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 National Water Commission, 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 National Water Commission. 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 National Water Commission 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 the need for effective financial management and accountability within the Australian government. This legislation provides the framework for the administration of financial resources, ensuring that funds are properly allocated, managed, and accounted for. Section 31 of the FMA Act, under which the Net Appropriation Agreement for the National Water Commission was made, enables the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts marked as "net appropriation." This allows departmental appropriation items to be increased by amounts received by an agency as specified in the agreement, facilitating more efficient use of resources by enabling agencies to spend receipts from certain activities without requiring further appropriation by Parliament. The agreement ensures that the National Water Commission can utilise funds from specified receipts, such as the sale of minor assets, to meet its expenditure needs.
Scope and Application
The Net Appropriation Agreement for the National Water Commission is an instrument made under Section 31 of the Financial Management and Accountability Act 1997 (FMA Act), facilitating agreements between the Minister for Finance and Administration and other ministers for items in Appropriation Acts marked "net appropriation". This instrument, which comes into effect upon registration on the Federal Register of Legislative Instruments, pertains specifically to the National Water Commission. It allows the Commission to increase its existing appropriation by amounts received from specified transactions, such as the sale of minor assets like surplus office furniture and fittings, making these receipts available for expenditure by the agency. The agreement's duration is not tied to a particular Appropriation Act or financial year and can be cancelled or varied by the Finance Minister at any time without consent. The agreement is subject to specific provisions in annual Appropriation Acts, meaning its effect is contingent upon the existence of these provisions. The National Water Commission was consulted during the drafting process and concurs with the instrument's form, and no broader consultation was deemed necessary due to the internal nature of the agreement.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) establishes the framework for financial management within the Australian government. Section 31 of the FMA Act specifically allows the Minister for Finance and Administration to enter into agreements with other ministers concerning appropriations marked as “net appropriations” in Appropriation Acts. These agreements can cover any period, not necessarily limited to a particular financial year, and can be varied or cancelled by the Minister at any time without requiring the consent of the other party (sections 31(3) and 31(4)). The purpose of such agreements is to facilitate the increase of existing appropriations for certain agencies by the amounts they receive, as specified in the agreement.
The obligations under the FMA Act, as outlined in the instrument, require that the National Water Commission, as the affected agency, adhere to the terms of the agreement. The instrument details the types of receipts that will increase the existing appropriation for the Commission. These agreements ensure that receipts from specified activities, such as the sale of surplus office furniture and fittings, are made available for expenditure by the Commission without the need for additional appropriation by Parliament. The relevant annual Appropriation Acts incorporate the specifics of these agreements, making them effective only during the period that specific provisions exist in those Acts.
Breach of the terms of these agreements could result in significant consequences. Although the Explanatory Statement does not explicitly detail offences, penalties, or consequences for non-compliance, it is implied that failure to adhere to the terms could lead to financial mismanagement and accountability issues. The Finance Minister’s authority to cancel or vary the agreements at any time underscores the importance of compliance and highlights the potential for civil or administrative actions should an agency fail to meet the stipulated requirements. The absence of parliamentary disallowance and sunsetting provisions for these agreements suggests that their enforcement and compliance are critical to maintaining proper financial governance within the Australian government.