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 Resources, Energy and Tourism, commencing on 21 December 2007.
The legislative authority under which the instrument is made
Section 31 of the FMA Act enables the Minister for Finance and Deregulation (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 Resources, Energy and Tourism. 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 Resources, Energy and Tourism 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 of financial management and accountability within the Australian government. This Act provides the legislative framework for the management of public money, including the allocation and appropriation of funds. The FMA Act was introduced by the Commonwealth Parliament to ensure that public funds are used efficiently, effectively, and in accordance with the law. One of the key provisions of the Act is Section 31, which allows the Minister for Finance and Deregulation to enter into agreements with other ministers concerning "net appropriations". These agreements enable the increase of departmental appropriations by amounts received by an agency, such as proceeds from the sale of surplus assets, without the need for further appropriation by Parliament. The purpose of these agreements is to provide flexibility in the management of public funds and to ensure that revenue generated by government agencies can be utilised for their intended purposes.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to the Minister for Finance and Deregulation, who has the authority to enter into agreements with other Ministers concerning items in Appropriation Acts that are marked as “net appropriations.” This particular instrument, a Net Appropriation Agreement for the Department of Resources, Energy and Tourism, identifies types of receipts that can increase an existing appropriation for the department. These agreements enable receipts from specific activities, such as the sale of minor assets, to be spent by the agency without requiring further appropriation by Parliament. The instrument's effect is contingent upon the existence of specific provisions in the annual Appropriation Acts, and the agreement can span periods longer than a financial year, continuing until circumstances necessitate its renewal or alteration. Notably, these agreements are not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003, offering flexibility in their management and implementation.
Key Provisions
The instrument, made under section 31 of the Financial Management and Accountability Act 1997 (FMA Act), facilitates agreements for "net appropriations" for the Department of Resources, Energy and Tourism, effective from 21 December 2007. These agreements enable the department to increase its appropriation by any amounts it receives as specified in the agreement. Section 31 of the FMA Act empowers the Minister for Finance and Deregulation to enter into such agreements with other Ministers for items in Appropriation Acts marked as "net appropriation". The agreements can be for any period, not necessarily tied to a particular Appropriation Act or financial year, and can be cancelled or varied by the Finance Minister at any time without the consent of the other party.
The instrument specifically identifies the types of receipts that increase the department's appropriation, such as proceeds from the sale of minor assets like surplus office furniture and fittings. These receipts are then available for departmental expenditure without the need for further appropriation by Parliament. The operation of the instrument is contingent upon the specific provisions within the annual Appropriation Acts, which incorporate the terms of the agreement and allow for the appropriation increase. This ensures that the instrument remains effective only as long as the relevant provisions exist in the annual Appropriation Acts.
The obligations imposed by the instrument include ensuring that the department adheres to the terms specified in the agreement, which outlines the types of receipts that qualify for increasing the appropriation. The department must also ensure that the proceeds from these specified receipts are used in accordance with the purposes outlined in the agreement. Furthermore, the instrument requires the department to maintain records and documentation that demonstrate compliance with the terms of the agreement, providing transparency and accountability in the use of the increased appropriation.
The consequences for breach of the instrument are not explicitly stated, but the authority granted under section 31(4) of the FMA Act allows the Finance Minister to cancel or vary the agreement at any time. Such actions could be taken in response to a breach, effectively removing the ability of the department to increase its appropriation through the specified receipts. Additionally, any misuse of the increased appropriation could lead to administrative or legal repercussions, although specific penalties are not detailed within the instrument. The department is expected to operate within the bounds of the agreement to avoid any negative consequences.