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2019 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES APPROPRIATION (PARLIAMENTARY DEPARTMENTS) BILL (NO. 1) 2019-2020 EXPLANATORY MEMORANDUM (Circulated by the authority of the Minister for Finance, Senator the Honourable Mathias Cormann)Table of Acronyms and Defined Terms AAA Actual Available Appropriation AI Act Acts Interpretation Act 1901 APO Advance to the responsible Presiding Officer Commonwealth An entity as defined in section 10 of the PGPA Act entity CRF Consolidated Revenue Fund Finance Minister Minister for Finance GST Goods and Services Tax non-corporate Non-corporate Commonwealth entities as defined in entities the PGPA Act, or the High Court PGPA Act Public Governance, Performance and Accountability Act 2013 portfolio Portfolio Budget Statements statements Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 1
Outline Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 General Outline 1 This Explanatory Memorandum accompanies the Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 (the Bill). 2 The main purpose of the Bill is to propose appropriations from the Consolidated Revenue Fund (CRF) for expenditure in relation to the Parliamentary Departments. 3 Appropriations for the ordinary annual services of the Government must be contained in a separate Bill from other appropriations in accordance with sections 53 and 54 of the Australian Constitution. Consequently, the Bill proposes appropriations for the Parliamentary Departments, which are not for the ordinary annual services of the Government. 4 Annual appropriations that are for the ordinary annual services of the Government are proposed in the Appropriation Bill (No. 1) 2019-2020, on the same proportional basis as this Bill. Other annual appropriations that are not for the ordinary annual services of the Government are proposed in the Appropriation Bill (No. 2) 2019-2020, on the same proportional basis as this Bill. Together these three Bills are termed the Appropriation Bills. 5 The Bill proposes appropriations broadly equivalent to 7/12ths of the estimated 2019-20 annual appropriations for the ordinary annual services of the Government, and measures agreed since Appropriation (Parliamentary Departments) Bill (No. 2) 2018-2019 and certain election commitments. Further detail on the additional measures included in the Bill is at Appendix A. Supply (Parliamentary Departments) Act (No. 1) 2019-2020 appropriated from the CRF for the residual 5/12ths, less any Budget measures, with a view to ensure that there are adequate appropriations for the first part of the 2019-20 financial year for the expenditure of the Parliamentary Departments. 6 The Bill is in substantially the same terms, and has essentially the same effect, as the Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 that was introduced with that name into the 45th Parliament on 2 April 2019 but which lapsed on the dissolution of the two Houses on 11 April 2019 (the lapsed Bill). This Bill reflects the effect of the Efficiency Dividend on the Department of Parliamentary Services. 7 This Explanatory Memorandum should be read in conjunction with the various 2019-20 portfolio statements for the Parliamentary Departments published and tabled in the 45th Parliament in relation to the lapsed Bill. The portfolio statements contain details on the appropriations set out in the Schedules of the Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 2
Outline Bills. The portfolio statements are taken to cover both the Bill and the Supply (Parliamentary Departments) Act (No. 1) 2019-2020. Structure of the Bill 8 The Bill provides for the appropriation of specified amounts for expenditure by the Parliamentary Departments, under the Public Governance, Performance and Accountability Act 2013 (PGPA Act). 9 Part 1 of the Bill deals with definitions, the interpretative role of the portfolio statements and the concept of notional transactions. Part 2 of the Bill proposes appropriations to make payments of the amounts in Schedule 1 for departmental items (clause 7), administered items (clause 8), administered assets and liabilities items (clause 9) and other departmental items (clause 10). Part 3 of the Bill specifies the Advance to the responsible Presiding Officer (APO) provision (clause 11). 10 Part 4 of the Bill deals with credits to special accounts (clause 12), provides for amounts to be appropriated as necessary (clause 13), and specifies when the Bill is repealed (clause 14). In addition to the APO provision in Part 3, clause 13 of the Bill recognises that the appropriations in the Bill may also be varied by the PGPA Act. Financial Impact 11 The Bill, if enacted, would appropriate the amounts specified in Schedule 1 as set out in section 6. Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 3
Statement of compatibility with human rights Statement of compatibility with human rights 1 The Bill seeks to appropriate money for expenditure by the Parliamentary Departments. 2 Accordingly, the Bill performs an important constitutional function, by authorising the withdrawal of money from the CRF for the broad purposes identified in the Bill. 3 However, as the High Court has emphasised, beyond this, the Appropriation Acts for the ordinary annual services of Government do not confer authority to engage in executive action. In particular, they do not confer legal authority to spend. 4 Given that the legal effect of Appropriation Bills is limited in this way, the Bill is not seen as engaging, or otherwise affecting, the rights or freedoms relevant to the Human Rights (Parliamentary Scrutiny) Act 2011. 5 Detailed information on the relevant appropriations, however, is contained in the portfolio statements. Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 4
Notes on clauses Notes on clauses Part 1--Preliminary Clause 1--Short title 1 Clause 1 specifies that the short title of the Bill, once enacted, will be the Appropriation (Parliamentary Departments) Act (No. 1) 2019-2020. Clause 2--Commencement 2 Clause 2 provides for the Bill to commence as an Act on the day of the Royal Assent. Clause 3--Definitions 3 Clause 3 defines the key terms used in the Bill, such as "administered item" and "special account". Each Parliamentary Department is a non-corporate Commonwealth entity (non-corporate entity) for the purposes of the PGPA Act. Clause 4--Portfolio statements 4 Clause 4 declares that the portfolio statements prepared for the lapsed Bill and as for Supply (Parliamentary Departments) Act (No. 1) are relevant documents for the Bill. Paragraph 15AB(2)(g) of the Acts Interpretation Act 1901 (AI Act) provides for material to be considered in the interpretation of an Act if the material is declared by the Act to be relevant material for the purposes of section 15AB of the AI Act. 5 The purpose of the portfolio statements is to provide information on the proposed allocation of resources to the outcomes of the Parliamentary Departments. The term "portfolio statements" is defined in the Bill, at clause 3, to mean the Portfolio Budget Statements 2019-20. Clause 5--Notional transactions between entities that are part of the Commonwealth 6 Clause 5 provides that notional transactions between non-corporate entities are to be treated as if they are real transactions. Notional transactions, therefore, require the debiting of an appropriation made by Parliament. The payments of the amounts in Schedule 1 from one non-corporate entity to another do not require, in a constitutional sense, an appropriation, because both non-corporate entities operate within the CRF. For reasons of financial discipline and transparency, the practice has arisen for these payments between non-corporate entities to be treated as though they required an appropriation, and to debit an appropriation when such notional payments are made. This is consistent with section 76 of the PGPA Act. 7 When a non-corporate entity makes a payment, whether to another non-corporate entity or another part of the same non-corporate entity (such as a Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 5
Notes on clauses different "business unit" within the entity), it is to be treated as a "real" payment. This means that the appropriation made by Parliament is extinguished by the amount of the notional payment, even though no payment is actually made from the CRF. Similarly, a notional receipt in such a situation is to be treated by the receiving non-corporate entity (where relevant) as if it were a real receipt. This does not mean every internal transfer of public money involves a notional payment and receipt. Part 2--Appropriation items Clause 6--Summary of appropriations 8 Clause 6 sets out the total of the appropriations in Schedule 1 of the Bill. The amounts in Schedule 1 may be increased by a determination under clause 11 (Advance to the responsible Presiding Officer). 9 The amounts in Schedule 1 of the Bill may be adjusted further in accordance with sections 74 to 75 of the PGPA Act. Specifically: Section 74 of the PGPA Act, when read with Rule 27 of the Public Governance, Performance and Accountability Rule 2014, permits non-corporate entities to retain certain types of receipts by adding them to their most recent departmental item or other type of appropriation in an Appropriation Act when prescribed. Appropriations may be adjusted by amounts recoverable by a non-corporate entity from the Australian Taxation Office for Goods and Services Tax (GST), in accordance with section 74A of the PGPA 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 74A 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. Section 74A also applies to notional transactions between and within non-corporate entities. Items may be adjusted to take into account the transfer of functions between non-corporate entities, in accordance with section 75 of the PGPA Act. It is possible that adjustments under section 75 may result in new items and/or outcomes being created in an Appropriation Act. 10 Additionally, the Finance Minister may manage the payment from items in the Bill by the Parliamentary Departments using a discretionary power under section 51 of the PGPA Act. Section 51 allows the Finance Minister to manage the timing and the amount of appropriated money to be made available to a Commonwealth entity, except as required by law. Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 6
Notes on clauses Clause 7--Departmental items 11 Clause 7 provides that the amount specified in a departmental item for a Parliamentary Department may be applied for the departmental expenditure of the Parliamentary Department. Clause 3 defines: "departmental item" to be the total amount set out in Schedule 1 in relation to a Parliamentary Department under the heading "Departmental"; and "expenditure" to be payments for expenses, acquiring assets, making loans or paying liabilities. 12 While the departmental items 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. 13 Departmental items involve costs over which a Parliamentary Department has control. Departmental appropriations can be used to make any payment related to the functions of the Parliamentary Department including on purposes covered by other items whether or not they are in the Act for a Parliamentary Department. Expenditure typically covered by departmental items includes: employee expenses, suppliers and other operational expenses (e.g. interest and finance expenses); and the acquisition and capitalised maintenance of departmental assets valued at $10 million or less. 14 The cash to meet departmental expenses may be required at times other than when the expenses are incurred. Departmental items are available until they are spent, or until the Act through which they were appropriated is repealed. Annual Appropriation Acts have a lifespan of up to three years after which they automatically repeal. Clause 8--Administered items 15 Subclause 8(1) provides for the appropriation of administered amounts to be applied by a Parliamentary Department 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 a Parliamentary Department under the heading "Administered". Administered amounts are appropriated separately for each outcome, so, unlike departmental items, the split across outcomes is not notional. This makes it clear what the funding is intended to achieve. 16 The purposes for which each administered item can be spent are further set out in subclause 8(2). Subclause 8(2) provides that where the portfolio statements indicate a particular activity is in respect of a particular outcome, then expenditure on that activity is taken to be expenditure for the purpose of contributing to achieving that outcome. Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 7
Notes on clauses 17 Administered items are those administered by a Parliamentary Department on behalf of the Government (e.g. certain grants, benefits and transfer payments). These payments are usually made pursuant to eligibility rules and conditions established by the Government or the Parliament. Specifically, administered items are tied to outcomes (departmental items are not). Clause 9--Administered assets and liabilities items 18 Clause 9 provides amounts in Schedule 1 to acquire new administered assets, enhance existing administered assets and/or discharge administered liabilities relating to activities administered by the Parliamentary Departments. Administered assets and liabilities appropriations are provided for functions managed by a Parliamentary Department. Administered assets and liabilities items can also be applied for any outcomes of a Parliamentary Department. Clause 10--Other departmental items 19 Clause 10 appropriates departmental non-operating appropriations in the form of equity injections, over which the Parliamentary Departments also exercise control. This clause provides that the amount specified in other departmental items for a Parliamentary Department may be applied for the departmental expenditure of the Parliamentary Department. In short, "equity injections" can be provided to non-corporate entities to, for example, enable investment in assets to facilitate departmental activities. 20 Other departmental items are not expressed in terms of a particular financial year and do not automatically lapse. For example, equity injection appropriations provide funding for the full costs of acquiring new assets some of which might not be incurred until a later financial year. Other departmental items are available until they are spent, or the Act through which they were appropriated is repealed. Annual Appropriation Acts have a lifespan of up to three years after which they automatically repeal. Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 8
Notes on clauses Part 3--Advance to the responsible Presiding Officer Clause 11--Advance to the responsible Presiding Officer 21 Clause 11 of the Bill enables the responsible Presiding Officer to allocate additional amounts for items when satisfied that there is an urgent need for expenditure and the existing appropriation in the current year, is not provided for, or is insufficiently provided for. The allocated amount is referred to as the APO. Subclause 11(1) establishes the criteria about which the responsible Presiding Officer must be satisfied before determining to add an amount to an item of a Parliamentary Department. 22 The responsible Presiding Officer will only consider issuing an amount under subclause 11(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. Generally, options under sections 74 to 75 of the PGPA Act must be considered, where applicable, before the responsible Presiding Officer will make a determination under subclause 11(2). 23 Subclause 11(2) enables the responsible Presiding Officer to make a determination to allocate an amount from the APO to an existing item in Schedule 1, to a new item not already in Schedule 1, or to a new outcome. 24 Subclauses 11(3) to 11(6) provide the total amounts that can be determined under the APO provision are: $300,000 for the Department of the Senate; $300,000 for the Department of the House of Representatives; $1 million for the Department of Parliamentary Services; and $300,000 for the Parliamentary Budget Office. 25 Subclause 11(7) provides that a determination under subclause 11(2) is a legislative instrument, which must be tabled in Parliament. It is not subject to section 42 (disallowance) of the Legislation Act 2003 as this would frustrate the purpose of the provision, which is to provide additional appropriation for urgent expenditure. Further, an APO is not subject to Part 4 of Chapter 3 (sunsetting) of the Legislation Act 2003; legislative instruments enabled by the Bill, once enacted, automatically repeal when the Act itself repeals (see clause 14). Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 9
Notes on clauses Part 4--Miscellaneous Clause 12--Crediting amounts to special accounts 26 Clause 12 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 PGPA Act by a determination of the Finance Minister (section 78) that is disallowable by Parliament or by another Act (sections 79 and 80). The determination or Act that establishes the special account will specify the purposes of the special account. Clause 13--Appropriation of the Consolidated Revenue Fund 27 Clause 13 provides that the CRF is appropriated as necessary for the purposes of the Bill. Significantly, this clause means that there is an appropriation in law when the Act commences. That is, the appropriations are not made or brought into existence just before they are paid, but when the Act commences. This clause indicates that the amounts appropriated may be affected by the PGPA Act, in particular sections 74 to 75 (see clause 6), after the Act commences. Clause 14--Repeal of this Act 28 Clause 14 provides that the Bill, once enacted, will repeal at the start of 1 July 2022. Schedule 1--Services for which money is appropriated 29 Schedule 1 specifies the services of the Parliamentary Departments for which amounts will be appropriated. Schedule 1 contains a summary table which lists the total amounts for the Parliamentary Departments and separate tables detailing the appropriations for each Parliamentary Department. 30 Schedule 1 includes, for information purposes, a figure for the previous financial year labelled "Actual Available Appropriation (italic figures) - 2018-2019". The Actual Available Appropriation (AAA) is an estimate that does not affect the amount available at law. That figure provides a comparison with the proposed appropriations. 31 The AAA is calculated for each item by adding the amounts appropriated in the previous financial year's annual Appropriation Acts, plus any AFMs, and any adjustments under sections 51 and 75 of the PGPA Act. In some instances, the figure may also be affected by limits applied administratively by the Department of Finance. In addition, where an entity's outcome structure has changed since the last Appropriation Act, only ongoing outcomes may be shown in the Bill. Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 10
Notes on clauses 32 The AAA numbers contained in the Bill differ from those contained in the lapsed Bill, as this Bill reflects the effect of Royal Assent to the Appropriation (Parliamentary Departments) Act (No. 2) 2018-2019 on 4 April 2019, which occurred after the introduction of the lapsed Bill on 2 April 2019. 33 The Bill is in substantially the same terms, and has essentially the same effect, as the Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 that was introduced with that name into the 45th Parliament on 2 April 2019 but which lapsed on the dissolution of the two Houses on 11 April 2019 (the lapsed Bill). This Bill reflects the following changes: Decisions taken since the lapsed Bill 34 Schedule 1 reflects decisions taken since the lapsed Bill was tabled. The effect of these decisions on specific entities is detailed in Appendix A to this document. 35 Appendix A details the effect on appropriations by Parliamentary entity of spending decisions made since the lapsed Bill. 36 The Efficiency Dividend ensures that the Commonwealth entities continue to focus their efforts on achieving ongoing efficiencies in Government administration. 37 The following categories of entities are exempt from the additional Efficiency Dividend: Commonwealth funded entities with less than 200 Average Staffing Level as at the 2019-20 Budget as published in Budget Paper Number 4. The following Commonwealth material entities and national collecting institutions: o National Disability Insurance Agency; o Australian Prudential Regulation Authority; o Australian Securities and Investments Commission; o National Library of Australia; o National Gallery of Australia; o National Museum of Australia; o National Archives of Australia; and o Australian War Memorial. The Office of National Intelligence and the Australian Signals Directorate. All entities otherwise exempt from the application of the ED as at the 2019-20 Budget. Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 11
Efficiency Dividend - Saving by Entity Appendix A Portfolio 2019-20 $'000 Parliament Department of Parliamentary Services -723 Total -723 Explanatory Memorandum to Appropriation (Parliamentary Departments) Bill (No. 1) 2019-2020 House of Representatives 12