for the period ended 30 June 2018

Overview

Basis of preparation of the financial statements

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

The financial statements have been prepared in accordance with:

• Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) for reporting periods ending on or after 1 July 2017.
• Australian Accounting Standards and Interpretations – Reduced Disclosure Requirements issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period. The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except where certain assets and liabilities are recorded 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 are rounded to the nearest thousand dollars unless otherwise specified.
  Except where 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

The Department of the Prime Minister and Cabinet (PM&C) is exempt from all forms of taxation except Fringe Benefits Tax (FBT), the Goods and Services Tax (GST) and Mining Withholding Tax (WHT).

New Australian accounting standards

No accounting standard has been adopted earlier than the application date as stated in the standard.

Other new standards, revised standards, interpretations and amending standards that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material financial impact, and are not expected to have a future material financial impact on PM&C.

Compliance with statutory conditions for payments from the consolidated revenue fund

The Australian Government continues to have regard to developments in case law, including the High Court’s most recent decision on Commonwealth expenditure in Williams v Commonwealth [2014] HCA 23, as they contribute to the larger body of law relevant to the development of Commonwealth programs. In accordance with its general practice, the Government will continue to monitor and assess risk and decide on any appropriate actions to respond to risks of expenditure not being consistent with constitutional or other legal requirements.

During 2017-18 PM&C reviewed its exposure to the risk of not complying with statutory conditions on payments from appropriations, namely section 83 of the Constitution.

The review identified the following technical breach:

• The Aboriginals Benefit Account (ABA) special account – testing of transactions revealed that three payments made from the ABA under section 64(3) of the Aboriginal Land Rights (Northern Territory) Act 1976 (the ALRA), contravened section 83 of the Constitution totalling $0.594 million. The payments were a technical contravention, despite the payments having been made in accordance with the requirements of section 64(3) of the ALRA. Of the overpayments, $0.129 million has been recovered through reduction of subsequent payments and the remaining $0.465 million will be offset against future payments. Overpayments from previous years of $0.680 million were partially recovered during the year and the remaining $0.041 million will be offset against future payments.
  Payments are required to be made out of the ABA based on royalties received by the Northern Territory and Australian Governments. The contraventions occur when the royalties upon which the payments were based had been estimated at a value greater than the eventual actual. Legislation has been prepared, and is awaiting presentation to Parliament, to reduce the risks of non-compliance associated with these payments to an acceptably low level.

PM&C will continue to monitor its level of compliance with section 83 of the Constitution across all legislation for which it is administratively responsible. Where possible, amendments to legislation will continue to be progressed.

Events after the reporting period

Departmental

There are no known events occurring after the reporting period that could impact on the financial statements.

Administered

On 12 February 2018, the Minister for Indigenous Affairs announced that the Government will introduce new Bills into Parliament to ensure the long-term sustainability of the new Indigenous Land and Sea Corporation which acquires and manages assets for Indigenous Australians, and allow the entity to invest in sea country and water assets. The Bill will establish a new special account, ‘Aboriginal and Torres Strait Islander Land and Sea Future Fund Special Account’ and transfer all assets of the Aboriginal and Torres Strait Islander Land Account to this account. As at date of signing the financial statements, this Bill had not been passed.

1. Departmental Financial Performance

This section analyses the financial performance of the Department of the Prime Minister and Cabinet for the year ended 30 June 2018.

1.1. Expenses

	2018		2017
	$'000		$'000
Note 1.1A: Employee benefits
Wages and salaries	191,968		182,817
Superannuation
Defined contribution plans	18,016		16,711
Defined benefit plans	18,515		19,436
Leave and other entitlements	30,252		27,245
Separation and redundancies	5,576		1,566
Other	3,635		3,621
Total employee benefits	267,962		251,396

Note 1.1B: Suppliers
Goods and services supplied or rendered
Consultants, legal, contractors and secondees	53,304		57,538
Equipment, repairs and maintenance	10,929		7,062
General expenses1	14,268		13,619
Venue hire	2,774		762
Office accommodation, facility management and security	5,879		5,365
Information, communication and technology	40,615		40,310
Travel	14,250		11,216
Total goods and services supplied or rendered	142,019		135,872
Goods supplied	13,422		11,386
Services rendered	128,597		124,486
Total goods and services supplied or rendered	142,019		135,872
Other suppliers
Operating lease rentals	34,074		28,658
Workers compensation expenses	2,834		2,773
Payments to related entities	-		10,000
Total other supplier expenses	36,908		41,431
Total suppliers	178,927		177,303
Leasing commitments
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within 1 year	25,755		28,031
Between 1 to 5 years	92,166		90,134
More than 5 years	221,175		11,202
Total operating lease commitments	339,096		129,367

Note: Commitments are GST inclusive where relevant.

Operating lease commitments - leases for office accommodation

Office accommodation lease payments are subject to periodic increases in accordance with the rent review provisions in the lease agreements.

Operating leases comprise 80 leases for office accommodation (2017: 77).

¹ Includes $0.029 million audit fees to the ANAO for the financial statements audit of the Aboriginal and Torres Strait Islander Land Account (ATSILA) (2017: $0.029 million), which is not a resource received free of charge.

for the period ended 30 June 2018

Accounting Policy

Leases

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

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease.

Lease payments are allocated between the principal component and the interest expense.

PM&C currently has five (2017: seven) agreements for the leasing of premises which have provisions requiring the premises to be restored to their original condition at the conclusion of the lease. PM&C has recognised a make good provision to reflect the present value of this obligation.

	2018		2017
	$'000		$'000
Note 1.1C: Write-down and impairment of assets
Asset write-downs and impairments from:
Impairment and write-down of property, plant and equipment and intangibles	6,705		5,160
Impairment of receivables	16		153
Total write-down and impairment of assets	6,721		5,313

Note 1.1D: Losses from asset sales
Property, plant and equipment
Proceeds from sale	1,019		4,123
Carrying value of asset sold	(1,105)		(4,700)
Selling expense	(31)		(178)
Total losses from asset sales	117		755

Accounting Policy

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

1.2 Own-Source Revenue and Gains

	2018		2017
	$'000		$'000
Own-source revenue
Note 1.2A: Sale of goods and rendering of services
Sale of goods	-		15
Rendering of services	16,726		14,109
Total sale of goods and rendering of services	16,726		14,124

Accounting Policy

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

• The amount of revenue, stage of completion and transaction costs incurred can be reliably measured.

• The probable economic benefits associated with the transaction will flow to PM&C.

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

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

Note 1.2B: Resources received free of charge
Seconded staff	9,092		7,065
Other	474		474
Total resources received free of charge	9,566		7,539

Accounting Policy

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

Note 1.2C: Other gains
Gain on early termination of lease	4,944		-
Reversal of previous asset write-down	76		1,379
Reversal of make good provision	613		593
Asset first recognised	-		603
Total other gains	5,633		2,575

2. Income and Expenses Administered on Behalf of Government

2. Income and Expenses Administered on Behalf of Government

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

2.1. Administered – Expenses

	2018		2017
	$'000		$'000
Note 2.1A: Employee benefits
Wages and salaries	851		818
Superannuation
Defined contribution plans	40		37
Defined benefit plans	93		146
Leave and other entitlements	152		51
Separation and redundancies	62		43
Total employee benefits	1,198		1,095

Note 2.1B: Suppliers
Goods and services supplied or rendered
Outsourced providers, contractors and consultants	47,934		47,677
Equipment, repairs and maintenance	830		607
General expenses	7,707		8,198
Travel	3,004		2,703
Information, communication and technology	1,159		257
Total goods and services supplied or rendered	60,634		59,442
Goods supplied	626		529
Services rendered	60,008		58,913
Total goods and services supplied or rendered	60,634		59,442
Other suppliers
Operating lease rentals	3		3
Workers compensation expenses	11		12
Total other supplier expenses	14		15
Total suppliers	60,648		59,457
Leasing commitments
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within 1 year	380		570
Between 1 to 5 years	576		719
More than 5 years	1,415		1,538
Total operating lease commitments	2,371		2,827

Note: Commitments are GST inclusive where relevant.

Operating leases comprise 14 leases, five for office accommodation for the former Governors-General, one relating to the Indigenous Education (Northern Territory Facilities) program and eight relating to the Children and Schooling program. Lease payments are subject to periodic increase in accordance with the rent review provisions of the lease.

Accounting Policy

Leases

PM&C administers four (2017: four) agreements for the leasing of premises which have provisions requiring the premises to be restored to their original condition at the conclusion of the lease. A make good provision has been raised to reflect the present value of this obligation.

	2018		2017
	$'000		$'000
Note 2.1C: Grants
Public sector
Australian Government entities	100,676		90,278
Local Governments	87,893		70,103
State and Territory Governments	70,156		60,378
Private sector
Non-profit organisations	883,412		940,224
Commercial entities	198,787		186,390
Total grants	1,340,924		1,347,373
Program 2.1 - Jobs, Land and Economy	646,114		639,175
Program 2.2 - Children and Schooling	330,840		356,011
Program 2.3 - Safety and Wellbeing	258,133		236,612
Program 2.4 - Culture and Capability	47,756		63,955
Program 2.5 - Remote Australia Strategy	43,332		44,564
Program 1.1 - Prime Minister and Cabinet	14,749		7,056
Total grants	1,340,924		1,347,373

Accounting Policy

PM&C administers a number of grants and subsidy schemes on behalf of the Government. Grant liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed; or (ii) the grant eligibility criteria have been satisfied, but payments due have not been made. Where grant moneys are paid in advance of performance or eligibility, a prepayment is recognised.

Settlement is usually made according to the terms and conditions of each grant. This is usually within 30 days of performance or eligibility.

Note 2.1D: Write-down and impairment of assets
Impairment of receivables	2,814		8,632
Write-down of non-financial assets	13		-
Total write-down and impairment of assets	2,827		8,632

Note 2.1E: Payments associated with Land Councils
Payments associated with Land Councils administration	49,843		46,798
Land Councils distributions	97,482		50,875
Total payments associated with Land Councils	147,325		97,673

Note 2.1F: Payments to Corporate Commonwealth entities and companies
Aboriginal Hostels Limited	36,563		37,075
Australian Institute of Aboriginal and Torres Strait Islander Studies	3,249		-
Indigenous Business Australia	10,133		10,602
Indigenous Land Corporation	8,928		9,156
Torres Strait Regional Authority	36,056		35,919
Total payments to Corporate Commonwealth entities and companies	94,929		92,752

Accounting Policy

Payments to Corporate Commonwealth entities and companies from amounts appropriated for that purpose are classified as administered expenses, equity injections or loans of PM&C. The appropriation to PM&C is disclosed in section 5 Funding.

	2018		2017
	$'000		$'000
Note 2.1C: Grants
Public sector
Australian Government entities	100,676		90,278
Local Governments	87,893		70,103
State and Territory Governments	70,156		60,378
Private sector
Non-profit organisations	883,412		940,224
Commercial entities	198,787		186,390
Total grants	1,340,924		1,347,373
Program 2.1 - Jobs, Land and Economy	646,114		639,175
Program 2.2 - Children and Schooling	330,840		356,011
Program 2.3 - Safety and Wellbeing	258,133		236,612
Program 2.4 - Culture and Capability	47,756		63,955
Program 2.5 - Remote Australia Strategy	43,332		44,564
Program 1.1 - Prime Minister and Cabinet	14,749		7,056
Total grants	1,340,924		1,347,373

Accounting Policy

PM&C administers a number of grants and subsidy schemes on behalf of the Government. Grant liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed; or (ii) the grant eligibility criteria have been satisfied, but payments due have not been made. Where grant moneys are paid in advance of performance or eligibility, a prepayment is recognised.

Settlement is usually made according to the terms and conditions of each grant. This is usually within 30 days of performance or eligibility.

Note 2.1D: Write-down and impairment of assets
Impairment of receivables	2,814		8,632
Write-down of non-financial assets	13		-
Total write-down and impairment of assets	2,827		8,632

Note 2.1E: Payments associated with Land Councils
Payments associated with Land Councils administration	49,843		46,798
Land Councils distributions	97,482		50,875
Total payments associated with Land Councils	147,325		97,673

Note 2.1F: Payments to Corporate Commonwealth entities and companies
Aboriginal Hostels Limited	36,563		37,075
Australian Institute of Aboriginal and Torres Strait Islander Studies	3,249		-
Indigenous Business Australia	10,133		10,602
Indigenous Land Corporation	8,928		9,156
Torres Strait Regional Authority	36,056		35,919
Total payments to Corporate Commonwealth entities and companies	94,929		92,752

Accounting Policy

Payments to Corporate Commonwealth entities and companies from amounts appropriated for that purpose are classified as administered expenses, equity injections or loans of PM&C. The appropriation to PM&C is disclosed in section 5 Funding.

2.2 Administered – Income

Note 2.2A: Interest
Interest on investments	72,412		74,488
Interest on loans	1,513		1,644
Unwinding of discount on concessional loans	2,963		2,976
Total interest	76,888		79,108

Note 2.2B: Other revenue
Return of grant funding	11,372		25,176
Lease rental income	1,848		2,280
Other	44		108
Total other revenue	13,264		27,564

Accounting Policy

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

Interest revenue is recognised using the effective interest method.

3. Departmental Financial Position

This section analyses the Department of the Prime Minister and Cabinet’s assets used to generate financial performance and the operating liabilities incurred as a result. Employee related information is disclosed in the People section.

3.1. Financial Assets

	2018		2017
	$'000		$'000
Note 3.1: Trade and other receivables
Goods and services receivables
Goods and services	11,729		3,615
Total goods and services receivables	11,729		3,615
Appropriations receivables
Existing programs	81,571		81,768
Total appropriations receivable	81,571		81,768
Other receivables
Statutory receivables	3,449		3,588
Other	-		13,199
Total other receivables	3,449		16,787
Total trade and other receivables (gross)	96,749		102,170
Less impairment allowance
Goods and services	(106)		(167)
Total impairment allowance	(106)		(167)
Total trade and other receivables (net)	96,643		102,003

Reconciliation of the impairment allowance
	2018		2017
	$'000		$'000
As at 1 July	(167)		(112)
Amounts written off	-		24
Amounts recovered and reversed	76		74
Increases	(15)		(153)
Total as at 30 June	(106)		(167)

3.2 Non-Financial Assets

Note 3.2: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles
	Land1	Buildings1	Leasehold improvements	Plant and equipment	Computer software internally developed	Computer software purchased	Total
	$’000	$’000	$’000	$’000	$’000	$’000	$’000
As at 1 July 2017
Gross book value	-	-	-	-	24,986	3,764	28,750
Fair value	14,107	41,540	31,221	13,626	-	-	100,494
Work in progress	-	9,053	760	1,242	2,929	60	14,044
Accumulated depreciation/amortisation and impairment	-	(2,103)	(5,988)	(4,387)	(4,550)	(2,373)	(19,401)
Total as at 1 July 2017	14,107	48,490	25,993	10,481	23,365	1,451	123,887
Additions
Purchase	-	462	25,285	7,935	11,625	533	45,840
Revaluations and impairments recognised in other comprehensive income	-	(823)	-	-	-	-	(823)
Reclassifications	(1,160)	(4,130)	2,882	(364)	-	92	(2,680)
Depreciation and amortisation	-	(1,546)	(6,791)	(3,377)	(5,763)	(931)	(18,408)
Write-down and impairments recognised in net cost of services (expense)	(2,331)	(2,697)	(1,245)	(432)	-	-	(6,705)
Total as at 30 June 2018	10,616	39,756	46,124	14,243	29,227	1,145	141,111
Total as at 30 June 2018 represented by
Gross book value	-	-	-	-	32,283	4,292	36,575
Fair value	10,616	43,111	54,577	18,848	-	-	127,152
Work in progress	-	103	4,002	2,483	7,247	99	13,934
Accumulated depreciation, amortisation and impairment	-	(3,458)	(12,455)	(7,088)	(10,303)	(3,246)	(36,550)
Total as at 30 June 2018	10,616	39,756	46,124	14,243	29,227	1,145	141,111

¹ PM&C has a property portfolio divestment strategy that will result in properties throughout Australia being sold within the next 12 months.

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

Contractual commitments for the acquisition of IT equipment and other capital works of $6,529 million are payable within one year. (2017: $11.624 million).

Accounting Policy

Asset recognition threshold

Purchases of property, plant and equipment and intangibles are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $5,000, which are expensed in the year of acquisition (other than IT assets 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 PM&C where there exists an obligation to restore the asset to its original condition. These costs are included in the value of PM&C's property, plant and equipment with a corresponding provision for the ‘make good’ recognised.

Property, plant and equipment are subsequently measured at fair value.

Revaluations

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

Asset class	Fair value measurement
Land	Market selling price
Buildings excluding leasehold improvements	Market selling price and depreciated replacement cost
Leasehold improvements	Depreciated replacement cost
Plant and equipment	Market selling price and depreciated replacement cost

PM&C procured valuation services from independent valuation experts and relied on the valuations made by these experts. The experts provided written assurance that the models developed to value assets are in compliance with accounting standards. PM&C tests the procedures of the valuation model as an internal management review at least once every 12 months. PM&C has a rolling revaluation plan in place which ensures all assets are formally revalued at least once every three years. If a particular asset class experiences significant and volatile changes in fair value (i.e. where indicators suggest that the value of the class has changed materially since the previous reporting period), that class is subject to specific valuation in the reporting period, where practicable, regardless of the timing of the last specific valuation.

Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured using the cost (Depreciated Replacement Cost or DRC) approach. Professional judgement has been applied in calculating the consumed economic benefit/asset obsolescence relevant to the asset under construction.

All property, plant and equipment assets are valued on a recurring basis except for assets held for sale.

Upon revaluation, any accumulated depreciation is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Assets held for sale

Assets held for sale are measured at the lesser of their carrying amount and fair value less cost to sell and are valued at a non-recurring basis. PM&C is currently marketing five residential properties (staff housing) that are no longer essential for operational requirements. 2018: $1.825 million (2017: $0.250 million).

Intangibles

PM&C’s intangibles comprise internally developed and purchased software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Impairment

All assets were assessed for impairment during 2018.

Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

Accounting Policy (continued)

Depreciation/Amortisation

Depreciable assets are written-off to their estimated residual values over their estimated useful lives to PM&C using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of asset are based on the following total useful lives for the current and prior reporting periods:

Buildings excluding leasehold improvements 3 to 50 years (2017: 3 to 50 years)

Leasehold improvements Lease term (2017: Lease term)

Plant and equipment 1 to 25 years (2017: 1 to 24 years)

Intangibles 1 to 5 years (2017: 1 to 5 years)

Derecognition

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

3.3 Payables

	2018		2017
	$'000		$'000
Note 3.3: Other payables
Salaries, wages and superannuation	1,704		1,763
Separation and redundancies payable	3,314		601
Unearned income	2,435		2,725
Lease liability	10,666		10,980
Lease incentive	15,154		1,631
Other	3,026		3,059
Total other payables	36,299		20,759

3.4. Other Provisions

	Make good provision	Total
	$’000	$’000
As at 1 July 2017	1,258	1,258
Additional provisions made	121	121
Finance cost	10	10
Amounts used	(131)	(131)
Gain on reversal of provision	(613)	(613)
Total as at 30 June 2018	645	645

Significant accounting judgements and estimates

Provision for the restoration of leased premises (make good) is based on future obligations relating to the underlying assets and is supported by independent qualified valuers’ opinions.

4. Assets and Liabilities Administered on Behalf of Government

This section analyses assets used to generate financial performance and the operating liabilities incurred as a result which the Department of the Prime Minister and Cabinet does not control, but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

4.1 Administered – Financial Assets

	2018		2017
	$'000		$'000
Note 4.1A: Cash and cash equivalents
Cash on hand or on deposit	79		304
Aboriginals Benefit Account - Special Account	11,212		24,334
Aboriginal and Torres Strait Islander Land Account - Special Account	1		1
Cash held in the Official Public Account - Special Account	12,284		11,433
Total cash and cash equivalents	23,576		36,072

Note 4.1B: Trade and other receivables
Goods and services receivables
Goods and services receivable	17		7
Total goods and services receivables	17		7
Advances and loans
Loans to Australian Government entities	48,549		50,967
Total advances and loans	48,549		50,967
Other receivables
Statutory receivables	14,707		23,393
Interest receivable	34,243		32,829
Grants receivable	21,516		18,358
Other	322		743
Total other receivables	70,788		75,323
Total trade and other receivables (gross)	119,354		126,297
Less impairment allowance
Other receivables	(16,847)		(15,413)
Total impairment allowance	(16,847)		(15,413)
Total trade and other receivables (net)	102,507		110,884

Accounting Policy

Loans

Concessional loans are initially recognised at their fair value. If the rate of interest charged is lower than the government bond rate (for government/public sector loans) or the counterparty’s borrowing rate (for non-government loans), the difference between the amortised cost and the fair value of the loan is treated as an expense.

Loans to Australian Government entities are made for the period up to 7 years based on current interest rates. Interest is variable and is paid quarterly.

Reconciliation of the impairment allowance
Movements in relation to 2018
		2018	2017
		$'000	$'000
As at 1 July		(15,413)	(8,606)
Amounts written off		-	591
Amounts recovered and reversed		1,651	2,043
Increases		(3,085)	(9,441)
Total as at 30 June		(16,847)	(15,413)

	2018		2017
	$'000		$'000
Note 4.1C: Investments in Corporate Commonwealth entities and companies
Equity interest in
Aboriginal Hostels Limited	149,556		146,332
Anindilyakwa Land Council	15,945		14,607
Australian Institute of Aboriginal and Torres Strait Islander Studies	37,919		-
Central Land Council	41,665		39,598
Indigenous Land Corporation	452,005		371,367
Indigenous Business Australia	1,415,737		1,334,810
National Australia Day Council Limited	790		1,137
Northern Land Council	11,346		21,966
Outback Stores Pty Ltd	41,617		41,686
Tiwi Land Council	2,796		1,283
Torres Strait Regional Authority	83,600		79,821
Wreck Bay Aboriginal Community Council	56,790		61,377
Total investments in Corporate Commonwealth entities and companies	2,309,766		2,113,984
All investments in Corporate Commonwealth entities and companies are expected to be recovered in more than 12 months.

Accounting Policy

Administered investments

Administered investments in subsidiaries are not consolidated because their consolidation is relevant only at the whole-of-government level.

Administered investments other than those held for sale are classified as available for sale and are measured at their fair value as at 30 June 2018. Fair value has been taken to be the Australian Government's proportional interest in the net assets as advised by the entities as at the end of the reporting period recorded in the latest management accounts or unaudited financial statements provided.

Accounting Policy

Administered investments

Administered investments in subsidiaries are not consolidated because their consolidation is relevant only at the whole-of-government level.

Administered investments other than those held for sale are classified as available for sale and are measured at their fair value as at 30 June 2018. Fair value has been taken to be the Australian Government's proportional interest in the net assets as advised by the entities as at the end of the reporting period recorded in the latest management accounts or unaudited financial statements provided.

4.2 Administered – Non-Financial Assets

Note 4.2: Reconciliation of the opening and closing balances of property, plant and equipment
	Land	Buildings	Leasehold improvements	Plant and equipment	Total
	$’000	$’000	$’000	$’000	$’000
As at 1 July 2017
Fair value	-	-	97	1,990	2,087
Accumulated depreciation and impairment	-	-	(23)	(999)	(1,022)
Total as at 1 July 2017	-	-	74	991	1,065
Additions
Acquisition of entities or operations (including restructuring)	44,000	5,811	-	-	49,811
Revaluations recognised in other comprehensive income	-	-	-	(203)	(203)
Depreciation expense	-	(126)	(49)	(143)	(318)
Write-down and impairments recognised in net cost of services (expense)	-	-	-	(13)	(13)
Total as at 30 June 2018	44,000	5,685	25	632	50,342
Total as at 30 June 2018 represented by
Fair value	44,000	5,811	97	1,095	51,003
Accumulated depreciation and impairment	-	(126)	(72)	(463)	(661)
Total as at 30 June 2018	44,000	5,685	25	632	50,342

Accounting Policy

Revaluation

All leasehold improvements, plant and equipment assets were formally valued during the year by independent qualified valuers and were assessed for impairment.

Depreciation

Depreciation rates applying to each class of depreciable asset are based on the following useful lives for the current and prior reporting periods:

Buildings excluding leasehold improvements 22 to 30 years (2017: n/a)

Leasehold improvements Lease term (2017: Lease term)

Plant and equipment 5 to 114 years (2017: 1 to 115 years)

4.3A - Administered – Payables

2018 2017 $'000 $'000 Note 4.3A: Grants Public sector Australian Government entities (related parties) 17,064 1,979 Local Governments 22 60 State and Territory Governments 21,327 7,105 Private sector Commercial entities 860 857 Non-profit organisations 8,924 31,790 Total grants 48,197 41,791

Note 4.3B: Other payables
Office of Township Leasing payables	1,094		160
Other	341		743
Total other payables	1,435		903
All other payables are expected to be settled in no more than 12 months.

5. Funding

1.

This section identifies the Department of the Prime Minister and Cabinet funding structure.

5.1. Appropriations

Note 5.1A: Departmental annual and unspent appropriations ('recoverable GST exclusive')
	2018	2017
	$'000	$'000
Ordinary annual services
Annual Appropriation
Operating	451,886	404,494
Capital budget	14,506	11,732
Section 74 receipts	26,047	22,924
Section 75 transfers	(11,072)	-
Total available appropriation	481,367	439,150
Appropriation applied (current and prior years)	(470,695)	(439,277)
Variance	10,672	(127)
Opening unspent appropriation balance	143,464	143,591
Repeal of Annual Appropriation Acts 2013-14, 2014-15	(50,762)	-
Closing unspent appropriation balance	103,374	143,464
Balance comprises appropriations as follows1, 2:
Appropriation Act (No. 1) 2013-14	-	5,000
Appropriation Act (No.1) 2014-15	-	43,446
Appropriation Act (No.1) 2014-15 - Capital Budget (DCB)	-	2,316
Appropriation Act (No.1) 2015-16	1,190	1,190
Appropriation Act (No.1) 2016-17	13,128	86,770
Appropriation Act (No.1) 2016-17 cash held by the department	-	2,976
Appropriation Act (No.3) 2016-17	-	305
Appropriation Act (No.3) 2016-17 - Capital Budget (DCB) - Non Operating	-	1,461
Appropriation Act (No.1) 2017-18	78,867	-
Appropriation Act (No.1) 2017-18 cash held by the department	1,910	-
Appropriation Act (No.1) 2017-18 - Capital Budget (DCB) - Non Operating	8,279	-
Total unspent appropriation - ordinary annual services	103,374	143,464
Other services
Annual Appropriation
Equity injections	11,694	8,611
Total available appropriation	11,694	8,611
Appropriation applied (current and prior years)	(9,665)	(12,334)
Variance	2,029	(3,723)
Opening unspent appropriation balance	4,609	8,332
Repeal of Annual Appropriation Act 1 (No.2) 2014-15	(57)	-
Closing unspent appropriation balance	6,581	4,609
Balance comprises appropriations as follows :
Appropriation Act (No 2) 2014-15 - Non Operating - Equity Injection	-	57
Appropriation Act (No.2) 2016-17 - Non Operating - Equity Injection	-	4,552
Appropriation Act (No.2) 2017-18 - Non Operating - Equity Injection	6,581	-
Total unspent appropriation - other services	6,581	4,609
Total unspent appropriation	109,955	148,073

¹ The current year unspent appropriation balance is shown inclusive of Section 51 permanent quarantines against Appropriation Act (No.1) 2017-18 of $10.168 million, Appropriation Act (No.1) 2017-18 – Capital Budget(DCB) – Non Operating of $3.795 million, Appropriation Act (No.1) 2015-16 of $1.190 million and Appropriation Act (No.1) 2016-17 of $11.320 million.

² The current year unspent appropriation balance is shown inclusive of re-allocations of amounts from Appropriation Act (No.1) 2017-18 to Appropriation Act (No.1) 2017-18 – Capital Budget (DCB) of $1.600 million that was approved by the Finance Minister during 2017-18.

Accounting Policy

Revenue from Government - Departmental

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as revenue from Government when PM&C 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.

Note 5.1B: Administered annual and unspent appropriations ('recoverable GST exclusive')
	2018	2017
	$'000	$'000
Ordinary annual services
Annual Appropriation
Operating	1,320,644	1,408,961
Capital budget	253	250
Payments to corporate Commonwealth entities/companies	94,929	92,752
Section 74 receipts	5,213	2,131
Section 75 transfers	(19,037)	-
Total available appropriation	1,402,002	1,504,094
Appropriation applied (current and prior years)	(1,395,502)	(1,437,686)
Variance	6,500	66,408
Opening unspent appropriation balance	122,651	56,243
Repeal of Annual Appropriation Acts 2012-13, 2013-14 and 2014-15	(26,897)	-
Closing unspent appropriation balance	102,254	122,651
Balance comprises appropriations as follows1:
Appropriation Act (No.1) - Capital Budget (DCB) - - Non Operating 2012-13	-	240
Appropriation Act (No.1) 2013-14	-	10
Appropriation Act (No.5) 2013-14	-	10
Appropriation Act (No.1) 2014-15	-	26,497
Appropriation Act (No.1) - Capital Budget (DCB) - - Non Operating 2014-15	-	140
Appropriation Act (No.3) 2015-16	8,902	8,902
Appropriation Act (No.1) - Capital Budget (DCB) - - Non Operating 2015-16	252	252
Appropriation Act (No.1) 2016-17	39,058	86,442
Appropriation Act (No.1) - Capital Budget (DCB) - - Non Operating 2016-17	146	146
Supply Act (No.1) - Capital Budget (DCB) - - Non Operating 2016-17	12	12
Appropriation Act (No.1) 2017-18	53,631	-
Appropriation Act (No.1) - Capital Budget (DCB) - - Non Operating 2017-18	253	-
Total unspent appropriation - ordinary annual services	102,254	122,651
Other services
Annual Appropriation
States, ACT, NT and Local government	7,762	7,648
Payments to corporate Commonwealth entities/companies	23,850	36,550
Total available appropriation	31,612	44,198
Appropriation applied (current and prior years)	(31,612)	(45,257)
Variance	-	(1,059)
Opening unspent appropriation balance	23,838	24,897
Repeal of Annual Appropriation Acts 2013-14 and 2014-15	(23,838)	-
Closing unspent appropriation balance	-	23,838
Balance comprises appropriations as follows:
Appropriation Act 6 - SPP 2013-14	-	23,837
Appropriation Act 2 - SPP 2014-15	-	1
Total unspent appropriation - other services	-	23,838
Total unspent appropriation	102,254	146,489

Note 5.1C: Special appropriations ('recoverable GST exclusive')
Authority	Appropriation applied
	2018	2017
	$'000	$'000
Aboriginal Land Rights (Northern Territory) Act 1976	338,702	178,948
Public Governance, Performance and Accountability Act 2013 s.77	50	6
Higher Education Support Act 2003	67,979	58,584
Total	406,731	237,538

There were no transactions during 2017 and 2018 for special appropriations Indigenous Education (Targeted Assistance) Act 2000, s.13 and Native Title Act 1993, s.54(2).

¹ The prior year administered unspent annual appropriation is shown inclusive of Section 51 permanent quarantines against Appropriation Act (No.3) 2015-16 of $8.902 million, Appropriation Act (No.1) Capital Budget (DCB) 2015-16 of $0.252 million, Appropriation Act (No.1) 2016-17 of $39.058 million, Appropriation Act (No.1) Capital Budget (DCB) 2016-17 of $0.146 million and Supply Appropriation Act (No.1) Capital Budget (DCB) 2016-17 of $0.012 million.

5.2 Special Accounts

1Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Establishing Instrument: PGPA Act Determination (DPM&C SOETM Special Account 2018). PGPA Act Determination (DPM&C SOETM Special Account 2018) replaces Determination 2008/13, which was repealed on 30 June 2018.

Purpose: This account was created to disburse amounts held on trust or otherwise for the benefit of a person other than the Commonwealth. This account is non-interest bearing.

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

Establishing Instrument: Corporations (Aboriginal and Torres Strait Islander) Act 2006; section 551-20 Purpose: To administer unclaimed moneys received by the Registrar of Aboriginal and Torres Strait Islander Corporations. This account is non-interest bearing.

3Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Establishing Instrument: Determination 2003/05 Purpose: To provide a source of finance for the liability for the Superannuation Productivity Benefit entitlements owing to tutors contracted under the Aboriginal Tutorial Assistance Scheme (ATAS). This account is non-interest bearing. The Determination sunset on 1 April 2017.

4Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Establishing Instrument: Determination 2010/06

Purpose: To support the implementation of the Remote Service Delivery National Partnership Agreement. It will provide the Australian Government with the capacity to address high priority projects in a timely way and support projects identified through the local implementation planning process. This account is non-interest bearing.

5Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Establishing Instrument: Determination 2001/11 (amended by Determination 2006/10)

Purpose: To develop best practice policies and guidelines in spatial data management in Australia and New Zealand and to assist the growth of a spatial information industry in Australia and New Zealand. This account is non-interest bearing. The Determination sunset on 1 April 2017.

⁶Appropriation: Public Governance, Performance and Accountability Act 2013; section 80

Establishing Instrument: Aboriginal Land Rights (Northern Territory) Act 1976; sections 62, 63, 64 and 65

Purpose: For the receipt and disbursement of the equivalent of mining royalty moneys derived from mining operations on Aboriginal land in the Northern Territory.

This account is interest bearing.

⁷Appropriation: Public Governance, Performance and Accountability Act 2013; section 80

Establishing Instrument: Section 192W of the Aboriginal and Torres Strait Islander Act 2005

Purpose: To provide a secure stream of income to the Indigenous Land Corporation in perpetuity to provide economic, environmental, social and cultural benefits for Aboriginal people and Torres Strait Islanders by assisting in the acquisition and management of an Indigenous land base.

This account is interest bearing.

Aboriginal Advancement Account

The Aboriginal Advancement Account was established under section 80 of the PGPA Act.

The purpose of the account is for furthering the social and economic advancement of Aboriginal people living in Victoria. There were no transactions credited or debited to the special account during 2017 and 2018.

6. People

6. People

This section describes a range of employment and post-employment benefits provided to our people.

6.1 Employee Provisions

	2018		2017
	$'000		$'000
Note 6.1A: Employee provisions
Annual leave	26,445		26,163
Long service leave	52,184		51,497
Total employee provisions	78,629		77,660

Accounting policy and significant accounting judgements

Employee benefits

Liabilities for ‘short-term employee benefits’ and termination benefits due within 12 months of the end of the reporting period are measured at their nominal amounts.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of PM&C is estimated to be less than the annual entitlement for sick 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 PM&C’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by reference to the work of an actuary during 2018. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and redundancy

A liability is made for separation and redundancy benefit payments. PM&C recognises a liability for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

PM&C's staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or another fund of their choice.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes.

PM&C makes employer contributions to the employees' superannuation scheme. For Commonwealth defined benefits schemes, these rates are determined by an actuary to be sufficient to meet the current cost to the Government. PM&C accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.

	2018		2017
	$'000		$'000
Note 6.1B: Administered employee provisions
Annual leave	113		107
Long service leave	180		144
Total employee provisions	293		251

Accounting Policy

The expense and liabilities for services rendered by staff employed in the Prime Minister’s Official Establishments and in support of former Governors-General are recognised as administered items. Accounting policies are consistent with those applied to departmental items.

Note 6.1C: Non-cash benefits - former Governors-General benefits
Non-cash benefits - former Governors-General	13,251		13,918
Total non-cash benefits - former Governors-General benefits	13,251		13,918
Changes in the value of the defined benefit obligations are as follows:
Net liability at 1 July	13,918		16,037
Finance costs	348		305
Actuarial losses/(gains)	354		(1,112)
Benefits paid	(1,369)		(1,312)
Net liability at 30 June	13,251		13,918
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
Discount rate at 30 June	2.50%		2.50%
Future salary increases	3.50%		3.50%
Inflation rate	2.50%		2.50%
Rate of expenditure slow down with age	3.00%		3.00%

Accounting Policy

Former Governors-General benefits

PM&C has responsibility for the administration of non-cash benefits provided to former Governors-General. These entitlements are regarded as post-employment benefits and represent the provision of office facilities, administrative support and transport.

The liability for these benefits is calculated annually as the present value of future benefit obligations. Actuarial gains or losses are recognised in equity in the year in which they occur. Interest on the liability is recognised in the surplus/(deficit).

Significant accounting judgements and estimates

The provision for non-cash former Governors-General entitlements relate to post-employment benefits such as office facilities, administrative support and transport. The future liability for these benefits is based on the actuarial assessment determined by the Australian Government Actuary.

6.2 Key Management Personnel Remuneration

	2018		2017
	$'000		$'000
Short-term employee benefits	3,979		3,807
Post-employment benefits	582		569
Other long-term employee benefits	406		388
Total key management personnel remuneration expenses	4,967		4,764

The total number of key management personnel included in the above table is 17 (2017: 13). Included in that number is six staff who worked for the full-year and 11 staff who worked a part-year (2017: seven and six).

Key management personnel on acting arrangements are included where the length of the arrangement is longer than two months.

¹ Excludes remuneration and other benefits of the PM&C Portfolio Ministers as these are set by the Remuneration Tribunal and are not paid by PM&C.

6.3 Related Party Disclosures

PM&C is an Australian Government controlled entity. Related parties to PM&C are Key Management Personnel including the Portfolio Ministers, and other Australian Government entities.

Significant transactions with related parties can include:

• the payments of grants or loans;
• purchases of goods and services;
• asset purchases, sales transfers or leases;
• debts forgiven; and
• guarantees.

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

Giving consideration to relationships with related entities, and transactions entered into during the reporting period (including comparative year) by PM&C, it has been determined that there are no related party transactions to be separately disclosed.

7. Managing Uncertainties

1. Managing Uncertainties

This section analyses how the Department of the Prime Minister and Cabinet manages financial risks within its operating environment.

7.1 Contingent Assets and Liabilities

Note 7.1A: Contingent assets and liabilities

Unquantifiable contingent liabilities - claims for damages and costs

Claims have been made against the Australian Government by former residents of the Retta Dixon Home in the Northern Territory. These claims are currently being assessed.

Accounting Policy

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

Note 7.1B: Administered contingent assets and liabilities

PM&C is not aware of any material administered quantifiable or unquantifiable contingent assets or liabilities as at 30 June 2018.

7.2 Financial Instruments

	2018		2017
	$'000		$'000
Note 7.2A: Categories of financial instruments
Financial assets
Loans and receivables
Cash and cash equivalents	1,910		2,976
Goods and services receivables (net)	11,623		3,448
Accrued revenue	4,056		3,787
Total loans and receivables	17,589		10,211
Total financial assets	17,589		10,211
Financial liabilities
Financial liabilities measured at amortised cost
Trade creditors and accruals	22,709		22,673
Grants	232		303
Total financial liabilities measured at amortised cost	22,941		22,976
Total financial liabilities	22,941		22,976

Note 7.2B: Net gains or losses on financial assets
Loans and receivables
Impairment	(16)		(153)
Reversal of impairment	76		-
Net gains/ (losses) on loans and receivables	60		(153)
Net gain/ (loss) on financial assets	60		(153)

Accounting Policy

Financial Assets

PM&C classifies its financial assets in the following categories:

(a) Held-to-maturity investments

(b) Available for sale financial assets

(c) Loans and receivables.

All financial assets are expected to be recovered within 12 months except where indicated.

Interest is recognised by applying the effective interest rate.

Impairment of financial assets

Financial assets are assessed for impairment at the end of each reporting period.

Financial liabilities

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).

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

Settlement of supplier payables is usually made within 30 days.

Significant accounting judgements and estimates

The relevant government bond rate has been used to discount non-current liabilities.

1. Managing Uncertainties

This section analyses how the Department of the Prime Minister and Cabinet manages financial risks within its operating environment.

1.1. Contingent Assets and Liabilities

Note 7.1A: Contingent assets and liabilities

Unquantifiable contingent liabilities - claims for damages and costs

Claims have been made against the Australian Government by former residents of the Retta Dixon Home in the Northern Territory. These claims are currently being assessed.

Accounting Policy

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

Note 7.1B: Administered contingent assets and liabilities

PM&C is not aware of any material administered quantifiable or unquantifiable contingent assets or liabilities as at 30 June 2018.

7.2 Financial Instruments

	2018		2017
	$'000		$'000
Note 7.2A: Categories of financial instruments
Financial assets
Loans and receivables
Cash and cash equivalents	1,910		2,976
Goods and services receivables (net)	11,623		3,448
Accrued revenue	4,056		3,787
Total loans and receivables	17,589		10,211
Total financial assets	17,589		10,211
Financial liabilities
Financial liabilities measured at amortised cost
Trade creditors and accruals	22,709		22,673
Grants	232		303
Total financial liabilities measured at amortised cost	22,941		22,976
Total financial liabilities	22,941		22,976

Note 7.2B: Net gains or losses on financial assets
Loans and receivables
Impairment	(16)		(153)
Reversal of impairment	76		-
Net gains/ (losses) on loans and receivables	60		(153)
Net gain/ (loss) on financial assets	60		(153)

Accounting Policy

Financial Assets

PM&C classifies its financial assets in the following categories:

(a) Held-to-maturity investments

(b) Available for sale financial assets

(c) Loans and receivables.

All financial assets are expected to be recovered within 12 months except where indicated.

Interest is recognised by applying the effective interest rate.

Impairment of financial assets

Financial assets are assessed for impairment at the end of each reporting period.

Financial liabilities

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).

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

Settlement of supplier payables is usually made within 30 days.

Significant accounting judgements and estimates

The relevant government bond rate has been used to discount non-current liabilities.

7.3 Administered – Financial Instruments

	2018		2017
	$'000		$'000
Note 7.3A: Categories of financial instruments
Financial assets
Held-to-maturity investments
Bank term deposits	2,798,741		2,612,110
Total held-to-maturity investments	2,798,741		2,612,110
Loans and receivables
Cash and cash equivalents	23,576		36,072
Loans to Australian Government entities	48,549		50,967
Goods and services receivable	17		7
Interest receivable	34,243		32,829
Grants receivable (net)	4,669		2,945
Total loans and receivables	111,054		122,820
Available for sale financial assets
Aboriginal Hostels Limited	149,556		146,332
Anindilyakwa Land Council	15,945		14,607
Australian Institute of Aboriginal and Torres Strait Islander Studies	37,919		-
Central Land Council	41,665		39,598
Indigenous Land Corporation	452,005		371,367
Indigenous Business Australia	1,415,737		1,334,810
National Australia Day Council Limited	790		1,137
Northern Land Council	11,346		21,966
Outback Stores Pty Ltd	41,617		41,686
Tiwi Land Council	2,796		1,283
Torres Strait Regional Authority	83,600		79,821
Wreck Bay Aboriginal Community Council	56,790		61,377
Total available for sale financial assets	2,309,766		2,113,984
Total financial assets	5,219,561		4,848,914
Financial liabilities
Financial liabilities measured at amortised cost
Trade creditors and accruals	3,967		6,505
Grants	48,197		41,791
Other payables	1,094		845
Total financial liabilities measured at amortised cost	53,258		49,141
Total financial liabilities	53,258		49,141

	2018		2017
	$000		$000
Note 7.3B: Net gains or losses on financial instruments
Financial assets
Held-to-maturity investments
Interest revenue	72,200		74,244
Net gains on held-to-maturity investments	72,200		74,244
Loans and receivables
Interest revenue	4,688		4,864
Reversal of impairment	948		1,498
Impairment	(2,814)		(8,632)
Net gains/ (losses) on loans and receivables	2,822		(2,270)
Net gain on financial assets	75,022		71,974

Accounting Policy

Financial assets

Investments

Investment activities are conducted in accordance with the requirements of section 58 of the PGPA Act. Investments are typically low risk and take the form of term deposits. The duration of the term deposits are usually for a term of three to 12 months.

The investment objective of PM&C is to comply with legislative obligations under the PGPA Act, the ALRA and the Aboriginal and Torres Strait Islander Act 2005. Investment practices are also governed by the investment policy of PM&C, which requires the management of the portfolio to respond to positive investment opportunities in the market so as to achieve the best possible returns for the account within the legislative framework.

The investment portfolio and bank accounts are managed to ensure sufficient funds are available for payments as required.

The asset allocation of the portfolio as at 30 June 2018 is 100% (2017: 100%) term deposits with Australian banks.

Loans and receivables

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, derecognition and amortisation are recognised through the Administered Schedule of Comprehensive Income.

8. Other Information

8.1 Restructuring

Restructuring 2017

PM&C had no restructuring activity during 2017.

Restructuring 2018

	AIATSIS1	Official Establishments2
	Education	Finance	Finance
	$'000	$'000	$'000
FUNCTION ASSUMED
Assets recognised
Investment in Corporate Commonwealth entities	39,974	-	-
Appropriation receivable	-	28	-
Property, plant and equipment	-	-	49,811
Total assets recognised	39,974	28	49,811
Liabilities recognised
Employee provisions	-	28	-
Total liabilities recognised	-	28	-
Net assets assumed	39,974	-	49,811
Expenses
Recognised by the receiving entity	-	-	126
Recognised by the losing entity	-	50	219
Total expenses	-	50	345

¹ The Australian Institute of Aboriginal and Torres Strait Islander Studies (AIATSIS) was transferred into the PM&C Portfolio following the Administrative Arrangements Order of 19 April 2018. As a result, an investment in AIATSIS was transferred from the Department of Education and Training (Education).

² Official Establishments, ownership and property management of the Prime Minister’s official residences was assumed from the Department of Finance (Finance) during the year following the Administrative Arrangements Order of 30 November 2017.

	National policy on cities1	Cyber policy and counter terrorism coordination2	Intelligence policy3	Reducing the burden of Government regulation4	Spatial data5
	DIRDC	DoHA	ONI	DJSB	DIIS
	$'000	$'000	$'000	$'000	$'000
FUNCTION RELINQUISHED
Assets relinquished
Appropriation receivable	1,192	1,261	430	148	161
Total assets relinquished	1,192	1,261	430	148	161
Liabilities relinquished
Employee provisions	1,192	1,345	459	162	161
Total liabilities relinquished	1,192	1,345	459	162	161
Net assets relinquished	-	(84)	(29)	(14)	-

¹ Responsibility for National policy on cities and population was relinquished to the Department of Infrastructure, Regional Development and Cities (DIRDC) following the Administrative Arrangements Order of 20 December 2017.

² Responsibility for Cyber policy and Counter terrorism co-ordination was relinquished to the Department of Home Affairs (DoHA) following the Administrative Arrangements Order of 20 December 2017.

³ Responsibility for Intelligence Policy was relinquished to the Office of National Intelligence (ONI) following a decision of the Prime Minister, effective 21 August 2017.

⁴ Reducing the burden of Government regulation was relinquished to the Department of Jobs and Small Business (DJSB) following the Administrative Arrangements Order of 20 December 2017.

⁵ Responsibility for the spatial data function was transferred to the Department of Industry, Innovation and Science (DIIS) following a decision of the Prime Minister, effective January 2018.

Other functions relinquished

Responsibility for the APS Data Skills and Capability Framework and data platforms was relinquished to the Digital Transformation Agency following a decision of the Prime Minister, effective 31 October 2017. No assets or liabilities were transferred.

Responsibility for the Independent National Security Legislation Monitor was relinquished to the Attorney General's Department following the Administrative Arrangements Order of 10 May 2018. Funding transfers for this function had not been finalised as at 30 June 2018.

Responsibility for the Cyber Security Advisor was relinquished to the Australian Signals Directorate following the Administrative Arrangements Order of 10 May 2018. Funding transfers for this function had not been finalised as at 30 June 2018.