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 Medicare Australia, commencing 1 October 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 Medicare 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
Medicare 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 improve the financial management and accountability of the Commonwealth and its agencies. One of its key provisions, Section 31, enables the Minister for Finance and Administration to enter into agreements with other ministers regarding "net appropriations," which allow for the increase of specific appropriation items by specified amounts received by an agency. This provision was introduced to address the need for more flexible financial management within government agencies, ensuring that revenue generated by agencies, such as from the sale of minor assets, can be reinvested into their operations without the need for additional appropriation by Parliament. The instrument in question, a Net Appropriation Agreement for Medicare Australia, was made under this authority and commenced on 1 October 2005. The purpose of this agreement is to identify the types of receipts that will increase the existing appropriation for Medicare Australia, thereby allowing these funds to be spent by the agency. The agreement was developed in consultation with Medicare Australia and is given effect by specific provisions within the annual Appropriation Acts.
Scope and Application
The Net Appropriation Agreement For Medicare Australia made under section 31 of the Financial Management and Accountability Act 1997 applies specifically to the agency Medicare Australia. The purpose of this agreement is to allow the agency to increase its appropriation by the amounts received from specified transactions, which are detailed in the agreement itself. This agreement enables the agency to spend certain receipts, such as the proceeds from the sale of minor assets like surplus office furniture and fittings, without requiring further appropriation by Parliament. The agreement is effective as long as the specific provisions that give effect to it exist in the annual Appropriation Acts. Notably, the agreement can be for any period and does not necessarily have to align with a particular Appropriation Act or financial year. The Finance Minister also retains the authority to cancel or vary the agreement at any time without the consent of the other party. Importantly, this instrument is intended solely for internal government machinery and thus did not require consultation beyond the affected agency, Medicare Australia. Additionally, agreements made under section 31 of the FMA Act 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) facilitates the creation of agreements under section 31 to allow for "net appropriations." These agreements enable agencies such as Medicare Australia to increase their appropriations by specific receipts, such as proceeds from the sale of minor assets, without requiring additional appropriation from Parliament. This mechanism ensures that agencies can efficiently utilise funds received from specified activities. The agreement in question, effective from 1 October 2005, allows Medicare Australia to enhance its existing appropriations through certain receipts, which are detailed in the annual appropriation acts.
Under this Act, the Minister for Finance and Administration can enter into agreements with other ministers to adjust appropriations marked as "net appropriation" in Appropriation Acts. These agreements can be for any period, not necessarily limited to a financial year, and can be modified or cancelled by the Finance Minister at any time. The primary purpose of these agreements is to streamline the process of increasing departmental appropriations, ensuring that agencies can spend money received from specified activities without needing further parliamentary approval.
The obligations imposed by this Act on the relevant parties include the requirement for the Minister for Finance and Administration to consult with the affected agency, in this case, Medicare Australia, during the drafting process of the agreement. Additionally, the agency must agree to the form of the instrument before it is finalised. The Act also stipulates that such agreements are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, meaning they are not subject to disallowance or automatic expiry after a set period.
Regarding consequences for breaches, the FMA Act does not explicitly outline specific offences or penalties for non-compliance with the provisions of these agreements. However, any failure to adhere to the terms of the agreement could potentially lead to broader financial mismanagement issues, which might be addressed under other sections of the FMA Act or relevant financial management regulations. Non-compliance might also result in administrative or financial repercussions, though these would be determined on a case-by-case basis in accordance with the broader legal and regulatory framework.