EXPLANATORY STATEMENT

Issued by the authority of the Minister for Finance and Administration

Financial Management and Accountability Act 1997

Determination 2006/32 to establish a Special Account

Purposes of Determination 2006/32

The attached instrument makes a determination under subsection 20 (1) of the Financial Management and Accountability Act 1997 (FMA Act) to establish a Special Account entitled Australia-Japan Foundation Special Account.  It also specifies the nature of amounts that may be credited to, and the purposes for which amounts may be debited from, the Australia-Japan Foundation Special Account.

Special Accounts Generally

In accordance with the Constitution, all revenues or moneys raised or received by the Government of the Commonwealth form one Consolidated Revenue Fund (CRF) and may not be spent unless under an appropriation by the Parliament for the purposes of the Commonwealth.  A Special Account is established by a determination that sets out the amounts that may be credited and the purposes for which it may be debited.                   Special Accounts established by determination are supported by an appropriation under section 20 of the FMA Act.  In effect, Special Accounts allow amounts from the CRF to be spent on a purpose specified in the determination.

Determinations that establish Special Accounts, or vary determinations that establish Special Accounts, are subject to section 22 of the FMA Act. Section 22 of the FMA Act requires the Finance Minister to table a copy of the establishing or varying determination in each House of Parliament. Either House may disallow a determination within five sitting days of tabling.  If the determination is not disallowed, it comes into effect on the calendar day after the last day on which it could have been disallowed.

Regulation 10 of the Legislative Instruments Regulations 2004 preserves the disallowance provisions under section 22 of the FMA Act by exempting Special Account determinations from subsections 57(2) and 57(5) of the Legislative Instruments Act 2003.

Special Accounts can be abolished by a determination of the Finance Minister.  However, there is no requirement to table such a determination.

Operation of Determination 2006/32

Purpose of the Australia-Japan Foundation Special Account

The determination is required in order to provide for the continuing activities of the Australia-Japan Foundation (the Foundation), once its enabling legislation, the Australia-Japan Foundation Act 1976, has been repealed.  The purpose of the Foundation is to assist in furthering Australia’s foreign and trade policy objectives with Japan; to promote broad-based community links and strengthen people-to-people contacts between the two countries; to assist in advancing cultural awareness and understanding between Australia and Japan; and to undertake other initiatives that contribute to strengthening Australia-Japan relations. 

The Agency responsible for providing secretariat services to the Foundation will use the Special Account to administer the financial transactions of the Foundation.

Reasons for establishing a new Special Account

The Australia-Japan Foundation Special Account is required to replace the existing Australia-Japan Foundation Account, established under the Australia-Japan Foundation Act 1976, once that Act has been repealed.  The Australia-Japan Foundation (Repeal and Transitional Provisions) Bill 2006 was introduced in the House of Representatives on 10 May 2006 and is expected to be passed in the Spring sitting of Parliament.  Abolition of the Foundation’s enabling legislation will allow the Foundation to be reformed as a non-statutory, unincorporated bilateral foundation within the Department of Foreign Affairs and Trade.

In 2002, the Government appointed Mr John Uhrig AC to conduct a review of the corporate governance of Commonwealth statutory authorities and to develop a template of governance principles aimed at improving the performance of statutory authorities and their accountability frameworks. An assessment of the Foundation based on this template of governance principles recommended that the Foundation be reformed as outlined above.  A new Special Account established under section 20 of the FMA Act will ensure continued transparency for the Foundation’s programme activities.

The purposes of the Special Account are consistent with Special Account determinations for other bilateral foundations, councils and institutes administered by the responsible agency.

Clause 5(1) specifies the purposes for which a Special Account can be debited.

• Paragraphs 5(1)(a), (b), (c), and (d) describe the primary purposes for which expenditure can be made from the Special Account.
• Paragraph 5(1)(e) allows incidental costs, including such items as auditing, reporting, budgeting, accounting and information technology services incurred in the course of operating the Special Account, to be debited from the Special Account.
• Paragraph 5(1)(f) allows the balance of the Special Account to be reduced without a notional or real payment occurring.
• Paragraph 5(1)(g) allows the Special Account to be debited, in a manner that would otherwise be permitted by section 28 of the FMA Act. It is included to simplify accounting for these transactions.

Consultation

The Department of Foreign Affairs and Trade is the agency affected by this instrument.  The agency was provided with drafts of the instrument and agrees with the form of the instrument.  As the instrument is for internal machinery of government purposes only, no consultation was considered necessary with other persons (see sections 17 and 18 of the Legislative Instruments Act 2003).

Estimates of transactions on the Australia-Japan Foundation Special Account