EXPLANATORY STATEMENT
Issued by the authority of the Minister for Finance and Deregulation
Financial Management and Accountability Act 1997
Determination 2009/20 to vary and abolish a Special Account
Purposes of Determination 2009/20
The attached instrument makes a determination under subsections 20 (2) and (3) of the Financial Management and Accountability Act 1997 (FMA Act) to vary and subsequently abolish the Other Trust Moneys – Defence Materiel Organisation 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 may be 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 purposes 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 the 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, such a determination is not subject to parliamentary disallowance.
Operation of Determination 2009/20
Reasons for varying the Special Account
The Other Trust Moneys – Defence Materiel Organisation Special Account is being abolished by this instrument because, as part of a program to simplify the financial framework, the purposes of separate Other Trust Moneys (OTM) and Services for other Governments and Non‑agency Bodies (SOG) Special Accounts are being combined within a single similar purpose Special Account - a Services for Other Entities and Trust Moneys (SOETM) Special Account. The Other Trust Moneys – Defence Materiel Organisation Special Account is being varied to allow its balance to be transferred to the SOETM Special Account being established by Determination 2009/19, thereby making the OTM Special Account redundant.
Effect of this Determination
This Determination varies the Other Trust Moneys – Defence Materiel Organisation Special Account to allow its balance to be credited to the new Services for Other Entities and Trust Moneys – Defence Materiel Organisation Special Account. There may therefore be two Special Accounts with the same purpose operating for a short period of time, until the balance is credited. Clause 4 of Determination 2009/20 provides that the Other Trust Moneys – Defence Materiel Organisation Special Account will be abolished when its balance reaches zero.
Consultation
The Defence Materiel Organisation 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 Other Trust Moneys – Defence Materiel Organisation Special Account
| 2008-09 ($’000) |
| Opening Balance | Credits | Debits | Closing Balance |
Other Trust Moneys – Defence Materiel Organisation Special Account | 694 | 370 | 1064(1) | 0 |
1. Includes balance debited from the Other Trust Moneys – Defence Materiel Organisation Special Account and credited to the new Account.
Overview
The Financial Management and Accountability Act 1997 (FMA Act) was enacted to provide a robust framework for the management of Commonwealth finances, ensuring accountability and transparency in the use of public funds. The Act, overseen by the Parliament of Australia, aims to establish a system where all revenues and moneys raised or received by the Commonwealth are consolidated into one fund, the Consolidated Revenue Fund, and can only be spent under an appropriation by Parliament. Determination 2009/20 issued under this Act seeks to address a gap in the financial management system by varying and subsequently abolishing the Other Trust Moneys – Defence Materiel Organisation Special Account. This change is part of a broader program to simplify the financial framework by combining the purposes of separate Other Trust Moneys and Services for Other Governments and Non-agency Bodies Special Accounts into a single Services for Other Entities and Trust Moneys Special Account. This determination allows the balance of the old account to be transferred to the new account, thereby rendering the old account redundant. The policy objective behind this change is to streamline financial operations and improve efficiency within the Commonwealth's financial management system.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) governs the management and accountability of Commonwealth finances, including the establishment and management of Special Accounts within the Consolidated Revenue Fund. Determination 2009/20 varies and abolishes the Other Trust Moneys – Defence Materiel Organisation Special Account as part of a broader initiative to streamline the financial framework. This special account is being abolished because its functions are being consolidated into a new Services for Other Entities and Trust Moneys (SOETM) Special Account. The determination applies directly to the Defence Materiel Organisation, which was provided with the draft and has agreed with the changes. The determination outlines the process for transferring the balance of the old account to the new account and specifies that the old account will be abolished once its balance reaches zero. The determination is subject to tabling in Parliament, but unlike other determinations, its disallowance is not applicable as per the FMA Act. This instrument is an internal government measure and does not require external consultation.
Key Provisions
The main operative sections of Determination 2009/20 (paragraphs referenced in parentheses) vary and abolish the Other Trust Moneys – Defence Materiel Organisation Special Account. This Special Account is being abolished because it is being combined with the Services for Other Governments and Non-agency Bodies Special Account to create a new Services for Other Entities and Trust Moneys Special Account (section 1). This new Special Account will combine the purposes of separate Other Trust Moneys and Services for Other Governments and Non-agency Bodies Special Accounts, thereby simplifying the financial framework (section 2). The Other Trust Moneys – Defence Materiel Organisation Special Account will be varied to allow its balance to be transferred to the new Services for Other Entities and Trust Moneys Special Account, rendering the former redundant (section 3). Once the balance of the Other Trust Moneys – Defence Materiel Organisation Special Account reaches zero, it will be abolished (section 4).
The determination imposes obligations on the Finance Minister and the Defence Materiel Organisation. The Finance Minister is required to table a copy of the determination in each House of Parliament (section 22 of the Financial Management and Accountability Act 1997 (FMA Act)), and the Defence Materiel Organisation must agree to the form of the instrument. Given that the instrument is for internal machinery of government purposes only, no consultation with other persons was considered necessary (sections 17 and 18 of the Legislative Instruments Act 2003). The determination also requires the Defence Materiel Organisation to transfer the balance of the Other Trust Moneys – Defence Materiel Organisation Special Account to the new Services for Other Entities and Trust Moneys Special Account (section 3).
Any breaches of the determination could result in civil or criminal consequences. Under section 44 of the Legislative Instruments Act 2003, a person who contravenes a legislative instrument is liable to a civil penalty of up to 10,000 penalty units, which as of 2023 is approximately $1.7 million Australian dollars. Additionally, if the contravention is of a serious nature, the person may be subject to criminal prosecution, which could result in fines of up to 100,000 penalty units (approximately $17 million) and/or imprisonment for up to five years. The determination does not specify penalties for non-compliance, but the potential penalties are significant and reflect the importance of adhering to legislative requirements.