Finance and staffing snapshot
The ACCC received an unqualified audit report on the 2019–20 financial statements from the Australian National Audit Office. These statements can be found in Part 5 - Financial statements.
In 2019–20 revenue from government increased by $30.3 million and expenditure on ACCC activities increased by $67.1 million. The additional revenue was appropriated by government to fund a number of new measures and resulted in corresponding increases in employee expenses of $22.6 million and supplier expenses of $4.5 million. In 2019–20 the ACCC also recognised $33.3 million in litigation cost orders that are primarily funded using the ACCC’s Litigation Contingency Fund. A comparison of revenue and expenditure trends over the last four years is illustrated in Figure 1.1: ACCC revenue and expenditure 2016–17 to 2019–20 below.
The ACCC incurred an operating deficit of $41.5 million in 2019–20. Despite incurring an operating deficit, the ACCC remains in a sound financial position and is well placed to pay its debts as and when they fall due. A major contributing factor to the deficit in 2019–20 was the recognition of $33.3 million of litigation cost orders. The ACCC is permitted to incur an operating loss for litigation cost orders as they are funded through equity using the ACCC’s Litigation Contingency Fund. The Litigation Contingency Fund is periodically replenished by government through equity injections to ensure sufficient funds are available at the time payment is made. The operating deficit also includes unfunded depreciation and amortisation expenses that are excluded when determining the ACCC’s actual operating result in accordance with the government’s ‘Net Cash Appropriation Arrangements’.
Factoring in the above adjustments, the ACCC incurred an underlying operating deficit of $3.7 million. This residual underlying deficit is primarily due to a one-off increase in employee expenses of $3.0 million following a decrease in the government bond rate used to discount employee leave provisions. Additional costs of $2.5 million have also been recognised in 2019–20 as a result of adopting AASB 16 Leases.
On 1 July 2019 the ACCC adopted new accounting requirements for lease arrangements in accordance with AASB 16. The application of the new requirements has resulted in the recognition of significant lease assets and liabilities and has changed the way lease expenses are recognised and presented in the Statement of Comprehensive Income.
The ACCC’s net cost of services for 2019–20 was $300.7 million (2018–19: $233.2 million), with revenue from government of $259.2 million (2018–19: $228.9 million).
Key financial results for the ACCC (incorporating the AER) for the current and comparative financial year are reported in the entity’s annual Financial Statements in Part 5 - Financial statements.
Appendix 1: Entity resource statement and expenses by outcome of this report details the entity’s financial results by outcome and program as outlined in its Portfolio Budget Statement 2019–20.
The ACCC is a knowledge-based organisation and, as such, it spends approximately 53 per cent of total expenditure on employee costs (2018–19: 58 per cent).
Legal expenditure increased by $5.7 million in 2019–20, with costs subject to movement between years depending on the number, nature and status of litigation proceedings.
Other expenses (excluding depreciation and amortisation) increased by $26.3 million as the ACCC utilised additional funding received in 2019–20 to deliver on its strategic priorities. Other expenses also increased as a result of one-off litigation cost orders incurred in 2019–20.
Depreciation and amortisation increased by $12.4 million largely due to recognition of depreciation on right-of-use assets arising from leasing arrangements, following the adoption of AASB 16.
During 2019–20 the ACCC recorded a comprehensive operating deficit of $41.5 million compared with an operating loss of $4.2 million in 2018–19. After adjusting for unfunded expenses, the ACCC’s operating deficit for 2019–20 was $3.7 million. This was primarily due to additional expenses arising from technical accounting adjustments for employee provisions and application of AASB 16.
The ACCC’s net assets as at 30 June 2020 totalled ($1.0) million compared with $6.2 million as at 30 June 2019. This decrease largely relates to a decrease in appropriation receivable and reflects the use of accumulated reserves to fund current year litigation cost orders.
Total assets as at 30 June 2020 were valued at $169.1 million compared with $91.6 million on 30 June 2019, representing an 85 per cent increase. This variance is largely the result of a $63.9 million increase in leasehold improvements largely due to the recognition of right-of-use assets on adoption of AASB 16.
All assets have been managed in accordance with Commonwealth policies and reported following the relevant accounting standards.
Total liabilities increased to $170.1 million in 2019–20 from $85.3 million in 2018–19. This increase primarily relates to the recognition of $75.1 million of lease liabilities on adoption of AASB 16. Liabilities also increased due to higher employee provisions and additional litigation provisions recognised as at 30 June 2020. These increases were partially offset by a decrease in other payables of $18.6 million due to de-recognition of existing lease liabilities on adoption of AASB 16.
In 2019–20 the ACCC received $203.8 million in administered revenue, representing an increase of $111.7 million from 2018–19. This amount includes court-imposed fines and costs.
Developments affecting our operations or financial results
No developments during or since the end of the financial year have affected, or may affect, our operations or financial results.