Source: https://www.legislation.gov.au/Details/C2008B00254/Explanatory%20Memorandum/Text
Timestamp: 2019-12-07 13:57:55
Document Index: 285513034

Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 4', 'art 3', 'art 3', 'art 3', 'art 3']

Details: C2008B00254
- C2008B00254
A Bill for an Act to appropriate money out of the Consolidated Revenue Fund for the ordinary annual services of the Government and in relation to the Economic Security Strategy, and for related purposes
Registered 12 Nov 2008
Introduced HR 10 Nov 2008
Appropriation (economic security strategy) Bill (No. 1) 2008‑2009
1 This explanatory memorandum accompanies Appropriation (Economic Security Strategy) Bill (No. 1) 2008-2009 (the Bill).
2 The main purpose of the Bill is to propose annual appropriations from the Consolidated Revenue Fund (CRF) for the ordinary annual services of the Government in relation to the Economic Security Strategy.
3 Appropriations for the ordinary annual services of the Government must be contained in a separate bill to other appropriations in accordance with sections 53 and 54 of the Australian Constitution. Other annual appropriations in relation to the Economic Security Strategy that are not for the ordinary annual services of the Government are proposed in Appropriation (Economic Security Strategy) Bill (No. 2) 2008-2009.
4 This Explanatory Memorandum should be read in conjunction with the 2008-2009 Portfolio Budget Statements (PB Statements) and Portfolio Supplementary Estimates Statements (PSES). In particular, the PSES contain details of the appropriations set out in Schedule 1 to the Bill. The PB Statements were published and tabled with the Appropriation Bill (No. 1) 2008-2009 and Appropriation Bill (No. 2) 2008-2009. The PSES are published and tabled in the Parliament together with the Bill.
5 The Bill provides for the appropriation of specified amounts for expenditure by three Australian Government agencies (being those under the Financial Management and Accountability Act 1997 (FMA Act) on activities related to the Economic Security Strategy).
6 Part 1 of the Bill deals with definitions, PB Statements, PSES and the concept of notional payments. Part 2 of the Bill proposes appropriations to make payments of the amounts in Schedule 1 for departmental items (clause 7), administered items (clause 8) and payments to bodies under the Commonwealth Authorities and Companies Act 1997 (CAC Act body payment items) (clause 9).
7 Part 3 of the Bill specifies the ways in which the amounts in Schedule 1 may be adjusted.
8 Part 4 deals with special accounts and sets out the amount appropriated under the Act. In addition to the adjustment provisions in Part 3, clause 14 of the Bill recognises that the appropriations in the Bill may also be varied by the FMA Act.
1 This clause specifies the short title of the Bill, once enacted, will be Appropriation (Economic Security Strategy) Act (No. 1) 2008‑2009.
2 Clause 2 provides for the Bill to commence as an Act on the day of Royal assent.
3 Clause 3 defines the key terms used in the Bill, such as ‘administered item’, ‘departmental item’ and ‘current year’ (being the financial year ending on 30 June 2009).
4 Clause 4 declares that Portfolio Budget Statements (PB Statements) and Portfolio Supplementary Estimates Statements (PSES) are extrinsic material under paragraph 15AB(2)(g) of the Acts Interpretation Act 1901 (AI Act) that may be used to ascertain the meaning of certain provisions in the Bill in accordance with subsection 15AB(1) of the AI Act. The purpose of the PB Statements and PSES are to provide information on the proposed allocation of resources to Government outcomes by agencies within the portfolio. The PB Statements and PSES provide information, explanation and justification to enable Parliament to understand the purpose of each appropriation proposed in the Bill.
Clause 5—Notional payments, receipts etc
5 Clause 5 ensures that payments between agencies result in a debit to the appropriation to the paying agency. For example the payments of the amounts in Schedule 1 of the Bill from one FMA Act agency to another do not require an appropriation. However, for reasons of financial discipline and transparency, the practice has arisen for these payments between agencies to be treated as though they required an appropriation, and to debit an appropriation when such payments are made.
6 Clause 5 provides that these notional transactions between agencies are to be treated as if they were real transactions. The effect is that when a notional transaction takes place, the paying agency must debit the appropriation made to it by Parliament. For constitutional purposes this means that the real appropriation made by Parliament is extinguished by the amount of the notional payment.
7 Clause 6 sets out the total of the appropriations in Schedule 1 of the Bill. Importantly, the amounts in Schedule 1 may be adjusted under the provisions in Part 3 of the Bill. Specifically:
· Departmental items may be reduced in accordance with clause 10.
· Administered items may be reduced in accordance with clause 11.
· CAC Act body payment items may be reduced in accordance with clause 12.
· Items may be increased by the reinstatement of amounts that an agency is repaid, in accordance with section 30 of the FMA Act. The re-crediting or reinstatement authorised by section 30 can result in the total amount paid from the CRF in gross terms exceeding the amount specified in an item.
· Items may be adjusted by amounts recovered by an agency from the Australian Taxation Office for Goods and Services Tax (GST), in accordance with section 30A of the FMA Act. The amounts specified in Schedule 1 exclude recoverable GST. The appropriations shown represent the net amount that Parliament is asked to allocate to particular purposes. Section 30A has the effect of increasing an appropriation by the amount of the GST qualifying amount arising from payments in respect of the appropriation. As a result, there is sufficient appropriation for payments under an appropriation item provided that the amount of those payments, less the amount of recoverable GST, can be met from the initial amount shown against the item in Schedule 1.
· Departmental items may be increased to take into account certain other amounts received by an agency, if those receipts are prescribed by the Financial Management and Accountability Regulations, in accordance with section 31 of the FMA Act.
9 Clause 7 provides that the amount specified in a departmental item for an agency may be applied for the departmental expenditure of the agency. Clause 3 defines:
· ‘departmental item’ to be the total amount set out in Schedule 1 in relation to an agency under the heading ‘Departmental Outputs’; and
· ‘expenditure’ to be payments for expenses, acquiring assets, making loans or paying liabilities.
10 While the departmental outputs in Schedule 1 may be divided between outcomes, the different amounts against outcomes are notional. The total appropriation for departmental expenses represents the departmental item.
11 Departmental items involve costs over which an agency has control. Departmental appropriations can be used to make any payment related to the functions of the agency. Expenditure typically covered by departmental items includes employee expenses, suppliers and other operational expenses (eg, replacement and maintenance of existing departmental assets). There can also be occasions when an agency, such as a portfolio department, needs to cover matters in relation to other areas of the Government. Examples can include whole-of-Government activities or a portfolio department assisting with the formation and initial costs of a new portfolio body (for which the department might later be reimbursed).
12 Departmental items are not expressed in terms of a particular financial year and do not automatically lapse. Departmental items are available until they are spent. Because the cash to meet expenses such as employee entitlements can be required at times other than when the expenses are incurred, the departmental appropriations remain available until required.
13 The Finance Minister manages the payment from departmental items by agencies through the issuing of drawing rights in accordance with sections 26 and 27 of the FMA Act. Drawing rights control who may spend from appropriations, and allow for conditions and limits to be set by the Finance Minister (or the Finance Minister’s delegate) in relation to those activities.
14 Amounts appropriated for departmental outputs can be subject to a reduction process in accordance with clause 10 of the Bill. The reduction arrangements were first introduced in the Additional Estimates Appropriations Acts for 2003-2004, to enable appropriations that are no longer required to be reduced. Under clause 10, the Minister responsible for an agency may make a written request to ask the Finance Minister to make a determination to reduce the agency’s departmental appropriation.
15 Subclause 8(1) provides for the appropriation of administered expense amounts to be applied by an agency for the purpose of contributing to the outcome for an administered item. An administered item is defined in clause 3 to be the amounts set out in Schedule 1 opposite an outcome for an agency under the heading “Administered Expenses”. Administered expenses are appropriated separately for outcomes (ie, unlike departmental items, the split across outcomes is not notional), making it clear what the funding is intended to achieve. Schedule 1 specifies how much can be expended on each outcome.
16 The appropriations for administered items in Schedule 1 represent the amounts required to meet the total estimated expenses for the administered outcomes for 2008-2009 in relation to the Economic Security Strategy.
17 The purposes for which each administered item can be spent are set out in subclause 8(2). Subclause 8(2) provides that where the PB Statements or PSES indicate a particular activity is in respect of a particular outcome, then the amount in the administered item is taken to contribute to achieve the outcome. The outcomes are not, however, necessarily tied to the existence of a particular agency (eg, abolishing a department will not effect the valid operation of an appropriation for an administered item for an outcome of that department, because the purpose of the appropriation does not depend on the existence of the department).
18 Administered expenses are those administered by an agency on behalf of the Government (eg, certain grants, benefits and transfer payments). These payments are usually made pursuant to eligibility rules and conditions established by the Government or Parliament. Specifically:
19 The Finance Minister manages payments from administered items by agencies through the issuing of drawing rights in accordance with sections 26 and 27 of the FMA Act. Drawing rights control who may spend money from appropriations, and allow for conditions and limits to be set by the Finance Minister (or the Finance Minister’s delegate) in relation to those activities.
20 Clause 9 provides for direct appropriations of money for CAC Act bodies to be paid from the CRF by the relevant department. Clause 9 provides that payments for CAC Act bodies must be paid to those bodies to be used for the purposes of those bodies.
21 A CAC Act body is defined in clause 3 to be a Commonwealth authority or Commonwealth company within the meaning of the CAC Act. Many CAC Act bodies receive funding directly from appropriations. However, these bodies are legally separate from the Commonwealth and as a result, do not debit appropriations or make payments from the CRF.
22 CAC Act body payments will be initiated by requests to the relevant portfolio agencies from the CAC Act bodies. The Finance Minister manages appropriations for CAC Act bodies through the issuing of drawing rights in accordance with sections 26 and 27 of the FMA Act. Drawing rights control who may spend money from appropriations, and allow for conditions and limits to be set by the Finance Minister (or the Finance Minister’s delegate) in relation to those payments. CAC Act bodies will hold the amounts paid to them on their own account.
23 Subclause 9(2) provides that if a CAC Act body is subject to another Act that requires amounts appropriated by Parliament for the purposes of that body to be paid to the body, then the full amount of the CAC Act body payment must be paid to the body. The purpose of subclause 9(2) is to clarify that subclause 9(1) is not intended to qualify any obligations in other legislation regulating a CAC Act body, where that legislation requires the Commonwealth to pay the full amount appropriated for the purposes of the body.
24 The full amount of the CAC Act body payments specified in Schedule 1 may be reduced in accordance with clause 12. Subclause 12(5) provides that subclause 9(2) does not prevent the CAC Act body payments in Schedule 1 being reduced.
25 Part 3 of the Bill includes provisions to reduce the amounts specified in Schedule 1.
26 Departmental items remain available until the appropriation is spent or reduced in accordance with clause 10. This clause enables the Chief Executive of an agency to comply with his or her obligations under section 44 of the FMA Act to promote the efficient, effective and ethical use of any surplus appropriations. Agencies should only spend all of a departmental item if there are government decisions to support that expenditure. Examples of where clause 10 may be appropriate to reduce a departmental item include:
· an amount is reclassified and appropriated again under another kind of appropriation (eg, where an amount appropriated as departmental is to be reclassified as administered and a new administered appropriation is provided). The existing departmental appropriation remains legally available even though there is no Government authority to spend the funds;
27 Paragraph 10(1)(a) enables the Minister responsible for a particular agency to ask the Finance Minister to reduce a departmental item for that agency. Paragraph 10(1)(b) enables the Chief Executive of an agency for which the Finance Minister is responsible to ask the Finance Minister to reduce a departmental item for that agency. Subclause 10(5) assists readers by noting that a request under subclause 10(1) is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003 (LI Act).
28 Subclause 10(2) enables the Finance Minister to make a written determination to reduce a departmental item. The Finance Minister is not obliged to act on a request to reduce excess departmental output appropriations. However, if the Finance Minister does:
· the determination must not be greater than the amount specified in the request: subclause 10(2);
29 Subclause 10(6) provides that a determination made under subclause 10(2) is a legislative instrument.
30 Despite subsection 44(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to disallowance, subclause 10(6) provides that a determination reducing a departmental item is subject to disallowance in accordance with section 42 of the LI Act. Parliament retains the power to disallow a determination to reduce a departmental item because any such determination will reduce the amount of an appropriation authorised by Parliament. Subclause 10(6) also confirms subsection 54(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to sunsetting.
31 Clause 11 provides for amounts of administered items not required in later years to be extinguished. If the Government then decides that amounts should be spent in a later financial year, the Government must request Parliament to appropriate these amounts in future appropriation bills.
32 Clause 11 limits the amount that may be applied for an administered item to the amount reported for that item in an agency’s annual report. Subclause 11(1) provides that if the amount published in the annual report is less than the amount of the item, then the administered item is taken to be reduced to the amount specified in the annual report. The amount of the item specified in Schedule 1 of the Bill may be increased or reduced by the other clauses of Part 3 of the Bill or in accordance with sections 30 to 32 of the FMA Act. The amount in the annual report must therefore be compared with the amount for the item in Schedule 1 together with any other adjustments that have been made to that amount.
33 Subclause 11(2) retains a power for the Finance Minister to determine that an amount published in the financial statements of an agency is taken to be the amount specified in his or her determination. The power in paragraph 11(2)(b) is to ensure that the amount published for the administered item can be corrected if, for example, the amount is erroneous or requires updating after the annual report is published.
34 Subclause 11(3) provides that a determination made under subclause 11(2) is a legislative instrument.
35 Despite subsection 44(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to disallowance, subclause 11(3) provides that a determination regarding an administered item is subject to disallowance in accordance with section 42 of the LI Act. Parliament retains the power to disallow a determination to reduce a departmental item because any such determination will reduce the amount of an appropriation authorised by Parliament. Subclause 11(3) also confirms subsection 54(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to sunsetting.
36 Clause 12 provides a similar process for reducing CAC Act body payment items to the process for reducing departmental items. Subclause 12(1) enables a Minister responsible for a CAC Act body, or in the case of a CAC Act body who the Finance Minister is responsible for, the Secretary of the Finance Department, to ask the Finance Minister to reduce a CAC Act body payment for that body. Subclause 12(6) provides that a request under subclause 12(1) is not a legislative instrument within the meaning of section 5 of the LI Act.
37 Subclause 12(2) enables the Finance Minister to make a written determination to reduce a CAC Act body payment item. The Finance Minister is not obliged to act on a request to reduce excess CAC Act body payments. However, if the Finance Minister does:
· the determination will not be greater than the amount specified in the request: subclause 12(2);
38 Subclause 12(5) clarifies that the full amount that is required to be paid to a CAC Act body by subclause 9(2) of the Bill may be reduced in accordance with this clause 12.
39 Subclause 12(7) clarifies that a determination made under subclause 12(2) is a legislative instrument.
40 Despite subsection 44(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to disallowance, subclause 12(7) provides that a determination reducing a CAC Act body payment item is subject to disallowance in accordance with section 42 of the LI Act. Parliament retains the power to disallow a determination to reduce a departmental item because any such determination will reduce the amount of an appropriation authorised by Parliament. Subclause 12(7) also confirms subsection 54(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to sunsetting.
Clause 13—Crediting amounts to Special Accounts
41 Clause 13 provides that if the purpose of an item in Schedule 1 is also the purpose of a special account (regardless of whether the item expressly refers to the special account), then amounts may be debited against the appropriation for that item and credited to the special account. Special accounts may be established under the FMA Act by a determination of the Finance Minister (section 20) or another Act (section 21). The determination or Act that establishes the special account will specify the purposes of the special account.
Clause 14—Appropriations of the Consolidated Revenue Fund
42 Clause 14 provides that the CRF is appropriated as necessary for the purposes of the Bill. Significantly this clause notes that the amounts appropriated by the Bill may be affected by the FMA Act, in particular sections 30 to 32 of the FMA Act (see clause 6).
43 Schedule 1 specifies the appropriations proposed for the ordinary annual services of the Government. Schedule 1 contains a summary table detailing the total appropriations for each portfolio. A separate summary table is included for each portfolio together with other tables detailing the breakdown of the appropriations within each portfolio.
44 Schedule 1 includes for information purposes a figure for the annual Budget appropriations (the ‘Budget comparator’) and a figure for previous financial year (the ‘Actual Available Appropriation’). The Budget comparator printed in italics under each appropriation amount indicates the amounts provided by the annual appropriation Acts following the previous Budget. The Actual Available Appropriation printed in plain type under each appropriation amount provides a full year comparison with the proposed appropriations. Neither figure affects the amounts available at law.
45 More details about the appropriations in Schedule 1 are contained in the PB Statements, PSES and the second reading speech.