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 the Australian Prudential Regulation Authority commencing upon registration with the Federal Register of Legislative Instruments.
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 Australian Prudential Regulation Authority. 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 Prudential Regulation Authority 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 establish a framework for the management and accountability of financial resources within the Australian government. It was introduced to address the need for clear and effective mechanisms to ensure that government spending is authorised and appropriately accounted for. The Act empowers the Minister for Finance and Administration to enter into agreements with other ministers concerning appropriations that are designated as "net appropriations." This legislative tool enables the Minister to adjust departmental appropriations based on specific receipts, ensuring that agencies can utilise additional funds without the need for further parliamentary approval. The policy objective of this mechanism is to enhance financial flexibility and efficiency within the government, allowing agencies to manage their budgets more effectively by utilising additional income generated from activities such as the sale of surplus assets. The Act was passed by the Parliament of Australia and provides a structured approach to financial governance that supports the transparent and accountable use of public funds.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to the Minister for Finance and Administration, other Ministers, and government agencies, including the Australian Prudential Regulation Authority. Under section 31 of the FMA Act, the Minister for Finance and Administration can enter into agreements with other Ministers to increase departmental or administered appropriation items by the amounts received by an agency as specified in the agreement. These agreements, referred to as "Net Appropriation Agreements," allow agencies to spend the receipts they generate without further appropriation by Parliament. The instrument, made under section 31 of the FMA Act, identifies the types of receipts that increase an existing appropriation for the Australian Prudential Regulation Authority, and these agreements can be for any period, including longer than a financial year, and may be cancelled or varied by the Minister at any time without the consent of the other party. The instrument only has effect while the relevant specific provisions exist in the annual Appropriation Acts. The Australian Prudential Regulation Authority was provided with drafts of the instrument before it was finalised and agrees with the form of the instrument.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) includes a provision under section 31 that allows the Minister for Finance and Administration to enter into agreements with other Ministers for items marked as “net appropriation” in Appropriation Acts. This agreement, as detailed in the instrument, is designed to ensure that certain receipts increase an existing appropriation for the Australian Prudential Regulation Authority (APRA). These agreements allow the appropriation to be increased by amounts received by the agency as specified in the agreement. The duration of such agreements is not necessarily tied to a specific financial year, as outlined in subsection 31(3) of the FMA Act, and can continue until circumstances require their renewal. The Finance Minister also has the authority to cancel or vary an agreement at any time without the consent of the other party, as stipulated in subsection 31(4) of the FMA Act.
The obligations under the FMA Act, as interpreted through the instrument, require the Finance Minister to ensure that the agreements are drafted and agreed upon with relevant Ministers to facilitate the increase of appropriations. The Minister must also ensure that these agreements are aligned with the annual appropriation acts to give them effect. The Australian Prudential Regulation Authority, as the agency affected, is obligated to comply with the terms of the agreement and to use the increased appropriation for the purposes specified in the agreement. The instrument also mandates that the agency be provided with drafts of the instrument before it is finalised, and that the agency agrees with the form of the instrument. Additionally, since the instrument is for internal machinery of government purposes, no further consultation with other parties was deemed necessary.
The FMA Act does not specify particular offences, penalties, or civil/criminal consequences for breach of the provisions outlined in the instrument. However, any breaches of agreements entered into under section 31 of the FMA Act could potentially lead to administrative consequences, such as the cancellation or variation of the agreement by the Finance Minister without the need for consent from the other party. The lack of parliamentary disallowance and sunsetting provisions for agreements made under section 31 of the FMA Act means that these agreements remain in effect unless otherwise specified by the Finance Minister. The absence of explicit penalties in the explanatory statement suggests that enforcement and consequences would be managed internally within the government framework.