Direction under section 32, Financial Management and Accountability Act 1997 – Adjustments of Appropriations on Change of Agency Functions (No. 8 of 2006-2007)

Overview

The Financial Management and Accountability Act 1997 (FMA Act) was enacted to provide a framework for the financial management of Commonwealth agencies, ensuring accountability and transparency in the allocation and use of public funds. The Act, established by the Parliament of Australia, aims to maintain the integrity of financial management within government agencies. Section 32 of the FMA Act addresses the issue of appropriations when agency functions are transferred or altered. This provision allows the Finance Minister to issue directions for the transfer of appropriated funds from one agency to another, ensuring that financial resources follow the functions they are intended to support. This legislative mechanism was introduced to prevent financial mismanagement and ensure that funds are appropriately allocated to the agencies responsible for specific functions. In the context of the instrument dated 23 October 2006, the direction under Section 32 facilitates the transfer of $4,746,860 from the Department of Health and Ageing to the National Health and Medical Research Council, following the latter's establishment and the transfer of relevant functions.

Scope and Application

The instrument, dated 23 October 2006 and numbered 8 of 2006-2007, pertains to the Financial Management and Accountability Act 1997, specifically Section 32, which applies when a function of an agency is transferred to another agency, either due to the abolition of the original agency or for other reasons. The purpose of this instrument is to facilitate the transfer of an appropriation amounting to $4,746,860 from the Department of Health and Ageing (DHA) to the National Health and Medical Research Council (NHMRC), as necessitated by the establishment of NHMRC as a prescribed agency under the FMA Act on 1 July 2006. This transfer ensures that the appropriation provided to DHA for these functions is appropriately reallocated to NHMRC. The instrument is issued under the authority delegated by the Finance Minister to the General Manager, Financial Management Group, and the Division Manager, Financial Reporting and Cash Management Division, following the chain of delegation set out in instruments dated 19 February 2003 and 3 April 2006. This process is compliant with the requirements of the Legislative Instruments Act 2003, which mandates consultation with NHMRC in the preparation of this instrument.

Key Provisions

Section 32 of the Financial Management and Accountability Act 1997 (FMA Act) provides provisions for the adjustment of appropriations when a function of an Agency (referred to as the old Agency) becomes a function of another Agency (referred to as the new Agency). This change can occur due to the abolition of the old Agency or for other reasons. Specifically, subsection 32(2)(a) of the FMA Act enables the Finance Minister to issue directions to transfer some or all of the appropriated amount for the performance of the function from the old Agency to the new Agency. The instrument dated 23 October 2006 and numbered 8 of 2006-2007, titled "Direction under Section 32, Financial Management and Accountability Act 1997", directs that a departmental appropriation of $4,746,860 provided to the Department of Health and Ageing (DHA) in the Appropriation Act (No.1) 2004-2005 be transferred to the National Health and Medical Research Council (NHMRC). This adjustment is necessary to ensure that the appropriation for the functions that were previously performed by the DHA is now allocated to the NHMRC. The obligations imposed by the Act on the parties involved are primarily concerned with the transparent and efficient transfer of appropriations between Agencies. The Finance Minister, or a delegate such as the Chief Executive of the Department of Finance and Administration, must issue a direction for the transfer of appropriations when there is a change in the functions of an Agency. This direction must be clear, specifying the amount to be transferred and the Agencies involved. The old Agency is required to comply with the direction by transferring the specified appropriations to the new Agency. The new Agency must be prepared to receive the appropriations and ensure that they are used for the functions now being performed by the new Agency. The NHMRC, in this case, must be ready to receive and manage the transferred appropriations in accordance with its new functions. In terms of consequences for breach, the FMA Act does not explicitly outline specific offences, penalties, or civil/criminal consequences for failing to comply with the direction issued under Section 32. However, non-compliance with the Act’s provisions or ministerial directions generally may lead to administrative or legal actions, including potential financial penalties or sanctions. The Act’s broader framework emphasizes accountability and compliance, and failure to adhere to the provisions could result in scrutiny from relevant oversight bodies, financial audits, or legal proceedings to enforce compliance and recover any misappropriated funds. The precise penalties would depend on the context and severity of the breach, as well as other relevant legislation.