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 Inspector-General of Intelligence and Security, commencing 21 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 for the Office of the Inspector-General of Intelligence and Security. 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 Inspector-General of Intelligence and Security 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 by the Parliament of Australia to address the need for improved financial management and accountability within the federal government. This Act, particularly as it pertains to section 31, aims to provide flexibility in managing government appropriations by allowing the Minister for Finance and Administration to enter into agreements with other ministers for "net appropriations." These agreements enable departments and agencies to utilise receipts, such as proceeds from the sale of minor assets, without requiring additional appropriations from Parliament. This facilitates more efficient financial management and ensures that agencies can utilise available funds effectively. The instrument under section 31, in this case a Net Appropriation Agreement for the Office of the Inspector-General of Intelligence and Security, demonstrates the application of these provisions by specifying the types of receipts that increase existing appropriations, thereby allowing the agency to spend these funds as needed.
Scope and Application
The Financial Management and Accountability Act 1997 provides the legislative framework for managing the Commonwealth's financial resources, including the authority for the Minister for Finance and Administration to enter into agreements for "net appropriations" with other ministers. Specifically, section 31 of the FMA Act enables the Finance Minister to agree with other ministers to increase existing appropriations based on certain receipts. The instrument detailed in the explanatory statement is a Net Appropriation Agreement for the Office of the Inspector-General of Intelligence and Security, which identifies types of receipts that can increase the agency's existing appropriation. This agreement is given effect through the annual Appropriation Acts, allowing the Office to utilise receipts from activities such as the sale of surplus assets for expenditure without needing additional appropriation from Parliament. The agreement can span any period, including beyond a financial year, and may be cancelled or varied by the Finance Minister at any time without the consent of the other party. Notably, this agreement is subject to specific provisions within the annual Appropriation Acts and is exempt from the parliamentary disallowance and sunsetting provisions of the Legislative Instruments Act 2003.
Key Provisions
The Financial Management and Accountability Act 1997 (FMA Act) outlines provisions for the creation and operation of Net Appropriation Agreements (section 31). This instrument, in particular, is a Net Appropriation Agreement for the Office of the Inspector-General of Intelligence and Security, which came into effect on 21 February 2005. Under this agreement, the appropriation for the Office can be increased by specified receipts, such as the sale of surplus assets, which are then available for expenditure by the Office. These agreements are not limited to the duration of a particular Appropriation Act and can be longer than a financial year, continuing until they need renewal.
The obligations imposed by the Act on the parties involved are quite specific. The Minister for Finance and Administration is empowered to enter into these agreements with other Ministers (section 31(1)). The agreement identifies the types of receipts that will increase the appropriation for the Office of the Inspector-General of Intelligence and Security. The agreement is incorporated into the annual Appropriation Acts, ensuring that the relevant appropriation item is increased in accordance with the agreement. Furthermore, the Finance Minister has the authority to cancel or vary the agreement at any time without the consent of the other party (section 31(4)).
Failure to comply with the requirements set out in the Net Appropriation Agreement could lead to serious consequences. While specific offences and penalties are not detailed in the explanatory statement, breaches of financial management regulations generally could result in both civil and criminal penalties. Civil penalties might include fines and recovery of costs, whereas criminal penalties could include imprisonment, depending on the severity of the breach. The Financial Management and Accountability Act 1997, along with related legislation, provides the framework within which these penalties are applied.