight Equalisation and Wheat Freight Schemes. This urgent need arose as these expenditures were unforeseen until after the appropriation bills were finalised, thereby necessitating an appropriation from the Advance to the Finance Minister.

Key Provisions

The primary operative sections of the Appropriation Act (No. 1) 2004-05, particularly Section 12, establish the framework for issuing an advance to the Finance Minister from a central contingency fund. This fund is intended to cover urgent expenditures not accounted for or inadequately provided for in the existing appropriation schedules. Section 12 specifies that the Finance Minister may authorise such an advance up to $175 million if they are satisfied that the expenditure is both urgent and not provided for in Schedule 1 of the Act (either due to an omission or because the need was unforeseen until after the last practicable opportunity to include it in the appropriation bills). This determination effectively amends Schedule 1 to include the specified additional expenditure. The Act imposes several obligations on the relevant parties, particularly the Finance Minister and the Department of Transport and Regional Services. The Finance Minister must ensure that any advance issued from the contingency fund is justified by an urgent need for expenditure that is not adequately covered in the appropriation schedules. This determination must be made based on specific criteria, such as an erroneous omission or an unforeseen need. Additionally, the Minister must ensure that the advance does not exceed the specified limit of $175 million. The Department of Transport and Regional Services, on the other hand, must provide a detailed application for the funds, including a justification for the urgency and unforeseen nature of the required expenditure. They must also demonstrate that the expenditure is necessary and falls within the scope of the Act. Failure to comply with the provisions of the Act, or misuse of the contingency fund, can lead to various civil or criminal consequences. While the Act does not explicitly detail the penalties for breaches, general legal principles suggest that unauthorised or improper use of public funds could result in legal action. The Minister for Finance and Administration, who is responsible for overseeing the contingency fund, has also authorised a specific official in the Department of Finance and Administration to exercise the power provided for under Section 12. Any misuse of this authority could lead to disciplinary action or other consequences as determined by the relevant governing bodies.

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