Explanatory Statement
Appropriation Act (No. 3) 2003-2004, subsection 10(2) – 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 26 June 2007 and numbered 15 of 2006-2007.
The legislative authority under which the instrument is made
Section 10 of Appropriation Act (No. 3) 2003-2004 enables the Finance Minister to make a determination reducing a departmental item for an entity upon receipt of a written request from the Minister responsible or, in the case of an entity the Finance Minister is responsible for, the Chief Executive.
The provisions were included in the Appropriation Acts to enable excess departmental appropriation items 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; and
- A programme under Government policy is abolished prior to the appropriation being expensed.
In accordance with subsections 10(6) and 10(7) of Appropriation Act (No. 3) 2003-2004, a determination issued by the Finance Minister 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 items for the Commonwealth Scientific and Industrial Research Organisation (CSIRO) in Appropriation Act (No. 1) 2001-2002 be reduced by $2,222,000. The instrument also directs that departmental items for CSIRO in Appropriation Act (No. 1) 2002-2003 be reduced by $365,000.
Background
On 23 May 2007, the Minister for Education, Science and Training (the Minister) wrote to the Minister for Finance and Administration seeking a reduction of CSIRO’s departmental items in Appropriation Act (No. 1) 2001-2002 by $2,222,000 and Appropriation Act (No. 1) 2002-2003 by $365,000. The reasons for these reductions are as follows.
- Savings of $998,000 in 2001-2002 relating to the sale and lease back of the North Ryde property as per the ‘supplementation for commercial rents and sales’ costs measure of 2000-2001. A variation in the Capital Use Charge of $1,224,000 in 2001-2002 due to the use of actual net assets for the calculation compared to estimated net assets; and
- A net change of $365,000 in 2002-2003 due to a revised estimate of rental, outgoings and sale costs arising out of the sale and lease back of properties under the ‘supplementation for commercial rents and sales costs’ measure offset by an increase in appropriation due to a change in indexation.
Notes on the instrument
The instrument provides that the appropriation item in column 1 for the entity in column 2 is reduced in response to a request made by the Minister in column 4 by the amounts listed in column 6.
In accordance with the Legislative Instruments Act 2003, CSIRO has been consulted in the preparation of this instrument.
Overview
The Appropriation Act (No. 3) 2003-2004, enacted by the Parliament of Australia, addresses the issue of excess appropriations that may arise due to various circumstances such as reclassification of funds, efficiency savings, or the abolition of a government program before the appropriation is expensed. This Act empowers the Finance Minister to reduce departmental appropriation items upon a written request from the responsible Minister or Chief Executive, aiming to ensure that only the necessary funds are allocated and to prevent over-appropriation. The policy objective is to maintain fiscal discipline and efficiency in government spending. The explanatory statement pertains to a specific instrument that reduces appropriations for the Commonwealth Scientific and Industrial Research Organisation (CSIRO) for the fiscal years 2001-2002 and 2002-2003 by $2,222,000 and $365,000 respectively, following a request by the Minister for Education, Science and Training. These reductions were due to savings from property sales and leasebacks and adjustments in capital use charges and rental costs.
Scope and Application
The "Determination to Reduce Appropriation Upon Request" under the Appropriation Act (No. 3) 2003-2004 applies specifically to the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and its departmental appropriations for the financial years 2001-2002 and 2002-2003. The Act authorises the Finance Minister to reduce a departmental item for an entity upon receipt of a written request from the responsible Minister or Chief Executive, depending on who holds responsibility for the entity. This instrument was enacted to address instances where excess appropriations occur, such as through reclassification of funds, efficiency savings, or the abolition of government programmes before appropriations are expensed. The reductions for CSIRO were made following a request by the Minister for Education, Science and Training, reflecting savings from the sale and lease back of the North Ryde property and variations in the Capital Use Charge for the specified years. The reductions are limited to the lesser of the requested amount or the balance of the appropriation item remaining in the Consolidated Revenue Fund, as stipulated in the Act.
Key Provisions
The main sections of the Appropriation Act (No. 3) 2003-2004 that are relevant to the Determination to Reduce Appropriation Upon Request include Section 10(2) (subsection 10(2)), which empowers the Finance Minister to reduce a departmental appropriation upon receiving a written request from the relevant Minister or Chief Executive. The Act also includes subsections 10(6) and 10(7) (subsections 10(6) and 10(7)) which set limits on the amount by which an appropriation can be reduced, ensuring that the reduction does not exceed either the amount requested or the remaining balance in the Consolidated Revenue Fund.
The Act imposes specific obligations on the parties involved. For example, the responsible Minister or Chief Executive must submit a written request to the Finance Minister if they wish to reduce an appropriation. This request must be based on legitimate reasons such as savings from the sale or leaseback of property, variations in capital use charges, or changes in rental, outgoings, and sale costs. The Finance Minister, upon receiving this request, must review it and issue a determination that reduces the appropriation by an amount not exceeding the request or the remaining balance in the Consolidated Revenue Fund, as per subsections 10(6) and 10(7) (subsections 10(6) and 10(7)). In this particular case, the Minister for Education, Science and Training submitted a request on 23 May 2007, leading to the determination issued on 26 June 2007.
The Appropriation Act (No. 3) 2003-2004 does not specify particular offences, penalties, or consequences for breaches within the context of reducing appropriations. However, the integrity of the appropriation process is paramount, and any misuse or improper reduction of appropriations could lead to broader administrative or legal consequences. The Act ensures that the reductions are made in accordance with the request and the remaining balance, maintaining the fiscal discipline and accountability within the government’s financial management framework.