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 Professional Services Review, commencing 1 July 2004.
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 Professional Services Review. 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 Professional Services Review 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 the need for a robust framework governing the financial management and accountability of Commonwealth agencies. One significant aspect of this Act is its provision for net appropriation agreements, allowing the Minister for Finance and Administration to enter into agreements with other Ministers for items marked "net appropriation" in Appropriation Acts. This mechanism ensures that agencies can utilise receipts, such as proceeds from the sale of minor assets, without requiring additional parliamentary appropriation. The purpose of the instrument in question, the Net Appropriation Agreement For Professional Services Review, is to specify the types of receipts that can increase existing appropriations, thereby facilitating the efficient use of funds by the relevant agency. This legislative tool is integral to the overarching policy objective of enhancing financial flexibility and accountability within the Commonwealth's fiscal framework.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to agreements made under Section 31 for net appropriations, enabling the Minister for Finance and Administration to enter into agreements with other Ministers to increase departmental or administered appropriation items by amounts received by an agency as specified in the agreement. The instrument in question, which commences on 1 July 2004, pertains to a Net Appropriation Agreement for Professional Services Review. The agreement allows for the inclusion of certain receipts, such as proceeds from the sale of minor assets like surplus office furniture and fittings, which would otherwise not be available for expenditure without further appropriation by Parliament. This instrument is effective only as long as the relevant provisions exist in the annual Appropriation Acts, and eligible receipts are detailed in clause 5.1 of the instrument. The agreement can be for any period, not necessarily tied to a particular Appropriation Act, and can be cancelled or varied by the Minister at any time. Notably, this agreement is for internal machinery of government purposes and does not require consultation beyond the relevant agency, the Professional Services Review, which was provided with drafts of the instrument prior to its finalisation.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) allows the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts that are marked “net appropriation.” These agreements, as stipulated in section 31(3), can be for any duration, including periods longer than a financial year, and do not necessarily have to be tied to a particular Appropriation Act or Acts. The purpose of these agreements is to enable an agency to increase its appropriation by amounts received, as specified in the agreement. For example, if an agency sells minor assets such as surplus office furniture and fittings, the proceeds from such sales can be used for expenditure by the agency without the need for further appropriation by Parliament.
The obligations imposed by the Act on the parties involved include the requirement that the Finance Minister can enter into these agreements for any period, and these agreements generally continue until circumstances necessitate their renewal. Importantly, subsection 31(4) allows the Finance Minister to cancel or vary an agreement at any time without needing the consent of the other party. This flexibility is intended to allow for adjustments in financial management as needed. Furthermore, the relevant appropriations are increased in accordance with the agreement, as provided for in the annual Appropriation Acts. This ensures that the receipts are properly accounted for and available for expenditure by the relevant agency.
The Financial Management and Accountability Act 1997 does not outline specific offences or penalties for breaches of the agreements under section 31. However, any breaches of financial management or accountability standards generally could result in administrative or disciplinary actions against the relevant officers or entities involved. Given that these agreements are internal to the machinery of government and are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, the consequences of non-compliance would typically be internal administrative measures rather than formal legal penalties. Nonetheless, maintaining adherence to the agreements and statutory requirements is crucial to ensuring proper financial management within the government.