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 Cancer Australia commencing upon the signature of the second party.
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 Cancer 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
Cancer 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 ensure effective management of public funds and accountability in the spending of these funds. This Act addresses the need for clear and structured financial arrangements within the government, particularly in relation to how appropriations are handled and utilised by various agencies. Section 31 of the Act allows the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts that are marked as “net appropriation”. This provision ensures that agencies can effectively manage their finances by allowing the increase of existing appropriations through specified receipts, such as proceeds from the sale of minor assets. The overarching policy objective is to streamline financial management processes and enhance the accountability of government spending.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) provides a framework for the management of financial resources within the Commonwealth government. Specifically, section 31 of the FMA Act enables the Minister for Finance and Administration to enter into agreements with other Ministers concerning the use of “net appropriations.” These agreements facilitate the increase of departmental appropriation items by amounts received by an agency, as specified in the agreement. This legislation applies to the Commonwealth government and the entities within it, such as agencies like Cancer Australia, as outlined in the Net Appropriation Agreement for Cancer Australia. The agreement identifies the types of receipts that increase existing appropriations for the agency, allowing the agency to spend these receipts without further appropriation by Parliament. The scope of this Act is limited to the Commonwealth jurisdiction, and it extends its application through subordinate instruments such as the annual Appropriation Acts, which provide the necessary provisions for these agreements to take effect. There are no exclusions or exemptions specified in this particular instrument, and the agreements are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) provides the framework for the Minister for Finance and Administration to enter into agreements with other Ministers regarding items marked as “net appropriation” in Appropriation Acts. These agreements, which can be for any period and are not limited to the duration of a particular financial year, allow for the increase of departmental or, in certain cases, administered appropriation items by amounts received by an agency as specified in the agreement (section 31(3)). This means that any revenue generated from specific activities, such as the sale of minor assets like surplus office furniture, can be directly utilised by the agency for expenditure without the need for additional appropriation by Parliament.
The obligations under the Act require the Minister for Finance and Administration to ensure that these agreements are drafted in a manner that clearly identifies the types of receipts that will increase the appropriation for the specified agency. For Cancer Australia, this means that any revenue generated from the specified activities outlined in the agreement will be available for its use. The Act also mandates that the agency affected by the agreement, in this case Cancer Australia, must be consulted on the drafts of the instrument before it is finalised, ensuring that the agency agrees with the form of the instrument. This consultation process is crucial to maintain the accuracy and relevance of the appropriations as per the operational needs of the agency.
Failure to comply with the terms of the agreement or the provisions of the FMA Act may result in significant consequences. While the Act does not specify detailed penalties for breaches, it is understood that non-compliance could lead to financial mismanagement and accountability issues. The Minister for Finance and Administration retains the power to cancel or vary an agreement at any time without the consent of the other party, underscoring the importance of adherence to the agreed terms. The absence of parliamentary disallowance and sunsetting provisions for agreements under section 31 of the FMA Act (as outlined in the Legislative Instruments Act 2003) highlights the critical need for these agreements to be carefully drafted and adhered to, ensuring that they serve their intended purpose effectively and efficiently.