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 Trade Commission, 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 the Australian Trade 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 Trade 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 management and accountability of financial resources within the Commonwealth. The Act aims to ensure that financial management practices within the public sector are consistent, transparent, and accountable. The instrument under consideration is the Net Appropriation Agreement for the Australian Trade Commission, which was made under section 31 of the FMA Act. This agreement allows for the increase of appropriations for the Australian Trade Commission by the amounts received from specified activities, such as the sale of surplus office furniture and fittings, without requiring further appropriation by Parliament. This mechanism ensures that the agency can utilise the proceeds from these activities for their intended purposes, thereby enhancing financial flexibility and operational efficiency. The instrument has been developed in consultation with the Australian Trade Commission and is effective as long as the relevant provisions exist in the annual Appropriation Acts.
Scope and Application
The instrument outlined in the explanatory statement pertains to a Net Appropriation Agreement made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act). It specifically applies to the Australian Trade Commission, which is the entity affected by this agreement. The purpose of this agreement is to facilitate the increase of existing appropriations for the Australian Trade Commission by the amounts received by the agency, such as from the sale of minor assets like surplus office furniture and fittings. This legislative instrument is created to ensure that these receipts are available for expenditure by the agency without requiring further appropriation by Parliament. The agreement is authorised by the Finance Minister and can extend beyond a single financial year, continuing until circumstances necessitate its renewal. Importantly, the agreement allows the Finance Minister to cancel or vary it at any time without the consent of the other party, providing flexibility in financial management. The agreement’s effect is contingent upon the existence of specific provisions within the annual Appropriation Acts, and it only applies to the Australian Trade Commission as per the consultation and agreement processes outlined in the document.
Key Provisions
The main operative sections of the Financial Management and Accountability Act 1997 (FMA Act), as referenced in the explanatory statement, are sections 31 and 10 of the Appropriation Act (No. 1) 2004-2005. Section 31 of the FMA Act allows the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts marked "net appropriation." These agreements can cover any period, including beyond a financial year, and can be cancelled or varied by the Finance Minister at any time without the consent of the other party. Section 10 of the Appropriation Act (No. 1) 2004-2005 specifies that departmental or administered appropriation items can be increased by the amounts received by an agency as outlined in the agreement. This allows the agency to spend those receipts, which without the agreement, would not be available without further appropriation by Parliament.
The Act imposes obligations on the parties involved, primarily the Minister for Finance and Administration and the relevant agencies such as the Australian Trade Commission. The Finance Minister must enter into agreements that enable the specified agencies to increase their appropriations through certain receipts, such as the sale of minor assets. These agreements are integral to ensuring that agencies can utilise funds received from specific activities without needing additional parliamentary approval. The Australian Trade Commission, as the agency affected, must comply with the terms of the agreement and ensure that any eligible receipts are appropriately accounted for and spent in accordance with the agreement.
For breaches of the obligations outlined in the agreements, the consequences can include both civil and criminal penalties. However, the explanatory statement does not specify any particular offences, penalties, or civil/criminal consequences for breach of the Act itself. It does note that 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, which means they remain in effect unless explicitly cancelled or varied by the Finance Minister. Any failure to adhere to the terms of the agreement could potentially lead to financial mismanagement or misuse of funds, but the exact penalties would depend on the nature and severity of the breach.