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
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. The instrument is given effect by the annual appropriation Acts, which provide that the relevant 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 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 (FMA Act) was enacted to provide a framework for the financial management and accountability of Commonwealth entities, aiming to ensure that public money is used efficiently, effectively, economically, and ethically. This Act was introduced to address the need for a robust system to manage public funds, ensuring transparency, accountability, and adherence to financial management principles across all Commonwealth entities. The FMA Act is administered by the Parliament of Australia and seeks to establish clear guidelines and standards for financial management within the government. One of the key objectives of the FMA Act is to facilitate the effective control and management of public funds by enabling the Minister for Finance and Administration to enter into agreements that allow for the adjustment of appropriations based on specific receipts, as outlined in the Act.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) governs the agreements for "Net Appropriations" concerning the Department of Foreign Affairs and Trade, as illustrated by the instrument made under section 31 of the FMA Act, effective from 28 June 2005. The Act allows the Minister for Finance and Administration to enter into agreements with other ministers for items in Appropriation Acts marked as “net appropriation,” which enables certain departmental appropriation items to be increased by amounts received by an agency as specified in the agreement. This mechanism facilitates the spending of receipts such as sales of minor assets by the agency, without requiring further appropriation by Parliament. The instrument operates through specific provisions in the annual Appropriation Acts, and it remains in effect only as long as these provisions exist. The Department of Foreign Affairs, the agency affected by the instrument, was consulted during its drafting and agrees with its form. It is noteworthy that agreements 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) contains several key provisions that govern financial management and accountability within the Australian government. Section 31 of the Act is particularly significant as it allows the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts that are marked "net appropriation". This section, along with standard provisions of the annual Appropriation Acts, such as section 10 of the Appropriation Act (No.1) 2004-2005, enables departmental appropriation items to be increased by amounts received by an agency as specified in the agreement. The agreements can cover any period, including periods longer than a financial year, and they generally continue until circumstances require their renewal.
Under subsection 31(3) of the FMA Act, these agreements can cover any period, including periods longer than a financial year. This flexibility allows for long-term financial planning and management. Furthermore, subsection 31(4) of the FMA Act grants the Finance Minister the authority to cancel or vary an agreement at any time without the consent of the other party, providing a measure of control over financial agreements. These agreements are intended to streamline financial management and ensure that funds received by agencies can be used for their intended purposes without the need for additional parliamentary appropriation.
The obligations imposed by the FMA Act on the parties involved are clear and specific. The Minister for Finance and Administration must enter into agreements that accurately reflect the financial needs and circumstances of the relevant agencies. The affected agencies, such as the Department of Foreign Affairs, must ensure that any eligible receipts are properly recorded and that the funds are used in accordance with the terms of the agreement. Additionally, the annual Appropriation Acts must include specific provisions that give effect to these agreements, ensuring that the relevant appropriation items are increased in line with the amounts received by the agencies.
Failure to comply with the provisions of the FMA Act can result in significant consequences. While specific offences and penalties are not detailed in the explanatory statement, breaches of financial management and accountability laws can lead to both civil and criminal penalties. For example, breaches of appropriation laws can result in financial penalties, and in more severe cases, criminal charges may be brought against individuals responsible for the breach. The maximum penalties for such offences can vary widely, depending on the nature and severity of the breach. However, the overarching aim of the FMA Act is to ensure that public funds are managed responsibly and efficiently, with appropriate accountability mechanisms in place to prevent and address any breaches.