Introduction

The ATO is responsible for the management of substantial Commonwealth funds and must be able to demonstrate sound financial management that accords with the Australian Government’s policies and meets the requirements of other agencies, such as the ANAO.

For our financial statements (as required by subsection 43(4) of the PGPA Act), see Part 5 - Financial statements.

For details on how we have performed against our financial performance measures in our corporate plan, see Strategic objective: F1 Financial in the annual performance statement.

Operating expense budget

The ATO’s operating expense budget (excluding depreciation) was $3.4 billion.

The ATO’s 2018–19 financial result (including the ACNC) was an operating deficit of $3.3 million or 0.1% of budget. This result excludes non-cash financial accounting adjustments, such as write-off expenses, depreciation, amortisation, finance lease and revaluation adjustments made for our financial statements. See also Part 5 - Financial statements.

Operating expenditure, 2018–19

Capital budget

The ATO commenced 2018–19 with a capital budget of $144.1 million, which comprised:

• departmental capital budget of $112.3 million
• equity funding of $31.8 million.

During the year, the capital budget increased by $21.1 million as a result of both government and ATO decisions.

The ATO’s 2018–19 capital expenditure was $142.7 million. An amount of $21.5 million has been carried forward to support building improvement expenditure in future years.

NOTE

(a) Totals may differ from the sum of components due to rounding.

Administering GST

The ATO administers the goods and services tax (GST) on behalf of the Australian states and territories. The states and territories reimburse the Commonwealth for the ATO’s cost of administering GST. Our obligations to the states and territories are set out in the GST Administration Performance Agreement between the ATO and the Council on Federal Financial Relations, as per the Intergovernmental Agreement on Federal Financial Relations.

In 2018–19, the ATO met the agreed outcomes, including expenditure for administering GST (in 2018–19, this was capped at the agreed estimate of $599.2 million).

GST administration costs are subject to a special purpose audit by the ANAO.

Agency resource statement

NOTES

(a) Appropriation Act (No.1 and 3) 2018–19. This includes prior-year departmental appropriations, PGPA Act section 74 agency receipts and PGPA Act section 75 repayments.

(b) Includes $132.3 million in 2018–19 for the Departmental Capital Budget. For accounting purposes, this amount has been designated as ‘contributions by owners’.

(c) Current year's annual appropriation available for Administered Expenses does not include $4.3 million withheld through a section 51 withholding of the PGPA Act.

(d) Appropriation Act (No. 2 and 4) 2018–19.

Budgeted expenses and resources

The next table is prepared on the basis of accrued expense amounts, while the table of administered payments provided in the performance results overview for Administered programs 1.5 to 1.18 is prepared on a cash basis.

NOTES

(a) Budget 2018–19 relates to Estimated Actual published in the 2019–20 Portfolio Budget Statements, and includes any subsequent adjustments made to the original 2018–19 Budget.

(b) Expenses not requiring appropriation in the Budget year includes depreciation, resources received free of charge and write-down and impairment of assets.

Efficient administrative practices

Along with agency budgets that provide funding to deliver specific programs, government expenditure is guided by specific legislation that provides direction and sets minimum requirements including reporting obligations. The ATO complies with the Public Governance, Performance and Accountability Act 2013 (PGPA Act), the PGPA Rule, ANAO requirements, and the Environment Protection and Biodiversity Conservation Act 1999.

Asset management

The ATO has an asset management framework in place which outlines how we plan and maintain the optimal asset mix for effective delivery of our programs. The ATO’s approach to asset management includes:

• forums to oversee our strategic capital investments, deliver on our priorities and support significant business transformation projects
• a capital management plan that contains information about our proposed capital expenditure from all funding sources
• detailed procedures and guidance on asset management
• an asset register, which is subject to an annual stocktake.

Procurement

Procurement refers to the whole process of acquiring goods or services – starting from identifying a need, through to obtaining and paying for the goods or services. If relevant, it also includes the ongoing contract management and disposal of goods.

The ATO’s approach to procuring goods and services – including consultancies – is consistent with, and reflects the principles of, the Commonwealth procurement rules and various procurement-related legislation and government policies. To ensure this, the ATO has a range of system-based and other controls in place and conducts regular assurance processes.

Consultancies

The ATO uses consultancy services to obtain independent advice – for example, in developing specialised 'intellectual output' to assist with decision-making at the agency level.

Consultants are engaged through a procurement process, using open tender, limited tender or an established panel arrangement. All consultants who require unsupervised access to ATO premises or ATO information are required to complete mandatory training on security, as well as work, health and safety.

During 2018–19, the ATO entered into 164 new consultancy contracts, resulting in total consultancy expenditure of $10 million. In addition, 87 ongoing consultancy contracts were active during 2018–19, resulting in total consultancy expenditure of almost $6 million. Prior year contracts accounted for 36% of total consultancy expenditure.

NOTE

(a) Amounts are GST-inclusive.

For new contracts awarded during 2018–19, the most significant expenditure related to:

• the provision of advice and assurance on technology design and delivery to support the Digital Identity program
• the ATO’s IT infrastructure architecture and design governance capability, with a focus on ensuring the ATO can continue delivering quality digital services to the community.

For ongoing contracts entered into during previous years, the most significant expenditure in
2018–19 related to:

• the development of predictive and prescriptive analytic models to support the ATO’s payment compliance and debt management strategy
• design of IT architecture as part of the Improving ATO IT Systems program.

Annual reports contain information about actual expenditure on contracts for consultancies. Information on the value of contracts and consultancies is available on the AusTender website at tenders.gov.au.

Contracting

The ATO had no contracts in excess of $10,000 that were exempted by the Accountable Authority from being published on AusTender because it would disclose exempt matters under the FOI Act.

All ATO contracts of $100,000 or more provide for the Auditor-General to have access to the contractor’s premises.

Small and medium enterprises

The ATO supports small business participation in the Commonwealth Government procurement market. This support focuses on removing barriers to their participation and includes:

• streamlined tender requirements for lower value and less complex contracts
• adhering to the principles of the Commonwealth Government’s Digital Sourcing Framework, which includes structuring procurements in a way that enables small and medium enterprises to compete fairly to provide components of large ICT projects
• actively seeking opportunities to engage Aboriginal and Torres Strait Islander businesses.

Small-to-medium enterprises and small enterprise participation statistics are available on the Department of Finance website at finance.gov.au/procurement. The Australian Government has a target for 10% of contracts (by value) to be awarded to businesses with less than 200 employees. In 2018, the government announced an additional commitment to source at least 35% of contracts valued up to $20 million (by number) from small-to-medium enterprises.

The ATO recognises the importance of ensuring small businesses are paid on time. The results of the Survey of Australian Government Payments to Small Business are available on the Treasury’s website at treasury.gov.au. The ATO pays our invoices to all businesses (including small businesses) within 30 days, achieving 98% compliance in 2018–19.

Indigenous procurement policy

This year the ATO continued to actively create opportunities for Aboriginal and Torres Strait Islander businesses to supply goods and services to us. For example, we conducted focus sessions to provide Indigenous suppliers with an opportunity to introduce their services and capability to us. The ATO considers Aboriginal and Torres Strait Islander businesses for all procurements regardless of value.

In 2018–19, we spent over $17 million with Aboriginal and Torres Strait Islander businesses. This expenditure relates to both new contracts entered into during 2018–19 (112 with a total value of almost $12 million) and contracts entered into during previous years.

In May 2019, at the Supply Nation Diversity Awards, the ATO was named a finalist for the Government Member of the Year Award, making it into the top three among federal and state government and university sectors in the country.

Grants

The ATO provides a small number of discretionary grants, including funding for legal institutes and to encourage community participation in the tax system through sponsorship and mentoring arrangements.

All of the ATO’s grant activities meet the requirements and principles of grants administration contained in the Commonwealth grants rules and guidelines 2017, including reporting and publishing of all funding provided throughout the year.

During 2018–19, 14 grants were awarded by the ATO. Information on grants awarded is available at grants.gov.au.

Compliance with finance law

The PGPA Act requires that agencies provide a statement of significant issues reported to the minister under paragraph 19(1)(e) of the Act, which relates to non-compliance with finance law and action taken to remedy non-compliance.

The ATO had no instances of significant non-compliance with the finance law to report to the minister in 2018–19.

Ecologically sustainable development and environmental performance

Section 516A of the Environment Protection and Biodiversity Conservation Act 1999 requires all Commonwealth agencies to report on certain aspects of ecologically sustainable development and environmental performance.

Appropriations – Administered funding

In 2018–19, the ATO administered appropriations for two energy and fuel schemes that provide credits and grants to reduce the costs of some fuels, or to provide a benefit to encourage recycling of waste oils. These were:

• Program 1.7 Fuel Tax Credits Scheme (see Performance results – programs 1.5 to 1.13 and 1.15 to 1.18)
• Program 1.9 Product Stewardship for Oil (see Performance results – programs 1.5 to 1.13 and 1.15 to 1.18).

More information about fuel schemes is available at ato.gov.au/business/fuel-schemes.

Appropriations – Departmental funding

The ATO has no departmental funding for work that specifically contributes to ecologically sustainable development. However, in making decisions on expenditure, we apply the Commonwealth procurement rules and guidance from the Department of Finance on informed decision-making processes, to ensure our procurements achieve value for money.

The Commonwealth procurement rules include the need to consider the environmental aspects of the purchase, including whole-of-life costs and, where the procurement is via tender, a tenderer’s practices regarding environmental impacts.

In July 2017, the ATO adopted a new environmental strategy that aims to reduce the ATO’s greenhouse gas emissions by 2020. As at 30 June 2019, we had reduced our emissions by 14.5% from 2017 levels. The ATO is focused on sustainable environmental practices and continuing to reduce emissions.

In 2018–19, The ATO minimised our environmental impact by meeting the energy efficiency requirements of the Energy Efficiency in Government Operations (EEGO) policy for Tenant light and power and Central services performance ratings.

Additionally, 68.4% of ATO’s eligible tenancies that qualify for a rating have achieved or exceeded the minimum National Australian Built Environment Rating System (NABERS) rating of 4.5 stars.