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 Finance and Administration, commencing upon registration n 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 Finance and Administration 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 Finance and Administration 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 ensure robust financial management and accountability in the government sector. It provides a framework for the effective management of public funds and the accountability of government entities. One of the key provisions of the FMA Act is section 31, which enables the Minister for Finance and Administration to enter into agreements with other Ministers regarding appropriations marked as "net appropriations." This provision addresses the need for flexibility in managing funds that are received by an agency and need to be spent by that agency without requiring further appropriation by Parliament. The instrument created under section 31, titled Net Appropriation Agreement for the Department of Finance and Administration, facilitates the increase of existing appropriations by amounts received by the agency, such as proceeds from the sale of minor assets. The agreement ensures that these receipts can be utilised for departmental expenditure, thereby enhancing the efficiency of financial management within the government. The Australian Parliament enacted this provision to streamline financial processes and improve the accountability of government spending.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to the Minister for Finance and Administration, who is empowered to enter into agreements with other Ministers concerning items marked as “net appropriation” in Appropriation Acts. These agreements, which can span periods longer than a financial year, pertain to the Department of Finance and Administration and are designed to facilitate the increase of departmental appropriations by receipts specified in the agreement. This arrangement ensures that certain funds, such as those from the sale of minor assets, are available for departmental expenditure without the need for further parliamentary appropriation. The instrument, effective through specific provisions in annual Appropriation Acts, is tailored for internal government operations and does not require external consultation. Notably, agreements under section 31 of the FMA Act are exempt from parliamentary disallowance and sunset provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
The main operative sections of the Financial Management and Accountability Act 1997 (FMA Act) relevant to this instrument pertain to agreements for “net appropriations” under section 31. This section allows the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts that are marked as “net appropriation.” These agreements can cover any period, including periods longer than a financial year, and may be varied or cancelled by the Finance Minister at any time without the consent of the other party (section 31(3) and 31(4) of the FMA Act). The agreements are designed to ensure that any receipts received by an agency, such as the sale of surplus assets, can be spent by that agency without requiring further appropriation by Parliament.
The obligations and requirements imposed by the Act on the parties governed by it include the need for the Minister for Finance and Administration to enter into formal agreements with relevant Ministers for net appropriation items. These agreements must be in line with the provisions of the Appropriation Acts, which specify how the appropriations can be increased by the amounts received by the agency. The Department of Finance and Administration, as the affected agency, must also adhere to these agreements and ensure that any receipts are managed and spent in accordance with the stipulated terms. The Finance Minister retains the flexibility to vary or cancel these agreements as necessary, ensuring that the financial management practices remain adaptable to changing circumstances.
The Act does not specify explicit offences, penalties, or consequences for breach of these agreements. However, any failure to comply with the terms of the agreements could potentially lead to financial mismanagement or misuse of funds, which might attract scrutiny from the responsible authorities. Additionally, the agreements are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, meaning they do not require parliamentary approval or periodic review to remain in effect. The focus, therefore, remains on ensuring that the agreements are adhered to in good faith to maintain proper financial accountability and management within the government.