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 the Prime Minister and Cabinet, commencing 27 September 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 the Prime Minister and Cabinet. 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 the Prime Minister and Cabinet 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 financial management and accountability within the Australian government. It was designed to address the need for effective financial oversight and control mechanisms to ensure that public funds are used efficiently and transparently. The FMA Act was introduced by the Parliament of Australia to establish a robust system for the appropriation and management of public funds, ensuring accountability and compliance with financial regulations. Section 31 of the FMA Act empowers the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts marked as “net appropriation,” enabling the increase of departmental appropriation items by specified receipts. This provision facilitates the allocation and spending of funds received from activities such as the sale of minor assets by agencies, ensuring these funds are available for departmental expenditure without requiring additional appropriation by Parliament.
Scope and Application
The Financial Management and Accountability Act 1997, specifically through Section 31, provides the legislative authority for the Minister for Finance and Administration to enter into agreements with other Ministers for items marked as “net appropriations” in Appropriation Acts. These agreements enable the increase of existing departmental appropriation items by the amounts received by the agency as specified in the agreement. The instrument in question, which pertains to the Department of the Prime Minister and Cabinet, identifies the types of receipts that will increase an appropriation for that department. The agreement is operationalised through specific provisions within the annual Appropriation Acts, which increase the relevant appropriation item in accordance with the agreement, allowing the agency to spend the receipts. The Department of the Prime Minister and Cabinet was consulted and agrees with the terms of the instrument. Notably, 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) authorises the Minister for Finance and Administration to enter into agreements for "net appropriations" with other Ministers (section 31(1)). These agreements allow certain departmental appropriation items to be increased by specific receipts, as outlined in the agreement. For instance, if an agency sells surplus assets like office furniture, the proceeds from the sale can be used for departmental spending. This is made effective through the annual Appropriation Acts, which incorporate the agreement’s provisions (section 31(3)). Importantly, these agreements can cover periods longer than a financial year and can be varied or cancelled by the Finance Minister at any time without the consent of the other party (section 31(4)).
The obligations imposed by the FMA Act require the Finance Minister to consult with the relevant department, such as the Department of the Prime Minister and Cabinet, before finalising the agreement. This ensures that the agreement aligns with the department's needs and operational requirements (section 31). The department must agree with the form of the agreement before it is finalised. Furthermore, while the agreement itself is for internal machinery of government purposes, the department was provided with drafts of the instrument prior to finalisation, allowing them to voice any concerns or modifications needed.
The legislation also outlines the consequences for any breach of the agreement. Although specific penalties are not detailed in the explanatory statement, the nature of the agreements suggests that failure to comply with the terms could lead to financial mismanagement or unauthorised expenditures, which could be subject to audit and potential legal action. However, 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. This means that these agreements have a degree of permanence unless specifically amended or cancelled by the Finance Minister (subsection 44(2) and 54(2) of the Legislative Instruments Act 2003).