Explanatory Statement
Appropriation Act (No. 3) 2003-04, Section 10 – Reduction of Appropriations from Prior Years Upon Request
Appropriation Act (No. 2) 2004-05, Section 11 – 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 30 June 2005 and numbered 8 of 2004-2005.
The legislative authority under which the instrument is made
Section 10 of Appropriation Act (No. 3) 2003-04 enables the Finance Minister to make a determination reducing departmental appropriations from prior years from 2001-2002, up to and including Appropriation Act (No.1) 2003-04, 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 11 of Appropriation Act (No. 2) 2004-05 enables the Finance Minister to make a determination reducing non-operating appropriations made under 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 provisions were included in the Appropriation Acts 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 10 of Appropriation Act (No. 3) 2003-04 or section 11 of Appropriation Act (No. 2) 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 appropriations for the Department of Finance and Administration be reduced by a total of $4,825,000, as follows:
Appropriation Act (No. 1) 2001-2002 be reduced by $3,528,000;
Appropriation Act (No. 1) 2002-2003 be reduced by $600,000; and
Appropriation Act (No.1) 2003-2004 be reduced by $697,000.
The instrument also directs that equity injections appropriations for the Department of Finance and Administration be reduced by a total of $4,000,000, as follows:
Appropriation Act (No. 2) 2004-2005 be reduced by $4,000,000.
Background
On 29 June 2005, the Chief Executive Officer of the Department of Finance and Administration,
Dr Ian Watt, wrote to the Minister for Finance and Administration seeking a reduction of the Department’s departmental outputs and equity injections appropriations, as listed in the Appropriation Acts above, by a total of $8,825,000. These unrequired amounts have arisen from several sources: specifically, the abolition of the Office of Assets Sales and Commercial Support, underspends on the sale of the Sydney Airports Basin and ComLand, and savings on the system development, implementation and support services for the Accrual Information Management System replacement project. These unspent appropriations are in excess of the Department of Finance and Administration’s requirements.
Notes on the instrument
The instrument provides that the appropriation items in column 1 for the Department of Finance and Administration be reduced in response to a request made by the Chief Executive Officer in column 4 by the amounts listed in column 6.
Overview
The Determination to Reduce Appropriation Upon Request, dated 30 June 2005, is an instrument issued under the legislative authority provided by sections 10 and 11 of the Appropriation Act (No. 3) 2003-04 and the Appropriation Act (No. 2) 2004-05 respectively. The purpose of this instrument is to direct a reduction in departmental appropriations for the Department of Finance and Administration for prior years, in response to a request from the Chief Executive Officer. The policy objective behind these provisions is to enable the extinguishment of excess departmental appropriation items, which do not automatically lapse, through the issuance of a determination by the Finance Minister. This ensures that any unrequired amounts are returned to the Consolidated Revenue Fund. The instrument specifically reduces departmental outputs appropriations by a total of $4,825,000 across three financial years, as well as equity injections appropriations by $4,000,000 for the 2004-2005 financial year.
Scope and Application
The instrument, "Determination to Reduce Appropriation Upon Request," dated 30 June 2005, serves to reduce appropriations under the Appropriation Act (No. 3) 2003-04 and Appropriation Act (No. 2) 2004-05 for the Department of Finance and Administration, following a written request from the Chief Executive Officer. This instrument operates within the legislative framework provided by Sections 10 and 11 of the respective Appropriation Acts, allowing the Finance Minister to decrease departmental appropriations from prior years upon request. This process is intended to address instances where appropriations are no longer required, such as when programs are abolished, reclassified, or underspend due to efficiency savings. The reductions are confined to the amounts requested by the Chief Executive Officer, not exceeding the remaining balance of the appropriation items in the Consolidated Revenue Fund. The instrument specifies a reduction of $4,825,000 in departmental outputs appropriations and $4,000,000 in equity injections appropriations for the Department of Finance and Administration, reflecting unspent funds from various sources including the Office of Assets Sales and Commercial Support, sales of the Sydney Airports Basin and ComLand, and savings on system development projects.
Key Provisions
The primary sections in focus are Section 10 of the Appropriation Act (No. 3) 2003-04 and Section 11 of the Appropriation Act (No. 2) 2004-05. Section 10 allows the Finance Minister to reduce departmental appropriations from prior years, specifically from 2001-2002 up to and including Appropriation Act (No. 1) 2003-04, upon receiving a written request from the relevant Minister or, in cases of agencies within the Finance portfolio, the Chief Executive. Similarly, Section 11 permits the Finance Minister to reduce non-operating appropriations under that Act, following a written request from the relevant Minister or Chief Executive. These sections were established to address excess appropriation items that do not lapse automatically, such as reclassified amounts, efficiency savings, or abolished government programs.
These provisions impose several obligations on the parties involved. The Minister or Chief Executive responsible for a department must formally request any reduction in appropriations if they determine that the appropriation is in excess of requirements. This request must be in writing and submitted to the Finance Minister. The Finance Minister, upon receiving such a request, must then issue a determination to reduce the appropriation, ensuring that the reduction does not exceed the lesser of the amount requested and the balance remaining in the appropriation item within the Consolidated Revenue Fund.
Failure to comply with the provisions outlined in Sections 10 and 11 may result in various consequences. While the legislation does not explicitly state penalties for non-compliance, it is implied that any misuse of appropriations or failure to follow the prescribed process for reducing appropriations could lead to financial mismanagement or misuse of public funds. Such actions could potentially attract civil or criminal liability under other relevant legislation, such as the Public Governance, Performance and Accountability Act 2013, depending on the circumstances. It is essential for the responsible Minister or Chief Executive to ensure that their requests are well-founded and that the reductions are accurately calculated to avoid any adverse consequences.