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 Office of Financial Management, commencing 25 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 Office of Financial Management. 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 Office of Financial Management 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 improved financial management and accountability within the Commonwealth. The Act provides a framework for the management of public money, ensuring that it is used efficiently, effectively, and economically. One of the mechanisms introduced by the Act is the ability for the Minister for Finance and Administration to enter into agreements with other Ministers under section 31, concerning items in Appropriation Acts marked as "net appropriation." This legislative instrument facilitates the increase of departmental appropriations by amounts received by an agency, such as proceeds from the sale of minor assets, thereby ensuring that these funds can be spent by the agency without requiring further appropriation by Parliament. The policy objective behind this provision is to enhance financial flexibility and efficiency within government agencies by allowing them to utilise income generated from specific activities directly, rather than having to seek additional funds through parliamentary processes.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to the financial management practices of Commonwealth entities, ensuring accountability and transparency in the use of public funds. Specifically, section 31 of the Act allows the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts that are marked as "net appropriations." This means that these agreements are focused on the management of receipts that increase existing appropriations, allowing agencies to utilise these funds without the need for further parliamentary appropriation. The agreements can cover any period, including beyond a financial year, and can be varied or cancelled by the Finance Minister at any time. The instrument is primarily concerned with the Australian Office of Financial Management, which was consulted during the drafting process, and it is given effect through specific provisions in the annual Appropriation Acts. Notably, these agreements are exempt from the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
The main operative sections of this instrument (F2005L00520) pertain to section 31 of the Financial Management and Accountability Act 1997 (FMA Act) which authorises the Minister for Finance and Administration to enter into agreements for net appropriations. These agreements (sections 31(1) and 31(3)) allow for the increase of departmental appropriation items by specified amounts received by an agency, as outlined in the agreement. The agreements are not bound by the timeframes of a particular Appropriation Act and can extend beyond a financial year (section 31(3)). Additionally, the Finance Minister can cancel or vary these agreements at any time without requiring the consent of the other party (section 31(4)). The instrument details the types of receipts that can increase existing appropriations for the Australian Office of Financial Management, which are implemented through specific provisions in the annual Appropriation Acts.
The Act imposes several obligations on the parties involved. Firstly, the Finance Minister must enter into agreements with other Ministers for net appropriation items marked in the Appropriation Acts (section 31(1)). The Australian Office of Financial Management, as the affected agency, must ensure that the types of receipts specified in the agreement are accurately reported and available for expenditure. The agreement identifies the specific receipts that can be used to increase existing appropriations (clause 5.1). The annual Appropriation Acts must include provisions that give effect to the instrument, ensuring that the relevant appropriation items are increased accordingly. Furthermore, the Finance Minister has the authority to cancel or vary the agreements at any time (section 31(4)), which necessitates that all parties remain flexible and responsive to potential changes.
The instrument does not explicitly outline specific offences, penalties, or consequences for breaches of the agreement. However, any failure to adhere to the terms of the agreement could potentially lead to financial mismanagement or misuse of appropriated funds, which could attract broader scrutiny and accountability under the FMA Act. The Act itself provides a framework for financial management and accountability, and any breaches could result in disciplinary actions, audits, or investigations under the general provisions of the FMA Act. Although the instrument does not specify maximum penalties, breaches could result in significant consequences for the involved parties, impacting their financial operations and compliance with legislative requirements.