Notes to and forming part of the financial statements
Overview
Objectives of the Australian Federal Police
The AFP is an Australian Government controlled not-for-profit entity. As Australia's national policing agency, the AFP is a key member of the Australian law enforcement and national security community, leading policing efforts to keep Australians and Australian interests safe, both at home and overseas. This is delivered through the following outcomes:
Outcome 1: Reduced criminal and security threats to Australia's collective economic and societal interests through cooperative policing services
Outcome 2: A safe and secure environment through policing activities on behalf of the Australian Capital Territory Government
The continued existence of the AFP in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for the entity’s administration and programs.
AFP's activities contributing toward these outcomes are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by the entity in its own right.
Administered activities involve the management or oversight by the entity, on behalf of the Government, of items controlled or incurred by the Government. AFP conducts administered activities on behalf of the Government supporting the objectives of Outcome 1, predominantly international development assistance.
Basis of preparation of the financial statements
The financial statements are general-purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.
The financial statements have been prepared in accordance with:
- Public Governance Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
- Australian Accounting Standards and Interpretations - Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.
The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.
The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.
Significant accounting judgements and estimates
The AFP has made estimates and judgements with respect to the methods used to assess the fair value of assets and the calculation of employee provisions. All assets and liabilities are held at fair value. These estimates and judgements are outlined at the relevant note.
No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting period.
Impact of COVID-19 pandemic on the financial statements
Since mid-February 2020, the COVID-19 pandemic has led to global financial uncertainty. The AFP has been impacted by the pandemic through the delivery of emergency response services and capital project delays.
Management has assessed the impact on the financial statements including the potential for movements in the fair value of non-current assets and the potential for impairment of other assets such as receivables. The COVID-19 pandemic did not have a significant impact on the transactions and balances in the financial statements.
New Australian Accounting Standards
Adoption of new Australian Accounting Standards requirements
AASB 16 became effective as at 1 July 2019. This new standard has replaced AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation 115 Operating Leases—Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases.
Adoption of AASB 16 has had a major impact on the AFP financial statements, recognising significant additional right-of-use assets and lease liabilities. AFP has applied a modified retrospective approach, recognising the cumulative effect of the standard as at 1 July 2019. AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The comparative information has not been restated and continues to be reported under AASB 117. The AFP applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:
- Excluded initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date;
- Relied on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of assets as at the date of initial application; and
- Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.
The impact on transition is summarised below:
Departmental | 1 July 2019 ($'000) |
Right-of-use assets - property, plant and equipment | 1,050,198 |
Lease liabilities | (1,041,964) |
Prepayments | (8,234) |
Retained earnings | (25,479) |
Supplier payables | 25,479 |
There has been no impact on AFP Administered accounts.
AASB 15 Revenue from Contracts with Customers and AASB 1058 Income of Not-for-Profit Entities were adopted from 1 July 2019 with no material impact on the AFP's financial statements.
No other new and revised standards and interpretations that were issued prior to the sign-off date and are applicable to the current reporting period had a material effect on the AFP’s financial statements.
No accounting standard has been adopted earlier than the application date as stated in the standard.
Taxation
The AFP is exempt from all forms of taxation except fringe benefits tax (FBT) and the goods and services tax (GST).
Reporting of administered activities
Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.
Except where otherwise stated below, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards. Administered items are presented on shaded blue background.
Administered cash transfers to and from the Official Public Account
Revenue collected by the AFP for use by the government rather than the AFP is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under parliamentary appropriation on behalf of the government. These transfers to and from the OPA are adjustments to the administered cash held by the AFP on behalf of the government and reported as such in the administered cash flow statement and in the administered reconciliation schedule.
Events after the reporting period
Departmental
No significant events have occurred since the reporting date requiring disclosure in the financial statements.
Administered
No significant events have occurred since the reporting date requiring disclosure in the financial statements.
Note 1.1: Expenses
Note 1.1A: Employee benefits expense | 2020 | 20191 |
$'000 | $'000 | |
Wages and salaries | 656,833 | 621,508 |
Superannuation: | ||
Defined contribution plans | 65,368 | 56,682 |
Defined benefit plans | 65,322 | 69,599 |
Leave and other entitlements | 138,162 | 165,320 |
Separation and redundancies | 4,807 | 2,685 |
Other employee expenses | 13,190 | 12,406 |
Total employee benefits expense | 943,682 | 928,200 |
1 Adjusted 2018-19 figures. Refer to Note 3.4. | ||
Note 1.1A: Accounting policy | ||
The AFP's employees are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or a nominated superannuation fund. The CSS and PSS are defined benefit plans for the Australian Government. All other superannuation funds are accumulation plans. | ||
The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance's administered schedules and notes. The AFP makes employer contributions to the employees' superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the government. The AFP accounts for the contributions as if they were contributions to defined contribution plans. | ||
Note 1.1B: Supplier expenses | 2020 | 2019 |
$'000 | $'000 | |
Supplier expenses – goods and services | ||
Operational | 56,397 | 50,759 |
Consultant and contractor services | 49,989 | 52,787 |
Staff and recruitment | 51,078 | 45,176 |
Communications and IT | 62,501 | 53,639 |
Building and accommodation | 45,755 | 38,619 |
Travel | 31,042 | 36,761 |
General and office | 34,304 | 26,845 |
Training | 12,692 | 11,924 |
Vehicle expenses* | 7,483 | 2,761 |
Postage and freight | 2,855 | 2,232 |
Total supplier expenses – goods and services | 354,096 | 321,503 |
Supplier expenses – other | ||
Operating lease rentals | - | 111,067 |
Short term and low value leases | 7,733 | - |
Workers compensation expenses | 41,498 | 42,757 |
Other supplier expenses | 16 | 11 |
Total supplier expenses - other | 49,247 | 153,835 |
Total supplier expenses | 403,343 | 475,338 |
* Vehicle expenses for 2019-20 include $4.909m of costs previously categorised as operating lease rentals in the 2018-19 financial statements under AASB 117. | ||
Note 1.1B: Accounting policy | ||
Recognition and measurement of operating lease payments With the introduction of AASB 16 Leases, operating lease payments relating to underlying assets are no longer reported as a supplier expense - for AFP these include leases for office space, vehicles and other equipment. AFP has elected not to recognise right-of-use assets and lease liabilities for short-term leases of assets that have a lease term of 12 months or less and leases of low-value assets (less than $10,000). Consistent with the modified retrospective approach, comparative figures are not restated. A reconciliation of lease commitments disclosed as at 30 June 2019 to lease liabilities recognised on 1 July 2019 is provided below: | ||
$'000 | ||
Minimum operating lease commitment 30 June 2019 | 515,557 | |
Less: GST included in commitments | (45,160) | |
Less: non asset related commitments | (15,422) | |
Less: short term leases not recognised under AASB 16 | (2,168) | |
Less: low value leases not recognised under AASB 16 | (1,145) | |
Plus: effect of extension options reasonably certain to be exercised | 698,624 | |
Undiscounted lease payments | 1,150,286 | |
Less: effect of discounting using the incremental borrowing rate | (108,322) | |
Lease liabilities recognised at 1 July 2020 | 1,041,964 | |
The AFP has short term lease commitments of $110.8m as at 30 June 2020. | ||
Note 1.1C: Finance costs | 2020 | 2019 |
Interest on lease liabilities | 14,381 | - |
Unwinding of discount | 560 | 565 |
Total finance costs | 14,941 | 565 |
Lease disclosures should be read in conjunction with accompanying notes 2.2 and 2.4. | ||
Note 1.1D: Write-down and impairment of assets | 2020 | 2019 |
$'000 | $'000 | |
Impairment from trade and other receivables | 1,585 | 264 |
Impairment of buildings | 54 | 728 |
Impairment of property, plant and equipment | 715 | 6,806 |
Impairment of intangibles | 80 | 795 |
Total write-down and impairment of assets | 2,434 | 8,593 |
Note 1.1E: Regulatory charging summary | ||
The AFP undertakes national police checks that are cost-recovered, as outlined in Schedule 2 of the Australian Federal Police Regulations 1979. Expenses and income associated with this activity is outlined below. | ||
2020 | 2019 | |
$'000 | $'000 | |
Expenses – departmental | 19,591 | 20,223 |
Revenue – departmental | 27,755 | 26,838 |
Note 1.2: Own-source revenue and gains
Note 1.2A: Revenue | 2020 | 2019 |
$'000 | $'000 | |
Revenue from contracts with customers | ||
Sale of goods | 119 | 104 |
Rendering of services: | ||
Police services | 237,731 | 240,832 |
Criminal record checks | 28,936 | 27,520 |
Other services | 23,890 | 15,610 |
Total revenue from contracts with customers | 290,676 | 284,066 |
Other revenue | 5,150 | 1,514 |
Total revenue | 295,826 | 285,580 |
Note 1.2A: Accounting policy | ||
AFP primarily generates revenue from providing policing services to the ACT Government and other Commonwealth agencies. AFP also generates revenue from performing criminal record checks, and training related to police services. | ||
Revenue from contracts with customers is recognised when the performance obligation has been met, either:
| ||
Note 1.2B: Gains | 2020 | 2019 |
$'000 | $'000 | |
Resources received free of charge | 6,179 | 6,114 |
Sale of assets: | ||
Proceeds from sale of assets | 652 | 1,119 |
Carrying value of assets sold | (41) | (167) |
Other gains | 3,703 | 797 |
Total gains | 10,493 | 7,863 |
Note 1.2B: Accounting policy | ||
Resources Received Free of Charge | ||
Resources received free of charge are recognised as gains when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. | ||
Resources received free of charge includes Australian National Audit Office audit fees of $0.275m (2019: $0.255m) for AFP's financial statements and $5.854m (2019: $5.859m) for ACT Policing facilities and legal services received free of charge from the ACT Government. | ||
Contributions of assets at no cost of acquisition, or for nominal consideration, are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another government entity as a consequence of a restructuring of administrative arrangements. | ||
Sale of Assets | ||
Gains from disposal of assets are recognised when control of the asset has passed to the buyer. | ||
Note 2.1: Financial assets
Note 2.1A: Cash and cash equivalents | 2020 | 2019 |
$'000 | $'000 | |
Cash in special accounts | 4,603 | 3,494 |
Cash on hand | 101 | 101 |
Cash at bank | 11,238 | 11,372 |
Cash - held by the OPA | 7,500 | 6,500 |
Total cash and cash equivalents | 23,442 | 21,467 |
The closing balance of Cash in special accounts does not include amounts held in trust: $31.045m in 2020 and $43.088m in 2019. See Note 4.3 Special Accounts for more information. | ||
Note 2.1B: Trade and other receivables | ||
2020 | 2019 | |
Goods and services receivable | $'000 | $'000 |
Goods and services receivable | 13,198 | 11,920 |
Total goods and services receivables | 13,198 | 11,920 |
Contract assets are associated with the provision of policing services to the ACT Government and other Commonwealth agencies. | ||
Appropriation receivable | ||
-for ordinary service | 210,180 | 193,094 |
-for equity projects | 57,707 | 67,583 |
Total appropriations receivables | 267,887 | 260,677 |
Other receivables | ||
GST receivable from the Australian Taxation Office | 5,761 | 5,155 |
Comcare | 47 | 9,506 |
Other | 438 | 823 |
Total other receivables | 6,246 | 15,484 |
Total trade and other receivables (gross) | 287,331 | 288,081 |
Less: impairment loss allowance | (2,326) | (766) |
Total trade and other receivables (net) | 285,005 | 287,315 |
Note 2.1B: Accounting policy | ||
All trade receivables are expected to be recovered in less than 12 months. Credit terms for goods and services are 30 days (2019: 30 days). Receivables are held for the purpose of collecting contractual cash flows and measured at amortised cost using the effective interest method adjusted for any loss allowance. | ||
Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses. | ||
Note 2.2: Non-financial assets
Note 2.2A: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles | |||||||
Land | Buildings | Leasehold improvements | Total land and buildings | Other property, plant and equipment | Intangible assets - computer software | Total non-financial assets | |
$’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | |
As at 1 July 2019 | |||||||
Gross book value | 2,400 | 153,388 | 280,392 | 436,180 | 255,649 | 160,793 | 852,622 |
Accumulated depreciation and amortisation | - | (9,850) | (61,958) | (71,808) | (75,635) | (78,710) | (226,153) |
Total as at 1 July 2019 | 2,400 | 143,538 | 218,434 | 364,372 | 180,014 | 82,083 | 626,469 |
Recognition of right-of-use assets on initial application of AASB 16 | 215 | 1,034,113 | - | 1,034,328 | 15,870 | - | 1,050,198 |
Total as at 1 July 2019 | 2,615 | 1,177,651 | 218,434 | 1,398,700 | 195,884 | 82,083 | 1,676,667 |
Additions: | |||||||
Purchased or internally developed | - | 6,421 | 28,943 | 35,364 | 61,430 | 30,450 | 127,244 |
Right-of-use assets | - | 98,775 | - | 98,775 | 27,552 | - | 126,327 |
Revaluations recognised in other comprehensive income | - | (1,491) | 17,539 | 16,048 | 11,769 | - | 27,817 |
Write-down and impairment recognised in net cost of services | - | (29) | (25) | (54) | (715) | (80) | (849) |
Depreciation/amortisation | - | (5,187) | (35,113) | (40,300) | (41,663) | (11,168) | (93,131) |
Depreciation on right-of-use assets | (46) | (100,298) | - | (100,344) | (9,844) | - | (110,188) |
Other movements of right-of-use assets1 | - | (45,579) | - | (45,579) | - | - | (45,579) |
Reclassifications | - | (516) | (95) | (611) | 601 | 10 | - |
Disposals: | |||||||
Other | - | - | - | - | (41) | - | (41) |
Total as at 30 June 2020 | 2,569 | 1,129,747 | 229,683 | 1,361,999 | 244,973 | 101,295 | 1,708,267 |
Total as at 30 June 2020 represented by: | |||||||
Gross book value | 2,615 | 1,230,045 | 229,709 | 1,462,369 | 256,138 | 190,417 | 1,908,924 |
Accumulated depreciation and amortisation | (46) | (100,298) | (26) | (100,370) | (11,165) | (89,122) | (200,657) |
Total as at 30 June 2020 | 2,569 | 1,129,747 | 229,683 | 1,361,999 | 244,973 | 101,295 | 1,708,267 |
Carrying amount of right-of-use assets | 169 | 987,011 | - | 987,180 | 33,578 | - | 1,020,758 |
The carrying amount of computer software includes purchase of software of $33.4m and internally generated software of $65.0m. | |||||||
1 Other movements of right-of-use assets arise from lease modifications entered into during the financial year. | |||||||
Capital commitments | |||||||
The AFP has entered into contracts to purchase equipment, intangibles, leasehold fit-outs and buildings that are currently under construction. Some contracts contain a termination clause as part of the contract, the value of these contracts for 2020: $43.976m (2019:$35.041m). At 30 June, the AFP intends to fully exercise these contracts. | |||||||
2020 | 2019 | ||||||
As at 30 June, the future minimum payments under non-cancellable contracts were: | $'000 | $'000 | |||||
Less than one year | 44,671 | 38,186 | |||||
Between one and five years | 7,888 | 6,976 | |||||
More than five years | - | - | |||||
Total capital commitments | 52,559 | 45,162 | |||||
Note 2.2B: Accounting policy
Assets under construction (AUC)
AUC are included in all asset classes in Note 2.2A except for Land. AUC are initially recorded at acquisition cost. They include expenditure to date on various capital projects carried as AUC. AUC projects are reviewed annually for indicators of impairment and all AUC older than 12 months at reporting date is externally revalued to fair value. Prior to rollout into service, the accumulated AUC balance is reviewed to ensure accurate capitalisation of built and purchased assets.
Make good
The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to make good provisions in property leases taken up by the AFP where there exists an obligation to restore the property to its original condition. These costs are included in the value of the AFP's leasehold improvements with a corresponding provision for the make good recognised.
Asset recognition thresholds
Assets are recorded at cost on acquisition, except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken.
Asset class | Threshold |
Land and buildings | $5,000 |
Property, plant and equipment | $5,000 |
Intangibles - purchased | $10,000 |
Intangibles - internally developed | $25,000 |
All asset purchases below these thresholds are expensed in the year of acquisition. Where assets cost less than the threshold and form part of a group of similar items which are significant in total, they are recognised as assets. Asset thresholds for AFP (excluding APG and AIPM) have been updated to a capitalisation threshold of $5,000 at 30 June 2019.
Leased right-of-use (ROU) assets
Leased ROU assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received. These assets are accounted for as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned. Following initial application, an impairment review is undertaken for any right of use lease asset that shows indicators of impairment and an impairment loss is recognised against any right of use lease asset that is impaired. Leased ROU assets continue to be measured at cost after initial recognition.
Key judgement
Reasonable certainty of option exercise in relation to ROU assets
The AFP enters into property lease arrangements for domestic and international offices and residential premises. A significant number of these leases have options for the AFP to extend its ROU beyond the initial term. These option periods have been included in the measurement of the ROU asset and lease liability when management make the judgment that the option is reasonably certain to be exercised based on historical experience and the importance of the underlying asset to AFP’s operations, the availability of alternative assets, security considerations and other relevant requirements for each particular location.
Revaluations
Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date. The AFP has adopted a 3 year revaluation cycle. The AFP tests the valuation model as an internal management review at least once every 12 months to ensure there are no material differences. An asset revaluation was performed as at 30 June 2020.
The valuation of non-financial assets identified the current COVID-19 situation as an area of uncertainty which may impact asset values in the future. The AFP considers the value of non-financial assets recorded at 30 June 2020 to be reliable, with no current evidence of adverse impacts on relevant asset markets.
Valuations were conducted by registered and independent valuers at 30 June 2020 by Australian Valuation Services. Revaluations were conducted on all tangible assets, including those under construction.
Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation surplus except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reverse a previous revaluation increment for that class.
Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.
Key judgement
The valuation basis for each class of assets is as follows:
- land – fair value based on market value of similar properties
- buildings and leasehold improvements – depreciated replacement cost due to no active market for custom-built assets
- other property, plant and equipment – measured at market selling price for assets unless a market does not exist. In these circumstances depreciated replacement cost is applied.
Where possible, a market approach was used through examination of similar assets. Revaluations were conducted on the following basis:
Asset class | Valuation technique |
Land | Market valuation |
Buildings | Depreciation replacement cost |
Leasehold improvements | Depreciation replacement cost |
Property, plant & equipment | Depreciation replacement cost and market valuation |
Impairment and derecognition
All assets were assessed for impairment at 30 June 2020. Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount. Where assets were no longer used by the AFP, these have been written down during the financial year.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use.
The AFP’s intangibles comprise of internally developed and externally acquired software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.
Depreciation and amortisation expense
Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to AFP using the straight-line method of depreciation. Depreciation and amortisation rates have been applied to each class of asset based on the following useful lives:
Buildings on freehold land | 10 to 40 years |
Buildings on leasehold land | 4 to 60 years |
Leasehold improvements | 15 years or lease term |
Other property, plant and equipment | 1 to 30 years |
Software assets | 2 to 20 years |
Useful lives, residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future, reporting periods, as appropriate.
Software is amortised on a straight-line basis over its estimated useful life.
The depreciation rates for ROU assets are based on the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term.
Inventories
Inventories held for distribution are valued at cost, adjusted for any loss of service potential.
Inventories acquired at no cost or nominal consideration are initially measured at current replacement cost at the date of acquisition. Inventory held by the AFP includes uniforms and goods held for distribution.
Note 2.3: Payables
Note 2.3A: Supplier payables | ||
2020 | 2019 | |
$'000 | $'000 | |
Trade creditors and accruals | 65,443 | 75,448 |
Operating lease rentals1 | - | 25,479 |
Total supplier payable | 65,443 | 100,927 |
1Balances reflecting previous lease accounting were adjusted against opening retained earnings on transition to AASB 16. The AFP has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117. | ||
Note 2.3B: Other payables | 2020 | 2019 |
$'000 | $'000 | |
Wages and salaries | 15,970 | 10,603 |
Superannuation | 1,908 | 989 |
Unearned income | 17,656 | 6,967 |
Other payables | 1 | 27 |
Total other payables | 35,535 | 18,586 |
Note 2.3: Accounting policy | ||
Recognition and measurement of supplier and other payables: payables are carried at the amount owing to parties for goods and services provided, which is usually the invoice amount. Settlement is usually made within 7 days (2019: 7 days). | ||
Note 2.4: Interest bearing liabilities
2020 | 2019 | |
$'000 | $'000 | |
Leases | ||
Land | 217 | - |
Buildings | 1,013,024 | - |
Property, plant and equipment | 33,351 | - |
Total interest bearing liabilities | 1,046,592 | - |
The AFP has applied AASB 16 Leases using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117. Lease disclosures should be read in conjunction with accompanying notes 1.1 and 2.2. | ||
The cash outflow for leases for the year ended 30 June 2020 was $111.604m, comprising $97.223m in principal repayments and $14.381m in interest payments. | ||
Note 2.4: Accounting policy | ||
On adoption of AASB 16 Leases, the AFP recognised right-of-use assets and lease liabilities in relation to leases of office space, vehicles and other equipment which had previously been classified as operating leases. Under AASB 16, the AFP recognises lease liabilities for most leases, however has elected not to recognise lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less. The lease liabilities were measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate as at 1 July 2019. The incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The AFP has applied zero coupon yields to calculate the incremental borrowing rate applicable to each of its leases. Given that each lease has a unique lease term, the derived incremental borrowing rates varies for lease to lease. The weighted-average rate applied was 1.4%. | ||
Note 2.5: Other provisions
Provision for restoration obligations | Provision for settlements | Provision for relocations | Total | |
$'000 | $'000 | $'000 | $'000 | |
As at 1 July 2019 | 24,783 | 3,500 | 3,216 | 31,499 |
Additional provisions made | 2,280 | - | 6,472 | 8,752 |
Amounts used | (45) | - | (1,858) | (1,903) |
Provisions not realised | - | (3,500) | (2,616) | (6,116) |
Revaluation | 4,940 | - | - | 4,940 |
Unwinding of discount | 560 | - | - | 560 |
Total as at 30 June 2020 | 32,518 | - | 5,214 | 37,732 |
Note 2.4A: Accounting policy | ||||
Provisions | ||||
Provisions are recognised when the AFP has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a rate that reflects the risks specific to the lability. When discounting is used, the increase in the provision due to the unwinding of the discount or change in the discount rates is recognised in the Statement of comprehensive income. | ||||
Provision for restoration obligations | ||||
The provision for restoration obligations relates to leased accommodation where the AFP is required to restore the premises upon termination of the lease. The original estimates for future costs associated with restoration obligations are determined by independent valuation and discounted to their present value. The original provisions are adjusted for changes in expected future cost and the discount rate. | ||||
The AFP has 44 (2019: 43) agreements for leases of premises which have provisions requiring the AFP to restore the premises to their original condition at the conclusion of the lease. The AFP has made a provision to reflect the present value of this obligation. | ||||
Provision for legal settlement | ||||
The AFP provision for legal settlements includes legal claims made against the AFP which the AFP believes it will have to settle. | ||||
Provision for relocations | ||||
Staff relocations are payments which staff are entitled to for relocating but are yet to fully claim. | ||||
Note 3.1: Employee provisions
2020 | 20191 | |
$'000 | $'000 | |
Leave | 335,383 | 329,771 |
Underpayment of superannuation | 78,697 | 70,678 |
Unpaid overtime | 3,090 | 9,151 |
Other | 50 | 50 |
Total employee provisions | 417,220 | 409,650 |
Breakdown of employee provisions | ||
- amount of employee provisions expected to be settled in less than 12 months | 175,154 | 169,395 |
- amount of employee provisions expected to be settled in more than 12 months | 242,066 | 240,255 |
Total employee provisions | 417,220 | 409,650 |
1 Adjusted 2018-19 figures. Refer to Note 3.4 for the adjustment and accounting policy in relation to the superannuation provision and Note 4.4. | ||
Note 3.1: Accounting policy
Recognition and measurement of employee benefits
Employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if there is a present legal obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Leave
The leave liabilities are annual and long service leave. The liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the AFP’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.
An actuary review is performed every 3 years. A formal actuarial review was conducted as at 30 June 2019.
Employee provision
Employee provisions due within twelve months of the end of the reporting period are measured at their nominal amounts. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.
Employee provisions which are expected to be settled beyond 12 months (commonly long service leave), are discounted to present value using market yields on the 10-year government bond rate.
Superannuation
The AFP's employees are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or a nominated superannuation fund. The CSS and PSS are defined benefit plans for the Australian Government. All other superannuation funds are accumulation plans.
The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance's administered schedules and notes. The AFP makes employer contributions to the employees' superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the government. The AFP accounts for the contributions as if they were contributions to defined contribution plans.
Key estimate
Employee provisions which are expected to be settled beyond 12 months required management judgement and independent actuarial assessment of key assumptions, including, but not limited to:
- future salaries and wages increases;
- future on-cost rates; and
- period of service and attrition; and
- discounted to present value using market yields on 10 year government bonds.
Note 3.2: Key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the AFP. The AFP has determined the key management personnel to be the members of the Executive Leadership Committee, including any member whom has acted for 30 days or more continuous. Key management personnel remuneration is reported in the table below. Included are those who have acted in any of the above mentioned roles deemed as key management personnel or who have departed prior to reporting date. | ||
2020 | 2019 | |
$'000 | $'000 | |
Short-term employee benefits | 2,531 | 2,463 |
Post-employment benefits | 380 | 394 |
Other long-term employee benefits | 61 | 64 |
Termination benefits | 620 | - |
Total key management personnel remuneration expenses1 | 3,592 | 2,921 |
The total number of key management personnel included in the above table is 13 including 3 acting in management positions (2019: 9 including 2 acting in management positions). The number of key management personnel roles at 30 June 2020 was 6 (2019: 6 roles). | ||
The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister's remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the entity. | ||
1 Key management personnel is included in the Home Affairs KMP remuneration tables for part of the year, and this amount has been excluded from AFP figures to avoid duplication. | ||
Note 3.3: Related party disclosures
The AFP is an Australian Government controlled entity. Related parties to this entity are Key Management Personnel including the Portfolio Minister and Executive, and other Australian Government entities.
Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the AFP, it has been determined that there are no related party transactions to be separately disclosed.
Note 3.4: Prior year restatement
Provision | |||
The prior period error relates to unpaid employee entitlements for superannuation. An estimate of the associated cost has been recognised in the opening balances for 2018-19 to the extent applicable to earlier years. | |||
Following clarification on inclusion of entitlements to superannuation, the provision has been increased from the error recognised in the prior year. The current year correction accounts for additional superannuation payable on certain components of employee benefits not previously included in the superannuation calculations. | |||
Reported 2018-19 | Correction | Restated 2018-19 | |
$'000 | $'000 | $'000 | |
Employee Benefits expense | 924,083 | 4,117 | 928,200 |
Employee Provision | 397,594 | 12,056 | 409,650 |
Opening Equity | (917,803) | (7,939) | (925,742) |
Closing Equity | (1,027,161) | (12,056) | (1,039,217) |
The provision is based on management's assessment of the range of potential outcomes taking into account independent advice. The estimate is subject to uncertainty such that the final outcome may be lower or higher than the amount reported as at 30 June 2019, as there are several eligibility criteria to be assessed when unpaid entitlements are calculated for each affected employee. | |||
Note 4.1: Appropriations
Note 4.1A: Revenue from government | 2020 | 2019 |
$'000 | $'000 | |
Departmental appropriations | 1,128,302 | 1,103,344 |
Total revenue from government | 1,128,302 | 1,103,344 |
Note 4.1A: Accounting policy | ||
Revenue from government | ||
Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as revenue from government when the AFP gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts. | ||
Note 4.1B: Annual and unspent appropriations | ||
2020 | 2019 | |
$'000 | $'000 | |
Annual Appropriations | ||
Opening unspent appropriation balance | 273,432 | 285,488 |
Annual appropriation - operating 1 | 1,127,943 | 1,100,464 |
Annual appropriation - capital budget 2 | 78,251 | 58,623 |
Annual appropriation - equity injection | 53,319 | 70,909 |
PGPA Act Section 74 receipts | 309,529 | 281,947 |
Total appropriation available | 1,842,474 | 1,797,431 |
Appropriation applied (current and prior years) | 1,555,549 | 1,523,999 |
Closing unspent appropriation balance | 286,925 | 273,432 |
Balance comprises appropriations as follows: | ||
Appropriation Act (No. 1) 2017–181 | 160 | 160 |
Appropriation Act (No. 1) – Capital Budget (DCB) – Non Operating – 2017–181 | 4,091 | 4,091 |
Appropriation Act (No. 2) – Equity Injection – 2017–18 | 7,664 | 8,881 |
Appropriation Act (No. 4) – Equity Injection – 2017–18 | 2,332 | 2,874 |
Appropriation Act (No. 1) 2018-19 | - | 140,895 |
Appropriation Act (No. 1) – Capital Budget (DCB) – Non Operating – 2018–191 | - | 8,768 |
Appropriation Act (No. 2) - Equity Injection - 2018-19 | 21,033 | 46,554 |
Appropriation Act (No. 3) 2018-19 | - | 49,231 |
Appropriation Act (No. 4) - Equity Injection - 2018-19 | 238 | 507 |
Appropriation Supply Act (No. 1) 2019-20 | 91,000 | - |
Appropriation Supply Act (No. 2) - Equity Injection - 2019-20 | 14,463 | - |
Appropriation Act (No. 1) 2019-20 | 115,853 | - |
Appropriation Act (No. 2) - Equity Injection - 2019-20 | 16,758 | - |
Appropriation Act (No. 4) - Equity Injection - 2019-20 | 2,000 | - |
Appropriation – Cash on hand / at bank | 11,333 | 11,471 |
Total unspent appropriation | 286,925 | 273,432 |
All amounts are GST exclusive | ||
1. The following amounts are included in unspent annual appropriations, as the amounts have not been formally reduced (by law). They have been reduced by permanent quarantine under section 51 of the PGPA Act which constitutes a permanent loss of control. They are included in this note, however do not form part of the appropriation receivable balance at note 2.1B. | ||
- $0.160m – Appropriation Act (No.1) 2017–18 - $4.091m – Appropriation Act (No.1) Capital Budget (DCB) 2017–18 - $6.780m – Appropriation Act (No.2) Equity Injection 2018–19 | ||
2. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts. | ||
At 30 June 2020 the AFP recognised a receivable at Note 2.1B of $3.699m for a no win / no loss arrangement to cover additional FBT expense related to living away from home allowance, to be received in 2020-21. This met the formal recognition criteria under section 51 of the PGPA Act; however, as the appropriation had not been formally appropriated by law, it is not represented in this note (2019: receivable of $1.146m). | ||
Note 4.1C: Annual and unspent administered appropriations | ||
2020 $'000 | 2019 $'000 | |
Opening unspent appropriation balance | 3,435 | 4,423 |
Annual appropriation - operating1 | 9,115 | 15,958 |
Total available appropriation | 12,550 | 20,381 |
Appropriation applied (current and prior years) | 9,031 | 16,946 |
Closing unspent appropriation balance | 3,519 | 3,435 |
Balance comprises appropriations as follows: | ||
Appropriation Act (No. 1) 2017–18 | 7 | 7 |
Appropriation Act (No. 1) 2018-19 | 6 | 395 |
Appropriation Act (No. 3) 2018-19 | 1,464 | 2,173 |
Appropriation Supply Act (No. 1) 2019-20 | 10 | - |
Appropriation Act (No. 1) 2019-20 | 785 | - |
Appropriation Act (No. 3) 2019-20 | 1,247 | - |
Appropriation – Cash on hand / at bank | - | 860 |
Total unspent appropriation - ordinary annual services | 3,519 | 3,435 |
All amounts are GST exclusive. | ||
1. The following amounts are included in unspent annual appropriations, as the amounts have not been formally reduced (by law). They have been reduced by permanent quarantine under section 51 of the PGPA Act which constitutes a permanent loss of control. | ||
- $0.007m – Administered Appropriation Act (No.1) 2017–18 - $0.006m – Administered Appropriation Act (No.1) 2018–19 - $1.464m – Administered Appropriation Act (No.3) 2018–19 | ||
Note 4.2: Net cash appropriation arrangements
From 2010–11, the government introduced net cash appropriation arrangements whereby revenue appropriations for depreciation/amortisation expenses ceased. Entities now receive a separate capital budget provided through equity appropriations. Capital budgets are appropriated in the period when cash payment for capital expenditure is required. | |||
The inclusion of depreciation/amortisation expenses related to ROU leased assets and the lease liability principal repayment amount reflects the cash impact on implementation of AASB 16 Leases, it does not directly reflect a change in appropriation arrangements. | |||
2020 | 2019 | ||
$'000 | $'000 | ||
Total comprehensive income (loss) less depreciation/amortisation expenses 1 | (33,391) | (22,821) | |
Movement in revaluation reserve | 22,877 | - | |
Plus: Depreciation/amortisation expenses not funded through revenue appropriation 1 | (90,139) | (90,654) | |
Plus: Depreciation right-of-use assets | (110,188) | - | |
Less: Principal repayments - leased assets2 | 97,222 | - | |
Total comprehensive income (loss) - per the Statement of comprehensive income | (113,619) | (113,475) | |
1.The comprehensive income (loss) per the Statement of comprehensive income is ($113.619m) (2019: ($113.475m)). The depreciation/amortisation expense per the Statement of comprehensive income is $203.319m including depreciation on right-of-use assets (2019: $93.459m). The amount presented above for these two items has been reduced by $2.992m (2019: $2.641m), representing the depreciation/amortisation expense funded by the ACT Government for Outcome 2. | |||
2.Principal repayments - leased assets of $97.222m per the Statement of cash flows includes prepaid lease payments of $2.493m. The comprehensive loss for 2019-20 excluding the impact of the lease prepayments is ($30.898m). | |||
Note 4.3: Special accounts
The AFP has one special account that contains the receipt of monies temporarily held in trust or otherwise for the benefit of a person other than the Commonwealth, for the payment of monies in connection with services performed on behalf of other governments and non-agency bodies and for expenditure related to providing secretariat support in relation to the detection and prevention of money laundering in the Asia–Pacific region and carrying out activities that are incidental to this purpose. | ||
Services for other entities and trust moneys account (SOETM)1 | 2020 | 2019 |
$'000 | $'000 | |
Balance brought forward from previous year | 53,084 | 50,706 |
Increases | ||
Appropriation credited to special account | 3,738 | 2,921 |
Departmental receipts (AIPM2 and APG3) | 13,870 | 8,931 |
Other receipts | 47,042 | 31,928 |
Total increases | 64,650 | 43,780 |
Decreases | ||
Departmental payments (AIPM and APG) | (15,499) | (13,013) |
Other payments | (59,085) | (28,389) |
Total decreases | (74,584) | (41,402) |
Balance carried to next year and represented by: | 43,150 | 53,084 |
Cash – held by the agency | 4,605 | 3,496 |
Cash – held by the agency on trust | 31,045 | 43,088 |
Monies – held by the OPA | 7,500 | 6,500 |
Total balance carried to the next year | 43,150 | 53,084 |
All amounts are GST exclusive. | ||
1. Appropriation: Public Governance, Performance and Accountability Act 2013, section 78. | ||
Establishing Instrument: Financial Management and Accountability (Establishment of Special Account for Australian Federal Police) Determination 2011/03. Date established: 17 May 2011. | ||
2. Accounting for the Australian Institute of Police Management (AIPM) | ||
The purpose of the AIPM is to provide executive development and education services to Australasian police forces. The AIPM is hosted by the AFP. It also reports on its performance to a Board of Control that is comprised of police Commissioners from Australia and New Zealand. | ||
3. Accounting for the Asia–Pacific Group (APG) on Money Laundering | ||
The purpose of the APG on Money Laundering is to facilitate the adoption, implementation and enforcement of internationally accepted anti-money-laundering and anti-terrorist-financing standards. The APG is hosted by the AFP. It also reports on its performance to the members of the APG. | ||
The AIPM and APG operate within the corporate governance framework of the AFP and the AFP's policies apply in all aspects of the AIPM and APG's functions. All staff members are staff members of the AFP. The AIPM is partly funded from AFP annual departmental appropriations. The AFP has effective control of the AIPM and APG and therefore AIPM and APG transactions are consolidated into the financial statements of the AFP. | ||
AIPM and APG transactions are contained within the special account, 'Services for other entities and trust moneys account', in addition to being consolidated within the AFP financial statements. As a special account, AIPM and APG funds can only be used for the purpose specified. | ||
Note 4.4: Contingent liabilities and contingent assets
Contingent liabilities and assets are not recognised in the Statement of financial position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote.
The AFP has contingent liabilities in respect of legal claims. The amounts are still under negotiation, the remainder are unquantifiable at 30 June.
The AFP had no administered contingent liabilities or contingent assets at 30 June 2020 (2019: nil).
Unquantifiable contingencies
The AFP has unquantifiable contingencies in relation to a potential underpayment of employee costs resulting from interpretations of Enterprise Agreements and other employee arrangements. The quantum is indeterminate as the obligation is not considered probable.
If a matter prosecuted by the AFP is defended successfully, the court may order that the AFP meet certain costs incurred by the defence.
Any contingencies that may arise relating to compensation matters are covered by AFP’s insurance providers Comcare and Comcover.
If a matter is being litigated by the AFP and assets are restrained under the Proceeds of Crime Act 1987 or the Proceeds of Crime Act 2002, the AFP gives an undertaking against potential damages caused to the person(s) whose assets have been restrained. If the proceeds of crime action is unsuccessful, damages may be awarded against the AFP. In addition, cost orders may be made against the AFP if a proceeds of crime action is unsuccessful. Costs awarded are met from the AFP or client organisations' annual appropriations. Damages may be covered by Comcover where Comcover assesses that the liability is covered by the AFP’s insurance policy.
Although costs and damages may be awarded against the AFP from time to time, the AFP is unable to declare an estimate of liabilities not recognised nor undertakings due to the uncertainty of the outcome of matters but, more particularly, due to the sensitivity of the information related to matters still before the courts.
Note 4.5: Aggregate assets and liabilities
2020 | 2019 | |
$'000 | $'000 | |
Assets expected to be recovered in: | ||
No more than 12 months | 342,730 | 345,587 |
More than 12 months | 1,712,478 | 631,111 |
Total assets | 2,055,208 | 976,698 |
Liabilities expected to be settled in: | ||
No more than 12 months | 279,011 | 295,287 |
More than 12 months | 1,323,511 | 265,375 |
Total liabilities | 1,602,522 | 560,662 |
All administered assets and liabilities are expected to be settled in no more than 12 months. | ||
Note 5.1: Budget reporting and major budget variances
The Statement of comprehensive income, the Statement of financial position and the Cash flow statement provide a comparison of the original budget as presented in the 2019–20 Portfolio Budget Statements (PBS) to the 2019–20 actual outcome. No comparison has been provided for the Statement of changes in equity as major changes between the PBS and the actual outcome are explained by movements in the Statement of comprehensive income and the Statement of financial position. | |
Note 5.1A: Departmental major budget variances for 2020 | |
(i) | Employee benefits (Statement of comprehensive income) and (Cash flow statement) |
Employee benefit expenses were $943.682m, $34.463m higher than the budget estimate of $909.219m. The variance is primarily due to the recognition of additional provisions for unpaid employee on costs relating to superannuation on certain allowances and increased costs relating to increased leave provisions. | |
(ii) | Supplier expenses (Statement of comprehensive income) and (Cash flow statement) |
Supplier expenses were $403.343m, $103.018m lower than the budget estimate of $506.361 due to the transition to AASB 16 Leases, resulting in the recognition of operating lease payments against the finance lease liability, not reflected in the budget estimates and lower operational costs across supplier expense categories. | |
(iii) | Depreciation and amortisation expenses (Statement of comprehensive income) |
Depreciation and amortisation expenses were $203.319m, $96.337m higher than the budget estimate of $106.982m due to the transition to AASB 16 Leases and the recognition of depreciation expenses on leased right-of-use assets, not reflected in the budget estimates. | |
(iv) | Finance costs (Statement of comprehensive income) and (Cash flow statement) |
Finance costs were $14.941m compared to the budget estimate of nil due to the transition to AASB 16 Leases and the recognition of interest expense on lease liabilities, not reflected in the budget estimates. | |
(v) | Trade and other receivables (Statement of financial position) |
Trade and other receivables were $285.005m, $20.804m higher than the budget estimate of $264.201m. This is due to an additional $12.222m provided in Additional Estimates and $8.5m increase in goods and services receivables at year end. | |
(vi) | Revaluation of property, plant and equipment (Statement of comprehensive income) |
Revaluation of property, plant and equipment was $22.877m compared to the budget estimate of nil. The budget did not include the impact of the asset revaluation of $22.877m. | |
(vii) | Land and buildings (Statement of financial position) and (Cash flow statement) |
Land and buildings were $1,361.999m, $1,036.561m higher than the budget estimate of $325.438m. The variance is due to the recognition of leased right-of-use assets on transition to AASB 16 Leases, not reflected in the budget estimates. | |
(viii) | Suppliers payable (Statement of financial position) and (Cash flow statement) |
Supplier payables were $65.443m, $49.965m lower than the budget estimate of $115.408m. The variance is due to lease accruals no longer recognised under supplier payables due to transition to AASB 16 Leases and lower than expected payables at year end. | |
(ix) | Lease liabilities (Statement of financial position) |
Lease liabilities were $1,046.592m compared to the budget estimate of nil due to the recognition of finance lease liabilities for buildings and property, plant and equipment on transition to AASB 16 Leases. | |
(x) | Employee provisions (Statement of financial position) and (Cash flow statement) |
Employee provisions were $417.220m, $90.568m higher than the budget estimate of $326.652m. The variance is due to underestimated provisions which were increased by $58.975m through Additional Estimates, recognition of additional provision for unpaid employee on costs relating to superannuation on certain allowances, and less leave taken over the period. | |
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