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 (the Act), 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 an existing appropriation by Parliament. Any other unappropriated expenditure must be validated by an Appropriation Act.

Confirming Public Finance (Transfers Between Outputs) Order 2013

Section 26A of the Act 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 not have been any other transfer under section 26A of the Act 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.

This Bill confirms the Public Finance (Transfers Between Outputs) Order 2013, which was made under section 26A of the Act (clause 5).

Confirming unappropriated expenditure

Section 4 of the Act prohibits the incurring of expenses or capital expenditure, except as expressly authorised by an appropriation, or other authority, by or under an Act. Sections 8 and 9 of the Act require appropriations to be limited to a specified amount and limited to the scope of the appropriation.

Section 26B of the Act 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.

This Bill confirms expenses incurred for the 2012/13 financial year with the approval of the Minister of Finance under section 26B of the Act (clause 6). Details of these confirmations are set out in Schedule 1.

Validating unappropriated expenditure

Section 26C of the Act 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 2012/13 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. These expenses and capital expenditure fall into 2 categories: those that were incurred under the authority of an Imprest Supply Act and those that were incurred without any such authority.

This Bill validates this unappropriated expenditure as follows:

• clause 7 validates expenses incurred under the authority of an Imprest Supply Act. Details of these validations are set out in Schedule 2:

• clause 8 validates expenses and capital expenditure incurred without the authority of an Imprest Supply Act. Details of these validations are set out in Schedules 3 and 4.

This Bill also validates expenses incurred for the 10 financial years from 2002/03 to 2011/12 (inclusive) by the Inland Revenue Department in respect of Vote Revenue without an appropriation (clause 9).

Validating excess net asset holding

During or at the end of the 2012/13 financial year, the net asset holding in the New Zealand Defence Force exceeded its most recent projected balance of net assets. This Bill validates that net asset holding (clause 10). Details of the validation are set out in Schedule 5.

Departmental disclosure statement

A departmental disclosure statement is not required for this Bill.

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 purpose of the Bill, which is—

• to confirm financial matters relating to the 2012/13 financial year; and

• to validate other financial matters relating to the 2012/13 financial year and previous financial years.

Clause 4 is an interpretation clause.

Clause 5 confirms the Public Finance (Transfers Between Outputs) Order 2013. That order, which came into force on 30 June 2013, directed that fiscally neutral transfers be made decreasing the amounts appropriated for 11 output expense appropriations in 4 Votes and increasing the amounts appropriated for 15 other output expense appropriations in the same 4 Votes.

Clause 6 confirms the incurring of expenses for the 2012/13 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 4 instances in 4 Votes administered by 4 departments or Offices of Parliament of approved unappropriated expenses. These are set out in Schedule 1.

Clause 7 validates expenses that were incurred by a department in the 2012/13 financial year in excess of existing appropriations. These expenses were incurred under the authority of an Imprest Supply Act. The expenses validated by this clause are set out in Schedule 2. There are 3 instances in 3 Votes administered by 3 departments.

Clause 8 validates expenses and capital expenditure that were incurred by departments in the 2012/13 financial year in excess of existing appropriations or without appropriation, or other authority, by or under an Act. These expenses or capital expenditure were not incurred under the authority of an Imprest Supply Act.

The expenses that were incurred in excess of an existing appropriation are set out in Schedule 3. There are 7 instances in 4 Votes administered by 4 departments.

The expenses and capital expenditure that were incurred without appropriation, or other authority, by or under an Act are set out in Schedule 4. There are 6 instances in 4 Votes administered by 4 departments.

Clause 9 validates expenses incurred for the 10 financial years from 2002/03 to 2011/12 (inclusive) by the Inland Revenue Department in respect of Vote Revenue without an appropriation.

Clause 10 validates the amount of net asset holdings in the New Zealand Defence Force that exceeded, at the end of the 2012/13 financial year, its most recent projected balance of net assets (as set out in Schedule 5).