Bills Digest no. 107 2007–08
Appropriation Bill (No. 2) 2008-09
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
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Appropriation
Bill No. 2) 2008-09
Date introduced: 13
May 2008
House: House
of Representatives
Portfolio: Finance
and Deregulation
Commencement: On
Royal Assent
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills
have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
To appropriate approximately $12.691 billion for the
non-ordinary (or ‘other’) annual services of government.
Section 83 of the Constitution provides that no monies may be withdrawn
from the Consolidated Revenue Fund except ‘under an appropriation made
by law’. Laws authorising spending are either:
- special appropriations, or
- six (usually) annual appropriation acts.
Of the Appropriation Bills introduced to accompany the May Budget, by
far the most important in dollar terms is Appropriation Bill (No. 1),
which appropriates funds for the ‘ordinary’ annual services of the government
while Appropriation Bill (No. 2) appropriates funds for other annual services.
Section 54 of the Constitution requires that there be a separate
law appropriating funds for the ordinary annual services of the government.
That is why there are separate bills for ordinary annual services and
for other annual services. The distinction between ordinary and other
annual services was set out in a ‘Compact’ between the Senate and the
government in 1965 (the Compact was updated to take account of the adoption
of accrual budgeting).
Appropriation Bill (No. 2) 2008-2009 (the Bill) funds four categories
of payment:
- payments to the states, territories and local government (clause
7)
- these are paid under section 96 of the Constitution
- new administered expenses (clause 8)
- ‘non-operating’ costs:
- appropriations for ‘administered assets and liabilities’ fund,
for example, the purchase of new administered assets and the discharge
of administered liabilities (clause 9)
- funding in the form of ‘equity injections’ is, for example, for
substantial investment in new assets (clause 10)
- ‘loans’ are provided when an investment is expected to result
in a return to the investment, for example, productivity gains (clause
10)
- ‘previous years’ outputs’ appropriations replenish
funds used to provide departmental outputs in a previous year. This
can occur, for example, when the government has decided to introduce
a new program but the decision comes too late for the program to
be funded through the additional appropriation bills. In such cases,
the program is funded initially from existing appropriations. This
funding is later replenished in the form of a previous years’ outputs
appropriation (clause 10), and
- • Commonwealth
Authorities and Companies Act 1997 (CAC Act) body payments (clause
11).
CAC Act bodies are authorities and companies that the Commonwealth has
established. Examples are the Australian War Memorial, the Australian
Film Commission, and the Australian Broadcasting Corporation. In previous
years, payments to CAC Act bodies were funded ‘directly’ through Appropriation
Act No. 2. From 2008-09, payments to CAC Act bodies will be paid ‘indirectly’
through portfolio departments. CAC Act bodies are grouped within portfolios.
The Bill provides funds to the relevant portfolio department for on-payment
to a CAC Act body for the latter’s non‑operating costs. For example,
under the Bill, funding for the Australian Broadcasting Corporation and
the Special Broadcasting Corporation are made ‘indirectly’ through the
Department of Broadband, Communications and the Digital Economy, the latter
being the relevant portfolio department. The Department of Finance and
Deregulation maintains a list
of CAC Act bodies.
From 2008-09, appropriations for administered expenses will be subject
to a different process to extinguish unspent appropriations. Under this
process, the amount to be reduced will be based on agencies’ financial
statements in their annual reports. In essence, the amount of the reduction
will be the difference between the total of amounts appropriated for administered
expenses less the amount shown as having been spent in the financial statements.
If the government wishes to spend the reduced amount in another financial
year, it will have to seek funding in a future appropriation bill.
The Bill appropriates about $12.691 billion (compared with about $10.133
billion in Appropriation Act (No. 2) 2007-08).
The Bill recasts substantially the provisions of Appropriation Act No.
2 and Appropriation Act No. 4 of previous years. Some of the recasting
flows from the change to the way CAC Act bodies are funded. Other recasting
follows from the changes to the reduction process. However, Schedule 1—which
confers on the ministers named, power to determine the conditions under
which payments to the States, the ACT and NT and local government authorities
may be made, and the amounts and timing of those payments—and Schedule 2
which contains the detail of appropriations—are unchanged.
Clause 3 contains definitions. Most definitions are unchanged
from previous Appropriation Acts. Several changes are noteworthy:
- the clause introduces a definition of a ‘CAC Act body’. This is a
Commonwealth authority or company within the meaning of the Commonwealth
Authorities and Companies Act 1997
- Clause 3 defines a ‘CAC Act body payment item’. This is the
amount set out in Schedule 2 in relation to a CAC Act body under the
heading “Non-operating”
- the term ‘Chief Executive’ is defined as having the same meaning as
in the Financial Management and Accountability Act 1997[1]
- the definition of ‘item’ is expanded to include ‘a CAC Act body payment
item’, and
- Clause 3 changes the definition of a ‘State, ACT, NT and local
government item’ by substituting ‘for an Agency’ for ‘of an entity’.
Part 2—Appropriation items—was formerly titled ‘Basic appropriations’.
Clause 6 of Part 2 provides that the total of the items
in Schedule 2 is $12 690 922 000.
Clause 7 deals with payments to the states, territories and local
government, and recasts provisions in previous Appropriation Acts.
The changes are outlined in the Explanatory Memorandum.[2] Subclause 7(2) is a new
provision and specifies that if the Portfolio Budget Statements indicate
that certain activities were intended to be for a particular outcome,
then expenditure on those activities is taken to be as contributing to
the outcome.
Clause 8 deals with ‘administered items’. Although clause 8
does not specifically state that it is referring to new administered
items, the Explanatory Memorandum states that this is the case.[3] Clause 8 contains new provisions
compared with previous Appropriation Acts. Subclause 8(1) provides
that the amount identified for an administered item in an outcome can
be used to contribute to that outcome. The wording of subclause 8(2)
is identical to that in subclause 7(2).
As noted, administered assets and liabilities are one of the four
categories of non-operating costs. The provisions of clause
9—Administered assets and liabilities items—are new. Subclause
9(1) provides that the amount identified for an agency’s administered
assets and liabilities may be applied to achieving any of the agency’s
outcomes, which are specified in Schedule 2 of the Bill or in Schedule
1 of Appropriation Bill (No. 1) 2008-2009. The wording of subclause
9(2) is identical to that in subclause 8(2) and subclause
7(2).
Clause 10—Other departmental items—is also new. The Explanatory
Memorandum states that clause 10 authorises funding for three departmental
non-operating categories of funding—equity injections, loans and previous
years’ outputs.[4] This
seems to be because ‘other departmental item’ is an amount specified in
Schedule 2 of the Bill as defined in clause 3. Clause
10 provides that the amount specified in an other departmental item
for an Agency may be applied for the departmental expenditure of the Agency.
Clause 11 deals with CAC Act body payments. Subclause 11(1)
provides that an amount appropriated for a CAC Act body payment item may
only be applied for payment to the CAC Act body named. Subclause 11(2)
provides that if an Act provides that a CAC Act body must be paid
amounts that are appropriated by the Parliament for the purposes of the
body, and Schedule 2 contains a CAC Act body payment item for that body,
then the body must be paid the full amount specified in the item. The
Explanatory Memorandum states:
The purpose of subclause 11(2) is to clarify that subclause
11(1) is not intended to qualify any obligations in other legislation
regulating a CAC Act body, where that other legislation requires the Commonwealth
to pay the full amount appropriated for the purposes of the body.[5]
Part 3—Adjusting appropriation items—is completely recast
compared with previous Appropriation Acts. Three clauses in Part 3 deal
with reductions to appropriations. Clause 12 deals with adjustments
to (a) payments to the states, territories and local government and (b)
administered items; clause 13 with (a) administered assets and
liabilities and (b) other departmental items, that is, equity injections,
loans, and previous years’ outputs; and clause 14 with reductions
to CAC Act bodies payment items.
The essence of subclause 12(1) is that the amount by which payments
to the states, territories and local government and for administered items
can be reduced is the difference between what has been appropriated and
what has been spent, the latter being the amount shown in agencies’ financial
statements. However, paragraph 12(2)(a) gives the Finance
Minister power to determine that subclause 12(1) does not apply
or that subclause 12(1) applies as if the amount in the annual
report were the amount that the Finance Minister determines [paragraph
12(2)(b)]. The power in paragraph 12(2)(a) may be
designed to give the Finance Minister flexibility. According to the Explanatory
Memorandum, the power in paragraph 12(2)(b) is designed to ensure
that the amount published in annual reports can be corrected for errors
if necessary.[6]
Subclause 13(1) enables the minister responsible for an agency,
or the chief executive of the agency—where the Finance Minister is responsible
for the agency—to seek a reduction in administered assets and liabilities
and other departmental items, while subclause 13(2) empowers the
Finance Minister to make a determination that accords with the request.
However, the determination cannot reduce the appropriation below zero
[subclause 13(3)]. Requests are not legislative instruments [subclause
13(5)]. However, while the Finance Minister’s determinations are legislative
instruments and are disallowable, the determinations are not subject to
the sunsetting provisions of the Legislative Instruments Act 2003
[subclause 13(6)].
Clause 14—which deals with reductions to CAC Act bodies payment
items is also entirely new and follows from the revised arrangements
for payments to CAC Act bodies. The wording in clause 14 is almost
the same as for clause 13. However, whereas a request can come
from the Chief Executive of an agency for which the Finance Minister is
responsible in the case of clause 13, a similar request must come
from the Secretary of the Department in the case of CAC Act bodies [paragraph
14(1)(b)]. Subclause 14(5) confirms that a reduction can be made for
a CAC Act body even though it has been allocated funds under subsection
11(2).
Clause 15—Advance to the Finance Minister—changes the wording
slightly—compared to previous Appropriation Acts—regarding the circumstances
under which the Finance Minister can issue funds from the Advance [subclause
15(1)]. Subclause 15(3) allocates $380 million to the Advance.
Previously this amount was $215 million.
Part 4—Reducing State, ACT, NT and local government items, State payments
items and administered items in previous Acts—is totally new. The
Explanatory Memorandum explains that Clause 16 has been added to
prevent amounts of administered expenses, which were determined under
previous Appropriation Acts but which were not spent, to be re-determined
and spent. Clause 16 prevents this by providing that such unspent
amounts are ‘extinguished’ or ‘lapsed’ in law.
Concluding
comments
The introduction of the Explanatory Memorandum in conduction with the
Bill is a welcome development. It contains useful definitions of terms
and explanations of the purposes and effect of various clauses. In some
instances, these purposes are not evident from the wording of the clauses.
Note that clause 4 provides that the Portfolio Budget Statements are aids
to the interpretation of the clauses under section 15AB of the Acts Interpretation
Act 1901.
Richard Webb
23 May 2008
Bills Digest Service
Parliamentary Library
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