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 Immigration and Multicultural Affairs Section 31 Agreement commencing upon registration of the agreement on the Federal Register of Legislative Instruments.
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 Immigration and Multicultural Affairs. 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 Immigration and Multicultural 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 address the need for improved financial management and accountability within Australian government departments and agencies. This legislation was introduced to provide a clear framework for the allocation, management, and reporting of public funds, ensuring transparency and efficiency in government spending. The Act was passed by the Parliament of Australia, aiming to establish robust financial management practices across the public sector. The policy objective behind the Act is to enhance the integrity and effectiveness of financial management within government agencies, thereby promoting fiscal responsibility and public trust in government operations.
Under the Act, Section 31 specifically allows the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts that are marked as "net appropriation". This provision enables agencies to increase their existing appropriations by amounts received from specified activities, such as the sale of minor assets. These agreements facilitate the reallocation of funds within the fiscal year without requiring additional parliamentary appropriation, streamlining the financial processes and ensuring that agencies can effectively utilise available resources.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to the Finance Minister and other Ministers of the Commonwealth, enabling them to enter into agreements regarding appropriations marked as "net appropriation." These agreements, facilitated by section 31 of the FMA Act, allow for the increase of departmental or administered appropriation items based on specified receipts, such as the sale of minor assets by an agency. The instrument in question, the Net Appropriation Agreement for the Department of Immigration and Multicultural Affairs, is effective upon registration and operates in conjunction with the annual Appropriation Acts, ensuring that receipts from specified transactions are available for departmental expenditure without additional parliamentary appropriation. The agreement extends beyond a single financial year and can be varied or cancelled by the Finance Minister at any time. This instrument is designed for internal government machinery, with consultation limited to the affected department, and it is not subject to the parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
The primary operative sections of the Financial Management and Accountability Act 1997, particularly section 31, establish the framework for net appropriation agreements. Section 31 allows the Minister for Finance and Administration to enter into agreements with other ministers regarding appropriation items marked as "net appropriation" in Appropriation Acts. These agreements can cover any period, including beyond a financial year, and enable the appropriation for specific departments to be increased by specified receipts. This means that any revenue generated by the sale of minor assets, for instance, can be retained by the department and used for expenditure without the need for additional appropriation by Parliament.
These agreements impose several obligations on the parties involved. Firstly, the Finance Minister must enter into agreements that specify the types of receipts that can increase the appropriation for the relevant department. The Department of Immigration and Multicultural Affairs, in this case, must ensure that the agreements align with its operational needs and financial planning. Furthermore, the Finance Minister retains the authority to cancel or vary these agreements at any time, as stipulated in subsection 31(4) of the Act, without requiring consent from the other party.
Breaching the terms of these agreements, or failing to comply with the provisions set out in the FMA Act, can lead to various consequences. Although the explanatory statement does not detail specific offences or penalties for breaches, general provisions within the Act or other related legislation might apply. Non-compliance could potentially result in financial mismanagement, misallocation of funds, or other administrative penalties. The Act does not explicitly outline maximum penalties for breaches within this specific context, but it is implied that significant consequences would follow from failing to adhere to the agreement terms or statutory requirements.