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 Foreign Affairs and Trade, commencing
30 November 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. The instrument is given effect by the annual appropriation Acts, which provide that the relevant administered appropriation item for outcome 3 for the agency 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 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 was enacted to provide a comprehensive framework for the management and accountability of public funds within the Australian government. This Act was introduced to address the need for robust financial management practices, ensuring that public money is used efficiently, effectively, and in accordance with the law. The Act was enacted by the Parliament of Australia and its overarching policy objective is to promote transparency, accountability, and prudent financial management across all government agencies. Section 31 of the FMA Act specifically empowers the Minister for Finance and Administration to enter into agreements with other ministers concerning items in Appropriation Acts that are designated as "net appropriations," allowing certain departmental and administered appropriation items to be increased by specified receipts. This mechanism ensures that agencies can utilise receipts from specific activities, such as the sale of surplus assets, for their intended purposes without requiring additional appropriation by Parliament.
Scope and Application
The instrument pertains to an agreement under Section 31 of the Financial Management and Accountability Act 1997, which enables the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts marked as "net appropriation". This instrument, specifically the Net Appropriation Agreement For the Department of Foreign Affairs and Trade, applies to the Department of Foreign Affairs and Trade and is effective from 30 November 2005. The agreement allows the department to increase its appropriation by the amounts received through specified transactions, such as the sale of minor assets like surplus office furniture and fittings. This ensures that the proceeds from such transactions are available for departmental expenditure without the need for further appropriation by Parliament. The agreement can extend beyond a financial year and may be cancelled or varied by the Finance Minister at any time. The instrument is implemented through specific provisions in the annual Appropriation Acts, which outline the eligible receipts that increase the existing appropriation for the department. The agreement is for internal government machinery purposes and therefore did not require consultation with external parties. Notably, agreements made under Section 31 of the FMA Act are exempt from the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) includes specific provisions that enable the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts that are marked “net appropriation” (Section 31). These agreements allow for the increase of departmental appropriation items by amounts received by an agency as specified in the agreement. The agreements can be for any period, including periods longer than a financial year, and they can be cancelled or varied by the Finance Minister at any time without the consent of the other party (Section 31(3) and 31(4)). This particular instrument, the Net Appropriation Agreement For the Department of Foreign Affairs and Trade, identifies the types of receipts that increase an existing appropriation for the Department of Foreign Affairs.
The obligations imposed by this Act require that the Department of Foreign Affairs provide drafts of the instrument for review before finalisation and agree with the form of the instrument. 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. Importantly, because this instrument is for internal machinery of government purposes only, no consultation was considered necessary with other persons, as per sections 17 and 18 of the Legislative Instruments Act 2003.
Failure to adhere to the requirements set out in the FMA Act may result in civil or criminal consequences. The FMA Act does not explicitly state penalties for non-compliance, but breaches of financial management and accountability legislation can lead to disciplinary action, financial penalties, or legal proceedings. 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, the seriousness of non-compliance is underscored. Therefore, it is critical for the Department of Foreign Affairs and any other affected entities to comply fully with the terms of the agreement and the requirements of the FMA Act to avoid potential legal and financial repercussions.