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.
Overview
The Appropriation Act (No. 1) 2006-2007 and the Appropriation Act (No. 2) 2006-2007 were enacted to allow for the reduction of appropriations upon request from the relevant Minister or Chief Executive, thereby addressing the issue of excess appropriations. These Acts empower the Finance Minister to decrease departmental items and administered assets and liabilities items in response to specific requests, ensuring fiscal efficiency and preventing the unnecessary carryover of funds into subsequent financial years. The objective of these provisions is to facilitate the management of government finances by allowing for the timely adjustment of appropriations in line with changing circumstances or realised savings. This legislative framework was enacted by the Australian Parliament to provide a formal mechanism for the reduction of appropriations, reflecting the policy objective of maintaining budgetary discipline and responsiveness to economic and administrative changes.
Scope and Application
The Determination to Reduce Appropriation Upon Request, dated 29 June 2007, applies to the Department of Finance and Administration, a Commonwealth entity, as it concerns the reduction of appropriations for this particular entity. The Act is made under the legislative authority provided by sections 9 and 11 of the Appropriation Acts (No. 1) and (No. 2) 2006-2007, which empower the Finance Minister to reduce departmental items upon receipt of a written request from the responsible Minister or the Chief Executive, where applicable. The purpose of this instrument is to direct the reduction of the Department of Finance and Administration's departmental items by $143,536,000 and administered assets and liabilities items by $47,000, as requested by the Chief Financial Officer. The instrument ensures that the reduction does not exceed the lesser of the amount requested and the balance remaining in the Consolidated Revenue Fund. The instrument’s application is limited to the appropriation items specified in the determination and does not extend to other entities or items not listed.
Key Provisions
The main operative sections of the Determination to Reduce Appropriation Upon Request are sections 9(2) of the Appropriation Act (No. 1) 2006-2007 and section 11(2) of the Appropriation Act (No. 2) 2006-2007. These sections empower the Finance Minister to reduce a departmental item or an administered asset and liability item upon receipt of a written request from the responsible Minister or the Chief Executive of the entity, as applicable. This mechanism allows for the reduction of excess appropriations that arise due to various circumstances such as reclassification of funds, efficiency savings, or policy changes that lead to the termination of a program before the appropriation is expensed.
The obligations imposed by these sections on the relevant parties include the requirement for the Minister responsible for the department or entity, or the Chief Executive in cases where the Finance Minister is responsible, to submit a written request to the Finance Minister. This request must detail the reasons for the reduction and specify the exact amount by which the appropriation should be reduced. The Finance Minister then reviews the request and, if deemed appropriate, issues a determination that reduces the appropriation accordingly. The Finance Minister must ensure that the reduction does not exceed the lesser of the amount requested and the balance of the appropriation item remaining in the Consolidated Revenue Fund.
In terms of penalties and consequences, the Act does not explicitly state penalties for non-compliance with the requirements set out in the sections. However, if a determination is made in an improper or unauthorised manner, it could potentially lead to legal challenges or administrative reviews, which may result in the determination being overturned or amended. Additionally, any financial mismanagement or misappropriation arising from the misapplication of these provisions could lead to broader criminal or civil liabilities under other applicable laws. The Act underscores the importance of proper documentation and adherence to the legislative framework when making such determinations to avoid any potential repercussions.