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 8 February 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 ensure the integrity and accountability of financial management within the Australian Government. The Act was introduced to address the need for clear and efficient financial management practices across government departments, ensuring that funds are appropriately allocated and utilised. The FMA Act provides the legislative framework for the management of Commonwealth finances and establishes the roles and responsibilities of key personnel in financial management. Enacted by the Parliament of Australia, the policy objective of the FMA Act is to ensure that public funds are managed in an accountable, efficient, and effective manner, thereby maintaining public trust in government financial operations. Under the FMA Act, the Minister for Finance and Administration has the authority to enter into agreements with other ministers to manage certain financial appropriations more flexibly, which aids in the efficient allocation of resources within departments.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to the Minister for Finance and Administration, who is authorised under section 31 to enter into agreements with other Ministers concerning items in Appropriation Acts that are marked "net appropriation". The purpose of these agreements is to allow certain receipts to increase existing appropriations for specific departments or agencies, such as the Department of the Prime Minister and Cabinet. These agreements are effective as long as the relevant provisions exist within the annual Appropriation Acts and can be for any period, including longer than a financial year. The Finance Minister has the authority to cancel or vary these agreements at any time without the consent of the other party. Notably, agreements made under section 31 of the FMA Act are exempt from the parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
Section 31 of the Financial Management and Accountability Act 1997 (FMA Act) authorises the Minister for Finance and Administration to enter into agreements with other Ministers to adjust items in Appropriation Acts marked as "net appropriation." These agreements (paragraph 1) can cover any period, including beyond a financial year, and can be amended or cancelled by the Finance Minister at any time without the consent of the other party (paragraph 3). The instrument in question pertains to the Department of the Prime Minister and Cabinet and specifies the types of receipts that will increase the existing appropriation for this department (paragraph 5). This instrument becomes effective through the annual appropriation Acts, which allow for the relevant appropriation item to be increased in line with the agreement, thereby enabling the agency to spend the receipts received (paragraph 6).
The obligations imposed by this Act on the parties involved include the requirement for the Minister for Finance and Administration to enter into agreements with other Ministers to adjust net appropriation items in Appropriation Acts, as stipulated in section 31(1) of the FMA Act (paragraph 1). The agreement must specify the types of receipts that will increase the existing appropriation for the relevant department, as outlined in the instrument (paragraph 5). The Finance Minister holds the authority to cancel or vary the agreement at any time without the consent of the other party (paragraph 3). The affected department, in this case, the Department of the Prime Minister and Cabinet, must comply with the terms of the agreement and ensure that the specified receipts are used as outlined (paragraph 6).
There are no specific offences, penalties, or consequences outlined in the explanatory statement for breaching the terms of the agreement under section 31 of the FMA Act. However, failure to comply with the agreement could result in financial mismanagement or misuse of funds, which could lead to legal action or disciplinary measures against the relevant parties. The explanatory statement notes that 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 (paragraph 9). This means that the agreements are not subject to parliamentary review or automatic expiration, and their validity and enforceability depend on the terms and conditions specified in the agreement itself.