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 Department of Family and Community Services, made on 23 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 the Department of Family and Community Services. 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 Department of Family and Community Services 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 that government agencies adhere to sound financial management practices, providing a framework for effective oversight and accountability in the allocation and use of public funds. One of the critical mechanisms established by the Act is the provision for "net appropriations," which allows certain government agencies to retain and utilise additional funds they receive from specified activities. The problem this mechanism addresses is the inefficiency that can arise when agencies must seek parliamentary approval for every additional dollar they earn, hindering their ability to respond quickly to financial opportunities. The Act was passed by the Commonwealth Parliament and its policy objective includes enhancing financial flexibility for government agencies while maintaining robust oversight. Under Section 31 of the Act, the Minister for Finance and Administration can enter into agreements with other ministers, allowing agencies to retain and spend certain additional funds without the need for further appropriation by Parliament, thereby streamlining financial operations and improving the efficiency of public spending.
Scope and Application
The Net Appropriation Agreement for the Department of Family and Community Services, made under section 31 of the Financial Management and Accountability Act 1997, applies specifically to the Department of Family and Community Services and governs the treatment of certain financial receipts for the purposes of increasing departmental appropriations. This agreement is designed to facilitate the use of certain receipts, such as proceeds from the sale of surplus assets, directly within the department's appropriation without requiring further appropriation by Parliament. The agreement applies to the types of receipts specified in the instrument, and its effect is implemented through the annual Appropriation Acts, which increase the relevant appropriation items in accordance with the agreement. The agreement can cover any period, including periods longer than a financial year, and can be cancelled or varied by the Minister for Finance and Administration at any time. Notably, this instrument is for internal government purposes and does not require consultation with external parties, as it does not impact the broader public or other entities beyond the specified department.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) outlines the authority 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, as specified in the instrument, allow for the increase of departmental appropriation items by specified receipts, such as proceeds from the sale of minor assets like surplus office furniture and fittings. The agreements can be for any period, including beyond a single financial year, and can be cancelled or varied by the Finance Minister at any time without consent from the other party. The Net Appropriation Agreement for the Department of Family and Community Services, made on 23 June 2005, identifies the types of receipts that will increase existing appropriations for the department. The agreement is implemented through specific provisions in the annual Appropriation Acts, which dictate that the relevant departmental appropriation items are increased in line with the agreement.
The obligations imposed by the Act on the parties involved include the requirement for the Minister for Finance and Administration to consult with the relevant department before finalizing the agreement. In this case, the Department of Family and Community Services was provided with drafts of the instrument and agrees with its form. However, because the instrument is for internal machinery of government purposes only, no further consultation was deemed necessary. The Act also allows for the Finance Minister to cancel or vary the agreement at any time without the consent of the other party, providing flexibility in managing financial appropriations.
There are no specific offences, penalties, or civil/criminal consequences outlined in the explanatory statement for breaches of the Net Appropriation Agreement. However, given the nature of financial agreements and the potential impact on public funds, any significant breach could potentially lead to administrative or financial repercussions. The legislative framework ensures that agreements are subject to the oversight of the Minister for Finance and Administration, who has the authority to cancel or vary the agreement as necessary. The lack of specific penalties in this context suggests that the primary focus is on ensuring compliance through administrative mechanisms rather than through punitive measures.