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 Australian Institute of Family Studies, commencing upon registration.
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 Australian Institute of Family Studies. 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 Australian Institute of Family Studies 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 framework for the financial management and accountability of Commonwealth agencies. It was introduced to address the need for clear guidelines and controls over the financial operations of these agencies, ensuring that they manage public funds effectively and transparently. This Act is significant in establishing the principles and rules that govern how federal agencies should manage their finances, with the overarching objective of maintaining the integrity and efficiency of public financial management. The Act was enacted by the Parliament of Australia, reflecting a broad consensus on the importance of robust financial accountability mechanisms within the federal government.
The Net Appropriation Agreement for the Australian Institute of Family Studies, made under section 31 of the FMA Act, exemplifies the application of this legislation. The agreement allows the Institute to utilise receipts from certain activities, such as the sale of minor assets, directly towards its appropriations without requiring additional parliamentary approval. This facilitates more flexible and efficient financial management within the Institute, aligning with the broader policy objective of the FMA Act to enhance the financial accountability and performance of Commonwealth agencies. The Australian Institute of Family Studies was consulted on the agreement, reflecting the Act’s emphasis on stakeholder engagement in financial management practices.
Scope and Application
The instrument made under section 31 of the Financial Management and Accountability Act 1997 relates to a Net Appropriation Agreement specifically for the Australian Institute of Family Studies. This agreement pertains to the types of receipts that can augment an existing appropriation for the Institute, enabling the receipt of funds from activities such as the sale of minor assets to be used for expenditure by the agency. This mechanism allows the Australian Institute of Family Studies to utilise the proceeds from such activities without requiring additional appropriation by Parliament. The agreement, which can be for any duration and is subject to cancellation or variation by the Minister for Finance and Administration at any time, is implemented through the annual Appropriation Acts and remains effective only for as long as specific provisions exist within these acts. The instrument was developed in consultation with the Australian Institute of Family Studies, which approved the final form, and no further consultation was deemed necessary as the instrument is intended solely for internal government processes.
Key Provisions
The instrument in question, made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act), pertains to the Australian Institute of Family Studies and outlines the conditions under which certain receipts can increase the agency's appropriations (section 31(3)). Specifically, this agreement permits the Australian Institute of Family Studies to utilise receipts from the sale of minor assets, such as surplus office furniture and fittings, for its expenditure without requiring further appropriation by Parliament (section 31(4)). The agreement does not need to be tied to a specific financial year or Appropriation Act and can be varied or cancelled by the Minister for Finance and Administration at any time.
The obligations imposed by this agreement require the Australian Institute of Family Studies to ensure that any receipts from specified activities are used in accordance with the terms set out in the agreement. This means that the agency must manage and account for these receipts in a manner that complies with the stipulations of the Financial Management and Accountability Act 1997 and any relevant Appropriation Acts. Additionally, the Finance Minister retains the authority to modify or terminate the agreement at any time without the need for the agreement of the other party, ensuring flexibility in the financial management of the agency.
Breaching the terms of this agreement could potentially lead to legal consequences, although the explanatory statement does not specify any particular offences or penalties. However, under the broader provisions of the FMA Act, any misuse of public funds or non-compliance with financial management requirements can result in civil or criminal penalties, including fines and imprisonment. The specifics of penalties would depend on the nature and severity of the breach, as well as any additional legislative provisions that may apply.