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Notes to and forming part of the financial statements

1. Departmental Financial Performance

1.1 Expenses

This section analyses the financial performance of the Department of Communications and the Arts for the year ended 2019.

2019

$'000

2018

$'000

Note 1.1A: Employee Benefits

Wages and salaries

54,060

52,202

Superannuation

Defined contribution plans

5,097

4,943

Defined benefit plans

5,145

5,217

Leave and other entitlements

7,528

6,912

Separation and redundancies

490

728

Other employee expenses

748

1,019

Total employee benefits

73,068

71,021

Accounting Policy

Accounting policies for employee related expenses are contained in the People and Relationships section at Note 6.

2019

$'000

2018

$'000

Note 1.1B: Suppliers

Goods and services supplied or rendered

Consultants and contractors

10,096

8,827

IT services

8,493

7,489

Office requisites

999

1,158

Property

1,603

2,465

Training

1,259

1,458

Travel

2,592

2,041

Other goods and services

3,877

3,423

Total goods and services supplied or rendered

28,919

26,861

Goods supplied

3,009

3,177

Services rendered

25,910

23,684

Total goods and services supplied or rendered

28,919

26,861

Other suppliers

Workers compensation expenses

191

323

Operating lease rentals

9,643

10,929

Total other suppliers

9,834

11,252

Total suppliers

38,753

38,113

Leasing commitments

The Department in its capacity as lessee for 2 Phillip Law St, Canberra is subject to a 3.5% fixed annual adjustment with a market rent review in April 2023. The lease term expires on 14 December 2027.

The Department in its capacity as lessee for Level 46, 360 Elizabeth Street, Melbourne is subject to a 4% fixed annual adjustment. The lease term expires on 3 April 2022.

The Department in its capacity as lessee for 23-33 Mary Street Level 6, Sydney is subject to a 3% fixed annual adjustment. The lease term expires on 14 May 2021.

The Department in its capacity as lessee for 222 Young Street, Sydney is subject to a 3% fixed annual adjustment. The lease term expires on 31 December 2023.

The Department in its capacity as lessee for 18-24 Down Street, Collingwood is subject to a 3% fixed annual adjustment with a market rent review in January 2025. The lease term expires on 31 December 2026.

2019

$'000

2018

$'000

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within 1 year

9,844

9,355

Between 1 to 5 years

38,903

36,304

More than 5 years

35,589

45,313

Total operating lease commitments

84,336

90,972

The above commitment amounts are GST inclusive.

Accounting Policy

Where an asset is acquired by means of a finance lease, the asset is capitalised at the lower of the fair value of the leased property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability is recognised at the same time and for the same amount.

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.

Operating lease payments are expensed on a straight-line basis which is representative of the pattern of benefits derived from the leased assets.

2019

$'000

2018

$'000

Note 1.1C: Finance Costs

Unwinding of discount

3

19

Total finance costs

3

19

2019

$'000

2018

$'000

Note 1.1D: Impairment Loss Allowance on Financial Instruments

Impairment of financial instruments

7

-

Total impairment loss allowance on financial instruments

7

-

2019

$'000

2018

$'000

Note 1.1E: Losses from Asset Sales

Heritage and cultural:

Proceeds from sale

-

(721)

Carrying value of assets sold

-

1,126

Property, plant and equipment:

Carrying value of assets disposed

85

543

Building:

Carrying value of assets transferred

-

5,212

Intangibles:

Carrying value of assets disposed

44

86

Net losses from asset sales

129

6,246

2019

$'000

2018

$'000

Note 1.1F: Other Expenses

Contributions to corporate Commonwealth entities

1,270

3,551

Contributions to State and Territory Governments

678

368

Contributions to Non-profit organisations

370

465

Contributions to Administered special account

856

786

Other contributions

-

50

Other expenses

26

-

Total other expenses

3,200

5,220

1.2 Own-Source Revenue and Gains

2019

$'000

2018

$'000

Own-Source Revenue

Note 1.2A: Sale of Goods and Rendering of Services

Rendering of services

3,625

3,788

Total sale of goods and rendering of services

3,625

3,788

Accounting Policy

Revenue from the sale of goods and rendering of services is recognised when:

a) The risks and rewards of ownership have been transferred to the buyer; and

b) The entity retains no managerial involvement or effective control over the goods.

The stage of completion of contracts at the reporting date is determined by reference to:

a) Surveys of work performed;

b) Services performed to date as a percentage of total services to be performed; or

c) The proportion that costs incurred to date bear to the estimated total costs of the transaction.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

2019

$'000

2018

$'000

Note 1.2B: Rental Income

Rental reimbursements for car parking

-

10

Rental Rebates

37

39

Operating Lease Rental

1,954

1,837

Total rental income

1,991

1,886

Subleasing rental income commitments

The Department in its capacity as lessor sublet two floors at 2 Phillip Law St, Canberra as of 1 July 2017. The lease is subject to a 3.5% fixed annual adjustment, with a market rent review in April 2023. The lease term expires on 14 December 2027.

2019

$'000

2018

$'000

Commitments for sublease rental income receivables are as follows:

Within 1 year

1,991

1,924

Between 1 to 5 years

8,688

8,394

More than 5 years

8,538

10,823

Total sublease rental income commitments

19,217

21,141

The above commitment amounts are GST inclusive.

2019

$'000

2018

$'000

Note 1.2C: Other Revenue

Refunds from prior year payments

-

2

Special account contributions

1,151

1,392

Other

231

275

Total other revenue

1,382

1,669

2019

$'000

2018

$'000

Note 1.2D: Other Gains

Resources received free of charge

415

396

Reversal of provisions

-

1,781

Leasehold fitout

-

16,498

Total other gains

415

18,675

Accounting Policy

Resources received free of charge

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.

2019

$'000

2018

$'000

Note 1.2E: Revenue from Government

Appropriations

Departmental appropriations

107,763

104,179

Total revenue from Government

107,763

104,179

Accounting Policy

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the entity 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.

2. Income and Expenses Administered on Behalf of Government

2.1 Administered – Expenses

This section analyses the activities that the Department of Communications and the Arts does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

2019

$'000

2018

$'000

Note 2.1A: Suppliers

Goods and services supplied or rendered

Consultants and contractors

346,194

361,220

Royalty payments

21,818

22,312

Other goods and services

8,193

423

Total goods and services supplied or rendered

376,205

383,955

Goods supplied

15

33

Services rendered

376,190

383,922

Total goods and services supplied or rendered

376,205

383,955

2019

$'000

2018

$'000

Note 2.1B: Grants

Public sector

Australian Government entities (related parties)

82,418

85,088

State and Territory Governments

1,710

2,967

Local Governments

2,156

2,029

Private sector

Not-for-profit organisations

91,491

88,968

Commercial entities

71,805

107,650

Total grants

249,580

286,702

Accounting Policy

The entity administers a number of grant and subsidy schemes on behalf of the Government. Grant and subsidy liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed or (ii) the grant eligibility criteria have been satisfied, but payments due have not been made. When the Government enters into an agreement to make these grant and subsidy payments but services have not been performed or criteria satisfied, this is considered a commitment.

2019

$'000

2018

$'000

Note 2.1C: Impairment Loss Allowance on Financial Instruments

Impairment on trade and other receivables

241

-

Total impairment loss allowance on financial instruments

241

-

2019

$'000

2018

$'000

Note 2.1D: Write-Down and Impairment of Other Assets

Revaluation decrement - Land and Buildings

-

1,582

Total write-down and impairment of other assets

-

1,582

2019

$'000

2018

$'000

Note 2.1E: Payments to corporate Commonwealth entities

Australian Broadcasting Corporation

1,045,911

1,043,680

Special Broadcasting Service Corporation

281,726

280,058

Australia Council

208,186

209,393

Australian Film, Television and Radio School

22,584

22,683

Australian National Maritime Museum

21,415

20,727

National Film and Sound Archive of Australia

23,932

24,028

National Museum of Australia

45,164

41,444

National Library of Australia

55,557

51,836

National Portrait Gallery of Australia

11,685

10,809

Screen Australia

11,335

11,394

National Gallery of Australia

45,010

30,787

Old Parliament House

16,425

16,059

Total payments to corporate Commonwealth entities

1,788,930

1,762,898

Accounting Policy

Payments to corporate Commonwealth entities from amounts appropriated for that purpose are classified as administered expenses, equity injections or loans of the relevant portfolio department. The appropriation to the department is disclosed under the Funding section – Appropriations at Note 5.

2019

$'000

2018

$'000

Note 2.1F: Other Expenses

International membership fees

7,219

7,027

Prizes and awards

600

595

Entitlements

4,951

4,577

Contributions

855

1,071

Other expenses

-

334

Total other expenses

13,625

13,604

2.2 Administered – Income

2019

$'000

2018

$'000

Revenue

Non-Taxation Revenue

Note 2.2A: Sale of Goods and Rendering of Services

Rendering of services

3,628

3,702

Total sale of goods and rendering of services

3,628

3,702

Accounting Policy

All administered revenues are revenues relating to ordinary activities performed by the entity on behalf of the Australian Government. As such, administered appropriations are not revenues of the individual entity that oversees distribution or expenditure of the funds as directed.

2019

$'000

2018

$'000

Note 2.2B: Interest

Australian Broadcasting Corporation

1,539

2,132

NBN Co Limited

351,835

69,730

Total interest

353,374

71,862

2019

$'000

2018

$'000

Note 2.2C: Dividends

Australian Postal Corporation

42,205

78,472

Total dividends

42,205

78,472

2019

$'000

2018

$'000

Note 2.2D: Rental Income

Indefeasible Rights of Use

1,529

1,529

Total rental income

1,529

1,529

Accounting Policy

Rental Income is recognised over the term of the Indefeasible Rights of Use granted by the Commonwealth to external parties for use of the Administered property, plant and equipment.

2019

$'000

2018

$'000

Note 2.2E: Other Revenue

Grant refunds

43

378

Contributions

856

786

Other revenue

43

73

Total other revenue

942

1,237

2019

$'000

2018

$'000

Note 2.2F: Other Gains

Reversal of prior year payables

5,527

6,406

Total other gains

5,527

6,406

3. Departmental Financial Position

3.1 Financial Assets

This section analyses the Department of Communications and the Arts assets used to conduct its operations and the operating liabilities incurred as a result. Employee related information is disclosed in the People and Relationships section.

2019

$'000

2018

$'000

Note 3.1A: Cash and Cash Equivalents

Cash in special accounts

300

240

Cash on hand or on deposit

844

972

Cash held in the OPA (special accounts)

4,448

3,454

Total cash and cash equivalents

5,592

4,666

Accounting Policy

Cash is recognised at its nominal amount. Cash and cash equivalents includes:

  • Cash on hand;
  • Demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value; and
  • Cash in special accounts.

2019

$'000

2018

$'000

Note 3.1B: Trade and Other Receivables

Goods and services receivables

Goods and services

834

2,147

Total goods and services receivables

834

2,147

Appropriations receivable

For existing programs

17,458

17,766

Total appropriations receivable

17,458

17,766

Other receivables

GST receivable from the Australian Taxation Office

596

444

Other

515

847

Total other receivables

1,111

1,291

Total trade and other receivables (gross)

19,403

21,204

Less impairment loss allowance

Other receivables

(16)

(9)

Total impairment loss allowance

(16)

(9)

Total trade and other receivables (net)

19,387

21,195

All receivables are expected to be recovered in no more than 12 months.

Credit terms for goods and services were within 30 days (2018: 30 days).

Accounting Policy

Financial assets

Trade receivables, loans and other receivables that are held for the purpose of collecting the contractual cash flows where the cash flows are solely payments of principal and interest, that are not provided at below-market interest rates, are subsequently measured at amortised cost using the effective interest method adjusted for any loss allowance.

3.2 Non-Financial Assets

Note 3.2A: Reconciliation of the Opening and Closing Balances of Buildings, Property, Plant and Equipment and Intangibles for 2019

Buildings

$’000

Heritage and cultural

$’000

Property, Plant and Equipment

$’000

Computer software internally developed

$’000

Computer software purchased

$’000

Total

$’000

As at 1 July 2018

Gross book value

15,199

36,103

8,397

14,134

967

74,800

Accumulated depreciation, amortisation and impairment

(1,356)

(369)

(379)

(7,777)

(761)

(10,642)

Total as at 1 July 2018

13,843

35,734

8,018

6,357

206

64,158

Additions

Purchase

733

468

77

-

-

1,278

Internally developed

-

-

-

4,023

-

4,023

Impairments recognised in net cost of services

-

-

-

-

-

-

Revaluations recognised in net cost of services

-

-

-

-

-

-

Reclassifications

(90)

(40)

(67)

-

(12)

(209)

Depreciation and amortisation

(1,837)

(140)

(1,347)

(1,841)

(62)

(5,227)

Disposals

From disposal of obsolete items

-

-

(85)

(39)

(5)

(129)

Total as at 30 June 2019

12,649

36,022

6,596

8,500

127

63,894

Total as at 30 June 2019 represented by

Gross book value

15,842

36,531

8,272

16,340

942

77,927

Accumulated depreciation, amortisation and impairment

(3,193)

(509)

(1,676)

(7,840)

(815)

(14,033)

Total as at 30 June 2019

12,649

36,022

6,596

8,500

127

63,894

Assets under construction are included in the value of property, plant and equipment of nil (2018: $548,002) and computer software internally developed of $4,141,712 (2018: $1,506,274).

All revaluations are conducted in accordance with the revaluation policy stated at Note 7.4. An independent valuer conducted the revaluations as at 30 June 2019.

There were no revaluation decrements recognised in 2019. Revaluation decrements in 2018 of $358,656 for leasehold improvements and $24,653 for property, plant and equipment were debited from the asset revaluation reserve and included in the equity section of the Statement of Financial Position.

As at 30 June 2019 no intangible assets were found to be impaired.

Contractual commitments for the acquisition of property, plant, equipment and intangible assets for 2019

Capital Commitments

Within 1 year

$’000

Between 1 to 5 years

$’000

More than 5 years

$’000

Computer software internally developed

3,393

-

-

Total capital commitments

3,393

-

-

Contractual commitments for the acquisition of property, plant, equipment and intangible assets for 2018

Capital Commitments

Within 1 year

Between 1 to 5 years

More than 5 years

$’000

$’000

$’000

Buildings

156

-

-

Property, plant and equipment

68

-

-

Computer software internally developed

300

-

-

Total capital commitments

524

-

-

The above commitment amounts are GST inclusive.

Accounting Policy

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. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

Property, Plant and Equipment

Asset Recognition Threshold

Purchases of property, plant and equipment are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $2,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items that are significant in total).

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 Department where an obligation exists to restore the property to its original condition. These costs are included in the value of the Department’s leasehold improvements with a corresponding provision for the ‘make-good’ recognised.

Revaluations

Fair values for each class of asset are determined as shown below:

Asset Class

Fair Value measured at:

Land and buildings

Depreciated replacement cost

Property, plant and equipment

Market selling price or depreciated replacement cost

Heritage and cultural asset

Active market

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 regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reversed 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.

Assets purchased during the financial year are excluded from asset revaluation as they represent fair value.

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Department using, in all cases, the straight-line method of depreciation. Depreciation rates (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.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

2019

2018

Buildings

Leasehold improvements

Lower of 10 years or lease term

Lower of 10 years or lease term

Property, Plant and Equipment

Artworks

Up to 480 years

Up to 480 years

Computer equipment

3 to 5 years

3 to 5 years

Plant, office equipment, furniture and fittings

5 to 10 years

5 to 10 years

Heritage and Cultural

Heritage and cultural items include artworks held by Artbank that are of national, historical or cultural significance. Artbank maintains separate curatorial and preservation policies for heritage and cultural assets: (http://artbank.gov.au/legal/#preservation-policy).

Impairment

All assets were assessed for impairment at 30 June 2019. 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.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the entity were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Intangibles

The Department’s intangibles comprise software externally purchased and internally developed for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses. Software is amortised on a straight-line basis over its anticipated useful life.

The useful lives of the Department’s software are:

2019

2018

Externally purchased software

3 to 5 years

3 to 5 years

Internally developed software

3 to 5 years

3 to 5 years

All software assets were assessed for indications of impairment as at 30 June 2019.

2019

$'000

2018

$'000

Note 3.2B: Other Non-Financial Assets

Operating lease rentals - sublease

452

188

Lease incentive - sublease

593

663

Prepayments

3,119

1,519

Total other non-financial assets

4,164

2,370

3.3 Payables

2019

$'000

2018

$'000

Note 3.3A: Suppliers

Trade creditors and accruals

3,724

3,794

Operating lease rentals

1,799

740

Total suppliers

5,523

4,534

The majority of suppliers engaged had 30 day payment terms.

Suppliers are expected to be settled in no more than 12 months.

2019

$'000

2018

$'000

Note 3.3B: Other Payables

Salaries and wages

457

569

Superannuation

77

81

Employee transfers

1,658

1,657

Lease incentive

2,633

2,999

Prepayments received/unearned income

2,111

2,030

Contributions

106

176

Other

450

90

Total other payables

7,492

7,602

3.4 Other Provisions

Provision for make-good1

$’000

Total

$’000

As at 1 July 2018

221

221

Additional provisions made

250

250

Amounts used

(100)

(100)

Unwinding of discount or change in discount rate

3

3

Total as at 30 June 2019

374

374

1The Department currently has two (2018: two) agreements for the leasing of premises that have provisions requiring the Department to restore the premises to their original condition at the conclusion of the lease. The Department has made a provision to reflect the present value of this obligation.

4. Assets and Liabilities Administered on Behalf of Government

4.1 Administered – Financial Assets

This section analyses assets used to conduct operations and the operating liabilities incurred that therefore the Department of Communications and the Arts does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

2019

$'000

2018

$'000

Note 4.1A: Cash and Cash Equivalents

Cash held in the OPA (special accounts)

98

47

Total cash and cash equivalents

98

47

2019

$'000

2018

$'000

Note 4.1B: Trade and Other Receivables

Advances and loans

Loans to corporate Commonwealth entities

Australian Broadcasting Corporation1

29,619

49,021

NBN Co Limited2

13,053,335

5,531,000

Total advances and loans

13,082,954

5,580,021

Other receivables

GST receivable from the Australian Taxation Office

33,158

36,083

Grants receivable

264

264

Other

-

1

Total other receivables

33,422

36,348

Total trade and other receivables (gross)

13,116,376

5,616,369

Less impairment loss allowance

Loans to corporate Commonwealth entities3

(1,600)

-

Grants receivable

(264)

(1)

Total impairment loss allowance

(1,864)

(1)

Total trade and other receivables (net)

13,114,512

5,616,368

1Loans to Australian Broadcasting Corporation were made under financial assistance legislation. No security isrequired. Interest rates are fixed. Principal and interest are repaid annually in arrears. Effective interest rates average 1.95% per annum (2018: 1.88% per annum).

2The Government has provided a loan to NBN Co Limited (NBN Co) on commercial terms of up to $19.5 billion with drawings available on a monthly basis. The loan was established in December 2016 and must be repaid in full by 30 June 2024. The loan has a fixed interest rate of 3.96% per annum with interest payable monthly over the life of the facility.

3The Department has assessed the loan to NBN Co on transition to AASB 9 Financial Instruments. In accordance with the requirements of AASB 9, the Department has determined that there has not been a significant increase in credit risk of the loan since inception and the probability of default has been assessed as extremely low. The impairment allowance has been calculated with reference to the probability of default. The allowance recognised by the Department is not indicative of an identified loss event for the NBN Co loan.

2019

$'000

2018

$'000

Note 4.1C: Other Investments

Corporate Commonwealth entities:

Australian Broadcasting Corporation

1,071,656

1,033,352

Australian Postal Corporation

2,224,649

2,582,229

Special Broadcasting Service Corporation

222,626

215,544

Australia Council

14,725

14,340

Australian Film, Television and Radio School

11,105

11,122

Australian National Maritime Museum

263,063

256,668

National Film and Sound Archive of Australia

353,384

292,051

National Gallery of Australia

6,333,026

6,314,864

National Library of Australia

1,695,104

1,691,970

National Museum of Australia

459,315

471,444

National Portrait Gallery of Australia

146,170

143,798

Screen Australia

17,749

17,743

Old Parliament House

112,629

93,924

12,925,201

13,139,049

Commonwealth companies:

NBN Co Limited1

8,682,301

13,247,377

Bundanon Trust

59,196

58,729

Creative Partnerships Australia

5,473

2,922

8,746,970

13,309,028

Total other investments

21,672,171

26,448,077

For full details of the corporate Commonwealth entities and the Commonwealth companies please refer to each entity's individual financial statements.

1The Government’s loan to NBN Co is disclosed in Note 4.1B.

Accounting Policy

Administered investments in subsidiaries, joint ventures and associates are not consolidated because their consolidation is relevant only at the Whole of Australian Government level.

In accordance with AASB 13 Fair Value Measurement, the following techniques are used to value Administered Investments:

(a) Discounted Cash Flows – this method needs to be considered when an entity invests in another entity that generates significant non-government cash inflows; and

(b) Net Assets – this method needs to be considered when an entity invests in another entity that does not generate significant non-government cash inflows.

A review of all administered investments is performed on an annual basis to ensure the appropriate valuation method is used.

Administered investments, other than those held for sale, are classified as 'financial assets of fair value through other comprehensive income’ and are measured at their fair value as at 30 June 2019. Apart from Australian Postal Corporation, fair value has been taken to be the Australian Government's proportional interest in the net assets of the entities as at the end of reporting period.

Australian Postal Corporation’s fair value estimates are based on a Discounted Cash Flow valuation calculated using cash flow forecasts extracted from the Australia Post Corporate Plan 2019-20 to 2022-23. The forecasts use management estimates to determine volume and price growth rates, and the weighted average cost of capital. Actual results may differ from these estimates under different assumptions and conditions and may materially affect the financial position reported in future periods.

In accordance with AASB 9 Financial Instruments and AASB 13 Fair Value Measurement, the Department has determined that the appropriate valuation method for the investment in NBN Co as at 30 June 2019 is the net assets approach. NBN Co is still in the build phase of construction and its cash flows are predominately from government.

2019

$'000

2018

$'000

Note 4.1D: Other Financial Assets

Assets forfeited under the Protection of Movable Cultural Heritage Act 19961

-

19

Total other financial assets

-

19

1Items forfeited to the Commonwealth under subsection 14(1) of the Protection of Movable Cultural Heritage Act 1996.

4.2 Administered – Non-Financial Assets

Note 4.2A: Reconciliation of the Opening and Closing Balances of Buildings, Property, Plant and Equipment for 2019

Buildings

$’000

Property plant and equipment

$’000

Total

$’000

As at 1 July 2018

Gross book value

56,377

148,012

204,389

Accumulated depreciation, amortisation and impairment

-

-

-

Total as at 1 July 2018

56,377

148,012

204,389

Additions

Purchase

1,608

-

1,608

Revaluations recognised in other comprehensive income

-

(1,841)

(1,841)

Revaluations recognised in comprehensive income

-

-

-

Depreciation and amortisation

(2,416)

(8,031)

(10,447)

Total as at 30 June 2019

55,569

138,140

193,709

Total as at 30 June 2019 represented by

Gross book value

57,985

138,140

196,125

Accumulated depreciation, amortisation and impairment

(2,416)

-

(2,416)

Total as at 30 June 2019

55,569

138,140

193,709

No indicators of impairment were found for buildings or property, plant and equipment.

No buildings or property, plant or equipment is expected to be sold or disposed of within the next 12 months.

All revaluations were conducted in accordance with the revaluation policy stated at Note 7.5. An independent valuer conducted the revaluations as at 30 June 2019 for property, plant and equipment and buildings.

Revaluation decrements of $1,840,540 for property, plant and equipment (2018: $87,961) were debited to the asset revaluation reserve and included in the Statement of Other Comprehensive Income. There were no building decrements in 2019 (2018: $1,582,048).

Contractual commitments for the acquisition of property, plant, equipment assets for 2019

Within 1 year

$’000

Between 1 to 5 years

$’000

More than 5 years

$’000

Buildings

1,763

3,555

-

Total capital commitments

1,763

3,555

-

Contractual commitments for the acquisition of property, plant, equipment assets for 2018

Within 1 year

$'000

Between 1 to 5 years

$'000

More than 5 years

$'000

Buildings

1,769

5,319

-

Total capital commitments

1,769

5,319

-

The above commitment amounts are GST inclusive.

2019

$'000

2018

$'000

Note 4.2B: Other Non-Financial Assets

Other prepayments

2,965

2,917

Total other non-financial assets

2,965

2,917

4.3 Administered - Payables

2019

$'000

2018

$'000

Note 4.3A: Suppliers

Trade creditors and accruals

330,215

340,653

Total suppliers

330,215

340,653

Settlement is usually made within 30 days.

2019

$'000

2018

$'000

Note 4.3B: Grants

Australian Government entities

431

323

Local Governments

166

53

Non-profit organisations

1,397

197

Commercial entities

11,261

29,059

Total grants

13,255

29,632

All grant payables are expected to be settled in no more than 12 months. Settlement is usually made according to the terms and conditions of each grant within 30 days of performance or eligibility.

2019

$'000

2018

$'000

Note 4.3C: Other Payables

GST payable to the Official Public Account

5,410

5,643

Lease income received in advance1

11,347

12,876

Classification income received in advance

449

523

Forfeited assets2

-

19

Total other payables

17,206

19,061

1Lease income received in advance relates to the indefeasible rights of use (IRUs) issued by the Commonwealth in relation to network infrastructure assets. As part of the arrangement for the construction of assets and the issue of IRUs, the Commonwealth has provided a lease incentive to the contractor in the form of a reduction of lease payments that would otherwise be payable to the Commonwealth for the IRUs. The lease incentive was recognised as a lease prepayment and lease income received in advance.

2Items forfeited to the Commonwealth under subsection 14(1) of the Protection of Movable Cultural Heritage Act 1996.

4.4 Administered – Provisions

Note 4.4A: Other Provisions

Provision for grants

$'000

Total

$'000

As at 1st July 2018

1,173

1,173

New provisions made

-

-

Amounts used

(1,173)

(1,173)

Amounts reversed

-

-

Total as at 30 June 2019

-

-

5. Funding

5.1 Appropriations

This section identifies the Department of Communications and the Arts funding structure.

Note 5.1A: Annual Appropriations ('Recoverable GST exclusive')

Annual Appropriations for 2019

Annual appropriation

$'000

Adjustments to appropriation1

$'000

Total appropriation

$'000

Appropriation applied in 2019 (current and prior years)

$'000

Variance2

$'000

Departmental

Ordinary annual services

107,763

8,706

116,469

115,904

565

Capital budget3

3,547

-

3,547

4,269

(722)

Other services

Equity injections

-

-

-

150

(150)

Total departmental

111,310

8,706

120,016

120,323

(307)

Administered

Ordinary annual services

Administered items

417,246

-

417,246

404,472

12,774

Capital budget3

1,608

-

1,608

1,608

-

Payments to corporate Commonwealth entities

1,788,930

-

1,788,930

1,788,930

-

Other services

Administered assets and liabilities

5,055,869

-

5,055,869

7,170,499

(2,114,630)

Payments to corporate Commonwealth entities

55,240

-

55,240

55,240

-

Total administered

7,318,893

-

7,318,893

9,420,749

(2,101,856)

1 Departmental adjustments are PGPA Act Section 74 receipts.

2 Departmental variances relate to funds required to cover accruals and prior year funds expended in the current year. Administered variances relate to funds required to cover accruals, and the assets and liabilities variance relates to funding required by NBN Co in 2018-19 due to revised expenditure forecasts that reflect changes in the deployment profile and other payments.

3 Departmental and Administered 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.

Annual appropriations for 2018

Annual
appropriation
1

$'000

Adjustments to appropriation2

$'000

Total appropriation

$'000

Appropriation applied in 2018 (current and prior years)

$'000

Variance3

$'000

Departmental

Ordinary annual services

104,179

11,030

115,209

116,145

(936)

Capital budget4

3,558

-

3,558

5,551

(1,993)

Other services

Equity injections

-

-

-

-

-

Total departmental

107,737

11,030

118,767

121,696

(2,929)

Administered

Ordinary annual services

Administered items

450,885

-

450,885

426,060

24,825

Capital budget4

1,636

-

1,636

1,636

-

Payments to corporate Commonwealth entities

1,762,898

-

1,762,898

1,762,898

-

Other services

Administered assets and liabilities

9,158,817

-

9,158,817

7,495,825

1,662,992

Payments to corporate Commonwealth entities

40,601

-

40,601

40,601

-

Total administered

11,414,837

-

11,414,837

9,727,020

1,687,817

1 Administered Appropriation Act (No. 1) 2017-18 of $14,035,000 was withheld (Section 51 of the PGPA Act) on 26 June 2018 and quarantined for administrative purposes.

2 Departmental adjustments are PGPA Act Section 74 receipts.

3 Departmental variances relate to prior year funds expended in the current year. Administered variances relate to funds required to cover accruals, and the assets and liabilities variance relates to funding not required by NBN Co in 2017-18 due to revised expenditure forecasts that reflect changes in the deployment profile and other payments.

4 Departmental and Administered 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.

2019

$'000

2018

$'000

Departmental

Cash on hand or on deposit

844

972

Appropriation Act (No.1) 2018-2019 (Capital Budget)

454

-

Appropriation Act (No.1) 2018-2019

15,453

-

Appropriation Act (No.3) 2018-2019

1,551

-

Appropriation Act (No.1) 2017-2018

-

15,571

Supply Act (No.1) 2017-2018 (Capital Budget - DCB)

-

1,177

Appropriation Act (No.3) 2016-2017

-

868

Appropriation Act (No.2) 2016-2017

-

150

Total Departmental

18,302

18,738

Administered

Appropriation Act (No.1) 2018-2019

44,031

-

Appropriation Act (No.3) 2018-2019

13,115

-

Appropriation Act (No.2) 2018-2019

1,582,916

-

Appropriation Act (No.1) 2017-20181

14,196

49,813

Appropriation Act (No.3) 2017-2018

2,041

2,041

Appropriation Act (No.2) 2017-2018

-

3,252,992

Appropriation Act (No.1) 2016-20171

4,172

12,927

Appropriation Act (No.3) 2016-2017

928

928

Appropriation Act (No.2) 2016-2017

-

444,555

Appropriation Act (No.1) 2015-20162

-

545

Appropriation Act (No.3) 2015-20162

-

697

Total Administered

1,661,399

3,764,498

1Administered appropriations have been permanently withheld under section 51 of the PGPA Act amounting to $36,411,000 (2016-17) and $14,035,000 (2017-18) for unspent appropriation no longer required.

2Administered appropriations for 2015-16 were repealed on 1 July 2018.

Note 5.1C: Special Appropriations ('Recoverable GST exclusive')

Authority

Appropriation applied

2019

$'000

2018

$'000

Telstra Corporation Act 1991, section 8BA(3).
Nature: Administered (Unlimited Amount)

-

-

Public Governance, Performance and Accountability Act 2013 , section 77.
Nature: Administered (Refund Provisions)

47

70

Classification (Publications, Films and Computer Games) Act 1995.
Nature: Administered

-

-

Total special appropriations applied

47

70

5.2 Special Accounts

Note 5.2A: Special Accounts ('Recoverable GST exclusive')

Art Rental Special Account 20161

Public Interest Telecommunications Services
Special Account2

Cultural
Special Account3

Indigenous Repatriation
Special Account 20164

National Cultural Heritage
Special Account5

2019

$'000

2018

$'000

2019

$'000

2018

$'000

2019

$'000

2018

$'000

2019

$'000

2018

$'000

2019

$'000

2018

$'000

Balance brought forward from previous period

725

986

44

26,711

380

203

2,589

1,542

3

-

Increases

Departmental

Appropriation credited to special account

-

1,350

4,046

4,007

167

135

660

800

-

-

Receipts

5,552

4,192

-

-

543

610

782

992

-

-

Total departmental

5,552

5,542

4,046

4,007

710

745

1,442

1,792

-

-

Administered

Contribution received

-

-

856

786

-

-

-

-

497

500

Telecommunication Industry Levy receipts

-

-

253,887

227,220

-

-

-

-

-

-

Appropriation credited to special account

-

-

95,954

95,993

-

-

-

-

-

-

Total administered

-

-

350,697

323,999

-

-

-

-

497

500

Total increases

5,552

5,542

354,743

328,006

710

745

1,442

1,792

497

500

Available for payments

6,277

6,528

354,787

354,717

1,090

948

4,031

3,334

500

500

Decreases

Departmental

Payments made

(5,092)

(5,803)

(3,190)

(3,221)

(356)

(568)

(1,202)

(745)

-

-

Contribution made

-

-

(856)

(786)

-

-

-

-

-

-

Total departmental

(5,092)

(5,803)

(4,046)

(4,007)

(356)

(568)

(1,202)

(745)

-

-

Administered

Payments made

-

-

(350,673)

(350,666)

-

-

-

-

(470)

(497)

Total administered

-

-

(350,673)

(350,666)

-

-

-

-

(470)

(497)

Total decreases

(5,092)

(5,803)

(354,719)

(354,673)

(356)

(568)

(1,202)

(745)

(470)

(497)

Total balance carried to the next period

1,185

725

68

44

734

380

2,829

2,589

30

3

Balance represented by:

Cash held in entity bank accounts

300

240

-

-

-

-

-

-

-

-

Cash held in the Official Public Account

885

485

68

44

734

380

2,829

2,589

30

3

Total balance carried to the next period

1,185

725

68

44

734

380

2,829

2,589

30

3

1Appropriation: Public Governance, Performance and Accountability Act 2013, section 78.

Establishing Instrument: PGPA Act Determination (Art Rental Special Account 2016).

Purpose: Amounts may be debited from the special account to:

a. acquire, deaccession, lease, promote, develop, exhibit, lend, conserve and undertake any other activities in relation to managing an art rental collection for the Commonwealth;

b. activities that are incidental to the purposes mentioned in paragraph (a);

c. to reduce the balance of the special account without making a real or notional payment; and

d. to repay, as required by law, amounts that have been credited to the special account.

2Appropriation: Public Governance, Performance and Accountability Act 2013, section 80.

Establishing Instrument: Telecommunications (Consumer Protection and Service Standards) Act 1999, Division 5, section 37.

Purpose: Support the delivery of Universal Service Obligation, National Relay Service and other public interest telecommunications services for all Australians.

The Australian Communications and Media Authority collects a levy imposed on carriers under the Telecommunications (Industry Levy) Act 2012 and the Telecommunications (Consumer Protection and Service Standards) Act 1999. These levy receipts are credited to the special account, and along with Government funding, are used to pay contractors and grant recipients and to contribute to administrative costs.

3Appropriation: Public Governance, Performance and Accountability Act 2013, section 78.

Establishing Instrument: Financial Management and Accountability (Establishment of Cultural Special Account) Determination 2011/18.

Purpose: Supporting the performance or administration of cultural activities.

4Appropriation: Public Governance, Performance and Accountability Act 2013 section 78.

Establishing Instrument: PGPA Act Determination (Indigenous Repatriation Special Account 2016).

Purpose: Developing and conducting projects, programs and strategies associated with the repatriation of Indigenous ancestral remains and secret sacred objects.

5Appropriation: Public Governance, Performance and Accountability Act 2013, section 80.

Establishing Instrument: Protection of Moveable Cultural Heritage Act 1986, section 25.

Purpose: Amounts standing to the credit of the National Cultural Heritage Account may be expended for the purpose of facilitating the acquisition of the Australian protected objects for display or self-keeping.

This account is non-interest bearing and the balance is held in the Official Public Account.

The Department has a BAF Communications Portfolio Special Account as a part of the Nations Building Funds Act 2008. The account was established under section 80 of the Public Governance, Performance and Accountability Act 2013.

Purpose: To make payments in relation to the creation or development of communications infrastructure; and eligible national broadband network matters.

For the year ended 30 June 2019, the account had a nil balance and there were no transactions debited or credited to it during the current or prior reporting period.

5.3 Regulatory Charging Summary

2019

$'000

2018

$'000

Amounts applied

Departmental

Annual appropriations

6,223

6,424

Own source revenue

32

26

Administered

Annual appropriations

-

-

Total amounts applied

6,255

6,450

Expenses

Departmental

6,255

6,450

Administered

-

-

Total expenses

6,255

6,450

External revenue

Departmental

32

26

Administered

3,628

3,702

Total external revenue

3,660

3,728

Amounts written off

Departmental

-

-

Administered

-

-

Total amounts written off

-

-

Regulatory charging activities:

Classification Fees: Before every film, computer game and certain publications can be legally made available to the Australian public by means of sale, exhibition or commercial distribution they must be classified (with limited exceptions). A valid classification application is to be accompanied with the prescribed fee before any classification decision can be made. The Classification (Publications, Films and Computer Games) Act 1995 and the Classification (Publications, Films and Computer Games) Regulations 2005 are the enabling legislation.

Cost Recovery Implementation Statement for the above activity is available at http://www.classification.gov.au/About/Pages/Legislation.aspx.

6. People and Relationships

6.1 Employee Provisions

This section describes a range of employment and post employment benefits provided to our people and our relationships with other key people.

2019

$'000

2018

$'000

6.1: Employee Provisions

Leave

25,975

25,011

Separations and redundancies

316

-

Total employee provisions

26,291

25,011

Accounting policy

Liabilities for short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts.

Other long-term employee benefits are measured as the net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. The leave 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 entity’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by using the Department of Finance’s Short Hand Method as at 30 June 2019, as outlined in the Financial Reporting Rule. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and Redundancy

Provision is made for separation and redundancy benefit payments. The entity recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

The entity's staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government. The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

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 entity makes employer contributions to the employees' defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The entity accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

6.2 Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Department, directly or indirectly. During 2017-18 the Secretary formed the Secretary’s Business Meeting (SBM) with the first meeting held on 24 November 2017. For the 2018-19 financial year, the Department has determined the key management personnel to be permanent members of the SBM, being the Secretary, Deputy Secretaries and Chief Operating Officer and anyone who has acted in one of those positions and attended a SBM during the acting periods.

In the previous year the Department had determined the key management personnel to be the members of the Executive Leadership Team (ELT), comprising the Secretary, Deputy Secretaries, First Assistant Secretaries and the Chief Risk Officer. The total key management personnel remuneration expense for the Executive Leadership Team in 2018 was $4,269,000. However, for comparative purposes the 2018 figures have been re-stated based on the SBM.

Key management personnel remuneration is reported in the table below:

2019

$'000

2018

$'000

Short-term employee benefits

1,688

1,827

Post-employment benefits

260

296

Other long-term employee benefits

38

176

Termination benefits

-

221

Total key management personnel remuneration expenses1

1,986

2,520

The total number of key management personnel included in the above table is six individuals, being four individuals who held the position for the full year and two who acted in the position for part of the year (2018: nine individuals, being two who held the position for the full year and seven who held the position for part of the year, including acting arrangements).

There were no termination benefits paid in 2019.

1The above key management personnel remuneration excludes the remuneration and other benefits of the Cabinet Ministers, Portfolio Ministers, Assistant Ministers and Presiding Officers. The ministers’ remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the Department.

6.3 Related Party Disclosures

Related party relationships:

The Department is an Australian Government controlled entity. Related parties to this Department are Key Management Personnel including the Portfolio Minister and Executive, and other Australian Government entities.

Transactions with related parties:

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.

Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the Department, it has been determined that there are no related party transactions to be separately disclosed.

7. Managing Uncertainties

7.1 Contingent Assets and Liabilities

This section analyses how the Department of Communications and the Arts manages financial risks within its operating environment.

7.1A: Departmental Contingent Assets and Liabilities

Quantifiable Contingencies

There are no significant quantifiable contingencies as at 30 June 2019 (2018: nil).

Unquantifiable Contingencies

There are no significant unquantifiable contingencies as at 30 June 2019 (2018: nil).

Significant Remote Contingencies

Operating Leases and Car Parking Licences

The Commonwealth indemnifies third parties against loss in relation to operating leases for accommodation, storage and some car parking. The Commonwealth also indemnifies some third parties against loss in relation to car parking facilities acquired under car parking licence agreements. As at 30 June 2019, no claims have been made.

Westpac Banking Corporation

The Commonwealth indemnifies Westpac Banking Corporation against loss reasonably incurred in relation to Departmental banking functions. In June 2013, the Department entered into a new banking contract with Westpac that provided for an indemnity capped at $50 million per occurrence. The previous contract provided for an indemnity capped at $25 million per occurrence. As at 30 June 2019, no claims have been made (2018: nil).

Accounting Policy

Contingent liabilities and contingent 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.

Indemnities

The maximum amounts payable under the indemnities given is disclosed above. At the time of completion of the financial statements, there was no reason to believe that the indemnities would be called upon, and no recognition of any liability was therefore required.

7.1B: Administered – Contingent Assets and Liabilities

Quantifiable Administered Contingencies

As at 30 June 2019, the Australian Government did not have any quantifiable contingencies (2018: nil).

Unquantifiable Administered Contingencies

NBN Co Limited (NBN Co) Board Members Insolvency Indemnity

The Australian Government has provided Directors of NBN Co with an indemnity against liability should the Government fail to meet its funding obligations to NBN Co. The liabilities covered by this indemnity would be no greater than those covered by the NBN Co Equity Funding Agreement, with the exception of any legal expenses incurred by individual Directors arising from this indemnity.

Significant Remote Administered Contingencies

Telstra Financial Guarantee

The Australian Government has provided to Telstra Corporation Limited (Telstra) a Guarantee in respect of
NBN Co financial obligations under the Definitive Agreements. The Agreements were amended on 14 December 2014. The Guarantee was not amended at that time and it continues in force in accordance with its terms in respect of the amended Definitive Agreements. The liabilities under the Definitive Agreements between Telstra and NBN Co arise progressively during the roll-out of the National Broadband Network as Telstra’s infrastructure is accessed and Telstra’s customers are disconnected from its copper and Hybrid Fibre Coaxial cable networks. The Australian Government is only liable in the event NBN Co does not pay an amount when due under the Definitive Agreements. As at 30 June 2019, NBN Co had generated liabilities covered by the Guarantee estimated at $9.4 billion. The Guarantee will terminate when NBN Co achieves specified credit ratings for a period of two continuous years and either:

  • the company is capitalised by the Commonwealth to the agreed amount; or
  • the Communications Minister declares, under the National Broadband Network Companies Act 2011, that, in his or her opinion, the National Broadband Network should be treated as built and fully operational.

Optus Financial Guarantee

The Australian Government has provided a Guarantee in respect of the NBN Co financial obligations to Optus Networks Pty Ltd, Optus Internet Pty Ltd, Optus Vision Media Pty Ltd and SingTel Optus Pty Ltd (collectively, Optus) under the Optus HFC Subscriber Agreement (the Agreement). An amended version of the Agreement came into effect on 22 January 2019. The Guarantee continues to apply to that Agreement. The Agreement extends for the period of the National Broadband Network roll-out in Optus Hybrid Fibre Coaxial areas. The Australian Government is only liable in the event NBN Co does not pay an amount when due under the Optus Agreement. As at 30 June 2019, NBN Co had generated liabilities covered by the Optus Agreement, which are estimated at an amount lower than $197.0 million. There is a low risk that a claim would be made under the Guarantee. The Guarantee will terminate in 2021.

Equity Funding Agreement

The Australian Government has entered into an Equity Funding Agreement with NBN Co to provide $29.5 billion equity funding. Although this Agreement ended on 30 June 2019, the Australian Government retains obligations to meet NBN Co’s costs arising from a termination of the roll-out. As at 30 June 2019, NBN Co’s termination liabilities were estimated at $21.3 billion.

7.2 Financial Instruments

2019

$'000

2018

$'000

Note 7.2A: Categories of Financial Instruments

Financial Assets under AASB 139

Loans and receivables

Cash and cash equivalents

4,666

Goods and services receivable

2,147

Other receivables

847

Total loans and receivables

7,660

Financial Assets under AASB 9

Financial assets at amortised cost

Cash and cash equivalents

5,592

Goods and services receivable

834

Other receivables

515

Total financial assets at amortised cost

6,941

Total financial assets

6,941

7,660

Financial Liabilities

Financial liabilities measured at amortised cost

Suppliers

3,724

3,794

Other payables

2,214

1,923

Total financial liabilities measured at amortised cost

5,938

5,717

Total financial liabilities

5,938

5,717

Classification of financial assets on the date of initial application of AASB 9

Financial assets class

Note

AASB 139 original classification

AASB 9 new classification

AASB 139 carrying amount at 1 July 2018

$'000

AASB 9 carrying amount at 1 July 2018

$'000

Cash and cash equivalents

3.1A

Loans and receivable

Amortised Cost

4,666

4,666

Goods and services receivable

3.1B

Loans and receivable

Amortised Cost

2,147

2,147

Other receivables

3.1B

Loans and receivable

Amortised Cost

847

847

Total financial assets

7,660

7,660

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB 9

AASB 139 carrying amount at 1 July 2018

$'000

Reclassification

$'000

Re-measurement

$'000

AASB 9 carrying amount at 1 July 2018

$'000

Financial assets at amortised cost

Cash and cash equivalents

4,666

-

-

4,666

Goods and services receivable

2,147

-

-

2,147

Other receivables

847

-

-

847

Total amortised cost

7,660

-

-

7,660

2019

$'000

2018

$'000

Note 7.2B: Net Gains or Losses on Financial Assets

Financial assets at amortised cost

Impairment

(7)

-

Net loss on financial assets at amortised cost

(7)

-

Net loss on financial assets

(7)

-

The Department had no gains or losses on financial liabilities in either the current or prior year.

Accounting Policy

Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019; the entity classifies its financial assets in the following categories:

a) financial assets at fair value through profit or loss;

b) financial assets at fair value through other comprehensive income; and

c) financial assets measured at amortised cost.

The classification depends on both the entity’s business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the entity becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon a trade date.

Comparatives have not been restated on initial application.

Financial Assets at Amortised Cost

Financial assets included in this category need to meet two criteria:

  1. the financial asset is held in order to collect the contractual cash flows; and
  2. the cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest method.

Effective Interest Method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Financial Assets at Fair Value Through Other Comprehensive Income (FVOCI)

Financial assets measured at fair value through other comprehensive income are held with the objective of both collecting contractual cash flows and selling the financial assets and the cash flows meet the SPPI test.

Any gains or losses as a result of fair value measurement or the recognition of an impairment loss allowance is recognised in other comprehensive income.

Financial Assets at Fair Value Through Profit or Loss (FVTPL)

Financial assets are classified as financial assets at fair value through profit or loss where the financial assets either doesn’t meet the criteria of financial assets held at amortised cost or at FVOCI (i.e. mandatorily held at FVTPL) or may be designated.

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.

Impairment of Financial Assets

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 where risk has significantly increased, or an amount equal to 12-month expected credit losses if the risk has not increased.

The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

Financial Liabilities

Financial liabilities are classified as either financial liabilities at ‘fair value through profit or loss’ or other financial liabilities.

Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial Liabilities at Fair Value Through Profit or Loss

Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Financial Liabilities at Amortised Cost

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis.

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

All payables are expected to be settled within 12 months except where indicated.

7.3 Administered – Financial Instruments

2019

$'000

2018

$'000

Note 7.3A: Categories of Financial Instruments

Financial Assets under AASB 139

Loans and receivables

Cash on hand or on deposit

47

Loans to corporate Commonwealth entities

Australian Broadcasting Corporation

49,021

NBN Co Limited

5,531,000

Grants receivable

264

Other

1

Total loans and receivables

5,580,333

Available for sale financial assets

Other investments

26,448,077

Total available for sale financial assets

26,448,077

Financial Assets under AASB 9

Financial assets at amortised cost

Cash on hand or on deposit

98

Loans to corporate Commonwealth entities

Australian Broadcasting Corporation

29,619

NBN Co Limited

13,053,335

Grants receivable

264

Total financial assets at amortised cost

13,083,316

Financial assets at fair value through other comprehensive income

Other investments

21,672,171

Total financial assets at fair value through other comprehensive income

21,672,171

Total financial assets

34,755,487

32,028,410

Financial Liabilities

Financial liabilities measured at amortised cost

Suppliers

330,215

340,653

Grants payable

13,255

29,632

Total financial liabilities measured at amortised cost

343,470

370,285

Total financial liabilities

343,470

370,285

Classification of financial assets on the date of initial application of AASB 9

Financial asset class

Notes

AASB 139 original classification

AASB 9 new classification

AASB 139 carrying amount at 1 July 2018

$'000

AASB 9 carrying amount at 1 July 2018

$'000

Cash on hand or on deposit

4.1A

Loans and receivable

Amortised Cost

47

47

Loans to corporate Commonwealth entities

Australian Broadcasting Corporation

4.1B

Loans and receivable

Amortised Cost

49,021

49,021

NBN Co Limited

4.1B

Loans and receivable

Amortised Cost

5,531,000

5,529,400

Grants receivable

4.1B

Loans and receivable

Amortised Cost

264

264

Other

4.1B

Loans and receivable

Amortised Cost

1

1

Other investments

4.1C

Available-for-sales financial assets

FVOCI

26,448,077

26,448,077

Total financial assets

32,028,410

32,026,810

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB 9

AASB 139 carrying amount at 1 July 2018

$'000

Reclassification

$'000

Re-measurement

$'000

AASB 9 carrying amount at 1 July 2018

$'000

Financial assets at amortised cost

Cash on hand or on deposit

47

-

-

47

Loans to corporate Commonwealth entities

Australian Broadcasting Corporation

49,021

-

-

49,021

NBN Co Limited1

5,531,000

-

(1,600)

5,529,400

Grants receivable

264

-

-

264

Other

1

-

-

1

Total amortised cost

5,580,333

-

(1,600)

5,578,733

Financial assets at fair value through other comprehensive income

Other investments

26,448,077

-

-

26,448,077

Total fair value through other comprehensive income

26,448,077

-

-

26,448,077

1The Department has reviewed the requirements of the expected credit loss model under AASB 9 and has recognised an impairment allowance on the NBN Co loan on transition to the new standard at 1 July 2018 of $1,600,000. The Department has assessed that there has been no significant increase in credit risk of the NBN Co loan since inception and the probability of default is extremely low. In accordance with the transitional provisions in AASB 9, the impairment allowance has been recognised in the current year opening retained earnings with no change to comparatives.

2019

$'000

2018

$'000

Note 7.3B: Net Gains and Losses on Financial Assets

Financial assets at amortised cost

Interest revenue

353,374

71,862

Australia Post dividend

42,205

78,472

Impairment

(241)

-

Net gains on financial assets at amortised cost

395,338

150,334

Financial assets at fair value through other comprehensive income

Losses recognised in equity

(4,831,145)

(4,915,290)

Net losses on financial assets at fair value through other comprehensive income

(4,831,145)

(4,915,290)

Net losses on financial assets

(4,435,807)

(4,764,956)

Note 7.3C: Fair Value of Financial Instruments

Carrying

amount

2019

$'000

Fair

value

2019

$'000

Carrying

amount

2018

$'000

Fair

value

2018

$'000

Financial Assets

Cash and cash equivalents

98

98

47

47

Loans to corporate Commonwealth entities

Australian Broadcasting Corporation

29,619

30,295

49,021

49,669

NBN Co Limited

13,051,735

13,051,735

5,531,000

5,531,000

Other investments

21,672,171

21,672,171

26,448,077

26,448,077

Total financial assets

34,753,623

34,754,299

32,028,145

32,028,793

Financial Liabilities

Suppliers

330,215

330,215

340,653

340,653

Grants

13,255

13,255

29,632

29,632

Total financial liabilities

343,470

343,470

370,285

370,285

Note 7.3D: Credit Risk

The administered activities of the Department were not exposed to a high level of credit risk as the majority of financial assets are trade receivables, loans to Government controlled and funded entities and investment in Portfolio Agencies. The maximum exposure to credit risk is the risk that arises from potential default of a debtor. The carrying amount of financial assets, net of impairment losses, reported in the Administered Schedule of Assets and Liabilities represents the maximum exposure to credit risk as $13,081 million (2018: $5,580 million).

Grants receivable - Credit risk is managed by undertaking background and credit checks prior to allowing a debtor relationship. In addition, there are policies and procedures that guide debt recovery techniques that are to be applied. The Department has assessed the risk of the default on payment of grants receivable and has allocated $264,000 to an impairment allowance in 2019 (2018: nil). The Department has reviewed the historic impairment provision for grants receivable in accordance with AASB 9 Financial Instruments and has determined that there is no material adjustment on adoption of the new standard.

Loans to Government controlled and funded entities – the loan to NBN Co is monitored between origination and maturity through a series of oversight arrangements that assess the short and long-term financial performance of NBN Co. This considers changes in the borrower’s earnings, expenditure and market position. Our assessment of the security for the loan recognises that NBN Co is a wholly-owned Government Business Enterprise.

Note 7.3E: Liquidity Risk

The Administered financial liabilities are trade creditors and grants payable. The exposure to liquidity risk is based on the notion that the Commonwealth will encounter difficulty in meeting its obligations associated with Administered financial liabilities. This is highly unlikely due to appropriation funding and mechanisms, internal policies and procedures that are currently in place.

All financial liabilities are payable within one year.

Note 7.3F: Market Risk

Currency risk

Other than Administered Investments the Commonwealth holds basic financial instruments that do not expose the Commonwealth to certain market risk. The Department’s Administered activities are not exposed to ‘currency risk’ and ‘other price risk’.

Interest rate risk

Interest rate risk’ refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The only interest bearing item in the closing Administered Schedule of Assets and Liabilities is ‘loans receivable’. These items have fixed interest and will, therefore, not fluctuate due to changes in the market interest rate. As the loans to corporate Commonwealth entities are fixed interest only loans there is no inherent interest rate risk.

Other price risk

The Department’s administered activities are not exposed to ‘Other Price Risk’. The Administered investments are not traded on the Australian Stock Exchange. The Department does not hold any other financial instruments that would be exposed to price risk.

7.4 Fair Value Measurement

The following table provides an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the Statement of Financial Position do not apply to the fair value hierarchy.

The different levels of fair value hierarchy are defined below:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Department can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Note 7.4A: Fair Value Measurement

Fair value measurements at the end of the reporting period

2019

$'000

2018

$'000

Non-financial assets1

Heritage and cultural4

36,022

35,734

Plant and equipment2

6,596

8,018

Buildings2

12,649

13,843

Total non-financial assets

55,267

57,595

1The Department's assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all non-financial assets is considered their highest and best use.

2No non-financial assets were measured at fair value on a non-recurring basis as at 30 June 2019 (2018: nil).

3The remaining assets and liabilities reported by the Department are not measured at fair value in the Statement of Financial Position.

4Heritage and cultural assets relate to the Artbank collection.

Accounting Policy

A desktop materiality review of the artwork was conducted as at 30 June 2019 and the outcomes were relied upon to assess the fair value measurement for this asset class.

The Department engaged the service of Jones Lang LaSalle (JLL) to conduct an asset materiality review of all non-financial assets with the exception of Artbank’s artwork collection (Heritage and Cultural asset class) as at 30 June 2019. An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from the fair value. Comprehensive valuations are carried out at least once every three years with the previous comprehensive valuation conducted as at 30 June 2018. JLL has provided written assurance to the Department that the models developed are in compliance with AASB 13 Fair Value Measurement.

The methods utilised to determine and substantiate the unobservable inputs are derived and evaluated as follows:

Physical Depreciation and Obsolescence - Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the Depreciated Replacement Cost approach. Under the Depreciated Replacement Cost approach the estimated cost to replace the asset is calculated and then adjusted to take into account the physical depreciation and obsolescence. Physical depreciation and obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration. For all Leasehold Improvement assets, the consumed economic benefit/asset obsolescence deduction is determined based on the term of the associated lease.

The Department’s policy is to recognise transfers into and transfers out of fair value hierarchy levels at the end of the reporting period.

7.5 Administered – Fair Value Measurements

The following table provides an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the Statement of Financial Position do not apply to the fair value hierarchy.

The different levels of fair value hierarchy are defined below:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Department can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Accounting Policy

Fair values for Regional Backbone Blackspots Program (RBBP) network infrastructure assets under property, plant and equipment are determined based on the depreciated replacement cost method. The method is calculated for each individual part of the asset using a price per unit adjusted for inflation, a quantity of each component and a location factor before being aggregated to form the values for each identified component of the assets. Components include fibre optic cable, Control Environment Vault Shelters and Backbone Point of Interconnect cabinets. There has been no change in the valuation technique for the RBBP network infrastructure assets.

The Department engaged the service of Jones Lang LaSalle (JLL) to conduct an asset materiality review of all non-financial assets (excluding the RBBP) at 30 June 2019, which includes the Administered National Institute of Dramatic Arts Building. An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from the fair value. Comprehensive valuations are carried out at least once every three years. JLL has provided written assurance to the Department that the models developed are in compliance with AASB 13 Fair Value Measurement. If a particular asset class experiences significant or volatile changes in fair value (i.e. where indicators suggest that the value of the class has changed materially since the previous reporting period), that class is subject to specific valuation in the reporting period, where practicable, regardless of the timing of the last specific valuation.

The methods utilised to determine and substantiate the unobservable inputs are derived and evaluated as follows:

Physical Depreciation and Obsolescence - Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the Depreciated Replacement Cost approach. Under the Depreciated Replacement Cost approach the estimated cost to replace the asset is calculated and then adjusted to take into account the physical depreciation and obsolescence. Physical depreciation and obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration. For all Leasehold Improvement assets, the consumed economic benefit / asset obsolescence deduction is determined based on the term of the associated lease.

The Department's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

Note 7.5A: Fair Value Measurements

Fair value measurements at the end of the reporting period1

2019

$'000

2018

$'000

Category (Level 1,2 or 3)2

Valuation Technique(s) and Inputs Used

Financial assets5

Loans to corporate Commonwealth entities:

Australian Broadcasting Corporation

30,295

49,669

2

Discounted cash flow (DCF): Future principal, interest cash flows and market rate interest.

NBN Co Limited

13,051,735

5,531,000

2

Amortised cost basis using the effective interest rate method.

Other investments6

Australian Broadcasting Corporation

1,071,656

1,033,352

3

Net asset balance

Special Broadcasting Service Corporation

222,626

215,544

3

Net asset balance

Australia Council

14,725

14,340

3

Net asset balance

Australian Film,Television and Radio School

11,105

11,122

3

Net asset balance

Australian National Maritime Museum

263,063

256,668

3

Net asset balance

National Film and Sound Archive of Australia

353,384

292,051

3

Net asset balance

National Gallery of Australia

6,333,026

6,314,864

3

Net asset balance

National Library of Australia

1,695,104

1,691,970

3

Net asset balance

National Museum of Australia

459,315

471,444

3

Net asset balance

National Portrait Gallery of Australia

146,170

143,798

3

Net asset balance

Screen Australia

17,749

17,743

3

Net asset balance

Old Parliament House

112,629

93,924

3

Net asset balance

Bundanon Trust

59,196

58,729

3

Net asset balance

Creative Partnerships Australia

5,473

2,922

3

Net asset balance

NBN Co Limited

8,682,301

13,247,377

3

Administered investment valuation in NBN Co Limited is based on its net assets balance with the property, plant and equipment adjusted for fair value and the discounting of leave and superannuation liabilities adjusted by applying the Government bond rate. Administered investment valuation is based on discounted cash flow (DCF): Volume and price growth rates, and Weighted Average Cost of Capital (WACC).

Investment in Australian Postal Corporation3

2,224,649

2,582,229

3

Volume & Price Growth Rates Range

10% an increase of approximately $251 million

(10)% a decrease of approximately $231 million

Weighted Average Cost of Capital Range

1.25% a decrease of approximately $489 million

(0.11)% an increase of approximately $51 million

Total financial assets

34,754,201

32,028,746

Non-financial assets2

Buildings

55,569

56,377

3

Depreciated Replacement Cost (DRC): Current Cost per square metre of floor area relevant to the location asset. Physical depreciation and obsolescence has been determined based on the term of the associated nominal lease. Depreciated Replacement Cost (DRC)

Property, plant and equipment

138,140

148,012

3

Replacement cost per unit for the following asset components:

Asset Component

Range ($'000)
(Weighted Average)

- Fibre optic cable (per km)

$5.33 - $12.71 ($6.57)

- Controlled environment vault shelters (per section)

$271.90 - $528.13 ($324.46)

- Transmission Equipment (per section)

$538.61 - $869.21 ($615.65)

- Bpol cabinets (per cabinet)

$15.23 - $119.24 ($92.44)

Other Inputs

Input

Range (weighted average)

- Remaining useful life (in years)

7 - 23 (19)

- Inflation factor

0.98 - 1.26 (1.15)

- Installation cost (per section of network)

$492.73 - $1,117.20 ($562.87)

- Installation cost (per cabinet)

$35.98 - $154.05 ($110.30)

Sensitivity of the fair value measurement to change in unobservable inputs. The estimated fair value would increase (decrease) if:
  the replacement cost per unit for the asset components was higher (lower);
  the rate of inflation was higher (lower);
  the useful life of the asset components was longer (shorter); and/or
  the installation cost per component was higher (lower).

Total non-financial assets

193,709

204,389

Total assets

34,947,910

32,233,135

1The Department did not measure any non-financial assets at fair value on a non-recurring basis as at 30 June.

2Significant Level 3 inputs utilised by the Department are derived and evaluated as follows; assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the cost (Depreciated Replacement Cost or DRC) approach. Under the DRC approach the estimated cost to replace the asset is calculated and then adjusted to take into account its consumed economic benefit/asset obsolescence (accumulated depreciation). Consumed economic benefit/asset obsolescence has been determined based on professional judgement regarding physical, economic and external obsolescence factors relevant to the asset under consideration.

3The Discounted Cash Flow (DCF) method, is appropriate when it results in a measurement that is more representative of fair value. Per AASB13.B10 when using an income approach, fair value reflects current market expectations about the future amounts.

4Significant unobservable inputs only. Not applicable for assets or liabilities in the Level 2 category. The weighted average is determined by assessing the fair value measurement as a proportion of the total fair value for the class against the total useful life of each asset.

5The current use of all non-financial assets is considered their highest and best use.

6Administered investments valuations are based on the audited net asset balance with the exception of the Australian Postal Corporation and NBN Co Limited (NBN Co), refer Note 4.1C.

  • Australia Post is based on the discounted cash flow methodology.
  • NBN Co is based on the audited net asset balance adjusted for fair value of property, plant and equipment and discounting leave and superannuation liabilities adjusted by applying the Government bond rate. The impact of these adjustments was an increase of $1.345 billion at 30 June 2019 (2018: $1.035 billion) to the $7.337 billion reported in
  • NBN Co's financial statements. NBN Co engaged an independent reviewer to assess the fair value of property, plant and equipment in June 2019 and in June 2018.

Note 7.5B: Reconciliation for Recurring Level 3 Fair Value Measurements

Recurring Level 3 fair value measurements - reconciliation for assets

Financial assets

Non-financial assets

Administered Investments

Building

Property, plant and equipment

Total

2019

$'000

2018

$'000

2019

$'000

2018

$'000

2019

$'000

2018

$'000

2019

$'000

2018

$'000

As at 1 July1

26,448,077

29,293,211

56,377

58,110

148,012

156,135

26,652,466

29,507,456

Revaluation (decrements)/increments recognised in other comprehensive income

(4,831,145)

(4,915,290)

-

-

(1,841)

(88)

(4,832,986)

(4,915,378)

Equity injections

55,240

2,075,156

1,608

1,636

-

-

56,848

2,076,792

Returns to the Consolidated Revenue Fund (CRF)

-

(5,000)

-

-

-

-

-

(5,000)

Depreciation

-

-

(2,416)

(1,787)

(8,031)

(8,035)

(10,447)

(9,822)

Other2

(1)

-

-

(1,582)

-

-

(1)

(1,582)

Total as at 30 June3

21,672,171

26,448,077

55,569

56,377

138,140

148,012

21,865,880

26,652,466

1 Opening balance as determined in accordance with AASB 13.

2 Included in the other movement is rounding for administered investments and for buildings is a revaluation decrement in 2018 (2019: nil).

3 Additional details in Note 4.2A.

8. Other Information

8.1 Aggregate Assets and Liabilities

2019

$'000

2018

$'000

Note 8.1A: Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

27,656

27,634

More than 12 months

65,381

64,755

Total assets

93,037

92,389

Liabilities expected to be settled in:

No more than 12 months

16,968

16,262

More than 12 months

22,712

21,106

Total liabilities

39,680

37,368

2019

$'000

2018

$'000

Note 8.1B: Administered - Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

56,445

59,318

More than 12 months

34,927,010

32,212,499

Total assets

34,983,455

32,271,817

Liabilities expected to be settled in:

No more than 12 months

351,913

380,227

More than 12 months

8,763

10,292

Total liabilities

360,676

390,519

8.2 Restructuring

There were no Departmental or Administered restructures for 2019 (2018: nil).

8.3 Budgetary Reports and Explanations of Major Variances

The following tables provide a comparison of the original budget as presented in the 2018-19 Portfolio Budget Statements to the 2018-19 final financial outcome as presented in accordance with Australian Accounting Standards for the Department. The Budget is not audited and does not reflect additional estimates provided in the 2018-19 Portfolio Additional Estimates Statements. Explanations are provided for significant variances between actual results and the original budget, being the Portfolio Budget Statements. Significant variances are those relevant to the performance of the Department and are typically those greater than $5 million (Departmental), $20 million (Administered) and greater than five percent.

8.3A: Departmental Budgetary Reports

Statement of Comprehensive Income

for the period ended 30 June 2019

Budget estimate

Actual

2019

$'000

Original

2019

$'000

Variance

2019

$'000

NET COST OF SERVICES

Expenses

Employee benefits

73,068

72,733

335

Suppliers1

38,753

36,571

2,182

Depreciation and amortisation

5,227

4,691

536

Finance costs

3

66

(63)

Impairment loss allowance on financial instruments

7

-

7

Losses from sale of assets

129

-

129

Other expenses

3,200

2,912

288

Total expenses

120,387

116,973

3,414

Own-Source Income

Own-source revenue

Sales of goods and rendering of services

3,625

3,495

130

Rental income2

1,991

-

1,991

Other revenue

1,382

2,087

(705)

Total own-source revenue

6,998

5,582

1,416

Gains

Other gains

415

488

(73)

Total gains

415

488

(73)

Total own-source income

7,413

6,070

1,343

Net cost of services

(112,974)

(110,903)

(2,071)

Revenue from Government

107,763

106,212

1,551

Surplus (Deficit) before income tax on continuing operations

(5,211)

(4,691)

(520)

Surplus (Deficit) after income tax on continuing operations

(5,211)

(4,691)

(520)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation surplus

-

-

-

Total other comprehensive income

-

-

-

Total comprehensive income (loss)

(5,211)

(4,691)

(520)

The above statement should be read in conjunction with note 8.3B.

Statement of Financial Position

as at 30 June 2019

Actual

2019

$'000

Original

2019

$'000

Variance

2019

$'000

ASSETS

Financial Assets

Cash and cash equivalents

5,592

3,398

2,194

Trade and other receivables

19,387

19,163

224

Total financial assets

24,979

22,561

2,418

Non-Financial Assets

Buildings3

12,649

2,645

10,004

Property, plant and equipment3

6,596

15,251

(8,655)

Intangibles4

8,627

5,969

2,658

Heritage and cultural assets

36,022

36,126

(104)

Other non-financial assets

4,164

1,586

2,578

Total non-financial assets

68,058

61,577

6,481

Total assets

93,037

84,138

8,899

LIABILITIES

Payables

Suppliers

5,523

2,882

2,641

Other payables5

7,492

2,440

5,052

Total payables

13,015

5,322

7,693

Provisions

Employee provisions

26,291

25,869

422

Other provisions

374

342

32

Total provisions

26,665

26,211

454

Total liabilities

39,680

31,533

8,147

Net assets

53,357

52,605

752

EQUITY

Contributed equity

72,849

73,528

(679)

Reserves

7,049

7,439

(390)

Accumulated deficit

(26,541)

(28,362)

1,821

Total equity

53,357

52,605

752

The above statement should be read in conjunction with note 8.3B

Statement of Changes in Equity

for the period ended 30 June 2019

Retained Earnings

Asset revaluation reserve

Contributed equity/capital

Total Equity

Budget Estimate

Budget Estimate

Budget Estimate

Budget Estimate

Actual

2019

$'000

Original

2019

$'000

Variance

2019

$'000

Actual

2019

$'000

Original

2019

$'000

Variance

2019

$'000

Actual

2019

$'000

Original

2019

$'000

Variance

2019

$'000

Actual

2019

$'000

Original

2019

$'000

Variance

2019

$'000

Opening balance

Balance carried forward from previous period

(21,330)

(23,671)

2,341

7,049

7,439

(390)

69,302

69,981

(679)

55,021

53,749

1,272

Adjusted opening balance

(21,330)

(23,671)

2,341

7,049

7,439

(390)

69,302

69,981

(679)

55,021

53,749

1,272

Comprehensive income

Surplus/(Deficit) for the period

(5,211)

(4,691)

(520)

-

-

-

-

-

-

(5,211)

(4,691)

(520)

Total comprehensive income

(5,211)

(4,691)

(520)

-

-

-

-

-

-

(5,211)

(4,691)

(520)

Transactions with owners

Contributions by owners

Departmental capital budget

-

-

-

-

-

-

3,547

3,547

-

3,547

3,547

-

Total transactions with owners

-

-

-

-

-

-

3,547

3,547

-

3,547

3,547

-

Transfers between equity components

-

-

-

-

-

-

-

-

-

-

-

-

Closing balance as at 30 June

(26,541)

(28,362)

1,821

7,049

7,439

(390)

72,849

73,528

(679)

53,357

52,605

752

The above statement should be read in conjunction with note 8.3B

Cash Flow Statement

for the period ended 30 June 2019

Budget Estimate

Actual

Original

Variance

2019

2019

2019

$'000

$'000

$'000

OPERATING ACTIVITIES

Cash received

Receipts from Government6

115,904

106,475

9,429

Sales of goods and rendering of services2

5,334

514

4,820

GST received

3,315

-

3,315

Other

3,179

5,005

(1,826)

Total cash received

127,732

111,994

15,738

Cash used

Employees

71,571

72,360

(789)

Suppliers1

42,697

36,722

5,975

Section 74 receipts transferred to Official Public Account6

8,706

-

8,706

Other expenses

3,200

2,912

288

Total cash used

126,174

111,994

14,180

Net cash from operating activities

1,558

-

1,558

INVESTING ACTIVITIES

Cash used

Purchase of land and buildings

483

-

483

Purchase of property, plant and equipment7

545

3,547

(3,002)

Purchase of intangibles4

4,023

-

4,023

Total cash used

5,051

3,547

1,504

Net cash used by investing activities

(5,051)

(3,547)

(1,504)

FINANCING ACTIVITIES

Cash received

Contributed equity

150

-

150

Departmental capital budget

4,269

3,547

722

Total cash received

4,419

3,547

872

Net cash from financing activities

4,419

3,547

872

Net increase in cash held

926

-

926

Cash and cash equivalents at the beginning of the reporting period

4,666

3,398

1,268

Cash and cash equivalents at the end of the reporting period

5,592

3,398

2,194

The above statement should be read in conjunction with note 8.3B.

8.3B: Departmental Major Budget Variances

Explanations of major variances

1Supplier expenditure was higher than budgeted due to increases in departmental projects.

2The budget relating to rental income in the Statement of Comprehensive Income and the Cash Flow Statement is included in ‘other revenue’.

3During 2017-18 the Department relocated from Sydney Avenue in Barton to the Nishi Building on Philip Law Street in Acton. The fitout assets in the Nishi Building were originally recognised as ‘property, plant and equipment’ in the budget estimates, the balances will be moved to ‘buildings’ in the next budget update.

4The Department’s Information Technology standard operating environment was upgraded during 2018-19 which is reflected in an increase in the ‘intangibles’ balance.

5The balance reported as ‘other payables’ mainly reflects the recognition of lease incentives and rental income.

6Receipts from government is higher than budgeted due to the inclusion of the PGPA Section 74 receipts transferred to the Official Public Account.

7The fitout of the Nishi building required less modification to meet the needs of the Department than expected, resulting in lower than budgeted expenditure on property, plant and equipment.

8.3C: Administered Budgetary Reports

Administered Schedule of Comprehensive income

for the period ended 30 June 2019

Budget estimate

Actual

2019

$'000

Original

2019

$'000

Variance

2019

$'000

NET COST OF SERVICES

Expenses

Suppliers1

376,205

355,350

20,855

Grants2

249,580

272,404

(22,824)

Depreciation and amortisation

10,447

9,671

776

Impairment loss allowance on financial instruments

241

-

241

Payments to corporate Commonwealth entities

1,788,930

1,774,530

14,400

Subsidies3

-

570,188

(570,188)

Other expenses

13,625

7,146

6,479

Total expenses

2,439,028

2,989,289

(550,261)

Income

Revenue

Non-taxation revenue

Sale of goods and rendering of services

3,628

3,309

319

Interest4

353,374

401,836

(48,462)

Dividends5

42,205

71,800

(29,595)

Rental income

1,529

1,529

-

Other revenue

942

389

553

Total non-taxation revenue

401,678

478,863

(77,185)

Total revenue

401,678

478,863

(77,185)

Gains

Other gains

5,527

-

5,527

Total gains

5,527

-

5,527

Total income

407,205

478,863

(71,658)

Net cost of services

(2,031,823)

(2,510,426)

478,603

Deficit

(2,031,823)

(2,510,426)

478,603

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation surplus

(1,841)

-

(1,841)

Items subject to subsequent reclassification to net cost of services

Losses on available for sale financial assets6

(4,831,145)

-

(4,831,145)

Total other comprehensive income

(4,832,986)

-

(4,832,986)

Total comprehensive loss

(6,864,809)

(2,510,426)

(4,354,383)

The above statement should be read in conjunction with note 8.3D.

Administered Schedule of Assets and Liabilities

as at 30 June 2019

Budget estimate

Actual

2019

$'000

Original

2019

$'000

Variance

2019

$'000

ASSETS

Financial Assets

Cash and cash equivalents7

98

26,711

(26,613)

Trade and other receivables4

13,114,512

14,754,100

(1,639,588)

Other investments6

21,672,171

25,271,723

(3,599,552)

Total financial assets

34,786,781

40,052,534

(5,265,753)

Non-financial assets

Buildings

55,569

58,080

(2,511)

Property, plant and equipment

138,140

140,069

(1,929)

Other non-financial assets

2,965

6,288

(3,323)

Total non-financial assets

196,674

204,437

(7,763)

Total assets administered on behalf of Government

34,983,455

40,256,971

(5,273,516)

LIABILITIES

Payables

Suppliers

330,215

335,350

(5,135)

Grants2

13,255

39,452

(26,197)

Subsidies3

-

563,989

(563,989)

Other payables

17,206

18,317

(1,111)

Total payables

360,676

957,108

(596,432)

Total liabilities administered on behalf of Government

360,676

957,108

(596,432)

Net assets

34,622,779

39,299,863

(4,677,084)

The above statement should be read in conjunction with note 8.3D.

8.3D: Administered Major Budget Variances

Explanation of major variances

1Supplier expenses increased in 2018-19 mainly as a result of the advertising costs relating to the online safety campaign and increased activity under the Public Interest Telecommunications program.

2The lower than budgeted grants expense mainly relates to the Mobile Black Spots Program. Some base stations that were budgeted for completion in 2018-19 will be completed in 2019-20 and the related grant milestones payments will now be made in 2019-20.

3The 2018-19 Budget estimates reflected the planned commencement of the Regional Broadband Scheme in 2018-19. The Budget was updated during the year to reflect the commencement of the program being deferred to 2019-20.

4During 2018-19 NBN Co accessed less of the loan funding than anticipated in the Budget estimates resulting in lower interest revenue being recognised and a lower than budgeted loan receivable balance being recorded in the Administered Schedule of Assets and Liabilities.

5Dividend revenue reflects the dividend paid to the Government by the Australian Postal Corporation. The Budget estimates for dividend revenue were updated during the year to reflect more recent projections as agreed by Shareholder Ministers.

6The Department’s Budget estimates for Administered Investments are generally held constant over the forward years due to the difficulties associated with predicting any changes likely to occur in the values of portfolio entities.

7Representing the closing balance of the Public Interest Telecommunications Services and National Cultural Heritage special accounts cash held in the Official Public Account. The variance is mainly driven by actual activities of the programs during the year.