Direction under section 32, Financial Management and Accountability Act 1997 - Adjustments of Appropriations on Change of Agency Functions (No. 13 of 2006-2007)

Overview

The Financial Management and Accountability Act 1997 (FMA Act) was enacted to provide a framework for financial management, accountability and reporting by Commonwealth entities. The problem it aimed to address was the need for a comprehensive and consistent approach to managing public funds across government agencies, ensuring transparency, efficiency and effectiveness. The FMA Act was introduced by the Australian Parliament and seeks to establish clear policy objectives around fiscal responsibility, governance and stewardship of public resources. In 2007, a Direction under Section 32 of the FMA Act was issued to facilitate the transfer of appropriations when the functions of an agency change, such as when the Business Cost Calculator function was moved from the Department of Industry, Tourism and Resources to the Productivity Commission. This instrument underscores the importance of adjusting appropriations to reflect changes in agency functions, ensuring that resources are allocated in line with the current operational needs of government entities.

Scope and Application

The Financial Management and Accountability Act 1997 applies to any Agency, which can include government departments and public sector bodies, where there is a change in the functions performed by an Agency. This may occur due to the abolition of the old Agency or for other reasons. The Act facilitates the transfer of appropriations and financial responsibilities from the old Agency to the new Agency responsible for the same function. The legislation is applicable across the Commonwealth of Australia and governs the financial management and accountability of federal government agencies. The Act may be extended or restricted through subordinate instruments, which can include specific delegations of authority made by the Finance Minister or other officials to manage the financial transfers. The Act does not specify exclusions or exemptions but rather provides a framework for the orderly transfer of financial responsibilities when there is a change in agency functions. This ensures that financial resources are appropriately allocated to continue the functions seamlessly without any lapses in service or accountability.

Key Provisions

Section 32 of the Financial Management and Accountability Act 1997 (FMA Act) deals with the adjustment of appropriations when a function of an agency changes to another agency. Specifically, subsection 32(2)(a) allows the Finance Minister to issue directions to transfer appropriations from the old agency to the new agency if the old agency is abolished or for any other reason. This is operationalised through the issuance of instruments under section 62 of the FMA Act. In this case, the Finance Minister has delegated the power to the Chief Executive of the Department of Finance and Administration, who in turn has delegated the power to the General Manager, Financial Management Group, and the Division Manager, Financial Reporting and Cash Management Division. The Acting Division Manager, Financial Reporting and Cash Management Division, issued the direction to transfer a specific appropriation from the Department of Industry, Tourism and Resources (DITR) to the Productivity Commission. The obligations imposed by the Act on the relevant parties include ensuring that the transfer of appropriations is managed efficiently and accurately. This involves the Finance Minister or their delegates making informed decisions based on the changes in agency functions. The Chief Executive of the Department of Finance and Administration and the General Manager, Financial Management Group, must exercise their delegated powers in accordance with the legislative requirements, ensuring that any transfers are properly authorised and documented. The Acting Division Manager, Financial Reporting and Cash Management Division, is responsible for issuing the direction that specifies the amount and details of the appropriation transfer. The consequences of non-compliance with the Act's requirements can be severe. While the explanatory statement does not specify penalties for breaches, the FMA Act generally allows for enforcement actions such as fines or other penalties as prescribed by the relevant legislation. In the context of financial management, failure to properly adjust and transfer appropriations could lead to financial mismanagement and potential legal consequences for the involved parties. The Act mandates that all actions must be taken in accordance with the legislative instruments, which include ensuring that the Department of Industry, Tourism and Resources and the Productivity Commission are consulted during the preparation of the instrument.