Overview

Objectives of the Department of Education

The Department of Education (the department) is an Australian Government controlled not-for-profit entity.

The department provides advice to the Government and administers programs to achieve the Government’s objectives for education. The department works in partnership with the states and territories, non-government authorities, providers and industry.

For the financial period ended 30 June 2019, the department was structured to meet the following outcomes:

Outcome 1: Improved early learning, schooling, student educational outcomes and transitions to and from school through access to quality child care, support, parent engagement, quality teaching and learning environments.

Outcome 2: Promote growth in economic productivity and social wellbeing through access to quality higher education, international education, and international quality research.

The continued existence of the department in its present form and with its present programs is dependent on Government policy and on continued funding by the Parliament for the department’s administration and programs.

The department’s activities contributing toward these outcomes are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by the department in its own right. Administered activities involve the management or oversight by the department, on behalf of the Government, of items controlled or incurred by the Government.

As a result of government decisions, there were changes to the functions of the department during 2018-19. Note E2 and J2 refers.

The Basis of Preparation

The financial statements are general purpose financial statements and are required by section 42 of the PGPA Act.

The financial statements have been prepared in accordance with the PGPA (Financial Reporting Rule) 2015 (FRR) and the Australian Accounting Standards and Interpretations.

In accordance with the FRR and AASB 1053 Application of Tiers of Australian Accounting Standards and other reporting requirements, the department has applied tier 2 reporting requirements (as a minimum).

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position.

The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

Reporting of Administered Activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.

Unless otherwise stated, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards and Interpretations.

Tier 1 reporting requirements have been applied to administered disclosures in respect of AASB 7 Financial Instrument: Disclosure and AASB 13 Fair Value Measurement.

Significant Accounting Judgements and Estimates

During the 2018-19 financial year, the department made a number of judgements and applied estimates that had an impact on the amounts recorded in the financial statements. Judgements and estimates that are material to the financial statements are found in the following notes:

Employee Provisions (C4.1)

Non-financial Assets (C2.1)

Higher education loan program

The higher education loan program (HELP) is an income contingent loan program that assists eligible tertiary education students with the cost of their fees. It is administered under the Higher Education Support Act 2003 and the VET Student Loans Act 2016. The HELP debt, recognised as an administered receivable, comprises: HECS-HELP, FEE-HELP, OS-HELP, and the VET FEE-HELP program. The Australian Taxation Office collects repayment of these debts through the tax system.

The Australian Government Actuary has developed a microsimulation model to provide estimates of a number of financial measures related to the HELP receivables, including an estimate of the debt that is not expected to be repaid. Significant judgements, estimates and assumptions are re-evaluated for each reporting period in light of historical experience, new loan schemes and changes to reasonable expectations of future events. Consideration is given to: projections of future income of debtors, pattern and timing of repayments, changes in legislation, the recoverability of concessional debt and yield curve for discounting future cash flows. Only measures that have been legislated are incorporated into the estimates for financial statement reporting purposes.

As at 30 June 2019 the Australian Government Actuary estimated the present value of the HELP debt to be $49.9 billion (2018: $39.9 billion) based upon a single rate equivalent to the 45 year yield curve of Commonwealth bond rates and expected repayment patterns. This resulted in an administered fair value gain of $5.6 billion in 2018-19 (2017-18: fair value loss $0.8 billion). Further information is provided at notes G2.3 and H1.2.

Higher education superannuation program

The higher education superannuation program (HESP) provides supplementary funding to eligible higher education providers to cover certain superannuation expenses incurred for staff who are members of identified State government emerging cost superannuation schemes. A portion of the funding is recovered from the relevant States under cost-sharing arrangements.

The Australian Government Actuary estimates the provision and receivable balances relying upon data provided by the State superannuation schemes, adjusting for the differing valuation dates and economic basis underpinning the estimates of the liabilities. Further information is provided at notes G1.7 and H3.

Personal benefits – Child Care Subsidy program

From 2 July 2018 the Child Care Subsidy program replaced the child care fee assistance program. A feature of the program is that the payments are subject to eligibility requirements including an end year reconciliation.

The end year reconciliation of child care personal benefits received by families depends on the lodgement of tax returns which occurs after 30 June each year. The department has therefore used historical data to estimate the financial effect of provision for payments not yet made and the receivable for debts not yet raised, disclosing these as contingent assets and liabilities (refer Note J1).
In light of the child care reforms implemented in 2018-19, the Australian Government Actuary has reviewed the methodology used and determined it to be reasonable. Note H1.2 and H3 refers.

New Australian Accounting Standards

Adoption of new Australian Accounting Standard requirements

All new, revised, amending standards and interpretations that were issued prior to the sign-off date and are applicable to the current reporting period, unless otherwise stated, are not expected to have a material effect on the department’s financial statements in 2018-19 or future years.

AASB 9 Financial Instruments has been adopted from 1 July 2018 with no material impact on the financial statements in 2018-19. Notes F1 and K1 refer.

Future Australian Accounting Standard Requirements

The following new standards, revised standards, interpretations and amending standards were issued by the Australian Accounting Standards Board prior to the sign-off date.

The department will apply AASB 15 Revenue from Contracts with Customers from 2019-20. The standard requires revenue from such contracts to be recognised as the entity transfers goods and services to the customer. An assessment has been undertaken and the standard is not expected to have a material financial impact, however there will be a change to disclosures in the financial statements for 2019-20 and future years.

The department will apply AASB 1058 Income of Not-for-Profit Entities from 2019-20. The standard outlines revenue recognition requirements for not-for-profit entities that receive volunteer services or enter into other transactions to acquire an asset for significantly less than its fair value to enable the entity to achieve its objectives. An assessment has been conducted alongside the assessment for AASB 15 and the standard is not expected to have a material financial impact, however there will be a change to disclosures in the financial statements for 2019-20 and future years.

The department will apply AASB 16 Leases from 2019-20. The vast majority of the department’s current operating leases will move to the balance sheet, leaving a small proportion to be accounted for as expenses. The impact on transition in 2019-20 is an increase to departmental assets and liabilities of $290.9 million and $288.5 million, respectively and an increase to both administered assets and liabilities of $1.2 million.

Taxation

The department is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Changes in Accounting Policy

There have been no changes to accounting policies that impact on the 2018-19 financial results or position.

Section 83 of the Constitution

Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under appropriation made by law. Payments made which are not supported by an appropriation contravene section 83 of the Constitution.

In 2018-19, two refunds made on 21 December 2018 from an incorrect appropriation source. The two payments were made from the Higher Education Support Act 2003 (HESA) instead of the PGPA s77 special appropriation. Controls have been put in place to prevent similar events occurring in future.

In 2017-18, three students and four education providers received overpayments totalling $118,285 under the Tuition Protection Service. The overpayments were incorrectly paid from the Overseas Student Tuition Fund, a special account established by the Education Services for Overseas Students Act 2000. During 2017-18 controls were put in place to prevent similar events occurring in future and all the overpayments were repaid.

Recoverable Payments

Six recoverable payments to the value of $808,520 were made under the Australian Education Act 2013.

Shared Service Arrangements

The department has established memorandums of understanding with the Service Delivery Office, Department of Finance and the Department of Employment, Skills, Small and Family Business (Employment) for the provision of shared services arrangements. The department receives core transactional services from the Department of Finance; and information and communications technology and other corporate services such as records management, mailroom, and switchboard, from Employment.

Events after the Reporting Period

As a result of the Administrative Arrangements Order (AAO) issued on the 29 May 2019, skills, vocational education and training, and migrant adult education functions will be relinquished to Employment, and the Department of Home Affairs (DHA), respectively, in 2019-20. Refer to Note E2 and J2, for further details.

From 2014-15 onwards, annual Appropriation Acts include an automatic repeal clause, where the Acts have a life span of up to three years. As a result, administered quarantined amounts under Appropriation Act (No. 1) 2016-17, $273.4 million, are not legally available from 1 July 2019. Note I1.2 refers.

Departmental Financial Statement

STATEMENT OF COMPREHENSIVE INCOME

for the period ended 30 June 2019

STATEMENT OF FINANCIAL POSITION

as at 30 June 2019

STATEMENT OF CHANGES IN EQUITY

for the period ended 30 June 2019

STATEMENT OF CASH FLOWS

for the period ended 30 June 2019

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

A. Departmental Operating Result Reconciliation

A1: Net Cash Appropriation Arrangements

B. Departmental Financial Performance

B1: Expenses

Operating lease commitments

The following significant leasing arrangements, representing 93 per cent of the department's lease commitments, are:
(a) 50 Marcus Clarke Street, Canberra: the current term for office accommodation expires on 23 May 2025 with one five year option, and is subject to a 3.35 per cent fixed annual increase except for a market review in May 2025.
(b) 226 Adelaide Terrace, Perth: the current term for office accommodation expires on 5 July 2020 with one three year option, and is subject to a 5 per cent fixed annual increase.

B1.4: Write-down and impairment of other assets	2019		2018
	$'000		$'000
Computer software	747		9,696
Leasehold improvements	567		147
Infrastructure, plant and equipment	25		33
Total write-down and impairment of assets	1,339		9,876

B2: Income

Sublease rental income commitments

The department in its capacity as lessor of 50 Marcus Clarke Street, Canberra subleases spaces to various public and private sector entities with the latest option period ending in May 2025. Leasing arrangements include a 3.35 per cent fixed annual increase in all years.
The department in its capacity as lessor of 226 Adelaide Terrace, Perth subleases spaces to various public sector entities with the latest lease end date being July 2020, with option periods to July 2023. Leasing arrangements include a fixed annual increase of between 4 and 5 per cent with a market review occurring at commencement of the option period.

C. Departmental Financial Position

C1: Financial Assets

C2: Non-Financial Assets

Purchases of non-financial assets are recognised initially at cost in the statement of financial position, except for purchases costing less than the asset capitalisation thresholds. Purchases below the threshold are expensed in the year of acquisition other than where they form part of a group of similar items which are significant in total.

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.

The asset thresholds and useful lives for each asset class remain unchanged from 2018.

Asset class	2019 Useful life	2019 Threshold
Leasehold improvements	Lease term	$50,000
Infrastructure, plant and equipment	3-25 years	$2,000
Computer software	2-15 years	$200,000

Unless otherwise stated, depreciation and amortisation rates are applied on a straight-line basis and rates are reviewed annually, as are useful lives and residual values. Any necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

All non-financial assets are assessed annually for indications of impairment and, where appropriate, the asset’s carrying value is adjusted to fair value, except for software assets under development which are recognised at cost.

Leasehold improvements

There are no (2018: nil) leased properties that the department manages which are due to expire within the next 12 months that have leasehold improvement assets. All leasehold improvements are assessed for indications of impairment at the end of each reporting period. Nil indicators of impairment were found for leasehold improvements in 2018-19 (2017-18: nil).

Infrastructure, plant and equipment

No material amounts of infrastructure, plant and equipment are expected to be sold or disposed of within the next 12 months. All infrastructure, plant and equipment are assessed for indications of impairment at the end of each reporting period. Nil indicators of impairment were found for infrastructure, plant and equipment in 2018‑19 (2017-18: nil).

Computer software

The department’s computer software comprises of internally developed software for internal use. No material amounts of computer software are expected to be sold or disposed of within the next 12 months.

All computer software assets are assessed for indications of impairment at the end of each reporting period. This resulted in impairment expense of $0.8 million in 2018-19 (2017-18: $9.7 million), Note B1.4 refers.

Revaluations of non-financial assets

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. Revaluations are conducted by an independent valuer. 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 reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reverse a previous revaluation increment for that class.

In 2018-19, JLL undertook a full valuation review of non-financial assets except for computer software and prepayments as at 30 June 2019. The carrying amount of these non-financial assets have been adjusted to reflect this valuation as at 30 June 2019 (2017-18: nil).

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

As at 30 June 2019, Contractual commitments for the acquisition of property, plant and equipment, and intangible assets amounted to $2.4 million (2017-18: nil).

C2.2: Fair value measurements, valuation techniques and input used

Fair value is a market based, rather than entity specific, measurement. The objective in all cases is to estimate the price at which an orderly transaction to sell the asset would take place between market participants under current market conditions at the measurement date. Where possible the assets are valued based upon observable inputs, such as quoted prices in active markets or other market transactions or information. Where this information is not available valuation techniques rely upon unobservable inputs. The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets.

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

Level 3: Unobservable inputs for the asset.

An analysis of the fair value of non-financial assets by level is provided below.

C3: Payables

		2019		2018
C3.1: Supplier payables	Notes	$'000		$'000
Supplier payables	F1.1	21,293		17,082
Operating lease rentals		2,855		459
Total supplier payables		24,148		17,541

Settlement is usually due within 30 days. All supplier payables are expected to be settled within 12 months.

C3.2: Other payables
Lease incentives	8,237		9,650
Separations and redundancies	1,819		4,756
Wages and salaries	2,061		2,016
Unearned income	927		1,068
Superannuation	246		931
Other employee benefits	286		353
Total other payables	13,576		18,774

Payables are recognised to the extent that the goods or services have been received and not paid or where payments for services have been received in advance.

Lease incentives taking the form of ‘free’ leasehold improvements are recognised as liabilities. These liabilities are reduced by allocating lease payments between rental expense and reduction of the liability over the term of the lease.

C4: Provisions

	2019		2018
C4.1: Employee provisions	$'000		$'000
Annual and long service leave provisions	75,677		63,792
Total employee provisions	75,677		63,792

As required by AASB 119 Employee Benefits, the estimate of future cash outflows takes into account estimated attrition, probability factors, future salary rates and ancillary costs. In 2018-19, the Australian Government Actuary undertook an assessment of leave provisions taking into account the likely tenure of existing staff, patterns of leave claims and payouts, future salary movements and discount rates. The Australian Government Actuary confirmed their assessment on 3 June 2019.

Liabilities for short-term employee benefits expected to be paid within 12 months of the end of reporting period are measured at the one year Commonwealth government bond rate of 0.98 per cent (2018: 1.9 per cent). Liabilities for long term employee benefits are discounted using the 10 year Commonwealth government bond rate of 1.32 per cent (2018: 2.6 per cent).

No provision has been made for personal leave as all personal leave is non-vesting and the average personal leave taken in future years by employees of the department is estimated to be less than the annual entitlement.

Provision is made for separation and redundancy benefits when the department has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Employees of the department are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or other elected defined contribution schemes. 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 financial statements. The department makes employer contributions to defined benefit superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Government. The department accounts for the contributions as if they were contributions to defined contribution plans. The payable for superannuation recognised at 30 June represents outstanding contributions owed by the department to the superannuation schemes. Note C3.2 refers.

As a result of the AAO issued on the 29 May 2019, employee provisions relating to the skills, vocational education and training, and migrant adult education functions will be relinquished to Employment, and the Department of Home Affairs (DHA), respectively, in 2019-20. Note E2 also refers.

C4.2: Other provisions
	Legal obligations	Surplus lease space	Total other provisions
	$’000	$’000	$’000
As at 1 July 2018	384	493	877
Additional provisions made	(384)	952	568
Amounts used/(reversed)	-	(879)	(879)
Total as at 30 June 2019	-	566	566

D. Departmental Funding

D1: Appropriations

D2: Special Accounts

D3: Regulatory Charging

	2019		2018
	$'000		$'000
Amounts applied
Annual appropriation	20,165		17,748
Total amounts applied	20,165		17,748
Expenses
Employee benefits	11,766		10,454
Supplier	9,803		9,180
Total expenses	21,569		19,634
External revenue
Sale of goods and rendering of services1	1,404		1,886
Total external revenue	1,404		1,886

The department undertakes regulatory charging activities relating to:

• The Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS);
• Certain programs managed by Trades Recognition Australia (TRA) ¹; and
• The VET Student Loans program (VSL) ¹.

Further information on the above activities is available at:

• CRICOS: www.internationaleducation.gov.au
• TRA: www.tradesrecognitionaustralia.gov.au
• VET Student Loans program: www.education.gov.au

¹ As a result of AAOs, the department receipted $23,700 of TRA external revenue for the period 29 May to 30 June 2019 on behalf of Employment. Note E2 refers.

E. Departmental Other Items

E1: Contingent Assets and Liabilities

Contingent assets and liabilities are not recognised in the statement of financial position. They may arise from uncertainty as to the existence of an asset or liability 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.

Quantifiable contingencies

There were no departmental quantifiable contingent assets or liabilities as at 30 June 2019 (2018: nil).

Unquantifiable contingencies

As at 30 June 2019, the department had unquantifiable contingent assets in respect of three litigation matters (2018: three). These contingent assets relate to costs awarded to the department, however it is not possible to estimate the amounts to be received at 30 June 2019.

As at 30 June 2019, the department had unquantifiable contingent liabilities in respect to three litigation matters (2018: nil). These contingent liabilities relate to potential costs to be paid by the department, however it is not possible to estimate the amounts owed at 30 June 2019.

E2: Restructuring

The net assets relinquished to all entities in 2018-19 was $4.1 million.

There were no departmental transfers of functions in 2017-18.

E3: Key Management Personnel Remuneration

	2019		2018
	$'000		$'000
Short-term employee benefits	2,531		2,645
Post-employment benefits	397		421
Other long-term employee benefits	145		265
Termination benefits	-		573
Total key management personnel remuneration	3,073		3,904

Key management personnel (KMP) are those persons having authority and responsibility for planning, directing and controlling the activities of the department. The department has determined the KMP to be the Portfolio Minister, the Secretary, and the Deputy Secretaries. Other senior executives may at times act in one of these positions for a short period of time during the year. These officers are not reported as KMP unless they have acted in the position for more than three consecutive months.

The above table includes the remuneration for nine officers occupying KMP positions during the year

(2017-18: eight). The remuneration and benefits for the Portfolio Minister are excluded from the table as they are set by the Remuneration Tribunal and are not paid by the department.

The amounts in the table are prepared on an accrual basis and include: salary, superannuation, annual and long service leave expense (including revaluations of leave provisions), allowances and changes in ancillary costs and probability rates on leave provisions.

E4: Related Party Disclosures

The department is an Australian Government controlled entity. Related parties to the department are key management personnel as described in Note E3.

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 child care benefits or higher education loans which are not included in this note.

Transactions with entities where KMP have an interest

Several of the department’s KMP are members of the board of directors for a number of educational institutions and councils. During 2018-19 and 2017-18, the department purchased services from these entities in relation to the:

• Support of quality teaching and school leadership
• Collection of data, development and delivery of research studies, questionnaires and assessments.

	2019		2018
	$'000		$'000
Expenses
Supplier expenses	382		1,852
Total expenses	382		1,852
Payables
Supplier payables	40		913
Total payables	40		913

All purchases were conducted under normal terms and conditions.

Details of administered related party transactions and balances associated with the above activities are separately disclosed. Note J3 refers.

E5: Budgetary Reporting

Departmental financial result

In 2018-19 the department reported an operating deficit on continuing operations of $20.4 million, against a budgeted deficit of $25.0 million as reported in the 2018-19 Portfolio Budget Statements (original budget). After adjusting for other comprehensive income of $1.0 million, and unfunded depreciation and amortisation expense of $22.2 million, the department reported a net surplus of $2.8 million.

The department’s total expenses of $408.6 million are $11.7 million more than the original budget of $396.9 million. This primarily reflects a $7.3 million increase in employee expenses based on the application of discount factor adjustments to employee provisions from the Australian Government Actuary review, offset by a general decrease in salaries resulting from an overall decrease in average staffing level compared to original budget. Supplier expenses were $8.4 million more than original budget due to an increase in the use of temporary contractors by the department, which can be generally attributed to the lower than budgeted average staffing level, and additional measures received as part of budget updates in 2018-19.

The department reported own source income of $23.2 million, $4.5 million less than the original budget of $27.6 million. This variance primarily reflects a reduction to the cost of services provided free of charge by the Australian Taxation Office due to a reduction in processing volumes and cost savings achieved through further use of outsourcing arrangements.

Revenue from Government for 2018-19 was $365.0 million, which was $20.7 million more than originally budgeted. The increase predominately relates to an additional $16.8 million of new measures announced as part of budget updates in 2018-19. In addition, the Student Identifier special account reported $4.0 million in revenue which was not included in the original budget.

The department also recognised a $1.0 million increase in other comprehensive income due to increases in asset revaluation reserves for infrastructure, plant and equipment and leasehold improvements as a result of 2018-19 revaluations.

Departmental financial position

As at 30 June 2019, the department’s total equity was $54.4 million compared to the original budget of $60.7 million. The original budget was prepared based on 30 June 2017 data being the latest available at that time. The decrease is primarily attributed to quarantines processed under section 51 of the PGPA Act in 2018-19, and Machinery of Government adjustments processed following the AAOs issued on 29 May 2019.

The department reported cash and equivalents of $4.5 million, after adjusting for the impact of transferring the Student Identifier special account to Employment as at the date of AAOs.

The department reported $76.7 million for trade and other receivables, $17.7 million more than the original budget of $59.0 million. The increase predominately relates to an additional $16.8 million of new measures announced as part of budget updates in 2018-19.

As at 30 June 2019, the department holds $86.8 million of non-financial assets, $20.1 million less than the original budget of $106.9 million. The decrease against budget is primarily due to $7.7 million of capital contributions to other departments, and $8.6 million for the Automated Childcare Attendance Development project being reduced by quarantine under section 51 of the PGPA Act. In addition, the department impaired $0.8 million of internally developed computer software as part of the annual impairment assessment.

Payables totalling $37.7 million, were $6.3 million lower than the original budget of $44.0 million, noting this budget was set with reference to 2016-17 actuals. These balances are consistent with 2017-18 and primarily relate to amounts owed to suppliers and employees which fluctuate month to month, depending on timing of payroll processing, and provision of invoices from suppliers.

Employee provisions at 30 June 2019 were $75.7 million against an original budget of $70.7 million. The variance of $5.0 million, is primarily due to actuarial adjustments, offset by a reduction in ASL as previously noted under employee expenses.

E6: Aggregate Assets and Liabilities

	2019		2018
E6.1: Aggregate assets and liabilities	$'000		$'000
Assets expected to be recovered in:
No more than 12 months	85,340		82,454
More than 12 months	83,070		83,182
Total assets	168,410		165,636
Liabilities expected to be recovered in:
No more than 12 months	50,644		46,047
More than 12 months	63,323		54,937
Total liabilities	113,967		100,984

F. Departmental Financial Instruments

F1: Financial Instruments

		2019		2018
F1.1: Categories of Financial instruments	Notes	$'000		$'000
Financial assets at amortised cost
(2018: Loans and receivables)
Cash and cash equivalents	C1.1	4,477		6,381
Goods and services receivable	C1.2	6,875		3,340
Accrued revenue		469		199
Total financial assets at amortised cost Total (2018: Loans and receivables)		11,821		9,920
Total financial assets		11,821		9,920
Financial liabilities measured at amortised cost
Supplier payables	C3.1	21,293		17,082
Total financial liabilities measured at amortised cost		21,293		17,082
Total financial liabilities		21,293		17,082

Departmental financial assets are recognised at amortised cost in accordance with AASB 9 Financial Instruments, which the department adopted from 1 July 2018. The transition to AASB 9 has resulted in a small increase to the impairment loss allowance for financial assets, which were previously disclosed as Loans and Receivables under AASB 139 Financial Instruments: Recognition and Disclosure which no longer applies.

The department has adopted the simplified approach for measuring the impairment loss allowance for these financial assets. This approach measures the loss allowance as the amount equal to the lifetime expected credit losses. Any amounts written off have been recognised as a reduction to the financial asset.

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.

Administered Schedules

ADMINISTERED SCHEDULE OF COMPREHENSIVE INCOME

for the period ended 30 June 2019

.

ADMINISTERED SCHEDULE OF ASSETS AND LIABILITIES

as at 30 June 2019

ADMINISTERED RECONCILIATION SCHEDULE

for the period ended 30 June 2019

Revenue collected by the department for use by the Government rather than the department is administered revenue. Collections are transferred to the OPA, maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under appropriation on behalf of Government. These transfers to and from the OPA are adjustments to the administered cash held by the department on behalf of the Government and reported as such in the administered cash flow statement and in the administered reconciliation schedule.

ADMINISTERED CASH FLOW STATEMENT

for the period ended 30 June 2019

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

G. Administered Financial Performance

G1: Expenses

		2019		2018
G1.1: Grants	Notes	$'000		$'000
Public sector
Australian Government entities		33,226		34,318
State and Territory Governments		19,765,041		18,357,384
Private sector
Not-for-profit organisations		139,309		141,770
Multi-jurisdictional sector		9,429,632		9,651,391
Other		158,131		240,090
Total grants		29,525,339		28,424,953

G1.3: Supplier	2019		2018
	$'000		$'000
Services rendered
Vocational and industry training	523,211		500,738
School education - specific funding	77,571		66,407
Assistance to families with children	65,879		74,596
Higher education	23,639		19,701
General research	106		174
Total services rendered	690,406		661,616
Operating lease rentals	141		130
Total supplier expenses	690,547		661,746

		2019		2018
G1.5: Interest	Notes	$'000		$'000
Higher education superannuation program		177,000		195,000
Total interest		177,000		195,000

As at 30 June 2019, the Australian Government Actuary estimated the fair value of the higher education superannuation program provision to be $7.3 billion (note H3 refers) applying an interest rate of 1.4% (2018: 2.7%).

G2: Income

All administered revenues relate to ordinary activities performed by the department on behalf of the Australian Government. Administered appropriations are not revenues of the individual entity that oversees distribution or expenditure of funds as directed. Administered revenue is recognised when the service is provided. Collectability of the debt is reviewed at balance date. Impairment allowances are made when collectability of the debt is judged to be less, rather than more likely.

G2.3: Fair value gains	2019		2018
	$'000		$'000
Higher Education Loan	5,593,868		-
Total fair value gains	5,593,868		-

As at 30 June 2019, the Australian Government Actuary estimated the fair value of the higher education loans to be $49.9 billion (2018: $39.9 billion) (note H1.2 refers) applying an interest rate of 1.6% (2018: 2.8%). This increase of $10.0 billion takes into account a net movement of $3.6 billion of new loans and repayments made during 2018-19, unwinding of discount of $1.1 billion and a fair value gain totalling $5.6 billion, offset by the transfer of $0.3 billion of the VET student loans (Note J2 refers). The main factors contributing to this fair value gain includes $2.3 billion due to the expected loan repayments being received earlier through a widening of the repayment thresholds and a $5.1 billion adjustment for changes in the interest rate. These positive impacts are offset by $1.8 billion primarily comprising debt not expected to be repaid of $1.2 billion.

H. Administered Financial Position

H1: Financial Assets

Movements in impairment allowance
	Goods and services	Goods and services	Personal benefits	Personal benefits
	2019	2018	2019	2018
	$'000	$'000	$'000	$'000
Opening balance as at 1 July	(130,733)	(78,491)	(92,802)	(20,944)
Amounts written off against the provision	130,733	13	-	-
Amounts recovered and reversed	-	43	-	-
Reversal of previous impairment	-	519	-	-
Movement	-	3,760	7,623	(3,760)
Increase/(decrease) recognised in net cost of services	(23,430)	(56,577)	(20,832)	(68,098)
Closing balance as at 30 June	(23,430)	(130,733)	(106,011)	(92,802)

Administered investments are measured at their fair value as at 30 June. Fair value has been taken to be the Australian Government's proportional interest in the net assets of the entities.

Movements between years are recognised at fair value through other comprehensive income. In 2018-19 the increase was $225.1 million (2017-18: $385.1 million).

H2: Payables

H3: Provisions

Higher education superannuation program (HESP)

As at 30 June 2019, the Australian Government Actuary estimated the present value of the Commonwealth’s total superannuation liability in respect of current and former university employees who are members of State superannuation schemes. The current cost share arrangements are based on allocating the emerging cost of benefits between the States and the Commonwealth based on the split of responsibility at the time the benefits accrued.

Personal benefits

This is the childcare program.

I. Administered Funding

I1: Appropriations

	2019		2018
I1.1: Annual appropriations ('recoverable GST exclusive')	$'000		$'000
Ordinary annual services
Annual appropriations
Operating	1,832,982		2,078,106
Payments to corporate Commonwealth entities	-		19,493
PGPA Act section 75 transfers	-		(3,249)
Total appropriations - ordinary annual services	1,832,982		2,094,350
Appropriations applied (current and prior years)	1,567,549		1,810,219
Variance	265,433		284,131
Other services
Annual appropriations
States, ACT, NT and local government	62,514		40,221
Payments to corporate Commonwealth entities	-		74
Total appropriations - other services	62,514		40,295
Appropriations applied (current and prior years)	64,406		37,756
Variance	(1,892)		2,539

	2019		2018
I1.3: Special appropriations applied ('recoverable GST exclusive')	$'000		$'000
A New Tax System (Family Assistance) (Administration) Act 1999	7,882,059		7,066,549
Australian Education Act 2013	19,693,039		18,321,450
Higher Education Support Act 2003, section 238-12	16,128,564		16,020,699
Trade Support Loans Act 2014, section 104	198,094		255,460
VET Student Loans Act 2016, section 11	247,322		199,083
Public Governance, Performance and Accountability Act 2013, section 77	92		26
Total special appropriations applied	44,149,170		41,863,267

I1.4: Disclosure by agent in relation to annual and special appropriations ('recoverable GST exclusive')

The department had drawing rights for the Department of Foreign Affairs and Trade administered annual appropriation for the New Colombo Plan program. The payments in relation to this program in 2018-19 were $46.2 million (2017-18: $48.2 million).

I2: Special Accounts

The previous legislation Financial Management and Accountability Determination 2008/14 to establish the Department of Education, Employment and Workplace Relations Services for Other Entities and Trust Moneys Special Account sun setted on 21 September 2018 and the balances were transferred to the new account (above).

I3: Regulatory Charging

J. Administered Other Items

J1: Contingent Assets and Liabilities

Contingent assets and liabilities are not recognised in the administered schedule of assets and liabilities. They may arise from uncertainty as to the existence of an asset or liability 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.

Quantifiable contingencies

A contingent asset of $58.9 million and a contingent liability of $216.3 million arising from the Child Care Subsidy program relate to the end year reconciliation which will occur after 30 June and is dependent upon individuals lodging a tax return. There were no administered quantifiable contingent assets or liabilities as at 30 June 2018.

Unquantifiable contingencies

The Government is undertaking compliance action, wherever appropriate under the legislation, to recover VET FEE-HELP payments from providers who inappropriately enrolled students in units and courses for which they incurred a VET FEE-HELP debt. There is a potential financial risk to the Commonwealth in the event that compliance action results in student loan debts being remitted but the Commonwealth is unable to recover the payments from providers or tuition assurance operators where the provider has closed.

J2: Restructuring

The non-child care BBF and CSP functions were relinquished to the PMC and the DSS, respectively, through the 2018-19 Budget process. There were no transfers of administered assets or liabilities as a result of these restructures.

Departmental impacts are included at Note E2.

J3: Related Party Disclosures

	2019		2018
	$'000		$'000
Expenses
Supplier expenses	14,060		3,781
Grant expenses	-		33,905
Total expenses	14,060		37,686
Payables
Supplier payables	1,294		927
Total payables	1,294		927

J4: Budgetary Reporting

Administered schedule of comprehensive income

In 2018-19 the department administered $39.2 billion of expenses on behalf of the government, of which, $29.5 billion (75 per cent) represented grants primarily to schools and higher education facilities which were delivered in accordance with the original budget estimate.

During 2018-19 the department administered $7.5 billion of personal benefits against a budget of $8.0 billion. The difference can be attributed to the impact of child care compliance measures and lower fee growth than originally estimated.

At the time the budget was prepared the fair values of the higher education superannuation provision, higher education loans and trade support loans were estimated on 2016-17 data and actuarial assumptions. The actual fair value at 30 June 2019 is based upon updated data, any changes in the actuary’s assessment and the Government bond rates used to discount future cash flows. This impacts on the amount recognised as fair value gains or losses, interest expense, loan fee revenue and interest revenue.

In 2018-19 the department administered revenue totalling $1.4 billion compared to a budget of $1.3 billion. This variance was predominantly driven by changes in actuarial assumptions reducing the amount of interest revenue on higher education loans as compared to budget.

Movements in administered investments, write-downs and impairments of assets, act of grace payments and reversals of previous write-downs are difficult to predict and are not included in the budget estimates.

Administered schedule of assets and liabilities

As at 30 June 2019 assets administered on behalf of government totalled $53.6 billion compared to an original budget of $49.2 billion.

The actual value of the receivables at 30 June are impacted by updated data, any changes resulting from the actuary’s assessment and the Government bond rates as previously described.

Administered investments have increased by $225.1 million during the year and are valued at $2.9 billion at 30 June 2019 compared to the original budget of $2.3 billion. The variance predominantly reflects an increase in the net assets of the Australian National University as at 30 June 2019.

As at 30 June 2019, payables total $153.2 million, $94 million less than the budget of $247.2 million. The value of invoices on hand at the end of the financial year are by nature difficult to predict with the estimates being based upon previous years’ averages.

As at 30 June 2019, provisions totalled $7.8 billion compared to a budget of $7.0 billion, a variance of 11.4 per cent. Again, given the timing of the original budget the movement can in part be attributed to prior year results. The personal benefit provision was statistically estimated at $0.8 billion compared to an actual closing balance of $0.5 billion. The decrease is consistent with the trend in personal benefits expense.

The 30 June 2019 provision for the higher education superannuation program was assessed by the Australian Government Actuary at $7.3 billion against an original budget of $6.1 billion which is based on the 30 June 2017 assessment.

J5: Aggregate Assets and Liabilities

	2019		2018
	$'000		$'000
Assets expected to be recovered in:
No more than 12 months	3,787,885		3,196,181
More than 12 months	49,780,764		40,629,149
Total assets	53,568,649		43,825,330
Liabilities to be settled in:
No more than 12 months	510,285		286,045
More than 12 months	7,445,818		7,428,569
Total liabilities	7,956,103		7,714,614

K. Administered Financial Instruments

K1: Financial Instruments

The department adopted AASB9 Financial Instruments (AASB 9) from 1 July 2018 and has measured and categorised the above financial instruments accordingly. The transition to AASB 9 did not result in any change to the measurement or categorisation of financial assets.

The financial assets measured at amortised cost are impaired according to AASB 9, wherein the lifetime expected credit losses are measured using the simplified approach. Transition to this approach did not result in any change to the impairment provision.

K1.3: Credit risk

The financial assets measured at amortised cost are not exposed to a high level of credit risk and the department manages this risk by applying debt recovery policies and procedures. The risk of default on payments has been assessed and an impairment provision brought to account. Note H1.2 refers.

The financial assets at fair value through other comprehensive income represent the Government’s proportional interest in the net assets of the entities which are not exposed to a high level of credit risk. Note H1.3 refers.

The financial assets at fair value through profit or loss are subject to annual fair value actuarial assessments which take into account the future income projections, pattern and timing of repayments and debt not expected to be repaid. Note H1.2 refers.

K1.4: Liquidity risk

The department is exposed to minimal liquidity risk and is appropriated funding from the Australian Government. The department manages its budgeted funds to ensure it has adequate funds to meet payments as they fall due. In addition, the department has policies in place to ensure timely payments are made when due and has no past experience of default.

K2: Fair Value

K2.1: Fair value measurement of level 3 financial instruments

Fair value measurement as at 30 June

K2.2: Movement in level 3 fair value measurement