Explanatory Statement
Appropriation Act (No. 1) 2005-06, 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) 2005-2006”, dated 28 November 2005 and numbered 2 of 2005-2006.
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) 2005-06, the Advance to the Finance Minister 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:
(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 Appropriation Bill before the 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) 2005-06 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 12 of Appropriation Act (No. 1) 2005-06.
Purpose of the instrument
The instrument determines that the Administered Expenses, Outcome 3 appropriation for the Department of Foreign Affairs and Trade in Appropriation Act (No. 1) 2005-06 be increased by $10,000,000.
Background
The background to the instrument is provided in the application made by the Department of Foreign Affairs and Trade for funding from the Advance to the Finance Minister. The application is reproduced below.
APPLICATION FOR FUNDS - ADVANCE TO THE FINANCE MINISTER 2005-2006
Agency: Department of Foreign Affairs and Trade
Appropriation: Appropriation Act (No.1) 2005-2006
Description: Administered Expenses – Outcome 3
Description of Outcome: Public understanding in Australia and overseas of Australia’s foreign and trade policy and a positive image of Australia internationally.
Source of Available Funds | 2003-2004 | 2004-2005 | 2005-2006 |
$ | $ | $ | |
Appropriation Act (No1) Outcome 3 | 23,226,000 | 48,621,000 | 28,846,000 |
Section 8 Retention. Under the Outcome. | 7,500 | 1,889,492 | 519,829 |
Others. | 0 | 1,819,446 | 0 |
TOTAL FUNDS AVAILABLE. | 23,233,500 | 52,329,938 | 29,365,829 |
TOTAL EXPENDITURE. | 21,344,008 | 51,635,734 |
29,349,246
|
TOTAL UNSPENT FUNDS. | 1,889,492 | 694,204 | 16,583 |
Funds Required: $10,016,583
Funds Currently Unspent: $ 16,583
Amount required from AFM: $10,000,000
AFM Category: Appropriation Act (No. 1) 2005-2006 Part 3 12 (1) (b) (ii).
Explanation of requirements from AFM:
On the 2 September 2005, the Prime Minister approved a $A10 million donation to the American Red Cross for the provision of humanitarian assistance as a consequence of Hurricane Katrina. DFAT paid the due amount from its administered budget for outcome 3. The Prime Minister agreed that the department would be able to seek full supplementation for this payment at additional estimates. However, these funds will only become available once the next appropriation bill (PAES 2005-06) receives the Royal assent. Operational expenses related to outcome 3 need to be paid now and can not be deferred until this assent is received. The balance available for outcome 3 is now inadequate to cover known liabilities due for payment over the next few weeks. In particular, the final ABC Asia Television Pacific invoice will be received in early December 2005 for payment in 28 days in line with the contract payment terms.
In addition, administered outcome 3 is used to fund operational expenses for the discretionary grants program and includes salaries for AICHI Expo, Japan. Adequate levels of available appropriation are essential to meet these ongoing costs.
Urgent:
The contract between ABC TV and DFAT on behalf of the Australian Government states that invoices must be paid within 28 days. The department will received the final invoice for an approximate total value of $A9.3m. The Prime Minister approved funds of $10m for the American Red Cross donation with the department to be reimbursed accordingly. However, these funds will not be available until the next appropriation bill (PAES 2005-06) receives the Royal assent. DFAT liabilities against outcome 3 require settlement before this time and due to the $A10m donation payment, DFAT does not have sufficient funds to meet these payment obligations.
Unforeseen:
Prime Minister’s decision to donate $10 million to the American Red Cross could not have been foreseen by the department.
Notes on the instrument
The instrument provides that the appropriation item listed in column 1 for the Department of Foreign Affairs and Trade be increased by the amount listed in column 3. The instrument specifies that the additional amount is provided for the purpose of meeting ongoing operational expenses, following an unforeseen payment to the American Red Cross in response to the devastation caused by Hurricane Katrina in the United States of America.