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 16 June 2009 and numbered 5 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 1 for the Australian Trade Commission in Appropriation Act (No. 1) 2008-2009 be increased by $50,000,000. The additional amount is provided to enable increased grant payments under the Export Market Development Grants scheme.
Background
The background to the instrument is provided in the application made by the Australian Trade Commission for funding from the Advance to the Finance Minister. The application is reproduced below.
APPLICATION FOR ADVANCE TO THE FINANCE MINISTER - 2008-2009
Agency: Australian Trade Commission
Appropriation: Appropriation Act (No. 1) 2008-2009
Description: Administered Expenses
Outcome: Outcome 1 – Australians succeeding in international business with widespread community support
Source of Available Appropriations | 2006-2007 | 2007-2008 | 2008-2009 |
$ | $ | $ | |
Appropriation Act (No. 1) 2008-2009 | - | 159,280,000 | 150,400,000 |
Retained Prior Years Appropriation | - | - | 3,041,997 |
Australian Trade Commission Legislation Amendment Act 2006 | - | - | 2,540,121 |
TOTAL APPROPRIATIONS AVAILABLE | - | 159,280,000 | 155,982,118 |
|
|
|
|
TOTAL AMOUNT SPENT | - | 156,238,003 | 119,230,797 |
TOTAL UNSPENT APPROPRIATIONS | - | 3,041,997 | 36,751,321 |
Appropriations Required: $ 86,751,321
Appropriations Available: $ 36,751,321
Amount required from AFM: $ 50,000,000
AFM Category: Appropriation Act (No. 1) 2008-2009, Part 3 14(1)(b)
Explanation of requirements from AFM:
The Government provided an additional $50.0 million in 2008-09 for the Export Market Development Grants scheme. The scheme provides small and medium-sized Australian businesses with taxable grants to reimburse a proportion of eligible export promotion costs. Changes to the EMDG scheme by the previous government have led to a significant unfunded increase in the value of EMDG applications. In the previous financial year these unfunded changes resulted in a reduction in the proportion of the assessed grant entitlements being paid to individual applicants.
The shortfall in funding to meet eligible claimant’s full entitlements in the 2008-09 year is $50 million. The Government’s decision to provide an additional $50 million in grant funding for 2008-09 aims to ensure that eligible applicants receive their full entitlement and to have the desired stimulus impact for Australian businesses. To ensure funding is available to meet payment requirements as set out in the Export Market Development Grants Act 1997 access to appropriation, consistent with the Government decision, is required this financial year. The 2nd tranche payments under the scheme will be determined by 19th June 2009 and paid to eligible claimants the following week.
Calculation of Remaining Entitlements:
First tranche payments to eligible applicants totalling approx. $101 million have already been paid. Based upon eligible claims processed to date, approx. $173.6 million in entitlements have been determined. Unprocessed claims on hand of approx. $30 million are likely to result, based on historical averages for claims received toward the end of the financial year, in a further $21 million in entitlements being determined. A summary of entitlements calculated for 2008-09 follows:
Entitlements | Analysis $ ‘000
|
Total confirmed Entitlements to be paid (13% adjustment rate) | $173,600 |
Total claims to be processed ($30.0m in identified unprocessed claims ~ assume a 33% adjustment rate) | $20,625 |
Administration Expenses | $8,200 |
Appropriations Required | $202,425 |
Urgent:
The EMDG act rules require the calculation and payment of the 2nd tranche payment for audited and determined grants in late June each year. The legislation provides for grants that have been determined by Austrade to be paid in the same financial year prior to 30 June. Consistent with the Government decision and to meet the calculation and payment requirements access to appropriation needs to be in place by no later than 19 June 2009 to be used in the 2008-09 year determination calculation. This rules out the 2009-10 appropriation as an option.
Unforeseen:
The Government’s decision to provide an additional $50.0 million in 2008-09 for the Export Market Development Grants scheme was made after the finalisation of the last Appropriation Bills for 2008-09. As there are no further Appropriation Bills planned for this financial year, an Advance to the Finance Minister(AFM) is required to ensure payments can be made in 2008-09 consistent with the Government’s decision to provide grants to eligible applicants.