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 Families, Community Services and Indigenous Affairs commencing upon registration upon FRLI database
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 Families, Community Services and Indigenous Affairs. 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 Families, Community Services and Indigenous Affairs 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 robust financial management and accountability within the Australian Government's appropriations system. This Act enables the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts that are marked as "net appropriation". The objective of these agreements, as stated in section 31 of the FMA Act, is to allow departmental or administered appropriation items to be increased by amounts received by an agency, facilitating better financial management and ensuring that these receipts can be utilised by the relevant agency for its intended purposes without the need for additional parliamentary appropriation. These agreements can be for any period, including longer than a financial year, and can be cancelled or varied by the Finance Minister at any time. The instrument made under this section for the Department of Families, Community Services and Indigenous Affairs specifies the types of receipts that increase existing appropriations, such as the sale of minor assets like surplus office furniture and fittings, and is implemented through the annual Appropriation Acts.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) authorises the Minister for Finance and Administration to enter into agreements with other Ministers to increase departmental appropriations, specifically those marked as “net appropriation.” The instrument in question relates to an agreement for the Department of Families, Community Services and Indigenous Affairs, which identifies the types of receipts that can augment an existing appropriation. This arrangement allows the department to use the proceeds from certain activities, such as the sale of minor assets, for departmental expenditures without requiring further appropriation by Parliament. The instrument's effect is contingent upon the specific provisions in the annual Appropriation Acts, and it can cover a period longer than a financial year. The Minister for Finance and Administration can cancel or vary the agreement at any time without consent, and these agreements are exempt from the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003. The Department of Families, Community Services and Indigenous Affairs was consulted and agrees with the instrument, and no further consultation was deemed necessary as it pertains to internal government machinery.
Key Provisions
The instrument made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act) concerns the Department of Families, Community Services and Indigenous Affairs (section 31(1)). This instrument allows for the increase of an existing appropriation for the department based on certain receipts, as identified in the agreement (section 31(2)). The agreement can cover any period, not necessarily tied to a particular Appropriation Act, and can be longer than a financial year (section 31(3)). The Minister for Finance and Administration has the authority to cancel or vary the agreement at any time without requiring the consent of the other party (section 31(4)).
The obligations imposed by this Act on the Department of Families, Community Services and Indigenous Affairs include adhering to the terms set out in the Net Appropriation Agreement. This means that the department must ensure that any receipts specified in the agreement are properly recorded and utilised in accordance with the agreement. The department must also collaborate with the Finance Minister to monitor and manage these receipts effectively. Furthermore, the department is required to ensure that the specific provisions within the annual Appropriation Acts are aligned with the terms of the agreement, thereby enabling the receipts to be spent by the agency.
Any breach of the terms set out in the Net Appropriation Agreement could have various legal consequences. While the explanatory statement does not detail specific offences or penalties, it is likely that breaches could result in administrative or financial penalties as stipulated by relevant laws and regulations. Additionally, failure to adhere to the agreement could lead to inefficiencies in the management of departmental funds, potentially affecting the delivery of services. Given that agreements under section 31 of the FMA Act are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, there are fewer avenues for external scrutiny of these agreements, which underscores the importance of internal compliance mechanisms.