Explanatory Statement
Appropriation Act (No. 3) 2003-2004, subsection 10(2) – Reduction of appropriations from prior years upon request
Appropriation Act (No. 4) 2003-2004, subsection 12(2) – Reduction of appropriations from prior years upon request
Appropriation Act (No. 1) 2005-2006, subsection 9(1) – Reduction of appropriations upon request
Appropriation Act (No. 2) 2005-2006, subsection 11(1) – 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 26 June 2007 and numbered 16 of 2006-2007.
The legislative authority under which the instrument is made
Section 10 of Appropriation Act (No. 3) 2003-2004 enable 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.
Section 12 of Appropriation Act (No. 4) 2003-2004 enable the Finance Minister to make a determination reducing an administered assets and liabilities item or an other departmental item 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.
Section 9 of Appropriation Act (No. 1) 2005-2006 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.
Section 11 of Appropriation Act (No. 2) 2005-2006 enables the Finance Minister to make a determination reducing an administered assets and liabilities item or an other departmental item 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; subsections 12(7) and 12(8) of Appropriation Act (No. 4) 2003-2004; subsections 9(5) and 9(6) of Appropriation Act (No. 1) 2005-2006 and subsections 11(5) and 11(6) of Appropriation Act (No. 2) 2005-2006 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 Department of Defence (Defence) be reduced by a total of $80,563,000, as follows:
- Appropriation Act (No. 1) 2000-2001 be reduced by $14,200,000;
- Appropriation Act (No. 1) 2001-2002 be reduced by $12,000,000;
- Appropriation Act (No. 1) 2002-2003 be reduced by $38,816,000;
- Appropriation Act (No. 1) 2003-2004 be reduced by $9,891,000; and
- Appropriation Act (No. 1) 2005-2006 be reduced by $5,656,000.
The instrument also directs that equity injections for Defence be reduced by a total of $2,552,414,000, as follows:
- Appropriation Act (No. 2) 1999-2000 be reduced by $591,060,000;
- Appropriation Act (No. 2) 2000-2001 be reduced by $659,396,000;
- Appropriation Act (No. 2) 2002-2003 be reduced by $420,000,000;
- Appropriation Act (No. 2) 2003-2004 be reduced by $732,890,000; and
- Appropriation Act (No. 2) 2005-2006 be reduced by $149,068,000.
Background
On 18 June 2007, the Minister for Defence (the Minister) wrote to the Minister for Finance and Administration requesting approval for a determination to reduce Defence’s departmental items for the financial years 2000-2001 to 2003-2004 and 2005-2006 as follows.
- $14,200,000 in Appropriation Act (No. 1) 2000-2001 – return of surplus supplementation relating to Defence Housing Australia competitive neutrality costs;
- $12,000,000 in Appropriation Act (No. 1) 2001-2002 – $10,000,000 return of surplus supplementation for leases of certain Defence properties and $2,000,000 return as a result of the postponement of the Commonwealth Heads of Government Meeting in October 2001;
- $38,816,000 in Appropriation Act (No. 1) 2002-2003 – return of $11,900,000 as a result of cost savings identified from a communication network project for which Defence was fully supplemented and $26,916,000 for surplus funding associated with Operations Relex, Citadel and Slipper;
- $9,891,000 in Appropriation Act (No. 1) 2003-2004 – savings associated with a communications network project for which Defence was fully supplemented; and
- $5,656,000 in Appropriation Act (No. 1) 2005-2006 – lower than expected expenditure in areas of inventory, transport costs and remediation.
The Minister also requested approval to reduce Defence’s equity injections for the financial years 1999-2000, 2000-2001, 2002-2003, 2003-2004 and 2005-2006 as follows.
- $591,060,000 in Appropriation Act (No. 2) 1999-2000 – due to the re-categorisation of funding from equity injections to price of outputs to fund an increase in price of outputs;
- $659,396,000 in Appropriation Act (No. 2) 2000-2001 – reclassification of funding from equity injections to price of outputs to fund an increase in price of outputs;
- $420,000,000 in Appropriation Act (No. 2) 2002-2003 – $200,000,000 underspend in the Approved Major Capital Equipment Programme in 2002-2003 reprogrammed to 2008-2009 and $220,000,000 return of supplementation for movements in foreign currency exposures and exchange rates under “no-win/no-loss” arrangements;
- $732,890,000 in Appropriation Act (No. 2) 2003-2004:
- $330,000,000 return (net) Major Capital Equipment Programme reprogramming following $500,000,000 underspend reprogrammed to 2008-2009 to 2010-2011 and purchase of a AEW&C aircraft.
- $88,700,000 return of supplementation for movements in foreign currency exposures and exchange rates under “no-win/no-loss” arrangements.
- $35,000,000 return of FOREX supplementation reflecting the differences between forecasts and actuals.
- $256,400,000 return of FOREX supplementation reflecting the differences between parameters provided in the 2003-2004 budget and revised rates.
- $38,400,000 return reflecting rephasing of Operation Bastille/Falconer and Catalyst requirements from 2003-2004 into future years.
- $19,400,000 return due to a revision in the net additional cost of operations in East Timor (Operational Citadel).
- $19,900,000 increase due to price parameters provided in the 2003-2004 budget reflecting movements in the non-farm gross domestic product.
- An increase for several operations and the establishment of the National Threat Assessment Centre.
- $149,068,000 in Appropriation Act (No. 2) 2005-2006:
- $159,000,000 return due to rescheduling of capital payments to 2006-2007 – procurement of AEGIS for Air Warfare Destroyer.
- $88,900,000 return due to accounting adjustments offset against the equity appropriation – revised depreciation estimates, adoption of AEIFRS, reclassification of inventory purchases resulting of the return of inventory from DMO to Defence’s balance sheet.
- $98,300,000 increases due to the appropriation for operations, increases in FOREX supplementation and parameter updates.
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, Defence has been consulted in the preparation of this instrument.