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 Department of Industry, Tourism and Resources 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 the Department of Industry, Tourism and Resources. 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 Industry, Tourism and Resources 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 robust framework for the management of financial resources within the Australian government. It aimed to address issues related to the appropriation and management of funds, ensuring transparency and accountability in the use of public money. The Act was enacted by the Australian Parliament and its overarching policy objective is to enhance the efficiency and effectiveness of financial management across government agencies. Under section 31 of the FMA Act, the Minister for Finance and Administration is empowered to enter into agreements with other ministers for items in Appropriation Acts that are designated as "net appropriations." These agreements allow for the automatic adjustment of departmental appropriations to include any additional funds received by an agency, thereby streamlining the financial management process and ensuring that agencies can utilise available funds without the need for additional parliamentary appropriation.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) pertains to the financial governance and accountability mechanisms within the Australian Commonwealth government, particularly concerning the appropriation and expenditure of public funds. Section 31 of the FMA Act empowers the Minister for Finance and Administration to enter into agreements with other ministers to increase specific appropriations for certain departments and agencies. These agreements, referred to as "Net Appropriation Agreements," allow departments to utilise receipts, such as proceeds from the sale of minor assets, to augment their existing appropriations without requiring further appropriation by Parliament. The scope of these agreements extends to the Department of Industry, Tourism and Resources, and the agreement in question was designed to enable the department to utilise specified receipts to increase its appropriation. These agreements operate in conjunction with the provisions of annual Appropriation Acts and remain in effect as long as the relevant clauses exist in these Acts. Notably, these agreements are exempt from the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) includes the provision for "Net Appropriations" agreements, which are outlined in section 31. These agreements, as detailed in the instrument, allow the Minister for Finance and Administration to enter into arrangements with other Ministers to increase departmental appropriations. Section 31(3) specifies that these agreements can cover any period, not necessarily tied to a particular Appropriation Act or financial year. Furthermore, section 31(4) permits the Finance Minister to cancel or vary these agreements at any time without requiring the consent of the other party involved.
These agreements primarily serve to facilitate the availability of receipts for expenditure by the relevant departments or agencies. For instance, if an agency sells minor assets, the proceeds from such sales can be spent by the agency itself, rather than being subject to further appropriation by Parliament. This is made possible through specific provisions in the annual Appropriation Acts, which incorporate the terms of the agreement. Therefore, the effectiveness of the instrument is contingent upon the existence of these specific provisions in the Appropriation Acts. Clause 5.1 of the instrument lists the eligible receipts that can increase existing appropriations for the Department of Industry, Tourism and Resources.
The obligations imposed by the FMA Act under these agreements require the Department of Industry, Tourism and Resources to comply with the terms set out in the Net Appropriation Agreement. The Department was provided with drafts of the instrument prior to its finalisation and has agreed to its form. Given the internal nature of the instrument, consultation with other parties was deemed unnecessary, in line with sections 17 and 18 of the Legislative Instruments Act 2003.
Breach of these agreements or failure to comply with their terms could lead to administrative or financial repercussions. Although the instrument itself does not specify detailed penalties, the general legal framework surrounding the FMA Act would apply. Breaches might result in financial misallocations, which could attract scrutiny or corrective measures from relevant oversight bodies. Moreover, the ability of the Finance Minister to cancel or vary these agreements at any time underscores the importance of adhering to the terms to avoid potential disruptions in funding or operational continuity.