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 Taxation Office, commencing 28 July 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 Australian Taxation Office. 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 Taxation Office 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 provide a framework for the financial management and accountability of Commonwealth entities. The Act was introduced to address the need for clear and effective financial management within the government to ensure transparency, efficiency, and compliance with financial laws. Section 31 of the FMA Act enables the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts that are marked “net appropriation.” This legislative authority allows departmental appropriation items to be increased by amounts received by an agency, as specified in the agreement. Such agreements can be for any period, not necessarily limited to a financial year, and can continue until circumstances require their renewal. The policy objective of these agreements is to ensure that receipts from certain activities, such as the sale of minor assets, are available for expenditure by the relevant agency without the need for further appropriation by Parliament.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to the Minister for Finance and Administration, who is empowered to enter into agreements with other Ministers for items marked "net appropriation" in Appropriation Acts. These agreements are made under section 31 of the FMA Act and pertain to the Australian Taxation Office (ATO), commencing on 28 July 2005. The agreements allow for the increase of departmental or administered appropriation items based on specified receipts, such as proceeds from the sale of minor assets like surplus office furniture and fittings. These receipts become available for expenditure by the ATO without requiring further appropriation by Parliament. The agreements can be for any period, including longer than a financial year, and can be cancelled or varied by the Finance Minister at any time. The instrument only has effect as long as specific provisions exist in the annual Appropriation Acts, and eligible receipts are outlined in clause 5.1 of the instrument. The ATO was consulted on drafts of the instrument before its finalisation and agrees with its form. Notably, 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 main operative sections of this instrument are sections 31 and 31(3) to 31(4) of the Financial Management and Accountability Act 1997 (FMA Act). Section 31 of the FMA Act allows the Minister for Finance and Administration to enter into agreements with other Ministers for the purposes of items in Appropriation Acts that are marked as "net appropriation". These agreements determine the types of receipts that can increase an existing appropriation for an agency, in this case, the Australian Taxation Office (ATO). Under section 31(3) of the FMA Act, agreements can be made for any period, not necessarily relating to a particular Appropriation Act or Acts, and can be for a period longer than a financial year. Generally, these agreements continue until circumstances require their renewal. Section 31(4) of the FMA Act allows the Finance Minister to cancel or vary an agreement at any time without the consent of the other party.
The obligations and requirements imposed by the Act on the parties involved are primarily those of the Minister for Finance and Administration. This includes entering into agreements with other Ministers for the purposes of "net appropriation" items in Appropriation Acts, as stipulated in section 31 of the FMA Act. The Minister for Finance and Administration must ensure that the agreements are in line with the purpose of increasing existing appropriations for specified agencies such as the ATO. Furthermore, the Minister has the authority to cancel or vary an agreement at any time without the consent of the other party, as outlined in section 31(4) of the FMA Act. The ATO, as the agency affected, is required to adhere to the terms of the agreement and to ensure that the receipts identified in the agreement are used in accordance with the purpose of increasing its appropriation.
In terms of offences, penalties, or civil and criminal consequences for breach, the Explanatory Statement does not provide explicit details on such consequences. However, it is implied that failure to comply with the terms of the agreement or misuse of the increased appropriation could lead to potential legal or administrative repercussions. Given the nature of the instrument and the financial management context, breaches might result in financial penalties, audits, or other corrective measures by the relevant authorities. The specific penalties or consequences would depend on the nature and severity of the breach, as well as the applicable laws and regulations at the time.