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 Defence, commencing 30 June 2005.
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 Defence. 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 Defence 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 by the Australian Parliament to address issues related to the financial management and accountability of Commonwealth entities. Specifically, Section 31 of the FMA Act empowers the Minister for Finance and Administration to enter into agreements with other Ministers concerning "net appropriations" as outlined in Appropriation Acts. These agreements are designed to facilitate the increase of departmental appropriation items by the amounts received by an agency, as specified in the agreement. The objective of this legislative provision is to ensure that receipts from activities such as the sale of minor assets, which would otherwise require additional appropriation by Parliament, can be utilised for expenditure by the relevant agency. The instrument in question, which is an agreement for "Net Appropriations" for the Department of Defence, was developed to identify the types of receipts that increase existing appropriations for the department, thereby streamlining financial management processes.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) empowers the Minister for Finance and Administration to enter into agreements with other Ministers for items marked as "net appropriation" in Appropriation Acts. Specifically, section 31 of the FMA Act allows the Minister to agree on the use of funds received by an agency, thereby increasing the appropriation for the relevant department. This instrument, effective from 30 June 2005, pertains to the Department of Defence and identifies the types of receipts that increase the department's appropriation, such as the proceeds from the sale of surplus assets. These agreements are operationalised through specific provisions in annual Appropriation Acts, and while they can be for any period, they generally continue until circumstances necessitate renewal. The Minister has the authority to cancel or vary these agreements at any time without requiring consent from the other party. The Department of Defence was consulted during the drafting process and agrees with the instrument's form, and as it pertains to internal government mechanisms, no further consultation was deemed necessary. Notably, agreements under section 31 of the FMA Act are exempt from parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
The instrument, which is the Net Appropriation Agreement For the Department of Defence, is made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act). This section enables the Minister for Finance and Administration to enter into agreements with other Ministers for the purposes of items in Appropriation Acts that are marked "net appropriation" (section 31(1)). The instrument identifies the types of receipts which increase an existing appropriation for the Department of Defence (section 31(3)). 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 (section 31(3)). This enables the receipts to be spent by the agency (section 31(4)). The instrument allows for the agreement to be for any period, including a period longer than a financial year, and it generally continues until circumstances require its renewal (section 31(3)). The Finance Minister can cancel or vary the agreement at any time without the consent of the other party (section 31(4)).
The obligations imposed by the Act on the parties governed by it include the requirement for the Minister for Finance and Administration to enter into agreements with other Ministers for the purposes of items in Appropriation Acts that are marked "net appropriation" (section 31(1)). The Minister must also ensure that the agreement 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 (section 31(3)). The obligations also include the requirement for the agreement to be for any period, including a period longer than a financial year, and it generally continues until circumstances require its renewal (section 31(3)). The Finance Minister also has the obligation to cancel or vary the agreement at any time without the consent of the other party (section 31(4)).
There are no explicit offences, penalties, or civil/criminal consequences for breach mentioned in the explanatory statement. However, the Finance Minister has the authority to cancel or vary the agreement at any time without the consent of the other party (section 31(4)). It can be inferred that any failure to comply with the terms of the agreement could result in the cancellation or variation of the agreement by the Finance Minister. The explanatory statement does not provide information on the maximum penalties for breach. It is important to 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 (subsection 44(2) and subsection 54(2) of the Legislative Instruments Act 2003).