General policy statement

It is a basic constitutional principle that the Government can spend public money and incur expenses and capital expenditure only in accordance with appropriations made by an Act of Parliament and in an otherwise lawful manner.

However, Parliament has, in the Public Finance Act 1989, conferred limited authority on the Governor-General by Order in Council to vary appropriations made by Parliament, and on the Minister of Finance to approve expenditure in excess of appropriation by Parliament.

Section 26A of the Public Finance Act 1989 authorises the Governor-General by Order in Council to direct that an amount appropriated in a Vote for an output expense be transferred to another output expense appropriation in that Vote. There are 3 restrictions. First, the transfer must not increase that appropriation for the financial year by more than 5%. Secondly, there must have been no other transfer under section 26A of the Public Finance Act 1989 to that appropriation during the financial year. Thirdly, the total amount appropriated for all output expense appropriations for that Vote for the financial year must remain unaltered. A clause that confirms these Orders in Council must be included in an Appropriation Bill that applies to that financial year.

Section 26B of the Public Finance Act 1989 authorises the Minister of Finance to approve the incurring of expenses or capital expenditure in the last 3 months of the financial year in excess, but within the scope, of an existing appropriation by Parliament. This is subject to a limit that is the greater of $10,000 or 2% of the total amount appropriated for that appropriation by all Appropriation Acts for that financial year. The approval must be given not later than 3 months after the end of the financial year concerned. Expenses and capital expenditure incurred under the approval must be confirmed in an Appropriation Bill that applies to that financial year.

Sections 8 and 9 of the Public Finance Act 1989 require appropriations to be limited to a specified amount and limited to the scope of the appropriation.

Section 26C of the Public Finance Act 1989 requires the incurring of expenses or capital expenditure without appropriation, or other authority, by or under an Act to be validated by an Act of Parliament.

During the 2008/09 financial year some expenses and capital expenditure were incurred that were in excess, or outside the scope, of the relevant appropriation or were incurred without appropriation, or other authority, by or under an Act of Parliament.

During the 2007/08 financial year, Te Puni Kōkiri incurred some expenses without appropriation and the Ministry of Justice incurred some expenses outside the scope of an existing appropriation. During the 2004/05, 2005/06, 2006/07, and 2007/08 financial years the Ministry of Transport incurred some expenses outside the scope of existing appropriations.

During or at the end of the 2008/09 financial year, the net asset holdings in some departments exceeded the most recent projected balance of net assets for those departments as set out in an Appropriation Act. Those excess net asset holdings require validation.

This Appropriation Bill—

• confirms the Public Finance (Transfers Between Outputs) Order 2009, which was made under section 26A of the Public Finance Act 1989 (clause 5):

• confirms expenses incurred for the 2008/09 financial year in excess, but within the scope, of an existing appropriation in accordance with the approval of the Minister of Finance under section 26B of the Public Finance Act 1989 (clause 6). Details of these confirmations are set out in Schedule 1:

• validates unappropriated expenses and capital expenditure incurred for the 2008/09 financial year that were in excess of an existing appropriation, or without appropriation, or other authority, by or under an Act of Parliament (clause 7). Details of these validations are set out in Schedules 2 and 3:

• validates expenses incurred for the 2007/08 financial year by Te Puni Kōkiri in respect of Vote Māori Affairs without an appropriation (clause 8):

• validates expenses incurred for the 2004/05, 2005/06, 2006/07, and 2007/08 financial years by the Ministry of Transport outside the scope of the existing appropriation International Memberships in Vote Transport (clause 9):

• validates expenses incurred for the 2007/08 financial year by the Ministry of Justice outside the scope of the existing appropriation Historical Treaty of Waitangi Settlements in Vote Treaty Negotiations (clause 10):

• validates excess net asset holdings in 2 departments during or at the end of the 2008/09 financial year (clause 11). Details of these validations are set out in Schedule 4.

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 is the commencement clause. The Bill comes into force on the day after the date on which it receives the Royal assent.

Clause 3 states the purposes of the Bill, which are—

• to confirm financial matters relating to the financial year ended 30 June 2009; and

• to validate other financial matters relating to the financial year ended 30 June 2009 and previous financial years.

Clause 4 is an interpretation clause.

Clause 5 confirms the Public Finance (Transfers Between Outputs) Order 2009. That order, which came into force on 30 June 2009, directed that fiscally neutral transfers be made decreasing the amounts appropriated for 16 output expense appropriations in 6 Votes and increasing the amounts appropriated for 19 other output expense appropriations in the same 6 Votes.

Clause 6 confirms the incurring of expenses for the 2008/09 financial year in excess, but within the scope, of an existing appropriation in accordance with the approval of the Minister of Finance under section 26B of the Public Finance Act 1989. There are 16 instances in 6 Votes administered by 6 departments of approved unappropriated expenses. These are set out in Schedule 1.

Clause 7 validates expenses and capital expenditure that were incurred by departments in the 2008/09 financial year in excess of existing appropriations or without appropriation, or other authority, by or under an Act.

The expenses that were incurred in excess of an existing appropriation are set out in Schedule 2. There are 22 instances in 14 Votes administered by 13 departments.

The expenses and capital expenditure that were incurred without appropriation, or other authority, by or under an Act are set out in Schedule 3. There are 11 instances in 7 Votes administered by 6 departments.

Clause 8 validates expenses incurred in the 2007/08 financial year by Te Puni Kōkiri for the management of land administered under Part 2 of the Maori Affairs Restructuring Act 1989 in respect of Vote Māori Affairs without appropriation, or other authority, by or under an Act.

Clause 9 validates expenses incurred for the 2004/05, 2005/06, 2006/07, and 2007/08 financial years by the Ministry of Transport outside the scope of the existing appropriation International Memberships in Vote Transport.

Clause 10 validates expenses incurred for the 2007/08 financial year by the Ministry of Justice outside the scope of the existing appropriation Historical Treaty of Waitangi Settlements in Vote Treaty Negotiations.

Clause 11 validates the amount of net asset holding in 2 departments that exceeded the most recent projected balance of net assets for those departments. The relevant departments and their net asset holdings are set out in Schedule 4.