Direction under section 32, Financial Management and Accountability Act 1997 – Adjustments of Appropriations on Change of Agency Functions (No. 3 of 2006-2007)

Overview

The Financial Management and Accountability Act 1997 (FMA Act) was enacted to address the need for clear, accountable, and transparent financial management across Australian government agencies. The Act provides mechanisms for the efficient and effective use of public funds, including the reallocation of appropriations when there are changes in agency functions. The FMA Act is overseen by the Australian Parliament and its purpose is to ensure that public funds are used for their intended purposes and that government agencies are held accountable for their financial management. On 1 July 2006, the NHMRC was established as a prescribed agency under the FMA Act, resulting in a transfer of functions from the Department of Health and Ageing (DHA) to the NHMRC. To address this change, a direction was issued under section 32 of the FMA Act to transfer departmental and administered appropriations from the DHA to the NHMRC. This adjustment ensures that funding for the transferred functions is appropriately allocated to the NHMRC.

Scope and Application

The Financial Management and Accountability Act 1997 (FMA Act) applies to various agencies within the Commonwealth of Australia, specifically addressing the financial management and appropriation adjustments when there are changes in agency functions. Section 32 of the Act provides for the adjustment of appropriations when a function of one agency becomes a function of another agency, either due to the abolition of the former or for other reasons. This includes the transfer of funds from the old agency to the new agency responsible for the function. The Act allows the Finance Minister to issue directions for such transfers, a power which has been delegated to the Chief Executive of the Department of Finance and Administration and further to the General Manager, Financial Management Group, and the Division Manager, Financial Reporting and Cash Management Division. This legislative mechanism ensures the smooth transition of financial responsibilities and resources between agencies. The geographic reach of this Act is national, as it pertains to federal agencies within Australia. The Act does not specify exclusions or thresholds but allows for detailed adjustments through subordinate instruments, facilitating flexibility in financial management as agency functions evolve.

Key Provisions

Section 32 of the Financial Management and Accountability Act 1997 provides a mechanism for the adjustment of appropriations when the functions of an agency are transferred to another agency. Specifically, subsection 32(2)(a) empowers the Finance Minister to issue directions to transfer appropriations from the old agency to the new agency when a function is reassigned. This was exercised in the context of a Direction issued on 1 July 2006, which transferred departmental appropriation totalling $19,300,000 and administered appropriation of $638,476,000 from the Department of Health and Ageing (DHA) to the National Health and Medical Research Council (NHMRC). This adjustment was necessary because, on 1 July 2006, the NHMRC became a prescribed agency under the FMA Act and assumed the functions previously performed by the DHA. The obligations imposed by this Act on the relevant parties include the requirement for the Finance Minister to issue the necessary directions for the transfer of appropriations, as outlined in section 32. The delegation of this authority 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, ensures that the process is managed by appropriately authorised individuals. The instrument itself directs the specific appropriation transfers, ensuring clarity and accountability in the transition of financial responsibilities from the DHA to the NHMRC. Failure to comply with the provisions of the FMA Act, including the directions issued under section 32, could result in legal and financial repercussions. While the explanatory statement does not specify particular offences, penalties, or consequences for non-compliance, the seriousness of the Act suggests potential civil or criminal liabilities for those who fail to adhere to its requirements. The maximum penalties for breaches of financial management legislation can be substantial, including fines and imprisonment, depending on the severity and intent behind the breach. The precise penalties would be determined in the context of any legal proceedings arising from a failure to comply with the Act's provisions.