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 the Treasury, commencing 1 August 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 the Treasury. 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 the Treasury 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 establish a framework for the effective financial management and accountability of Commonwealth agencies. This Act addresses the need for clear guidelines and procedures to ensure that public funds are used efficiently, effectively, and in accordance with legislative requirements. The policy objective of the Act is to promote transparency, responsibility, and efficiency in the management of public money. Section 31 of the FMA Act empowers the Minister for Finance and Administration to enter into agreements with other Ministers to increase departmental appropriation items by amounts received by an agency, as specified in the agreement. These agreements, which can be for any period, enable the agency to utilise the receipts for their intended purposes without requiring additional appropriation by Parliament. The Net Appropriation Agreement For Department of the Treasury, commencing 1 August 2005, is an example of such an agreement, which identifies the types of receipts that increase an existing appropriation for the Department of the Treasury, such as the sale of minor assets like surplus office furniture and fittings.
Scope and Application
The Net Appropriation Agreement For Department of the Treasury is an instrument made under section 31 of the Financial Management and Accountability Act 1997. It is an agreement between the Minister for Finance and Administration and the Minister for the Treasury to allow for the increase of specific appropriation items for the Department of the Treasury by amounts received by the department as outlined in the agreement. This agreement applies to the types of receipts that increase the existing appropriation for the department and is given effect by the annual appropriation Acts, which increase the relevant departmental appropriation item in accordance with the agreement. 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 with the Department of the Treasury was conducted before finalisation of the instrument, and no consultation with other persons was considered necessary as the instrument is for internal machinery of government purposes only.
Key Provisions
The Net Appropriation Agreement for the Department of the Treasury, which came into effect on 1 August 2005, is governed by section 31 of the Financial Management and Accountability Act 1997 (FMA Act). This section 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" (section 31(1)). These agreements can cover any period and are not restricted to the duration of a specific Appropriation Act, providing flexibility in financial management (section 31(3)). Such agreements are instrumental in increasing departmental appropriations by the amounts received by the agency, as specified in the agreement, and are operationalised through the annual Appropriation Acts (section 10 of Appropriation Act (No.1) 2004-2005).
The obligations imposed by the Act on the parties involved are primarily administrative and procedural. The Finance Minister is responsible for entering into and managing these agreements, including the power to cancel or vary them at any time without the consent of the other party (section 31(4)). The Department of the Treasury, as the agency affected, must ensure that the receipts identified in the agreement are appropriately accounted for and available for expenditure. This requires compliance with the terms of the agreement and the annual Appropriation Acts, which specify the increase in appropriation based on the agreement.
Breaches of the terms of these agreements or failure to comply with the obligations under the FMA Act do not typically result in specific offences or penalties outlined in the Act itself. However, non-compliance could potentially lead to broader administrative or financial repercussions, such as the failure to appropriately account for government funds or the misallocation of budgetary resources. It is worth noting that agreements made under section 31 of the FMA Act are exempt from the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003 (subsection 44(2)(19) and 54(2)(17) of the Legislative Instruments Act 2003), meaning they do not require parliamentary approval to remain in effect.