EXPLANATORY STATEMENT
Financial Management and Accountability Act 1997, Section 31
Agreements for “Net Appropriations”
The instrument to which this explanatory statement relates
This explanatory statement relates to an instrument (the instrument) made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act), which is entitled Financial Management and Accountability Net Appropriation Agreement for the Department of Foreign Affairs and Trade Variation 2008, commencing upon registration on the Federal Register of Legislative Instruments (FRLI).
The legislative authority under which the instrument is made
Section 31 of the FMA Act enables the Minister for Finance and Deregulation (the Finance Minister) to enter into agreements with other Ministers for the purposes of items in Appropriation Acts that are marked “net appropriation”.
Section 31 of the FMA Act, together with certain standard provisions of the annual Appropriation Acts, (for example, section 10 of Appropriation Act (No.1) 2004-2005), allows departmental (and in select cases, administered) appropriation items to be increased by amounts received by an agency as specified in the agreement.
Subsection 31(3) of the FMA Act provides that an agreement may be for any period (that is, it need not relate to a particular Appropriation Act or Acts), including a period longer than a financial year. Generally agreements continue until circumstances require their renewal.
Subsection 31(4) of the FMA Act enables the Finance Minister to cancel or vary an agreement at any time without the consent of the other party.
Purpose and operation of the instrument
On 4 April 2008 the Department of Finance and Deregulation varied the Net Appropriation Agreement for Foreign Affairs and Trade by the Financial Management and Accountability Net Appropriation Agreement for the Department of Foreign Affairs and Trade Variation 2008. The effect of the instrument is to cover relevant receipts received by the agency on or after 16 August 2007.
The retrospective clause was included in the instrument to reflect the commencement date of the Expositions Special Account.
Prior to 1 January 2008, variations to Net Appropriation Agreements were achieved by creating new Net Appropriations Agreements for the Agency concerned. However, as of 1 January 2008 the FMA Act was amended so that no further new Net Appropriation Agreements can be made. Existing Agreements can be varied until new FMA Regulations are put in place regarding section 31. These new Regulations are expected to commence on 1 July 2008. After the new Regulations are in place, there will no longer be Net Appropriation Agreements or variations to these to be registered on FRLI.
Notes on the instrument
Specific provisions within the annual Appropriation Acts give effect to the instrument. Therefore, the instrument only has effect while the relevant specific provisions exist in the annual Appropriation Acts.
Consultation
The Department of Foreign Affairs and Trade is the agency affected by this instrument. The agency was consulted in the drafting 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).
Overview
The Financial Management and Accountability Net Appropriation Agreement for the Department of Foreign Affairs and Trade Variation 2008 is an instrument made under section 31 of the Financial Management and Accountability Act 1997. This Act was enacted to ensure that the Commonwealth's financial management and accountability framework is robust and transparent. The problem it addresses is the need for flexibility in managing the appropriation of funds to government departments, particularly in cases where departments receive additional revenue that should be reinvested into their operations. This instrument, which varies an existing agreement, aims to reflect changes in the financial arrangements of the Department of Foreign Affairs and Trade. It allows for the adjustment of appropriations to account for additional revenue received by the department, ensuring that these funds are appropriately managed within the existing legislative framework. The instrument was developed and enacted by the Minister for Finance and Deregulation, in consultation with the relevant department, to provide a seamless transition in the financial arrangements of the department as stipulated by the FMA Act.
Scope and Application
The Financial Management and Accountability Net Appropriation Agreement for the Department of Foreign Affairs and Trade Variation 2008, made under section 31 of the Financial Management and Accountability Act 1997, pertains to the Department of Foreign Affairs and Trade and concerns the agreements for “net appropriations”. These agreements enable the Minister for Finance and Deregulation to collaborate with other ministers for appropriations marked as “net appropriation” in Appropriation Acts. The agreements can cover any period, including beyond a financial year, and generally continue until circumstances necessitate their renewal. The instrument, which applies to the agency's receipts from 16 August 2007, was varied on 4 April 2008 to reflect the commencement date of the Expositions Special Account and due to legislative changes on 1 January 2008 that prohibited the creation of new Net Appropriation Agreements. The instrument's effect is contingent on the existence of specific provisions within the annual Appropriation Acts. The Department of Foreign Affairs and Trade was consulted during the drafting of this instrument, and no further consultation was deemed necessary as it pertains to internal government mechanisms.
Key Provisions
The main operative sections of the Financial Management and Accountability Net Appropriation Agreement for the Department of Foreign Affairs and Trade Variation 2008 (section 31(3)) enable the Minister for Finance and Deregulation to enter into agreements with other ministers concerning items in Appropriation Acts marked as “net appropriation.” This means that appropriation items for the Department of Foreign Affairs and Trade can be increased by amounts received by the agency as specified in the agreement. The agreement can cover any period, including longer than a financial year, and continues until circumstances require its renewal (section 31(3)). The Finance Minister has the power to cancel or vary the agreement at any time without needing consent from the other party (section 31(4)).
The Act imposes certain obligations and requirements on the parties involved. The Minister for Finance and Deregulation must ensure that the agreements are in line with the objectives of the Financial Management and Accountability Act 1997. The Department of Foreign Affairs and Trade must adhere to the terms of the agreement, ensuring that any increases in appropriation items are accurately reflected and accounted for. Additionally, any variations to the agreement must be in line with the legislative requirements, and any retrospective clauses must be justified and documented appropriately.
Breaching the terms of the agreement or failing to comply with the requirements of the Financial Management and Accountability Act 1997 can lead to various consequences. The Act does not specify particular offences, penalties, or civil/criminal consequences for breaches of the net appropriation agreements. However, failure to comply with the Act or the terms of the agreement could potentially result in financial mismanagement, which may attract penalties under other sections of the FMA Act or related legislation. Such breaches could also lead to administrative or legal actions, including investigations, audits, and potential disciplinary measures against individuals or entities involved. It is important for all parties to ensure strict adherence to the terms and requirements of the agreement to avoid any adverse consequences.