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 Education, Science and Training, commencing upon registration upon 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 Education Science and Training. 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 Education Science and Training 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 address issues related to the management and accountability of public funds, ensuring that the Commonwealth's financial resources are used efficiently and effectively. This Act was introduced by the Australian Parliament, aiming to provide a framework for financial management that promotes transparency, responsibility, and effectiveness in the use of public funds. Specifically, Section 31 of the Act allows the Minister for Finance and Administration to enter into agreements with other Ministers concerning appropriations marked as "net appropriations." These agreements facilitate the adjustment of departmental appropriations based on specified receipts, ensuring that agencies can utilise the funds they generate without the need for additional parliamentary appropriation. The objective is to streamline financial operations within government agencies and ensure that they can respond more flexibly to their financial circumstances.
Scope and Application
The instrument described pertains to the Financial Management and Accountability Act 1997, specifically under section 31, which allows for agreements concerning "net appropriations." The Act applies to agreements made between the Minister for Finance and Administration and other ministers for items in Appropriation Acts marked as "net appropriations." This primarily involves the Department of Education, Science and Training, which is the entity affected by this particular agreement. The agreement delineates the types of receipts that will increase an existing appropriation for the department, enabling these receipts to be spent by the agency without further appropriation by Parliament. The agreement's jurisdiction is federal, aligning with the Commonwealth's financial management frameworks. The agreement extends to 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. Notably, this instrument is subject to the annual Appropriation Acts and ceases to have effect when those specific provisions no longer exist.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) provides the framework for agreements that allow for "net appropriations." Under this section, the Minister for Finance and Administration can enter into agreements with other Ministers to increase departmental appropriation items by the amounts received by an agency as specified in the agreement. These agreements can cover any period, not necessarily limited to the duration of a specific Appropriation Act, and can be varied or cancelled by the Finance Minister at any time without requiring the consent of the other party. The purpose of these agreements is to ensure that certain receipts, such as those from the sale of minor assets, are available for departmental expenditure without requiring additional appropriation by Parliament.
The obligations imposed by this Act on the parties involved primarily include the requirement for the Minister for Finance and Administration to enter into agreements that clearly define the types of receipts that will increase an existing appropriation. The affected department, in this case, the Department of Education, Science and Training, must ensure that these agreements align with the operational needs and financial management practices. The annual Appropriation Acts incorporate these agreements, enabling the specified receipts to be spent by the agency. The department must also provide input and agree with the form of the instrument before it is finalised. Additionally, the agreements must be in line with the specific provisions set out in the annual Appropriation Acts, ensuring that the agreements remain effective as long as these provisions exist.
Failure to comply with the provisions outlined in the agreements or the FMA Act may result in significant consequences. While specific offences and penalties are not detailed in the explanatory statement, breaches of financial management and accountability regulations can generally lead to civil or criminal penalties. For instance, under other sections of the FMA Act, unauthorised expenditure or misuse of public funds can result in fines and imprisonment. The maximum penalties for such offences can vary, but they often reflect the severity and impact of the breach on public finances. It is crucial for parties involved to adhere strictly to the terms of the agreements and the legislative requirements to avoid these adverse outcomes.