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 Foreign Affairs and Trade, commencing
28 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 Foreign Affairs and Trade. 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 Foreign Affairs and Trade 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 issues surrounding the financial management and accountability of government agencies in Australia. Section 31 of the FMA Act empowers the Minister for Finance and Administration to enter into agreements with other ministers regarding "net appropriations." These agreements allow for the increase of appropriations for certain departments, such as the Department of Foreign Affairs and Trade, by amounts received through specified activities, such as the sale of minor assets. This mechanism ensures that funds received by these agencies can be spent within the scope of their operations without requiring additional appropriations from Parliament. The purpose of this legislative instrument is to streamline financial management processes and ensure that agencies can utilise their received funds effectively.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) provides the legislative framework for the Net Appropriation Agreement for the Department of Foreign Affairs and Trade, which applies to the Minister for Finance and Administration and the relevant appropriations for the department. The instrument, made under section 31 of the FMA Act, allows the Minister for Finance and Administration to enter into agreements with other ministers regarding appropriations marked as "net appropriation." The purpose of these agreements is to ensure that any receipts generated by the department, such as from the sale of minor assets like surplus office furniture, can be used for departmental expenditure without requiring further appropriation by Parliament. These agreements are not bound by the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, and they can cover any period, including beyond a financial year, until circumstances necessitate their renewal or variation. The instrument is effective only as long as the specific provisions exist within the annual Appropriation Acts.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) includes provisions that allow for the making of agreements under section 31, which pertain to "net appropriations." This section enables the Minister for Finance and Administration to enter into agreements with other Ministers to adjust departmental appropriations based on certain receipts. Specifically, section 31(3) of the FMA Act permits these agreements to cover any period, not necessarily limited to a financial year, and they remain in effect until changed by circumstances. The Minister also has the authority to cancel or vary these agreements at any time without the consent of the other party, as outlined in section 31(4).
The operative sections of this legislation mandate that the agreements specify the types of receipts that will increase the existing appropriation for the relevant department. In this case, the instrument focuses on the Department of Foreign Affairs and Trade. The annual Appropriation Acts enforce these agreements by increasing the relevant departmental appropriation items according to the terms of the agreement, allowing the agency to spend the receipts as necessary. For example, if the department sells surplus office furniture, the proceeds from such sales can be used for departmental expenditure.
The obligations under this Act require that the Department of Foreign Affairs and Trade adhere to the terms of the agreement, which has been drafted and agreed upon by the department itself. There is no requirement for broader consultation as the instrument is for internal government purposes only, and no other parties are affected directly by its terms. However, the annual Appropriation Acts must contain specific provisions to give effect to the instrument, meaning the agreement is only valid as long as these provisions exist.
Regarding potential breaches, the FMA Act does not explicitly outline specific offences or penalties for violating the terms of a net appropriation agreement. However, any misuse of public funds or failure to comply with financial management directives could lead to broader legal consequences under other sections of the FMA Act or related financial legislation. The agreements themselves are not subject to the disallowance or sunsetting provisions of the Legislative Instruments Act 2003, highlighting their specific nature and the importance of their terms being strictly adhered to.