Explanatory Statement
Appropriation Act (No. 3) 2003-2004, Section 10 - Reduction of Appropriations Upon Request
Appropriation Act (No. 1) 2004-2005, Section 9 - Reduction of Appropriations 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 29 June 2006 and numbered 16 of 2005-2006.
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 departmental appropriations made under that Act, upon receipt of a written request from the Minister responsible or, in the case of an agency in the Finance portfolio, the Chief Executive.
Section 9 of Appropriation Act (No. 1) 2004-2005 enables the Finance Minister to make a determination reducing departmental appropriations made under that Act, 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 provisions were included in the Appropriation Acts to enable excess departmental appropriation items, 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; and
- 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) 2003-2004 or section 9 of Appropriation Act (No.1) 2004-2005 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 for the Department of Defence in Appropriation Act (No. 1) 2001-2002 be reduced by $114,441,000; Appropriation Act (No. 1) 2002-2003 be reduced by $37,000; Appropriation Act (No. 1) 2003-2004 be reduced by $12,014,000; and Appropriation Act (No. 1) 2004-2005 be reduced by $123,962,000.
Background
On 15 September 2005, the Minister for Defence, Senator the Hon Robert Hill, wrote to the Minister for Finance and Administration seeking a reduction of the Department of Defence departmental outputs in Appropriation Act (No. 1) 2001-2002 by $114,441,000; Appropriation Act (No. 1) 2002-2003 by $37,000; Appropriation Act (No. 1) 2003-2004 by $12,014,000; and Appropriation Act (No. 1) 2004-2005 by $123,962,000.
These amounts have arisen from a variety of sources, namely 2001-2002 funding no longer required for the Military Compensation Scheme, which has been administered by the Department of Veteran Affairs from 1 July 2004; excess foreign exchange rate supplementation over several years, underspending on Project Pitchpipe; and excess funding relating to Defence Housing Authority competitive neutrality and land tax supplementation arrangements.
Notes on the instrument
The instrument provides that the appropriation items in column 1 for the agency in column 2 be reduced in response to a request made by the Minister in column 4 by the amounts listed in column 6.
Overview
The Determination to Reduce Appropriation Upon Request, dated 29 June 2006, was enacted under the legislative authority of Section 10 of the Appropriation Act (No. 3) 2003-2004 and Section 9 of the Appropriation Act (No. 1) 2004-2005, allowing the Finance Minister to reduce departmental appropriations upon a written request from the relevant Minister or Chief Executive. This instrument was introduced to address the issue of excess appropriations that do not automatically lapse, such as those arising from reclassification, efficiency savings, or the abolition of government programs before the appropriation is expensed. The purpose of this legislation is to enable the Finance Minister to adjust the appropriation items in response to such circumstances, ensuring that funds are not unnecessarily retained in the Consolidated Revenue Fund. This is achieved by reducing the appropriation items by the lesser of the requested amount or the balance remaining in the Consolidated Revenue Fund.
Scope and Application
The "Determination to Reduce Appropriation Upon Request" instrument, dated 29 June 2006 and numbered 16 of 2005-2006, applies to the specific appropriation items within the Department of Defence for the financial years 2001-2002, 2002-2003, 2003-2004, and 2004-2005, as requested by the Minister for Defence. The instrument is made under the authority of sections 10 and 9 of the Appropriation Act (No. 3) 2003-2004 and Appropriation Act (No. 1) 2004-2005, respectively, allowing the Finance Minister to reduce departmental appropriations upon a written request from the relevant Minister or Chief Executive. The reductions are a result of various factors including the transfer of the Military Compensation Scheme to the Department of Veteran Affairs, excess foreign exchange rate supplementation, underspending on Project Pitchpipe, and excess funding related to Defence Housing Authority competitive neutrality and land tax supplementation arrangements. The instrument strictly adheres to the amount requested or the balance remaining in the Consolidated Revenue Fund, whichever is lesser, and applies to the Commonwealth level, affecting only the specified appropriation items for the Department of Defence within the provided financial years.
Key Provisions
The Determination to Reduce Appropriation Upon Request dated 29 June 2006, numbered 16 of 2005-2006, provides for the reduction of departmental appropriations for the Department of Defence in the Appropriation Acts (No. 1) from 2001-2002 to 2004-2005. Specifically, section 10 of the Appropriation Act (No. 3) 2003-2004 and section 9 of the Appropriation Act (No. 1) 2004-2005 empower the Finance Minister to reduce such appropriations upon receiving a written request from the Minister responsible for the department or the Chief Executive of an agency within the Finance portfolio. In this case, the request was made by the Minister for Defence, Senator the Hon Robert Hill, on 15 September 2005. The reductions are intended to address excess appropriations that do not automatically lapse, such as reclassified funds, efficiency savings, or abolished government programs.
The obligations and requirements imposed by the Act on the parties involved include the submission of a written request by the Minister responsible or the Chief Executive of an agency within the Finance portfolio to the Finance Minister. This request must specify the appropriation items to be reduced and the amounts requested. Once the Finance Minister receives this request, they are required to assess it and issue a determination if appropriate. The determination must comply with the limitations set by the Act, which restrict the reduction to the lesser of the requested amount and the balance of the appropriation item in the Consolidated Revenue Fund. This ensures that the appropriations are reduced only to the extent necessary and within the legal limits set by the Act.
The Act does not specify any particular offences, penalties, or consequences for breach of its provisions in the context of the determination to reduce appropriations. However, it is implicit that any misuse of the authority granted by sections 10 and 9, such as requesting reductions without proper justification or exceeding the allowable limits, could lead to administrative or legal repercussions. These might include investigations by the relevant authorities, potential disciplinary actions against the responsible officials, and corrective measures to restore any improperly reduced appropriations. The Act's purpose is to ensure that appropriations are managed efficiently and responsibly, and any breaches of this intent could result in significant administrative or legal consequences.