Determination to Reduce Appropriation Upon Request (No. 16 of 2006-2007)

Administered by Department of Finance

Legislation au F2007L02084 Not in force Legislative Instrument

Legislation content

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.

Overview

The instrument, titled "Determination to Reduce Appropriation Upon Request", dated 26 June 2007 and numbered 16 of 2006-2007, relates to the Appropriation Acts (No. 3) 2003-2004, (No. 4) 2003-2004, (No. 1) 2005-2006 and (No. 2) 2005-2006. These Acts were enacted to enable the Finance Minister to reduce departmental appropriation items upon request from the relevant Minister or Chief Executive. The Acts aim to address the problem of excess appropriations that can arise from reclassifications, efficiency savings, or policy changes, ensuring that unutilised funds are appropriately managed and reallocated. The instrument was authorised under sections 10, 12, 9, and 11 of the aforementioned Acts, which empower the Finance Minister to make such reductions. The determination allows for a reduction of appropriations for the Department of Defence across several financial years, reflecting savings and reallocations of funds. The objective is to efficiently manage government finances by reducing excess appropriations as requested by the Minister for Defence.

Scope and Application

The Determination to Reduce Appropriation Upon Request, dated 26 June 2007 and numbered 16 of 2006-2007, applies to the Department of Defence (Defence) and is made under the authority of the Appropriation Acts of 2003-2004 and 2005-2006. Specifically, the Finance Minister has the power to reduce departmental items and administered assets and liabilities items upon receiving a written request from the relevant Minister or Chief Executive. The reductions are made to address excess appropriations resulting from reclassifications, efficiency savings, or policy changes. The instrument provides for the reduction of $80,563,000 from various departmental items for the financial years 2000-2001 to 2005-2006, and a reduction of $2,552,414,000 from equity injections for the financial years 1999-2000 to 2005-2006. The reductions are limited to the lesser of the amount requested and the balance of the appropriation item remaining in the Consolidated Revenue Fund. Defence was consulted in the preparation of this instrument in accordance with the Legislative Instruments Act 2003. The scope of the instrument is limited to the specific reductions requested by the Minister for Defence and approved by the Finance Minister. The instrument does not affect any other appropriations or entities outside of Defence. The instrument's application is limited to the specific financial years and appropriation items listed in the instrument. The reductions are made to address excess appropriations and are not intended to restrict or extend the application of the Appropriation Acts beyond their existing scope. The instrument does not include any exclusions, exemptions, or thresholds beyond those specified in the Appropriation Acts. The instrument provides a clear and specific direction for the reduction of appropriations in response to the request from the Minister for Defence and is consistent with the legislative authority granted by the Appropriation Acts.

Key Provisions

The primary operative sections of the "Determination to Reduce Appropriation Upon Request" (F2007L02084) are sections 10, 12, 9, and 11 of the Appropriation Acts (No. 3) 2003-2004, (No. 4) 2003-2004, (No. 1) 2005-2006, and (No. 2) 2005-2006 respectively. These sections allow the Finance Minister to reduce departmental items upon receiving a written request from the relevant Minister or Chief Executive. The determination specifies that the reduction cannot exceed the amount requested by the Minister or Chief Executive, or the balance of the appropriation item in the Consolidated Revenue Fund, whichever is less. The Act imposes several obligations on the parties involved. Firstly, the responsible Minister or Chief Executive must submit a written request to the Finance Minister detailing the specific appropriation items to be reduced and the reasons for the reduction. The Finance Minister must then review the request, ensure it complies with the Act's provisions, and issue a determination if appropriate. The determination must specify the exact amount of the reduction and the appropriation item affected. Additionally, Defence, as the entity affected by the reduction, must be consulted in the preparation of the instrument, as required by the Legislative Instruments Act 2003. Failure to comply with the requirements of the Act may result in legal consequences. While the Act does not explicitly outline specific offences or penalties for non-compliance, any breaches could potentially be addressed under broader legal principles concerning administrative law and statutory interpretation. If the Finance Minister acts outside the scope of the statutory authority or fails to follow the prescribed procedures, it could lead to judicial review or other legal challenges. Additionally, if the reductions are not properly justified or are excessive, it could result in financial mismanagement claims or other forms of administrative misconduct. The determination itself provides a clear framework for reducing appropriations by specifying the appropriation items and the exact amounts to be reduced. For example, it mandates a reduction in Defence's departmental items by a total of $80,563,000 across various financial years, and a reduction in equity injections by $2,552,414,000. These reductions are based on various factors such as cost savings, reclassification of funds, and underspends in capital equipment programs. The determination ensures that the reductions are within the limits specified in the Act and that they are justified by the reasons outlined in the request from the Minister for Defence.

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