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Appropriation Bill (No.3) 1999-2000
Date Introduced: 8 December 1999
House: House of
Portfolio: Finance and Administration
Commencement: On Royal Assent.
To authorise the Minister for Finance to issue
$1.847 billion from the Consolidated Revenue Fund (CRF) in addition
to funds appropriated by the Appropriation Act (No.1)
Annual authorisations for expenditure are
- Appropriation Act (No.1), which authorises expenditure
for the ordinary annual services of government
- Appropriation Act (No.2), which authorises expenditure
on capital works and services, payments to the States and other
purposes not authorised by special legislation, and
- Appropriation (Parliamentary Departments) Act which
authorises expenditure for the five parliamentary departments.
However, if the initial appropriation is
insufficient for the financial year additional appropriations may
be sought. These additional appropriations, known as additional
estimates, are extra spending requirements - for example, for cost
overruns in existing programs or for new programs - not foreseen
when the Budget was presented.
The 1999-2000 additional estimates differ from
previous additional estimates in two main ways. First, the
estimates documentation is presented in an outcomes and outputs
framework. Previous estimates were based on a program approach.
Second, the estimates use an accrual budgeting framework. Previous
budgets used a cash framework.
Accrual budgeting allows for the incorporation
of all assets, liabilities, expenses and revenues, including cash
receipts and expenditures. Under accrual budgeting, agencies are
funded for the full cost of their functions, including non-cash
costs such as employee entitlements such as long service leave or
depreciation. Thus the amount an agency is appropriated under
accrual budgeting in any one year may exceed its cash costs. Any
unspent amount is accumulated for use in future years when required
- for example accumulated depreciation to replace buildings and
It is suggested that this Bills Digest be read
in conjunction with the Parliamentary Information and Research
Services publication, Budget Review
Glossary of Budgetary and Accounting
Accrual accounting A system of
accounting that recognises costs, revenues, lending and borrowing
when they occur. Accrual accounting differs from cash accounting -
the traditional basis used by the Commonwealth - which records
transactions only when a payment or receipt is made. Thus the
timing of the recording of transactions can differ under
accrual accounting and cash accounting. Accrual accounting also
includes non-cash costs-such as depreciation-and costs which, while
incurred, have not yet been paid (e.g. accruing superannuation
entitlements). Accrual accounting thus seeks to measure the full
cost of providing goods and services in a given period. The
1999-2000 Budget is the first to be presented in an accrual
Accrual budgeting A
comprehensive budget incorporating assets, liabilities, expenses
and revenues, including cash receipts and expenditures. Under
accrual budgeting, agencies are funded for the full cost of their
functions, including non-cash costs (e.g. depreciation). Thus the
amount an agency is appropriated under accrual budgeting in any one
year may exceed its cash costs (although the amount appropriated
covers its full costs). Any unspent amount is accumulated for use
in future years when required (e.g. accumulated depreciation to
replace buildings and equipment).
Additional estimates Extra
spending requirements (e.g. for cost overruns in existing programs
or for new programs) not foreseen when the Budget was presented.
Additional estimates are contained in Appropriation Bills Nos. 3
and 4 and the Appropriation (Parliamentary Departments) Bill No.
Administered expenses Items
that agencies administer on behalf of the Commonwealth (e.g. social
security payments to eligible recipients). Administered expenses
include grants, subsidies and benefits.
Advance to the Minister for
Finance Contingency funds, appropriated in Appropriation
Acts Nos. 1 and 2, to cover urgent expenditure not foreseen when
the relevant Bill was drawn up (e.g. natural disasters) or for
which funding provision was inadequate. The advance may also be
used to implement changes in priorities, by enabling 'transfers'
from the purpose for which they were originally appropriated to
another purpose, pending specific appropriation.
Amortisation Refers to the
writing off of the value of an asset over its lifetime. The term is
usually applied to the writing off of 'intangible' assets such as
goodwill or expenditure on software. The term is sometimes used as
a synonym for depreciation. (See also
Appropriation Refers to the
authorisation by Parliament of expenditure of public moneys from
the Consolidated Revenue Fund (CRF) for a particular purpose.
Annual appropriations under Appropriation Bills Nos. 1 and 2
account for about only 25 per cent of total appropriations (the
balance is accounted for by Special Appropriations). A major
difference between the 1998-99 and 1999-2000 Budgets is that under
the accrual accounting framework used in the 1999-2000 Budget,
moneys appropriated for accrued expenses will remain in the CRF
until they are required to be spent in future years. In the past,
moneys appropriated but not spent lapsed at 30 June.
Appropriation Bill (No. 1) A
Bill to appropriate moneys from the Consolidated Revenue Fund for
the ordinary annual services of government i.e. recurrent services
(e.g. running costs) and recurrent expenditures on already
Appropriation Bill (No. 2) A
Bill to appropriate moneys from the Consolidated Revenue Fund for
purposes other than the ordinary annual services of government e.g.
payments to the States (i.e. those not covered by special
appropriations), and spending on new programs.
Appropriation Bills (No. 3 and No.
4) When funds required exceed the approved appropriations
contained in Appropriation Acts 1 or 2 because of spending
overruns, the government may seek additional appropriations in
Appropriation Bills Nos. 3 and 4. The government may also seek
appropriations for new spending in these Bills (see 'additional
Departments) Bills (No. 1 and No. 2) Bills to appropriate
moneys from the Consolidated Revenue Fund for the Parliamentary
Departments. Bill No. 2 covers additional appropriations (see
Change in net assets In an
accrual system, the net change in accumulated assets and
liabilities. This measure equals the operating balance plus asset
revaluations. Thus a positive operating balance-akin to the profit
in a business-will increase net assets. Changes in net assets
should be interpreted cautiously. On the one hand, increased asset
values may indicate the ability to retire debt through asset sales.
On the other hand, capital gains may also reflect higher costs of
replacing assets in the future and the corresponding need for
Transactions A monthly statement, in economic
type/functional format, of revenue and outlays, the deficit or
surplus, and the ways in which the deficit has been financed or the
surplus invested. It compares transactions to date with budgeted
revenue and outlays and the previous year's figures. Sometimes
referred to as the Niemeyer Statement.
Commonwealth Public Account
(CPA) The main bank account of the Commonwealth,
maintained at the Reserve Bank, through which the day-to-day
operations of the budget sector are conducted. It holds the moneys
of the Consolidated Revenue Fund. Bodies (e.g. CSIRO) that receive
budget funding but maintain their own bank accounts, operate
outside the CPA. However, the distinction will become less clear as
more agencies operate their own bank accounts.
Consolidated Revenue Fund (CRF)
The Fund established by section 81 of the Constitution, which
requires that all monies received by the Commonwealth must be paid
into this Fund, and so is the main working fund. Section 83 of the
Constitution requires an appropriation of moneys by the Parliament
before any payment can be made from the CRF. The Financial
Management and Accountability Act 1997 (FMA Act) established
four funds-the Consolidated Revenue Fund, the Loan Fund, the
Reserved Money Fund and the Commercial Activities Fund (the latter
two consist of a number of trust accounts) in the Commonwealth
Public Account (CPA).
Depreciation Refers to the
reduction in the value of an asset though wear and tear. The term
is usually applied to physical assets such as plant and equipment.
See also amortisation.
Forward estimates When a Budget
is brought down, 'rolling' forward estimates are presented for the
three years following the Budget year. These estimates assume no
further policy decisions (i.e. they are based on existing
policies), and are based on estimates of key economic parameters
such as inflation and unemployment. Forward estimates are the
starting point for budgetary deliberations, since all new policy or
savings proposals constitute variations to the forward
General revenue assistance
Grants paid by the Commonwealth to the States and Territories to
assist in meeting recurrent outlays. They are the main form of
assistance to the States and are 'untied' (i.e. there are no
conditions on their expenditure). The Commonwealth Government
proposes to replace general revenue assistance (but not Specific
Purpose Payments) with the revenue from the GST. In 1998-99,
general revenue grants comprised Financial Assistance Grants,
Special Revenue Assistance ('transitional allowances' and 'special
fiscal needs' grants to the Australian Capital Territory), and
National Competition Payments.
Horizontal fiscal equalisation
The principle underlying the Commonwealth Grants Commission's
assessments of per capita relativities, which are the basis for the
interstate distribution of general revenue grants. Under this
principle, grants are distributed to provide each State and
Territory with the capacity to provide public services at an
average standard and level of efficiency, for comparable revenue
Inputs Resources in the forms
of people, materials, energy, facilities and funds that an agency
uses in activities to produce outputs.
Net assets In an accrual
system, equal total assets less total liabilities. Net assets take
account of both non-debt liabilities (such as accrued
superannuation), non-financial assets (such as land and buildings)
and equity in public trading and financial enterprises. Net assets
in an accrual system thus provide a more comprehensive picture of
the government's financial position at a point in time than the
cash framework measure of net debt-the difference between gross
debt and financial assets. However, the valuation of some assets is
Operating balance In an accrual
system, is revenues less expenses. It excludes spending on capital
assets but includes non-cash costs (such as depreciation) and costs
which, while incurred, have not yet been paid (e.g. accruing
superannuation liabilities). The operating balance thus reflects
the full cost of providing goods and services.
Outcomes The results and
consequences of actions by the government on the community.
Planned outcomes are the results or consequences that
government wants to achieve for the community. Actual
outcomes are the results or consequences actually achieved.
Outputs The goods and services
agencies produce on behalf of government for external organisations
or individuals. Outputs include goods and services produced for
other areas of government external to the agency.
Performance measures Measures
to assess the extent of success in achieving outcomes. Performance
measures relate to outcomes, outputs, third party outputs and
administered items. They are used when there is a direct causal
link between an action and a change in performance. Performance
measures are a more precise measure than indicators.
Price The amount the government
pays for the delivery of agreed outputs.
Real Adjusted for inflation.
For example, gross domestic product (GDP) is the nominal (current
price) value of GDP adjusted for inflation to yield real (constant
price) GDP values. This process (deflating) is to a range of other
data. For example, real growth in outlays is measured by deflating
nominal outlays by the GDP deflator, a measure of price changes
throughout the entire economy.
Seignorage The net revenue
derived by any money-issuing body e.g. a note-issuing authority.
The difference between the face value of coins and the cost of
their minting is an example of seignorage.
Special (or Standing)
appropriation Moneys appropriated by a specific Act for a
specific purpose (e.g. unemployment benefits, and grants to the
States for schools). Special Appropriations do not require annual
authorisation by the Parliament, as they do not lapse at the end of
each financial year; rather, Special Appropriations continue until
their authorising legislation is either amended or otherwise
lapses. They may or may not be for a specific amount of money or
particular period of time. A distinction is sometimes drawn between
Standing and Special Appropriations. Standing
Appropriations refer to an open-ended appropriation of the
Consolidated Revenue Fund by the enabling Act of a
legislatively-based program. The amount appropriated will depend on
the demand for payments by claimants who have satisfied program
eligibility criteria as specified in the legislation.
Special Appropriations can be regarded as somewhere
between Standing and Annual Appropriations. While a specified
amount is provided, it is included in a separate Bill authorising
the particular program, and can be specified for any number of
years. Special Appropriations account for around 75 per cent of
Specific Purpose Payments
Commonwealth payments to the States and Territories for designated
purposes e.g. for housing under the Commonwealth-State Housing
Agreement, legal aid, and government schools. SPPs comprise current
and capital grants, and are classified into three categories: SPPs
paid to the States; those paid through the States
for on-passing to local government, other bodies (e.g.
universities) and individuals; and a small number of SPPs made
directly to local government.
Tax Expenditures Concessions in
the tax system, which reduce the tax liabilities of particular
groups of taxpayers. The concessions reduce or delay collection of
taxation revenue, and constitute a call on the Budget similar to
outlays. Superannuation concessions are the single largest tax
Outline of Major Additional
Major additional appropriations effected by this
- Department of Defence - $740 million is appropriated to cover
the Government's decision to increase the readiness of a second
brigade to 28 days notice to move, a change in the pace of the
drawdown to 50,000 full-time ADF personnel and increased
depreciation expenses following asset revaluations and a
reassessment of the useful lives of some assets. Additionally,
employee expenses, such as ADF pay, have been increasing in real
terms, while previously programmed savings in housing, health and
removals costs have decreased.(3)
- Department of the Treasury - $118 million is appropriated to
the Australian Taxation Office for various costs relating to the
implementation of the Goods and Services Tax and related changes to
the tax system. The major items are $60 million per year to cover
increased administration costs arising from the partial removal of
food from the GST base and $43.72 million to implement changes to
the Diesel Fuel Rebate Scheme and the introduction of the Diesel
and Alternative Fuels Grants Scheme.(4)
- Department of Immigration and Multicultural Affairs - $135.60
million is appropriated, primarily a result of the Government's
decisions to offer safe haven to Kosovars and East Timorese ($48.24
million), the strengthening of systems for coastal surveillance and
the detection of illegal immigration ($10.37 million) and meeting
the costs associated with the significant increase in the detention
of unauthorised arrivals in recent times ($41
- Attorney-General's Department - $67.97 million is appropriated
for various purposes, including $40.48 million to the Australian
Federal Police, mainly for its participation United Nations
Transitional Administration in East Timor .(6)
- Department of Health and Aged Care - $92 million is
appropriated as a result of a review of the accounting treatment of
grants and personal benefit liabilities for all programs in line
with Australian National Audit Office advice.(7)
Carryovers amount to about $200 million and 'the
balance...is made up of minor variations in most departments and
The amount available for an agency's expenditure
on Departmental and administered items is specified in the Schedule
to the Bill. The total amount specified in the Schedule is $1.847
billion (clause 5).
Where an amount is specified in the Schedule for
an administered item, the Minister for Finance may issue the lesser
of the amount specified in the item and the amount determined by
the Minister as expenses incurred by the entity in relation to the
item in the 1999-2000 year (clause 7). In relation
to departmental items, the Minister must issue the amount
- where an Act specifies that an entity must be paid amounts
appropriated for the purposes of the entity and this Bill specifies
an amount, or
- for certain payments of remuneration and allowances
The Minister for Finance may increase the amount
in a Departmental item/s by determination to a total maximum of $20
million (clause 9), while clause
10 provides that where there are unforeseen circumstances
and the need is urgent, the Minister for Finance may increase
expenditure by a total of $175 million. Parliament must be notified
of increased spending under clauses 9 and 10.
Clause 13 will formally
appropriate the funds for the Bill.
- This glossary is taken from the Parliamentary Information and
Research Services Budget Review 1999-2000 which itself
draws on Guide to the Commonwealth Budget Papers 1999-2000
Commonwealth of Australia, 1999.
- Defence Portfolio 1999-2000 Additional Estimates Statements, p.
6. See http://www.defence.gov.au/budget/PAES99_00/pae99_00.pdf
- Treasury Portfolio 1999-2000 Additional Estimates Statements,
p. 36. (no www address)
- Immigration and Multicultural Affairs Portfolio 1999-2000
Additional Estimates Statements, pp. 13-15. See
- Attorney-General's Portfolio 1999-2000 Additional Estimates
Statements, Additional Estimates for the Australian Federal Police,
p. 3. See http://law.gov.au/publications/Budget/6afp.pdf
- Health and Aged Care Portfolio 1999-2000 Additional Estimates
Statements pp. 21-22. See
- The Hon John Fahey, Second Reading Speech, House of
Representative Debates, 8 December 1999 p. 13019.
9 February 2000
Bills Digest Service
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