Unappropriated Expenses and Capital Expenditure

Expenses and capital expenditure that exceed the prescribed amount, fall outside the scope of the appropriation, are not in the prescribed period or are not covered by an appropriation at all have not been authorised by Parliament and are therefore unappropriated.
Several remedies exist under the PFA 1989 for a situation of unappropriated expenditure.
Treasury releases a circular each year detailing the remedies and the deadlines that departments need to meet.
The Auditor General also exercises a controller function to monitor the compliance of departments with appropriations.

Order in C ouncil (Section 26A PFA 1989)

Ideally unappropriated expenditure should be met from existing resources within the vote.
Under section 26A of the PFA an Order in Council may transfer resources between output expense appropriations within a single vote, so long as the transfer does not increase the recipient output expense appropriation by more than 5% and the Order in Council is made prior to 30 June.
A department must still obtain authority to incur expenses in advance of the Order in Council. As the Order in Council is unlikely to be made until near the end of June departments need to seek interim authority under Imprest Supply.
Only one transfer can be made to an appropriation each year.
Transfers cannot be made from MYAs, PLAs and RDAs.

The Minister of Finance may approve expenses or capital expenditure in excess of appropriations within the following limits:
- Expenditure must be within the scope of an existing appropriation
- The expenditure in excess of the appropriation must be incurred in the last three months of the fiscal year; and
- The cumulative total of such approvals for a single appropriation may only be up to the greater of $10,000 or 2% of the appropriation.
Where possible departments should seek approval before the expenditure is incurred. If adequate justification exists it is possible to gain a retrospective approval from the Minister of Finance. This should be avoided though as the expenditure will be illegal at the time that it is incurred. If the justification is not adequate validating legislation under s 26C will be required.
Unlike an approval under section 26A this approval is only a 1 step process. Therefore Imprest Supply is not required as the Minister of Finance's approval is final.
This approval cannot apply to breaches of net asset schedules.

If a potential breach of appropriation is identified in advance and does not meet the criteria for approval under section 26A or 26B then a department should seek interim authority under Imprest Supply in advance of the expenditure being incurred.
Anticipated breaches in the following areas should seek interim authority under Imprest Supply:
- Breaches of projected net asset balances
- Expenses or capital expenditure outside the scope of an appropriation (i.e. where no appropriation exists)
- Expenses or capital expenditure in excess of the amount of an appropriation where the use of S 26A & 26B is not appropriate.
Interim authority under Imprest Supply usually requires Cabinet approval unless it falls within a delegation joint Ministers have from Cabinet.

Validating legislation is the most serious remedy for unappropriated expenditure and should be used only when none of the other options is available.
Validation gains retrospective approval for:
- Breaches of projected net asset balances
- Expenses or capital expenditure outside the scope of appropriation (i.e. where no appropriation exists)
- Expenses or capital expenditure in excess of the amount of an appropriation that is not able to be addressed through the other remedies
It is important to note that if an appropriation has been exceeded during the year (either in respect of amount or scope), and a department has subsequently sought a change in the appropriation, this change only applies for the appropriation going forward. The initial breach must be validated (usual course of action) or gain approval from the Minister of Finance under section 26B.

In addition to identification by departments of unappropriated expenditure the Auditor General exercises a controller function to ensure that appropriations are being incurred for purposes that are lawful and within the agreed scope, amount and period.
The Auditor General can direct a Minister to report to the House of Representatives if he believes that any expenditure that has been incurred is unlawful or applied for a purpose that is not within scope, amount, or period (s65Z PFA 1989).
The Auditor General can stop payments to a Crown bank account or a departmental bank account to prevent money being paid out of the account that may be applied for a purpose that is unlawful or that is inconsistent with any appropriation or other statutory authority.

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