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 18 May 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 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 was enacted to provide a framework for the effective management and accountability of public finances in Australia. This legislation was introduced to address the need for a comprehensive legal structure governing the financial operations of the Commonwealth and its agencies. Enacted by the Australian Parliament, the Act aims to ensure that public funds are managed efficiently, effectively, and in accordance with the law, thereby promoting transparency and responsibility in government financial practices. The Act facilitates the Minister for Finance and Administration entering into agreements with other ministers for items in Appropriation Acts marked as "net appropriation," thereby allowing for the increase of departmental appropriations by amounts received by an agency as specified in these agreements. This mechanism enables agencies to utilise certain receipts for expenditure without the need for further appropriation by Parliament, streamlining financial processes and enhancing the flexibility of budget management.
Scope and Application
The Net Appropriation Agreement for the National Water Commission, commencing 18 May 2005, is an instrument made under section 31 of the Financial Management and Accountability Act 1997. This Act authorises the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts marked as “net appropriations”. The purpose of such agreements is to allow specified receipts, such as sales of minor assets like surplus office furniture and fittings, to increase existing appropriations for the National Water Commission, thereby making the proceeds available for departmental expenditure without the need for additional appropriation by Parliament. The agreement applies specifically to the National Water Commission and is enacted through the annual Appropriation Acts, which include provisions that align with the terms of the agreement. The agreement is not subject to the parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003, meaning it can continue in effect until circumstances necessitate its renewal or cancellation by the Minister for Finance and Administration.
Key Provisions
The main operative sections of the Financial Management and Accountability Act 1997, particularly section 31, allow the Minister for Finance and Administration to enter into agreements with other Ministers for appropriations that are marked as "net appropriation". These agreements, as detailed in the instrument, pertain specifically to the National Water Commission and outline the types of receipts that will increase existing appropriations for the Commission. For example, the sale of minor assets like surplus office furniture and fittings would result in additional funds available for the Commission's expenditure. These agreements are not tied to a particular Appropriation Act or financial year and can be varied or cancelled by the Finance Minister at any time without needing the consent of the other party.
Under the Act, the obligations imposed on the parties include the requirement for the Finance Minister to consult with the relevant agency before entering into an agreement. In this case, the National Water Commission was provided with drafts of the instrument and has agreed with its form. Moreover, the Finance Minister must ensure that the agreements are implemented through specific provisions in the annual Appropriation Acts. Failure to adhere to these provisions means that the agreement will not have the intended effect, and the additional funds received by the agency will not be available for expenditure without further appropriation by Parliament.
In terms of offences, penalties, or consequences for breach, the Act does not specify civil or criminal penalties for non-compliance with the agreements. However, any failure to follow the agreed terms could result in funds not being available for intended expenditure, potentially impacting the agency's ability to carry out its functions effectively. It is essential for the parties to ensure that the agreements are adhered to and that the necessary provisions are included in the annual Appropriation Acts to give effect to the agreements. Furthermore, the 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, providing some stability and predictability in their operation.