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 Research Council, commencing 31 January 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 Research Council. 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 Research Council 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 ensure that the Commonwealth's financial resources are managed in a manner that provides accountability and transparency. Specifically, it was introduced to address the need for efficient financial management practices within federal agencies, ensuring that funds are utilised effectively and in accordance with legislative and budgetary constraints. The Act was enacted by the Parliament of Australia, with the objective of providing a framework for financial management that is robust, transparent, and aligned with the public interest. Section 31 of the FMA Act empowers the Minister for Finance to enter into agreements that allow for the increase of departmental appropriations by certain specified receipts, facilitating more flexible and efficient financial management for agencies such as the Australian Research Council. These agreements ensure that funds received from activities like the sale of surplus assets can be re-allocated for intended agency expenditures without the need for additional parliamentary appropriation.
Scope and Application
The Net Appropriation Agreement for the Australian Research Council, established under Section 31 of the Financial Management and Accountability Act 1997, applies specifically to the Australian Research Council as the affected agency. This agreement allows the Council to increase its existing appropriation by incorporating receipts that it receives, such as proceeds from the sale of surplus office furniture and fittings. The scope of this agreement is defined by the specific provisions in the annual Appropriation Acts, which determine how and when these receipts can be utilised for expenditure by the Council. This legislation does not extend to other agencies or entities, ensuring its application remains internal to the machinery of government as intended. Additionally, this agreement operates without the requirement for parliamentary disallowance or sunset provisions, as it is exempted under the Legislative Instruments Act 2003, thereby maintaining its continuous effect unless otherwise cancelled or varied by the Minister for Finance and Administration.
Key Provisions
The main operative sections of the Financial Management and Accountability Act 1997 (FMA Act) relevant to the Net Appropriation Agreement for the Australian Research Council are sections 31 and 44. Section 31(1) of the FMA Act allows the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts marked as “net appropriations.” This section facilitates the process of increasing departmental or administered appropriation items by the amounts received by an agency as specified in the agreement. For example, any revenue generated by the sale of minor assets such as surplus office furniture can be allocated towards the agency's expenditure. Section 44 further details that such agreements are not subject to parliamentary disallowance and sunsetting provisions under the Legislative Instruments Act 2003, ensuring they remain in effect unless altered or cancelled by the Minister.
The Act imposes several obligations on the parties involved in these agreements. The Minister for Finance and Administration is tasked with entering into agreements that clearly outline the conditions under which receipts can be utilised by the respective agencies. These agreements must be specific about the types of receipts eligible for appropriation and the period for which the agreement remains in effect. Additionally, the Minister retains the authority to cancel or vary the agreement at any time without the consent of the other party, as stipulated in section 31(4) of the FMA Act. The Australian Research Council, as the affected agency, must comply with the terms of the agreement and ensure that any receipts are used in accordance with the specified guidelines.
Failure to adhere to the terms of the Net Appropriation Agreement could lead to legal consequences. While the explanatory statement does not explicitly outline specific offences or penalties for breaches, it is implied that non-compliance with the agreement could result in financial mismanagement or misuse of funds. Given the nature of the FMA Act, breaches might lead to disciplinary actions against the involved parties or agencies. It is important to note that the agreements themselves are not subject to parliamentary disallowance, but they do provide a framework within which financial activities must be conducted. Therefore, any significant deviation from the agreed terms could result in administrative or financial repercussions for the implicated agencies.