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 Insolvency and Trustee Service Australia, commencing 29 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 the Insolvency and Trustee Service Australia. 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 Insolvency and Trustee Service Australia 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 provide a robust framework for the management of public money and to ensure accountability in the use of public funds. One of the specific issues the Act was designed to address is the need for flexibility in the use of appropriations, particularly in cases where agencies receive additional revenue that can be used to augment their existing appropriations. The Act empowers the Minister for Finance and Administration to enter into agreements with other Ministers, allowing for the increase of departmental appropriations by amounts received by an agency, such as proceeds from the sale of surplus assets. This legislative tool is intended to enhance the efficiency of financial management within government agencies, ensuring that additional revenues can be utilised without the need for further appropriation by Parliament. The policy objective, as outlined in the explanatory statement, is to streamline the process of increasing departmental appropriations and to facilitate better financial management and accountability within the public sector.
Scope and Application
The instrument to which this explanatory statement relates is an agreement made under section 31 of the Financial Management and Accountability Act 1997, specifically concerning net appropriations for the Insolvency and Trustee Service Australia, commencing 29 June 2005. This agreement allows for the increase of departmental appropriation items by amounts received by the agency, as specified within the agreement. The Minister for Finance and Administration has the authority to enter into such agreements with other Ministers for items marked as "net appropriation" in Appropriation Acts. These agreements are not confined to a specific financial year and may be varied or cancelled by the Minister at any time without the consent of the other party. The instrument identifies the types of receipts that increase existing appropriations, enabling the agency to spend the received amounts without further appropriation by Parliament. The Insolvency and Trustee Service Australia was provided with drafts of the instrument and agrees with its form. Given that the instrument pertains to internal machinery of government purposes, no external consultation was deemed necessary. It is important to note that agreements made under section 31 of the FMA Act are exempt from the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
The instrument under consideration is a Net Appropriation Agreement (Departmental) for Insolvency and Trustee Service Australia, which came into effect on 29 June 2005. This agreement is made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act). Section 31 of the FMA Act empowers the Minister for Finance and Administration to enter into agreements with other ministers for items in Appropriation Acts that are marked "net appropriation." These agreements allow for the increase of departmental or administered appropriation items by amounts received by an agency as specified in the agreement. Notably, section 31(3) of the FMA Act allows these agreements to be for any period, including periods longer than a financial year, and section 31(4) permits the Finance Minister to cancel or vary the agreement at any time without the consent of the other party.
The obligations imposed by this instrument on the Insolvency and Trustee Service Australia include the requirement to adhere to the conditions set out in the agreement. This means that the agency must ensure that any receipts from specified activities, such as the sale of minor assets like surplus office furniture and fittings, are correctly recorded and used for the purposes intended. The agreement facilitates the spending of these receipts without the need for further appropriation by Parliament. The agency must also ensure that it complies with the specific provisions within the annual Appropriation Acts that give effect to the instrument.
Failure to comply with the terms of the agreement could have significant consequences. Although the explanatory statement does not explicitly detail the penalties for breach, it is implied that non-compliance with the FMA Act and related agreements could lead to legal or administrative consequences. It is also noteworthy 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. This means that such agreements do not need to be reviewed or approved by Parliament in the same way as other legislative instruments, though this does not lessen the importance of adhering to their terms.