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 Department of Finance and Administration, commencing
29 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 Finance and Administration. The instrument is given effect by the annual appropriation Acts, which provide that the relevant departmental 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 of the Commonwealth and to ensure accountability for the use of public funds. It was introduced to address the need for clear guidelines and accountability in the management of government finances. The Act was passed by the Parliament of Australia, aiming to enhance the transparency and efficiency of financial operations within the federal government. Under Section 31 of the FMA Act, the Minister for Finance and Administration is empowered to enter into agreements with other ministers concerning appropriations marked as “net appropriation.” These agreements allow for the increase of departmental appropriations by amounts received by the relevant agencies, ensuring that these funds are available for expenditure by the agencies without the need for further appropriation by Parliament. The purpose of these agreements is to facilitate the management of receipts such as the sale of minor assets by agencies, ensuring that the proceeds can be utilised effectively within the scope of the agency's operations.
Scope and Application
The Financial Management and Accountability Act 1997, through section 31, provides the Minister for Finance and Administration with the authority to enter into agreements with other Ministers for items in Appropriation Acts that are marked as "net appropriation." These agreements serve to increase the appropriations for specific departments and agencies by the amounts received from specified transactions, as detailed in the agreements. The Act applies to appropriations for the Department of Finance and Administration, with the instrument in question, the Net Appropriation Agreement, coming into effect on 29 June 2005. This agreement is designed to allow the department to spend receipts from certain transactions, such as the sale of surplus office furniture and fittings, without requiring additional appropriation from Parliament. The agreement can be for any period, not limited to a specific Appropriation Act or financial year, and can be cancelled or varied by the Finance Minister at any time. Notably, these agreements are not subject to the parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) allows the Minister for Finance and Administration to enter into agreements with other Ministers for items marked as “net appropriation” in Appropriation Acts. These agreements, known as Net Appropriation Agreements, enable the appropriations for specific departments, such as the Department of Finance and Administration, to be increased by specified receipts, like proceeds from the sale of minor assets, without the need for additional appropriation by Parliament. This facilitates the spending of these receipts by the relevant agency.
The obligations under this Act for the parties involved include the requirement that the Minister for Finance and Administration can enter into these agreements to allow the specified departments to utilise their receipts for the purposes outlined in the agreements. These agreements need not necessarily align with the duration of a particular Appropriation Act and can extend beyond a financial year. Moreover, subsection 31(4) of the FMA Act empowers the Finance Minister to cancel or vary an agreement at any time without needing the consent of the other party. The Department of Finance and Administration, as the affected agency, is expected to comply with the terms of the agreement and ensure that the specified receipts are spent as per the agreement.
Failure to adhere to the provisions of the agreements made under section 31 of the FMA Act does not incur specific criminal or civil penalties as outlined in the legislation. However, non-compliance could potentially lead to financial mismanagement or misallocation of funds, which might result in scrutiny or corrective actions by the relevant oversight bodies. The agreements themselves are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, as stipulated in the explanatory statement.