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Notes to and forming part of the Financial Statements

For the period ended 30 June 2020

Overview

1. Departmental Financial Performance

1.1. Expenses

1.2. Own-Source Revenue and Gains

2. Income and Expenses Administered on Behalf of Government

2.1. Administered – Expenses

2.2. Administered – Income

3. Departmental Financial Position

3.1. Financial Assets

3.2. Non-Financial Assets

3.3. Payables

3.4. Interest Bearing Liabilities

3.5. Make Good Provisions

4. Assets and Liabilities Administered on Behalf of Government

4.1. Administered – Financial Assets

4.2. Administered – Non-Financial Assets

4.3. Administered – Payables

4.4. Administered – Interest Bearing Liabilities

5. Funding

5.1. Appropriations

5.2. Special Accounts

6. People

6.1. Employee Provisions

6.2. Key Management Personnel Remuneration

6.3. Related Party Disclosures

7. Managing Uncertainties

7.1. Contingent Assets and Liabilities

7.2. Financial Instruments

7.3. Administered – Financial Instruments

8. Other Information

8.1. Aggregate Assets and Liabilities

8.2. Restructuring

Overview

Objectives of the Department of Prime Minister and Cabinet

The Department of the Prime Minister and Cabinet (PM&C) is a not-for-profit Australian Government controlled entity for the purposes of preparing the financial statements. The objective of the Department is to provide policy advice and support to the Prime Minster, the Cabinet, Portfolio Ministers and Assistant Ministers on matters that are at the forefront of public and government administration.

During 2019-20, the Prime Minister announced the creation of two new functions to be based in the Department. The National Bushfire Recovery Agency was announced on 6 January 2020 to lead and coordinate a national response to rebuilding communities affected by bushfires across large parts of Australia. On 25 March 2020, a National COVID-19 Commission (NCC) was created to coordinate advice to the Australian Government on actions to anticipate and mitigate the economic and social effects of the global coronavirus pandemic. Both functions are included in the 2019-20 PM&C Financial Statements. In addition, Old Parliament House was transferred from the then Communications and the Arts portfolio to the PM&C portfolio following amendments to the Administrative Arrangements Order issued on 8 August 2019.

Following the Executive Order signed by the Governor-General on 29 May 2019 establishing the National Indigenous Australians Agency (NIAA) on 1 July 2019, Indigenous Affairs functions (Outcome 2) were transferred to NIAA. This has resulted in a significant change to the balances compared to original budget and prior year. The Department is structured to meet one outcome as outlined below:

Outcome 1: Provide high quality policy advice and support to the Prime Minister, the Cabinet, Portfolio Ministers and Assistant Ministers including through the coordination of government activities, policy development and program delivery.

Basis of preparation of the financial statements

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

The financial statements have been prepared in accordance with:

  • Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR); and
  • 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.

PM&C has assessed the impact of COVID-19 pandemic on the balances included in its financial statements. The fair value of its land, buildings, property, plant and equipment and leasehold improvements was assessed due to the valuation uncertainty created by the COVID-19 pandemic. Further information is included in the accounting policy for Note 3.2 Non-financial Assets, Note 4.1C Investments on Corporate Commonwealth entities and companies and Note 4.2 Administered – Non-financial Assets. PM&C has concluded that COVID-19 has not had a material impact on the fair value of these assets.

Taxation

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 standards have been adopted earlier than the application date as stated in the standard.

AASB 16 Leases and AASB15/1058 are applicable to the current reporting period and the financial impact is recorded in the financial statements for the period ended 30 June 2020. The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

Standard/ Interpretation

Nature of change in accounting policy, transitional provisions, and adjustment to financial statements

AASB 15 Revenue from Contracts with Customers / AASB 2016-8 Amendments to Australian Accounting

Standards – Australian Implementation Guidance for Not-for-Profit Entities and AASB 1058 Income of Not-For-Profit Entities

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance. The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

AASB 1058 is relevant in circumstances where AASB 15 does not apply. AASB 1058 applies to transactions where the consideration to acquire an asset is significantly less than fair value principally to enable the entity to further its objectives, and where volunteer services are received.

The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

AASB 16 Leases

AASB 16 became effective on 1 July 2019.

This new standard has replaced AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation 115 Operating Leases—Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

AASB 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. AASB 16 substantially carries forward the lessor accounting in AASB 117, with the distinction between operating leases and finance leases being retained.

The details of the changes in accounting policies, transitional provisions and adjustments are disclosed below and in the relevant notes to the financial statements.

Application of AASB 15 Revenue from Contracts with Customers / AASB 1058 Income of Not-For-Profit Entities

PM&C adopted AASB 15 and AASB 1058 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under the various applicable AASBs and related interpretations.

Under the new income recognition model, PM&C shall first determine whether an enforceable agreement exists and whether the promises to transfer goods or services to the customer are ‘sufficiently specific’. If an enforceable agreement exists and the promises are ‘sufficiently specific’ (to a transaction or part of a transaction), PM&C applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, PM&C shall consider whether AASB 1058 applies.

In relation to AASB 15, PM&C elected to apply the new standard to all new and uncompleted contracts from the date of initial application. PM&C is required to aggregate the effect of all of the contract modifications that occur before the date of initial application.

Application of AASB 16 Leases

PM&C adopted AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 2019 is not restated, that is, it is presented as previously reported under AASB 117 and related interpretations.

PM&C elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under AASB 117 were not reassessed. The definition of a lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.

AASB 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. PM&C applied the following practical expedients when applying AASB 16 to leases previously classified as operating leases under AASB 117:

  • Applied a single discount rate to a portfolio of leases with reasonably similar characteristics;
  • Excluded initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if AASB 16 had been applied since the commencement date;
  • Relied on previous assessments on whether leases are onerous as opposed to preparing an impairment review under AASB 136 Impairment of assets as at the date of initial application; and
  • Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.

As a lessee, PM&C previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under AASB 16, PM&C recognises right-of-use assets and lease liabilities for most leases. However, PM&C has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.

On adoption of AASB 16, PM&C recognised right-of-use assets and lease liabilities in relation to leases of office space and motor vehicles, which had previously been classified as operating leases.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using PM&C’s incremental borrowing rate as at 1 July 2019. PM&C’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions.

The right-of-use assets were measured as follows:

  1. Office space: measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
  2. All other leases: the carrying value that would have resulted from AASB 16 being applied from the commencement date of the leases, subject to the practical expedients noted above.

Impact on transition

On transition to AASB 16, PM&C recognised additional right-of-use assets and additional lease liabilities, recognising the reversal of lease incentives, recognised under the old AASB 117 standard, in retained earnings. The impact on transition is summarised below:

1 July 2019

Departmental

$'000

Right-of-use assets - property, plant and equipment

123,276

Reduce lease prepayments

-657

Lease liabilities

122,619

Reduce lease incentives liabilities

-13,720

Reduce straight line provision

-8,349

Retained earnings

22,069

The following table reconciles the Departmental minimum lease commitments disclosed in PM&C's 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

1 July 2019

$'000

Minimum operating lease commitment at 30 June 2019

318,238

Less: short-term leases not recognised under AASB 16

-264

Less: Lease commitments transferred to NIAA

-182,714

Undiscounted lease payments

135,260

Less: effect of discounting using the incremental borrowing rate as at the date of initial application

-11,984

Less: lease prepayments

-657

Lease liabilities recognised at 1 July 2019

122,619

Administered

1 July 2019

$'000

Right-of-use assets - property, plant and equipment

1,533

Reduce lease prepayments

-31

Lease liabilities

1,502

Reduce straight line provision

-1

Retained earnings (Administered reconciliation schedule)

1

The following table reconciles the Administered minimum lease commitments disclosed in PM&C's 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

1 July 2019

$'000

Minimum operating lease commitment at 30 June 2019

2,142

Less: short-term leases not recognised under AASB 16

-208

Less: lease commitments transferred to NIAA

-368

Undiscounted lease payments

1,566

Less: effect of discounting using the incremental borrowing rate as at the date of initial application

-33

Less: lease prepayments

-31

Lease liabilities recognised at 1 July 2019

1,502

Events after the reporting period

On 15 June 2020, the Prime Minister announced the Deregulation Taskforce will be brought into PM&C from the Department of the Treasury. This will further drive a whole-of-government approach to regulatory policy. The Taskforce has been tasked with revitalising Australia’s regulatory reform and deregulation agenda. The date of effect for this transfer is 1 July 2020.

1. Departmental Financial Performance

This section analyses the financial performance of the Department of the Prime Minister and Cabinet for the period ended 30 June 2020.

1.1 Expenses

2020

2019

$'000

$'000

Note 1.1A: Employee benefits

Wages and salaries

92,680

189,372

Superannuation

Defined contribution plans

9,987

18,919

Defined benefit plans

6,481

17,006

Leave and other entitlements

11,558

33,551

Separation and redundancies

1,715

2,705

Other

702

3,066

Total employee benefits

123,123

264,619

Note 1.1B Suppliers

Goods and services supplied or rendered

Consultants, legal, contractors and secondees

49,307

51,817

Equipment, repairs and maintenance

440

6,583

General expenses

9,026

12,863

Venue hire

120

443

Office accommodation, facility management and security

5,988

5,826

Information, communication and technology

28,880

30,976

Travel

2,578

11,020

Total goods and services supplied or rendered

96,339

119,528

Goods supplied

3,224

7,975

Services rendered

93,115

111,553

Total goods and services supplied or rendered

96,339

119,528

Other suppliers

Operating lease rentals1

0

34,259

Short-term leases

264

0

Workers compensation expenses

641

2,521

Total other supplier expenses

905

36,780

Total suppliers

97,244

156,308

1 PM&C applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

The above lease disclosures should be read in conjunction with the accompanying notes 1.1C, 1.2C, and 3.2.

Accounting Policy

Short-term leases and leases of low-value assets

PM&C has elected not to recognise right-of-use assets and lease liabilities for short-term leases of assets that have a lease term of 12 months or less and leases of low-value assets (less than $10,000). PM&C recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

2020

2019

$'000

$'000

Note 1.1C: Finance costs

Unwinding of discount on make good

0

7

Interest on lease liabilities1

1,563

0

Total finance costs

1,563

7

1 PM&C has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

The above lease disclosures should be read in conjunction with the accompanying notes 1.1B, 1.2C, and 3.2.

Note 1.1D: Losses from asset sales

Property, plant and equipment

Proceeds from sale

0

1,238

Carrying value of asset sold

0

-1,270

Selling expense

0

-10

Total losses from asset sales

0

42

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

2020

2019

$'000

$'000

Own-source revenue

Note 1.2A: Revenue from contracts with customers

Revenue from contracts with customers

61,507

19,078

Total revenue from contracts with customers

61,507

19,078

Disaggregation of revenue from contracts with customers

Major product / service line:

Delivery of enabling services

53,779

0

Cost recovery

7,728

0

61,507

0

Type of customer:

Australian Government entities (related parties)

58,578

0

Non-government entities

2,929

0

61,507

0

Timing of transfer of goods and services:

Over time

61,507

0

61,507

0

Accounting Policy

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

Revenue from Memorandum of Understanding (MoU) agreements between PM&C and other related parties are recognised as per AASB 15 and revenue from appropriations & resources received free of charge are recognised as per AASB1058.

The principal activity from which the PM&C generates its revenue is delivery of enabling services and its performance obligations are satisfied over time.

The transaction price is the total amount of consideration to which PM&C expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

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

5,821

4,077

Volunteer services

1,149

0

Other

202

477

Total resources received free of charge

7,172

4,554

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.

On the initial recognition of volunteer services as an asset or an expense, PM&C recognises any related amounts in accordance with the relevant standard.

Note 1.2C: Other gains

Gain on early termination of lease

0

80

Reversal of impairment

777

9

Reversal of make good provision

0

10

Total other gains

777

99

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.

For the period ended 30 June 2020

2.1 Administered – Expenses

2020

2019

$'000

$'000

Note 2.1A: Employee benefits

Wages and salaries

1,158

1,083

Superannuation

Defined contribution plans

125

140

Defined benefit plans

52

52

Leave and other entitlements

90

240

Total employee benefits

1,425

1,515

Note 2.1B: Suppliers

Goods and services supplied or rendered

Outsourced providers, contractors and consultants

602

47,622

Equipment, repairs and maintenance

551

721

General expenses

713

7,455

Travel

1,662

2,194

Information, communication and technology

115

4,006

Total goods and services supplied or rendered

3,643

61,998

Goods supplied

659

1,172

Services rendered

2,984

60,826

Total goods and services supplied or rendered

3,643

61,998

Other suppliers

Workers compensation expenses

13

13

Total other supplier expenses

13

13

Total suppliers

3,656

62,011

2020

2019

$'000

$'000

Note 2.1C: Grants

Public sector

Australian Government entities

17,437

87,203

Local Governments

0

78,052

State and Territory Governments

0

65,781

Private sector

Non-profit organisations

3,392

859,651

Commercial entities

160

191,164

Total grants

20,989

1,281,851

Program 1.1 - Prime Minister and Cabinet

20,989

18,608

Program 2.1 - Jobs, Land and Economy

0

626,083

Program 2.2 - Children and Schooling

0

314,124

Program 2.3 - Safety and Wellbeing

0

246,665

Program 2.4 - Culture and Capability

0

46,438

Program 2.5 - Remote Australia Strategy

0

29,933

Total grants

20,989

1,281,851

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. Please refer to the Administered Budget Commentary for further information.

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

Note 2.1D: Finance costs

Service costs

0

3,547

Interest on lease liabilities

14

0

Unwinding of discount

0

331

Total finance costs

14

3,878

The above lease disclosures should be read in conjunction with the accompanying note 4.2.

Note 2.1E: Payments associated with Land Councils

Payments associated with Land Councils administration

0

59,008

Land Councils' distributions

0

122,703

Total payments associated with Land Councils

0

181,711

Note 2.1F: Payments to Corporate Commonwealth entities and companies

Aboriginal Hostels Limited

36,241

36,323

Australian Institute of Aboriginal and Torres Strait Islander Studies

20,371

20,388

Indigenous Business Australia

9,538

9,762

Indigenous Land and Sea Corporation

8,572

8,749

Old Parliament House

8,565

-

Torres Strait Regional Authority

35,897

35,883

Total payments to Corporate Commonwealth entities and companies

119,184

111,105

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

2020

2019

$'000

$'000

Note 2.2A: Interest

Interest on investments

0

57,377

Interest on loans

0

1,153

Unwinding of discount on concessional loans

0

2,172

Total interest

0

60,702

Note 2.2B: Other revenue

Return of grant funding

2

12,118

Other

681

94

Lease rental income

0

2,251

Total other revenue

683

14,463

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.

For the period ended 30 June 2020

3.1 Financial Assets

2020

2019

$'000

$'000

Note 3.1: Trade and other receivables

Goods and services receivables

Goods and services

10,134

5,752

Total goods and services receivables

10,134

5,752

Appropriations receivables

Existing programs

19,578

86,599

Total appropriations receivable

19,578

86,599

Other receivables

Statutory receivables

1,981

2,471

Other

0

3,000

Total other receivables

1,981

5,471

Total trade and other receivables (gross)

31,693

97,822

Less impairment loss allowance

Goods and services

-35

-828

Total impairment loss allowance

-35

-828

Total trade and other receivables (net)

31,658

96,994

3.2 Non-Financial Assets

Note 3.2: Reconciliation of the opening and closing balances of property, plant and equipment and intangibles

Land

Buildings

Leasehold improvements

Plant and equipment

Computer software internally developed

Computer software purchased

Total

$’000

$’000

$’000

$’000

$’000

$’000

$’000

As at 1 July 2019

Gross book value

0

0

0

0

29,140

3,191

32,331

Fair value

10,336

42,132

55,177

23,761

0

0

131,406

Work in progress

0

495

15,543

2,553

17,645

1,578

37,814

Accumulated depreciation/amortisation and impairment

0

-5,616

-16,558

-10,239

-14,068

-2,773

-49,254

Total as at 1 July 2019

10,336

37,011

54,162

16,075

32,717

1,996

152,297

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

0

123,214

0

62

0

0

123,276

Other adjustments1

0

0

0

-492

0

0

-492

Adjusted total as at 1 July 2019

10,336

160,225

54,162

15,645

32,717

1,996

275,081

Additions

Purchase

0

9

6,330

2,584

4,546

118

13,587

Right-of-use assets

0

2,909

0

0

0

0

2,909

Revaluations and impairments recognised in other comprehensive income

0

0

1,246

-707

0

0

539

Restructuring

-10,336

-36,443

-23,533

-4,840

-10,107

-1,428

-86,687

Depreciation and amortisation

0

0

-2,145

-2,906

-4,784

-169

-10,004

Depreciation on right-of-use assets

0

-9,549

0

-25

0

0

-9,574

Write-down and impairments recognised in net cost of services (expense)

0

-72

0

-119

-131

0

-322

Total as at 30 June 2020

0

117,079

36,060

9,632

22,241

517

185,529

Total as at 30 June 2020 represented by

Gross book value

0

0

0

0

27,420

614

28,034

Fair value

0

129,735

48,452

17,156

0

0

195,343

Work in progress

0

505

5,870

995

8,479

481

16,330

Accumulated depreciation, amortisation and impairment

0

-13,161

-18,262

-8,519

-13,658

-578

-54,178

Total as at 30 June 2020

0

117,079

36,060

9,632

22,241

517

185,529

Carrying amount of right-of-use assets

0

116,574

0

37

0

0

116,611

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

There are no contractual commitments for the acquisition of IT equipment and other capital works payable in 2020 (2019: $0.295 million).

1 Relates to assets recognised by shared services clients.

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.

Leased Right-of-Use (ROU) Assets

Leased 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 by Commonwealth lessees as separate asset classes to corresponding assets owned outright, but included in the same column as where the corresponding underlying assets would be presented if they were owned.

On initial adoption of AASB 16 PM&C has adjusted the ROU assets at the date of initial application by the amount of any provision for onerous leases recognised immediately before the date of initial application. Following initial application, an impairment review is undertaken for any right-of-use lease asset that shows indicators of impairment and an impairment loss is recognised against any right-of-use lease asset that is impaired.

Revaluations

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

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit.

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

Significant accounting judgements and estimates

In 2019-20, PM&C procured the services of independent valuation experts (Opteon) to perform a valuation of departmental property, plant and equipment and leasehold improvements as at 30 June 2020.

The experts provided written assurance that the models developed to value assets are in compliance with accounting and valuation standards and identified that currently there is significant valuation uncertainty due to the COVID-19 pandemic impacting markets. However, whilst this uncertainty exists the valuations also took into consideration that real estate markets and in particular certain niches in the market (unique properties such as those held by PM&C) are less volatile.

The valuation methodologies used (the market approach and the depreciated replacement cost method) have reflected current market conditions and the impact of COVID-19. The department currently has no assets held for sale which may be impacted by the market uncertainty.

Due to the valuation uncertainty, PM&C will conduct a revaluation in 2020-21 to ensure the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date.

Accounting Policy (continued)

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 currently has zero assets held for sale. (2019: $1.01 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 2020.

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.

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 (2019: 3 to 50 years)

Leasehold improvements

Lease term (2019: Lease term)

Plant and equipment

1 to 25 years (2019: 1 to 25 years)

Intangibles

1 to 5 years (2019: 1 to 5 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.

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

2020

2019

$'000

$'000

Note 3.3: Other payables

Salaries, wages and superannuation

1,954

1,721

Separation and redundancies payable

0

292

Unearned income

606

1,854

Lease liability

0

14,156

Lease incentive1

0

22,767

Other

2,988

2,345

Total other payables

5,548

43,135

1 PM&C has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

3.4 Interest Bearing Liabilities

2020

2019

$'000

$'000

Note 3.4: Leases

Lease liabilities1

Buildings

119,455

0

Plant and equipment

37

0

Total finance leases

119,492

0

1 PM&C has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

Total cash outflow for leases for the year ended 30 June 2020 was $7.599 million.

Accounting Policy

Refer Overview section for accounting policy on leases.

3.5 Make Good Provisions

Make good provision

Total

$’000

$’000

As at 1 July 2019

642

642

Transferred on restructure

-642

-642

Total as at 30 June 2020

0

0

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.

For the period ended 30 June 2020

4.1 Administered - Financial Assets

2020

2019

$'000

$'000

Note 4.1A: Cash and cash equivalents

Cash on hand or on deposit

1,342

1,282

Aboriginals Benefit Account - Special Account

0

9,154

Cash held in the Official Public Account - Special Account

0

28,626

Total cash and cash equivalents

1,342

39,062

Note 4.1B: Trade and other receivables

Goods and services receivables

Goods and services receivable

0

16

Total goods and services receivables

0

16

Advances and loans

Loans to Australian Government entities

0

23,624

Total advances and loans

0

23,624

Other receivables

Statutory receivables

73

15,522

Interest receivable

0

14,685

Grants receivable

146

23,182

Other

0

911

Total other receivables

219

54,300

Total trade and other receivables (gross)

219

77,940

Less impairment loss allowance

Grants receivables

-146

-21,488

Total impairment loss allowance

-146

-21,488

Total trade and other receivables (net)

73

56,452

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.

All loans were transferred to the National Indigenous Australians Agency (NIAA).

2020

2019

$'000

$'000

Note 4.1C: Investments in Corporate Commonwealth entities and companies

Equity interest in

Aboriginal Hostels Limited

143,347

149,272

Anindilyakwa Land Council

16,512

15,468

Australian Institute of Aboriginal and Torres Strait Islander Studies

44,254

41,087

Central Land Council

44,091

42,168

Indigenous Land and Sea Corporation

455,486

479,132

Indigenous Business Australia

1,552,467

1,499,150

National Australia Day Council Limited

932

797

Northern Land Council

31,431

11,516

Outback Stores Pty Ltd

41,120

41,983

Tiwi Land Council

7,144

4,704

Torres Strait Regional Authority

87,357

85,084

Wreck Bay Aboriginal Community Council

57,547

56,938

Old Parliament House

115,410

-

Total investments in Corporate Commonwealth entities and companies

2,597,098

2,427,299

All investments in Corporate Commonwealth entities and companies are expected to be recovered in more than 12 months.

Investment in Corporate Commonwealth Entities

The Australian Government holds a 100% equity interest in the following administered investments:

Aboriginal Hostels Limited

Provides temporary accommodation to Aboriginal and Torres Strait Islander people through a national network of hostels.

Australian Institute of Aboriginal and Torres Strait Islander Studies

The Australian Institute of Aboriginal and Torres Strait Islander Studies (AIATSIS) is a research, collections and publishing organisation that promotes knowledge and understanding of Aboriginal and Torres Strait Islander cultures, traditions, languages and stories, past and present.

Land Councils

The Land Councils include:

  • Anindilyakwa Land Council
  • Central Land Council
  • Northern Land Council
  • Tiwi Land Council; and
  • Wreck Bay Aboriginal Community Council

The Land Councils represent the Aboriginal people living in the area of the Land Council in the management of Aboriginal land in the area, and in relation to legislation concerning that land. The Land Councils also consult and protect the interests of traditional owners and take measures to assist in the protection of sacred sites in the area of the Land Council. Wreck Bay Aboriginal Community Council holds title to land and provides services to the Aboriginal community of Jervis Bay.

Indigenous Land and Sea Corporation

The Indigenous Land and Sea Corporation provides economic, environmental, social and cultural benefits for Aboriginal persons and Torres Strait Islanders by assisting in the acquisition and management of land, fresh water and salt water.

Indigenous Business Australia

Indigenous Business Australia assists and enhances Aboriginal and Torres Strait Islander self-management and economic self-sufficiency, and aims to advance the commercial and economic interests of Aboriginal and Torres Strait Islander people by accumulating and using a substantial capital asset for their benefit.

National Australia Day Council Limited

Promotes national pride, active citizenship and the observance and celebration of Australia Day; administration of the Australian of the Year awards, which includes awards for the Young Australian of the Year, the Senior Australian of the Year and Australia’s Local Hero; distribution of grants to State and Territory Australia Day Councils; and provision of recommendations and advice to the Australian Government on all matters relating to year-round national pride activities.

Old Parliament House

The Old Parliament House promotes an enhanced appreciation and understanding of the political and social heritage of Australia for members of the public through activities including the conservation and upkeep of, and the provision of access to, Old Parliament House and the development of its collection, exhibitions and educational programs.

Outback Stores Pty Ltd

Outback Stores Pty Ltd improves access to affordable, healthy food for Indigenous communities, particularly in remote areas, through providing food supply and store management and support services.

Torres Strait Regional Authority

The Torres Strait Regional Authority formulates, implements and monitors the effectiveness of programs for Aboriginal and Torres Strait Islander people living in the Torres Strait and Northern Peninsula Area.

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 are classified as fair value through other comprehensive income and are measured at their fair value as at 30 June 2020. 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.

Corporate Commonwealth Entities and Companies are subject to prevailing economic conditions which include the impact of the COVID-19 pandemic. Due to the pandemic occurring late in this financial year, it has not caused any significant impacts to the amounts recorded for assets and liabilities of the Corporate Commonwealth Entities as at 30 June 2020. However, it should be noted that the full and ongoing impact from COVID-19 on the operations of the Corporate Commonwealth Entities and Companies into the future is at present unknown.

4.2 Administered–Non-Financial Assets

Note 4.2: Reconciliation of the opening and closing balances of plant and equipment

Land

Buildings

Leasehold improvements

Plant and equipment

Total

$’000

$’000

$’000

$’000

$’000

As at 1 July 2019

Fair value

44,000

5,900

97

758

50,755

Work in progress

0

0

76

148

224

Accumulated depreciation and impairment

0

0

-97

-232

-329

Total as at 1 July 2019

44,000

5,900

76

674

50,650

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

0

1,533

0

0

1,533

Adjusted total as at 1 July 2019

44,000

7,433

76

674

52,183

Additions

Purchases

0

58

425

275

758

Right-of-use assets

0

212

0

0

212

Revaluations recognised in other comprehensive income

-589

71

140

-2

-380

Depreciation expense

0

-236

-114

-94

-444

Depreciation on right-of-use assets

0

-428

0

0

-428

Reclassifications

0

7

107

-165

-51

Write-down and impairments

-161

0

0

-122

-283

Total as at 30 June 2020

43,250

7,117

634

566

51,567

Total as at 30 June 2020 represented by

Fair value

43,250

7,781

731

1,238

53,000

Work in progress

0

0

0

102

102

Accumulated depreciation and impairment

0

-664

-97

-774

-1,535

Total as at 30 June 2020

43,250

7,117

634

566

51,567

Carrying amount of right-of-use assets

0

1,317

0

0

1,317

Accounting Policy

Revaluation

In 2019-20, PM&C procured the services of independent valuation experts (JLL) to perform a desktop valuation of administered land, buildings, property, plant and equipment and leasehold improvements assets as at 30 June 2020.

The experts provided written assurance that the models developed to value assets are in compliance with accounting and valuation standards and identified that currently there is significant valuation uncertainty due to the COVID-19 pandemic impacting markets. However, whilst this uncertainty exists the valuations also took into consideration that real estate markets and in particular certain niches in the market (unique properties such as those held by PM&C) are less volatile.

The valuation methodologies used (the market approach and the depreciated replacement cost method) have reflected current market conditions and the impact of COVID-19. The department currently has no assets held for sale which may be impacted by the market uncertainty.

Due to the valuation uncertainty, PM&C will conduct a revaluation in 2020-21 to ensure the carrying amounts of assets do not differ materially from the assets’ fair values as at the reporting date.

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 (2019: 22 to 30 years)

Leasehold improvements

Lease term (2019: Lease term)

Plant and equipment

5 to 114 years (2019: 5 to 114 years)

4.3 Administered–Payables

2020

2019

$'000

$'000

Note 4.3A: Grants

Public sector

Australian Government entities (related parties)

0

21

Local Governments

0

220

State and Territory Governments

0

13

Private sector

Commercial entities

0

236

Non-profit organisations

0

23,474

Total grants

0

23,964

Note 4.3B: Other payables

Office of Township Leasing payables

0

1,809

Salaries, wages and superannuation

24

0

Other

413

1,074

Total other payables

437

2,883

4.4 Administered – Interest Bearing Liabilities

Note 4.4: Leases

Lease Liabilities1

Buildings

1,314

0

Total finance leases

1,314

0

1 PM&C has applied AASB 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under AASB 117.

Total cash outflow for leases for the year ended 30 June 2020 was $0.37 million.

5. Funding

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

For the period ended 30 June 2020

5.1 Appropriations

Note 5.1A: Departmental annual and unspent appropriations ('recoverable GST exclusive')

2020

2019

$'000

$'000

Ordinary annual services

Annual Appropriation

Operating

308,803

407,376

Capital budget

20,174

17,514

Section 74 receipts

60,926

27,889

Section 75 transfers

-112,458

-1,237

Total available appropriation

277,445

451,542

Appropriation applied (current and prior years)

-250,658

-442,747

Variance

26,787

8,795

Opening unspent appropriation balance

110,979

103,374

Repeal of Appropriation Acts 2016-17

-11,320

0

Repeal of Appropriation Act (No. 1) 2015-16

0

-1,190

Closing unspent appropriation balance

126,446

110,979

Balance comprises appropriations as follows1:

Appropriation Act (No. 1) 2016-17

0

11,320

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

3,795

3,795

Appropriation Act (No. 1) 2017-18

10,168

10,168

Appropriation Act (No. 1) 2018-19

4,000

76,770

Appropriation Act (No. 1) 2018-19 - Capital Budget (DCB) - Non Operating

0

180

Appropriation Act (No. 1) 2018-19 cash held by the department

0

2,160

Appropriation Act (No. 3) 2018-19

0

6,586

Appropriation Act (No. 1) 2019-20

90,703

0

Appropriation Act (No. 1) 2019-20 - Capital Budget (DCB) - Non Operating

8,787

0

Appropriation Act (No. 1) 2019-20 cash held by the department

8,993

0

Total unspent appropriation - ordinary annual services

126,446

110,979

Other services

Annual Appropriation

Equity injections

791

8,273

Total available appropriation

791

8,273

Appropriation applied (current and prior years)

0

-7,791

Variance

791

482

Opening unspent appropriation balance

7,063

6,581

Prior year section 75 transfers

-7,715

0

Closing unspent appropriation balance

139

7,063

Balance comprises appropriations as follows :

Appropriation Act (No. 2) 2018-19 - Non Operating - Equity Injection

139

7,063

Total unspent appropriation - other services

139

7,063

Total unspent appropriation

126,585

118,042

1 The unspent annual appropriation is shown inclusive of Section 51 permanent quarantines against Appropriation Act (No. 1) 2017-18 – Capital Budget – Non Operating of $3.795 million, Appropriation Act (No. 1) 2017-18 of $10.168 million, Appropriation Act (No. 1) 2018-19 of $4.000 million, Appropriation Act (No. 1) 2019-20 of $73.341 million and Appropriation Act (No. 1) 2019-20 – Capital Budget – Non Operating of $6.710 million.

Note 5.1B: Administered annual and unspent appropriations ('recoverable GST exclusive')

2020

2019

$'000

$'000

Ordinary annual services

Annual Appropriation

Operating

558,971

1,270,474

Capital budget

1,233

1,276

Payments to corporate Commonwealth entities/companies

119,184

111,105

Section 74 receipts

514

4,103

Section 75 transfers

-563,430

126

Total available appropriation

116,472

1,387,084

Appropriation applied (current and prior years)

-147,921

-1,402,289

Variance

-31,449

-15,205

Opening unspent appropriation balance

77,895

102,254

Repeal of Annual Appropriation Acts 2015-16

0

-9,154

Repeal of Annual Appropriation Act 2016-17

-39,216

0

Closing unspent appropriation balance

7,230

77,895

Balance comprises appropriations as follows:1

Appropriation Act (No. 1) 2016-17

0

39,058

Appropriation Act (No. 1) 2016-17 - Capital Budget (DCB) - Non Operating

0

146

Supply Act (No. 1) 2016-17 - Capital Budget (DCB) - Non Operating

0

12

Appropriation Act (No. 1) 2017-18

984

1,010

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

253

253

Appropriation Act (No. 1) 2018-19

107

34,654

Appropriation Act (No. 1) 2018-19- Capital Budget (DCB) - Non Operating

863

863

Appropriation Act (No. 3) 2018-19

1,709

1,709

Appropriation Act (No. 1) 2018-19 - Capital Budget (DCB) - Non Operating

190

190

Appropriation Act (No. 1) 2019-20

0

0

Appropriation Act (No. 1) 2019-20 - Capital Budget (DCB) - Non Operating

407

0

Supply Act (No. 1) 2019-20 - Capital Budget (DCB) - Non Operating

514

0

Appropriation Act (No. 3) 2019-20

2,203

0

Total unspent appropriation - ordinary annual services

7,230

77,895

Other services

Annual Appropriation

States, ACT, NT and Local government

0

6,536

Payments to corporate Commonwealth entities/companies

25,035

24,913

Total available appropriation

25,035

31,449

Appropriation applied (current and prior years)

-25,035

-31,449

Variance

0

0

Opening unspent appropriation balance

0

0

Closing unspent appropriation balance

0

0

Total unspent appropriation

7,230

77,895

1 The administered unspent annual appropriation is shown inclusive of Section 51 permanent quarantines against Appropriation Act (No.1) 2017-18 of $0.984 million and Appropriation Act (No.1) Capital Budget (DCB) 2017-18 of $0.253 million.

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

Authority

Appropriation applied

2020

2019

$'000

$'000

Aboriginal Land Rights (Northern Territory) Act 1976

0

430,627

Public Governance, Performance and Accountability Act 2013 s.77

0

0

Higher Education Support Act 2003

0

69,135

Total

0

499,762

There were no transactions during 2019 for special appropriations Indigenous Education (Targeted Assistance) Act 2000, s.13 and Native Title Act 1993, s.54(2). These were transferred to NIAA on 1 July 2019.

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.

5.2 Special Accounts

Services for Other Entities and Trust Moneys1

Aboriginals and Torres Strait Islander Corporations Unclaimed Money Account2

Indigenous Remote Services Delivery Special Account3

Aboriginals Benefit Account4

Aboriginals and Torres Strait Islander Land Account5

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Balance brought forward from previous period

1,864

1,418

979

981

25,782

9,885

9,154

11,212

0

1

Increases

Administered

Appropriation credited to special account

0

0

0

0

0

28,500

0

429,608

0

0

Investments realised

0

0

0

0

0

0

0

853,746

0

1,717,559

Interest receipts

0

0

0

0

0

0

20,348

0

32,718

Other receipts

100

817

0

0

0

1,363

0

2,394

0

0

Total increase

100

817

0

0

0

29,863

0

1,306,096

0

1,750,277

Available for payments

1,964

2,235

979

981

25,782

39,748

9,154

1,317,308

-

1,750,278

Decreases

Administered

Transfers due to restructure

-1,637

0

-979

0

-25,782

0

-9,154

0

0

0

Transfers to OPA

0

0

0

0

0

0

0

0

0

-366,122

PGPA Act section 58 investments

0

0

0

0

0

0

0

-1,102,500

0

-1,330,745

Payments made

-327

-371

0

-2

0

-13,966

-

-205,654

0

-53,411

Total decreases

-1,964

-371

-979

-2

-25,782

-13,966

-9,154

-1,308,154

0

-1,750,278

Total balance carried to the next period

0

1,864

0

979

0

25,782

0

9,154

0

0

Balance represented by:

Cash held in entity bank accounts

0

0

0

0

0

0

0

9,154

0

0

Cash held in the Official Public Account

0

1,864

0

979

0

25,782

0

0

0

0

Total balance carried to the next period

0

1,864

0

979

0

25,782

0

9,154

0

0

Indigenous Land and Sea Corporation Funding Special Account

The Indigenous Land and Sea Corporation Funding Special Account is a special account under section 80 of the PGPA Act.

Establishing Instrument: Section 12 of the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018 (ATSILSFF Act).

The new Indigenous Land and Sea Corporation Funding Special Account was established on 1 February 2019 to continue payments to the Indigenous Land and Sea Corporation. There were no transactions credited or debited to the special account during 2019. This account transferred to NIAA on 1 July 2019.

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 2019. This account transferred to NIAA on 1 July 2019.

6. People

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

For the period ended 30 June 2020

6.1 Employee Provisions

2020

2019

$'000

$'000

Note 6.1A: Employee provisions

Annual leave

15,058

25,953

Long service leave

25,755

60,244

Total employee provisions

40,813

86,197

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 2020. 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.

2020

2019

$'000

$'000

Note 6.1B: Administered employee provisions

Annual leave

194

174

Long service leave

264

259

Total employee provisions

458

433

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

18,008

18,909

Total non-cash benefits - former Governors-General benefits

18,008

18,909

Changes in the value of the defined benefit obligations are as follows:

Net liability at 1 July

18,909

13,251

Current service cost

0

3,547

Finance costs

236

331

Actuarial losses

593

3,257

Benefits paid

-1,730

-1,477

Net liability at 30 June

18,008

18,909

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

Discount rate at 30 June

0.69%

1.25%

Future salary increases

2.90%

3.50%

Inflation rate

1.97%

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, which is performed annually.

6.2 Key Management Personnel Remuneration

2020

2019

$'000

$'000

Short-term employee benefits

3,332

4,184

Post-employment benefits

467

616

Other long-term employee benefits

107

211

Termination benefits

880

0

Total key management personnel remuneration expenses1

4,786

5,011

The total number of key management personnel included in the above table is 13 (2019: 16). The reduction in the number of key management personnel is due to the transfer of the Indigenous Affairs function to the NIAA. 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.

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 for example payment or refund of taxes, receipt of a Medicare rebate or higher education loans. PM&C transacts with other Australian Government controlled entities for normal day-to-day business operations provided under normal terms and conditions or on a cost recovery basis. This includes the provision of shared services such as IT, Finance, HR and governance and ministerial support. 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

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

For the period ended 30 June 2020

7.1 Contingent Assets and Liabilities

Note 7.1A: Contingent assets and liabilities

PM&C is not aware of any material quantifiable or unquantifiable contingent assets or liabilities as at 30 June 2020.

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 2020.

7.2 Financial Instruments

2020

2019

$'000

$'000

Note 7.2A: Categories of financial instruments

Financial assets at amortised cost

Cash and cash equivalents

8,993

2,160

Goods and services receivables (net)

2,831

4,924

Accrued revenue

4,866

1,876

Total financial assets at amortised cost

16,690

8,960

Total financial assets

16,690

8,960

Financial liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

8,501

19,035

Total financial liabilities measured at amortised cost

8,501

19,035

Total financial liabilities

8,501

19,035

Note 7.2B: Net gains or losses on financial assets

Financial assets at amortised cost

Impairment

0

-151

Reversal of impairment

777

9

Net gains/ (losses) on financial assets at amortised cost

777

-142

Net gain/ (loss) on financial assets

777

-142

Accounting Policy

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

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.

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

7.3 Administered - Financial Instruments

2020

2019

$'000

$'000

Note 7.3A: Categories of financial instruments

Financial assets at amortised cost

Bank term deposits

0

1,042,500

Cash and cash equivalents

1,342

39,062

Loans to Australian Government entities

0

23,624

Goods and services receivable

0

16

Interest receivable

0

14,685

Grants receivable (net)

0

1,694

Total financial assets at amortised cost

1,342

1,121,581

Financial assets at fair value through other comprehensive income

Investments in Corporate Commonwealth entities

2,597,098

2,427,299

Total financial assets at fair value through other comprehensive income

2,597,098

2,427,299

Total financial assets

2,598,440

3,548,880

Financial liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

148

8,549

Grants

0

23,964

Other payables

0

1,809

Total financial liabilities measured at amortised cost

148

34,322

Total financial liabilities

148

34,322

2020

2019

$000

$000

Note 7.3B: Net gains or losses on financial instruments

Financial assets at amortised cost

Interest revenue

0

60,702

Reversal of impairment

0

669

Impairment

0

-2,091

Other gains

0

2,568

Net gains on financial assets at amortised cost

0

61,848

Investment in equity instruments at fair value through other comprehensive income

Changes in investments in Corporate Commonwealth entities

27,018

92,620

Net gain on investments in equity instruments at fair value through other comprehensive income

27,018

92,620

Accounting Policy

Financial assets

Term Deposits

In 2018-19, investment activities were conducted in accordance with the requirements of section 58 of the PGPA Act. Investments were typically low risk and took the form of term deposits. The investment objective of PM&C was to comply with legislative obligations under the PGPA Act and the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA). Investment practices were also governed by the investment policy of PM&C, which required 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.

Term deposits transferred to NIAA on 1 July 2019.

Administered Investments

Administered investments are classified as fair value through other comprehensive income (FVOCI) and are measured at their fair value as at 30 June 2020. 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.

Any gains or losses as a result of fair value measurement or the recognition of an impairment loss allowance is recognised in other comprehensive income.

8. Other information

For the period ended 30 June 2020

8.1 Aggregate Assets and Liabilities

2020

2019

$'000

$'000

Note 8.1A: Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

49,557

108,593

More than 12 months

186,217

153,396

Total assets

235,774

261,989

Liabilities expected to be settled in:

No more than 12 months

34,772

53,943

More than 12 months

139,582

95,066

Total liabilities

174,354

149,009

Note 8.1B: Administered Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

1,589

1,121,520

More than 12 months

2,648,665

2,498,162

Total assets

2,650,254

3,619,682

Liabilities expected to be settle in:

No more than 12 months

1,221

35,585

More than 12 months

19,468

19,258

Total liabilities

20,689

54,843

8.2 Restructuring

In 2019-20 there were several restructures that impacted the Department as the result of Government decisions. PM&C assumed responsibility for the Deregulation agenda from the former Department of Employment, Skills, Small and Family Business following a decision of the Prime Minister on 4 December 2019. Old Parliament House was transferred from the then Communications and the Arts portfolio to the PM&C portfolio following amendments to the Administrative Arrangements Order issued on 8 August 2019.

The NIAA was established in the PM&C Portfolio as at 1 July 2019. Indigenous Affairs functions have been relinquished by the Department and transferred to NIAA as at that date.

Restructuring 2020

Deregulation

Old Parliament House

Department of Employment, Skills, Small and Family Business

Department of Communications and the Arts

$'000

$'000

FUNCTION ASSUMED

Assets recognised

Appropriation receivable

172

0

Investments in Corporate Commonwealth entities

0

117,746

Total assets recognised

172

117,746

Liabilities recognised

Other payables

11

0

Employee provisions

184

0

Total liabilities recognised

195

0

Net Assets / (liabilities) assumed

-23

117,746

Income

Recognised by the receiving entity

268

8,665

Recognised by the losing entity

414

6,118

Total income assumed

682

14,783

Expenses

Recognised by the receiving entity

268

8,665

Recognised by the losing entity

414

6,118

Total expenses

682

14,783

Indigenous Affairs

National Indigenous Australians Agency

$'000

$'000

FUNCTION RELINQUISHED

Assets relinquished

Cash and cash equivalents

37,552

0

Trade and other receivables

41,304

52,249

Other financial assets

1,042,500

750

Property, plant and equipment

0

75,152

Intangibles

0

11,535

Assets held for sale

0

1,012

Other non-financial assets

3,677

0

Total assets relinquished

1,125,033

140,698

Liabilities relinquished

Trade creditors and accruals

8,263

2,047

Grants payable

23,964

0

Other payables

2,773

16,078

Employee provisions

49

48,079

Make good provisions

0

642

Total liabilities relinquished

35,049

66,846

Net assets relinquished

1,089,984

73,852

Equity relinquished

Reserves

0

5,516

Total equity relinquished

0

5,516

Other functions relinquished

Responsibility for the National Orphanage Museum establishment was relinquished to the Department of Social Services following a decision of the Prime Minister, effective 3 September 2019. No assets or liabilities were transferred.

Responsibility for the ongoing activities of the former Joint Agency Drought Taskforce was relinquished to the Department of Agriculture following a decision of the Prime Minister, effective 1 July 2019. No assets or liabilities were transferred.

Restructuring 2019

National Office of Child Safety (NOCS)

Indigenous Children and Schooling

Department of Social Services1

Department of Education2

$'000

$'000

$'000

FUNCTION ASSUMED

Assets recognised

Appropriation receivable

0

361

67

Total assets recognised

0

361

67

Liabilities recognised

Employee provisions

0

361

67

Total liabilities recognised

0

361

67

Net assets assumed

0

0

0

Expenses

Recognised by the receiving entity

126

813

293

Recognised by the losing entity

4

695

0

Total expenses

130

1,508

293

National Cyber Security Adviser3

Independent National Security Legislation Monitor4

Australian Signals Directorate

Attorney-General's Department

$'000

$'000

FUNCTION RELINQUISHED

Assets relinquished

Appropriation receivable

72

227

Total assets relinquished

72

227

Liabilities relinquished

Employee provisions

72

227

Total liabilities relinquished

72

227

Net assets relinquished

0

0

1 Responsibility for the NOCS was transferred to PM&C following a decision of the Prime Minister effective 24 January 2019.

2 Responsibility for Indigenous Children and Schooling Program was transferred to PM&C following a decision of the Prime Minister on 3 April 2018.

3 Responsibility for the National Cyber Security Advisor was relinquished to the Australian Signals Directorate in 2017-18 following the Administrative Arrangements Order of 10 May 2018. Funding transfers for this function were finalised in 2018-19 as presented above.

4 Responsibility for the Independent National Security Legislation Monitor was relinquished to the Attorney-General's Department in 2017-18 following the Administrative Arrangements Order of 10 May 2018. Funding transfers for this function were finalised in 2018-19 as presented above.