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 Transport and Regional Services, commencing 3 March 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 Transport and Regional Services. The instrument is given effect by the annual appropriation Acts, which provide that the relevant departmental 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 Transport and Regional 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 (FMA Act) was enacted to address issues in the financial management and accountability of government agencies. This Act allows the Minister for Finance and Administration to enter into agreements with other ministers concerning appropriations that are marked as "net appropriations". This provision ensures that agencies can effectively manage and utilise certain types of receipts, such as proceeds from the sale of minor assets, without requiring additional appropriation from Parliament. The purpose of these agreements is to provide clarity and flexibility in financial management, enabling agencies to spend certain receipts without further parliamentary action. The instrument in question, which relates to the Department of Transport and Regional Services, was developed in accordance with section 31 of the FMA Act and includes provisions that allow for the automatic increase of departmental appropriations based on specified receipts. This ensures that the agency can utilise the funds efficiently and in accordance with the terms of the agreement.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) allows the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts that are marked “net appropriation”. This enables departmental appropriation items to be increased by amounts received by an agency as specified in the agreement, allowing these receipts to be spent by the agency. The instrument relates specifically to the Net Appropriation Agreement for the Department of Transport and Regional Services, identifying the types of receipts which increase an existing appropriation for this department. The instrument is given effect by the annual appropriation Acts, which provide that the relevant departmental appropriation item is increased in accordance with the agreement. The instrument only has effect while the relevant specific provisions exist in the annual Appropriation Acts and eligible receipts are set out in clause 5.1 of the instrument. As the instrument is for internal machinery of government purposes only, no consultation was considered necessary with other persons. 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.
Key Provisions
The Net Appropriation Agreement for the Department of Transport and Regional Services, as outlined in the explanatory statement, is primarily governed by section 31 of the Financial Management and Accountability Act 1997 (FMA Act). Section 31 empowers the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts that are marked as "net appropriations." These agreements allow for the increase of departmental appropriation items by the amounts received by an agency as specified in the agreement, as per section 10 of the Appropriation Act (No.1) 2004-2005. The agreements can cover any period, not necessarily tied to a particular financial year, and can continue until circumstances necessitate their renewal or amendment.
The obligations imposed by this Act on the parties involved are clear and structured. The Minister for Finance and Administration is tasked with entering into these agreements, which must specify the types of receipts that will increase existing appropriations for the Department of Transport and Regional Services. The Department of Transport and Regional Services, in turn, must ensure that the receipts identified in the agreement are properly accounted for and spent as per the terms set out. Additionally, the Minister for Finance and Administration retains the authority to cancel or vary these agreements at any time without the consent of the other party, as stipulated in subsection 31(4) of the FMA Act.
Breaching the terms of these agreements could lead to several consequences. Although specific offences and penalties are not detailed in the explanatory statement, it is implied that non-compliance with the terms of an agreement made under section 31 of the FMA Act could result in financial mismanagement or improper use of public funds. Given the nature of the agreements and their impact on public finances, breaches could potentially lead to civil or criminal liabilities, with penalties that could include fines or other legal repercussions. The exact penalties would depend on the specifics of the breach and the jurisdiction under which it is prosecuted.