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 Securities and Investments Commission, commencing on the date when the agency is prescribed in Part 1 of Schedule 1 of the FMA Regulations 1997. The instrument will commence on 1 July 2007.
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 Securities and Investments 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 Securities and Investments 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 address the need for robust financial management and accountability within the Australian Government. The Act aims to ensure that government agencies manage their finances effectively and are accountable for their financial decisions. Section 31 of the FMA Act, which enables the Minister for Finance and Administration to enter into agreements for "net appropriations" with other Ministers, was introduced to provide flexibility in the management of government appropriations. These agreements allow for the automatic increase of appropriations based on certain receipts, facilitating more efficient financial management. The policy objective behind these provisions is to enhance the financial autonomy of government agencies, enabling them to spend funds they receive from specified activities without additional appropriation by Parliament. The instrument in question, which establishes a net appropriation agreement for the Australian Securities and Investments Commission, ensures that the agency can utilise receipts from specified activities, such as the sale of minor assets, for expenditure, thereby improving financial flexibility and accountability.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to appropriations and financial management practices within the Australian government, particularly concerning the allocation and use of funds by Commonwealth agencies. Under section 31 of the FMA Act, the Minister for Finance and Administration can enter into agreements with other Ministers to specify how certain items in Appropriation Acts, marked as "net appropriations," are to be managed. These agreements allow agencies, such as the Australian Securities and Investments Commission, to retain and spend receipts from specified activities, such as the sale of minor assets, without requiring further appropriation by Parliament. The agreements can cover any period, including beyond a single financial year, and can be varied or cancelled by the Finance Minister at any time. This instrument, which relates to the Australian Securities and Investments Commission, was agreed upon by the relevant agency and is given effect through specific provisions in the annual Appropriation Acts, making it effective only as long as these provisions exist. Importantly, agreements under section 31 of the FMA Act are exempt from the disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) establishes a framework for managing and accounting for government finances, with Section 31 being particularly pertinent to the present instrument. Section 31(1) allows the Minister for Finance and Administration to enter into agreements with other ministers for items in Appropriation Acts that are marked as “net appropriation”. This means that any revenue or income generated by an agency, as specified in the agreement, can increase the existing appropriation for that agency. For example, if the Australian Securities and Investments Commission (ASIC) sells surplus office furniture, the proceeds from this sale can be added to their appropriation, making them available for expenditure without further appropriation by Parliament.
The obligations imposed by this Act on the relevant parties are primarily administrative and procedural. The Minister for Finance and Administration is tasked with entering into these agreements and ensuring they are aligned with the appropriations outlined in the Appropriation Acts. The agencies, such as ASIC, must adhere to the terms of the agreement and ensure that any specified receipts are properly accounted for and utilised as permitted under the agreement. The agreements, as per Section 31(3) of the FMA Act, can be for any period and are not necessarily tied to the duration of a particular Appropriation Act, allowing for flexibility in financial management.
Failure to comply with the terms of these agreements could have significant consequences, although specific offences and penalties are not detailed in the explanatory statement. The FMA Act, however, implies that breaches may result in financial mismanagement or misallocation of funds, which could lead to administrative penalties or corrective actions as per the Act's provisions. Additionally, because agreements under Section 31 of the FMA Act are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, they remain in effect unless explicitly cancelled or varied by the Minister for Finance and Administration, as per Section 31(4) of the FMA Act. This provides a robust framework to manage agency finances while ensuring accountability and proper utilisation of government funds.