Explanatory Statement
Appropriation Act (No. 1) 2004-05, Section 9 – Reduction of Appropriations Upon Request
Appropriation (Tsunami Financial Assistance) Act 2004-05, 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 16 February 2006 and numbered 3 of 2005-2006.
The legislative authority under which the instrument is made
Section 9 of Appropriation Act (No. 1) 2004-05 enables the Finance Minister to make a determination reducing departmental appropriations in 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 (Tsunami Financial Assistance) Act 2004-05 enables the Finance Minister to make a determination reducing departmental appropriations in 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 provision was included in Appropriation Act (No. 1) 2004-05 and Appropriation (Tsunami Financial Assistance) Act 2004-05 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 9 of Appropriation Act (No. 1) 2004-05 or Appropriation (Tsunami Financial Assistance) Act 2004-05 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 appropriation for the Department of Defence in Appropriation Act (No. 1) 2004-05 be reduced by $1,700,000, and in Appropriation (Tsunami Financial Assistance) Act 2004-05 by $13,900,000.
Background
On 10 November 2005, the former Minister for Defence, Senator the Hon Robert Hill, wrote to the Minister for Finance and Administration seeking a reduction of the Department of Defence’s departmental outputs appropriation in Appropriation Act (No. 1) 2004-05 by $1,700,000, and departmental outputs appropriation in Appropriation (Tsunami Financial Assistance) Act 2004-05 by $13,900,000. These amounts relate to savings across a number of Defence’s overseas deployments, including the defence contribution to the government’s tsunami relief effort.
Notes on the instrument
The instrument provides that the appropriation items in column 1 for the Department of Defence be reduced in response to a request made by the Minister in column 4 by the amounts listed in column 6.
Overview
The Appropriation Act (No. 1) 2004-05 and the Appropriation (Tsunami Financial Assistance) Act 2004-05 were enacted to address the issue of excess departmental appropriations that do not automatically lapse. These Acts were enacted by the Parliament of Australia to provide a mechanism for reducing departmental appropriations upon request from the relevant Minister or Chief Executive, ensuring fiscal efficiency and proper management of public funds. The policy objective behind these provisions is to enable the extinguishment of excess appropriation items that may arise due to reclassifications, efficiency savings, or the abolition of government programs. The Appropriation (Tsunami Financial Assistance) Act 2004-05 was specifically enacted in response to the need for financial assistance following the tsunami disaster, allowing for the reduction of appropriations related to the government's relief efforts. The explanatory statement details a determination made by the Finance Minister to reduce the Department of Defence's appropriations by specified amounts, following a request by the Minister for Defence to reflect savings from overseas deployments, including those related to tsunami relief efforts.
Scope and Application
The “Determination to Reduce Appropriation Upon Request”, dated 16 February 2006, pertains to the reduction of appropriations in the Appropriation Act (No. 1) 2004-05 and the Appropriation (Tsunami Financial Assistance) Act 2004-05 for the Department of Defence. Under section 9 of these Acts, the Finance Minister is empowered to make such reductions upon receiving a written request from the Minister responsible or the Chief Executive of an agency within the Finance portfolio. This authority is intended to address excess departmental appropriations that do not automatically lapse, which may arise due to reclassifications, efficiency savings, or policy changes that lead to the cessation of programs before the appropriations are expensed. The instrument reduces the departmental outputs appropriation for the Department of Defence by $1,700,000 in the Appropriation Act (No. 1) 2004-05 and by $13,900,000 in the Appropriation (Tsunami Financial Assistance) Act 2004-05, following a request from the former Minister for Defence, Senator the Hon Robert Hill, to reflect savings from various Defence overseas deployments, including the tsunami relief effort. The reduction cannot exceed the amount requested or the balance remaining in the Consolidated Revenue Fund.
Key Provisions
Section 9 of both the Appropriation Act (No. 1) 2004-05 and the Appropriation (Tsunami Financial Assistance) Act 2004-05 empowers the Finance Minister to reduce departmental appropriations upon receiving a written request from the relevant Minister responsible or, in the case of an agency within the Finance portfolio, the Chief Executive. This provision is designed to address situations where excess appropriations exist, which do not automatically lapse. Such excess appropriations can arise from various scenarios, such as reclassification of funds under a different appropriation, efficiency savings resulting in lower-than-expected program costs, or the abolition of a government program before the appropriation is expensed.
The Act imposes specific obligations on the responsible Minister or Chief Executive to submit a written request to the Finance Minister when they identify a need to reduce departmental appropriations. The Finance Minister then assesses the request and, if deemed appropriate, issues a determination to reduce the appropriation. The determination must not exceed the lesser of the amount requested and the balance of the appropriation item remaining in the Consolidated Revenue Fund. This ensures that the reduction is both justified and does not exceed the available funds.
Breach of the provisions or misuse of the authority to reduce appropriations could lead to significant consequences. Although the explanatory statement does not detail specific penalties, it is reasonable to infer that any improper use of this authority might result in civil or criminal liability, depending on the nature and extent of the breach. The Finance Minister’s determination is a formal process, and any failure to comply with the legislative requirements could be subject to review or challenge in court, potentially leading to penalties or corrective actions. It is also important to note that misappropriating funds or making unfounded requests could result in disciplinary action against the responsible Minister or Chief Executive, in addition to any legal penalties imposed.