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withdrawn from the Consolidated Revenue Fund except under an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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