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 12 April 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 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 provide a framework for the financial management and accountability of Commonwealth agencies. It addresses the need for efficient and effective financial management within the public sector, ensuring that public funds are used responsibly and in accordance with legislative requirements. The Act empowers the Minister for Finance and Administration to enter into agreements with other Ministers to increase appropriations for certain items, such as the sale of surplus assets, without requiring further appropriation by Parliament. This legislative instrument, made under section 31 of the FMA Act, specifically targets the Department of Finance and Administration, allowing it to utilise receipts from specified activities directly, thereby streamlining financial operations and ensuring funds are available for intended expenditures. The policy objective is to enhance the flexibility and efficiency of financial management within the public sector, facilitating better use of resources and adherence to budgetary constraints.
Scope and Application
The Net Appropriation Agreement for the Department of Finance and Administration, commencing on 12 April 2005, is established under section 31 of the Financial Management and Accountability Act 1997 (FMA Act). This agreement applies to the Finance Minister's capacity to negotiate with other ministers for items in Appropriation Acts marked as "net appropriation". The purpose is to allow the increase of departmental appropriation items by the amounts received by an agency as specified in the agreement, with these agreements generally continuing until circumstances necessitate their renewal. The scope of the agreement is confined to the Department of Finance and Administration, and it operates within the framework of the annual Appropriation Acts, which are designed to provide the legal basis for the increase in appropriations. The agreement does not require external consultation as it pertains to internal government operations, although the department was provided with drafts for review prior to finalisation. Notably, agreements under section 31 of the FMA Act are exempt from parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) authorises the Minister for Finance and Administration to enter into agreements with other ministers for certain appropriation items marked as “net appropriation” (section 31(1)). These agreements allow for the increase of departmental or administered appropriation items based on specified receipts, such as sales of minor assets like surplus office furniture. These agreements can cover any period, including beyond a financial year, and may be cancelled or varied at any time by the Finance Minister without requiring consent from the other party (subsection 31(3) and (4)). The instrument in question pertains to the Department of Finance and Administration and identifies types of receipts that increase the department's appropriation.
Obligations and requirements under this Act include ensuring that the relevant appropriation items in the annual Appropriation Acts reflect the agreed increases. This ensures that any receipts from specified activities, such as the sale of minor assets, can be spent by the agency without the need for further appropriation by Parliament. The Department of Finance and Administration must comply with these agreements, which are given effect through specific provisions in the annual Appropriation Acts. It is important to note that the instrument only has effect as long as the relevant provisions exist in the Appropriation Acts.
There are no specific offences or penalties outlined in the explanatory statement for breaches of the Net Appropriation Agreement. However, the implications of not adhering to the agreement could involve financial mismanagement or misallocation of funds, which might lead to broader accountability issues. The Finance Minister retains the authority to cancel or vary the agreement at any time, providing a safeguard against any potential misuse of the agreement. The instrument does not fall under the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, highlighting its stability and ongoing relevance in managing departmental appropriations.