Bills Digest No. 93 2003-04
Appropriation Bill (No. 3) 2003
04
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Appropriation Bill (No. 3)
2003 04
Date
Introduced: 11
February 2004
House: House of Representatives
Portfolio: Department of Finance and
Administration
Commencement:
On the day when it
receives the Royal Assent
To appropriate additional sums
for the ordinary annual services of the Government.
Section 83 of the Constitution
states:
No money shall be drawn from the Treasury of the
Commonwealth except under appropriation made by law.
There are two broad categories of appropriations:
There are six annual appropriation Bills. They authorise about
30 per cent of annual Commonwealth spending.
Special (or standing) appropriations the terms are often used
interchangeably authorise about 70 per cent of spending. An example
of special appropriations is road spending. This is authorised
under three Acts: the Australian Land
Transport Development Act 1988, the Roads to Recovery
Act 2000, and the Local Government (Financial Assistance)
Act 1995.
Three annual appropriations Bills are introduced when the Budget
is brought down. They are:
-
Appropriation Bill (No. 1)
-
Appropriation Bill (No. 2 ), and
-
Appropriation (Parliamentary Departments) Bill.
These Bills are contained in Budget Paper No. 4.
The Bills authorise the payment of specified amounts for
particular purposes. Appropriation Bill (No. 1) provides for the
appropriation of money from the Consolidated Revenue Fund for the
ordinary annual services of government. Appropriation Bill (No. 2)
provides for the appropriation of money from the Consolidated
Revenue Fund for purposes other than the ordinary services of
government. The division of items between the two Bills accords
with the 1965 'compact' between the House of Representatives and
the Senate.
Appropriation Bill (No. 2) provides appropriations for:
Administered expenses include:
Administered items are expenses, revenues, assets or liabilities
managed by agencies on behalf of the Commonwealth. Agencies do not
control administered items. Administered expenses include grants,
subsidies and benefits. In many cases, administered expenses fund
the delivery of third party outputs.
Non-operating costs sometimes called 'capital costs'
include:
-
'equity injections', which are provided to agencies to enable
investment in new capacity when normal cash flows are
insufficient
-
'loans', which are provided to agencies and used when an
investment is expected to result in a direct return such as an
efficiency saving
-
previous years outputs appropriations: these provide funding for
outputs that were delivered in a previous year. This can occur, for
example, when a decision is made to implement a new activity after
the date for inclusion in the additional appropriation Bills. Such
activities are funded initially from cash balances, which are then
replenished by the previous years outputs appropriation, and
-
'administered assets and liabilities' appropriations: they
provide funding for acquiring new assets, extending existing
assets, and discharging administered liabilities relating to
activities administered by agencies in their fiduciary capacity on
behalf of the Government.(1)
The Parliamentary Departments have a separate Appropriation Bill
because Parliament is constitutionally separate and independent of
the Executive.
Funding requirements often change after the Budget is brought
down. Governments make new policy commitments which have to be
funded. Agencies reassess their requirements and, if necessary,
submit requests for additional funding. The Government may agree to
additional funding if the amounts in the Appropriation Acts are
inadequate. The process whereby additional funds are provided is
called
additional estimates, and begins
around November. The approved additional estimates are incorporated
into Appropriation Bill (No 3), Appropriation Bill (No 4), and
Appropriations (Parliamentary Departments) Bill No. 2. These Bills
are the counterparts of Appropriation Bills No. 1 and 2 and
Appropriations (Parliamentary Departments) Bill No. 1
respectively.
Portfolio Additional Estimates Statements (PAES) are the
additional estimates counterparts of Portfolio Budget Statements
(PBS) and contain explanations of Appropriation Bills 3 and 4 and
Appropriations (Parliamentary Departments) Bill No. 2.
The
Advance to the Finance Minister (AFM) provides flexibility to
the system of appropriating funds. The AFM is a contingency fund
from which the Minister for Finance can spend for emergency or
unforeseen circumstances. Authority for payments derives from the
annual Appropriation Acts. According to Department of Finance and
Administration guidelines, funding is available only if agencies
meet two tests:
-
the need for funding must be urgent, and
-
the need was unforeseen or arose because of erroneous omission
or understatement.
The Appropriation Acts also require the Finance Minister to
account to Parliament for spending from the AFM, which the Minister
does by tabling monthly and annual statements. These reports are,
however, virtually useless in finding out the purposes for which
funds were expended because the reports contain so little
information: the data are aggregated and the outcomes are
vague.
Special Accounts are a mechanism used to record in the
Consolidated Revenue Fund amounts that are earmarked for specified
purposes, that is, they are a way of classifying revenue and
spending into different categories. The Australian National Audit
Office recently released a report that criticised
agency management of Special Accounts.
According to the second reading speech, sums sought in the Bill
include:
-
$235.8 million to the Department of Defence, Department of
Foreign Affairs and Trade, AusAID and the Australian Federal
Police, in relation to peace-keeping commitments and aid work in
the Solomon Islands
-
$86.3 million towards drought assistance and interim support
payments
-
$75 million in indexation adjustments for the Department of
Defence
-
$75.1 million for rephasing from 2002-03 into 2003-04 of funds
for the Department of Health and Ageing
-
$65.5 million to the Australian Federal Police to cover the
costs of the Papua New Guinea deployment
-
$38.8 million for implementation of the MedicarePlus package
-
$19.3 million to meet Australia's contribution payments to
various international organisations
-
$19 million across 15 of the 17 portfolios in order to implement
the findings of the Budget Estimates and Framework Review
-
$21.4 million in assistance for victims of the Bali terrorist
attacks and their families and for meeting the cost of the
investigations
-
$14.3 million in relation to changes in the Hearing Services
model, and
-
$12.8 million towards the government's response to the
recommendations of the inquiry into regional
telecommunications.
The remaining amount around $269.5 million relates to estimates
variations and other measures.(2)
Proposed Part 2 deals with 'basic
appropriations'. These are the amounts allocated to agencies to
enable them to perform ordinary annual services. Clause
6 of proposed Part 2 specifies a total of $944
938 000. The amounts, by agency, are contained in
proposed Schedule 1.
The Bill contains two new clauses, that is, similar clauses do
not appear in Appropriation Act (No. 3) 2002-03. In his
second reading speech, the Parliamentary Secretary to the Minister
for Finance and Administration, the Hon. Peter Slipper said:
Two new clauses have been added to the three
additional estimates bills. The new clauses will provide a
mechanism for the finance minister, on request from a portfolio
minister, to lapse amounts of departmental expense appropriations
which are not required. Such amounts may be not required because of
an accounting reclassification, efficiency gains resulting in
reduced spending or changes in the structure of government.
The first clause provides the lapsing mechanism in
respect of the three bills. The second clause provides the same
mechanism in respect of the annual appropriation acts agreed to
since the 1999 budget.
The first new clause Clause 9 of proposed Part
2 provides that a Minister proposed subsection
9(1) or a Chief Executive proposed subsection
9(2) may request the Minister for Finance to make a
written determination which reduces a departmental item by the
amount specified in the determination. Following receipt of such a
request, the Minister for Finance can issue such a determination.
Proposed subsection 9(5) limits the amount of the
reduction in two circumstances. First, paragraph 9(5)(a) limits the
reduction to the amount in the determination. Second, where
payments have already been made from the Consolidated Revenue Fund,
paragraph 9(5)(b) limits the actual reduction to the difference
between the amount already paid and the reduction sought in the
determination. Proposed subsection 9(9) provides
that a determination is a disallowable instrument for the purpose
of section 46A of the Acts Interpretation Act 1901.
A similar mechanism is intended in Clause 10 of
proposed Part 2. Clause 10 empowers the Minister for Finance, on
receipt of a written request from a Minister proposed
subsection 10(2) or a Chief Executive proposed
subsection 10(3) to reduce, by a written determination,
amounts allocated by the Acts set out in subsection
10(1). All these Acts are Appropriation Acts of earlier
years.
Proposed Part 3 deals with additions to basic
appropriations. Clause 13 authorises the Minister
for Finance to spend no more than $175 million from the AFM and to
provide Parliament with details of the amounts spent.
Compared with Appropriation Act (No. 3) 2002 03, the
only significant change in the Bill other than the amounts
appropriated are Clauses 9 and 10 of proposed Part 2.
The effect of Clause 9 seems to be to make it possible to claw
back the amount appropriated under the Bill to the amount likely to
be spent. Similarly, Clause 10 seems to be intended to claw back
unused departmental appropriations from previous years. The purpose
of these clauses is not clear but seems to be a spending control
mechanism aimed at preventing agencies from seeking unduly large
appropriations for departmental expenses and carrying forward
unspent amounts to future years that agencies are unlikely to
spend.
-
Budget Paper No. 4 2003-04. pp. 4 5.
-
House Hansard, 11 February 2004, p. 24255.
Richard Webb
23 February 2004
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 2004
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