Explanatory Statement
Appropriation Act (No. 1) 2006-2007, subsection 9(2) – Reduction of appropriations upon request
Appropriation Act (No. 2) 2006-2007, subsection 11(2) – 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 2007 and numbered 18 of 2006-2007.
The legislative authority under which the instrument is made
Section 9 of Appropriation Act (No. 1) 2006-2007 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) 2006-2007 enables the Finance Minister to make a determination reducing an administered assets and liabilities item or an other 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 subsection 9(5) and subsection 9(6) of Appropriation Act (No. 1) 2006-2007 and subsection 11(5) and subsection 11(6) of Appropriation Act (No. 2) 2006-2007, 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 Finance and Administration (Finance) in Appropriation Act (No. 1) 2006-2007 be reduced by $143,536,000 and administered assets and liabilities items in Appropriation Act (No. 2) 2006-2007 be reduced by $47,000.
Background
On 24 May 2007, the Chief Financial Officer of the Department of Finance and Administration (the CFO), Mr Dominic Staun, wrote to the Minister for Finance and Administration seeking a reduction of Finance’s departmental items in Appropriation Act (No. 1) 2006-2007 by $143,536,000. The reasons for the reductions are as follows:
- Surplus sale funding of $100,000,000 not required following the completion of the Telstra share offer in November 2006;
- $17,807,000 in funding rephased from 2006-2007 to 2007-2008 and 2008-2009 for the sale of Medibank Private Ltd; and
- A net reduction of $25,729,000 due to funding for the sale of Telstra being rephased to 2007-2008 and 2008-2009 offset by new measures, estimates and variations to outcomes approved as part of the 2006-2007 Additional Estimates process.
The CFO is also seeking a reduction of Finance’s administered assets and liabilities items in Appropriation Act (No. 2) 2006-2007 of $47,000. This reduction relates to a reallocation from equity to operational funding through nominal interest reflecting the higher than expected opening balance of the Act of Grace liability and the economic parameter update.
Notes on the instrument
The instrument provides that the appropriation items in column 1 for the entity in column 2 are reduced in response to a request made by the officer in column 4 by the amounts listed in column 6.
In accordance with the Legislative Instruments Act 2003, Finance was consulted in the preparation of this instrument.