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 Office of National Assessments, commencing
14 June 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 Office of National Assessments. 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 Office of National Assessments 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 the management and accountability of public finances in Australia. It was introduced to address the need for clear, consistent, and transparent financial management practices across government agencies. The Act was enacted by the Commonwealth Parliament and its policy objective is to ensure that government resources are used efficiently, effectively, and in accordance with the law. One of the mechanisms established by the FMA Act is the ability for the Minister for Finance to enter into agreements with other Ministers concerning “net appropriations.” These agreements allow for the automatic adjustment of appropriations based on certain receipts, ensuring that funds are available for intended expenditures without the need for additional parliamentary approval. This approach streamlines financial management and enhances the ability of agencies to respond to changing circumstances.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) applies to the Commonwealth government, specifically allowing the Minister for Finance and Administration to enter into agreements with other Ministers concerning appropriations marked as “net appropriations.” This instrument, created under section 31 of the FMA Act, relates to a Net Appropriation Agreement for the Office of National Assessments, which commenced on 14 June 2005. The purpose of this agreement is to allow the Office of National Assessments to increase its existing appropriations by amounts received from specified transactions, such as the sale of minor assets like surplus office furniture and fittings. This agreement ensures that such receipts can be spent by the agency without requiring further appropriation by Parliament, provided that the specific provisions of the annual Appropriation Acts are in place. The instrument is limited in scope to internal machinery of government purposes and does not require consultation with external parties as it is not subject to the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) includes a provision in Section 31 that allows the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts that are marked as “net appropriations.” These agreements, such as the Net Appropriation Agreement for the Office of National Assessments, enable the appropriation for specific agencies to be increased by the amounts received by those agencies. Section 10 of the Appropriation Act (No.1) 2004-2005, for example, is a standard provision that supports this process. These agreements can be for any period and may continue until circumstances require their renewal. The Finance Minister has the authority to cancel or vary an agreement at any time without the consent of the other party, as stipulated in subsection 31(4) of the FMA Act.
The obligations and requirements imposed by the Act on the parties involved are quite specific. The Minister for Finance and Administration must ensure that the agreements are drafted in a way that accurately reflects the financial transactions and needs of the agencies involved. The Office of National Assessments, in this case, must comply with the terms of the agreement and ensure that any receipts that qualify under the agreement are accounted for and used in accordance with the agreement's provisions. These receipts, such as the proceeds from the sale of surplus office furniture and fittings, must be used for expenditure by the agency, as allowed by the agreement. The annual Appropriation Acts must contain the specific provisions that give effect to the instrument, ensuring that the agreement is legally binding and operational within the legislative framework.
Breach of the provisions of the Financial Management and Accountability Act 1997 can have significant consequences. While the explanatory statement does not specify particular offences or penalties, it is clear that 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. This suggests that any failure to comply with the terms of the agreement could result in legal action or other consequences as determined by the courts. The specific financial and legal repercussions would depend on the nature and extent of the breach, but the importance of adherence to the agreement is underscored by the structured legislative framework that governs these transactions.