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 Private Health Insurance Ombudsman, 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 Private Health Insurance 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 Private Health Insurance 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 was enacted to provide a framework for the financial management and accountability of Commonwealth entities, addressing the need for improved financial management practices and ensuring that public funds are used effectively and efficiently. The Act was enacted by the Parliament of Australia and aims to enhance the financial management and accountability of Commonwealth entities, thereby ensuring transparency and efficiency in the use of public funds. Section 31 of the Act allows the Minister for Finance and Administration to enter into agreements with other ministers regarding "net appropriations," enabling certain receipts to be added to existing appropriations and made available for expenditure by the relevant agency. This mechanism is designed to streamline financial processes and ensure that agencies can utilise available funds without requiring additional appropriations from Parliament, thereby improving operational efficiency.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) authorises the Minister for Finance and Administration to enter into agreements concerning "net appropriations" with other Ministers, allowing for increased appropriations based on specified receipts. This process is detailed in Section 31 of the FMA Act, which enables the augmentation of departmental or administered appropriation items through revenues such as the sale of minor assets by agencies. The agreement in question, the Net Appropriation Agreement for the Private Health Insurance Ombudsman, allows the Ombudsman to utilise receipts from specified activities to fund its operations, without requiring additional appropriation by Parliament. This legislative framework ensures that such receipts are integrated into the annual appropriation acts, making them available for expenditure by the agency. The instrument's effect is contingent upon the existence of corresponding provisions within the annual Appropriation Acts, and it remains in force until such provisions are altered or the agreement is terminated by the Finance Minister. Importantly, this agreement is exempt from the parliamentary disallowance and sunsetting provisions outlined in the Legislative Instruments Act 2003.
Key Provisions
The instrument under the Financial Management and Accountability Act 1997 (FMA Act) pertains to a Net Appropriation Agreement for the Private Health Insurance Ombudsman (sections 31(1) to 31(4)). This agreement allows the Minister for Finance and Administration to enter into an arrangement with other Ministers concerning items in Appropriation Acts marked as "net appropriations." These agreements enable departmental appropriations to be augmented by specific receipts received by an agency, as outlined in the agreement. This means that certain funds, such as those received from the sale of minor assets like surplus office furniture, can be retained by the agency for its use without the need for additional parliamentary appropriation.
Under section 31 of the FMA Act, the Minister for Finance and Administration has the authority to enter into agreements with other Ministers regarding items in Appropriation Acts marked as "net appropriations." These agreements can be for any period, including beyond a single financial year, and can be modified or cancelled by the Minister at any time without requiring the consent of the other party. This flexibility ensures that the financial arrangements can be adapted to changing circumstances and needs.
The obligations imposed by this agreement on the parties involved primarily include ensuring that any receipts specified in the agreement are properly accounted for and used for the intended purposes. The Private Health Insurance Ombudsman, as the affected agency, must adhere to the terms of the agreement to ensure that the additional funds are used effectively within the scope of its operations. The Finance Minister, on the other hand, must ensure that the terms of the agreement are clear and that the additional appropriations are managed appropriately.
Failure to comply with the terms of the Net Appropriation Agreement may lead to financial mismanagement or misuse of funds. Although the explanatory statement does not detail specific offences or penalties, breaches of financial management regulations under the FMA Act can result in both civil and criminal consequences. Civil penalties may include fines, while criminal penalties could involve imprisonment, depending on the severity of the breach and the discretion of the court. The exact penalties would be determined in the context of the specific breach and applicable laws.