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 (Administered) for AusAID, commencing 28 June 2005.
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 AusAID. 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
AusAID 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 was enacted to establish a framework for the financial management and accountability of the Commonwealth. The Act aims to ensure that public funds are used efficiently, effectively, economically and ethically, and that public money is safeguarded and accounted for properly. The Act was introduced to address the need for a comprehensive legal framework governing financial management and accountability within the Commonwealth. The instrument related to this explanatory statement was made under section 31 of the FMA Act, enabling the Minister for Finance and Administration to enter into agreements with other Ministers for the purposes of items in Appropriation Acts that are marked "net appropriation". The purpose of this instrument is to identify the types of receipts that increase an existing appropriation for AusAID, enabling the receipts to be spent by the agency. 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.
Scope and Application
The Financial Management and Accountability Act 1997, under section 31, enables the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts marked as “net appropriation.” This arrangement is specifically designed to allow departmental and, in some cases, administered appropriation items to be increased by amounts received by an agency as specified in the agreement. The instrument, which pertains to the Australian Agency for International Development (AusAID), identifies the types of receipts that increase existing appropriations for AusAID, ensuring that these receipts are available for expenditure by the agency. This legislative framework ensures that any income generated by AusAID from activities such as the sale of surplus assets can be utilised without the need for additional appropriation by Parliament, thereby facilitating more efficient financial management. The agreement, which can span any period and is not limited to a specific Appropriation Act or financial year, remains in effect until circumstances necessitate its renewal or variation by the Finance Minister. Notably, AusAID was consulted on the drafts of this instrument, which is considered internal to the machinery of government and thus exempt from broader consultation requirements.
Key Provisions
The instrument (F2005L02567) made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act) pertains to a Net Appropriation Agreement for AusAID, which commenced on 28 June 2005. This agreement allows for the appropriation items that are marked as "net appropriations" in the Appropriation Acts to be increased by specific receipts received by the agency, as outlined in the agreement. The agreement can be for any period, not necessarily tied to a particular Appropriation Act or financial year, and can be altered or cancelled by the Minister for Finance and Administration at any time without needing consent from the other party (section 31(3) and (4) of the FMA Act).
The obligations and requirements imposed by this Act on the parties involve the Finance Minister entering into agreements with other Ministers for the net appropriation items, ensuring that the specified receipts increase the existing appropriations for AusAID. The annual Appropriation Acts provide for these increases to be made, allowing the agency to spend the receipts. For instance, if AusAID sells surplus office furniture, the proceeds from the sale are available for departmental expenditure. Without the agreement, any such receipts would not be available for spending without further appropriation by Parliament.
The Act does not explicitly state any offences, penalties, or consequences for breach, as the focus is on the administrative mechanism for increasing appropriations. However, the failure to adhere to the terms of the agreement or the provisions of the FMA Act could lead to administrative and financial management issues for AusAID. It is important to note that 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, as outlined in subsections 44(2) and 54(2) of the latter Act.