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 Climate Change, commencing 20 December 2007.
The legislative authority under which the instrument is made
Section 31 of the FMA Act enables the Minister for Finance and Deregulation (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 Climate Change. 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 Climate Change 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 was enacted to provide a framework for financial management and accountability within the Australian Government. One of the issues it aimed to address was the need for a flexible mechanism to manage appropriations, particularly in cases where departments receive additional funds through means other than direct appropriation by Parliament. The Act was enacted by the Australian Parliament to provide a robust and adaptable system for financial governance and accountability. Section 31 of the FMA Act specifically allows the Minister for Finance and Deregulation to enter into agreements with other ministers concerning "net appropriations", which are items in Appropriation Acts marked for such agreements. These agreements enable the increase of departmental appropriations by amounts received by an agency, as specified in the agreement, thereby allowing these funds to be spent without the need for further appropriation by Parliament. This legislative tool ensures that agencies can efficiently manage and utilise additional funds received through various means, enhancing the overall financial management framework of the government.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) provides the framework for financial agreements concerning "net appropriations" under section 31. This section empowers the Minister for Finance and Deregulation to enter into agreements with other Ministers regarding appropriations marked as "net" in Appropriation Acts, allowing departmental or administered appropriation items to be increased by specified receipts. The agreements are not limited to a particular financial year and can continue until circumstances necessitate their renewal. The agreements can be varied or cancelled by the Finance Minister at any time without requiring consent from the other party. The instrument in question specifically pertains to the Department of Climate Change, detailing the types of receipts that augment its existing appropriations. These agreements are implemented through specific provisions in the annual Appropriation Acts and remain in effect only as long as these provisions exist. The Department of Climate Change was consulted during the drafting process and agrees with the instrument’s form. As the instrument is for internal government purposes, no further consultation was deemed necessary. It is noteworthy that agreements made under section 31 of the FMA Act are exempt from the parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) provides a framework for the financial management of government agencies. Under section 31 of the Act, the Minister for Finance and Deregulation has the authority to enter into agreements with other ministers for items in Appropriation Acts marked as "net appropriations". These agreements allow for the increase of departmental appropriation items by amounts received by an agency as specified in the agreement. For instance, the instrument in question is a Net Appropriation Agreement for the Department of Climate Change, which identifies the types of receipts that can increase the existing appropriation for the department. Such receipts include sales of minor assets like surplus office furniture and fittings, and the proceeds from these sales can be used for expenditure by the department. These agreements can be for any period, including periods longer than a financial year, and can be cancelled or varied by the Minister for Finance and Deregulation at any time without the consent of the other party.
The obligations under this Act require that the Department of Climate Change, or any other agency covered by such an agreement, must ensure that the types of receipts that increase their appropriations are clearly identified and managed in accordance with the terms of the agreement. The annual Appropriation Acts incorporate specific provisions that give effect to the agreement, meaning that the agreement is only effective as long as these provisions exist within the Appropriation Acts. The department must also consult with the Minister for Finance and Deregulation and agree on the form of the instrument before it is finalised. Furthermore, the department must ensure that any receipts eligible for increasing their appropriation are properly recorded and accounted for.
Breaching the terms of these agreements can lead to significant consequences. While the explanatory statement does not detail specific offences, penalties, or consequences for breach, the FMA Act generally provides for various enforcement mechanisms. These may include financial penalties, corrective actions, or other administrative measures to ensure compliance. The Act also provides for civil or criminal liability in cases where there is intentional or reckless disregard for the provisions of the Act. The maximum penalties for breaches can vary depending on the nature and severity of the breach, but they can include substantial fines and, in some cases, imprisonment. It is important for agencies to adhere to the terms of these agreements to avoid these potential consequences.