APPROPRIATION BILL (NO. 1) 2008-2009 Explanatory Memorandum

Commonwealth of Australia Explanatory Memoranda

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APPROPRIATION BILL (NO. 1) 2008-2009

2008 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES APPROPRIATION BILL (NO. 1) 2008-2009 EXPLANATORY MEMORANDUM (Circulated by the authority of the Minister for Finance and Deregulation, the Honourable Lindsay Tanner MP)

Outline Appropriation Bill (No. 1) 2008-2009 General Outline 1 This explanatory memorandum accompanies an Appropriation Bill (No. 1) 2008-2009 (the Bill), consistent with the Government's commitment to increasing transparency of the Budget process generally. Explanatory memoranda have not previously been used for appropriation bills, but are being prepared in relation to the financial year 2008-2009 onwards. 2 The main purpose of the Bill is to make annual appropriations from the Consolidated Revenue Fund (CRF) for the ordinary annual services of the Government. 3 Appropriations for the ordinary annual services of the Government must be contained in a separate bill to other appropriations in accordance with sections 53 and 54 of the Australian Constitution. Two other annual appropriation bills will provide for the services that are not for the ordinary annual services of the Government: Appropriation Bill (No. 2) 2008-2009 and Appropriation (Parliamentary Departments) Bill (No. 1) 2008-2009. 4 This Explanatory Memorandum describes the reforms and clarifications that have been made since Appropriation Act (No. 1) 2007-2008 and Appropriation Act (No. 3) 2007-2008 (previous Appropriation Acts). 5 This Explanatory Memorandum should be read in conjunction with the 2008-2009 Portfolio Budget Statements (PB Statements) which contain details of the appropriations set out in Schedule 1 to the Bill. The PB Statements are published and tabled in the Parliament together with the Bill. Structure of appropriations in the Bill 6 The Bill provides for the appropriation of specified amounts for expenditure by Australian Government agencies (being those under the Financial Management and Accountability Act 1997 (FMA Act) and the High Court of Australia) plus bodies under the Commonwealth Authorities and Companies Act 1997 (CAC Act bodies). 7 Part 1 of the Bill deals with definitions, PB Statements and the concept of notional payments. Part 2 of the Bill proposes appropriations to make payments of the amounts in Schedule 1 for departmental items (clause 7) and administered items (clause 8). Part 2 also establishes a new type of payment, House of Representatives page 1 Appropriation Act (No. 1) 2008-2009

Outline CAC Act body payment items (clause 9), by separating these payments from departmental and administered items. 8 Part 3 of the Bill specifies the ways in which the amounts in Schedule 1 may be adjusted. In addition to the adjustment provisions in Part 3, clause 19 of the Bill recognises that the appropriations in the Bill may also be varied by the FMA Act. 9 Part 4 deals with reductions of administered items made in previous Acts. Part 5 deals with special accounts and sets out the amount appropriated under the Act. Financial Impact 10 This Bill will appropriate the amounts specified in Schedule 1. House of Representatives page 2 Appropriation Act (No. 1) 2008-2009

Notes on clauses Notes on clauses Part 1--Preliminary Clause 1--Short title 1 This clause specifies the short title of the Bill, once enacted, will be Appropriation Act (No. 1) 2008-2009. Clause 2--Commencement 2 Clause 2 provides for the Bill to commence as an Act on the day of Royal assent. Clause 3--Definitions 3 Clause 3 defines the key terms used in the Bill, such as `administered item', `departmental item' and `current year' (being the financial year ending on 30 June 2009). 4 In terms of new definitions, the Bill recognises that the CAC Act bodies are separate from the Commonwealth. In contrast, previous Appropriation Acts provided appropriations for expenditure by FMA Act agencies and CAC Act bodies alike. To clarify the distinction, clause 3 of the Bill defines: · `agency' to be an agency within the meaning of the FMA Act or the High Court of Australia (since the High Court is recognised as a agency for the purposes of the Bill, although it is not a prescribed agency under the FMA Act, due to its status under its enabling legislation); and · `CAC Act body' to be a Commonwealth authority or a Commonwealth company within the meaning of the CAC Act (see clause 9 for their appropriations). 5 A new definition, `CAC Act body payment item' has also been included in clause 3 to specify that the payments for CAC Act bodies will be the amounts set out in Schedule 1 in relation to a CAC Act body under the heading "Administered Expenses". Clause 4--Portfolio Budget Statements (PB Statements) 6 Clause 4 declares that PB Statements are extrinsic material under paragraph 15AB(2)(g) of the Acts Interpretation Act 1901 (AI Act) that may be House of Representatives page 3 Appropriation Act (No. 1) 2008-2009

Notes on clauses used to ascertain the meaning of certain provisions in the Bill in accordance with subsection 15AB(1) of the AI Act. The purpose of the PB Statements is to provide information on the proposed allocation of resources to Government outcomes by agencies within the portfolio. The PB Statements provide information, explanation and justification to enable Parliament to understand the purpose of each appropriation proposed in the Bill. 7 Subsection 4(2) of previous Appropriation Acts provided that where the PB Statements indicated a particular activity is in respect of a particular outcome, then the amount in the administered item is taken to contribute to achieve the outcome. In the Bill this provision has been relocated to improve readability to clause 8 which deals with appropriations for administered items. Clause 5--Notional payments, receipts etc 8 Clause 5 ensures that payments between agencies result in a reduction of the available appropriation to the paying agency. For example the payments of the amounts in Schedule 1 of the Bill from one FMA Act agency to another do not require an appropriation. However, for reasons of financial discipline and transparency, the practice has arisen for these payments between agencies to be treated as though they required an appropriation, and to debit an appropriation when such payments are made. 9 Clause 5 provides that these notional transactions between agencies are to be treated as if they were real transactions. The effect is that when a notional transaction takes place, the paying agency must debit the appropriation made to it by Parliament. For constitutional purposes this means that the real appropriation made by Parliament is extinguished by the amount of the notional payment. Part 2--Appropriation items Clause 6--Summary of appropriations 10 Clause 6 sets out the total of the appropriations in the Bill. Importantly, the amounts in Schedule 1 may be adjusted under the provisions in Part 3 of the Bill. Specifically: · Departmental items may be reduced in accordance with clause 10. · Administered items may be reduced in accordance with clause 11. · CAC Act body payment items may be reduced in accordance with clause 12. House of Representatives page 4 Appropriation Act (No. 1) 2008-2009

Notes on clauses · Items may be increased by the amount of the receipts described in an agreement entered before 1 January 2008 under section 31 of the FMA Act, in accordance with clause 13. · Items may be increased by a payment from the Advance to the Finance Minister in accordance with clause 14. · Items may be increased by a payment from the Northern Territory Flexible Funding Pool Special Account in accordance with clause 15. · Items may be increased by a payment from Comcover in accordance with clause 16. 11 The amounts in Schedule 1 of the Bill may further be adjusted in accordance with sections 30 to 32 of the FMA Act. Specifically: · Items may be increased by the reinstatement of amounts that an agency is repaid, in accordance with section 30 of the FMA Act. The re- crediting or reinstatement authorised by section 30 can result in the total amount paid from the CRF in gross terms exceeding the amount specified in an item. · Items may be adjusted by amounts recovered by an agency from the Australian Taxation Office for Goods and Services Tax (GST), in accordance with section 30A of the FMA Act. The amounts specified in Schedule 1 exclude recoverable GST. The appropriations shown represent the net amount that Parliament is asked to allocate to particular purposes. Section 30A has the effect of increasing an appropriation by the amount of the GST qualifying amount arising from payments in respect of the appropriation. As a result, there is sufficient appropriation for payments under an appropriation item provided that the amount of those payments, less the amount of recoverable GST, can be met from the initial amount shown against the item in Schedule 1. · Departmental items may be increased to take into account certain other amounts received by an agency, if those receipts are prescribed by the Financial Management and Accountability Regulations, in accordance with section 31 of the FMA Act. · Items may be adjusted to take into account the transfer of functions between agencies, in accordance with section 32 of the FMA Act. It is possible that adjustments under section 32 may result in new items and/or outcomes being created in an Appropriation Act. It might also result in amounts being shifted between Appropriation Acts. House of Representatives page 5 Appropriation Act (No. 1) 2008-2009

Notes on clauses Clause 7--Departmental items 12 Clause 7 provides that the amount specified in a departmental item for an agency may be applied for the departmental expenditure of the agency. Clause 3 defines: · `departmental item' to be the total amount set out in Schedule 1 in relation to an agency under the heading "Departmental Outputs"; and · `expenditure' to be payments for expenses, acquiring assets, making loans or paying liabilities. 13 While the departmental outputs in Schedule 1 may be divided between outcomes, the different amounts against outcomes are notional. The total appropriation for departmental expenses represents the departmental item. 14 Departmental items involve costs over which an agency has control. Departmental appropriations can be used to make any payment related to the functions of the agency. Expenditure typically covered by departmental items includes employee expenses, suppliers and other operational expenses (eg, replacement and maintenance of existing departmental assets). There can also be occasions when an agency, such as a portfolio department, needs to cover matters in relation to other areas of the Government. Examples can include whole-of-Government activities or a portfolio department assisting with the formation and initial costs of a new portfolio body (for which the department might later be reimbursed). 15 Departmental items are not expressed in terms of a particular financial year and do not automatically lapse. Departmental items are available until they are spent. Because the cash to meet expenses such as employee entitlements can be required at times other than when the expenses are incurred, the departmental appropriations remain available until required. 16 The Finance Minister manages the payment from departmental items by agencies through the issuing of drawing rights in accordance with sections 26 and 27 of the FMA Act. Drawing rights control who may spend from appropriations, and allow for conditions and limits to be set by the Finance Minister (or the Finance Minister's delegate) in relation to those activities. 17 Amounts appropriated for departmental outputs can be subject to a reduction process in accordance with clause 10 of the Bill. The reduction arrangements were first introduced in the Additional Estimates Appropriations Acts for 2003-2004, to enable appropriations that are no longer required to be reduced. Under clause 10, the Minister responsible for an agency may make a House of Representatives page 6 Appropriation Act (No. 1) 2008-2009

Notes on clauses written request to ask the Finance Minister to make a determination to reduce the agency's departmental appropriation. The following improvements have been made to clause 7: · Subsection 7(1) of previous Appropriation Acts enabled the Finance Minister to `issue out of the CRF amounts' specified in a departmental item. As noted in paragraph 16 above the Finance Minister controls the use of appropriations through drawing rights issued under the FMA Act. Therefore clause 7 of the Bill no longer refers to the Finance Minister issuing amounts from the CRF. · Subsection 7(1) of previous Appropriation Acts also specified that the amounts issued out of the CRF for a departmental item must `not exceed, in total' the amount specified for the item. Clause 7 does not include this limit, as the amounts may be adjusted in accordance with Part 3 of the Bill or sections 30 to 32 of the FMA Act. · Subsections 7(1) and (3) of previous Appropriation Acts required the Finance Minister to issue an amount out of the CRF to pay agencies and CAC Act bodies (jointly described in that Act as `entities'). Clause 7 of the Bill only deals with the payment of amounts specified in a departmental item to agencies within the meaning of the FMA Act and the High Court. The Bill has a new clause for payments to CAC Act bodies (new clause 9). · Subsection 7(4) of previous Appropriation Acts required the Finance Minister to issue out of the CRF sufficient amounts for a departmental item of an agencies that includes provision to pay the remuneration or allowances of the holder of a public office (within the meaning of the Remuneration Tribunal Act 1973) or an office specified in a Schedule to the Remuneration and Allowances Act1990. The Bill does not include a similar provision because the Commonwealth or an agency will be obliged to pay any entitlements determined under any other Act without the need for a specific provision in clause 7. If amounts are appropriated by the Bill for the purpose of paying certain entitlements, then it is not necessary for a further provision in the Bill to prevent agencies from relying on the standing appropriations in the Remuneration Tribunal Act 1973 or the Remuneration and Allowances Act 1990. Clause 8--Administered items 18 Subclause 8(1) provides for the appropriation of administered expense amounts to be applied by an agency for the purpose of contributing to the outcome for an administered item. An administered item is defined in clause 3 to be the amounts set out in Schedule 1 opposite an outcome for an agency House of Representatives page 7 Appropriation Act (No. 1) 2008-2009

Notes on clauses under the heading "Administered Expenses". Administered expenses are appropriated separately for outcomes (ie, unlike departmental items, the split across outcomes is not notional), making it clear what the funding is intended to achieve. Schedule 1 specifies how much can be expended on each outcome. 19 The appropriations for administered items in Schedule 1 represent the amounts required to meet the total estimated expenses for the administered outcomes for 2008-2009. 20 The purposes for which each administered item can be spent are set out in subclause 8(2). Subclause 8(2) provides that where the PB Statements indicate a particular activity is in respect of a particular outcome, then the amount in the administered item is taken to contribute to achieve the outcome. The outcomes are not, however, necessarily tied to the existence of a particular agency (eg, abolishing a department will not effect the valid operation of an appropriation for an administered item for an outcome of that department, because the purpose of the appropriation does not depend on the existence of the department). 21 Administered expenses are those administered by an agency on behalf of the Government (eg, certain grants, benefits and transfer payments). These payments are usually made pursuant to eligibility rules and conditions established by the Government or Parliament. Specifically: · administered items are tied to outcomes, departmental items are not; · administered items must be spent in accordance with rules and conditions established by Government or Parliament; and · there is a process in clause 11 for dealing with administered items that are not fully expensed or spent during the financial year. 22 The Finance Minister manages payments from administered items by agencies through the issuing of drawing rights in accordance with sections 26 and 27 of the FMA Act. Drawing rights control who may spend money from appropriations, and allow for conditions and limits to be set by the Finance Minister (or the Finance Minister's delegate) in relation to those activities. 23 The following improvements have been made to clause 8: · Subsections 8(1) and (2) of previous Appropriation Acts required the Finance Minister to issue an amount for an administered item out of the CRF. For the reasons noted in paragraph 17 above, it is no longer necessary for the Finance Minister to issue amounts out of the CRF. House of Representatives page 8 Appropriation Act (No. 1) 2008-2009

Notes on clauses · Subsections 8(1) and (3) of previous Appropriation Acts required the Finance Minister to determine whether a lesser amount should be issued out of the CRF for an item, having regard to the expenses of the agency in relation to the item. Subclause 8(1) of the Bill no longer requires that determination by the Finance Minister. Reductions of the amount provided for an administered item can now be dealt with by the streamlined process in clause 11 of the Bill. · Subsection 8(1) of previous Appropriation Acts also specified that the amounts issued out of the CRF for an administered item may `not exceed, in total,' the amounts specified for the item. Clause 8 no longer includes this limit, as the payment may be adjusted in accordance with Part 3 of the Bill or sections 30 to 32 of the FMA Act. Clause 9--CAC Act body payment items 24 Clause 9 establishes an appropriation provision for direct appropriations for CAC Act bodies to be managed by the relevant department. Clause 9 provides that payments for CAC Act bodies must be used for the purposes of those bodies. 25 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. 26 CAC Act body payments will be initiated by requests to the relevant portfolio agencies from the CAC Act bodies. The Finance Minister manages appropriations for CAC Act bodies through the issuing of drawing rights in accordance with sections 26 and 27 of the FMA Act. Drawing rights control who may spend money from appropriations, and allow for conditions and limits to be set by the Finance Minister (or the Finance Minister's delegate) in relation to those payments. CAC Act bodies will hold the amounts paid to them on their own account. 27 Subclause 9(2) provides that if a CAC Act body is subject to another Act that requires amounts appropriated by Parliament for the purposes of that body to be paid to the body, then the full amount of the CAC Act body payment must be paid to the body. The purpose of subclause 9(2) is to clarify that subclause 9(1) is not intended to qualify any obligations in other legislation House of Representatives page 9 Appropriation Act (No. 1) 2008-2009

Notes on clauses regulating a CAC Act body, where that legislation requires the Commonwealth to pay the full amount appropriated for the purposes of the body. 28 The full amount of the CAC Act body payments specified in Schedule 1 may be reduced in accordance with clause 12. Subclause 12(5) provides that subclause 9(2) does not prevent the CAC Act body payments in Schedule 1 being reduced. 29 In addition to the annual appropriations, some CAC Act bodies may also receive public money through special appropriations and from related entities such as a portfolio department. Many CAC Act bodies also receive funds from external sources. Part 3--Adjusting appropriation items 30 Part 3 of the Bill includes provisions that may increase or reduce the amounts specified in Schedule 1. Up until the Additional Estimates Acts for 2007-08, Part 3 of the annual Appropriation Acts only included the clauses that increased appropriations. For example, in previous Appropriation Acts the provision to reduce appropriations (section 9) was included in Part 2 of that Act. The equivalent reduction clauses are now located with the other adjustment provisions in Part 3 of the Bill (clauses 10 to 12). For clarity this Part has been renamed "Adjusting appropriation items". Clause 10--Reducing departmental items 31 Departmental items remain available until the appropriation is spent or reduced in accordance with clause 10. This clause enables the Chief Executive of an agency to comply with his or her obligations under section 44 of the FMA Act to promote the efficient, effective and ethical use of any surplus appropriations. Agencies should only spend all of a departmental item if there are government decisions to support that expenditure. Examples of where clause 10 may be appropriate to reduce a departmental item include: · an excessive amount of appropriation was made in error; · an amount is reclassified and appropriated again under another kind of appropriation (eg, where an amount appropriated as departmental is to be reclassified as administered and a new administered appropriation is provided). The existing departmental appropriation remains legally available even though there is no Government authority to spend the funds; · efficiency savings result in a program costing less than expected; or House of Representatives page 10 Appropriation Act (No. 1) 2008-2009

Notes on clauses · a program is abolished under Government policy before the appropriation is expended. 32 Paragraph 10(1)(a) enables the Minister responsible for a particular agency to ask the Finance Minister to reduce a departmental item for that agency. 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. Subclause 10(5) assists readers by noting that a request under subclause 10(1) is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003 (LI Act). 33 Subclause 10(2) enables the Finance Minister to make a written determination to reduce a departmental item. The Finance Minister is not obliged to act on a request to reduce excess departmental output appropriations. However, if the Finance Minister does: · the determination must not be greater than the amount specified in the request: subclause 10(2); · the determination may not reduce the departmental item below nil: subclause 10(3); and · the departmental item in Schedule 1 will be taken to be reduced in accordance with the determination of the Finance Minister: subclause 10(4). 34 Subclause 10(6) provides that a determination made under subclause 10(2) is a legislative instrument. 35 Despite subsection 44(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to disallowance, subclause 10(6) provides that a determination reducing a departmental item is subject to disallowance in accordance with section 42 of the LI Act. Parliament retains the power to disallow a determination to reduce a departmental item because any such determination will reduce the amount of an appropriation authorised by Parliament. Subclause 10(6) also confirms subsection 54(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to sunsetting. 36 A clause to enable departmental items to be reduced was first included in the additional estimates Appropriation Acts for 2003-2004. Clause 10 has been simplified by not including some ambiguous and unnecessary conditions that were previously included in section 9 of previous Appropriation Acts. House of Representatives page 11 Appropriation Act (No. 1) 2008-2009

Notes on clauses Clause 11--Reducing administered items 37 Clause 11 provides a streamlined process for amounts of administered items not required in later years to be extinguished. Clause 11 enables amounts of administered items which are not expensed or spent during the financial year to be reduced. If the Government then decides that amounts should be spent in a later financial year, the Government must request Parliament to appropriate these amounts in future appropriation bills. 38 Clause 11 is a new clause in the annual appropriation bills. In previous Appropriation Acts, section 8 appropriated amounts for administered items and provided for those amounts to be reduced in accordance with a determination of the Finance Minister (see paragraph 23 above). Determinations under section 8 limited the amount of annual appropriation available, but did not reduce the amount of the appropriations. 39 Clause 11 establishes a more efficient process to permanently reduce administered items. It does this by limiting the amount that may be applied for an administered item to the amount reported for that item in an agency's annual report. Subclause 11(1) provides that if the amount published in the annual report is less than the amount of the item, then the administered item is taken to be reduced to the amount specified in the annual report. The amount of the item specified in Schedule 1 of the Bill may be increased or reduced by the other clauses of Part 3 of the Bill or in accordance with sections 30 to 32 of the FMA Act. The amount in the annual report must therefore be compared with the amount for the item in Schedule 1 together with any other adjustments that have been made to that amount. 40 Subclause 11(2) retains a power for 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. The power in paragraph 11(2)(b) is to ensure that the amount published for the administered item can be corrected if, for example, the amount is erroneous or requires updating after the annual report is published. 41 Subclause 11(3) provides that a determination made under subclause 11(2) is a legislative instrument. 42 Despite subsection 44(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to disallowance, subclause 11(3) provides that a determination regarding an administered item is subject to disallowance in accordance with section 42 of the LI Act. Parliament retains the power to disallow a determination to reduce a departmental item House of Representatives page 12 Appropriation Act (No. 1) 2008-2009

Notes on clauses because any such determination will reduce the amount of an appropriation authorised by Parliament. Subclause 11(3) also confirms subsection 54(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to sunsetting. Clause 12--Reducing CAC Act body payment items 43 Clause 12 will establish a similar process for reducing CAC Act body payment items to the process for reducing departmental items. Subclause 12(1) enables a Minister responsible for a CAC Act body, or in the case of a CAC Act body who the Finance Minister is responsible for, the Secretary of the Finance Department, to ask the Finance Minister to reduce a CAC Act body payment for that body. Subclause 12(6) assists readers by noting that a request under subclause 12(1) is not a legislative instrument within the meaning of section 5 of the LI Act. 44 Subclause 12(2) enables the Finance Minister to make a written determination to reduce a CAC Act body payment item. The Finance Minister is not obliged to act on a request to reduce excess CAC Act body payments. However, if the Finance Minister does: · the determination will not be greater than the amount specified in the request: subclause 12(2); · the determination may not reduce the CAC Act body payment item below nil: subclause 12(3); and · the CAC Act body payment item in Schedule 1 will be taken to be reduced in accordance with the determination of the Finance Minister: subclause 12(4). 45 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 12. 46 Subclause 12(7) clarifies that a determination made under subclause 12(2) is a legislative instrument. 47 Despite subsection 44(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to disallowance, subclause 12(7) provides that a determination reducing a CAC Act body payment item is subject to disallowance in accordance with section 42 of the LI Act. Parliament retains the power to disallow a determination to reduce a departmental item because any such determination will reduce the amount of an appropriation authorised by Parliament. Subclause 12(7) also confirms House of Representatives page 13 Appropriation Act (No. 1) 2008-2009

Notes on clauses subsection 54(2) of the LI Act, which provides that instruments made under annual Appropriation Acts are not subject to sunsetting. Clause 13--Section 31 agreements 48 Clause 13 is a transitional saving provision that recognises that departmental items and administered items may be increased in accordance with agreements that were made under section 31 of the FMA Act before that section was amended on 1 January 2008 (section 31 agreements). While section 31 of the FMA Act was amended on 1 January 2008 to establish a simpler arrangement for handling agency receipts, the Financial Framework Legislation Amendment Act (No.1) 2007 which repealed and substituted section 31 provided for the gradual phase out of the section 31 agreements. Section 31 agreements will continue to apply until regulations are made and come into effect. 49 Prior to 1 January 2008, section 31 of the FMA Act required a Minister responsible for an agency that received money from a source other than an Appropriation Act, to enter into an agreement with the Finance Minister to increase the net appropriation of an agency's departmental item by the amount of the agency's receipts. Receipts could include moneys from cost recovery activities or the sale of minor assets. Under the previous arrangements, if there was no agreement in place, amounts received by an agency had to be returned to the CRF. 50 The changes to section 31 of the FMA Act that came into effect on 1 January 2008, removed the need for agencies to enter into agreements with the Finance Minister in relation to agency receipts. The changes were implemented partly in response to criticisms of net appropriation agreements that were made by the Auditor-General in Report No. 28 of 2005/2006, Management of Net Appropriation Agreements. Section 31 now provides that regulations will prescribe the types of receipts that an agency may retain by adding those amounts to the departmental item of the agency. The regulations will also ensure greater consistency in relation to receipts across agencies. Unlike the section 31 agreements, the regulations will be tabled in Parliament and will be subject to disallowance. It is intended that regulations describing the receipts that an agency may retain will come into effect on 1 July 2008. However, depending on the date that the regulations do come into effect, some section 31 agreements may continue to apply into the 2008-2009 financial year. 51 Subclauses 13(1) and (2) provide that if a section 31 agreement continues to apply to a departmental item, then the receipts described in the House of Representatives page 14 Appropriation Act (No. 1) 2008-2009

Notes on clauses agreement will be added to the departmental item of the agency, thereby increasing the net appropriation of the agency. 52 While most section 31 agreements under the previous arrangements were of a departmental nature, some section 31 agreements related to administered items. Subclause 13(3) provides that if a section 31 agreement continues to apply to an administered item (while the agreement continues in existence, ie. until such time as the regulations are made), then the receipts described in the agreement will be added to the net appropriation of the agency's administered items. Subclause 13(4) specifies the agencies whose administered items are taken to be increased by former section 31 agreements: AusAID and the Department of Families, Housing, Community Services and Indigenous Affairs. Clause 14--Advance to the Finance Minister 53 Clause 14 provides $295 million as an advance to the Finance Minister (AFM) to be allocated when he or she is satisfied that there is an urgent need for expenditure during the 2008-2009 financial year, for which Schedule 1 does not provide a sufficient appropriation. 54 Subclause 14(1) establishes the criteria about which the Finance Minister must be satisfied before he or she may determine to add an amount from the AFM to an item of an agency. The Finance Minister will only consider issuing an amount under subclause 14(1) if satisfied there is an urgent need for expenditure that is not provided for, or is insufficiently provided for, in Schedule 1 because of an omission or understatement or because of unforeseen circumstances (ie, according to the AFM guidelines, an urgent need for expenditure is expenditure that is required within two weeks). Generally the other appropriation adjustment options in Part 3 of the Bill or under sections 30 to 32 of the FMA Act must have been exhausted before the Finance Minister will make a determination under subclause 14(2). 55 Subclause 14(2) enables the Finance Minister to make a determination to add an amount from the AFM to an item in Schedule 1, to a new item not already in Schedule 1, or to a new outcome. 56 The amount of the AFM provided by clause 14(3) is higher than previous Appropriation Acts, as the previous arrangements for recovering AFM amounts from the additional estimates acts will be discontinued. A further AFM will only be requested in the additional estimates bills for the current year if the AFM in the Bill is close to being exhausted. House of Representatives page 15 Appropriation Act (No. 1) 2008-2009

Notes on clauses 57 Subclause 14(4) provides that a determination under subclause 14(2) is a legislative instrument, which must be tabled in Parliament but is not subject to disallowance or sunsetting. 58 Disallowance of a subclause 14(2) determination could frustrate the purpose of clause 14 which is to provide additional appropriations for urgent expenditure. Parliament authorises the AFM under clause 14 so that there is an amount available to cover any potential urgent requirements that may arise. A subclause 14(2) determination will not require any additional appropriations to be authorised by Parliament. A subclause 14(2) determination also differs from a ministerial determination under clause 10, 11 or 12. Determinations under those clauses will reduce the amount of an appropriation approved by Parliament. As noted above, those other determinations therefore will be subject to disallowance. 59 A subclause 14(2) determination is not subject to sunsetting provisions because the amount allocated from the AFM will be extinguished when it is spent. Further, if the determination did expire after a period, then the recipient of money paid from the AFM would be liable to repay that money as if the amount had not been appropriated in the first place. Clause 15--Flexible Funding Pool receipts 60 Clause 15 provides appropriations for agencies to spend amounts equal to receipts from the Northern Territory Flexible Funding Pool Special Account (the NTFFP). This clause has been included in the Bill because section 12 of previous Appropriation Acts did not cover all the agencies that might need appropriations for administered items. 61 Financial Management and Accountability Determination 2007/21 established the NTFFP under subsection 20(1) of the FMA Act to develop, promote, assist or implement employment creation initiatives in relation to the Northern Territory Emergency Response. 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 in accordance with the Financial Management and Accountability Determination 2007/21 and the FMA Act, to be applied by an agency for the purpose of achieving an outcome for an administered item; and · the Finance Minister specifies that item in a written determination. 62 If the conditions in subclause 15(1) are satisfied, then subclause 15(2) provides that an item is increased by the amount of the payment and at the time House of Representatives page 16 Appropriation Act (No. 1) 2008-2009

Notes on clauses when an entry recording the payment is made in the accounts and records of the agency. 63 Subclause 15(4) provides that a determination under paragraph 15(1)(c) is a legislative instrument which must be tabled in Parliament, but is not subject to disallowance or sunsetting. Unlike a determination under clause 10, 11 or 12 to reduce the amount of an appropriations approved by Parliament, Parliament has already appropriated amounts for the NTFFP. The purpose of clause 15 will be to debit an amount from the NTFFP and credit that amount to an item of an agency. A determination under paragraph 15(1)(c) will not be subject to sunsetting for the same reason as a determination under clause 14 in relation to AFM is not subject to sunsetting (see paragraph 59 above). Clause 16--Comcover receipts 64 Clause 16 applies to Comcover payments that are debited from the Comcover Account to an agency. The Comcover Account is a special account established under the FMA Act. 65 Subclauses 16(2) and (5) enable an agency Minister to determine which of the items of the agency may be increased by specified amounts. Subclause 16(3) requires the written determination of an agency Minister to specify amounts that total the full Comcover payment and to specify the items in Schedule 1 of the Bill or items in Appropriation Bill (No.2) 2008-2009. Subclause 16(6) enables an agency Minister to delegate his or her powers under clause 16 to the Chief Executive of the agency. 66 Subclause 16(7) specifies that neither a determination of an agency Minister under subclause 16(2) nor a written direction of the Finance Minister under subclause 16(4) will be a legislative instrument. The reason for this is that the discretion of the agency Ministers and the Finance Minister under these provisions is very limited. If an agency receives a Comcover payment, the only decision an agency Minister may make is which item that amount should be added to. In practice this will be the agency's departmental item. 67 When regulations are made under section 31 of the FMA Act, this will enable Comcover payments to agencies to be added to the departmental item of an agency without the need for a determination. As with clause 13 of the Bill, clause 16 will then be redundant and will not be required in future annual appropriation bills. House of Representatives page 17 Appropriation Act (No. 1) 2008-2009

Notes on clauses Part 4--Reducing administered items in previous Acts Clause 17--Reducing administered items in previous Acts 68 Clause 17 has been included in the Bill to prevent amounts of administered expenses determined under previous Appropriation Acts from being re-determined and spent. Clause 17 provides for all past determined amounts of unnecessary administered expense appropriations to be `extinguished' or `lapsed' in law. Previous Appropriations Acts limited the amounts that may be issued from the CRF but technically did not prevent new determinations raising the limit, thereby allowing previously unavailable appropriations to be spent. Part 5--Miscellaneous Clause 18--Crediting amounts to Special Accounts 69 Clause 18 provides that if the purpose of an item in Schedule 1 is also the purpose of a special account (regardless of whether the item expressly refers to the special account), then amounts may be debited against the appropriation for that item and credited to the special account. Special accounts may be established under the FMA Act by a determination of the Finance Minister (section 20) or another Act (section 21). The determination or Act that establishes the special account will specify the purposes of the special account. Clause 19--Appropriations of the Consolidated Revenue Fund 70 Clause 19 provides that the CRF is appropriated as necessary for the purposes of the Bill. Significantly this clause notes that the amounts appropriated by the Bill may be affected by the FMA Act, in particular sections 30 to 32 of the FMA Act (see clause 6). Schedule 1--Services for which money is appropriated 71 Schedule 1 specifies the ordinary annual services of the Government for which amounts will be appropriated. Schedule 1 contains a summary table detailing the total appropriations for each portfolio. A separate summary table is included for each portfolio together with other tables detailing the breakdown of the appropriations within each portfolio. 72 Schedule 1 includes for information purposes a figure for the previous financial year, labelled the `Actual Available Appropriation'. That figure is printed in italics under each appropriation amount to provide a comparison with House of Representatives page 18 Appropriation Act (No. 1) 2008-2009

Notes on clauses the proposed appropriations. The Actual Available Appropriation does not affect the amounts available at law. 73 More details about the appropriations in Schedule 1 are contained in the Budget Papers and the PB Statements. House of Representatives page 19 Appropriation Act (No. 1) 2008-2009

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