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 Biosecurity Australia, commencing 24 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 Biosecurity 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
Biosecurity 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 (FMA Act) was enacted to ensure efficient, effective, and economical use of Commonwealth resources. It aims to address the problem of financial accountability and transparency in the management of public funds. Enacted by the Commonwealth Parliament, the FMA Act establishes a framework for the financial management of Commonwealth entities and seeks to promote sound financial practices. The Act specifically targets the need for clear and flexible mechanisms to manage net appropriations, which are appropriations increased by amounts received by an agency as specified in agreements. Such agreements are intended to streamline the financial management process and ensure that agencies can utilise available funds effectively without requiring additional parliamentary appropriation. The Net Appropriation Agreement for Biosecurity Australia, commencing on 24 June 2005, is an example of how the Act facilitates this by allowing receipts, such as sales of minor assets, to be spent by the agency directly, thereby enhancing operational efficiency.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) authorises the Minister for Finance and Administration to enter into agreements with other ministers to increase departmental appropriations by specific receipts, such as the sale of minor assets, as outlined in the Net Appropriation Agreement for Biosecurity Australia. These agreements, which can be for any period and are not subject to parliamentary disallowance or sunsetting, enable the agency to spend the receipts without further appropriation by Parliament. The instrument, which is given effect by annual Appropriation Acts, specifies the types of receipts that increase an appropriation for Biosecurity Australia. The agency was consulted during the drafting process and agrees with the form of the instrument. Given that the instrument concerns internal machinery of government purposes, no additional consultation was deemed necessary.
Key Provisions
The Net Appropriation Agreement For Biosecurity Australia, commencing 24 June 2005, made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act), enables the Minister for Finance and Administration to enter into agreements with other ministers regarding appropriations marked as "net appropriation." Specifically, Section 31(1) of the FMA Act allows the Minister for Finance and Administration to enter into agreements that increase departmental appropriations by amounts received by an agency as specified in the agreement. These agreements can cover any period, not necessarily limited to a particular financial year, and can be cancelled or varied at any time by the Minister without consent from the other party (Section 31(4)).
The obligations imposed by this Act require that the Minister for Finance and Administration consult with the relevant agency, in this case Biosecurity Australia, before finalising the agreement. The agency must be provided with drafts of the instrument and must agree with its form before it becomes effective. Additionally, specific provisions within the annual Appropriation Acts must exist to give effect to the instrument. These provisions determine how the relevant departmental or administered appropriation item is increased according to the agreement, enabling the agency to spend the receipts received. For instance, if Biosecurity Australia sells surplus office furniture and fittings, the proceeds from the sale will be available for expenditure by the agency.
The Act does not outline specific offences, penalties, or consequences for breach, as the agreements themselves do not fall under the parliamentary disallowance or sunsetting provisions of the Legislative Instruments Act 2003. However, the authority to cancel or vary the agreement at any time provides a mechanism for addressing any potential issues that may arise during the agreement's operation. The lack of specified penalties suggests that the primary enforcement mechanism is the administrative ability to modify or terminate the agreement as necessary to ensure compliance with financial management and accountability objectives.