Home >> Budget >> Budget Process >> Advance to Finance Minister (AFM)

Advance to the Finance Minister (AFM)

What is an Advance to the Finance Minister?

The Advance to the Finance Minister (AFM) is a provision in the annual Appropriation Acts which enables the Minister for Finance and Deregulation (Finance Minister) to provide additional appropriation funding to agencies in the current year in which the AFM is issued. The Finance Minister will only consider issuing an AFM if satisfied that there is an urgent need for expenditure that is either not provided for or has been insufficiently provided for in the existing appropriations of the agency.

Before the Finance Minister can consider making additional funding available to a requesting agency under the AFM mechanism, the Finance Minister must be satisfied that the legislative criteria set out in the annual Appropriation Acts are met. The legislative criteria, set out in the annual Appropriation Acts, are generally worded along the following lines:

1. Amounts can be issued under the AFM if the Finance Minister is satisfied that:
   1. there is an urgent need for expenditure, in the current year, that is not provided for, or is insufficiently provided for, in the Schedules; and
   2. the additional expenditure is not provided for, or is insufficiently provided for, in the Schedules:
      1. because of an erroneous omission or understatement; or
      2. because the additional expenditure was unforeseen until after the last day on which it was practicable to provide for it in the Appropriation Bills before those Bills were introduced into the House of Representatives.
2. The Appropriation Acts have effect as if the Schedules were amended, in accordance with a determination of the Finance Minister, to make provision for so much (if any) of the additional expenditure as the Finance Minister determines.
3. The total of the amounts determined under subsection (2) for Appropriation Acts No. 1, 3 and 5 cannot be more than $175 million. The total of the amounts determined under subsection (2) for Appropriation Acts No. 2, 4 and 6 cannot be more than $215 million.

Analysis of the Legislative Criteria

As outlined above, the Finance Minister will only consider issuing an AFM if the below conditions are met to the Finance Minister's satisfaction:

1. There is an urgent need for expenditure in the current year; and
2. The additional expenditure is not provided for, or is insufficiently provided for in the Schedules to the Appropriation Acts
   1. because of an erroneous omission or understatement; or
   2. because the additional expenditure was unforeseen.

An analysis of each of these criteria is provided below.

1. Urgent need for expenditure

In this context, "urgent" is not a legal specific term. In interpreting whether additional expenditure is urgent one can apply ordinary English usage to the term. Generally, for there to be an urgent need for expenditure in the current year, an agency must have exhausted, or be close to exhausting, all available appropriation under the relevant item.

• "Urgent need" in this context means the expenditure requires immediate actioning and is unable to be delayed until the passing of the next annual Appropriation Bills.
• "Expenditure" refers to cash payments.
• "Current year" refers to the financial year ending on 30 June as defined in the relevant Appropriation Act.
• "Close to exhausting" in this context means that an agency expects to exhaust its available appropriation within two weeks.
• "Available appropriation" in this context means:
  • amounts available from the relevant annual Appropriation Acts for the item. This includes amounts that have been quarantined within the Appropriations and Cash Management (ACM) module of the Central Budget Management System (CBMS), such as declared savings, movement of administered funds into later years and previous issues made from the AFM in the current financial year;
  • unused relevant previous years' appropriations including section 8 retentions;
  • section 31 and Comcover receipts where relevant; and
  • relevant appropriations transferred via section 32 of the Financial Management and Accountability Act 1997 (FMA Act) following a transfer of function.
• "Relevant item" in this context means:
  • Departmental items are appropriated as a single amount for each agency, with splits across agency outcomes being notional only; and
  • Administered items are appropriated separately for each agency outcome, specifying how much can be spent for the purpose of each outcome.

An AFM will only be considered for urgent expenditure required before the passing of an additional/new Appropriation Bill. An AFM will not be issued for amounts that have been accrued and require payment at a later point in time when there will be sufficient appropriation available.

Some examples of where an urgent need for expenditure could be demonstrated include:

• insufficient appropriations are available to make grant payments or settle accounts that are either on hand or expected to be received (taking into account due dates for payment); and
• insufficient appropriations are available to enable the payment of salaries/wages.

ACM can be used to verify the amount of appropriation available and should be used by agencies to confirm the balance of unspent appropriations prior to submitting an application for an AFM.

2. Additional expenditure

Additional expenditure can be separated into two different categories; either expenditure that is ‘not provided for' or expenditure that is ‘insufficiently provided for'. When requesting the Finance Minister to consider a request for an AFM, agencies must be able to explain why the expenditure they believe is required in the current year was either not provided for, or was insufficiently provided for. The legislative provision for the AFM provides the criteria that the requesting agency must address in their application.

2.1 Not provided for

The phrase ‘not provided for' as distinct from ‘insufficiently provided for' clearly contemplates the possibility of a new type of expenditure to be made, which was not contemplated at the time that the Appropriation Bill was introduced to Parliament.

2.2 Insufficiently provided for

The phrase ‘insufficiently provided for', in distinction to the phrase ‘not provided for', clearly contemplates that an existing appropriation amount for a particular expenditure exists but that the amount is insufficient.

2.3 Reasons why additional expenditure was either ‘not provided for' or was ‘insufficiently provided for'

a. Erroneous omission or Understatement

(i) Erroneous omission: as the term suggests this criterion covers situations where amounts have been omitted in error. Generally, but not necessarily exclusively, this term would apply in situations where appropriation funding has not been provided for.

Some examples are where:

• an error was made when calculating a figure to be included in the relevant Appropriation Bill;
• an agency was aware of a particular payment or payments but failed to provide for it in the relevant Appropriation Bill.

(ii) Understatement: this term may be considered in situations where appropriation funding may have been provided for a purpose but is insufficient in amount to meet the expenditure required for that purpose in the current year. Generally, but not necessarily exclusively, this would apply where appropriation funding is insufficiently provided for.

Another type of situation which can result in an understatement of the appropriation required comes through the amount of a payment.  When the agency knows that some expenditure will be required for a particular purpose, but is unable to estimate with any degree of accuracy how much it will be, resulting in insufficient or no provision being made for it in the Appropriation Bills.

An example can be:

• where the expenditure is triggered or otherwise influenced by a factor that is beyond the agency's control (e.g. the happening of an event, the criteria for payments being met or supplier pricing decisions) and where the amount of expenditure cannot reasonably be predicted in such a situation, an understatement may be said to have occurred.

b. Unforeseen

Appropriations for expenditure may not have been provided for or insufficiently provided for because the need for it was unforeseen.

The legislative provision makes it clear that for the proposed expenditure to be described as ‘unforeseen' it is expenditure that was not within the contemplation of the Executive when the Appropriation Bills were introduced to Parliament. Therefore the expenditure was either not provided for at all in the Appropriation Bills, or was insufficiently provided for in the Appropriation Bills simply because the expenditure was unknown at the time of the introduction of the Appropriation Bills to Parliament. Unforeseen should be seen in distinction to erroneous omission, which clearly implies the existence of error, and understatement which clearly implies a knowledge that some expenditure was known to be required but the provision of funding was at an amount insufficient to the actual amount required.

Some examples are where:

• there have been unforeseen price/cost increases after the finalisation of the relevant Appropriation Bill (for overseas payments, this would include cost increases due to unfavourable movements in the exchange rate); and
• there are unexpected high levels of activity in a demand driven program.

Additional applications of the unforeseen criterion can relate to the timing of a payment. For example:

• where considerable uncertainty exists about whether a payment will be required within the current financial year or will even need to be made at all.
• If expenditure was expected to take place in the following financial year, but is then required in the current financial year after it is too late for it to be included in the Appropriation Bills.

Where expenditure has been excluded from an Appropriation Bill because it lacked the necessary formal authority before the cut-off date (e.g. the Government had not taken a decision on the expenditure), and that formal authority is subsequently conferred, this would, generally, be considered to satisfy the ‘unforeseen' criterion.

Agencies must be able to explain why the additional expenditure was not provided for in the Schedules to the Appropriation Acts. Possible reasons might be, for example, there has been an erroneous omission or understatement in the estimates used as the basis for the Appropriation Bills, or the need for the expenditure was unforeseen at the time the Appropriation Bills were introduced to Parliament. If the AFM required for additional expenditure is due to one or more of these reasons, agencies must separately identify the financial ramifications of each to provide sufficient information to the Finance Minister to make a decision.

The Finance Minister's Exclusive Power and the Ultimate Discretion of the Finance Minister

The issuing of an AFM is the exclusive legal power of the Finance Minister. Before the Finance Minister can consider issuing an AFM the Finance Minister must be satisfied that the legislative criteria for the issuing of an AFM have been met. It is the requesting agency's responsibility to frame its request to the Finance Minister for an AFM such that the request addresses the legislative criteria to enable the Finance Minister to make a decision.

Even where the Finance Minister considers that a request from an agency meets the criteria the Finance Minister retains discretion as to the additional amount – if any – that the Finance Minister will issue.

Agency Role

When should an AFM be sought?

Agencies should only apply for an AFM when the legislative criteria can be satisfied. However, agencies should advise their Department of Finance and Deregulation (Finance) Agency Advice Unit (AAU) as early as possible if an application for an AFM appears likely. The AAU should, in turn, provide this information, including details of the amount of the AFM that may be required and the relevant Act, to the Appropriations Management Team (AMT), Cash Management Branch. This will enable AMT to monitor potential calls on the AFM, and, if necessary, request the Finance Minister to prioritise competing demands.

Agencies should ensure that any amounts quarantined within ACM, such as for declared savings or the movement of administered funds, are reinstated to allow access to these amounts. Only after all available appropriation amounts have been exhausted, or close to exhausted, should an application for an AFM be lodged.

Once an agency has confirmed that an AFM is required and that the legislative criteria can be satisfied, they should liaise with their AAU in the first instance to discuss the application. Agencies are encouraged to submit draft letters to AMT via their AAU as soon as it is known that an AFM will be required. Incomplete or inaccurate applications could delay the process of having the application considered by the Finance Minister.

Addressing the legislative criteria

The agency's explanation of their AFM requirements should specifically and separately address the relevant legislative criteria in such a way that the explanations stand alone without reference to other documents and with no assumption of knowledge. The agency should ensure the application is error free as it will be included as part of the Explanatory Statement, which will be lodged with the Determination on the Federal Register of Legislative Instruments. In addition, agencies should not include any reference to a Cabinet decision number or any other confidential information, and instead should provide such information separately.

When addressing the urgent criterion, the agency should consider the reasons why payment is required as soon as practical, e.g. government policy, contract obligations. Agencies do not necessarily have to assess the financial position of the intended recipient of the payment when considering if the expenditure is urgent.

When an AFM request for additional appropriation under an Appropriation Act results from several unforeseen factors, each factor should be separately identified and quantified as specific dollar amounts (e.g. it is not sufficient to refer to an unforeseen 4 percent increase in interest charges).

Generally speaking, an AFM will only be issued to meet accounts at hand. However, if an agency is close to exhausting its available appropriations and has a need to make a series of small payments over an extended period before appropriation from the next set of Appropriation Acts is made available, an application can be made for a single AFM covering the amount of the remaining program payments. Future needs will only be considered if the agency can quantify their requirements in excess of the immediate ones (e.g. future payments to be made under an agreed schedule) and such estimates must take into account any other anticipated sources of appropriations within the projected time frame (e.g. s31 receipts).

Where should applications be sent?

Agencies are required to fill out the Application for AFM form [ 54 KB], which specifically addresses the legislative criteria, and have it signed by the Chief Financial Officer to confirm the accuracy of the application. Agencies should submit the completed application to their Finance AAU for consideration.

Finance AAU Role

Vetting AFM applications

AAUs are responsible for determining whether there is a need for AFM through consultation with the agency and with AMT, if required. In particular the AAU will need to determine whether the agency's cash situation warrants them seeking an AFM, and whether or not they are able to meet the legislative criteria. Where the AAU determines that it is appropriate for the agency to seek an AFM, the AAU is then responsible for checking the agency's application to confirm the accuracy of the information provided, ensure that sufficient detail and justification have been included and assess their compliance with the legislative criteria. A checklist (AAU Checklist [ 96 KB]) has been prepared to assist AAUs with their role in assessing AFM applications. AAUs are to complete this checklist and submit it along with the AFM application to AMT for consideration. If an agency's request for an AFM is approved by the Finance Minister, agency spending against the AFM should be monitored to ensure consistency with the intentions outlined in the application.

Finance AMT Role

Actioning of AFM requests

On receiving the Application for AFM [ 54 KB] form and AAU Checklist [ 96 KB] from the AAU, AMT will check the application to confirm that it contains sufficient information addressing the legislative criteria and that the formatting is correct.

AMT will, if satisfied, prepare the Determination and accompanying documentation for consideration by the Finance Minister.

Once the Finance Minister has approved the application, AMT will request a budget for that amount be entered into the ACM module of CBMS to enable the agency to access the appropriation and will advise the agency and AAU once completed.

Appropriation is issued on approval

Agencies need to be aware that expenditure in excess of appropriation is a breach of section 83 of the Australian Constitution and raises accounts and records issues under the FMA Act. Accordingly, as the issue of AFMs is governed by legislation and there is no guarantee that a particular application will be approved, access to appropriation will not be provided in advance of finalisation of the approval process.

Surplus AFM amounts

If an agency finds it has AFM amounts surplus to requirements, they must advise their AAU which will request that the OPA Administration Team quarantine the surplus amounts in ACM. If the surplus amounts have been drawn down, the agency must return them to the Official Public Account (OPA), making sure they identify them as ‘AFM reclaimed' in the title of the journal.

If it is nearing the end of the financial year and an agency is still holding unspent departmental AFM amounts, they must be returned to the OPA prior to 30 June, as generally, AFM amounts are provided to be spent in the financial year in which the determination was made.

Administered amounts no longer required may be quarantined within ACM to prevent the drawdown of these appropriations. The annual Appropriation Acts provide a mechanism whereby the Finance Minister, having regard to the expenses incurred by an agency in a financial year, may limit the amount of administered operating appropriation specified in the appropriation act. The Finance Minister performs this legislative requirement by issuing a determination on an annual basis and is commonly referred to as the section 8 process.

Categories of AFM

There are two categories of AFM:

• Issues made before the finalisation of the Additional Estimates Appropriation Bills and the Supplementary Additional Estimates Appropriation Bills; and
• Issues made after the Supplementary Additional Estimates Appropriation Bills which remain as a final charge to the AFM.

Issues made before the finalisation of the Additional Estimates Appropriation Bills and the Supplementary Additional Estimates Appropriation Bills are recovered from agencies through the additional appropriation provided in these Acts, thus replenishing the amount that may be issued under the AFM provision.

Issues made after the Supplementary Additional Estimates Appropriation Bills cannot be recovered and are therefore a ‘final charge' against the AFM. These issues are documented in an annual report, which is tabled in Parliament as discussed below.

Reporting Requirements

Annual Tabling of Issues from the AFM as a Final Charge

Each year the Finance Minister tables in Parliament a report entitled ‘Issues from the Advance to the Finance Minister as a Final Charge'. This report discloses amounts issued from the AFM that remained as a final charge to the AFM and related expenditure against each item as at 30 June.

When the document is tabled in the Senate, it is normal practice for it to be referred to the relevant Senate Standing Committee for consideration. Following the conclusion of the Committee's deliberations, the ‘Committee of the Whole' meets to consider adoption of the document.

Registration of AFMs on the Federal Register of Legislative Instruments

Issues from the AFM are classified as legislative instruments and are required to be registered in accordance with the Legislative Instruments Act 2003. Legislative instruments are publicly available from the Federal Register of Legislative Instruments [].

Further Information

Agencies seeking further information should contact their AAU in the first instance or send an email to AMTMail@finance.gov.au.

Attachments

• Application for AFM [ 54 KB]
• AAU Checklist [ 96 KB]

---

Contact for information on this page: AMTMail@finance.gov.au

---

Back to top