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 the Department of Communications, Information Technology and the Arts 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 Department of Communications, Information Technology and the Arts. 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 Communications, Information Technology and the Arts 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 financial management of the Commonwealth and its entities, aiming to ensure accountability, transparency, and efficiency in the use of public funds. Section 31 of the FMA Act specifically addresses the need to manage net appropriations, allowing the Minister for Finance and Administration to enter into agreements with other ministers for items in Appropriation Acts marked as "net appropriation." These agreements enable departments to increase their existing appropriations by amounts received through specified activities, such as the sale of minor assets, thereby ensuring that these funds can be utilised for intended departmental expenditures without requiring further appropriation by Parliament. This mechanism supports streamlined financial management and operational flexibility for government agencies.
Scope and Application
The Net Appropriation Agreement instrument under section 31 of the Financial Management and Accountability Act 1997 applies specifically to the Department of Communications, Information Technology and the Arts, allowing it to increase its appropriation by certain specified receipts without requiring further appropriation by Parliament. The agreement is intended to ensure that funds received by the department from specific transactions, such as the sale of minor assets, are available for departmental expenditure. The agreement can be for any period and is subject to cancellation or variation by the Minister for Finance and Administration without the consent of the other party. This instrument is effective only for the duration of the specific provisions in the annual Appropriation Acts and does not require consultation beyond the affected department as it pertains to internal machinery of government purposes. Additionally, agreements made under this section are exempt from parliamentary disallowance and sunsetting provisions.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) provides the legislative framework under which the Net Appropriation Agreement for the Department of Communications, Information Technology and the Arts has been established (section 31(1)). This agreement allows for certain receipts, such as the proceeds from the sale of surplus assets, to be added to the existing appropriations of the department, enabling these funds to be used for departmental expenditure without the need for additional parliamentary appropriation. This is detailed in the annual Appropriation Acts, which stipulate that the relevant departmental appropriation item is increased in accordance with the agreement, thus making the receipts available for expenditure by the agency.
Under the agreement, the Minister for Finance and Administration has the authority to enter into such agreements with other ministers concerning items in Appropriation Acts that are marked as “net appropriation” (section 31(1)). This means that the agreement can be for any period, not necessarily limited to the duration of a financial year, and it generally continues until circumstances necessitate its renewal. The Finance Minister also has the power to cancel or vary an agreement at any time without the consent of the other party, as outlined in subsection 31(4) of the FMA Act. The agreement identifies the specific types of receipts that will increase the existing appropriation for the department, ensuring that these funds can be utilised for departmental purposes.
The obligations imposed by this agreement on the Department of Communications, Information Technology and the Arts include ensuring that any eligible receipts are correctly identified and accounted for in accordance with the terms of the agreement. The department must also adhere to the conditions set forth in the annual Appropriation Acts, which provide the mechanism by which the agreement takes effect. Any changes to the agreement must be communicated and agreed upon by the relevant parties, and the department must ensure that all financial activities comply with the terms of the agreement to avoid any potential misuse of funds.
There are no explicit offences or penalties outlined in the explanatory statement for breach of the Net Appropriation Agreement. However, any failure to comply with the terms of the agreement or the annual Appropriation Acts could potentially lead to financial mismanagement or misuse of public funds, which could result in legal consequences. While the specific penalties for such breaches are not detailed in the explanatory statement, they would likely be determined by the relevant financial regulations and internal departmental policies. The department is obligated to maintain accurate records and ensure proper financial governance to avoid any such issues.