Go to top of page

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:

  • at a point in time where the ownership or control of the goods or services is passed to the customer at a specific time; or
  • over time where the services are provided and consumed simultaneously.

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.