Explanatory Statement
Appropriation Act (No. 1) 2005-2006, 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 29 June 2006 and numbered 9 of 2005-2006.
The legislative authority under which the instrument is made
Section 9 of Appropriation Act (No. 1) 2005-2006 enables the Finance Minister to make a determination reducing departmental 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 9 of Appropriation Act (No. 1) 2005-2006 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 for the Department of Defence in Appropriation Act (No. 1) 2005-2006 be reduced by $69,200,000.
Background
On 1 June 2006, the Minister for Defence, the Hon Brendan Nelson MP, 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) 2005-2006 by $69,200,000. This reduction relates to funds appropriated in excess of requirements for Project Pitchpipe, logistics funding for Naval Aviation and Defence Housing Authority competitive neutrality funding.
Notes on the instrument
The instrument provides that the appropriation item in column 1 for the agency in column 2 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) 2005-2006 was enacted to facilitate the management of departmental appropriations within the federal budget, specifically addressing the issue of excess appropriations that do not automatically lapse. This Act empowers the Finance Minister to reduce appropriations upon receiving a written request from the responsible Minister or, in the case of agencies under the Finance portfolio, the Chief Executive. The policy objective behind these provisions is to ensure that excess funds, which may arise due to reclassification of funds, efficiency savings, or the abolition of government programs, are appropriately extinguished. This legislative framework was introduced by the Australian Parliament to enhance fiscal responsibility and ensure that government spending aligns with actual requirements and policy changes.
On 29 June 2006, an instrument was issued under Section 9 of the Appropriation Act (No. 1) 2005-2006, directing a reduction in the Department of Defence’s appropriations by $69,200,000. This reduction was in response to a request from the Minister for Defence, the Hon Brendan Nelson MP, who identified excess appropriations related to Project Pitchpipe, logistics funding for Naval Aviation, and Defence Housing Authority competitive neutrality funding. The determination ensures that the appropriations are aligned with the actual needs of the department, reflecting the policy objective of prudent financial management.
Scope and Application
The Determination to Reduce Appropriation Upon Request, dated 29 June 2006, pertains to the authority granted under Section 9 of the Appropriation Act (No. 1) 2005-2006, enabling the Finance Minister to adjust departmental appropriations upon a written request from the relevant Minister or Chief Executive. This provision is intended to address instances where appropriations exceed actual requirements, such as reclassifications, efficiency savings, or the termination of government programs. The instrument specifies a reduction of $69,200,000 in the Department of Defence's appropriations, in response to a request by the Minister for Defence, reflecting surplus funds related to Project Pitchpipe, logistics funding for Naval Aviation, and Defence Housing Authority competitive neutrality funding. The reduction is limited to the amount requested or the remaining balance of the appropriation item in the Consolidated Revenue Fund, whichever is less.
Key Provisions
Section 9 of the Appropriation Act (No. 1) 2005-2006 is a crucial provision that allows the Finance Minister to reduce departmental appropriations following a written request from the relevant Minister or Chief Executive. This section is designed to address situations where funds have been appropriated but are no longer required due to various reasons such as reclassification of funds, efficiency savings, or policy changes that lead to the abolition of a program before the appropriation is expensed. The reduction can only be up to the amount requested and the balance remaining in the Consolidated Revenue Fund.
Under this section, the Minister for Defence, the Hon Brendan Nelson MP, submitted a request to the Minister for Finance and Administration on 1 June 2006 to reduce the Department of Defence's appropriation by $69,200,000. This request was in response to excess funds identified for Project Pitchpipe, logistics funding for Naval Aviation, and Defence Housing Authority competitive neutrality funding. The Finance Minister subsequently issued a determination to reduce the appropriation by this specified amount.
The obligations imposed by the Act on the relevant parties include the requirement for the responsible Minister or Chief Executive to submit a written request to the Finance Minister when they identify excess appropriations. The Finance Minister must then review the request and ensure that the reduction does not exceed the requested amount or the remaining balance in the Consolidated Revenue Fund. The Act also mandates that any such determination must be clearly documented and communicated to the affected departments.
Breaching the provisions of the Act by making a determination that exceeds the allowable limits could result in serious consequences. While the Act does not explicitly outline specific offences or penalties for such breaches, the improper handling of public funds could potentially lead to civil or criminal liability under other related legislation. The Finance Minister’s actions must be conducted with due diligence to avoid any misuse of public funds, as any mismanagement could attract scrutiny and result in legal repercussions.