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 Productivity Commission, commencing 24 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 Productivity 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 Productivity 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 (FMA Act) was enacted to address the need for effective financial management and accountability within Australian government agencies. This legislation, established by the Parliament of Australia, aims to ensure that public funds are used responsibly and efficiently. One of the mechanisms introduced by the FMA Act is the ability for the Minister for Finance and Administration to enter into agreements with other Ministers regarding "net appropriations." These agreements, outlined in section 31 of the FMA Act, allow for the automatic adjustment of appropriations based on certain receipts, ensuring that agencies can utilise income generated from activities such as the sale of surplus assets without the need for additional parliamentary appropriation. This instrument, effective from 24 February 2005, serves to streamline financial processes and enhance the operational efficiency of government agencies, as exemplified by its application to the Productivity Commission.
Scope and Application
The Financial Management and Accountability Act 1997 (FMA Act) establishes the framework for the management and accountability of Commonwealth financial resources, with section 31 specifically allowing the Minister for Finance and Administration to enter into agreements regarding "net appropriations" with other Ministers. These agreements pertain to items marked as "net appropriation" in Appropriation Acts, enabling departmental or administered appropriation items to be increased by specified receipts, such as proceeds from the sale of minor assets. This arrangement ensures that the revenues generated by these activities are available for expenditure by the concerned agency without necessitating further appropriation by Parliament. The agreements can span any period, including beyond a financial year, and are generally in force until circumstances necessitate renewal. The Minister for Finance and Administration also has the authority to cancel or vary these agreements at any time without requiring consent from the other party. The Productivity Commission is the specific entity affected by this instrument, and while the Commission was consulted and agrees with the form of the instrument, no further consultation was deemed necessary as the instrument pertains solely to internal government mechanisms.
Key Provisions
The main operative sections of the Financial Management and Accountability Act 1997 (FMA Act) relevant to the instrument in question are sections 31 and 31(3) to 31(4). Section 31 allows the Minister for Finance and Administration to enter into agreements with other Ministers for items in Appropriation Acts marked as “net appropriation.” These agreements permit the increase of departmental or administered appropriation items by amounts received by an agency as specified in the agreement, regardless of the duration of the agreement. Section 31(3) clarifies that agreements can be for any period, including periods longer than a financial year, while subsection 31(4) empowers the Finance Minister to cancel or vary an agreement at any time without the consent of the other party.
The Act imposes specific obligations on the parties involved. The Minister for Finance and Administration must negotiate and enter into agreements that clearly define the types of receipts that will increase the appropriations for the relevant agencies, such as the Productivity Commission in this case. The Productivity Commission, as the agency affected by the instrument, must adhere to the terms of the agreement and ensure that any eligible receipts are appropriately accounted for and spent within the scope of the agreement. The agreements must be in alignment with the provisions outlined in the annual Appropriation Acts, which specify how the appropriations are to be increased.
The FMA Act does not explicitly outline specific offences or penalties for breaches of the agreements made under section 31. However, failure to comply with the terms of the agreements could potentially lead to financial mismanagement and accountability issues. The implications of such breaches could result in internal administrative consequences, including audits and reviews by the relevant oversight bodies. Given the nature of these agreements, the primary focus is on ensuring adherence to the agreed terms to maintain financial integrity and accountability within the government's fiscal operations.