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Aboriginals Benefit Account

Independent Auditor's Report

Statement by the Secretary and Chief Financial Officer

Statement of Comprehensive Income

Table 2.3.1: Statement of Comprehensive Income for the period ended 30 June 2019

Notes

2019

$'000

2018

$'000

NET COST OF SERVICES

Expenses

Payments to advisory committee members

104

102

Suppliers - services rendered

80

40

Grants

1.1A

10,292

20,240

Payments for township leases

1.1B

5,547

5,899

Payments to Land Councils for administrative purposes

1.1C

61,466

51,920

Distribution to Land Councils

1.1D

127,814

101,544

Impairment loss allowance on financial instruments

280

578

Other expenses

1.1E

2,725

3,298

Total expenses

208,308

183,621

Own-Source Income

Own-source revenue

Interest

1.2A

25,661

19,496

Lease rental income

1.2B

2,251

1,847

Resources received free of charge

1.2C

2,725

3,298

Return of grant funding

267

621

Total own-source revenue

30,904

25,262

Gains

Gain on realisation of investment

1.2D

-

-

Other gains

5

3

Total gains

5

3

Total own-source income

30,909

25,265

Net cost of services

177,399

158,356

Revenue from Government

1.2E

426,051

338,474

Surplus

248,652

180,118

Total comprehensive income

248,652

180,118

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

Statement of Financial Position

Table 2.4.1: Statement of Financial Position as at 30 June 2019

Notes

2019

$'000

2018

$'000

ASSETS

Financial Assets

Cash and cash equivalents

3.1

9,154

11,212

Trade and other receivables

2.1

15,659

10,440

Investments - term deposits

1,042,500

793,746

Total financial assets

1,067,313

815,398

Non-Financial Assets

Other non-financial assets

2.2

3,678

3,102

Total non-financial assets

3,678

3,102

Total assets

1,070,991

818,500

LIABILITIES

Payables

Office of township leasing administrative liabilities

742

1,095

Grants - non-profit organisations

-

295

Other payables

2.3

7,915

2,909

Total payables

8,657

4,299

Total liabilities

8,657

4,299

Net assets

1,062,334

814,201

EQUITY

Retained surplus

1,062,334

814,201

Total equity

1,062,334

814,201

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

Statement of Changes in Equity

Table 2.5.1: Statement of Changes in Equity for the Period ended 30 June 2019

Notes

2019

$'000

2018

$'000

TOTAL EQUITY - RETAINED EARNINGS

Opening balance

Balance carried forward from previous period

814,201

634,083

Other adjustments

(563)

-

Adjustment for changes in accounting policies

44

-

Adjusted opening balance

813,682

634,083

Comprehensive income

Surplus for the period

248,652

180,118

Total comprehensive income

248,652

180,118

Closing balance as at 30 June

1,062,334

814,201

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

Cash Flow Statement

Table 2.6.1: Cash Flow Statement for the period ended 30 June 2019

Notes

2019

$'000

2018

$'000

OPERATING ACTIVITIES

Cash received

Appropriations

429,608

337,701

Net GST received

858

2,647

Lease rental receipts

2,394

2,222

Total cash received

432,860

342,570

Cash used

Committee members

104

102

Suppliers

36

40

Grants

11,497

28,908

Payments for township leases

4,524

4,947

Payments to Land Councils for administrative purposes

61,466

51,920

Distributions to Land Councils

128,885

101,430

Total cash used

206,512

187,347

Net cash from operating activities

226,348

155,223

INVESTING ACTIVITIES

Cash received

Proceeds from realisation of investments

853,746

691,500

Interest on investments

20,348

17,901

Total cash received

874,094

709,401

Cash used

Investments

1,102,500

877,746

Total cash used

1,102,500

877,746

Net cash used by investing activities

(228,406)

(168,345)

Net decrease in cash held

(2,058)

(13,122)

Cash and cash equivalents at the beginning of the reporting period

11,212

24,334

Cash and cash equivalents at the end of the reporting period

3.1

9,154

11,212

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

Notes to and forming part of the Financial Statements

Overview

1. Financial Performance

1.1 Expenses

1.2 Own-Source Revenue and Gains

2. Financial Position

2.1 Financial Assets

2.2 Non-Financial Assets

2.3 Payables

3. Funding

3.1 Special Accounts

4. Managing Uncertainties

4.1 Quantifiable Contingent Assets and Liabilities

4.2 Financial Instruments

5. Other Information

5.1 Aggregate Assets and Liabilities

Overview

Basis of preparation of the financial statements

The Aboriginals Benefit Account’s (ABA) activities are classified as administered activities carried out by the Department of the Prime Minister and Cabinet (PM&C) on behalf of the Australian Government and are reported in PM&C's administered financial statements for the period 1 July 2018 to 30 June 2019. In addition to being consolidated into PM&C's financial statements, the ABA prepares separate audited financial statements as required by the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA).

The Minister for Finance has granted ABA an exemption under the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR). The exemption applies to the following requirements of the FRR:

  1. Sections 9, 32 and 33 of the FRR. The ABA is required to present its administered activities in departmental format, in accordance with current practice.
  2. Divisions 2, 3, 4 and 5 of Part 6 of the FRR to the extent that ABA has no appropriation transactions and balances other than through its special account.

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

New Australian Accounting Standards

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

The Australian Accounting Standards Board (AASB) released a new accounting standard AASB 9 to replace AASB 139. The ABA has adopted this new accounting standard to recognise Financial Assets at amortised cost.

Taxation

The ABA is exempt from all forms of taxation except Mining Withholding Tax (MWT), Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

MWT is payable in respect of payments made from royalty equivalents credited to the ABA pursuant to section 63 of the ALRA. In accordance with the Taxation Laws Amendment Act (No. 3) 1994, the rate of MWT payable in respect of the payments made from royalty equivalents credited to the ABA pursuant to section 63 of the ALRA, is 4% (2018: 4%).

GST is payable on purchases made by the ABA under subsection 64(4) and 64(6) of the ALRA. These amounts are recoverable from the Australian Taxation Office (ATO).

Compliance with statutory conditions for payments from the consolidated revenue fund

The Government monitors and assesses risks and decides on any appropriate action to respond to risks of expenditure not being consistent with constitutional or other legal requirements.

During 2018-19 PM&C reviewed the ABA’s exposure to the risk of not complying with statutory conditions on payments from appropriations, namely section 83 of the Constitution. The risk profile and internal controls to manage this risk continue to remain appropriate.

Total ABA cash expenditure for 2018-19 was $206.512 million. Three payments totalling $1.660 million made in 2018-19 from the ABA under section 64(3) of the ALRA contravened section 83 of the Constitution due to difficulties in precisely estimating mining royalties.

Payments are required to be made out of the ABA based on royalties received by the Northern Territory or Australian Governments. The contraventions occurred when the royalties upon which the payments were based had been estimated at a value greater than the eventual actual value. 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.

The payments were a technical contravention of section 83, despite the payments having been made in accordance with the requirements of section 64(3) of the ALRA. No overpayments have been recovered through reduction of subsequent payments, therefore the $1.660 million will be offset against future payments. The majority of the overpayments from previous years of $0.507 million were recovered during the year with the remaining $0.034 million to be offset against future payments.

Significant accounting judgements and estimates

No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities.

Events after the reporting period

On 26 May 2019, the Prime Minister announced that the Indigenous Affairs Group (IAG), part of PM&C as at 30 June, is to become an Executive Agency in its own right and will be named the National Indigenous Australians Agency (NIAA) from the 1 July 2019. At this date the ABA will move from PM&C to NIAA. The new agency will provide more autonomy and authority to ensure there is a coordinated approach across the Commonwealth to pursue the Government’s agenda for Indigenous Australians.

Related party disclosures

Related parties to the ABA are Key Management Personnel including the Minister for Indigenous Affairs, and other Australian Government entities. The Ministers remuneration and other benefits are set by the Remuneration Tribunal and are not paid by ABA. Given consideration to relationships with related entities, and transactions entered into during the reporting period by ABA, there are no related party transactions to be separately disclosed.

1. Financial Performance

This section analyses the financial performance of the Aboriginals Benefit Account for the year ended 30 June 2019.

1.1 Expenses

2019

2018

$'000

$'000

Note 1.1A: Grants

Private sector

Non-profit organisations

10,157

19,720

Stores Infrastructure Project

88

127

Mining Withholding Tax

47

393

Total grants

10,292

20,240

Accounting Policy

The ABA makes payments to or for the benefit of Aboriginals living in the Northern Territory under subsection 64(4) of the ALRA. MWT is payable on grant payments made from royalty equivalents credited to the ABA pursuant to section 63 of the ALRA.

MWT is not payable on grant payments made from other income.

Note 1.1B: Payments for township leases

Office of township leasing administrative expenses

2,787

2,787

Community entity administrative expenses

284

328

Township revenue returned

1,813

1,397

Amortisation of township introductory payments

663

1,387

Total payments for township leases

5,547

5,899

Office of the Executive Director Township Leasing

The Office of Township Leasing (OTL) is headed by the Executive Director of Township Leasing, a statutory appointment under the ALRA. The Executive Director of Township Leasing is responsible for managing, on behalf of the Australian Government, any township leases entered into with Indigenous communities in the Northern Territory as specified under section 19A of the ALRA. The OTL manages the head lease over the specified township and negotiates any sub-leasing to commercial entities, government agencies, community organisations and others.

Community Entity Township Leasing

Under section 3AAA of the ALRA the Minister is able to approve any organisation as a Commonwealth entity to hold a township lease. Government policy allows for a community entity representative of traditional owners and community members to be approved to hold and administer a section 19A township lease. Community entities may be provided with funding from the ABA at the direction of the Minister for the purpose of acquiring and administrating a township lease under section 64(4A) of the ALRA.

2019

$'000

2018

$'000

Note 1.1C: Payments to Land Councils for administrative purpose

Subsection 64(1) payments:

Northern Land Council

30,686

23,793

Mining Withholding Tax

1,279

991

Sub-total Northern Land Council

31,965

24,784

Central Land Council

19,688

18,376

Mining Withholding Tax

820

766

Sub-total Central Land Council

20,508

19,142

Tiwi Land Council

4,521

3,469

Mining Withholding Tax

188

145

Sub-total Tiwi Land Council

4,709

3,614

Anindilyakwa Land Council

4,113

4,205

Mining Withholding Tax

171

175

Sub-total Anindilyakwa Land Council

4,284

4,380

Total payments associated with land councils administration

61,466

51,920

Accounting Policy

Land Councils obtain funding on a workload basis in accordance with subsection 64(1) of the ALRA. Estimates for funding are submitted to the Minister for Indigenous Affairs for approval and are distributed to Land Councils on a quarterly basis during the year.

Note 1.1D: Distribution to Land Councils

Subsection 64(3) payments:

Northern Land Council

17,865

17,329

Mining Withholding Tax

744

722

Sub-total Northern Land Council

18,609

18,051

Central Land Council

18,342

15,037

Mining Withholding Tax

764

627

Sub-total Central Land Council

19,106

15,664

Anindilyakwa Land Council

86,495

65,116

Mining Withholding Tax

3,604

2,713

Sub-total Anindilyakwa Land Council

90,099

67,829

Total land councils distributions

127,814

101,544

Accounting Policy

In accordance with subsection 64(3) and 35(2) of the ALRA, 30% of the royalty equivalents, received in respect of mining on Aboriginal land, are paid to the Land Councils for distribution to Aboriginal associations, communities or groups, for the benefit of those Aboriginal people who are affected by mining operations.

Note 1.1E: Other expenses

2019

$'000

2018

$'000

Salaries and operating expenses1

2,725

3,298

Total other expenses

2,725

3,298

1 Expenses associated with the administration of the ABA were received from PM&C as resources received free of charge including remuneration of auditors.

1.2. Own-Source Revenue and Gains

OWN-SOURCE REVENUE

Note 1.2A: Interest

Term deposits

25,478

19,284

Interest bearing bank account

183

212

Total interest

25,661

19,496

Accounting Policy

Interest revenue is recognised using the effective interest method.

Note 1.2B: Lease rental income

Revenue lease receipt - Wurrumiyanga

902

797

Revenue lease receipt - Groote

841

723

Revenue lease receipt - Milikapiti

260

255

Revenue lease receipt - Wurankuwu

19

16

Revenue lease receipt - Pirlangimpi

176

56

Revenue lease receipt - Mutitjulu

13

-

Other

40

-

Total lease rental income

2,251

1,847

Accounting Policy

The ABA receives lease rental income for Township Head Leases in the Northern Territory. Lease rental income is recognised when received by the ABA (refer to Note 1.1B Payments for township leases).

Note 1.2C: Resources received free of charge

Salaries

2,660

3,234

Remuneration of auditors - financial statements audit

65

64

Total resources received free of charge

2,725

3,298

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.

The ABA reports a number of resources received free of charge in relation to PM&C expenses associated with management of the ABA account, oversight of ABA grants and the ABA Advisory Committee secretariat.

GAINS

Note 1.2D: Gain on realisation of investment

Investments

2019

$'000

2018

$'000

Proceeds from sale

853,746

691,500

Carrying value of assets sold

(853,746)

(691,500)

Total gain from sale of assets

-

-

REVENUE FROM GOVERNMENT

Note 1.2E: Revenue from Government

Appropriations

Special appropriations

426,051

338,474

Total revenue from Government

426,051

338,474

Accounting Policy

Amounts appropriated are recognised as revenue. Revenue from Government is not typically recognised by administered entities, however, the determination provided by the Minister for Finance in relation to the ABA requires disclosure of such amounts as revenue.

Royalties in respect of uranium and non-uranium mining on Aboriginal land are paid to the Australian Government, the Department of Industry, Innovation & Science and the Northern Territory Treasury (Royalty Branch), respectively. Following advice from these entities, drawdowns are made from the Official Public Account (OPA) to enable royalty equivalents to be credited to the ABA, in accordance with section 63 of the ALRA.

These receipts are credited to the ABA shortly after receipt of advice from the respective entity, which usually occurs in the week following payment of the royalties by mining companies to the entity.

2. Financial Position

This section analyses the Aboriginals Benefit Account’s assets used to conduct its operations and the operating liabilities incurred as a result.

2.1 Financial Assets

Note 2.1: Trade and other receivables

2019

$'000

2018

$'000

Other receivables

Interest

14,685

9,935

GST receivable from the ATO

61

209

Other

2,062

1,220

Total other receivables

16,808

11,364

Less impairment loss allowance

Other receivables

(1,149)

(924)

Total impairment loss allowance

(1,149)

(924)

Total trade and other receivables (net)

15,659

10,440

2.2 Non-Financial Assets

Note 2.2: Other non-financial assets

Prepayments – subsection 64(3)

1,766

528

Prepayments – subsection 64(4A)

1,912

2,574

Total other non-financial assets

3,678

3,102

No indicators of impairment were found for other non-financial assets.

2.3 Payables

Note 2.3: Other payables

Royalty equivalent overpayment

5,885

1,760

Township leasing payable

1,808

1,094

Other

222

55

Total other payables

7,915

2,909

3. Funding

This section identifies the Aboriginals Benefit Account funding structure.

3.1 Special Accounts

Aboriginals Benefit Account1

2019

2018

$'000

$'000

Balance brought forward from previous period

11,212

24,334

Increases

Appropriation credited to special account

429,608

337,701

Investments realised

853,746

691,500

Other receipts

22,742

20,123

Total increases

1,306,096

1,049,324

Available for payments

1,317,308

1,073,658

Decreases

Payments made

(205,654)

(184,700)

PGPA Act section 58 investments

(1,102,500)

(877,746)

Total decreases

(1,308,154)

(1,062,446)

Total balance carried to the next period

9,154

11,212

Balance represented by:

Cash held in entity bank account

9,154

11,212

Total balance carried to the next period

9,154

11,212

1 Appropriation: 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 monies derived from mining operations on Aboriginal land in the Northern Territory.

4. Managing uncertainties

This section analyses how the Aboriginals Benefit Account manages financial risks within its operating environment.

4.1 Contingent Assets and Liabilities

PM&C, on behalf of ABA, is not aware of any material quantifiable or unquantifiable contingent assets or liabilities as at the signing date that would require disclosure in the financial statements.

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 settlement is greater than remote

4.2. Financial Instruments

2019

2018

$'000

$'000

Note 4.2A: Categories of financial instruments

Financial assets under AASB 139

Held-to-maturity investments:

Term deposits

793,746

Total held-to-maturity investments

793,746

Loans and receivables

Cash and cash equivalents

11,212

Interest receivable

9,935

Other receivables (net)

296

Total loans and receivables

21,443

Total financial assets

815,189

Financial assets under AASB 9

Financial assets at amortised cost

Term deposits

1,042,500

Cash and cash equivalents

9,154

Interest receivable

14,685

Other receivables (net)

913

Total financial assets at amortised cost

1,067,252

Total financial assets

1,067,252

Financial liabilities

Financial liabilities measured at amortised cost

Office of township leasing administrative liabilities

742

1,095

Grants payables – non-profit organisations

-

295

Other payables

1,808

1,094

Total financial liabilities measured at amortised cost

2,550

2,484

Total financial liabilities

2,550

2,484

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

Accounting Policy

Financial Assets

The ABA first adopted AASB 9 Financial Instruments on 1 July 2018. Upon initial application, financial assets previously recognised as loans and receivables and investments held to maturity under AASB 139 Financial Instruments were reclassified to financial assets measured at amortised cost. Adjustments to the carrying amounts upon initial application were recognised as adjustments for changes in accounting policies within the opening balance for retained earnings in the statement of changes in equity.

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 as administrators for ABA is to ensure that ABA complies with legislative obligations under the PGPA Act and the ALRA; and that ABA maintains and preserves its capital base.

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

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 asset allocation of the portfolio as at 30 June 2019 is 100% (2018: 100%) with Australian banks.

Effective Interest Method

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

Income is recognised on an effective interest rate basis except for financial assets that are recognised at fair value through profit and loss.

Impairment of Financial Assets

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses. Using the general approach, the loss allowance is based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12‐month expected credit losses if risk has not increased. The simplified approach for trade and contract receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

Financial Liabilities

Other Financial Liabilities (at amortised cost)

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

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

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

AASB 139 original

AASB 9 original

AASB 139 carrying amount at 1 July 2018

AASB 9 carrying amount at 1 July 2018

Financial assets class

Notes

classification

classification

$'000

$'000

Term deposits

Held-to-maturity investments

Amortised Cost

793,746

793,746

Cash and cash equivalents

Loans and receivables

Amortised Cost

11,212

11,212

Interest receivable

2.1A

Loans and receivables

Amortised Cost

9,935

9,935

Other receivables (net)

2.1A

Loans and receivables

Amortised Cost

296

340

Total financial assets

815,189

815,233

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

AASB 139 carrying amount at 1 July 2018

Reclassification

AASB 9 carrying amount at 1 July 2018

Financial assets class

$'000

$'000

$'000

Financial assets at amortised cost

Held-to-maturity investments

Term deposits

793,746

-

793,746

Loans and receivable

Cash and cash equivalents

11,212

-

11,212

Interest receivable

9,935

-

9,935

Other receivables (net)

296

44

340

Total financial assets

815,189

44

815,233

Note 4.2B: Net gains or losses on financial assets

2019

$'000

2018

$'000

Financial assets at amortised cost

Interest revenue

25,661

19,496

Other gain

5

3

Impairment

(280)

(578)

Net gain on financial assets at amortised cost

25,386

18,921

Net gain on financial assets

25,386

18,921

The above net gain is from financial assets that are not recognised at fair value through profit and loss.

Accounting Policy

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

5. Other information

5.1. Aggregate Assets and Liabilities

Note 5.1A: Aggregate Assets and Liabilities

2019

$'000

2018

$'000

Assets expected to be recovered in:

No more than 12 months

1,068,360

815,343

More than 12 months

2,631

3,157

Total assets

1,070,991

818,500

Liabilities expected to be settled in:

No more than 12 months

7,753

3,752

More than 12 months

904

547

Total liabilities

8,657

4,299