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Department Financial Statements

Statement of Comprehensive Income

2019

2018

Original Budget1

Notes

$'000

$'000

$'000

NET COST OF SERVICES

EXPENSES

Employee benefits

1A

240,909

226,285

231,766

Suppliers

1B

158,712

137,271

140,188

Grants

1C

-

137

-

Depreciation and amortisation

4A

44,489

42,671

40,991

Finance costs

1D

1

2

-

Impairment loss allowance on financial instruments

1E

3

2

-

Write-down and impairment of other assets

1F

711

1,989

-

Losses from asset sales

34

-

-

Total expenses

444,859

408,357

412,945

OWN-SOURCE INCOME

Own-source revenue

Sale of goods and rendering of services2

2A

55,678

52,500

52,431

Rental income

2B

825

1,552

898

Resources received free of charge - external audit

408

400

410

Total own-source revenue

56,911

54,452

53,739

Gains

Gain on sale of assets

-

256

-

Other gains

2C

560

1,678

-

Total gains

560

1,934

-

Total own-source income

57,471

56,386

53,739

Net cost of services

(387,388)

(351,971)

(359,206)

Revenue from Government

2D

334,956

310,830

318,215

Deficit attributable to the Australian Government

(52,432)

(41,141)

(40,991)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation surplus

158

-

-

Total other comprehensive income

158

-

-

Total comprehensive loss attributable to the Australian Government

(52,274)

(41,141)

(40,991)

The above statement should be read in conjunction with the accompanying notes.

  1. The Department’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period was the 2018–19 Portfolio Budget Statements. The budgeted financial statements have not been audited.
  2. The original budget amount for sale of goods and rendering of services was split to reflect the amount relating to sublease rental income disclosed as rental income.

Statement of Financial Position

2019

2018

Original Budget1

Notes

$'000

$'000

$'000

ASSETS

Financial Assets

Cash and cash equivalents

3A

6,673

2,396

2,000

Trade and other receivables

3B

129,290

144,650

153,209

Accrued revenue

1,480

2,582

898

Total financial assets

137,443

149,628

156,107

Non-financial Assets

Leasehold improvements

4A

29,280

28,957

23,640

Infrastructure, plant and equipment

4A

27,072

30,466

28,856

Intangibles

4A

130,460

113,238

131,887

Prepayments

22,639

21,843

17,162

Total non-financial assets

209,451

194,504

201,545

Total assets

346,894

344,132

357,652

LIABILITIES

Payables

Suppliers

5A

31,029

38,937

45,041

Other payables

5B

14,457

17,357

22,175

Total payables

45,486

56,294

67,216

Provisions

Employee provisions

6A

84,253

74,998

73,799

Other provisions

6B

63

93

52

Total provisions

84,316

75,091

73,851

Total liabilities

129,802

131,385

141,067

Net assets

217,092

212,747

216,585

EQUITY

Contributed equity

390,733

334,114

374,979

Reserves

10,410

10,252

10,252

Accumulated deficit

(184,051)

(131,619)

(168,646)

Total equity

217,092

212,747

216,585

The above statement should be read in conjunction with the accompanying notes.

  1. The Department’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period was the 2018–19 Portfolio Budget Statements. The budgeted financial statements have not been audited.

Statement of Changes in Equity

Retained earnings

Asset revaluation surplus

Contributed equity

Total equity

2019

2018

Original Budget1

2019

2018

Original Budget1

2019

2018

Original Budget1

2019

2018

Original Budget1

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Opening balance

Balance carried forward from previous period

(131,619)

(90,478)

(127,655)

10,252

10,252

10,252

334,114

262,484

334,139

212,747

182,258

216,736

Adjusted opening balance

(131,619)

(90,478)

(127,655)

10,252

10,252

10,252

334,114

262,484

334,139

212,747

182,258

216,736

Comprehensive income

Other comprehensive income

-

-

-

158

-

-

-

-

-

158

-

-

Deficit for the period

(52,432)

(41,141)

(40,991)

-

-

-

-

-

-

(52,432)

(41,141)

(40,991)

Total comprehensive income

(52,432)

(41,141)

(40,991)

158

-

-

-

-

-

(52,274)

(41,141)

(40,991)

Contributions by owners

Equity injection - Appropriation

-

-

-

-

-

-

22,096

40,349

16,390

22,096

40,349

16,390

Departmental capital budget

-

-

-

-

-

-

30,434

31,306

24,450

30,434

31,306

24,450

Restructuring

-

-

-

-

-

-

4,089

(25)

4,089

(25)

-

Sub-total transactions with owners

-

-

-

-

-

-

56,619

71,630

40,840

56,619

71,630

40,840

Closing balance as at 30 June

(184,051)

(131,619)

(168,646)

10,410

10,252

10,252

390,733

334,114

374,979

217,092

212,747

216,585

The above statement should be read in conjunction with the accompanying notes.

  1. The Department’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period was the 2018–19 Portfolio Budget Statements. The budgeted financial statements have not been audited.

Accounting Policy

Equity Injections

Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year.

Restructuring of Administrative Arrangements

Net assets received from, or relinquished to, another Government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.

Cash Flow Statement

2019

2018

Original Budget1

$'000

$'000

$'000

OPERATING ACTIVITIES

Cash received

Appropriations

414,615

380,300

318,574

Sale of goods and rendering of services

56,653

67,821

54,145

GST received

17,266

17,232

14,019

Sublease rent

825

1,552

-

Total cash received

489,359

466,905

386,738

Cash used

Employees

234,538

225,323

230,987

Suppliers

181,059

164,803

105,068

Grants

-

137

-

Section 74 receipts transferred to the OPA

74,744

78,179

50,683

Total cash used

490,341

468,442

386,738

Net cash used by operating activities

(982)

(1,537)

-

INVESTING ACTIVITIES

Cash received

Proceeds from sales of infrastructure, plant and
equipment

50

272

-

Total cash received

50

272

-

Cash used

Purchase of infrastructure, plant and equipment

13,353

16,474

3,626

Purchase / development of intangibles

47,276

47,761

32,368

Purchase of leasehold improvements

6,037

5,295

4,846

Total cash used

66,666

69,530

40,840

Net cash used by investing activities

(66,616)

(69,258)

(40,840)

FINANCING ACTIVITIES

Cash received

Contributed equity – restructure (special account balance)

5,431

-

-

Contributed equity - equity injection and capital budget

66,444

69,530

40,840

Total cash received

71,875

69,530

40,840

Net cash from financing activities

71,875

69,530

40,840

Net increase / (decrease) in cash held

4,277

(1,265)

-

Cash and cash equivalents at the beginning of the reporting period

2,396

3,661

2,000

Cash and cash equivalents at the end of the reporting period2

6,673

2,396

2,000

The above statement should be read in conjunction with the accompanying notes.

  1. The Department’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period was the 2018–19 Portfolio Budget Statements. The budgeted financial statements have not been audited.
  2. As shown in the Statement of Financial Position.

Budget Variance Commentary

The following table provides a comparison between the 2018–19 Portfolio Budget Statements (PBS) budget and the final financial outcome in the 2018–19 financial statements. The Budget and Revised Budget is not audited and does not reflect budget estimates presented to Parliament in respect of the 2019 financial year. However, major changes in budget have been explained as part of the variance analysis where relevant.

Variances are considered to be ‘major’ based on the following criteria:

  • the variance between budget and actual is greater than 10 per cent; or
  • an item that is below this threshold but is considered material for the analysis of the performance of the Department.

Departmental Major Budget Variances for 2018-19

Suppliers expense is $18.5m higher than the original budget largely due to additional expenditure to support the implementation of program measures, including: the Jobs and Education Data Infrastructure data tool for employers and employees, Online Employment Services
Trial - expansion and Small Business initiatives.

Suppliers (Statement of Comprehensive Income)

The Write-down of assets expense is $0.7m higher than the original budget largely due to the impairment of software.

Write-down of assets (Statement of Comprehensive Income)

Other gains are $0.6m higher than the original budget mainly due to prior year revenue adjustments.

Other gains (Statement of Comprehensive income)

Revenue from Government is $16.7m higher than original budget mainly due to new measures announced at MYEFO, including; the Jobs and Education Data Infrastructure data tool for employers and employees, Online Employment Services Trial- expansion and Small Business initiatives.

Revenue from Government (Statement of Comprehensive Income)

The asset revaluation surplus is $0.2m higher than the original budget due to a revaluation of the Department’s assets.

Changes in asset revaluation surplus (Statement of Comprehensive Income), Reserves (Statement of Financial Position), Other Comprehensive Income (Statement of Changes in Equity)

Cash and cash equivalents are $4.7m higher than the original budget due to Machinery of Government changes, including the impact of the Student Identifiers Special Account and additional receipts at the end of the financial year.

Cash and cash equivalents (Statement of Financial Position)

Trade and other receivables are $23.9m lower than the original budget due to a reduction in appropriations used to pay prior year accrued expenses.

Trade and other receivables (Statement of Financial Position)

Accrued revenue is $0.6m higher than the original budget due to services provided by the Department where payments have not yet been received.

Accrued revenue (Statement of Financial Position)

Leasehold improvement values have increased by $5.6m compared to the original budget due to fit outs undertaken in the Department’s properties.

Leasehold improvements (Statement of Financial Position)

Prepayments are $5.5m higher than the original budget due to an increased expenditure for software licences.

Prepayments (Statement of Financial Position)

Suppliers payables are $14.0m lower than the original budget due to reduced payables and accrued expenses as a result of the Department’s revised payment terms.

Suppliers payables (Statement of Financial Position)

Other payables are $7.7m lower than the original budget due to a change in the treatment of lease incentives.

Other payables (Statement of Financial Position)

Employee provisions are $10.5m higher than the original budget due to the decrease in the long term bond rate and the new enterprise agreement.

Employee provisions (Statement of Financial Position)

Contributed equity is ($15.8m) and equity received is ($25.6m) higher
than the original budget due to equity injections and departmental capital budget for new measures, including; the Jobs and Education Data Infrastructure data tool for employers and employees, Online Employment Services Trial- expansion and Small Business initiatives.

Contributed equity (Statement of Financial Position), Contributed equity/capital

(Statement of Changes in Equity), Contributed equity - equity injection (Cash Flow Statement)

Contributed equity – restructure is $5.4m higher than the original budget due to Machinery of Government changes, including the impact of the Student Identifiers Special Account.

Contributed equity - restructure (Cash Flow Statement)

Appropriations used are $96.0m higher than the original budget due to prior year accruals, and the implementation of measures announced at MYEFO; including; the Jobs and Education Data Infrastructure data tool for employers and employees, Online Employment Services Trial- expansion and Small Business initiatives.

Appropriations (Cash Flow Statement)

GST received is $3.2m higher than the original budget due to higher supplier expenses.

Net GST received (Cash Flow Statement)

Suppliers payments are $76.0m higher than the original budget due to payments for prior year expenses, and the implementation of measures announced at MYEFO.

Suppliers (Cash Flow Statement)

Section 74 transfers are $24.1m higher than the original budget due to
services provided by the Department and the timing of receipts across financial years.

Section 74 transfers to the OPA (Cash Flow Statement)

Purchase of infrastructure, plant and equipment is $9.7m higher than the original budget due to payments for prior year capital purchases.

Purchase of infrastructure, plant and equipment (Cash Flow Statement)

Development of intangibles is $14.9m higher than the original budget due to payments for prior year expenses, and higher than planned internally developed software.

Purchase / development of intangibles (Cash Flow Statement)

Purchase of leasehold improvements is $1.2m higher than the original budget due to higher than planned leasehold improvements.

Purchase of leasehold improvements (Cash Flow Statement)

Note 1: Expenses

2019

2018

$'000

$'000

Note 1A: Employee Benefits

Wages and salaries

176,414

170,227

Superannuation

Defined contribution plans

18,807

18,109

Defined benefit plans

16,921

17,386

Leave and other entitlements

25,866

16,459

Separations and redundancies

1,590

2,688

Other employee expenses

1,311

1,416

Total employee benefits

240,909

226,285

Accounting Policy

Accounting policies for employee related expenses are contained in Note 6A: Employee Provisions.

Note 1B: Suppliers

Goods and services supplied or rendered

Consultants

17,847

13,336

Contractors

32,781

24,795

Travel

4,829

5,258

IT services

39,877

33,059

Property

7,044

6,546

Shared services

7,737

7,948

Resources provided free of charge - external audit

408

400

Legal

4,027

2,262

Training

4,561

4,806

Other

12,927

12,689

Total goods and services supplied or rendered

132,038

111,099

Goods supplied

3,437

3,128

Services rendered

128,601

107,971

Total goods and services supplied or rendered

132,038

111,099

Other suppliers

Operating lease rentals in connection with Minimum lease rentals

26,143

25,644

Workers compensation expenses

531

528

Total other suppliers

26,674

26,172

Total suppliers

158,712

137,271

Leasing commitments

Details of significant leasing commitments for the Department include:

The Department in its capacity as lessee for 10 & 12 Mort Street, Canberra is subject to a 3.75% fixed
annual adjustment. The current lease term expires on 24 March 2025.

The Department in its capacity as lessee for 14 Mort Street, Canberra is subject to a 3.75% fixed annual
adjustment. The current lease term expires on 24 March 2025.

The Department in its capacity as lessee for 140-180 City Walk, Canberra is subject to a 4.00% fixed annual
adjustment. The current lease term expires on 31 March 2024.

The Department in its capacity as lessee for Level 9, 255 Elizabeth Street, Sydney is subject to a 3.75% fixed
annual adjustment. The current lease term expires on 31 December 2020.

The Department in its capacity as lessee for Level 10, 414 Latrobe Street, Melbourne is subject to a 3.75%
fixed annual adjustment. The current lease term expires on 30 September 2024.

The Department in its capacity as lessee for Level 18, 11 Waymouth Street, Adelaide is subject to a 3.50%
fixed annual adjustment. The current lease term expires on 31 March 2022.

The Department in its capacity as lessee for Levels 5 & 8, 215 Adelaide Street, Brisbane is subject to a
3.50% fixed annual adjustment. The current lease term expires on 30 November 2024.

2019

2018

$'000

$'000

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

Within 1 year

28,654

25,198

Between 1 to 5 years

103,520

97,709

More than 5 years

12,881

33,929

Total operating lease commitments

145,055

156,836

Accounting Policy

Leases

An operating lease is a lease that is not a finance lease and where the lessor effectively retains substantially all such risks and benefits.

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

Lease payments are subject to increases in accordance with upwards movements in the consumer price index, market rates, fixed increase rates or a combination of the aforementioned rates.

2019

2018

$'000

$'000

Note 1C: Grants

Private sector

Other

-

137

Total grants

-

137

Note 1D: Finance Costs

2019

2018

$'000

$'000

Unwinding of discount for restoration

1

2

Total finance costs

1

2

Note 1E: Impairment Loss Allowance on Financial Instruments

2019

2018

$'000

$'000

Impairment Loss Allowance from

Impairment of receivables - goods and services

3

2

Total impairment on financial instruments

3

2

Note 1F: Write-Down and Impairment of Other Assets

2019

2018

$'000

$'000

Write-off of infrastructure, plant and equipment

140

503

Impairment of intangibles

571

1,486

Total write-down and impairment of other assets

711

1,989

Note 2: Income

2019

2018

$'000

$'000

OWN-SOURCE REVENUE

Note 2A: Sale of Goods and Rendering of Services

Rendering of services

55,678

52,500

Total sale of goods and rendering of services

55,678

52,500

Accounting Policy

Revenue from the sale of goods is recognised when:

  • the risks and rewards of ownership have been transferred to the buyer;
  • the Department retains no managerial involvement or effective control over the goods;
  • the revenue and transaction costs incurred can be reliably measured; and
  • it is probable that the economic benefits associated with the transaction will flow to the Department.

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

  • the amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and
  • the probable economic benefits associated with the transaction will flow to the Department.

The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.

2019

2018

$'000

$'000

Note 2B: Rental Income

Rental income

825

1,552

Total rental income

825

1,552

Sub leasing rental income commitments

The Department in its capacity as lessor has in place a number of memorandum of understanding agreements with Commonwealth entities in four tenancies.

Commitments for sublease rental income receivables (GST inclusive) are as follows:

Within 1 year

(989)

(1,668)

Between 1 to 5 years

(884)

(4,147)

More than 5 years

-

(707)

Total sublease rental income commitments

(1,873)

(6,522)

Note 2C: Other Gains

2019

2018

$'000

$'000

First time recognition of assets – infrastructure, plant and equipment

Other

542

1,583

Total other gains

560

1,678

Accounting Policy

Resources Received Free of Charge

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

Gains

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government entity as a consequence of a restructuring of administrative arrangements (Refer to Accounting Policy for the Statement of Changes in Equity).

Sale of Assets

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.

2019

2018

$'000

$'000

REVENUE FROM GOVERNMENT

Note 2D: Revenue from Government

Appropriations

Departmental appropriations

334,015

310,830

Special Account Revenue

941

-

Total revenue from Government

334,956

310,830

Accounting Policy

Revenue from Government

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

Funding received or receivable from non-corporate Commonwealth entities (appropriated to the non-corporate Commonwealth entity as a corporate Commonwealth entity payment item for payment to this entity) is recognised as Revenue from Government by the corporate Commonwealth entity unless the funding is in the nature of an equity injection or a loan.

Note 3: Financial Assets

2019

2018

$'000

$'000

Note 3A: Cash and Cash Equivalents

Cash on hand or on deposit

2,561

2,396

Cash held in the OPA - Special Account

4,112

-

Total cash and cash equivalents

6,673

2,396

Credit terms for goods and services are net 30 days.

Note 3B: Trade and Other Receivables

2019

2018

$'000

$'000

Goods and services

Appropriation receivables - for existing programs

118,953

137,782

GST receivable from the Australian Taxation Office

3,436

3,189

Other

928

484

Total trade and other receivables (gross)

129,297

144,654

Less impairment loss allowance for goods and services

(7)

(4)

Total trade and other receivables (net)

129,290

144,650

Accounting Policy

Receivables and impairment

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

Note 4: Non-Financial Assets

Note 4A: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles (2018-19)

Leasehold improvements

Other plant & equipment

Computer software internally developed

Computer software purchased

Total

$'000

$'000

$'000

$'000

$'000

As at 30 June 2018

Gross book value

36,111

46,594

191,195

1,913

275,813

Accumulated depreciation, amortisation and impairment

(7,154)

(16,128)

(78,521)

(1,349)

(103,152)

Net book value 30 June 2018

28,957

30,466

112,674

564

172,661

Additions

Purchase or internally developed

4,145

10,037

43,945

1,058

59,185

First time recognition

-

18

-

-

18

Reclassification

-

(2,910)

2,910

-

-

Revaluations recognised in other comprehensive income

472

(314)

-

-

158

Impairments recognised in net cost of services

-

-

(571)

-

(571)

Reversal of impairments recognised in net cost of services

-

-

-

-

-

Depreciation/amortisation expense

(4,294)

(10,075)

(29,913)

(207)

(44,489)

Other movements

Disposals

-

(10)

-

-

(10)

Write-offs

-

(140)

-

-

(140)

Total as at 30 June 2019

29,280

27,072

129,045

1,415

186,812

Total as at 30 June 2019 represented by:

Gross book value

Fair value

27,087

32,616

224,895

2,971

287,569

Work in progress

2,502

1,257

4,756

-

8,515

Accumulated depreciation, amortisation and impairment

(309)

(6,801)

(100,606)

(1,556)

(109,272)

Total as at 30 June 2019

29,280

27,072

129,045

1,415

186,812

During 2019, $0.571 million of internally developed software was impaired (2018: $1.486m). There were no write offs of internally developed software (2018: nil). There were no write offs of purchased software during 2019 (2018: nil).

During 2019, nil plant and equipment was impaired (2018: $0.428m).

There are no leased properties that the Department manages which are due to be vacated within the next 12 months that has a leasehold improvement asset.

No impairment loss was required for surplus lease space (2018: nil).

Revaluations of non-financial assets

All revaluations were conducted in accordance with the revaluation policy below.

Revaluation increments for leasehold improvements and other plant and equipment credited to the asset revaluation reserve were included in the equity section of the Statement of Financial Position, no decrements were expensed.

Contractual commitments for the acquisition of property, plant, equipment and intangible assets
s(GST inclusive) are as follows:

2019

2018

$'000

$'000

Commitments are payable as follows:

Within 1 year

1,681

5,189

Total commitments payable

1,681

5,189

Accounting Policy

Acquisition of Assets

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.

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, (or $50,000 for leasehold improvements) which are expensed in the year of acquisition (other than where they form part of a group of similar items which 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 the restoration provisions in property leases taken up by the Department where there exists an obligation 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 ‘restoration’ recognised.

Revaluations

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

Asset Class

Fair value measurement

Leasehold improvements

Depreciated replacement cost

Infrastructure, plant and equipment

Market selling price

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. This volatility is assessed before the end of each reporting period.

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 were 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.

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:

Asset Class

2019

Leasehold improvements

Lease Term

Infrastructure, plant and equipment

3–25 years

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 Department 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 purchased and internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses. Purchases costing less than $200,000 are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the Department’s software are 2–15 years.

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

Note 5: Payables

2019

2018

$'000

$'000

Note 5A: Trade Creditors and Accruals

Trade creditors and accruals

24,369

33,613

Operating lease rentals

6,660

5,324

Total suppliers

31,029

38,937

Settlement is usually made within 30 days.

Note 5B: Other Payables

2019

2018

$'000

$'000

Salaries and wages

1,589

1,586

Superannuation

271

558

Separations and redundancies

-

548

Other employee benefits

638

841

Lease incentive

9,937

11,503

Unearned income

2,022

2,321

Total other payables

14,457

17,357

Accounting Policy

Operating lease rentals

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

Lease Incentives

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

Note 6: Provisions

2019

2018

$'000

$'000

Note 6A: Employee Provisions

Leave

84,253

74,998

Total employee provisions

84,253

74,998

Accounting Policy

Employee Benefits

Liabilities for ‘short-term employee benefits’ and termination benefits expected within twelve months of the end of the 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 Department’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 reference to the work of an actuary as at 30 June 2019. 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 Department 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 majority of the Department’s staff are members of the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or other schemes administered by the Commonwealth Superannuation Corporation (CSC).

The PSS and AGEST 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 Department makes employer contributions to the employee’s defined benefit superannuation scheme 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 liability for superannuation recognised as at 30 June represents outstanding contributions.

Note 6B: Other provisions

Provision for restoration

Total

$’000

$’000

As at 1 July 2018

93

93

Amounts reversed

(31)

(31)

Discount or change in discount rate

1

1

Total as at 30 June 2019

63

63

The Department currently has one (2018:1) agreement for the leasing of premises which have provisions requiring the Department to restore the premises to their original condition at the conclusion of the lease. The provision reflects the present value of this obligation.

Note 7: 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, including any director (whether executive or otherwise) of the Department. The Department has determined the key management personnel to be the Secretary and Deputy Secretaries.

2019

2018

$'000

$'000

Note 7A: Key Management Personnel Remuneration

Short-term employee benefits

1,799

1,572

Post-employment benefits

280

279

Other long-term employee benefits1

67

248

Total key management personnel remuneration expenses

2,146

2,099

1. Other includes motor vehicle allowances, other allowances and reportable fringe benefits.

The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Minister. The Portfolio Minister's remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the Department.

The total number of senior management personnel that are included in the above table is 6 (2018: 5). The comparative in 2018 includes former Secretary Leon, from 1 July 2017 to 17 September 2017.

This note was prepared on an accrual basis and excludes acting arrangements, unless these are deemed to be significant long-term acting of greater than three months.

Note 8: Related Party Disclosures

Related party relationships:

The Department is an Australian Government controlled entity. Related parties to the Department are key management personnel including the Portfolio Minister and the Department’s executive.

Transactions with related parties:

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as any ordinary citizen. 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 entity, it has been determined that there are no related party transactions to be separately disclosed for 2019 (2018: nil).

Note 9: Contingent Assets and Liabilities

Quantifiable Contingencies

The Department has no quantifiable contingencies. All prior year contingencies have been realised or expired.

Accounting Policy

Contingent Assets and Contingent Liabilities

Contingent assets and contingent liabilities 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.

Note 10: Financial Instruments

2019

2018

$'000

$'000

Note 10A: Categories of Financial Instruments

Financial assets under AASB 139

Loans and receivables

Cash and cash equivalents

2,396

Goods and services receivable

3,195

Total loans and receivables

5,591

Total financial assets

5,591

Financial assets under AASB 9

Financial assets at amortised cost

Cash and cash equivalents

6,673

Goods and services receivable

5,973

Total financial assets at amortised cost

12,646

Total financial assets

12,646

Financial Liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

24,369

33,613

Total financial liabilities measured at amortised cost

24,369

33,613

Total financial liabilities

24,369

33,613

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

Financial assets class

Notes

AASB 139 original classification

AASB 9 new classification

AASB 139 carrying amount at 1 July 2018

AASB 9 carrying amount at 1 July 2018

$'000

$'000

Cash and cash equivalents

3A

Receivables

Amortised Cost

2,396

2,396

Goods and services receivable

3B

Receivables

Amortised Cost

3,195

3,195

Total financial assets

5,591

5,591

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

Financial assets class

AASB 139 carrying amount at 1 July 2018

Reclassification

Re-measurement

AASB 9 carrying amount at 1 July 2018

$'000

$'000

$'000

$'000

Financial assets at amortised cost

Loans and receivables

Cash and cash equivalents

2,396

-

-

2,396

Goods and services receivable

3,195

-

-

3,195

Total financial assets

5,591

-

-

5,591

2019

2018

$'000

$'000

Note 10B: Net Gains or Losses on Financial Assets

Financial assets at amortised cost

Impairment of receivables - goods and services

(3)

(2)

Net losses on financial assets at amortised cost

(3)

(2)

Net losses on financial assets

(3)

(2)

Accounting Policy

Financial Assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019; the Department classifies its financial assets as:

a) financial assets measured at amortised cost;

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

c) financial assets at fair value through profit or loss.

The classification depends on both the Department’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 Department 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.

Note 11: Fair Value Measurement

Note 11A: Fair Value Measurement

Fair value measurements at the end of the reporting period

2019

2018

$'000

$'000

Non-financial assets

Leasehold improvements

26,778

19,607

Infrastructure, plant and equipment

25,815

29,210

Total non-financial assets

52,593

48,817

Total fair value measurements of assets in the Statement of Financial Position

52,593

48,817

Assets not measured at fair value in the Statement of Financial Position

2019

2018

Leasehold improvements - AUC

2,502

9,349

Infrastructure, plant & equipment - AUC

1,257

1,256

Total assets not measured at fair value in the Statement of Financial Position

3,759

10,605

Accounting Policy

The Department’s policy under AASB 13 Fair Value Measurement is to test the value of assets at least once every 12 months and to obtain a comprehensive valuation at least once every three years1.

For 2018–19, Jones Lang LaSalle (JLL) has completed a fair value review of all leasehold improvements and infrastructure, plant and equipment as at 30 June 20192. The review concluded that there was no material movements in fair value of the Department’s assets.

Note 12: Appropriations

Note 12A: Annual Appropriations ('Recoverable GST exclusive')

2019 Appropriations

Appropriation applied in 2019 (current and prior years)

Annual appropriation

Adjustments to appropriation

Total appropriation

Variance

$'000

$'000

$'000

$'000

$'000

DEPARTMENTAL

Ordinary annual services1

334,015

74,744

408,759

413,674

(4,915)

Capital Budget2

31,367

-

31,367

39,067

(7,700)

Other services

Equity

22,096

-

22,096

27,377

(5,281)

Total departmental

387,478

74,744

462,222

480,118

(17,896)

1. The Departmental adjustments to appropriation includes PGPA Act Section 74 receipts. The ordinary annual services variance is due to timing between goods being received and payments being made.

2. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1, 3, 5). They form part of ordinary annual services and are not separately identified in the Appropriation Acts. The variance is due to timing between goods being received and payments being made. The Departmental Capital Budget has been reduced by $0.933m under a section 51 Determination dated 24 January 2019.

2018 Appropriations

Appropriation applied in 2018 (current and prior years)

Variance1

Annual appropriation

Adjustments to appropriation3

Total appropriation

$'000

$'000

$'000

$'000

$'000

DEPARTMENTAL

Ordinary annual services

305,391

83,618

389,009

380,300

8,709

Capital Budget2

31,306

-

31,306

34,462

(3,156)

Other services

Equity

40,349

-

40,349

35,068

5,281

Total departmental

377,046

83,618

460,664

449,830

10,834

1. The Ordinary annual services budget variance is due to closing liabilities not yet paid and operating surplus. The Capital Budget variance is due to timing between goods being received and payments being made.

2. Departmental Capital Budgets are appropriated through Appropriation Acts (No.1, 3, 5). They form part of ordinary annual services and are not separately identified in the Appropriation Acts.

3. Departmental adjustments to appropriation includes $78.18m of PGPA Act Section 74 receipts and $5.44m of PGPA Act Section 75 transfers as a result of transferred functions to the Department.

Note 12B: Unspent Annual Appropriations ('Recoverable GST exclusive')

2019

2018

$'000

$'000

Departmental

Appropriation Act (No. 1) 2016-17

-

1,258

Appropriation Act (No. 2) Equity Injection 2016-17

2,005

2,005

Appropriation Act (No. 4) Equity Injection 2016-17

1,063

1,063

Appropriation Act (No. 1) 2017-18

-

115,140

Appropriation Act (No. 1) Capital Budget 2017-18

-

4,838

Appropriation Act (No. 2) Equity Injection 2017-18

-

1,204

Appropriation Act (No. 3) 2017-18

-

4,244

Appropriation Act (No. 3) Capital Budget 2017-18

-

3,953

Appropriation Act (No. 4) Equity Injection 2017-18

-

4,077

Appropriation Act (No. 1) 2018-19

99,928

-

Appropriation Act (No. 1) Capital Budget 2018-191

933

-

Appropriation Act (No. 3) 2018-19

15,800

-

Appropriation Act (No. 3) Capital Budget 2018-19

158

-

Cash at bank

2,561

2,396

Total

122,448

140,178

1. The unspent Departmental Capital Budget is subject to a section 51 Determination dated 24 January 2019.

Note 13: Special Accounts

Student Identifiers Special Account1

2019

$'000

Balance as at 29 May (represented by cash held in the OPA)

5,431

Increases

Appropriations credited to special account

941

Total increases

941

Available for payments

6,372

Decreases

Payments made

(2,260)

Total decreases

(2,260)

Balance as at 30 June (represented by cash held in the OPA)

4,112

As a result of the Administrative Arrangements Order of 29 May 2019, the Student Identifiers Special Account transferred to the Department from the Department of Education.

1. Student Identifiers Special Account

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

Establishing Instrument: Student Identifiers Act 2014; subsection 48(1).

Purpose: For paying or discharging the costs, expenses and other obligations incurred by the Commonwealth in the performance of the Registrar’s functions, paying any remuneration and allowances payable to any person under the Act and meeting the expenses of administering the account.

Note 14: Regulatory Charging

As a result of the Administrative Arrangements Order of 29 May 2019, skills, vocational education and training programs transferred to the Department from the Department of Education.

From 29 May 2019 the Department undertook regulatory charging activities relating to:

  • certain programs managed by Trades Recognition Australia (TRA); and
  • the VET Student Loans program.

The Department of Education receipted $23,700 of TRA external revenue for the period 29 May to 30 June 2019 on behalf of the Department.

Further information on the above activities is available at:

Note 15: Net Cash Appropriation Arrangements

2019

2018

$'000

$'000

Total comprehensive income (loss) less depreciation/amortisation expenses previously funded through revenue appropriations

(7,785)

1,530

Plus: depreciation/amortisation expenses previously funded through revenue appropriation

(44,489)

(42,671)

Total comprehensive loss - as per the Statement of Comprehensive Income

(52,274)

(41,141)

Note 16: Aggregate Assets and Liabilities

2019

2018

$'000

$'000

Note 16A: Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

151,069

162,190

More than 12 months

195,825

181,942

Total assets

346,894

344,132

Liabilities expected to be settled in:

No more than 12 months

53,171

65,330

More than 12 months

76,631

66,055

Total liabilities

129,802

131,385

Note 17: Restructuring

2019

Department of Education 1

Total

$'000

$'000

FUNCTIONS ASSUMED

Assets recognised

Cash held in the OPA - Special Account

5,431

5,431

Total assets recognised

5,431

5,431

Liabilities recognised

Other payables

1,342

1,342

Total liabilities recognised

1,342

1,342

Net assets recognised 2

4,089

4,089

Income assumed

Recognised by the receiving entity3

941

941

Recognised by the losing entity

5,340

5,340

Total income assumed

6,281

6,281

Expenses assumed

Recognised by the receiving entity3

2,260

2,260

Recognised by the losing entity

3,998

3,998

Total expenses assumed

6,258

6,258

1. The Student Identifiers Special Account and the Trades Recognition Australia regulatory charging activities were assumed by the Department due to the Administrative Arrangements Order dated 29 May 2019. These balances have an effective transfer date of 29 May 2019.

2. The net assets assumed from the Department of Education was $4.089 million. In respect of functions assumed, the net book value of assets and liabilities were transferred to the Department for no consideration.

3. For additional information refer to Note 13 Special Accounts.

2018

Small Business and Small Business Ombudsman Functions
Department of Treasury1

Deregulation Functions
Department of the Prime Minister and Cabinet2

Total

$'000

$'000

$'000

FUNCTIONS ASSUMED

Assets recognised

Trade and other receivables

Appropriation receivable

1,110

148

1,258

Trade and other receivables

3

-

3

Leasehold improvements

492

-

492

Prepayments

26

-

26

Total assets recognised

1,631

148

1,779

Liabilities recognised

Suppliers

403

-

403

Operating lease rentals

20

-

20

Employee provisions

1,127

163

1,290

Other provisions

91

-

91

Total liabilities recognised

1,641

163

1,804

Net liabilities recognised3

(10)

(15)

(25)

Income assumed

Recognised by the receiving entity

2,297

214

2,511

Recognised by the losing entity

4,085

495

4,580

Total income assumed

6,382

709

7,091

Expenses assumed

Recognised by the receiving entity

2,297

214

2,511

Recognised by the losing entity

4,085

495

4,580

Total expenses assumed

6,382

709

7,091

1. The small business functions were assumed by the Department due to the Administrative Arrangements Order dated 19 April 2018.

2. The regulatory policy functions were assumed by the Department due to the Administrative Arrangements Order dated 19 April 2018.

3. The net liabilities assumed from all entities was $24,659.

Footnotes

  1. The Department’s assets are held for operational purposes and not held for the purpose of deriving a profit. The current use of all non-financial assets is considered their highest and best use.
  2. No non-financial assets were measured at fair value on a non-recurring basis at 30 June 2019 (2018: nil)