Explanatory Statement
Appropriation Act (No. 1) 2008-2009, Section 14 – 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 14 of Appropriation Act (No. 1) 2008-2009”, dated 9 February 2009 and numbered 3 of 2008-2009.
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.
In Appropriation Act (No. 1) 2008-2009, the Advance to the Finance Minister is provided for under section 14. The discretionary power is exercisable upon the Finance Minister’s satisfaction of the matters specified in section 14. 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 is contained in subsections 14(1)(a) and (b) of that Act. This application 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) 2008-2009 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 3 for the Department of Foreign Affairs and Trade in Appropriation Act (No. 1) 2008-2009 be increased by $22,208,044. The additional amount is provided to enable payments associated with Australia’s participation at the Shanghai World Expo 2010.
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 ADVANCE TO THE FINANCE MINISTER - 2008-2009
Agency: Department of Foreign Affairs and Trade
Appropriation: Appropriation Act (No. 1) 2008-2009
Description: Administered Expenses
Outcome: Outcome 3: Public understanding in Australia and overseas of Australia’s foreign and trade policy and a positive image of Australia internationally.
Source of Available Appropriations | 2006-2007 | 2007-2008 | 2008-2009 |
$ | $ | $ | |
Appropriation Act (No. 1) | 4,241,000 | 24,778,000 | 33,572,000 |
Appropriation Act (No. 3) | 18,479,000 | 3,500,000 | - |
Section 8 Retention | - | - | 4,848 |
TOTAL APPROPRIATIONS AVAILABLE | 22,720,000 | 28,278,000 | 33,576,848 |
|
|
|
|
TOTAL AMOUNT SPENT | 22,009,525 | 28,177,751 | 30,246,903 |
TOTAL UNSPENT APPROPRIATIONS | 710,475 | 100,249 | 3,329,945 |
Appropriations Required: $ 25,537,989
Appropriations Available: $ 3,329,945
Amount required from AFM: $ 22,208,044
AFM Category: Appropriation Act (No.1) 2008-2009, Part 3, section 14, (1) (b)
Explanation of requirements from AFM:
The Department of Foreign Affairs and Trade (DFAT) received Administered Outcome 3 funding in the 2008-09 Budget of $10 million for the new measure Shanghai World Expo 2010 – Australia’s Participation (SWE). Additional appropriation and movement of appropriation between financial years for this measure were included in the 2008-09 Additional Estimates to provide an additional $28 million in Outcome 3 appropriation in 2008-09. The appropriation bills containing the additional funding of this measure have not yet been granted royal assent. DFAT has fully drawn the original $10 million in Outcome 3 appropriation allocated for the SWE project and has also drawn a further $9.4 million in Outcome 3 appropriation allocated for Australia Network television service contract (in anticipation of the approved AE’s funding) to fund ongoing payments of the SWE project in 2008-09.
A further $12.991 million is required for the SWE project to make progress payments on construction and operational contracts in the period February through March 2009. A contract payment of $9.416 million for the Australia Network television service is due in February 2009. In addition, DFAT has commitments under the International Relations Grants Program (IRGP) totalling $3.131 million. These amounts will be due for payment before the Additional Estimates appropriation bills are expected to receive royal assent in April 2009. The required funds for DFAT Administered Outcome 3 for the period February through March 2009 therefore total $25.538 million, while the available appropriation for Outcome 3 is $3.330 million. DFAT requests an AFM of $22.208 million to enable payments for the SWE project, Australia Network television service and IRGP as they fall due.
Urgent:
The remaining balance of Appropriation Act (No.1) 2008-2009 does not provide sufficient funding for Outcome 3 to cover the SWE project, the Australia Network television service and IRGP payments in accordance with the terms of the contracts. These payments fall due before funding under the 2008-09 Additional Estimates Bills is estimated to become available. Any payment delay would be contrary to the terms of the contracts with possible legal consequences and could jeopardise Australia’s participation in the SWE and the ongoing provision of the Australia Network service. Any delay would also compromise DFAT’s reputation of meeting its financial obligations in a timely manner.
Unforeseen:
The 2008-09 Budget estimates for the SWE project included external sponsorship funding in 2008‑2009 which is now unlikely to be achieved this year (the sponsorship program is underway but is unlikely to deliver significant funding in 2008-09). In addition, the schedule of the contract payments over the life of the SWE project was not known as the construction and operational contracts were not yet open to tender in May 2008. In particular, the preferred construction tenderer’s payment schedule requires approximately 66 per cent of the total contract value to be paid in 2008-09 – a significantly higher percentage than the estimated payment schedule prepared for the 2008-09 Budget. Neither of these two contributing factors could be foreseen at the time of finalising the 2008-09 Budget.