Bills Digest no. 106 2007–08
Appropriation Bill (No. 1) 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. 1)
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
$60.875 billion for the ordinary annual services of the
Government.
Section 83 of the Constitution provides
that no monies may be withdrawn from the Consolidated Revenue Fund
(CRF) except under an appropriation made by law . Laws authorising
spending are either:
- special appropriations, or
- six (usually) annual Appropriation Acts.
Special appropriations which account of about three quarters of
spending are spending authorised by Acts for particular purposes.
Examples are age pensions, carer payments, and the seniors
concession allowance paid under the Social Security
(Administration) Act 1999, and the Family Tax Benefits A and B
paid under A New Tax System (Family Assistance)
(Administration) Act 1999.
Appropriation Bill (No. 1) 2008-2009 (the Bill) appropriates
funds for the ordinary annual services of the Government . By
comparison Appropriation Bill (No. 2) 2008-2009 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 has been updated to take account of the adoption of accrual
budgeting).
The amounts allocated to each portfolio and the breakdown
between departmental outputs and administered expenses, are set out
in Schedule 1.
Departmental outputs are expenses that portfolio departments and
agencies control. They are essentially the cost of running
agencies, for example, salaries and other day-to-day operating
expenses. The bulk of appropriations in the Bill are for
departmental expenses. Administered expenses are those that
agencies administer on the government s behalf. While most
administered expenses are funded through special appropriations,
some are funded through the Bill. The Bass Strait Passenger Vehicle
Equalisation Scheme is an example of an administered expense funded
through the Bill.
Departmental outputs and administered expenses contribute to
outcomes. They are the results or consequences for the community
that the government wishes to achieve. For example, under the
Attorney-General s portfolio, the Bill appropriates funds for the
Federal Magistrates Court of Australia under Outcome 1 which
is:
To provide the Australian Community with a
simple and accessible forum for the resolution of less complex
disputes within the jurisdiction of the Federal Magistrates Court
of Australia.[1]
The Senate s powers
in relation to ordinary annual services
Section 53 of the Constitution provides that the Senate may not
amend proposed laws appropriating revenue or moneys for the
ordinary annual services of the Government. The Senate may,
however, return to the House of Representatives any such proposed
laws requesting, by message, the omission or amendment of any items
or provisions therein.
The Bill introduces important changes to appropriation
processes. The following describes some of these changes.
A feature of this year s Budget Papers is the change to the way
so-called CAC Act bodies are funded. The CAC Act is the
Commonwealth Authorities and Companies Act 1997.
According to the Department of Finance and Deregulation website,
the CAC Act regulates certain aspects of:
- the corporate governance, financial management and reporting of
Commonwealth authorities, which are in addition to the requirements
of their enabling legislation, and
- the corporate governance and reporting of Commonwealth
companies, which are in addition to the requirements of the
Corporations Act 2001.
Matters the CAC Act covers include:
- reporting by an authority or a company to a Minister and,
through a Minister, to Parliament
- contents of the annual report of operations of an authority,
and
- the audit of financial statements of an authority or a company
by the Auditor-General.
The Department of Finance and Deregulation maintains a list
of CAC Act bodies. Examples of these bodies are the Australian War
Memorial, the Australian Film Commission, and the Australian
Broadcasting Corporation.
In the past, CAC Act bodies were funded directly through the
annual appropriation acts and special appropriations. In 2008-09,
funding is channelled indirectly through the relevant portfolio
department. For example, funding for the Australian Broadcasting
Corporation and the Special Broadcasting Corporation appear as a
payment to CAC Act bodies in the statement of administered income
and expenses of the Department of Broadband, Communications and the
Digital Economy. The Explanatory Memorandum contains an explanation
for the change:
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. The Bill is the first annual appropriation
bill since 1999 to clearly recognise CAC Act bodies with a separate
item.[2]
The change will complicate comparison of time series data. A
consequence of the change is that the Department s administered
revenue and expenses are both inflated in 2008-09 by the amount
received for and paid to CAC bodies compared with previous years.
To obtain comparable data, it will be necessary either to add the
revenue for and payments to CAC bodies to the department s previous
year s data, or subtract the CAC body revenue and payments from the
data for 2008-09 and future years.
It is sometimes the case that an appropriation for a
departmental expense exceeds what is needed. In these
circumstances, a reduction process to extinguish the unspent funds
is available. Under this process, on request in writing from a
minister, the Finance Minister may issue a determination to reduce
the agency s departmental expense appropriation. This process is
dealt with in clause 10.
From 2008-09, appropriations for administered expenses will be
subject to a different process to extinguish unspent
appropriations. Until now, appropriations for administered expenses
have been subject to determinations by the Finance Minister as to
the amounts that can be issued from the Consolidated Revenue Fund.
By convention, the Finance Minister issued determinations dealing
with administered expenses after the end of each financial year.
The effect of the determinations was to prevent any amount that was
not expensed from being issued. The determinations did not,
therefore, reduce the appropriation. Rather, the determinations set
the maximum amount that could be issued from each appropriation.
Consequently, appropriations that were not been expensed in a year
could not be spent in later years.
Under the process introduced in the Bill, from 2008‑09,
appropriations for administered expenses will be subject to an
annual process by which amounts, which are not required to fund
activities in the year, will be extinguished. Agencies financial
statements as published in their annual reports will govern the
amounts to be extinguished. This process is designed to ensure that
the amounts that are not required in the year are extinguished
permanently. If, in the future, the government wishes to spend the
extinguished amount, it will have to seek an appropriation in a new
appropriation bill. The process for reducing administered items is
dealt with in clause 11.
CAC Act bodies
Clause 12 introduces a process for reducing
payments to CAC Act bodies. This is necessitated by the change to
the way CAC Act bodies are funded.
The Bill appropriates from consolidated revenue more than
$60.874 billion (compared with $58.986 billion in Appropriation
Bill (No. 1) 2007-08). As usual, the largest single portfolio
appropriation is for defence with some $19.923 billion. Whilst
aggregate appropriations for the various portfolios are set out in
Schedule 1, some information on what the funds
will be spent on can be found in Portfolio
Budget Statements.
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 total amount set out in Schedule 1 of the Bill in
relation to a CAC Act body under the heading Administered Expenses
. For example, for the Broadband, Communications and the Digital
Economy portfolio, page 47 of Schedule 1, shows payments to the
Australian Broadcasting Corporation of more than $858 million and
$191 million for the Special Broadcasting Service Corporation
- Clause 3 changes the definition of a
departmental item compared with previous appropriation acts by
substituting Agency for item , and
- the definition of item is expanded compared with previous years
by the insertion of a CAC Act body payment item into the
definition. The purpose of this change is to ensure that
administered expenses include payments to CAC Act bodies.
Part 2 Appropriations Items was titled Basic
Appropriations in previous appropriation acts and now includes CAC
Act body payment items, along with departmental and administered
items.
Clause 6 Summary of appropriations states that
the total of the items specified in Schedule 1 is $60 874 689 000.
The Explanatory Memorandum contains a useful exposition of the
components of appropriations.[3]
Clause 7 of Part 2 inserts a
much shortened definition of departmental items compared with
previous appropriation acts. Clause 7 provides
that the amount specified in a departmental item for an agency may
be applied for its departmental expenditure. The new Note to the
clause observes that the Finance Minister manages the expenditure
of public money under the Financial Management and
Accountability Act 1997. The Explanatory Memorandum contains a
plain English definition and explanation of what departmental items
are, including discussions of the fact that they do not
automatically lapse and of the procedure for reducing unspent
amounts.[4]
Clause 8 substitutes a new and shorter
definition of administered items . Subclause 8(1)
confirms that if an amount is specified as an administered item for
an outcome, then money can be expended to achieve that outcome.
Subclause 8(2) provides that where the Portfolio
Budget Statements indicate an activity is for an outcome, the
amount in the administered item is taken to contribute towards the
achievement of that outcome.
Clause 9 is a new clause and deals with CAC Act
body payment items . Subclause 9(1) provides that
the amount designated as a payment for a CAC Act body may be paid
to that body for its purposes. Subclause 9(2)
provides that if there is an Act, which requires that amounts must
to be paid to a CAC Act body for that body s purposes, and Schedule
1 contains a CAC Act payment item for that body, that body must be
paid the full amount in Schedule 1. According to the Explanatory
Memorandum:
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.[5]
Part 3 Adjusting appropriation items deals with
adjusting departmental, administered and CAC Act body payments.
The process for adjusting departmental expenses described above
is essentially unchanged from previous appropriation acts.
Subclause 10(1) specifies who can request
reductions in departmental expenses. Paragraph
10(1)(a) enables the Minister for an agency to ask the
Finance Minister to reduce a departmental item for that agency,
while 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.[6] Subclause 10(2) specifies that the
Finance Minister may make a determination reducing a departmental
item by the amount in the request. Subclause 10(3)
provides that the determination will be null and void if its effect
is to reduce the departmental item below nil.
Clause 11 Reducing administered items is mostly
new compared with previous appropriations acts. As noted, this
clause introduces a new process for reducing administered items.
Subclause 11(1) provides that if the amount shown
in the financial statements of an agency s annual report shows that
the expensed amount of an administered item is less than the amount
appropriated for that item, then the amount of the reduction is the
difference between the appropriated amount and the amount in the
annual report.
According to the Explanatory Memorandum, subclause
11(2) enables 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, while
paragraph 11(2)(b) ensures that the amount
published in the annual report can be corrected.[7]
In previous appropriation acts, the Finance Minister s
determinations were legislative instruments. Similarly,
subclause 11(3) provides that the Finance Minister
s determination, made under subclause 11(2), is a
legislative instrument, that section 42 (relating to disallowance)
of the
Legislative Instruments Act 2003 applies to the
determination, but that Part 6 (relating to sunsetting provisions)
of the Legislative Instruments Act 2003 does not apply to
the determination. In brief, this means that the Minister s
determinations are disallowable by Parliament, but once made, will
not expire.
Clause 12 is also entirely new and follows from
the revised arrangements for payments to CAC Act bodies. The
wording is this clause is almost identical to that in
clause 10, which relates to reducing departmental
items. Whereas 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, paragraph 12(1)(b) enables
the Secretary of the Department for which the Finance Minister is
responsible to request a reduction for a CAC Act body. The reason
the Secretary of the Department is empowered to request a reduction
follows from the fact that payments to CAC Act bodies are
channelled through the relevant portfolio departments.
Subclause 12(2) empowers the Finance Minister to
make a determination reducing a CAC Act body payment by the amount
requested. Subclause 12(5) provides that proposed
subsection 9(2) does not limit the reduction of a
CAC Act body payment under this section. According to the
Explanatory Memorandum:
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.[8]
However, it is not obvious that subclause 12(5)
does this.
Clause 13 deals with section 31 agreements
(also referred to as net appropriations ). Before the Financial
Management and Accountability Act 1997 (FMA Act) was
amended on 1 January 2008, section 31 of the FMA Act
allowed an agreement (known as a section 31 agreement ) to be
made between an agency and the Finance Minister regarding the
agency s use of certain revenue it receives. The section 31
provisions of the annual appropriation Acts provided that, if a
section 31 agreement applied to an agency s appropriation item,
then the amount of that appropriation was taken to be increased in
accordance with that agreement. Thus when an agency had an
appropriation marked net appropriation in an annual appropriation
Act, the amount of its appropriation was increased by an amount
equal to the amount the agency received under a section 31
agreement. The agency therefore had the legal authority to
retain and spend the additional amount it received. An example of
section 31 revenue is that which the Australian Federal Police
receives from providing policing services to the Australian Capital
Territory. The provisions of clause 13 are
transitional because section 31 agreements are being phased
out.
Section 14 deals with the Advance to the
Finance Minister . Compared with previous appropriation Acts,
subclause 14(1) recasts slightly the criteria
under which the Finance Minister can make payments from the
Advance. For a payment to be made from the Advance, the Finance
Minister must be satisfied that an urgent need exists for
expenditure, and that no funds were allocated or that the amount
allocated was inadequate because of erroneous omission or
understatement [paragraph
14(1)(a)], or because the need for expenditure was
unforeseen [paragraph 14(1)(b)]. Subclause
14(2) provides that where the Finance Minister has
authorised a payment from the Advance, Schedule 1
is changed accordingly. Subclause 14(3) provides
that the amount of the Advance is $295 million. This is an increase
of $120 million over the amount of $175 million, which has been
provided over several years. As with earlier appropriation Acts,
subclause 14(4) provides that determinations
authorising payments made from the Advance are legislative
instruments. These must be tabled in Parliament but are not subject
to the disallowance or sunsetting provisions of the Legislative
Instruments Act 2003.
Clause 15 deals with Flexible Funding Pool
receipts . The provisions dealing with these receipts were
introduced following the Commonwealth government s Northern
Territory Emergency Response. A special account titled the Northern
Territory Flexible Funding Pool Special Account (NTFFP) was
established to fund employment creation initiatives under the
Response.[9]
Clause 15 recasts the provisions in
Appropriation Act (No. 3) 2007-08 but retains their
purpose. According to the Explanatory Memorandum, clause
15 is included because section 12 of previous
appropriation Acts did not cover all the agencies that might need
appropriations for administered items.[10] Subclause 15(1)
provides that an amount from the NTFFP may be added to an item in
Schedule 1 if the amount is debited from the NTFFP
to be applied by an agency for the purpose of achieving an outcome
for an administered item [paragraph 15(1)(a)], and
if the Finance Minister specifies that item in a written
determination [paragraph 15(1)(b)]. As in previous
appropriation Acts, subclause 15(4) provides that
a determination made under paragraph 15(1)(b) is a
legislative instrument, but that it is not subject to the
disallowance or sunsetting provisions of the Legislative
Instruments Act 2003. [The reference to paragraph 15(1)(c) in
paragraph 63 of the Explanatory Memorandum should be to paragraph
15(1)(b)].
When an agency incurs a Comcare-related expense, the effect of
that payment is to reduce the funds available to that agency. The
purpose of clause 16 which deals with Comcare
receipts is to ensure that any payment that Comcare makes to the
agency becomes available for that agency s use. The provisions in
clause 16 are broadly similar to those in previous
appropriation acts.
Part 4 Reducing administered items in previous
Acts is a totally new. The Explanatory Memorandum explains
that the reason for Clause 17 is to prevent
amounts of administered expenses, determined under previous
appropriation Acts, from being re-determined and spent.
Subclause 17(4) lists the Acts affected.
For the first time, the annual appropriations Bills are
accompanied by Explanatory Memorandums. These are useful additions
in that they contain explanations of the appropriations processes
and of the terminology used in the Bills. The Explanatory
Memorandums also contain explanations of the purposes and effects
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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