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 Public Service Commission, commencing
23 June 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 Public Service Commission. 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 Public Service Commission 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 the financial management of the Commonwealth and to ensure accountability in the use of public funds. The Act addresses the need for clear guidelines and mechanisms to manage appropriations effectively. Section 31 of the FMA Act allows the Minister for Finance and Administration to enter into agreements with other Ministers concerning items in Appropriation Acts marked as “net appropriation.” This provision enables certain receipts to increase existing appropriations, facilitating more flexible and efficient financial management within agencies. The purpose of these agreements is to ensure that funds received from specified activities, such as the sale of minor assets, can be utilised by the relevant agency without requiring further appropriation by Parliament. This mechanism streamlines the financial administration process and supports better budgetary control and accountability.
Scope and Application
The Net Appropriation Agreement for the Australian Public Service Commission, made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act), applies to the Australian Public Service Commission (APSC) and concerns the management of specific financial receipts that can increase the existing appropriations for the agency. This agreement, which came into effect on 23 June 2005, allows the APSC to utilise certain revenues, such as those from the sale of minor assets like surplus office furniture and fittings, without requiring further appropriation by Parliament. The agreement facilitates the spending of these receipts by the agency, thereby improving financial flexibility and accountability. The instrument operates through specific provisions in the annual Appropriation Acts, which must be in place for the agreement to have effect. The Minister for Finance and Administration has the authority to cancel or vary the agreement at any time without the consent of the other party, as outlined in subsection 31(4) of the FMA Act. 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 Financial Management and Accountability Act 1997 (FMA Act) includes, among other provisions, section 31, which facilitates the entering of agreements related to “net appropriations.” Specifically, section 31(1) of the FMA Act authorises the Minister for Finance and Administration to negotiate agreements with other Ministers regarding appropriation items marked as “net appropriations” in the Appropriation Acts. These agreements allow for the increase of departmental or administered appropriation items by the amounts received by the agencies as specified in the agreement (section 31(2)). Such agreements can be for any duration, not necessarily limited to the financial year, and typically continue until circumstances necessitate their renewal (section 31(3)). The Minister also retains the authority to cancel or amend these agreements at any time without requiring the consent of the other party (section 31(4)).
The obligations imposed by the FMA Act on the parties involved primarily revolve around the adherence to the terms of the agreement as stipulated in section 31. The Minister for Finance and Administration, in collaboration with other relevant Ministers, must ensure that the agreements are correctly implemented and that any increases to appropriation items are accurately reflected in the annual Appropriation Acts. The Australian Public Service Commission, as the affected agency, must comply with the provisions of these agreements and ensure that any eligible receipts, such as proceeds from the sale of minor assets, are managed in accordance with the agreement’s terms.
While the FMA Act does not explicitly list offences or penalties for breaches of the agreements under section 31, the overarching framework of the Act and related Appropriation Acts would still apply. Non-compliance with the provisions could potentially lead to administrative consequences, including scrutiny and potential corrective actions by the responsible authorities. Moreover, the absence of parliamentary disallowance and sunsetting provisions for agreements made under section 31 of the FMA Act (as outlined in the Legislative Instruments Act 2003) implies that such agreements are considered robust and integral to the financial management framework of the government. Failure to adhere to these agreements could thus result in financial mismanagement or misallocation of funds, leading to broader administrative or legal repercussions.