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 Transport and Regional Services, commencing upon registration 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 Transport and Regional Services. 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 Transport and Regional Services 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 establish a framework for effective financial management and accountability within the Australian government. It addresses the need for clear, consistent, and transparent financial practices across government agencies. The Act was enacted by the Parliament of Australia, reflecting a policy objective to ensure that public funds are managed responsibly and with accountability. Section 31 of the FMA Act specifically enables the Minister for Finance and Administration to enter into agreements with other Ministers regarding "net appropriations." These agreements allow for the increase of departmental appropriation items by amounts received by agencies, as specified in the agreement. This mechanism ensures that agencies can utilise receipts from activities such as the sale of surplus assets without requiring additional appropriation from Parliament, thereby enhancing operational efficiency and flexibility in financial management.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) provides a framework for the financial management of Commonwealth entities, including agreements for “net appropriations.” Section 31 of the FMA Act enables the Minister for Finance and Administration to enter into agreements with other ministers concerning items in Appropriation Acts that are marked “net appropriation.” These agreements allow for the increase of departmental appropriation items by amounts received by an agency, as specified in the agreement, which is then given effect through the annual Appropriation Acts. This ensures that any receipts from certain activities, such as the sale of minor assets, are available for expenditure by the agency without requiring additional appropriation by Parliament. The agreements can cover any period, including beyond a financial year, and can be cancelled or varied by the Finance Minister at any time. This particular instrument applies to the Department of Transport and Regional Services, which was consulted on the instrument before it was finalised. The instrument operates in conjunction with specific provisions within the annual Appropriation Acts and does not require consultation with other parties as it pertains solely to internal machinery of government.
Key Provisions
The main operative sections of the Financial Management and Accountability Act 1997 (FMA Act) relevant to this instrument are section 31 and its associated subsections. Section 31(1) provides the authority for the Minister for Finance and Administration to enter into agreements with other ministers for items in Appropriation Acts marked as “net appropriation.” The purpose of these agreements, as outlined in section 31(2), is to facilitate the increase of departmental (and in some cases, administered) appropriation items by the amounts received by an agency as specified in the agreement. Section 31(3) allows for the agreements to be for any period, not necessarily tied to a particular Appropriation Act or financial year, and section 31(4) provides the Finance Minister with the power to cancel or vary the agreements at any time without the consent of the other party.
The obligations and requirements imposed by the Act on the parties involved are primarily focused on the Finance Minister and the relevant departmental ministers. The Finance Minister is tasked with entering into agreements as necessary to facilitate the flow of additional funds to the relevant departments. These agreements must clearly specify the types of receipts that will increase the existing appropriations for the departments. The departments, in turn, must ensure that their operations align with the terms of these agreements and report any additional receipts that should be included in their appropriation calculations.
Failure to adhere to the terms of the net appropriation agreements can lead to financial discrepancies and mismanagement of funds. While the explanatory statement does not explicitly outline specific offences or penalties for breaching the terms of these agreements, it is implied that any mismanagement or failure to comply with the agreed terms could lead to financial irregularities. The potential consequences could include a review of the agency’s financial practices, adjustments to future appropriations, or other administrative actions taken by the Finance Minister. The severity of the consequences would depend on the extent of the non-compliance and the impact on the financial management of the relevant department.