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 the Commonwealth Ombudsman, commencing 1 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 the Office of the Commonwealth Ombudsman. 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 the Commonwealth Ombudsman 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 robust and accountable financial management within the Australian government. This legislation provides the framework for the appropriation and expenditure of public funds, ensuring transparency and responsibility. One of its key features is the ability to enter into agreements for "net appropriations," which allows certain receipts to be used for specific purposes without additional appropriation by Parliament. The Act empowers the Minister for Finance and Administration to negotiate these agreements with other Ministers, facilitating more efficient financial management across government agencies. The objective is to streamline the process of increasing appropriations through specified receipts, thereby enhancing the operational efficiency of government entities.
Scope and Application
The instrument relates to an agreement made under section 31 of the Financial Management and Accountability Act 1997, which pertains to "net appropriations" for the Office of the Commonwealth Ombudsman. This agreement, which came into effect on 1 February 2005, allows the agency to increase its appropriations by the amounts it receives from specified transactions, such as the sale of surplus assets, without needing further appropriation by Parliament. This ensures that such receipts are available for the agency's expenditure. The agreement is not bound by the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003. The instrument is effective only for as long as the specific provisions exist within the annual Appropriation Acts, and the eligible receipts are outlined in clause 5.1 of the instrument. The Office of the Commonwealth Ombudsman was consulted during the drafting of the instrument and agrees with its form.
Key Provisions
The instrument under section 31 of the Financial Management and Accountability Act 1997 (FMA Act) pertains to an agreement for "Net Appropriations" specifically concerning the Office of the Commonwealth Ombudsman, commencing on 1 February 2005. The legislation allows the Minister for Finance and Administration to enter into agreements with other Ministers regarding items in Appropriation Acts marked as "net appropriation" (section 31(1)). These agreements enable the increase of departmental appropriation items by amounts received by an agency, as specified in the agreement (section 31(2)). Such agreements can cover any period, not necessarily tied to a particular financial year, and can continue until circumstances necessitate renewal (subsection 31(3)). Furthermore, the Finance Minister retains the authority to cancel or vary these agreements at any time without requiring consent from the other party (subsection 31(4)).
The obligations imposed by the Act on the Office of the Commonwealth Ombudsman and other relevant entities involve adhering to the terms set forth in the agreement. The Office must ensure that any eligible receipts, such as proceeds from the sale of surplus office furniture and fittings, are appropriately recorded and used for the purposes outlined in the agreement. This allows the agency to spend the received amounts without needing additional appropriation by Parliament. The Office of the Commonwealth Ombudsman was provided with drafts of the instrument and agrees with its form, ensuring that the agreement aligns with their operational needs. As the instrument is for internal machinery of government purposes only, no external consultation was deemed necessary.
In terms of potential breaches, the Act does not specify explicit offences, penalties, or civil/criminal consequences for non-compliance with the net appropriation agreement. However, any misuse of funds or failure to adhere to the terms of the agreement could potentially lead to disciplinary actions against the responsible parties, as well as financial oversight and auditing by relevant government bodies. The absence of parliamentary disallowance and sunsetting provisions for agreements made under section 31 of the FMA Act (as noted in the Legislative Instruments Act 2003) means that these agreements remain in effect unless otherwise specified by the Minister for Finance and Administration.