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 2 May 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 (FMA Act) was enacted to ensure robust financial management and accountability within the Australian government. The Act addresses the need for clear guidelines and agreements on the appropriation of funds, particularly focusing on the effective use of net appropriations. The FMA Act was passed by the Australian Parliament, aiming to streamline financial processes and enhance transparency in the allocation and utilisation of government funds. This legislation allows the Minister for Finance and Administration to enter into agreements with other Ministers for specific appropriation items marked as "net appropriation" in Appropriation Acts. The Act's policy objective is to facilitate the increase of departmental appropriations by amounts received by agencies, ensuring these funds are appropriately utilised for intended purposes.
Scope and Application
The Net Appropriation Agreement (Administered) for AusAID, commencing 2 May 2005, is an instrument made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act) that applies specifically to the Australian Agency for International Development (AusAID). This instrument allows for the increase of existing appropriations for AusAID by the amounts it receives from specified transactions, such as the sale of minor assets like surplus office furniture and fittings. These increased appropriations enable AusAID to spend the received amounts without requiring further appropriation by Parliament. The agreement is not limited to a specific financial year and continues until circumstances require its renewal, with the Finance Minister having the authority to cancel or vary the agreement at any time without the consent of the other party. The instrument's provisions are given effect through specific provisions in the annual Appropriation Acts, and it only applies as long as these provisions exist. AusAID was consulted and agrees with the form of the instrument, and as it is for internal government purposes only, no further consultation was deemed necessary.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) provides a framework for the financial management of Commonwealth agencies. Section 31 of the FMA Act (section 31) empowers the Minister for Finance and Administration to enter into agreements with other Ministers concerning “net appropriations.” These agreements allow for the increase of departmental or administered appropriation items by amounts received by an agency, as specified in the agreement (section 31(1)). Such agreements do not have to be tied to a specific Appropriation Act or financial year and can continue until circumstances require their renewal (section 31(3)). Additionally, the Minister can cancel or vary these agreements at any time without the consent of the other party (section 31(4)).
Under the FMA Act, these agreements enable agencies to increase their existing appropriations by the proceeds of specified receipts. For instance, if an agency sells surplus office furniture and fittings, the proceeds can be made available for expenditure by the agency, provided that the agreement specifies these types of receipts (clause 5.1 of the instrument). Without such an agreement, any funds received by the agency from these types of sales would not be available for expenditure without further appropriation by Parliament. This legislative arrangement ensures that agencies can efficiently manage their finances and utilise available resources without additional parliamentary intervention.
The obligations imposed by the FMA Act on the parties involved include ensuring that the agreements are adhered to and that the specified receipts are accurately reported and utilised as per the agreement. The Finance Minister is obligated to enter into these agreements to facilitate the financial operations of the relevant agencies, while the agencies must comply with the terms of the agreements to ensure that the increased appropriations are used appropriately. The annual Appropriation Acts, which include specific provisions that give effect to these agreements, also play a crucial role in ensuring that the terms of the agreements are properly implemented.
Breaching the terms of these agreements could potentially lead to financial mismanagement or unauthorised expenditure, although the FMA Act does not explicitly outline specific offences, penalties, or consequences for breaches. However, the general legal and administrative consequences of not complying with legislative provisions could include investigations, audits, and potential disciplinary actions against responsible officials. The Financial Management and Accountability Act 1997, together with other relevant legislation, provides the overarching legal framework within which these agreements operate, and non-compliance could result in serious repercussions for the involved parties.