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 Insolvency and Trustee Service Australia, commencing upon registration on 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 Insolvency and Trustee Service 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
The Insolvency and Trustee Service 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 address the need for improved financial management and accountability within the Australian government. This Act provides a framework for the efficient and transparent allocation and usage of public funds, ensuring that government agencies operate within their financial means and adhere to the appropriations set by Parliament. The Act was introduced by the Australian Parliament with the policy objective of enhancing the efficiency, effectiveness, and transparency of financial management across the Commonwealth. Section 31 of the FMA Act allows the Minister for Finance to enter into agreements with other Ministers for items in Appropriation Acts marked as “net appropriation”. These agreements facilitate the increase of departmental appropriations by amounts received by an agency, ensuring that these funds can be spent by the agency without requiring further appropriation by Parliament. The legislative instrument in question, concerning the Net Appropriation Agreement for Insolvency and Trustee Service Australia, exemplifies this process by specifying the types of receipts that increase existing appropriations for the agency, thereby enabling more flexible and efficient financial management within the specified agency.
Scope and Application
The Net Appropriation Agreement for Insolvency and Trustee Service Australia is an instrument made under section 31 of the Financial Management and Accountability Act 1997. This instrument, which comes into effect upon registration on the Federal Register of Legislative Instruments, applies to the Insolvency and Trustee Service Australia. It enables the agency to increase its appropriation for certain specified receipts, such as the sale of minor assets like surplus office furniture and fittings. The agreement extends beyond a particular Appropriation Act or financial year, continuing until circumstances necessitate its renewal. The Minister for Finance and Administration retains the authority to cancel or vary the agreement at any time without requiring consent from the other party. The instrument is implemented through specific provisions in the annual Appropriation Acts, which allow the relevant departmental or administered appropriation item to be increased in accordance with the agreement. Given its internal machinery of government purpose, no further consultation beyond the affected agency was deemed necessary.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) provides the legislative basis for entering into agreements concerning "net appropriations." These agreements, known as Net Appropriation Agreements, are intended to facilitate the management of certain types of receipts that increase an existing appropriation for specific agencies. The Minister for Finance and Administration has the authority under this section to enter into such agreements with other Ministers, enabling departmental or administered appropriation items to be increased by specified amounts received by an agency. This mechanism ensures that agencies can effectively utilise receipts from activities such as the sale of minor assets, without the need for additional appropriation by Parliament.
The obligations imposed by this Act on the parties involved include the requirement for the Minister for Finance and Administration to consult with the relevant agency, such as the Insolvency and Trustee Service Australia, when drafting the agreement. The agency must agree with the form of the instrument before it is finalised and registered. Furthermore, the Act stipulates that these agreements can be for any period, not necessarily tied to a specific Appropriation Act or financial year, and can be varied or cancelled by the Minister at any time without the need for consent from the other party. This flexibility allows for the efficient management of financial resources within the government.
The Act also outlines the consequences of breaches or non-compliance with the provisions of the Net Appropriation Agreement. Although the 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, it is implicit that any significant breaches of the agreement could lead to administrative or legal consequences. The exact nature of these consequences would depend on the specifics of the breach and the policies of the respective agencies and the government. However, the primary focus of the Act is on ensuring that the financial management practices are transparent and effective, rather than on imposing strict penal consequences for breaches.