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 (Departmental) 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 ensure proper management of public funds and accountability in government financial operations. One of its key provisions is section 31, which allows the Minister for Finance and Administration to enter into agreements with other Ministers for appropriations marked as “net appropriations.” This mechanism enables departmental appropriation items to be increased by specific amounts received by an agency, as specified in the agreement. The purpose of this legislative tool is to ensure that funds received by agencies, such as proceeds from the sale of minor assets, are available for expenditure by those agencies without the need for further appropriation by Parliament. This legislative instrument, known as the Net Appropriation Agreement (Departmental) for AusAID, commenced on 28 June 2005 and provides a framework for such agreements, allowing for flexibility in the management of departmental appropriations.
Scope and Application
The Net Appropriation Agreement (Departmental) for AusAID, which was established under section 31 of the Financial Management and Accountability Act 1997 (FMA Act), applies specifically to the Australian Agency for International Development (AusAID) and governs how certain receipts can be treated as net appropriations. This agreement facilitates the increase of existing appropriations for AusAID by the amounts received from specified activities, such as the sale of minor assets like surplus office furniture and fittings, ensuring these funds are available for departmental expenditure. The agreement is effective as long as the corresponding provisions exist within the annual Appropriation Acts and can be for any period, including longer than a financial year, until circumstances require renewal or amendment. The Minister for Finance and Administration has the authority to cancel or vary these agreements at any time without requiring consent from the other party. Notably, this agreement is confined to internal machinery of government purposes, and no broader consultation was deemed necessary beyond providing AusAID with drafts of the instrument prior to finalisation. Additionally, agreements made under this section of the FMA Act are exempt from parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) allows the Minister for Finance and Administration to enter into agreements with other ministers concerning items in Appropriation Acts marked as "net appropriation". These agreements, known as Net Appropriation Agreements (Departmental), are designed to permit the increase of existing departmental appropriation items by the amounts received by the agency as specified in the agreement. Such agreements can be made for any period and can extend beyond a financial year (Section 31(3) FMA Act). Importantly, Subsection 31(4) grants the Minister for Finance and Administration the authority to cancel or vary these agreements at any time without needing the consent of the other party. The agreement for AusAID, which came into effect on 28 June 2005, specifies the types of receipts that will increase the existing appropriation for AusAID.
The obligations imposed by the agreement require AusAID to report and manage its financial activities in line with the terms of the agreement. This includes accurately reporting receipts from specified activities, such as the sale of minor assets like surplus office furniture and fittings, and ensuring that these receipts are available for expenditure by AusAID. The agreement is intended to streamline financial management by avoiding the need for additional appropriation by Parliament for certain types of receipts. AusAID must adhere to the terms of the agreement to maintain the validity and effectiveness of the financial arrangements outlined.
The FMA Act does not detail specific offences, penalties, or consequences for breaches of the Net Appropriation Agreement for AusAID. However, general provisions within the FMA Act and other related financial management legislation could apply to breaches of financial agreements. These might include administrative penalties, financial recovery actions, or other corrective measures to ensure compliance. The lack of explicit penalties in the explanatory statement suggests that adherence to the agreement is expected to be managed through internal financial controls and oversight mechanisms.