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 the Australian Customs Service, commencing 21 February 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 Australian Customs Service. 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 Australian Customs Service 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 entities. The Act provides mechanisms to ensure that public funds are managed efficiently, effectively, and in accordance with the law. One such mechanism is Section 31, which empowers the Minister for Finance and Administration to enter into agreements with other ministers concerning items in Appropriation Acts that are designated as "net appropriations." These agreements allow for the increase of departmental appropriations by the amounts received by an agency, as specified in the agreement. This enables the agency to utilise the receipts for expenditure without the need for further appropriation by Parliament, thereby streamlining financial management processes and ensuring that resources are used in accordance with their intended purpose. The policy objective behind Section 31 is to facilitate efficient financial management within government agencies by providing a clear framework for the allocation and utilisation of appropriated funds.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) pertains to agreements for "Net Appropriations" made under Section 31, which allows the Minister for Finance and Administration to enter into agreements with other ministers regarding items in Appropriation Acts marked as "net appropriation." These agreements pertain to the Australian Customs Service and allow for the increase of existing appropriations for the agency through specific receipts, such as the sale of minor assets like surplus office furniture and fittings. The agreements are not restricted to a particular financial year and can continue until circumstances necessitate their renewal. The instrument in question, the Net Appropriation Agreement for the Australian Customs Service, came into effect on 21 February 2005 and is enforced through specific provisions in annual Appropriation Acts, which increase the relevant departmental or administered appropriation item according to the agreement, thus enabling the agency to spend the receipts. Given its internal machinery of government purpose, the instrument was drafted with the Australian Customs Service and no further consultation was deemed necessary. Notably, 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 main sections of the instrument, titled "Net Appropriation Agreement for the Australian Customs Service," are provided under section 31 of the Financial Management and Accountability Act 1997 (FMA Act). Section 31 allows the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts marked "net appropriation." These agreements enable specified departmental or administered appropriation items to be increased by amounts received by an agency, as outlined in the agreement. The agreement is not tied to a particular Appropriation Act or financial year, and it can be cancelled or varied by the Minister at any time without the consent of the other party.
The obligations imposed by the Act on the parties governed by it include the requirement for the Finance Minister to enter into agreements that specify the types of receipts which will increase the existing appropriation for the Australian Customs Service. The Australian Customs Service must adhere to the terms of the agreement to ensure that the specified receipts are available for expenditure by the agency. The agreement is given effect by the annual Appropriation Acts, which increase the relevant departmental or administered appropriation item in accordance with the agreement. For example, if the agency sells minor assets such as surplus office furniture and fittings, the proceeds from the sale will be available for expenditure by the agency without requiring further appropriation by Parliament.
The Act does not impose specific offences or penalties for breach of the agreement, but it does state that the instrument is for internal machinery of government purposes only and therefore does not require consultation with other persons. It is worth noting that 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. This means that the agreements do not require parliamentary approval or automatic expiration after a certain period. However, the Finance Minister retains the power to cancel or vary the agreement at any time without the consent of the other party.