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 Net Appropriation Agreement for the Corporations and Markets Advisory Committee, commencing on the date when the agency is prescribed in Part 1 of Schedule 1 of the FMA Regulations 1997.
The legislative authority under which the instrument is made
Section 31 of the FMA Act enables the Minister for Finance and Administration (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
The instrument identifies the types of receipts which increase an existing appropriation for the Corporations and Markets Advisory Committee. The instrument is given effect by the annual appropriation Acts, which provide that the relevant departmental or administered appropriation item is increased in accordance with the agreement. This enables the receipts to be spent by the agency.
For example, where an agency sells minor assets, such as its surplus office furniture and fittings, the amounts received from the sale will be available for expenditure by that agency. Without the agreement, any amounts received by the agency would not be available to be spent by the agency, without further appropriation by Parliament.
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.
Eligible receipts covered by the instrument are set out in clause 5.1 of the instrument.
Consultation
The Corporations and Markets Advisory Committee is the agency affected by this instrument. The agency was provided with drafts of the instrument before the instrument was finalised 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).
Additional Information
Agreements made under section 31 of the FMA Act are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003: see item 19 in subsection 44(2) and item 17 in subsection 54(2) of the Legislative Instruments Act 2003.
Overview
The Financial Management and Accountability Act 1997 (FMA Act) was enacted by the Australian Parliament to ensure effective financial management and accountability within the Commonwealth. The Act was introduced to address issues related to the management of public funds and to provide a robust framework for ensuring that public money is used efficiently, effectively, and in accordance with the law. Section 31 of the FMA Act allows the Minister for Finance and Administration to enter into agreements with other Ministers for items marked as "net appropriations" in Appropriation Acts, ensuring that agencies can spend income they receive, such as from the sale of minor assets, without the need for additional parliamentary appropriation. The policy objective is to facilitate the efficient use of public funds by allowing agencies to retain and utilise income generated from their activities, thereby enhancing financial accountability and transparency.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to various agencies and their appropriation items, including the Corporations and Markets Advisory Committee. Section 31 of the FMA Act allows the Minister for Finance and Administration to enter into agreements with other ministers for items in Appropriation Acts marked as "net appropriation," which may involve increasing departmental or administered appropriation items by specified amounts received by an agency. The scope of this Act is such that agreements under section 31 are not subject to parliamentary disallowance and sunsetting provisions, and they can be for any period, including beyond a financial year. The purpose of these agreements is to ensure that certain receipts, such as those from the sale of minor assets, are available for expenditure by the affected agency without the need for further appropriation by Parliament. The Corporations and Markets Advisory Committee, as the agency affected by the agreement, was provided with drafts of the instrument before finalisation and agrees with its form. The instrument is effective only while specific provisions exist in the annual Appropriation Acts, and eligible receipts are outlined in clause 5.1 of the instrument.
Key Provisions
The main sections of the Financial Management and Accountability Act 1997 (FMA Act) relevant to this instrument are section 31, which enables the Minister for Finance and Administration to enter into agreements for “net appropriations” with other Ministers, and specific sections of the annual Appropriation Acts, such as section 10 of the Appropriation Act (No.1) 2004-2005, which allow for the increase of departmental appropriation items by specified receipts. Section 31(3) of the FMA Act allows for these agreements to cover any period, including beyond a financial year, and section 31(4) permits the Finance Minister to cancel or vary the agreement at any time without needing consent from the other party. The instrument itself identifies the types of receipts that can increase the existing appropriation for the Corporations and Markets Advisory Committee, which are then reflected in the annual Appropriation Acts.
The obligations and requirements imposed by this Act on the relevant parties include the need for the Finance Minister to enter into agreements with other Ministers for specified appropriations, ensuring that the receipts identified in the agreement are correctly applied to increase the relevant appropriation items. The annual Appropriation Acts must include specific provisions that give effect to these agreements, allowing the agency to use the increased appropriations for its intended purposes. The Corporations and Markets Advisory Committee, as the affected agency, must comply with the terms of the agreement and ensure that the receipts are properly accounted for and spent according to the agreement.
The Act does not explicitly outline specific offences, penalties, or civil/criminal consequences for breaches of the net appropriation agreements. However, any failure to comply with the terms of the agreement could potentially lead to financial mismanagement or unauthorised spending, which might be subject to internal departmental reviews or audits. Additionally, the ability of the Finance Minister to cancel or vary the agreement at any time provides a mechanism for corrective action if there are issues with the agreement’s implementation. The legislative framework ensures that these agreements are flexible and can be adjusted to meet changing circumstances while maintaining the integrity of the financial management process.