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 Australian Industrial Registry, 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 Australian Industrial Registry. 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 Industrial Registry 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 provide a framework for financial management within the Australian government, with a particular focus on ensuring accountability and transparency in the use of public funds. The Act was introduced to address the need for a coherent and consistent approach to financial management across all Commonwealth agencies. Enacted by the Parliament of Australia, the FMA Act aims to ensure that public money is used effectively and efficiently, with a clear focus on delivering value for money and maintaining public trust in government operations. One of the mechanisms provided by the Act is the ability for the Minister for Finance and Administration to enter into agreements for "net appropriations" under Section 31, facilitating the reallocation and increased use of certain receipts by specified agencies. This allows agencies to utilise funds more flexibly, supporting operational needs without requiring additional parliamentary appropriation for certain types of income.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) governs the agreements made under section 31 for "net appropriations," specifically enabling the Minister for Finance and Administration to enter into agreements with other Ministers concerning items marked "net appropriation" in Appropriation Acts. This legislative instrument, which applies to the Australian Industrial Registry, allows for the increase of existing appropriations by amounts received by the agency, such as proceeds from the sale of minor assets. The agreements, which can span beyond a financial year, are not subject to parliamentary disallowance or sunsetting provisions, and the Finance Minister retains the authority to cancel or vary them at any time. The instrument only holds effect as long as the specific provisions exist in the annual Appropriation Acts, and the Australian Industrial Registry was consulted and agrees with the terms of the agreement.
Key Provisions
The Net Appropriation Agreement Australian Industrial Registry (the instrument) made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act) (subsection 31(1)) allows the Minister for Finance and Administration (subsection 31(3)) to enter into an agreement with other Ministers concerning items in Appropriation Acts marked as “net appropriations.” These agreements enable the Australian Industrial Registry to increase its departmental appropriation by any amounts received by the agency, as specified in the agreement (subsection 31(3)). Such agreements can cover any period, including periods longer than a financial year, and continue until circumstances require their renewal (subsection 31(4)). The agreement in question identifies the types of receipts that will increase an existing appropriation for the Australian Industrial Registry, and this is given effect by the annual Appropriation Acts (subsection 31(4)). This enables the Australian Industrial Registry to spend the receipts without the need for further appropriation by Parliament.
The obligations imposed by this agreement on the Australian Industrial Registry and the relevant Ministers include ensuring that the receipts specified in the agreement are accurately recorded and appropriately allocated within the agency’s budget. The agreement mandates that the Australian Industrial Registry must report on the use of these receipts in accordance with the annual Appropriation Acts, ensuring transparency and accountability in the expenditure of these funds. The Finance Minister retains the authority to cancel or vary the agreement at any time without requiring the consent of the other party (subsection 31(4)). The Australian Industrial Registry must also comply with any additional requirements set out in the annual Appropriation Acts, which provide that the relevant departmental or administered appropriation item is increased in accordance with the agreement.
Failure to comply with the provisions of the Net Appropriation Agreement Australian Industrial Registry could result in financial mismanagement and misallocation of funds. Although specific offences and penalties are not detailed in the explanatory statement, breaches of financial management and accountability regulations typically attract civil or criminal penalties under other sections of the FMA Act. The consequences may include fines, imprisonment, or other sanctions as prescribed by relevant legislation. The precise penalties would depend on the nature and severity of the breach, as well as any applicable provisions in other financial management laws.