Explanatory Statement
Financial Management and Accountability Act 1997, Section 32 - Adjustment of appropriations on change of Agency functions
The instrument to which this explanatory statement relates
This explanatory statement relates to an instrument (the instrument) entitled “Direction under Section 32, Financial Management and Accountability Act 1997”, dated 20 June 2007 and numbered 15 of 2006-2007.
The legislative authority under which the instrument is made
Section 32 of the Financial Management and Accountability Act 1997 (‘the FMA Act’) applies if a function of an Agency (the old Agency) becomes a function of another Agency (the new Agency), either because the old Agency is abolished or for any other reason.
Subsection 32(2)(a) of the FMA Act enables the Finance Minister to, amongst other things, issue one or more directions to transfer from the old Agency to the new Agency some or all of an amount that has been appropriated for the performance of that function by the old Agency.
By way of an instrument dated 19 February 2003 made under section 62 of the FMA Act, the Finance Minister has delegated his power under section 32 to the Chief Executive of the Department of Finance and Administration. By way of an instrument dated 16 March 2007 made under section 53 of the FMA Act, the Chief Executive of the Department of Finance and Administration has, in turn, delegated the power to the General Manager, Financial Management Group, and the Division Manager, Financial Reporting and Cash Management Division. The direction is issued by the Acting Division Manager, Financial Reporting and Cash Management Division.
Purpose of the instrument
The instrument directs that departmental appropriation in the amount of $443,331 provided to the Department of Agriculture, Fisheries and Forestry (DAFF) in Appropriation Act (No.1) 2005-2006 be transferred to the Department of the Environment and Water Resources (DEW). The instrument also directs that administered appropriations in the amount of $2,056,833 provided to DEW in Appropriation Act (No. 1) 2006-2007 and $2,375,000 provided to DEW in
Appropriation Act (No. 2) 2006-2007 be transferred to DAFF.
Background
On 30 January 2007, changes to the Administrative Arrangements Order resulted in the transfer of water related functions from DAFF to DEW. The transfer of administered items from DEW to DAFF relates to an adjustment of administered items transferred from DAFF to DEW in accordance with instrument entitled “Direction under Section 32, Financial Management and Accountability Act 1997”, dated 27 April 2007 and numbered 14 of 2006-2007.
Notes on the instrument
The instrument provides that the amount set out in line 1 of column 4 of the table for the appropriation item in column 1 for DAFF be transferred to DEW, and that the amounts set out in lines 2 and 3 of column 4 of the table for the appropriation items in column 1 for DEW be transferred to DAFF.
In accordance with the Legislative Instruments Act 2003, DAFF and DEW were consulted in the preparation of this instrument.
Overview
The Financial Management and Accountability Act 1997 was enacted to ensure that Commonwealth entities effectively manage their financial resources and are accountable for their financial operations and decisions. The Act provides a framework for the financial management of public sector entities, including requirements for budget preparation, appropriation, and expenditure control. This legislation was introduced to address the need for improved financial management practices and accountability within the Australian public sector. The Act was enacted by the Parliament of Australia, with the policy objective of enhancing the transparency, efficiency, and effectiveness of financial management across government agencies. The Act empowers the Finance Minister to issue directions regarding the adjustment of appropriations when there are changes in the functions of agencies, as illustrated by the instrument dated 20 June 2007, which details the transfer of specific appropriations between the Department of Agriculture, Fisheries and Forestry and the Department of the Environment and Water Resources following a transfer of water-related functions.
Scope and Application
The Financial Management and Accountability Act 1997, specifically section 32, pertains to the adjustment of appropriations when there is a change in the functions of an agency. The act applies to instances where the functions of one agency are transferred to another, whether due to the abolition of the former agency or for other reasons. The legislative provision allows the Finance Minister to issue directions for the transfer of appropriated amounts from the old agency to the new agency responsible for the functions. This mechanism ensures that financial resources align with the current functional responsibilities of agencies. The authority to issue such directions has been delegated by the Finance Minister to the Chief Executive of the Department of Finance and Administration, and subsequently to the General Manager, Financial Management Group, and the Division Manager, Financial Reporting and Cash Management Division. The geographic reach of this act is national, applying across the Commonwealth of Australia. The act does not explicitly state exclusions or exemptions, but its application is contingent on the specific circumstances of agency function transfers. The act's application may be extended or further defined through subordinate instruments, as evidenced by the delegation of authority to various officials within the Department of Finance and Administration.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) includes provisions that allow for the adjustment of appropriations when there is a change in the functions of an agency. Section 32 of the FMA Act is particularly relevant in this context (s32). It outlines the process whereby appropriations can be transferred from one agency to another when functions are reassigned or an agency is abolished. Under subsection 32(2)(a) of the FMA Act, the Finance Minister has the authority to issue directions for the transfer of funds from the old agency to the new agency that now performs the functions in question. This provision ensures that financial resources follow the responsibilities they were intended to support.
The obligations under Section 32 of the FMA Act primarily rest on the Finance Minister and other delegated officials within the Department of Finance and Administration. The Minister, through a series of delegations, can issue the necessary directions to effect the transfer of appropriations (s32(2)(a)). These delegations, outlined in instruments dated 19 February 2003 and 16 March 2007, empower the Chief Executive of the Department of Finance and Administration and subsequently the General Manager, Financial Management Group, and the Division Manager, Financial Reporting and Cash Management Division, to carry out these transfers. This delegation mechanism ensures that the process is managed by officials with the requisite authority and expertise.
There are no direct offences or penalties specified for breaches of Section 32 of the FMA Act. However, the failure to appropriately adjust appropriations in line with the Act could lead to financial mismanagement or misallocation of funds, potentially resulting in legal or administrative consequences. The Act is designed to ensure financial integrity and accountability, so non-compliance could lead to investigations or other corrective actions by the relevant authorities. The emphasis is on maintaining proper financial management practices to avoid such issues.