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 Department of Agriculture Fisheries and Forestry, commencing upon registration with 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 Department of Agriculture Fisheries and Forestry. 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 Department of Agriculture Fisheries and Forestry 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's appropriations and expenditure. This Act was introduced to provide a framework that ensures the proper control and management of public funds. Section 31 of the FMA Act allows the Minister for Finance and Administration to enter into agreements with other Ministers to facilitate the increase of appropriations for specified items, termed as "net appropriations." This mechanism is designed to ensure that certain receipts, such as proceeds from the sale of minor assets, can be utilised by the relevant agencies without requiring additional appropriation by Parliament, thereby streamlining financial operations and ensuring that resources are used efficiently. The agreements under this section are flexible, allowing for periods longer than a financial year and can be varied or cancelled by the Finance Minister at any time.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) enables the Minister for Finance and Administration to enter into agreements with other Ministers concerning items in Appropriation Acts that are designated as "net appropriations". This legislative framework is designed to allow certain receipts, such as proceeds from the sale of minor assets like surplus office furniture, to be included in the appropriations of specified departments, in this case, the Department of Agriculture Fisheries and Forestry. The instrument, which is a specific Net Appropriation Agreement for this department, specifies the types of receipts that can increase an existing appropriation, thus making those funds available for departmental expenditure. This mechanism ensures that agencies can utilise these additional funds without the need for further appropriation by Parliament. The instrument operates in conjunction with the annual Appropriation Acts and remains in effect only as long as the relevant provisions exist within these Acts. Importantly, agreements under section 31 of the FMA Act are exempt from the parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003, thereby providing a stable framework for the financial management of the relevant departments.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) under section 31 enables the Minister for Finance and Administration to enter into agreements with other Ministers regarding appropriations marked as “net appropriation.” These agreements, such as the Net Appropriation Agreement for the Department of Agriculture Fisheries and Forestry, allow for the increase of departmental appropriation items by specified amounts received by the agency, as outlined in the agreement (section 31(3) FMA Act). This mechanism ensures that certain receipts, such as proceeds from the sale of surplus assets, can be spent by the agency without the need for additional appropriation by Parliament.
The obligations imposed by this Act on the parties involved include the requirement that the Minister for Finance and Administration can enter into such agreements for any period, including beyond a financial year, and these agreements can be varied or cancelled at any time without the consent of the other party (section 31(4) FMA Act). Additionally, the affected department must ensure that the annual appropriation Acts include specific provisions that give effect to the agreement, thereby enabling the designated receipts to be spent by the agency.
Failure to adhere to the terms of these agreements can result in serious consequences. While specific offences and penalties are not outlined in the text, it is implied that breaches could lead to financial mismanagement or misuse of funds, which might be subject to internal audits or investigations. The agreements themselves, however, are not subject to the parliamentary disallowance or sunsetting provisions of the Legislative Instruments Act 2003, which means they remain in effect unless specifically altered or cancelled by the Minister for Finance and Administration. This ensures that the financial management framework remains robust and adaptable to the needs of the government agencies involved.