Explanatory Statement
Appropriation Act (No. 3) 2003-04, Section 10 – Reduction of Appropriations from Prior Years Upon Request
The instrument to which this explanatory statement relates
This explanatory statement relates to an instrument (the instrument) entitled “Determination to Reduce Appropriation Upon Request”, dated 21 January 2005 and numbered 1 of 2004-2005.
The legislative authority under which the instrument is made
Section 10 of Appropriation Act (No. 3) 2003-04 enables the Finance Minister to make a determination reducing departmental appropriations for financial years 1999‑2000, up to and including Appropriation Act (No. 1) 2003-04, upon receipt of a written request from the Minister responsible or, in the case of an agency in the Finance portfolio, the Chief Executive.
The provision was included in Appropriation Act (No. 3) 2003-04 to enable excess departmental appropriation items for prior years, which do not automatically lapse, to be extinguished. Excess appropriation may arise where, for example:
- An amount is reclassified and appropriated again under another kind of appropriation;
- Efficiency savings result in a programme costing less than expected; or
- A programme under Government policy is abolished prior to the appropriation being expensed.
A determination issued by the Finance Minister pursuant to section 10 of Appropriation Act (No. 3) 2003-04 cannot reduce an appropriation item by more than the lesser of the amount requested by the responsible Minister or Chief Executive (as appropriate), and the balance of the appropriation item remaining in the Consolidated Revenue Fund.
Purpose of the instrument
The instrument directs that departmental outputs appropriation provided to the Australian Prudential Regulation Authority in 2001-02 be reduced by $2.1 million.
Background
The Minister for Revenue and Assistant Treasurer, the Hon Mal Brough, MP, wrote to the Minister for Finance and Administration on 5 August 2004 seeking a determination to reduce the Australian Prudential Regulation Authority’s departmental appropriation for 2001-02 by $2.1 million. The amount was appropriated in 2001-02 to provide for increased prudential supervision of superannuation in 2001-02, but was not spent. The Australian Prudential Regulation Authority has confirmed that there is no reasonable prospect of using the appropriation for the purpose of this measure. The measure has since been implemented using ongoing funding, making the $2.1 million surplus to requirements.
Notes on the instrument
The instrument provides that 2001-02 departmental outputs appropriation for the Australian Prudential Regulation Authority be reduced in response to a request made by the Minister in column 4 by the amount listed in column 6.
Overview
The Appropriation Act (No. 3) 2003-04, enacted by the Parliament of Australia, addresses the issue of excess departmental appropriations from prior years that do not automatically lapse. Section 10 of this Act allows the Finance Minister to reduce such appropriations upon a written request from the relevant Minister or Chief Executive. The objective of this provision is to ensure that unused funds from previous financial years are either reallocated or extinguished, thereby improving financial management and efficiency within government departments. The explanatory statement accompanying the "Determination to Reduce Appropriation Upon Request" dated 21 January 2005, illustrates this process by detailing a specific case where the Australian Prudential Regulation Authority's 2001-02 departmental appropriation was reduced by $2.1 million due to unspent funds that had no reasonable prospect of being utilised for their intended purpose.
Scope and Application
The "Determination to Reduce Appropriation Upon Request" under the Appropriation Act (No. 3) 2003-04 applies specifically to instances where the Finance Minister is requested to reduce departmental appropriations from prior years upon a written request from the relevant Minister or Chief Executive. This instrument is applicable to financial years from 1999-2000 up to and including 2003-04, targeting departments or agencies that have unutilised appropriations. The purpose of this legislation is to address instances where excess appropriations remain unutilised, such as reclassified funds, savings from efficiency, or discontinued programs. The instrument in question pertains to a specific instance where the Australian Prudential Regulation Authority's appropriation for 2001-2002 was reduced by $2.1 million due to it being surplus to requirements, following a request from the Minister for Revenue and Assistant Treasurer. This reduction is limited to the amount requested and the balance remaining in the Consolidated Revenue Fund. The Act's jurisdiction is at the Commonwealth level, and while the primary legislation authorises reductions, any specific determinations are made through subordinate instruments as illustrated in this case.
Key Provisions
The main operative sections of the legislation, specifically section 10 of the Appropriation Act (No. 3) 2003-04, allow the Finance Minister to reduce departmental appropriations for financial years 1999-2000 up to and including the 2003-04 financial year, following a written request from the Minister responsible or the Chief Executive of an agency in the Finance portfolio. This reduction applies to excess departmental appropriations from prior years that do not automatically lapse. Such excess appropriations can arise from reclassifications, efficiency savings, or the abolition of government programs. The Finance Minister’s determination can only reduce the appropriation by the lesser of the amount requested or the remaining balance in the Consolidated Revenue Fund.
The Act imposes specific obligations and requirements on the parties it governs. It mandates that any request for a reduction in departmental appropriations must be in writing and originate from the responsible Minister or Chief Executive of an agency within the Finance portfolio. The Finance Minister is required to act on these requests by issuing a determination that adheres to the constraints outlined in the Act, ensuring the reduction does not exceed the requested amount or the available balance in the Consolidated Revenue Fund. This process is intended to manage and extinguish excess appropriations that are no longer needed or cannot be utilised for their intended purposes.
In terms of consequences for non-compliance or misuse, the legislation does not explicitly detail specific offences or penalties for breaches within the Act. However, it is implied that any misuse of the appropriations process or failure to adhere to the stipulated requirements could result in financial mismanagement and potential legal repercussions under broader public sector governance laws. The focus of the Act is primarily on the procedural correctness of the appropriation reduction process rather than on penalising specific breaches. Nevertheless, the integrity of the financial management process is paramount, and any deviations from the prescribed requirements could lead to administrative or disciplinary actions within the public sector.