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Notes to and forming part of the financial statements

Overview

Objectives of the Department of Foreign Affairs and Trade

The Department of Foreign Affairs and Trade (DFAT) is an Australian Government controlled entity. It is a not-for-profit, non-corporate Commonwealth entity. The continued existence of DFAT in its present form and with its present outcomes and programs is dependent on Government policy and on continuing funding by Parliament for DFAT's administration and programs.

DFAT’s role is to advance the interests of Australia and Australians internationally, providing foreign, trade and investment, development and international security policy advice to the Government. DFAT works with other Government agencies to ensure that Australia’s pursuit of its global, regional and bilateral interests is coordinated effectively. DFAT’s role involves working to strengthen Australia’s security, enhancing Australia’s prosperity, delivering an effective and high quality aid program and helping Australian travellers and Australians overseas. The DFAT Portfolio Budget Statements are structured to meet three outcomes:

  • Outcome 1: The advancement of Australia's international strategic, security and economic interests including through bilateral, regional and multilateral engagement on Australian Government foreign, trade and international development policy priorities,
  • Outcome 2: The protection and welfare of Australians abroad and access to secure international travel documentation through timely and responsive travel advice and consular and passport services in Australia and overseas, and
  • Outcome 3: A secure Australian Government presence overseas through the provision of security services and information and communications technology infrastructure, and the management of the Commonwealth's overseas property estate.

DFAT's activities that contribute towards these outcomes are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by DFAT in its own right. Administered activities involve the management or oversight by DFAT, on behalf of the Government, of items controlled or incurred by the Government.

DFAT conducts the following administered activities on behalf of the Government:

  • Official development assistance,
  • Consular and passport services,
  • Public information services and public diplomacy,
  • International climate change engagement,
  • The New Colombo Plan,
  • Programs to promote Australia’s international tourism interests, and
  • Payments to international organisations.

Official development assistance administered by DFAT includes international development assistance and multilateral replenishments. Appropriation funding is allocated through country, regional and global programs, and includes payments to international organisations, emergency and humanitarian programs, contributions to non-Government organisations (NGOs) and volunteer programs. The aid program promotes Australia’s national interest by contributing to sustainable economic growth and poverty reduction, particularly in the Indo-Pacific.

Basis of Preparation

The financial statements and notes are general purpose financial statements and are required by section 42 of the Public Governance, Performance and Accountability Act 2013.

The financial statements and notes have been prepared in accordance with:

a) the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR), and

b) Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

DFAT has applied the Reduced Disclosure Requirements issued by the AASB with the exception of disclosures prepared under the following accounting standards, as required under subsection 18(3) of the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR):

  • AASB 7 Financial Instruments: Disclosure (administered only),
  • AASB 12 Disclosure of Interests in Other Entities (administered only),
  • AASB 13 Fair Value Measurement (administered and departmental), and
  • AASB 116 Property, Plant and Equipment (administered and departmental).

The financial statements have been prepared on an accrual basis and are 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. Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables are translated at the exchange rates current at the end of the reporting period. Exchange gains and losses are reported in the Statement of Comprehensive Income. DFAT does not enter into hedging arrangements for its foreign currency transactions and all foreign exchange gains or losses are considered non-speculative in nature.

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes. Except where otherwise stated below, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.

Taxation

DFAT is exempt from all forms of Australian taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST). Overseas, DFAT may be subject to Value Added Tax (VAT) or similar on the purchase of goods and services. Revenues, expenses, assets and liabilities are recognised net of GST / VAT except:

  1. where the amount of GST or VAT incurred is not recoverable from the Australian Taxation Office or overseas taxation authority, and
  2. for receivables and payables.

Events After the Reporting Period

There have been no events after 30 June 2021 which will affect the financial position of DFAT materially at the reporting date.

New Accounting Standards

No accounting standard has been adopted earlier than the application date as stated in the standard. No future accounting standards have been identified that will result in a material impact on DFAT accounts.

Significant Accounting Judgements and Estimates

In the process of applying the accounting policies detailed in these statements, DFAT has made the following estimate and judgement that have a significant impact on the amounts recorded in the departmental financial statements:

  • The fair value of land and buildings has been taken to be the market value of similar properties as determined by an independent valuer. The impact of COVID-19 has been taken into account using the best available market data. However, in some instances, DFAT’s buildings are purpose built and may in fact realise more or less in the market.

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next reporting period.

Administered

In the process of applying the accounting policies detailed in these statements, DFAT has made the following estimate and judgement that have a significant impact on the amounts recorded in the Administered financial statements:

  • The fair value of the administered financial instruments in 2020-21 has been determined using professional valuation advice. The fair value of the financial instruments reported in future periods will be affected by variables such as discount rates, exchange rates and possible impairment.

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying

1. Departmental Financial Performance

1.1 Expenses

2021

2020

$'000

$'000

Note 1.1A: Employee benefits

Wages and salaries

573,375

594,935

Superannuation

Defined contribution plans

47,825

44,234

Defined benefit plans

36,284

49,181

Leave and other entitlements

50,914

71,692

Fringe benefits expense

121,371

117,163

Separations and redundancies

7,886

6,713

Other employee expenses

3,891

4,616

Total employee benefits

841,546

888,534

Accounting policy

Accounting policies for employee benefits are included in Section 6 People and Relationships.

2021

2020

$'000

$'000

Note 1.1B: Suppliers

Goods and services supplied or rendered

Passport expenses

44,783

106,317

Property related expenses (excluding rent)

118,378

99,317

Security expenses

73,886

86,965

Information and communication technology

106,192

106,616

Travel expenses

25,624

47,528

Staff related expenses

38,862

35,560

Office expenses

20,584

19,487

Legal and other professional services

27,152

12,537

Contractors

11,170

10,516

Consultants

6,862

4,851

Remuneration of auditors

615

611

Facilitated flights expenses

13,690

3,441

Other expenses

18,035

17,604

Total goods and services supplied or rendered

505,833

551,350

Goods supplied

56,192

73,788

Services rendered

449,641

477,562

Total goods and services supplied or rendered

505,833

551,350

Other suppliers

Short–term leases

3,015

3,281

Workers compensation expenses

5,188

3,796

Total other suppliers

8,203

7,077

Total suppliers

514,036

558,427

1. DFAT has short-term lease commitments of $1.074m as at 30 June 2021.

2021

2020

$'000

$'000

Note 1.1C: Impairment loss on financial instruments

Write–down of financial assets

10

68

Movement in impairment loss allowance

-

195

Total impairment loss on financial instruments

10

263

2021

2020

$'000

$'000

Note 1.1D: Write–down and impairment of other assets

Write–down of buildings

52,483

1,631

Write–down of plant and equipment

4,103

1,727

Write–down of computer software

-

170

Impairment of non–current assets held for sale or divested

640

756

Write-down of assets under construction

1,982

-

Write-off of inventories

510

-

Total write-down and impairment of other assets

59,718

4,284

2021

2020

$'000

$'000

Note 1.1E: Finance costs

Unwinding of discount

136

279

Interest on lease liabilities

14,469

15,966

Other interest payments

2

2

Total finance costs

14,607

16,247

1.2 Own-source revenue and gains

2021

2020

$'000

$'000

Note 1.2A: Revenue from contracts with customers

Sale of goods

571

290

Rendering of services

92,900

102,313

Total revenue from contracts with customers

93,471

102,603

Disaggregation of revenue from contracts with customers

DFAT generates revenue from agreements with customers. A significant portion of rendering of services revenue is derived from DFAT providing services for other Commonwealth agencies overseas $91.606m (2020: $100.567m). The remainder of the revenue are contributions by employees in relation to expenses that are incurred by DFAT $1.294m (2020: $1.746m).

DFAT can categorise services provided overseas into accommodation and general support $72.245m (2020: $75.511m) and information technology support $19.361m (2020: $25.056m). The risks and uncertainties in relation to timing of revenue and associate cash flows for both services are identical. Per unit costs are determined at the beginning of the revenue period. Revenue is recognised from customers in arrears based on the agreed unit values. At the end of the revenue period the unit costs are reviewed to determine appropriateness in terms of cost that have been incurred. Revenue recognised for each customer is then adjusted to reflect the actual costs that have been incurred in determining the unit value.

Accounting policy

Revenue from the sale of goods is recognised when control has been transferred to the buyer.

DFAT will classify a service based agreement as within the scope of AASB 15 Revenue from Contacts with Customers and recognise revenue in relation to services rendered from that agreement when all the following conditions are satisfied:

  • DFAT has an agreement that has been approved by all parties to the agreement;
  • The obligations of each party under the agreement can be identified;
  • A pattern of transfer of services can be identified;
  • The agreement has commercial substance;
  • It is highly probable that DFAT will collect the payments.

Service revenue is predominately generated from providing services to other Commonwealth agencies overseas. The agreements with customers typically involve multiple services. All services relate to specific performance obligations, and as such the services are bundled for the purpose of revenue recognition. Revenue is recognised on a per unit basis and is not considered variable revenue. The transaction price is the total amount of consideration to which the department expects to be entitled in exchange for transferring the promised services to a customer. The transaction price is based on a service unit price for recovering costs and is initially determined applying judgement. The unit price is reviewed at the end of the revenue period to adjust revenues recognised for the actual unit cost. This process can result in the recognition of a customer contract liability or receivable.

The benefits to the customers under the agreements are provided and consumed simultaneously. The likelihood of re-performance of any aspects of the services are low and, as such, DFAT recognises the services revenue over time with proportionate recognition over the period of the agreement. The services are typically charged in arrears and as such, liabilities are not raised in relation to those obligations.

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

2021

2020

$'000

$'000

Note 1.2B: Rental income

Operating lease:

Lease income

38,151

34,105

Subleasing right–of–use assets

14,478

15,743

Total rental income

52,629

49,848

DFAT has in place a number of lease arrangements for operating lease commitments for right-of-use assets and DFAT owned properties. Lease revenue expected to be received is $147.319m (2020: $131.777m).

2021

2020

$'000

$'000

Maturity analysis of operating lease income receivables:

Within 1 year

47,452

45,658

One to two years

40,783

35,560

Two to three years

29,479

24,810

Three to four years

19,949

15,187

Four to five years

6,492

6,879

More than 5 years

3,164

3,683

Total undiscounted lease payments receivable

147,319

131,777

2021

2020

$'000

$'000

Note 1.2C: Other revenue

Foreign tax refunds

4,593

4,815

Sponsorship revenue

368

890

Resources received free of charge

615

619

Other revenue

1,179

226

Total other revenue

6,755

6,550

Accounting policy

Resources received free of charge, which relates to remuneration of auditors, 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.

Sponsorship revenue is recognised as revenue at the fair value of the sponsorship received or receivable when the probable economic benefits of the transaction will flow to DFAT.

Foreign tax refunds are recognised as revenue at the fair value of the foreign tax refund when the probable economic benefits of the transaction will flow to DFAT.

2021

2020

$'000

$'000

Note 1.2D: Other gains

Gain on restoration obligation

53

39

Assets previously expensed

232

286

Total other gains

285

325

2. Income and Expenses Administered on Behalf of Government

2.1 Administered - Expenses

2021

2020

$'000

$'000

Note 2.1A: International development assistance

Delivery of Australian international development assistance

International development assistance – suppliers

3,539,325

3,114,351

Employee benefits supporting delivery

33,839

39,100

Total international development assistance

3,573,164

3,153,451

Accounting Policy

Employee benefit expenses relate to both APS and locally engaged staff working on the direct delivery of the aid program.

2021

2020

$'000

$'000

Note 2.1B: Multilateral replenishments and other loans

New multilateral replenishments

414,543

230,726

Loss from measuring multilateral financial liabilities – at fair value through profit or loss

-

341,228

Unwinding costs – multilateral grants and contributions

15,552

17,865

Total multilateral replenishments and other loans

430,095

589,819

Accounting Policy

Accounting policies for other loans and multilateral replenishments are included in Note 4.1: Administered - Financial Assets and Note 4.3: Administered - Payables.

2021

2020

$'000

$'000

Note 2.1C: Other grants and contributions

Payments to international organisations

355,139

384,447

New Colombo Plan

48,750

48,998

Tourism Australia – Asia marketing fund

19,923

14,000

Tourism Australia – Working holiday makers

-

2,500

Tourism Australia – Bushfire response package

29,500

41,500

Tourism Australia – Implementing Sport 2030

3,000

2,000

Non–Aid discretionary grants

36,939

12,818

Consular emergency services

26,867

149

Other

843

1,507

Total other grants and contributions

520,961

507,919

Accounting Policy

DFAT administers a number of agreements on behalf of the Australian Government with international organisations. Liabilities are recognised to the extent that:

a) the services required to be performed by the recipient have been performed, or

b) the eligibility criteria has been satisfied, but payments due have not been made.

2021

2020

$'000

$'000

Note 2.1D: Other expenses

NIA financial guarantee

16,330

-

Facilitated flights

11,180

-

Defined benefit pension schemes

7,776

7,423

Passport fee refunds

1,115

933

Consular fee refunds

4

7

Other foreign exchange losses

-

569

Total other expenses

36,405

8,932

2.2 Administered - Income

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

2021

2020

$'000

$'000

Note 2.2A: Fees and charges

Passport fees

171,410

449,328

Consular fees

13,310

14,285

Nuclear safeguard charges

849

875

Total fees and charges

185,569

464,488

Accounting Policy

Passport and consular income are based on a fee arrangement, collected both domestically and internationally, for the processing of new passport applications, registering lost or stolen passports, issuing emergency passports, and for other travel related documents and notarial endorsements. Fees are determined under the Australian Passports (Application Fees) Act 2005 and the income is recognised on receipt of the fees and all income collected is returned to consolidated revenue. The nuclear safeguard charge income is the Uranium Producers Charge, under the Nuclear Safeguards (Producers of Uranium Ore Concentrates) Act 1993, for each kilogram of uranium ore concentrate produced in Australia with the income recognised on receipt of the charge and is all income returned to consolidated revenue.

2021

2020

$'000

$'000

Note 2.2B: EFA – NIA

NIA premiums

14,989

12,951

NIA repayments of interest subsidies and recoveries

46,633

22,931

Total EFA - NIA

61,622

35,882

Accounting Policy

Accounting policies for EFA are included in Note 4.1B: Receivables and loans.

2021

2020

$'000

$'000

Note 2.2C: EFA dividend and competitive neutrality

EFA dividend

5,596

13,425

Competitive neutrality

7,244

13,934

Total EFA dividend and competitive neutrality

12,840

27,359

Accounting Policy

Under section 61A of the Export Finance and Insurance Corporation Act 1991 (the EFIC Act) the Minister may apply to EFA a debt neutrality charge in respect of short‑term insurance contracts entered into by EFA. These arrangements ensure EFA does not have an unfair advantage over private sector financiers through its Australian Government ownership.

2021

2020

$'000

$'000

Note 2.2D: Return of prior year administered expenses

Return of prior year administered expenses

31,296

37,216

Total return of prior year administered expenses

31,296

37,216

Accounting Policy

Return of prior year administered expenses relates to funds returned after finalisation or acquittal of an agreement or funding arrangement which were originally paid from prior year appropriations. These funds are treated as administered revenue in the year the funds are returned and are transferred back to consolidated revenue.

2021

2020

$'000

$'000

Note 2.2E: Other revenue and gains

Gain from measuring multilateral financial liabilities – at fair value through profit or loss

9,621

-

Defined benefit pension schemes – contributions

4,582

5,461

Other foreign exchange gains

4,184

-

Other interest

717

311

Other revenue

37

10

Total other revenue and gains

19,141

5,782

Accounting Policy

Defined benefit schemes

Accounting policies for the defined benefit pension schemes – contributions are included in Note 7.6: Administered – Defined Benefit Pension Schemes.

3. Departmental Financial Position

3.1 Financial Assets

2021

2020

$'000

$'000

Note 3.1A: Cash and cash equivalents

Cash on hand or on deposit

87,377

92,667

Overseas property special account cash held by the entity

16,801

1,331

Overseas property special account cash held in the OPA

399,462

334,029

Total cash and cash equivalents

503,640

428,027

Accounting policy

Cash is recognised at its nominal amount. Cash and cash equivalents includes cash on hand, deposits on hand in bank accounts and special account cash held (excluding trust balances) in the OPA.

2021

2020

$'000

$'000

Note 3.1B: Trade and other receivables

Goods and services receivables

Goods and services

69,657

96,898

Other

15,329

24,853

Total goods and services receivables

84,986

121,751

Goods and services are associated with providing services for other Commonwealth agencies and contributions by employees in relation to expenses that are incurred by the Department.

Appropriations receivables

Departmental – operating

384,625

166,336

Departmental – capital

74,481

83,029

Total appropriations receivable

459,106

249,365

Other receivables

Advances

15,568

15,375

Statutory receivables

6,020

4,360

Cash held by outsiders

126

168

Other

1,638

1,119

Total other receivables

23,352

21,022

Total trade and other receivables (gross)

567,444

392,138

Less impairment loss allowance

(179)

(294)

Total trade and other receivables (net)

567,265

391,844

Accounting policy

Aside from cash, financial assets are all classified as receivables. Terms for receivables for goods and services are 30 days (2020: 30 days).

Note 3.1B: Trade and other receivables (continued)

Receivables

Receivables have fixed or determinable payments and are not quoted in an active market. Receivables are initially measured at fair value and subsequently at amortised cost using the effective interest method less impairment.

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

Under AASB 9 Financial Instruments, DFAT can classify its financial assets in the following categories:

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

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

c) financial assets measured at amortised cost.

The classification depends on both DFAT's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when DFAT becomes a party to the contract and has a legal right to receive cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date. Therefore, DFAT's trade and other receivable financial assets are measured, and carried, at amortised cost.

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.

Appropriations

Departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when DFAT 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.

Impairment

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses (ECL).

The simplified approach has been adopted in measuring the impairment loss allowance for trade and other receivables at an amount equal to lifetime ECL.

3.2 Non-Financial Assets

Note 3.2A: Reconciliation of the opening and closing balances of property, plant and equipment and computer software

Reconciliation of the opening and closing balances for 2021

Land

Buildings

Plant and equipment

Computer software1

Total

$'000

$'000

$'000

$'000

$'000

As at 1 July 2020

Gross book value

1,989,064

3,005,010

385,534

281,255

5,660,863

Accumulated depreciation, amortisation and impairment

-

(170,233)

(107,018)

(135,566)

(412,817)

Total as at 1 July 2020

1,989,064

2,834,777

278,516

145,689

5,248,046

Additions:

Purchase

22

113,043

47,507

9,553

170,125

Internally developed1

-

-

-

19,212

19,212

Right–of–use assets

-

84,065

400

-

84,465

Revaluations and impairments recognised in other comprehensive income

(102,059)

(78,184)

(4,618)

-

(184,861)

Write–offs and impairments on right–of–use assets recognised in net cost of services

-

(24,380)

-

-

(24,380)

Assets held for sale2

(19,583)

-

-

-

(19,583)

Depreciation and amortisation expense

-

(107,309)

(66,042)

(40,162)

(213,513)

Depreciation on right–of–use assets

-

(167,548)

(1,954)

-

(169,502)

Other movements

Asset reclassification

-

1,398

(8,178)

6,780

-

Disposals

(8,578)

(29,681)

(4,304)

(1,982)

(44,545)

Total as at 30 June 2021

1,858,866

2,626,181

241,327

139,090

4,865,464

Net book value as of 30 June 2021 represented by:

Gross book value

1,858,866

2,978,579

298,081

310,274

5,445,800

Accumulated depreciation, amortisation and impairment

-

(352,398)

(56,754)

(171,184)

(580,336)

Total

1,858,866

2,626,181

241,327

139,090

4,865,464

Carrying amount of right–of–use assets

-

1,072,018

359

-

1,072,377

1. The carrying amount of computer software included $5.039m purchased software and $134.051m internally generated software.

2. Assets held for sale relates to land in Jakarta.

No indicators of impairment were identified for property, plant and equipment, and computer software.

No land and building assets are to be sold within the next 12 months, other than those identified as assets held for sale in the Statement of Financial Position.

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

DFAT has a number of contractual commitments in place for the purchase and / or development of buildings, leasehold improvements and computer software assets, aged as follows:

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

2021

$’000

2020

$’000

Within 1 year

96,308

88,451

Between 1 to 5 years

10,877

85,992

More than 5 years

-

-

Total commitments

107,185

174,443

The majority of these commitments relate to contracts in place for the development, refurbishment and upgrade of properties in DFAT’s diplomatic network, and are managed through the Overseas Property Office. Commitments are GST / VAT inclusive where relevant.

Note 3.2A: Reconciliation of the opening and closing balances of property, plant and equipment and computer software (continued)

Reconciliation of the opening and closing balances for 2020

Land

Buildings

Plant and equipment

Computer
software1

Total

$’000

$’000

$’000

$’000

$’000

As at 1 July 2019

Gross book value

1,973,538

1,666,641

342,898

233,899

4,216,976

Accumulated depreciation, amortisation and impairment

-

(147,795)

(38,659)

(109,185)

(295,639)

Net book value 1 July 2019

1,973,538

1,518,846

304,239

124,714

3,921,337

Recognition of right of use asset on initial application of AASB 16

-

1,259,312

3,792

-

1,263,104

Adjusted total as at 1 July 2019

1,973,538

2,778,158

308,031

124,714

5,184,441

Additions:

Purchase

3

101,955

62,491

25,805

190,254

Internally developed1

-

880

1,719

21,108

23,707

Right–of–use assets

-

87,855

134

-

87,989

Revaluations and impairments recognised in other comprehensive income

25,310

105,852

913

-

132,075

Write–offs and impairments on right–of–use assets recognised in net cost of services

-

(1,213)

-

-

(1,213)

Assets held for sale2

(9,787)

(3,228)

-

-

(13,015)

Depreciation and amortisation expense

-

(83,888)

(69,662)

(31,647)

(185,197)

Depreciation on right–of–use assets

-

(166,073)

(2,013)

-

(168,086)

Other movements

Asset reclassification

-

14,897

(20,776)

5,879

-

Disposals

-

(418)

(2,321)

(170)

(2,909)

Net book value 30 June 2020

1,989,064

2,834,777

278,516

145,689

5,248,046

Net book value as of 30 June 2020 represented by:

Gross book value

1,989,064

3,005,010

385,534

281,255

5,660,863

Accumulated depreciation, amortisation and impairment

-

(170,233)

(107,018)

(135,566)

(412,817)

Total

1,989,064

2,834,777

278,516

145,689

5,248,046

Carrying amount of right–of–use assets

-

1,179,881

1,913

-

1,181,794

1. The carrying amount of computer software included $9.393m purchased software and $136.296m internally generated software.

2. Assets held for sale relates to two properties located in London. The land and buildings for these properties were revalued prior to classification as assets held for sale. The properties are expected to be disposed via orderly market transactions within the forward estimates period.

No indicators of impairment were identified for property, plant and equipment, and computer software.

No land and building assets are to be sold within the next 12 months, other than those identified as assets held for sale in the Statement of Financial Position. 

Accounting Policy

Non-financial 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.

Non-financial 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.

Lease Right of Use (ROU) Assets

Lease ROU assets are capitalised at the commencement date of the lease and comprise of the initial lease liability amount, initial direct costs incurred when entering into the lease less any lease incentives received. These assets are accounted for as separate asset classes to the corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

Lease ROU assets continue to be measured at cost after initial recognition. An impairment review is undertaken for any ROU lease asset that shows indicators of impairment and an impairment loss is recognised against any ROU lease asset that is impaired.

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 $5,000 (2020: $5,000), 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 'make good' provisions in property leases taken up by DFAT where there exists an obligation to restore the property to its original condition on termination of the lease. These costs are included in the value of DFAT's leasehold improvements with a corresponding provision for the 'make good' disclosed in Note 3.5A: Provision for restoration.

Depreciation

Depreciable property, plant and equipment assets are written-down to their estimated residual values over their estimated useful lives to DFAT using, in all cases, the straight-line method of depreciation. Depreciation and amortisation 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 typical useful lives:

Asset Class

2021

2020

Buildings

Based on remaining useful life

Based on remaining useful life

Leasehold Improvements

Lesser of lease term or up to 15 years

Lesser of lease term or up to 15 years

ROU Assets

Plant and Equipment (other than Works of Art)

Lesser of lease term or useful life

3 to 25 years

Lesser of lease term or useful life

3 to 25 years

Plant and Equipment (Works of Art)

100 years

100 years

The depreciation rates for ROU assets are based on the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term.

Revaluations

Following initial recognition at cost, property, plant and equipment (excluding ROU assets) are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure the carrying amount of assets did not differ materially from the assets' fair value as at the reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets.

The Commonwealth owned, non-Defence overseas property estate, comprising both land and buildings, and managed by OPO, is subject to a three-year rolling revaluation cycle in which each property is subject to a full revaluation once in the cycle. A desktop report is required where there has been material movement in the market in excess of 10% over the past 12 months, or when substantial works have been undertaken on an asset. The top 20 by value property assets receive a desktop update as a minimum each year, with remaining properties subject to a market review.

Restrictions on Title

Due to the diplomatic nature of the overseas property portfolio, some properties have restrictions on title. Restrictions on title vary depending on local Government rules and regulations, such as long term title that prohibits the Commonwealth of Australia from profiting from sale of land. Whilst the effect of restrictions on some titles can be quantified, there are others that cannot, such as those titles held in limited or unsophisticated markets. As part of the valuation process, consideration is given to the restrictions on title.

Due to Covid travel restrictions, DFAT has amended its rolling revaluation program and full valuations have not been undertaken in 2021. A desktop valuation has been undertaken in its place.

The other tangible assets are subject to revaluation every three years by class based on the following cycle:

Asset Class to be Revalued

Year 1

Vehicles / Plant and Equipment / Furniture and Fittings / Office Equipment

Year 2

Works of Art / Leasehold Improvement

Year 3

IT Equipment / Special Assets

DFAT has engaged CIVAS to undertake the revaluation of land and buildings and JLL to undertake the revaluation of other tangible assets.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus / deficit. Revaluation decrements for a class of assets are recognised directly in the surplus / deficit except to the extent that they reversed 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 re-valued amount. Assets held overseas are valued in local currencies and translated into Australian dollars at the exchange rates current at revaluation date.

Derecognition

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

Impairment

All assets were assessed for impairment at 30 June 2021. Where indications of impairment existed, the asset's recoverable amount was estimated and an impairment adjustment made if the asset's recoverable amount was less than its carrying amount.

The recoverable amount of any 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 DFAT were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Computer software

DFAT's computer software comprises purchased and internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Software is amortised on a straight-line basis over its anticipated useful life. The useful life of DFAT’s software is 5 to 10 years (2020: 5 to 10 years).

All software assets were assessed for indications of impairment as at 30 June 2021.

Assets held for sale

Non-current assets are classified as held for sale if the carrying amount is to be recovered principally through a sale transaction rather than through continuing use. On classification as held for sale, the asset is measured at the lower of its carrying amount and fair value less costs to sell. Any write down to fair value less costs to sell is recognised as an impairment loss. Assets which have been classified as held for sale are no longer subject to depreciation or amortisation.

Assets Under Construction

Assets under construction (AUC) are recorded at acquisition cost. They include expenditure to date on various capital projects carried as AUC. AUC projects are reviewed annually for indicators of impairment and all tangible AUC older than 12 months prior to the reporting date are externally revalued to fair value. Computer software AUC are reviewed through an internal monthly process. Prior to rollout into service, the accumulated AUC balance is reviewed to ensure accurate capitalisation of built or purchased assets.

2021

2020

$'000

$'000

Note 3.2B: Inventories

Inventories held for sale

Finished goods

52,886

42,430

Total inventories

52,886

42,430

During 2021, $12.739m of inventory held for sale was recognised as an expense (2020: $40.608m) and $0.510m inventory was written off in the current financial year (2020: nil).

Accounting policy

Inventories held for sale are valued at cost. Costs incurred in bringing each item of inventory to its present location and condition include the cost of direct materials and labour plus attributable costs that can be allocated on a reasonable basis.

3.3 Payables

2021

2020

$'000

$'000

Note 3.3A: Suppliers

Trade creditors and accruals

118,230

79,152

Other

3,800

10,691

Total suppliers

122,030

89,843

Settlement terms for trade creditors were within 20 days (2020: 20 days).

2021

2020

$'000

$'000

Note 3.3B: Other payables

Wages and salaries

14,117

11,831

Superannuation

7,603

12,238

Separations and redundancies

110

121

Unearned income

42,260

37,657

Other

577

596

Total other payables

64,667

62,443

Accounting policy

Payables are classified as other financial liabilities and are recognised and measured at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

The liability for wages and salaries and superannuation recognised as at 30 June 2021 represents outstanding amounts and contributions for the final payroll fortnight of the financial year.

3.4 Leases

2021

2020

$'000

$'000

Note 3.4A: Leases

Lease Liabilities

Land

1,037

-

Buildings

1,085,107

1,165,903

Plant and equipment

332

144

Total leases

1,086,476

1,166,047

Maturity analysis – contractual undiscounted cash flows

Within 1 year

152,759

165,440

Between 1 to 5 years

456,618

577,680

More than 5 years

674,159

649,541

Adjustment for discount

(197,060)

(206,614)

Total leases

1,086,476

1,166,047

Total cash outflow for leases for the year ended 30 June 2021 was $155.868m (2020: $167.536m)

DFAT in its capacity as lessee has 97 leases with fixed price escalation clauses (2020: 100) and 455 leases with extension options (2020: 397). It is assumed DFAT will take all of the extension options if they are available, and it has been reflected in the lease liabilities calculations.

Accounting Policy

For all new contracts entered into, DFAT considers whether the contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.

Once it has been determined that a contract is, or contains a lease, the lease liability is initially measured at the present value of the lease payments unpaid at the commencement date, discounted using the interest rate implicit in the lease, if that rate is readily determinable, or the department’s incremental borrowing rate.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification to the lease. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset or profit and loss depending on the nature of the re-assessment or modification.

3.5 Provisions

2021

2020

$'000

$'000

Note 3.5A: Provision for restoration

Provision for restoration obligations

38,649

29,528

Total other provisions

38,649

29,528

2021

2020

$'000

$'000

Provision for restoration

As at 1 July 2020

29,528

25,385

Additional provisions made

5,411

3,052

Amounts used

(11)

-

Amounts reversed

(53)

(39)

Revaluation of provision

4,905

766

Changes in foreign exchange rates

(1,267)

85

Unwinding of discount

136

279

Total as at 30 June 2021

38,649

29,528

DFAT currently has 86 agreements (2020: 69) for the leasing of premises where DFAT has raised a provision to restore the premises to their original condition at the conclusion of the lease. The provision reflects the present value of these obligations.

Accounting Policy

For a number of property leases, DFAT has obligations to restore to their original condition or makegood leasehold improvements. These are assessed on a site-by-site basis in line with the relevant clauses of the underlying lease, with fair value calculated based on estimated costs per square metre at the time the makegood obligation falls due, discounted to present value.

DFAT engages an independent expert to assist in the valuation of the estimated costs to makegood. The total provision is reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the adjustment relates to the revaluation of the provision and there is sufficient related asset revaluation surplus for the associated leasehold improvement assets, the adjustment is recorded against the asset revaluation reserve. All other adjustments are recognised in the Statement of Comprehensive Income.

4. Assets and Liabilities Administered on Behalf of Government

4.1 Administered - Financial Assets

2021

2020

$'000

$'000

Note 4.1A: Cash and cash equivalents

Cash on hand or on deposit

8,585

5,001

Special account cash held by the entity

5

-

Cash in special accounts held in the OPA

17,025

18,137

Total cash and cash equivalents

25,615

23,138

Accounting policy

The closing balance of cash in special accounts does not include amounts held in trust of $4.976m (2020: $4.981m).

See Note 5.2A: Special accounts and Note 5.2B: Assets held in trust for more information.

2021

2020

$'000

$'000

Note 4.1B: Receivables and loans

Receivables

Passport fines

9

28

Scholarship debts

2,603

1,966

Statutory receivables

23,084

17,291

Net position of EFA – NIA

40,101

12,749

Other

575

10,241

Total receivables

66,372

42,275

Loans

Concessional loan receivable – AIPRD

165,840

162,337

Other – travellers emergency loans

9,486

2,495

Total loans

175,326

164,832

Total receivables and loans (gross)

241,698

207,107

Less impairment allowance

Advances and loans – travellers emergency loans

(2,277)

(712)

Other receivables – external parties

(2,592)

(1,990)

Total impairment allowance

(4,869)

(2,702)

Total receivables (net)

236,829

204,405

Receivables and loans (net) are expected to be recovered

No more than 12 months

55,374

42,039

More than 12 months

181,455

162,366

Total receivables and loans (net)

236,829

204,405

The impairment loss allowance is based on an assessment of debts outstanding and is predominantly aged more than 90 days.

Reconciliation of the impairment loss allowance

Movements in relation to 2021

Advances
and loans

Receivables – external parties

Total

$'000

$'000

$'000

Opening balance

712

1,990

2,702

Amounts impaired

1,565

621

2,186

Amounts recovered and reversed

-

(19)

(19)

Closing balance

2,277

2,592

4,869

Movements in relation to 2020

Advances
and loans

Receivables – external parties

Total

$'000

$'000

$'000

Opening balance

651

1,771

2,422

Amounts impaired

61

220

281

Amounts recovered and reversed

-

(1)

(1)

Closing balance

712

1,990

2,702

Accounting Policy

Receivables and loans

Consistent with DFAT’s outcomes, long-term loans were provided to other entities at concessional rates. On DFAT providing these loans, differences between the nominal value of the loan subscription and the fair value of the associated assets were recorded in the administered schedule of comprehensive income as an expense administered on behalf of Government.

Where loans and receivables are not subject to concessional treatment, they are carried at amortised cost using the effective interest method. Gains and losses due to impairment, de-recognition and amortisation are recognised through profit or loss.

EFA – NIA

Part 5 of the EFIC Act provides for the Minister for Trade, Tourism and Investment to give an approval or direction to EFA to undertake any transaction that the Minister considers is in the national interest. Such transactions may relate to a class of business which EFA is not authorised to undertake, or involve terms and conditions EFA would not accept in the normal course of business on its Commercial Account. EFA manages these transactions on the NIA.

For these transactions, the credit risk is borne by the Government and the funding risk is borne by EFA on the Commercial Account. Accordingly, premium or other income arising from these transactions are paid by EFA to the Government. EFA recovers from the Government the costs of administration and any losses incurred in respect of such business.

Loans on the NIA are funded from the EFA Commercial Account at fair value. The amount disclosed above reflects the Commonwealth’s exposure on business undertaken on the NIA. It reflects the net amount of:

a) Assets in the form of loans to and rescheduled credit insurance debts owing by foreign governments, commitment fees on loans received by EFA but not yet paid to the Commonwealth and bond premiums receivable from exports; and,

b) Liabilities relating to the reimbursement to EFA for debt forgiveness on loans, provisions for unearned income on loan premiums, accrued expenses including EFA administration fees and other creditors.

2021

2020

$'000

$'000

Note 4.1C: Investments

Non–monetary IDA and ADF Subscriptions – fair value through OCI

2,560,275

2,556,415

EFA – Commercial Account

542,792

537,045

Tourism Australia

53,010

62,247

Emerging market impact investment fund

6,704

-

Total investments

3,162,781

3,155,707

Accounting Policy

Administered investments are measured at their fair value through other comprehensive income as at 30 June 2021. Administered investments in subsidiaries, joint ventures and associates are not consolidated because their consolidation is relevant only at the whole-of-Government level. Financial instruments are recognised on a trade date basis.

Non-monetary International Development Association (IDA) and Asian Development Fund (ADF) Subscriptions

The Australian Government holds these investments long-term for policy reasons, with the issuers being partner foreign governments and multilateral aid organisations including the IDA and the ADF. The investment represents subscription-based membership rights held by the Australian Government in accordance with the articles of association for the IDA and the ADF.

The subscriptions to the IDA and the ADF are classified as equity investments and have been reclassified at fair value through other comprehensive income under AASB 9: Financial Instruments. There is no intention to trade these investments, as there is no observable market value for them. DFAT, based on independent expert valuation advice, values the investment on a discounted cash flow basis. The basis assumes the redemption of the Commonwealth’s pro-rata share of the outstanding loan principal for each fund. The redemption basis is consistent with the withdrawal provisions of the articles of association with the IDA and the ADF.

The discount rate used to equate the future cash flows to a present value reflects the risk adjusted rate of return demanded by a hypothetical investor. The discount rate range uses the “build up method” based on the following components: risk free rate (20 year US Government bond rate), currency risk premium, sovereign risk premium and liquidity risk premium. Changes in fair value are recognised directly in the administered reconciliation schedule. Foreign currency movements and impairment losses and reversals are recorded in the administered schedule of comprehensive income.

EFA – Commercial Account

EFA's principal activity is the provision of competitive finance and insurance services to Australian exporters and Australian companies investing in new projects overseas. The Australian Government guarantees to EFA’s creditors the payment of monies payable by EFA on the Commercial Account. The Minister for Trade, Tourism and Investment has the powers to determine and instruct EFA to pay a dividend in accordance with section 55(1) of the EFIC Act. Fair value has been taken to be the Australian Government's proportional interest in the net assets of EFA as at the end of the reporting period.

Tourism Australia

Tourism Australia is the Australian Government agency responsible for attracting international visitors to Australia, both for leisure and business events. DFAT administers Tourism Australia on behalf of the Government for oversight and management purposes and to improve linkages internationally. Funding appropriated to DFAT for Tourism Australia is disclosed as Payments to corporate Commonwealth entities in the Administered Schedule of Comprehensive Income. Fair value has been taken to be the Australian Government's proportional interest in the net assets of Tourism Australia as at the end of the reporting period.

Emerging Markets Impact Investment Fund (EMIIF)

EMIIF is a development financing mechanism for the Australian Government. It provides investment capital and technical assistance to financial intermediaries who in turn provide access to financing for small and medium enterprises in South Asia, Southeast Asia and the Pacific. Value is based on fair value of net assets which this year reflects actual cash transferred to the Trust in late June.

4.2 Administered - Non-Financial Assets

Note 4.2A: Reconciliation of the opening and closing balances for computer software

2021

2020

$’000

$’000

As at 1 July

Gross book value

13,144

12,675

Accumulated depreciation, amortisation & impairment

(10,914)

(10,000)

Net book value 1 July

2,230

2,675

Additions

Internally developed

-

469

Depreciation & amortisation expenses

(1,513)

(914)

Net book value 30 June

717

2,230

Net book value as of 30 June represented by

Gross book value

13,144

13,144

Accumulated depreciation, amortisation & impairment

(12,427)

(10,914)

Net book value 30 June

717

2,230

No indicators of impairment were identified for computer software in 2021 (2020: nil).

Accounting Policy

Accounting policies are included in Note 3.2: Non–Financial Assets.

4.3 Administered - Payables

2021

2020

$'000

$'000

Note 4.3A: Grants

Multilateral grants payable – fair value through profit or loss

1,258,362

1,058,130

Total grants

1,258,362

1,058,130

2021

2020

$'000

$'000

Note 4.3B: Other payables

Multilateral contributions – fair value through profit or loss

582,234

664,311

International development assistance

212,602

144,402

Other payables

12,498

-

Total other payables

807,334

808,713

Accounting Policy

Financial liabilities are classified either at fair value through profit or loss, or as other financial liabilities. Financial liabilities are recognised and derecognised upon ‘Trade Date’.

Financial liabilities at fair value through profit or loss include multilateral grants payable and multilateral contributions payable. 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.

Other financial liabilities include trade creditors and accruals and 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 yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

5. Funding

5.1 Appropriations

Note 5.1A: Annual appropriations ('recoverable GST exclusive')

Annual Appropriations for 2021

Annual
Appropriation

Section 74
PGPA Act

Total
appropriation

Appropriation applied in 2021 (current
and prior years)

Variance1

$'000

$'000

$'000

$'000

$'000

Departmental2

Ordinary annual services

1,710,249

170,156

1,880,405

(1,537,270)

343,135

Capital budget3

69,539

-

69,539

(67,376)

2,163

Equity

104,628

-

104,628

(113,532)

(8,904)

Total departmental

1,884,416

170,156

2,054,572

(1,718,178)

336,394

Administered

Ordinary annual services

Capital budget3

528

-

528

-

528

Administered items4

4,358,782

-

4,358,782

(3,968,376)

390,406

Payments to corporate Commonwealth entities

139,445

-

139,445

(139,445)

-

Other services

Administered assets and liabilities

6,704

-

6,704

(86,704)

(80,000)

Total administered

4,505,459

-

4,505,459

(4,194,525)

310,934

1. Variances in appropriation may result from using prior year non–lapsed appropriations to fund operating and capital expenditure incurred in the current financial year, making payments for benefits to be received in future years and where obligations in the current financial year are lower than funding received or are not settled by financial year end.

2. In 2020–21, there were adjustments that met the recognition criteria of a formal addition or reduction in revenue, capital budget or in equity but at law the appropriations had not been amended before the end of the reporting period as Departmental appropriations do not lapse at financial year end. The adjustments were: a decrease to revenue of $14.073m relating to no–win / no–loss funding for foreign exchange; a decrease to revenue of $82.491m relating to no–win / no–loss funding for Passport Funding Agreement; a decrease to revenue of $31.914m relating to no–win / no–loss funding for FBT payable on living away from home allowance; and, a reduction in equity of $1.807m relating to no-win/no-loss funding for Security Kabul capital projects.

A net decrease in appropriation of $128.478m will be applied against 2020-21 Appropriation Act (No.1) and a net decrease in appropriation of $1.807m will be applied against 2020-21 Appropriation Act (No.2).

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

4. Commonwealth Superannuation Corporation (CSC) spends money from the Consolidated Revenue Fund on behalf of DFAT in accordance with the Papua New Guinea (Staffing Assistance) Act 1973. In 2020-21 CSC has drawdown $3.881m from DFAT's administered appropriation. This amount is included in the appropriation applied amount above.

Note 5.1A: Annual appropriations ('recoverable GST exclusive') (continued)

Annual Appropriations for 2020

Annual
Appropriation1

Section 74
PGPA Act

Total
appropriation

Appropriation applied in 2020 (current and prior years)

Variance2

$'000

$'000

$'000

$'000

$'000

Departmental

Ordinary annual services

1,510,017

129,978

1,639,995

(1,710,618)

(70,623)

Capital budget3

60,170

-

60,170

(60,170)

-

Equity

43,546

-

43,546

(76,640)

(33,094)

Total departmental

1,613,733

129,978

1,743,711

(1,847,428)

(103,717)

Administered

Ordinary annual services

Capital budget3

528

-

528

(457)

71

Administered items4

3,971,208

-

3,971,208

(3,970,677)

531

Payments to corporate Commonwealth entities

139,534

-

139,534

(139,534)

-

Other services

Administered assets and liabilities

605,072

-

605,072

-

605,072

Total administered

4,716,342

-

4,716,342

(4,110,668)

605,674

Note 5.1B: Unspent annual appropriations ('recoverable GST exclusive')

2021

2020

$'000

$'000

Departmental

Appropriation Act (No. 1) 2017–181

-

4,384

Appropriation Act (No. 2) 2017–182

-

5,829

Appropriation Act (No. 1) 2018–19 – DCB3

9,638

9,638

Appropriation Act (No. 2) 2018–194

3,016

3,016

Appropriation Act (No. 4) 2018–19

-

39,483

Appropriation Act (No. 1) 2019–205

13,743

180,079

Appropriation Act (No. 2) 2019–20

-

25,401

Supply Act (No. 2) 2019–20

-

18,145

Appropriation Act (No. 1) 2019–20 – Cash at bank and on hand

-

92,667

Supply Act (No. 2) 2020–21

51,526

-

Appropriation Act (No. 1) 2020–216

430,761

-

Appropriation Act (No. 2) 2020–217

11,471

-

Appropriation Act (No. 3) 2020–21

82,341

-

Appropriation Act (No. 3) 2020–21 – DCB

2,163

-

Appropriation Act (No. 4) 2020–21

11,128

-

Appropriation Act (No. 1) 2020–21 – Cash at bank and on hand

87,377

-

Total departmental

703,164

378,642

1. Appropriation Act (No. 1) 2017–18 includes $4.384m repealed on 1 July 2020.

2. Appropriation Act (No. 2) 2017–18 includes $5.829m repealed on 1 July 2020.

3. Appropriation Act (No. 1) 2018–19 DCB includes $9.638m withheld under section 51.

4. Appropriation Act (No. 2) 2018–19 includes $3.016m withheld under section 51.

5. Appropriation Act (No. 1) 2019–20 includes $13.743m withheld under section 51.

6. Appropriation Act (No. 1) 2020-21 includes $128.478m which is quarantined.

7. Appropriation Act (No. 2) 2020-21 includes $1.807m which is quarantined.

DFAT has in place a number of no-win / no-loss funding agreements due to the complex and variable environment the department operates in overseas. The difference between the balance of departmental appropriation receivable disclosed in Note 3.1B: Trade and other receivables and the above balance on unspent annual appropriations is due to these agreements and cash at bank and on hand. Adjustments relating to the no-win / no-loss agreements are recognised as a reduction to appropriation available in the year of the agreement, however, are not removed from the above until the amounts lapse and are formally repealed.

Note 5.1B: Unspent annual appropriations ('recoverable GST exclusive') (continued)

2021

2020

$'000

$'000

Administered

Appropriation Act (No. 1) 2017–181

-

125,108

Appropriation Act (No. 1) 2017–18 – ACB1

-

95

Appropriation Act (No. 1) 2018–19

73,156

73,156

Appropriation Act (No. 1) 2018–19 – ACB

461

461

Supply Act (No. 1) 2019–20

202

202

Appropriation Act (No. 1) 2019–20

80,320

167,529

Appropriation Act (No. 1) 2019–20 – ACB

71

71

Appropriation Act (No. 1) 2019–20 Cash at Bank and on hand

-

5,001

Supply Act (No. 2) 2019–20

252,114

252,114

Appropriation Act (No. 2) 2019–20

272,958

352,958

Supply Act (No. 1) 2020–2021

52,148

-

Supply Act (No. 1) 2020–2021 – ACB

308

-

Appropriation Act (No. 1) 2020–21

317,948

-

Appropriation Act (No. 1) 2020–21 – ACB

220

-

Appropriation Act (No. 1) 2020–21 Cash at Bank and on hand

8,585

-

Appropriation Act (No. 3) 2020–21

107,522

-

Total administered

1,166,013

976,695

1. Appropriation Acts (No.1) 2017-18 and Appropriation Act 2017–18 – ACB were repealed on 1 July 2020.

Note 5.1C: Special appropriations ('recoverable GST exclusive')

Appropriation applied

2021

2020

Authority

Type

Purpose

$'000

$'000


Export Finance and Insurance Corporation Act 1991
s.54(10), Administered


Unlimited Amount


For the payment by the Commonwealth to EFA of amounts equal to the amount of capital determined by the EFA Board as necessary to overcome the inadequacies, in the moneys or other assets of EFA to meet the expected liabilities, losses or claims against EFA.


-


-

Public Governance, Performance and Accountability Act 2013 s77, Administered1

Refund

To provide an appropriation where an Act or other law requires or permits the repayment of an amount received by the Commonwealth and apart from this section there is no specific appropriation for the repayment.

1,148

1,861

Special Appropriation – Official Development Assistance Multilateral Replenishment Obligations (Special Appropriation) Act 2020 – s6 official development payments, Administered

Unlimited Amount

To provide an appropriation for the payment of Official Development Assistance Multilateral Replenishment encashment obligations

302,991

-

Total special appropriation applied

304,139

1,861

1. DFAT uses section 77 of the PGPA Act to make refunds of passport and consular fees in certain circumstances, where there is no other specific appropriation available to make the repayment.

2. On 16 June 2020 the Official Development Assistance Multilateral Replenishments Obligations (Special Appropriation) Act 2020 came into effect. The Act allows funding out of the Consolidated Revenue Fund for expenditure in relation to Australia's official development assistance multilateral replenishment obligations and for related purposes. Previously these expenses were funded from Appropriation Act 1.

DFAT also hold a special appropriation under section 5 International Fund for Agricultural Development Act 1977. This appropriation has not been drawn against in both the current and prior year.

5.2 Special Accounts

Note 5.2A: Special accounts ('recoverable GST exclusive')

Overseas property special account1 (Departmental)

Services for Other Entities and Trust Moneys (SOETM) – DFAT special account2 (Administered)

DFAT SOETM Special Account 20193 (Administered)

2021

2020

2021

2020

2021

2020

$'000

$'000

$'000

$'000

$'000

$'000

Balance brought forward from previous period

335,360

337,822

-

5,202

5,619

-

Increases

239,187

185,807

-

18,163

11,115

23,554

Total increases

239,187

185,807

-

18,163

11,115

23,554

Available for payments

574,547

523,629

-

23,365

16,734

23,554

Decreases

Administered

-

-

-

(23,365)

(11,537)

(17,935)

Departmental

(158,284)

(188,269)

-

-

-

-

Total decreases

(158,284)

(188,269)

-

(23,365)

(11,537)

(17,935)

Total balance carried to the next period

416,263

335,360

-

-

5,197

5,619

Balance represented by:

Cash held in entity bank accounts

16,801

1,331

-

-

-

-

Cash held in the Official Public Account

399,462

334,029

-

-

5,197

5,619

Total balance carried to the next period

416,263

335,360

-

-

5,197

5,619

Consular services special account4 (Administered)

EXPO 2020 Dubai5 (Administered)

2021

2020

2021

2020

$'000

$'000

$'000

$'000

Balance brought forward from previous period

37

47

17,514

34,974

Increases

176

240

4,243

1,044

Total increases

176

240

4,243

1,044

Available for payments

213

287

21,757

36,018

Decreases

Administered

(136)

(250)

(5,026)

(18,504)

Total decreases

(136)

(250)

(5,026)

(18,504)

Total balance carried to the next period

77

37

16,731

17,514

Balance represented by:

Cash held in entity bank accounts

-

-

5

-

Cash held in the Official Public Account

77

37

16,726

17,514

Total balance carried to the next period

77

37

16,731

17,514

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

Establishing Instrument: PGPA Act Determination (Establishment of Overseas Property Special Account 2017)

Purpose:

  1. acquire, lease, construct, manage, operate, repair, maintain, divest, finance, identify or advise on, and undertake any other activities in relation to, the real property of the Commonwealth outside Australia
  2. repay to an original payer amounts credited to the special account or to the former special account, after any necessary payments made for the purposes mentioned in paragraph (a)
  3. carry out activities that are incidental to a purpose mentioned in paragraph (a)
  4. reduce the balance of the Special Account (and, therefore, the available appropriation for the Account) without making a real or notional payment, including to give effect to the remittance of amounts to the Official Public Account as agreed between the Finance Minister and the responsible minister
  5. repay amounts where an Act or other law requires or permits the repayment of an amount received.

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

Establishing Instrument: Financial Management and Accountability (Special Accounts) Determination 2009/25

Purpose:

  1. disburse amounts held in trust or otherwise for the benefit of a person other than the Commonwealth
  2. disburse amounts in connection with services performed on behalf of other governments and bodies that are corporate Commonwealth entities under the PGPA Act
  3. repay amounts where an Act or other law requires or permits the repayment of an amount received
  4. d) reduce the balance of the Special Account (and, therefore, the available appropriation for the Account) without making a real or notional payment.

This special account was sunsetted on 18 September 2019 and replaced with the below special account from this date.

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

Establishing Instrument: PGPA Act Determination (DFAT SOETM Special Account 2019)

Purpose:

a) to disburse an amount held on trust or otherwise for the benefit of a person other than the Commonwealth;

b) to disburse an amount in connection with services performed for or on behalf of other governments and bodies, including Commonwealth entities;

c) to disburse an amount in connection with joint activities performed for, on behalf of, or together with, another Commonwealth entity, Commonwealth company, another government, organisation or person;

d) to disburse an amount in connection with an agreement between the Commonwealth and another government;

e) to repay an amount where a court order, Act or other law requires or permits the repayment of an amount received; and

f) to reduce the balance of the special account (and, therefore, the available appropriation for the special account) without making a real or notional payment.

The SOETM Special Account includes the balance of funds held in trust for overseas governments via delegated co-operation agreements and for private individuals for amounts being transferred back to Australia in accordance with established policy. These amounts are $4,896,806.25 and $2,430.78 respectively and have, therefore, been excluded from presentation in the Administered Financial Statements.

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

Establishing Instrument: PGPA Act (Consular Services Special Account 2015 – Establishment) Determination 2015/05

Purpose:

  1. providing assistance to Australian citizens and permanent residents overseas:
    1. in circumstances of urgency
    2. when commercial money transfer services are unavailable or inappropriate
  2. to repay to an original payer amounts credited to the Special Account and residual after any necessary payments have been made under paragraph (a)
  3. activities that are incidental to a purpose mentioned in paragraphs (a) or (b)
  4. to reduce the balance of the Special Account (and, therefore, the available appropriation for that Account) without making a real or notional payment
  5. to repay amounts where an Act or other law requires or permits the repayment of an amount received.

The entire balance of the Consular Special Account is held in trust.

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

Establishing Instrument: PGPA Act Determination (Expo 2020 Dubai Special Account).

Purpose:

  1. to undertake activities in relation to the Commonwealth’s participation at Expo 2020, including, but not limited to:
    1. acquiring, leasing, hiring, constructing, managing, operating, repairing, maintaining, identifying or advising on assets;
    2. costs related to staff and contractors to carry out activities listed in clause (a)i above; and,
    3. activities that are incidental to those listed in clause (a)i above.
  2. to disburse an amount in connection with an agreement between the Commonwealth and another government in relation to the Expo 2020;
  3. to repay an amount where an Act, other law, or court order requires or permits the repayment of an amount credited to the special account;
  4. to reduce the balance of the special account (and, therefore, the available appropriation for the special account) without making a real or notional payment.

2021

2020

$'000

$'000

Note 5.2B: Assets held in trust

As at 1 July

4,981

3,439

Receipts

11,535

24,436

Payments

(11,540)

(22,894)

Total as at 30 June

4,976

4,981

Total assets held in trust

4,976

4,981

Accounting policy

All trust funds are held as cash within special accounts in OPA for the benefit of third parties. The SOETM Special Account includes the balance of funds held in trust for overseas governments via delegated co-operation agreements and for private individuals for amounts being transferred back to Australia in accordance with established policy. Consular trust funds are held to provide assistance to Australian citizens and permanent residents overseas in circumstances of urgency, or when commercial money transfer services are unavailable or inappropriate

6. People and Relationships

6.1 Employee Provisions

2021

2020

$'000

$'000

Note 6.1A: Employee provisions

Leave

202,516

204,795

Separations and redundancies

21,940

22,511

Superannuation

17,759

17,716

Other employee provisions

29,273

33,719

Total employee provisions

271,488

278,741

Accounting policy

Liabilities for short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts. Other long-term employee benefit liabilities 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 DFAT’s employer superannuation contribution rates and other employment on-costs, to the extent that the leave is likely to be taken during service rather than paid out on separation.

The liability for long service leave has been determined with reference to the work of an actuary as at 31 October 2019. The estimate of the present value of the liability takes into account attrition rates, pay increases through promotion and inflation. DFAT engages an actuary every three years unless it is assessed that there is a material movement in DFAT’s staff profile.

Separation and Redundancy

In some countries, locally engaged staff employed by DFAT at overseas posts are entitled to separation benefits under local labour laws. DFAT provides for these separation benefits, and they have been classified as an employee benefit.

DFAT recognises a provision for redundancy when a decision by management has been made and affected employees have been informed that DFAT will carry out those terminations of employment.

Superannuation

The Australian-based staff of DFAT are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the Public Sector Superannuation accumulation plan (PSSap), or other superannuation schemes. The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap and the other superannuation schemes are defined contribution schemes.

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.

DFAT makes employer contributions to the employee superannuation schemes at rates determined by the Government. For defined benefit scheme employer contribution rates are determined by an actuary to be sufficient to meet the current cost to the Government. DFAT accounts for these as if they were contributions to defined contributions plans.

Where required, DFAT makes superannuation contributions for locally engaged staff overseas to comply with local labour laws. Australian based staff who are engaged on a temporary basis and locally engaged staff overseas who are considered to be Australian residents for taxation purposes have compulsory employer superannuation contributions made on their behalf by DFAT.

2021

2020

$'000

$'000

Note 6.1B: Administered employee provisions

Leave

5,581

5,686

Superannuation

429

428

Separations and redundancies

4,696

4,947

Defined benefit pension schemes

70,804

82,653

Total administered employee provisions

81,510

93,714

Accounting Policy

DFAT administers defined benefit pension schemes for some locally engaged staff in Washington, Ottawa, London, Port Louis and New Delhi on behalf of the Australian Government. DFAT recognises an administered liability for the present values of the Government's expected future payments arising from the unfunded components of the Washington, Ottawa, London and Port Louis Pension Schemes and the New Delhi Gratuity Scheme.

Increases in the accrued benefits liability, pursuant to regular estimates of the liability taking account of actuarial reviews, are recognised as an expense and classified as employee superannuation expense. Re-measurement of the net defined benefit obligation is recognised in other comprehensive income as outlined in AASB 119 Employee Benefits. DFAT engages actuaries to estimate the unfunded provisions and expected future cash flows as at the end of the reporting period each year. More details on the defined benefit pension schemes are included in Note 7.6: Administered – Defined Benefit Pension Schemes.

6.2 Key Management Personnel Remuneration

DFAT’s key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the department. DFAT has determined the key management personnel to be the Portfolio and Assisting Ministers, the Secretary, Deputy Secretaries, Chief People Officer, Chief Performance and Risk Officer and Chief Finance Officer. Key management personnel remuneration is reported in the table below:

2021

2020

$'000

$'000

Short–term employee benefits

3,740

3,804

Post–employment benefits

627

622

Other long–term employee benefits

94

154

Total key management personnel remuneration expenses1

4,461

4,580

The total number of key management personnel that are included in the above table are 13 (2020: 12), however the total number of positions defined as key management personnel remains the same at 10.

1. The above key management personnel remuneration excludes the remuneration and other benefits of the Portfolio Ministers. The Portfolio Ministers remuneration and other benefits are set by the Remuneration Tribunal and are not paid by DFAT.

6.3 Related Party Disclosures

Related party relationships

DFAT is an Australian Government controlled entity. DFAT’s related parties are key management personnel including the DFAT Portfolio and Assisting Ministers, and other Australian Government entities.

Transactions with related parties

Given the breadth of Government activities, related parties may transact with the government sector in the same capacity as ordinary citizens.

Transactions with related parties of DFAT have occurred within normal customer or supplier relationships on terms and conditions no more favourable than those which it is reasonable to expect DFAT would have entered into on an arm's-length basis. 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 DFAT, it has been determined that there are no related party transactions (2020: nil) to be separately disclosed.

7. Managing Uncertainties

7.1 Contingent Assets and Liabilities

Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position but are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are reported when settlement is probable but not virtually certain and contingent liabilities are disclosed when the probability of settlement is greater than remote.

Note 7.1A: Contingent assets and liabilities

Guarantees

Claims for damages or costs

Total

2021

2020

2021

2020

2021

2020

$'000

$'000

$'000

$'000

$'000

$'000

Contingent liabilities

Balance from previous period

710

709

470

1,905

1,180

2,614

New contingent liabilities recognised

454

-

-

-

454

-

Re–measurement

(4)

1

-

32

(4)

33

Obligations expired

-

-

(470)

(1,467)

(470)

(1,467)

Total contingent liabilities

1,160

710

-

470

1,160

1,180

Net contingent (liabilities)

(1,160)

(710)

-

(470)

(1,160)

(1,180)

Quantifiable Contingencies

The above table reports contingent liabilities in respect of claims for damages / costs of $nil (2020: $0.470m). This amount represents an estimate of DFAT's liability based on precedent cases and on advice from DFAT's external legal service providers. The department is defending the claims.

The above table also reports contingent liabilities in respect of financial guarantees made by the department of $1.160m (2020: $0.710m)

Unquantifiable Contingencies

At 30 June 2021, DFAT was involved in a number of litigation matters for alleged losses suffered by claimants. DFAT is defending these claims. It is not possible to estimate the amounts of any eventual payments that may be required in relation to these claims.

Note 7.1B: Administered – contingent assets and liabilities

DFAT has no administered contingent assets or liabilities (2020: nil).

Quantifiable Administered Contingencies

There are no quantifiable administered contingencies disclosed in the Administered Schedule of Assets and Liabilities (2020: nil).

Unquantifiable Administered Contingencies

At 30 June 2021, DFAT was involved in a number of matters relating to the recovery of funds. It is not possible to estimate the amounts of any eventual recoveries that may be received in relation to these matters. There are no unquantifiable administered liabilities.

Significant Remote Administered Contingencies

Under section 62 of the EFIC Act, the Australian Government guarantees EFA’s creditors the due payment of all monies payable, or that may at any time become payable, by EFA on the Commercial Account and has a $1.2B (2019: $1.2B) callable capital facility available for this purpose. This guarantee has never been exercised.

7.2 Fair Value Measurements

The following tables provide an analysis of assets and liabilities that are measured at fair value. The remaining assets and liabilities disclosed in the statement of financial position do not apply the fair value hierarchy.

The different levels of the fair value hierarchy are defined below.

  • Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.
  • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
  • Level 3: Unobservable inputs for the asset or liability.

Accounting policy

An annual assessment is undertaken to determine whether the carrying amount of the assets is materially different from their fair value. DFAT's assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all non-financial assets is considered their highest and best use. DFAT's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. There were no transfers between levels 1 and 2 for recurring fair value measurements during the year.

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

Buildings and Leasehold Improvements - Replacement Cost of New Assets and Contracted Prices

DFAT also controls assets situated in locations where construction cost evidence is limited. In determining the replacement cost for new assets measured using the depreciated replacement cost approach, reference has been made to the available building cost information. The valuer has used significant professional judgement in determining the fair value measurements of these assets.

Leasehold improvements - Physical depreciation and obsolescence

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

Land and Buildings - Adjusted Market Transactions, Estimated Market Rental Values and Capitalisation Rates

DFAT also controls assets situated in locations where property markets experience relatively few transactions. In determining fair value of these assets, reference has been made to available sales evidence together with other relevant information related to local economic conditions and property market conditions. The valuer has used significant professional judgement in determining the fair value measurements of these assets.

Investment in the EFA Commercial Account and Tourism Australia

DFAT has determined that the reported net asset values represent fair value at the end of the reporting period.

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.

Other Financial Liabilities

Other 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 yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

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).

Note 7.2A: Fair value measurements, valuation techniques and inputs used

2021
$'000

2020
$'000

Category (Level 1, 2 or 3)

Valuation Technique

Inputs Used

Non–financial assets:

Land

969,176

1,082,222

2

Market approach

AMT

Land

889,690

906,842

3

Market approach

AMT, SPJ

Buildings

240,546

181,560

2

Market approach

AMT

Buildings

15,507

9,672

3

Market approach

AMT, SPJ

Buildings

287,896

301,890

2

Income approach

MRT, CR

Buildings

16,160

17,600

3

Income approach

MRT, CR, SPJ

Buildings

740,845

819,349

3

Cost approach

RCN, CEB

Leasehold Improvements

253,210

324,825

3

Cost approach

RCN, CEB

Plant and Equipment

185,839

199,152

2

Market approach

AMT

Plant and Equipment

19

831

3

Market approach

AMT, SPJ

Plant and Equipment

55,110

76,620

3

Cost approach

RCN, CEB

Assets held for sale – land

19,092

9,346

2

Market approach

AMT

Assets held for sale – building

-

3,082

2

Market approach

AMT

Total non–financial assets

3,673,090

3,932,991

Total fair value measurement of assets in the statement of financial position

3,673,090

3,932,991

Valuation Techniques:

Market Approach: This approach seeks to estimate the current value of an asset with reference to recent market transactions involving identical or comparable assets.

Income Approach: Converts future amounts (cash flows or income and expenses) to a single current (i.e. discounted) amount. The fair value measurement is determined on the basis of the value indicated by current market expectations about those future amounts.

Cost Approach: The amount a market participant would be prepared to pay to acquire or construct a substitute asset of comparable utility, adjusted for physical depreciation and obsolescence.

Inputs Used:

Adjusted Market Transactions (AMT): Market transactions of comparable assets, adjusted to reflect differences in price sensitive characteristics.

Significant Professional Judgement (SPJ): Significant professional adjustments, made by the independent valuer, to the available market transactions to reconcile the valuation.

Market Rental Transactions (MRT): Market rental transactions of comparable assets, adjusted to reflect differences in price.

Capitalisation Rate (CR): Capitalisation rates as represented by the income produced by an investment property, expressed as a percentage of the assets value.

Replacement Cost of New Assets (RCN): The amount a market participant would pay to acquire or construct a new substitute asset of comparable utility.

Consumed Economic Benefits (CEB): Obsolescence of assets, physical deterioration, functional or technical obsolescence and conditions of the economic environment specific to the asset.

The COVID-19 pandemic has had varied financial impacts on markets in which DFAT controls property, plant and equipment which has led to some uncertainty over values at year end. The external independent valuer has taken into account the impact of COVID-19 on the valuation inputs by using the best available market data, noting that in some cases the markets have experienced limited observable inputs.

DFAT reclassified one land asset in 2021 valued at $19.092m (2020: $13.015m) to assets held for sale. The land was measured at fair value less cost to sell at 30 June.

Note 7.2B: Reconciliation for recurring level 3 fair value measurements

Non-Financial assets - 2021

Land

Buildings

Leasehold improvements

Plant and equipment

Total

$'000

$'000

$'000

$'000

$'000

Opening balance - 1 July 2020

906,842

846,621

324,825

77,451

2,155,739

Total gains / (losses) recognised in other comprehensive income1

(68,167)

(89,077)

(62,512)

(20,527)

(240,283)

Reclassifications

-

-

1,398

-

1,398

Purchases

138

2,238

17,601

49

20,026

Disposals

(414)

(215)

(28,102)

(1,844)

(30,575)

Transfers into Level 32

83,624

12,945

-

-

96,569

Transfers out of Level 33

(32,333)

-

-

-

(32,333)

Closing balance - 30 June 2021

889,690

772,512

253,210

55,129

1,970,541

Non-Financial assets - 2020

Land

Buildings

Leasehold improvements

Plant and equipment

Total

$'000

$'000

$'000

$'000

$'000

Opening balance – 1 July 2019

489,708

574,322

200,162

100,855

1,365,047

Total gains / (losses) recognised in other comprehensive income1

(14,918)

(3,796)

49,490

(23,785)

6,991

Purchases

-

6,557

75,591

1,074

83,222

Disposals

-

-

(418)

(693)

(1,111)

Transfers into Level 32

432,052

269,538

-

-

701,590

Transfers out of Level 33

-

-

-

-

-

Closing balance – 30 June 2020

906,842

846,621

324,825

77,451

2,155,739

1. These gains / (losses) are presented in the Statement of Comprehensive Income under Depreciation and Amortisation, Write–down and Impairment of Assets, and change resulting from asset revaluation.

2. There have been transfers of land and buildings assets into Level 3 due to a combination of, limited market transactions, use of significant professional judgement, or a change in the valuation technique from the market approach to depreciated replacement cost approach.

3. There have been transfers of land out of Level 3 due to a combination of, the identification of market transactions, or a change in the valuation technique from the depreciated replacement cost approach to the market approach.

7.3 Financial Instruments

2021

2020

$'000

$'000

Note 7.3A: Categories of financial instruments

Notes

Financial assets

Financial assets at amortised cost

Cash and cash equivalents

3.1A

503,640

428,027

Goods and services receivables (gross)

3.1B

69,657

96,898

Cash held by outsiders

3.1B

126

168

Total financial assets at amortised cost

573,423

525,093

Total financial assets

573,423

525,093

Financial liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

3.3A

118,230

79,152

Total financial liabilities measured at amortised cost

118,230

79,152

Total financial liabilities

118,230

79,152

Accounting policy

Accounting policies for financial assets can be found in Note 3.1: Financial Assets. Accounting policies for financial liabilities can be found in Note 3.3: Payables.

2021

2020

$'000

$'000

Note 7.3B: Net gains or losses on financial assets

Financial assets at amortised cost

Foreign exchange (losses)

(10,410)

(11,448)

Movement in impairment loss allowance

115

(195)

Net (losses) on financial assets at amortised cost

(10,295)

(11,643)

Net (losses) on financial assets

(10,295)

(11,643)

2021

2020

$'000

$'000

Note 7.3C: Net gains or losses on financial liabilities

Financial liabilities measured at amortised cost

Foreign exchange gains

36,335

1,986

Net gains on financial liabilities measured at amortised cost

36,335

1,986

Net gains on financial liabilities

36,335

1,986

7.4 Administered - Fair Value Measurements

The following tables provide an analysis of administered assets and liabilities measured at fair value. The remaining assets and liabilities disclosed in the Schedule of Administered Assets and Liabilities do not apply the fair value hierarchy. See Note 7.2: Fair Value Measurements for an overview of the different levels of the fair value hierarchy and techniques and inputs used to determine fair value.

Note 7.4A: Fair value measurements, valuation techniques and inputs used

Fair value measurements at the end of the reporting period using

For Levels 2 and 3 fair value measurements

2021

2020

Level

Valuation

$'000

$'000

(1, 2 or 3)

technique(s)1

Inputs used2

Financial assets:

Other investments:

Non–monetary IDA and ADF subscriptions at FVOCI

2,560,275

2,556,415

3

Discounted cash flow method

A discounted rate range using the “build up” method based on the following components: risk free rate (20 year US government bond rate), currency risk premium, sovereign risk premium and liquidity risk premium to discount the expected loan principal repayments of the loan portfolio of IDA and ADF.

Investment in EFA's Commercial Account

542,792

537,045

3

Net asset position

Statement of financial position of EFA's Commercial Account.

Tourism Australia

53,010

62,247

3

Net asset position

Statement of financial position of Tourism Australia.

EMIIF

6,704

-

3

Net asset position

Statement of financial position of EMIIF.

Total financial assets

3,162,781

3,155,707

Total non-financial assets

-

-

Total fair value measurements of assets in the administered schedule of assets and liabilities

3,162,781

3,155,707

Note 7.4A: Fair value measurements, valuation techniques and inputs used (continued)

Fair value measurements at the end of the reporting period using

For Levels 2 and 3 fair value measurements

2021

2020

Level

Valuation

$'000

$'000

(1, 2 or 3)

technique(s)1

Inputs used2

Financial liabilities:

Multilateral grants

1,258,362

1,058,130

3

Discounted cash flow method

A discounted rate range and a 10 year government bond rate is used to discount the expected payment schedules of each loan agreement.

Multilateral contributions payable

582,234

662,142

3

Discounted cash flow method

A 10 year Australian government bond rate and a discounted rate range (comprising a risk free rate (20 year US government bond rate), and currency, sovereign and liquidity risk premium) is used to discount the expected payment schedules of each loan agreement.

Total financial liabilities

1,840,596

1,720,272

Total fair value measurements of liabilities in the administered schedule of assets and liabilities

1,840,596

1,720,272

There have been no transfers between levels during the year (2020: nil). DFAT's policy for determining when transfers between levels are deemed to have occurred can be found in Note 7.2: Fair Value Measurements.

Fair value measurements – highest and best use differs from current use for non–financial assets

DFAT's Administered assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all controlled assets is considered their highest and best use.

1. There have been no changes to valuation techniques used.

2. There were no significant inter–relationships between unobservable inputs that materially affect fair value.

The future economic benefits of DFAT's assets are not primarily dependent on their ability to generate cash flows. The determination of fair value and the use of observable and unobservable data is disclosed as part of Note 4.1C: Investments.

Note 7.4B: Reconciliation for recurring level 3 fair value measurements

Recurring Level 3 fair value measurements - reconciliation for assets

Financial assets

Investments

Total

2021

2021

$'000

$'000

Opening balance – 1 July 2020

3,155,707

3,155,707

Total gains recognised in other comprehensive income1

370

370

Closing balance – 30 June 2021

3,156,077

3,156,077

Changes in unrealised gains / (losses) recognised in net cost of services for assets held at the end of the reporting period2

-

-

Financial assets

Investments

Total

2020

2020

$'000

$'000

Opening balance – 1 July 2019

3,006,238

3,006,238

Total gains recognised in other comprehensive income1

149,469

149,469

Closing balance – 30 June 2020

3,155,707

3,155,707

Note 7.4B: Reconciliation for recurring level 3 fair value measurements (continued)

Recurring Level 3 fair value measurements - reconciliation for liabilities

Financial Liabilities

Multilateral
grants

Multilateral
contributions payable

Total

2021

2021

2021

$'000

$'000

$'000

Opening balance – 1 July 2020

1,058,130

664,311

1,722,441

Total gains / (losses) recognised in net cost of services3

425,411

(4,266)

421,145

Settlements

(225,179)

(77,811)

(302,990)

Closing balance – 30 June 2021

1,258,362

582,234

1,840,596

Changes in unrealised gains / (losses) recognised in net cost of services for assets held at the end of the reporting period2

-

-

-

Financial Liabilities

Multilateral
grants

Multilateral
contributions payable

Total

2020

2020

2020

$'000

$'000

$'000

Opening balance – 1 July 2019

930,179

494,521

1,424,700

Total gains recognised in net cost of services3

253,217

338,770

591,987

Settlements

(125,266)

(168,980)

(294,246)

Closing balance – 30 June 2020

1,058,130

664,311

1,722,441

Changes in unrealised gains / (losses) recognised in net cost of services for assets held at the end of the reporting period2

-

-

-

1. These gains / (losses) are represented in the Administered Schedule of Comprehensive Income.

2. There are no unrealised gains (losses) for level 3 assets and liabilities in the Administered Schedule of Comprehensive Income as at both 30 June 2021 and 30 June 2020.

3. These gains / (losses) are represented in the Administered Schedule of Comprehensive Income and in Note 2.1B: Multilateral replenishments and other loans.

7.5 Administered - Financial Instruments

2021

2020

Notes

$'000

$'000

Note 7.5A: Categories of financial instruments

Financial assets

Financial assets at amortised cost

Cash and cash equivalents

4.1A

25,615

23,138

Receivables (gross)

4.1B

2,612

1,994

Concessional loan receivable

4.1B

165,840

162,337

Net position of EFA – NIA

4.1B

40,101

12,749

Traveller Emergency Loans

4.1B

9,486

2,495

Total financial assets at amortised cost

243,654

202,713

Financial assets at fair value through other comprehensive income (FVOCI)

Non–monetary equity instrument

4.1C

2,560,275

2,556,415

EFA – Commercial Account

4.1C

542,792

537,045

Tourism Australia

4.1C

53,010

62,247

Emerging market impact investment fund

4.1C

6,704

-

Total financial assets at fair value through other comprehensive income

3,162,781

3,155,707

Total financial assets

3,406,435

3,358,420

Financial Liabilities

Financial liabilities measured at amortised cost

International development assistance

4.3B

212,602

144,402

Other payables

4.3B

12,498

-

Total financial liabilities measured at amortised cost

225,100

144,402

Financial liabilities at fair value through profit or loss

Multilateral grants payable

4.3A

1,258,362

1,058,130

Multilateral contributions payable

4.3B

582,234

664,311

Total financial liabilities at fair value through profit or loss

1,840,596

1,722,441

Total financial liabilities

2,065,696

1,866,843

The carrying value of DFAT’s administered assets and liabilities has also been assessed as the fair value of these assets and liabilities. The process for determining fair value is regularly reviewed.

The table at Note 7.4A: Fair value measurements, valuation techniques and inputs used provides an analysis of financial instruments that are measured at fair value, by valuation method.

2021

2020

$'000

$'000

Note 7.5B: Net gains or losses on financial assets

Financial assets at amortised cost

Interest revenue

13,971

13,310

Impairment

4.1B

(2,186)

(281)

Write–off

(1,695)

(146)

Remeasurements of multilateral subscriptions

3,860

108,300

Dividend revenue

2.2C

5,596

13,425

Competitive neutrality revenue

2.2C

7,244

13,934

Gains recognised in profit or loss for reversal of impairment

4.1B

19

1

Net gain on financial assets at amortised cost

26,809

148,543

Financial assets at fair value through other comprehensive income

Revaluation losses / gains recognised in equity

(3,490)

39,001

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

(3,490)

39,001

Net gain on financial assets

23,319

187,544

2021

2020

$'000

$'000

Note 7.5C: Net income and expense from financial liabilities

Financial liabilities measured at amortised cost

Foreign exchange gains / (losses)

4,184

(569)

Net gain on financial liabilities measured at amortised cost

4,184

(569)

Financial liabilities at fair value through profit or loss

Gains / (losses) on remeasuring at fair value through profit or loss

9,621

(341,228)

Net (loss) on financial liabilities at fair value through profit or loss

9,621

(341,228)

Net (loss) on financial liabilities

13,805

(341,797)

Note 7.5D: Credit risk

Recognised in the DFAT Administered Accounts

DFAT's senior executive has endorsed policies and procedures for debt management (including the provision of credit terms) to reduce the incidence of credit risk. Collateral is not required on any loan.

Credit risk is the possibility that a debtor will not repay all or a portion of a loan or will not repay in a timely manner and will therefore cause a loss to DFAT. DFAT has exposure to concentrations of credit risk with regard to the ‘loan receivable’ and the ‘non–monetary equity instrument’. The maximum exposure DFAT has to credit risk at reporting date in relation to each class of recognised financial assets is presented in the following table excluding any collateral or credit enhancements.

DFAT has assessed the risk of default on payment and has allocated $4.869m (2020: $2.702m) to an impairment allowance for doubtful debts account. DFAT has no collateral to mitigate against credit risk.

Maximum exposure to credit risk (excluding any collateral or credit enhancements)

2021

2020

$'000

$'000

Credit quality of financial instruments not best representing maximum exposure to credit risk

Amortised cost

213,745

187,114

Fair value through other comprehensive income

3,162,781

3,155,707

Total credit quality of financial instruments not best representing maximum exposure to credit risk

3,376,526

3,342,821

Credit quality of financial liabilities not best representing maximum exposure to credit risk

Amortised cost

225,100

144,402

Through profit or loss

1,840,596

1,722,441

Total credit quality of financial liabilities not best representing maximum exposure to credit risk

2,065,696

1,866,843

Credit quality of financial assets not past due or individually determined as impaired

Not past due

Not past due

Past due or

Past due or

or impaired

or impaired

impaired

impaired

2021

2020

2021

2020

$'000

$'000

$'000

$'000

Loans and receivables

208,292

185,822

5,453

1,292

Fair value through other comprehensive income

3,162,781

3,155,707

-

-

Total

3,371,073

3,341,529

5,453

1,292

Note 7.5E: Liquidity risk

The continued existence of DFAT in its present form and with its present programs is dependent on government policy and on continuing appropriations by Parliament for DFAT’s administration and programs. The probability of the Government encountering difficulties meeting its administered financial obligations is less than remote.

Maturities for non-derivative financial liabilities 2021

On

Within 1

Between 1

Between 2

More than

demand

year

to 2 years

to 5 years

5 years

Total

$'000

$'000

$'000

$'000

$'000

$'000

Financial liabilities measured at amortised cost

-

225,100

-

-

-

225,100

Financial liabilities at fair value through profit or loss

-

288,103

300,524

912,081

339,888

1,840,596

Total

-

513,203

300,524

912,081

339,888

2,065,696

Maturities for non-derivative financial liabilities 2020

On

Within 1

Between 1 to

Between 2 to

More than

demand

year

2 years

5 years

5 years

Total

$'000

$'000

$'000

$'000

$'000

$'000

Financial liabilities measured at amortised cost

-

144,402

-

-

-

144,402

Financial liabilities at fair value through profit or loss

-

274,461

284,312

728,036

435,632

1,722,441

Total

-

418,863

284,312

728,036

435,632

1,866,843

DFAT had no derivative financial liabilities in both the current and prior financial year.

Note 7.5F: Market risk

Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises the following types of risk, either alone or in combination: interest rate risk, sovereign risk and liquidity risk (for the purposes of discounting the future value of the non–monetary equity instrument); currency risk (for the purposes of converting to Australian dollars the discounted United States dollar value of the non–monetary equity instrument); and the 10–year government bond rate for the purposes of discounting future liabilities relating to multilateral loan and grant commitments. The following sensitivity analysis discloses the effect that a reasonable possible change in each risk variable, either alone, or in total, would have on DFAT’s administered income and expenses.

The following table illustrates the effect on DFAT's administered net income less expenses and equity as at 30 June 2021 from 7.89% (2020: 8.41%) increase or decrease against the AUD in the currencies in which the financial instruments were administered by DFAT with all other variables held constant.

Sensitivity analysis of the risk that the entity is exposed to for 2021

Risk variable

Change in risk variable

Effect on

Profit and loss

Equity

%

$'000

$'000

Currency risk

$/USD

+ 7.89%

(187,376)

(187,376)

Currency risk

$/USD

- 7.89%

219,103

219,103

Interest rate risk

Discount rates

+ 0.74%

(98,583)

(98,583)

Interest rate risk

Discount rates

- 0.74%

122,079

122,079

Sensitivity analysis of the risk that the entity is exposed to for 2020

Risk variable

Change in risk variable

Effect on

Profit and loss

Equity

%

$'000

$'000

Currency risk

$/USD

+ 8.41%

(198,366)

(198,366)

Currency risk

$/USD

- 8.41%

234,540

234,540

Interest rate risk

Discount rates

+ 0.09%

(9,431)

(9,431)

Interest rate risk

Discount rates

- 0.09%

16,659

16,659

All other items are denominated in AUD and are not subject to market risk due to exchange fluctuations.

7.6 Administered - Defined Benefit Pension Schemes

2021

2020

$'000

$'000

The amounts recognised in the Administered Schedule of Assets and Liabilities are as follows:

Present value of funded obligations

64,460

63,070

Fair value of plan assets

(45,202)

(41,092)

19,258

21,978

Present value of unfunded obligations

51,546

60,675

Net liability in schedule of administered assets and liabilities

70,804

82,653

Movements in the net liability recognised in the Administered Schedule of Assets and Liabilities as follows:

Net liability at the start of the year

82,653

77,613

Exchange differences on foreign plans

(4,148)

622

Net expense recognised in the Administered Schedule of Comprehensive Income

2,320

3,089

Net actuarial (gains) / losses

(5,508)

6,696

Contributions by employers

(4,513)

(5,367)

Net liability at the end of the year

70,804

82,653

Reconciliation of opening and closing balance of the defined benefit obligation:

Opening liability

123,745

117,974

Exchange differences on foreign plans

(3,275)

104

Service cost

658

771

Interest cost

2,480

3,371

Contributions by plan participants (funded schemes)

-

18

Actuarial (gains) due to experience

(1,261)

(14)

Actuarial (gains) / losses due to changes in financial assumptions

(688)

7,469

Actuarial (gains) due to changes in demographic assumptions

(767)

(698)

Benefits paid

(4,886)

(5,250)

Closing liability

116,006

123,745

Reconciliation of opening and closing balance of the fair value of plan assets:

Opening assets

41,092

40,361

Exchange differences on foreign plans

872

(518)

Expected return on plan assets

817

1,053

Contributions by plan participants (funded schemes)

-

18

Contributions by employer

1,512

2,143

Actuarial gains

2,794

61

Benefits paid

(1,885)

(2,026)

Closing liability

45,202

41,092

7.6 Administered - Defined Benefit Pension Schemes (continued)

2021

2020

$'000

$'000

The amounts recognised in the Administered Schedule of Comprehensive Income are as follows:

Current service cost

658

771

Net interest on net defined benefit liability

1,662

2,318

Total included 'employee benefit expense account'

2,320

3,089

Amounts recognised directly in administered equity

Financial year ended

2021

2020

$'000

$'000

Actuarial gains / (losses)

5,508

(6,696)

Cumulative amounts of losses recognised in administered equity

Financial year ended

2021

2020

$'000

$'000

Actuarial losses

(44,147)

(49,655)

Pension Scheme Assets

The fair value of scheme assets is represented by:

Financial year ended

2021

2020

Cash

0.0%

0.8%

Insured Pensioner

1.6%

1.7%

Investment in LIC India

4.7%

5.3%

Diversified Growth Fund

79.0%

74.9%

Liability Driven Investments

13.7%

16.0%

Deposite Administration Policy

1.1%

1.3%

Fair Value of pension scheme assets

The fair value of scheme assets does not include amounts relating to:

- any of DFAT's (and the Australian Government's) own financial instruments, and

- any property occupied by, or other assets used by DFAT (or the Australian Government).

Principal actuarial assumptions at the reporting date (expressed as weighted averages):

Financial year ended

2021

2020

Discount rate at 30 June

2.33%

2.09%

Expected return on assets at 30 June

Salary growth

2.86%

2.60%

Price inflation

3.05%

2.81%

Pension growth

2.89%

2.66%

Historical Information

Financial year ended

2021

2020

2019

2018

2017

$'000

$'000

$'000

$'000

$'000

Present value of defined benefit obligations

(116,006)

(123,745)

(117,974)

(107,375)

(110,624)

Fair value of scheme assets

45,202

41,092

40,361

37,767

37,221

Deficit in the scheme

(70,805)

(82,653)

(77,613)

(69,608)

(73,403)

Actuarial gains / (losses) - net liabilities

5,508

(6,696)

(5,309)

6,414

2,991

Effect of exchange rate gains / (losses)

4,148

(622)

(3,126)

(2,966)

3,213

Expected Employer Contributions

Financial year ended

2022

2021

$'000

$'000

Expected employer contributions

4,637

4,747

Scheme information

DFAT administers on behalf of the Australian Government, defined benefit pension schemes for locally engaged staff across a number of agencies at posts in London, Port Louis and New Delhi, and also Ottawa and Washington (the North American Pension Scheme). Port Louis and New Delhi are still open to new employees. All schemes, with the exception of the New Delhi Gratuity Scheme, provide pensions that are linked to final salaries. Figures disclosed are based on formal actuarial reviews that are generally conducted triennially and reviewed and updated by the actuary on an annual basis. The liabilities are not offset by assets held within the relevant schemes with the exception of London, New Delhi and Mauritius which are partially offset. Contributions for the North American Scheme are made to the Consolidated Revenue Fund, which will provide funding for the benefits payable under the scheme.

Weighted average maturity profile of defined benefit obligation

Financial year ended

2021

2020

Weighted average duration of defined benefit obligation (years)

14.15

13.83

Sensitivity to assumptions

DFAT’s defined benefit obligation at the reporting date has been determined using actuarial calculations that require assumptions about future events. The estimated sensitivity of the defined benefit obligation to each significant assumption shown below has been determined at an individual scheme level if each assumption were changed in isolation. In practice, the schemes are subject to multiple externally experienced items which may vary the defined benefit obligation over time. The methods and assumptions used in preparing these sensitivity results remain consistent with those used in previous reporting periods.

The estimated effects of variations in the principal actuarial assumptions on DFAT’s defined benefit obligation at the reporting date are as follows:

Increase / (decrease) in defined benefit obligation

Financial year ended

2021

2020

$'000

$'000

Discount rate

Increase of 0.5%

(8,080)

(8,629)

Decrease of 0.5%

8,371

9,008

Future salary increases

Increase of 0.5%

570

579

Decrease of 0.5%

(549)

(556)

Future inflation increases

Increase of 0.5%

7,747

8,495

Decrease of 0.5%

(7,528)

(8,215)

8. Other Information

8.1 Current/Non-Current Distinction For Assets and Liabilities

2021

2020

$'000

$'000

Note 8.1A: Current / non–current distinction for assets and liabilities

Assets expected to be recovered in:

No more than 12 months

Cash and cash equivalents

503,640

428,027

Trade and other receivables

540,341

363,016

Inventories

18,976

18,163

Assets held for sale

19,092

12,428

Prepayments

42,567

63,973

Total no more than 12 months

1,124,616

885,607

More than 12 months

Trade and other receivables

26,924

28,828

Land

1,858,866

1,989,064

Buildings

2,626,181

2,834,777

Plant and equipment

241,327

278,516

Computer software

139,090

145,689

Inventories

33,910

24,267

Prepayments

1,268

5,332

Total more than 12 months

4,927,566

5,306,473

Total assets

6,052,182

6,192,080

Liabilities expected to be settled in:

No more than 12 months

Suppliers

122,030

89,843

Other payables

59,530

58,016

Employee provisions

95,344

96,299

Provision for restoration

5,593

4,252

Leases

126,355

135,861

Total no more than 12 months

408,852

384,271

More than 12 months

Other payables

5,137

4,427

Employee provisions

176,144

182,442

Provision for restoration

33,056

25,276

Leases

960,121

1,030,186

Total more than 12 months

1,174,458

1,242,331

Total liabilities

1,583,310

1,626,602

2021

2020

$'000

$'000

Note 8.1B: Administered – current / non–current distinction for assets and liabilities

Assets expected to be recovered in:

No more than 12 months

Cash and cash equivalents

25,615

23,138

Receivables and loans

63,780

40,285

Total no more than 12 months

89,395

63,423

More than 12 months

Receivables and loans

173,049

164,120

Computer software internally developed

717

2,230

Investments

3,162,781

3,155,707

Total more than 12 months

3,336,547

3,322,057

Total assets

3,425,942

3,385,480

Liabilities expected to be settled in:

No more than 12 months

Grants

193,747

215,471

Other payables

225,100

144,402

Employee provisions

2,313

2,207

Total no more than 12 months

421,160

362,080

More than 12 months

Grants

1,064,615

842,659

Other payables

582,234

664,311

NIA financial guarantee

16,330

-

Employee provisions

79,197

91,507

Total more than 12 months

1,742,376

1,598,477

Total liabilities

2,163,536

1,960,557

8.2 Budgetary Reporting - Explanation of Major Variances

8.2A: Explanation of major departmental variances

The following provides explanations of major variances between DFAT’s original budget estimates, as published in the 2020-21 Portfolio Budget Statements (PBS) and the final outcome for the financial year, as presented, in accordance with the Australian Accounting Standards. Major variances are those relevant to an analysis of DFAT’s performance, not merely on numerical differences between the actual amounts and budget. Unless otherwise individually significant, no additional commentary has been included.

There are a number of items not incorporated into PBS estimates due to their unpredictable, uncontrollable and / or unplanned nature. This includes:

  • The write-down, impairment and sale of assets reported in the Statement of Comprehensive Income;
  • Gains or losses from foreign exchange differences reported in the Statement of Comprehensive Income and Cash Flow Statement;
  • Accounting adjustments for DFAT's provision for the future make-good of leasehold improvements in leased properties reported in the Statement of Comprehensive Income and Statement of Changes in Equity; and
  • Adjustments to revenue from Government for no-win/no-loss funding arrangements with the Department of Finance which are reported in the Statement of Comprehensive Income and Statement of Financial Position.

DFAT does not estimate or factor in revaluation adjustments for land, buildings and plant and equipment assets as these movements are beyond DFAT's control and are difficult to predict. This item impacts depreciation and other comprehensive income reported in the Statement of Comprehensive Income, Statement of Changes in Equity and non-financial asset balances reported in the Statement of Financial Position. The COVID-19 pandemic also impacted 2020-21 expenditure across the department’s operations.

Major variances between actual figures reported in the financial statement and the PBS estimates include:

  • Employee benefits are $86.5m (9.3%) lower than budget primarily due to an increase in the long-term Government bond rate used for valuing employee provisions, a stronger AUD relative to payment currencies for locally engaged staff expenses and reduced expenditure on overseas allowances following COVID-19 disruptions to posts. In addition, DFAT staffing numbers were below estimated levels;
  • Supplier expenses are $180.5m (26.0%) lower than budget primarily due to COVID-19 travel restrictions, which reduced the demand for passports, resulting in lower expenditure of $61.5m (57.9%) on passport raw materials and outsourced service providers and reduced travel expenses. Additionally, the AUD has been stronger than other currencies resulting in a decrease in overseas supplier expenses. This also impacts the cash used for suppliers in the Cash Flow Statement.
  • Overall own-source revenue is $13.1m (7.9%) lower than budget due to lower recoveries from related entities driven by reduced expenditure. This also affects the Sale of goods and rendering of services in the Cash Flow Statement.
  • Cash and cash equivalents are $175.2m (53.3%) higher due to several Posts holding additional cash balances to accommodate payments throughout the COVID-19 crisis and timing of rent receipts from other related entities. Additionally receipts not budgeted for from the sale of property of $83.6m were receipted into the Overseas Property special account to fund future property purchases;
  • Trade and other receivables are $225.7m (66.1%) higher mainly due to higher appropriation received this year but lower appropriation drawdowns, as the impact from COVID-19 resulted in overall lower expenditure;
  • Lease liabilities are $96.6m (8.2%) lower mainly due to cash outflow of lease payments and a stronger AUD relative to payment currencies for leases. This also impacts Principal Payments of Lease Liabilities in the Cash Flow Statement.
  • Cash used for investing activities is $157.5m (46.1%) lower due to delays in implementing IT and security capital projects as a result of the COVID-19 crisis. This impacts non-financial assets in both the Cash Flow Statement and the Statement of Financial Position.
  • Timing of payments had an impact on Statement of Financial Position balances for Prepayments which are $25.5m (36.8%) lower and total payables which are $13.9m (8.0%) higher than budget.

The Cash Flow Statement variance to budget analysis also includes variances due to items excluded from PBS estimates. Excluded items are section s74 receipts transferred to the Official Public Account (OPA) and subsequently re-drawn as appropriations, GST payments to suppliers and subsequent refunds received from the Australian Taxation Office.

8.2B: Explanation of major administered variances

There are a number of items excluded from the Portfolio Budget Statement (PBS) estimates on the Administered Schedule of Comprehensive Income, due to the unpredictable, uncontrollable and/or unplanned nature of some transactions, specifically items such as contributions, unplanned revenue and gains, impairments and EFA NIA income.

Further, DFAT does not estimate or factor in adjustments for re-measurement of the net liability for defined benefit pension schemes or movements in the carrying amount of investments, on the Administered Schedule of Assets and Liabilities for PBS purposes. Nor does it estimate the corresponding entries in Other Comprehensive Income (100.0% variance) as part of the PBS estimates. This is because the main factors that drive these movements are beyond DFAT's control, such as movements due to changes in the value of the Australian Dollar (AUD) on currency markets.

Overall expenses are $165.5m (3.6%) higher than the original PBS budget. International Development Assistance expenses are higher by $457.8m (14.7%) due to the Government providing budget funding for temporary targeted and supplementary measures in Portfolio Additional Estimates 2020-21 for COVID-19 response packages to support the Pacific and Timor-Leste, enhanced partnerships in Southeast Asia and for support for COVID-19 vaccine access in these areas. These measures were in part offset by a decrease in other grants and contributions of $310.4m (37.3%) due to budget adjustments and foreign exchange movements. The original PBS estimates for other grants and contributions were based on obligations to pay as assessed by international organisations such as the United Nations (UN), whereas the actual contributions paid depend on resolutions passed by UN members.

Other expenses were higher than budget by $28.7m (371.9%) and include for the first time in 2020-21 a financial guarantee for NIA loans of $16.2m, also recognised as a provision, as well as costs associated with COVID-19 facilitated flights of $11.2m, both not originally budgeted for. EFA expenses for administering the NIA were $0.9m (26.9%) higher than budget due to increased activity on AIIFP and COVID-19 loans.

Total administered revenue is $95.4m (24.5%) lower than budget. Passport and consular fees, which comprise the majority of fees and charges collected, have decreased by $109.8m (37.2%) due to a significant drop in demand for passports and notarial services associated with the COVID-19 pandemic and restrictions on travel. This was offset by higher EFA NIA revenue $29.2m (90.0%) following a reassessment by EFA of the collectability of debts which is also reflected as higher receivables and loans $28.4m (13.6%).

Returns of prior year administered expenses reported as revenue were lower than budget by $4.0m (11.2%). These funds relate to acquittal of funding provided upfront subject to unforeseen circumstances in delivery that influence the actual amounts spent. Accordingly, the actual funds returned, and the budget can be difficult to anticipate.

The actual cash on hand or on deposit balance reported in the Administered Schedule of Assets and Liabilities is higher than budget by $17.4m (211.3%) as it includes a non-trust special account balance of $16.7m held for the delayed Dubai Exposition 2020.

The timing of the preparation of estimates included in the PBS can also result in variances to actual results. PBS estimates generally prepared in March for inclusion in the Federal Budget, are based on the current financial year estimates at that point in time. Movements and adjustments that occur late in a financial year are not able to be incorporated into the estimates, resulting in variances.

The impacts of the timing of PBS estimates are most pronounced through higher variances to budgets for employee provisions including defined benefit pension schemes (13.0%), grants (32.6%) and other payables (-459.1%) administered on behalf of Government and reported in the Administered Schedule of Assets and Liabilities