Advance to the Finance Minister – Section 13 of Appropriation Act (No. 1) 2009-2010 (No. 6 of 2009-2010)

Explanatory Statement

Appropriation Act (No. 1) 2009-2010, Section 13 – 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 13 of Appropriation Act (No. 1) 2009-2010”, dated 22 June 2010 and numbered 6 of 2009-2010.

The legislative authority under which the instrument is made

The Advance to the Finance Minister (AFM) is a provision contained in the annual Appropriation Acts. It enables the Finance Minister to facilitate urgent and unforeseen expenditure that was not within the contemplation of Parliament when the Appropriation Act was passed and is therefore not provided for in Schedule 1 of the Appropriation Act.

The Advance to the Finance Minister is provided for under section 13 of Appropriation Act (No. 1) 2009-2010. The discretionary power is exercisable upon the Finance Minister’s satisfaction of the matters specified in section 13. This section indicates that amounts can be issued from the Advance to the Finance Minister, up to a limit of $295 million, if the Finance Minister is satisfied that there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, in Schedule 1 of that Act. The qualifying circumstances on the discretion of the Finance Minister to issue additional amounts under this provision are contained in subsections 13(1) (a) and (b) of that Act. The application from AusAID has satisfied the Finance Minister that the additional expenditure was not provided for because of unforeseen circumstances.

Exercise of the power via the issue of a determination has effect as if Schedule 1 of Appropriation Act (No. 1) 2009-2010 were amended to make provision for the additional expenditure specified in the determination.

Purpose of the instrument

The instrument determines that the Administered Item for Outcome 1 for AusAID in Appropriation Act (No. 1) 2009-2010 be increased by $29,381,000. The additional amount is provided to enable AusAID to meet commitments relating to Australia’s contribution to a global agreement to help developing countries deal with climate change and to Australia’s support of reconstruction efforts in Sri Lanka, including resettlement of internally displaced people.

Background

The background to the instrument is provided in the application made by AusAID for funding from the Advance to the Finance Minister, reproduced below.

APPLICATION FOR ADVANCE TO THE FINANCE MINISTER – 2009-2010

Agency: Australian Agency for International Development

Appropriation: Appropriation Act (No. 1) 2009-2010, Part 3, section 13 (1)(b)

Description: Administered Item

Outcome: Outcome 1 – To assist developing countries to reduce poverty and achieve sustainable development, in line with Australia’s national interest.

Appropriation Required: $29.381 million

Appropriations Available: $321,443,624.39

Amount required from AFM: $29.381 million

AFM Category:

Unforeseen – “Appropriation Act (No. 1) 2009-2010, Part 3, section 13 (1)(b)”

Explanation of requirements from AFM:

AusAID is seeking $29.381 million to fund two measures relating to climate change and Sri Lanka development assistance (as detailed below).  These two measures have Government approval, however, this approval was granted after the finalisation of the 2009-10 Additional Estimates Bills.

The commitments on Climate Change and Sri Lanka have not been funded.  The Department of Finance and Deregulation has advised that it is appropriate to seek an AFM to fund these Official Development Assistance commitments.

The funding approved for the 2009-10 financial year is offset from the provision for expanded aid funding held within the Official Development Assistance (ODA) Contingency Reserve. 

The disbursement of the funds associated with these is expected to occur in the week of the 14th June 2010.  Both payments are urgent, to meet commitments made in Copenhagen on climate change financing and to also ensure funding is provided to assist with the emergency refugee situation in Sri Lanka.

Climate Change:

The $5.0 million commitment in 2009-10 is for a contribution to the Least Developed Countries Fund of the Global Environment Facility primarily to assist developing countries develop National Adaptation Plans of Action.

Sri Lanka:

$25 million was agreed by the Prime Minster in November 2009 as an additional commitment to Sri Lanka to fund resettlement and reconstruction in Sri Lanka.  The $25 million aid package included the following elements: $12 million to the World Bank’s Emergency Northern Reconstruction Program (ENREP); $8 million to the Asian Development Bank’s North East Community Restoration and Development Project Phase II (NECORD II); $3m to UN-HABITAT for emergency housing reconstruction; $1.631 million was for the Australian Community Rehabilitation Project-Phase 3; and $0.369 million for departmental staffing costs (funded through the 2010-11 Budget process). 

The amount sought through an AFM for the Sri Lanka commitment is $24.381 million, which excludes staffing costs and also excludes $0.25 million which was appropriated to ACIAR for food security activities (reducing the AusAID appropriation which has been quarantined).

Unforeseen:

There has been policy approval for the commitments by the Prime Minister.  The details of the full contribution to the LDCF, of which this amount was only a part, were not finally confirmed until other climate change financing issues were resolved. Further, the Sri Lanka resettlement and reconstruction request also emerged post Additional Estimates and is a high priority emergency need.

While there are sufficient cash reserves in AusAID’s administered account, these cash reserves have been committed for multilateral replenishments and other minor remaining program commitments for 2009-10 and should be retained for these purposes.