Explanatory Statement
Appropriation Act (No. 2) 2005-06, 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. 2) 2005-2006”, dated 25 May 2006 and numbered 12 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. 2) 2005-06, the Advance to the Finance Minister is provided for under section 13. This section indicates that amounts can be issued from the Advance to the Finance Minister, up to a limit of $215 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 2 (which sets out the amounts appropriated); and
(b) The additional expenditure is not provided for, or is insufficiently provided for, in Schedule 2:
(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 2 of Appropriation Act (No. 2) 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 Management Division, in the Department of Finance and Administration to exercise the power provided for under section 13 of Appropriation Act (No. 2) 2005-06.
Purpose of the instrument
The instrument determines that the Administered Assets and Liabilities appropriation for the Department of Environment and Heritage in Appropriation Act (No. 2) 2005-06 be increased by $666,673.
Background
The background to the instrument is provided in the application made by the Department of Environment and Heritage 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 Environment & Heritage
Appropriation: Appropriation Act (No. 2) 2005-06
Description: Administered assets and liabilities
Description of Outcome: (no outcome)
Source of Available Funds | 2003-2004 | 2004-2005 | 2005-2006 |
$ | $ | $ | |
Appropriation Act No. 41 | 0 | 0 | 127,000 |
Appropriation Act No. 21 | 0 | 0 | 0 |
Appropriation Act No 6 | 0 | 0 | 1,871,000 |
Retained by AusIndustry2 | 0 | 0 | 0 |
TOTAL FUNDS AVAILABLE | 0 | 0 | 1,998,000 |
|
|
|
|
TOTAL EXPENDITURE | 0 | 0 | 1,998,000 |
|
|
|
|
TOTAL UNSPENT FUNDS | 0 | 0 | 0 |
1 Appropriations to the REEF programme were reclassified in the 2005-06 Additional Estimates process, from expenses (Act 1) to capital (Acts 2 & 4). Only the unspent portion of the 2005-06 appropriation was reclassified.
2 DEH has delegated administration of the REEF programme to AusIndustry, which has in turn delegated management of the REEF to a private fund manager. The fund manager may at times return funds (sourced ultimately from appropriations to DEH) to AusIndustry, which AusIndustry retains until the fund manager calls for further funds, at which time AusIndustry returns these funds to the fund manager.
Funds Required: $666,673
Funds Currently Unspent: $ 0
Amount required from AFM: $666,673
AFM Category: Appropriation Act (No. 2) 2005-2006 Part 3 13 (1)(b)(ii)
Explanation of requirements from AFM:
The Renewable Energy Equity Fund (REEF) programme provides funding for the Government’s two-thirds shareholding of the CVC REEF Ltd. venture capital fund, which invests in small, innovative renewable energy companies. The remaining third of the fund is provided by the private sector.
The Department of Environment and Heritage (DEH) has received from the REEF fund manager a call for $666,673, which exceeds the funds available to DEH for the REEF programme in 2005-06. DEH has no administered capital funds to draw upon. DEH therefore requires an AFM of $666,673.
Urgent:
DEH received the call for funds from the fund manager of the REEF programme, via AusIndustry, on 19 May 2006. Under the MOU between AusIndustry and the AGO (a division of DEH), DEH must pay AusIndustry within seven days. In accordance with the subscriber agreement between AusIndustry and the fund, AusIndustry must pay the fund within 14 days.
Unforeseen:
Under the 10-year REEF program, the Government has a contractual obligation to provide the total of the Government’s share ($17.723 million) to the fund, without reference to the size or timing of payments, which are determined by the fund manager as per their needs, and unrelated to Government annual appropriations to the DEH for the REEF programme. As a commercial venture capital fund, CVC REEF Ltd's needs are driven by investment opportunities and are unpredictable. While it was foreseeable that the fund may at some time make a call in excess of the annual appropriation to DEH, the specific size and timing of such a call was not foreseeable.
Notes on the instrument
The instrument provides that the appropriation item listed in column 1 for the Department of Environment and Heritage be increased by the amount listed in column 3. The instrument specifies that the additional amount be provided for the purpose of meeting a current Australian Government commitment under the Renewable Energy Equity Fund (REEF) programme.