Income for the year was $14.7 million compared to total expenses of $16.0 million, resulting in

a $1.3 million deficit. After adjusting for the $1.6 million impact of non-appropriated depreciation and amortisation expense, the Gallery achieved a surplus of $0.3 million.

Core operations own-source income decreased as a result of the COVID-19 restrictions. Total income for the year was $13.5 million compared to total expenses of $15.4 million, resulting in a $2.0 million deficit.

After adjusting for the $1.6 million impact of non-appropriated depreciation and amortisation expense, core operations achieved a deficit of $0.4 million.

The Foundation raised $1.1 million through donations and interest. A further $0.2 million in works of art was donated. Outlays for the Foundation included $0.5 million for the delivery of education and public programs

and $0.02 million to purchase artwork on behalf of the Gallery.

Income analysis

Income received comprised revenue from Government of $11.9 million, goods and services revenue of $0.7 million, donations to the Foundation of $0.8 million, interest of

$0.6 million, sponsorship of $0.5 million and grant funding of $0.2 million.

Expenditure analysis

Employee-related expenses of $6.4 million made up 39% of total expenses; supplier expenses of $5.3 million made up 35% of total expenses; and depreciation and amortisation of $4.0 million made up 26% of total expenses.

Supplier expenses included payments for property operating and maintenance; consultants and contracts; ICT services and other general supplier expenditure.

Depreciation related to buildings, property, plant and equipment, and heritage and cultural assets. Amortisation related to computer software. Only $2.4 million of depreciation/ amortisation was funded through revenue from Government in 2019-20, resulting in a funding shortfall of $1.6 million on long-lived assets.

Financial position

During the year the overall cash and investment position decreased by $2.3 million, leaving a closing balance of $28.5 million. This was attributable to growth in the Foundation reserves of $0.6 million and a reduction in operational reserves by $2.9 million due to increased capital activity.

The value of non-financial assets decreased from $118.4 million in 2018-19 to $118.1 million in 2019-20. Whilst acquisitions of $0.2 million and donations of $0.2 million increased the collection to $37.2 million, building and plant has reduced by $0.6 million.

Liabilities are maintained at a relatively low level of $2.5 million, consisting mainly of employee leave provisions of $1.4 million, payables of $1.0 million and prepayments received of $0.1 million.

Consolidated (including Foundation)

Operating funding

AUDITOR’S REPORT

OFFICIAL

INDEPENDENT AUDITOR’S REPORT

To the Minister for Communications, Cyber Safety and the Arts Opinion

In my opinion, the financial statements of the National Portrait Gallery of Australia (the Entity) for the year ended 30 June 2020:

1. comply with Australian Accounting Standards – Reduced Disclosure Requirements and the Public Governance,

Performance and Accountability (Financial Reporting) Rule 2015; and

1. present fairly the financial position of the Entity as at 30 June 2020 and its financial performance and cash flows for the year then ended.

The financial statements of the Entity, which I have audited, comprise the following as at 30 June 2020 and for the year then ended:

• Statement by the Board, Gallery Director and Chief Operating Officer;
• Statement of Comprehensive Income;
• Statement of Financial Position;
• Statement of Changes in Equity;
• Cash Flow Statement; and
• Notes to and forming part of the financial statements, comprising a summary of significant accounting policies and other explanatory information.

Basis for opinion

I conducted my audit in accordance with the Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Entity in accordance with the relevant ethical requirements for financial statement audits conducted by the Auditor‐General and his delegates. These include the relevant independence requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) to the extent that they are not in conflict with the Auditor‐General Act 1997. I have also fulfilled my other responsibilities in accordance with the Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Other information

The Accountable Authority is responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2020 but does not include the financial statements and my auditor’s report thereon.

My opinion on the financial statements does not cover the other information and accordingly I do not express any form of assurance conclusion thereon.

In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

GPO Box 707 CANBERRA ACT 2601

38 Sydney Avenue FORREST ACT 2603

Phone (02) 6203 7300 Fax (02) 6203 7777

OFFICIAL

OFFICIAL

Accountable Authority’s responsibility for the financial statements

As the Accountable Authority of the Entity, the Board is responsible under the Public Governance, Performance and Accountability Act 2013 (the Act) for the preparation and fair presentation of annual financial statements that comply with Australian Accounting Standards – Reduced Disclosure Requirements and the rules made under the Act. The Board is also responsible for such internal control as the Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board is responsible for assessing the ability of the Entity to continue as a going concern, taking into account whether the Entity’s operations will cease as a result of an administrative restructure or for any other reason. The Board is also responsible for disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the assessment indicates that it is not appropriate.

Auditor’s responsibilities for the audit of the financial statements

My objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian National Audit Office Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with the Australian National Audit Office Auditing Standards, I exercise professional judgement and maintain professional scepticism throughout the audit. I also:

• identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control;
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Accountable Authority;
• conclude on the appropriateness of the Accountable Authority’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern; and
• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

I communicate with the Accountable Authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

Australian National Audit Office

Peter Kerr Executive Director

Delegate of the Auditor‐General Canberra

25 September 2020

OFFICIAL

NATIONAL PORTRAIT GALLERY OF AUSTRALIA

FINANCIAL STATEMENTS

for the period ended 30 June 2020

Statement by the Board, Gallery Director and Chief Operating Officer

In our opinion, the attached financial statements for the year ended 30 June 2020 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(2) of the PGPA Act.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the National Portrait Gallery of Australia will be able to pay its debts as and when they fall due.

This statement is made in accordance with a resolution of the Board.

Dr Helen Nugent ao

Chairman

25 September 2020

Karen Quinlan am

Gallery Director

25 September 2020

Trent Birkett

Chief Operating Officer 25 September 2020

NATIONAL PORTRAIT GALLERY OF AUSTRALIA

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

for the period ended 30 June 2020​

OVERVIEW

Objectives of the National Portrait Gallery of Australia

The National Portrait Gallery of Australia (the Gallery) is an Australian Government controlled entity. It is a not-for-profit entity. The objective of the Gallery is to increase the understanding and appreciation of the Australian people – their identity, history, culture, creativity and diversity through portraiture.

The Gallery has a single outcome: Enhanced understanding and appreciation of Australian identity, culture and diversity through portraiture by engaging the public in education programs and exhibitions, and by developing and preserving the national portrait collection.

The continued existence of the Gallery in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for the Gallery’s administration and programs.

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 Act 2013 (PGPA).

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 for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements are presented in Australian dollars.

Significant accounting judgements and estimates

In the process of applying the accounting policies listed in this note, the Gallery has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:

• the fair value of land, heritage and cultural assets has been taken to be the market value of similar assets as determined by an independent valuer.
• the fair value of buildings, property, plant and equipment has been taken to be the depreciated replacement cost as determined by an independent valuer.
• the leave provision has been estimated using present value techniques in accordance with the shorthand method as permitted by the FRR.

This takes into account expected salary growth and future discounting using bond rates.

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

Temporary building closure

The Gallery reopened to the public on Saturday 14 September 2019 following the temporary closure to the public on Tuesday 23 April 2019 to undertake rectification works to maintain the integrity of the building and the Gallery’s collection of prized artworks.

The Gallery temporarily closed again to the public on Tuesday 24 March 2020 at the direction of Government to deal with the covid-19 pandemic. The Gallery reopened to the public with reduced capacity as per the Government’s guidelines on Saturday 6 June 2020.

The temporary building closure resulted in reduced own-sourced revenue during the closure period.

New accounting standards

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

All new, revised or amending standards that were issued prior to the sign-off date and applicable to the current reporting period did not have a material impact effect on the Gallery’s financial statements.

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

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, aasb 2016-8 and aasb 1058 became effective 1 July 2019.

aasb 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including aasb 118 Revenue, aasb 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. 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 replaces most of the not-for-profit (NFP) provisions of aasb 1004 Contributions and 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.

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 15, aasb 2016-8 and aasb 1058 became effective 1 July 2019.

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.

application of aasb 15 revenue from contracts with customers / aasb 1058 income of not-for-profit entities The adoption of aasb 15 and aasb 1058 did not alter amounts that would have been recognised had aasb 15 and aasb 1058 not been adopted.

application of aasb 16 leases - The adoption of aasb 16 did not have a material impact as the Gallery is not a lessee under any leases. The Gallery is the lessor in licence agreements for the Bookshop and Café. Revenue under these licence agreements is separately disclosed in Note 1.2a. The assets associated with these license agreements are included in the Land and Buildings categories in Note 2.2a.

Taxation

The Gallery is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST).

Revenues, expenses and assets are recognised net of GST except:

• where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
• for receivables and payables.

Events after the reporting period

There have been no significant subsequent events after the reporting period that impact on the financial statements for the year ended 30 June 2020.

Accounting Policy

Revenue from the sale of goods is recognised when control has transferred to the buyer. Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date where material.

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.

REVENUE FROM GOVERNMENT

1.2e: revenue from government

Department of Infrastructure, Transport, Regional Development and Communications

Accounting Policy

revenue from government

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

Amounts appropriated for the Collection Development Acquisition Budget are designated as ‘equity injections’ for a year are recognised directly in contributed equity in that year.

resources received free of charge

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

Resources received free of charge are recorded as either revenue or gains depending on their nature.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government Gallery as a consequence of a restructuring of administrative arrangements.

interest revenue

Interest revenue is recognised using the effective interest method.

Accounting Policy

cash

Cash is recognised at its nominal amount. Cash and cash equivalents include cash on hand and deposits in bank accounts with a maturity of less than 90 days that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

investments

Investments represent term deposits held with Australian banks with terms 90 days or greater. Effective interest rates range from 1.00% to 1.70%.

financial assets

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

impairment of financial assets

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

A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

NOTE 2: FINANCIAL POSITION (continued)

2.2a: reconciliation of the opening and closing balances of property, plant and equipment and intangibles

For the period ended 30 June 2020

Land, buildings and other property, plant and equipment that met the definition of a heritage and cultural item were disclosed in the heritage and cultural asset class. No land or buildings are expected to be sold or disposed of within the next 12 months.

Accounting Policy

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transferor’s accounts immediately prior to the restructuring.

asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than $2,000 which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located.

All heritage and cultural assets are recognised initially at cost in the Statement of Financial Position.

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

revaluations

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

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

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset is restated to the revalued amount.

The Gallery undertook a full valuation of the land, building, plant, equipment and works of art as at 30 June 2017.

As at 30 June 2020, Gallery management confirmed the carrying amounts for the works of art and an independent valuer confirmed the carrying amounts for the land, building, plant and equipment.

depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Gallery 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.

Buildings - 2 to 50 years (2020); 2 to 50 years (2019)

Infrastructure, plant and equipment - 2 to 50 years (2020); 2 to 20 years (2019)

Heritage and cultural assets - 70 to 480 (2020); 70 to 480 (2019)

impairment

All assets were assessed for impairment at 30 June 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.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset’s ability to generate future cash flows, and the asset would be replaced if the Gallery were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

derecognition

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

heritage and cultural assets

The Gallery is home to the nation’s portrait collection. The Gallery has classified them as heritage and cultural assets as they are primarily used for purposes that relate to their cultural significance. The Gallery has adopted appropriate curatorial and preservation policies for these artworks that are depreciated according to the assessment of useful lives.

The Gallery’s preservation and conservation plan and collection development policy are available at http://www.portrait.gov.au/content/ policies/.

intangibles

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

Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the Gallery’s software are 5 to 20 years.

All software assets were assessed for indications of impairment as at 30 June 2020 and were not found to be impaired.

inventories

Inventories are valued at cost and adjusted for any loss of service potential.

Inventories acquired at no cost or nominal consideration are initially measured at current replacement cost at the date of acquisition.

During 2020 $7,520 (2019: $23,945) of inventory was recognised as an expense.

Accounting Policy

Prepayments received/unearned income meets the definition of contract liabilities under aasb. 15. Contract liabilities are associated with sponsorships and grants.

NOTE 3: FUNDING

3.1: IMPACT OF THE FOUNDATION

The National Portrait Gallery of Australia Foundation was established in 2014 to support the Gallery through encouraging gifts, donations, bequests and legacies of property for the benefit of the Gallery. The Foundation committee has been established as a committee of the Board. The Gallery’s financial reports incorporate the financial activities of the Foundation.

foundation 1 core operations 2 total

1. 1 All donated works of art is credited to the Foundation, 2020: $185,500 (2019: $683,763). In addition, the Foundation funded works of art acquisitions of $16,500 (2019: $277,595).
2. Net cash appropriation arrangements, where revenue appropriations for depreciation/amortisation expenses on long life assets and the national collection ceased, has the impact of $1,608,000 on the Gallery’s depreciation/amortisation expenses not being funded in 2020 (2019: $1,685,000). Refer Note 3.2.

1 From 2010-11, the Government introduced net cash appropriation arrangements, where revenue appropriations for depreciation/amortisation expenses on long life assets and the national collection ceased. The Gallery receives a separate Collection Development Acquisition Budget provided through an equity appropriation to fund additions to the National Collection.

Accounting Policy

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

Other long-term employee benefits are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly.

leave

The liability for employee benefits includes provision for annual leave and long service leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the Gallery’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 shorthand method as permitted in the FRR. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

separation and redundancy

Provision is made for separation and redundancy benefit payments. The Gallery recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

superannuation

The Gallery’s staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

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.

The Gallery makes employer contributions to the employees’ defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The Gallery accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

NOTE 4: PEOPLE AND RELATIONSHIPS (continued)

4.2 : KEY MANAGEMENT PERSONNEL REMUNERATION

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Gallery. The Gallery has determined the key management personnel to be the Gallery Director and the Board members. However, the Board is not responsible for the management of the Gallery.

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

4.3 : RELATED PARTY DISCLOSURES

Related party relationships

The Gallery is an Australian Government controlled entity. Related parties to the Gallery include the Gallery Director, Board members and the Minister for Communications, Cyber Safety and the Arts.

Board members

Members of the National Portrait Gallery of Australia Board during the reporting period were: date commenced

Dr Helen Nugent ao, Chairman 1 Jul 2013

Sidney Myer am, Deputy Chairman 5 Aug 2013

Yasmin Allen 1 Jul 2013

Jillian Broadbent ac 5 Aug 2013

Patrick Corrigan am 10 Feb 2015

Alan Dodge am 21 Jan 2016

Penny Fowler 9 Mar 2016

Hugo Michell 10 Apr 2019

Stuart Wood am qc 20 Apr 2018

No Board member has received or become entitled to receive a benefit by reason of a contract made by the Gallery with the Board member or with a related entity of the Board member. Board members are paid in accordance with Remuneration Tribunal determinations as provided by section 18 of the National Portrait Gallery of Australia Act 2012.

Transactions with related parties

Related parties may transact with the Gallery in the same capacity as the public in the ordinary course of business. Such transactions include the payment for exhibition tickets, public programs and unencumbered donations. These transactions have not been separately disclosed in this note. There were no other transactions with related parties during the financial year.

NOTE 5: MANAGEMENT UNCERTAINTIES

5.1: CONTINGENT ASSETS AND LIABILITIES

At 30 June 2020, the Gallery held an unquantifiable contingent asset in relation to an insurance claim with Comcover for business interruption as a result of covid-19 restrictions put in place by the Government. The amount which represents the Gallery’s lost revenue during covid-19 restrictions is still being assessed by Comcover but is not expected to be material.

There are no unquantifiable contingent liabilities or quantifiable contingent assets or liabilities as at 30 June 2020 (2019: nil).

Accounting Policy

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

Accounting Policy

financial assets

The Gallery classifies its financial assets as:

• financial assets at fair value through profit or loss; or
• financial assets measured at amortised cost. The classification depends on both the entity’s business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the entity becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

financial assets at amortised cost

Financial assets included in this category need to meet two criteria:

• the financial asset is held in order to collect the contractual cash flows; and
• the cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest method.

effective interest method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

financial assets at fair value through profit or loss (fvtpl)

Financial assets are classified as financial assets at fair value through profit or loss where the financial assets doesn’t meet the criteria of financial assets held at amortised cost.

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest earned on the financial asset.

financial liabilities

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

financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are initially measured at fair value.

Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

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

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

NOTE 5: MANAGEMENT UNCERTAINTIES (continued)

5.3: FAIR VALUE MEASUREMENTS fair value measurements at the end of the reporting period

6.2 : BUDGETARY REPORTS AND EXPLANATIONS OF MAJOR VARIANCES

The primary statements provide a comparison between the 2019–20 Portfolio Budget Statements (PBS) budget and the final financial outcome. The PBS is not audited and does not reflect the revised budget provided as part of the 2019–20 Portfolio Budget Statements. However, major changes in budget have been explained as part of the variance analysis where relevant.

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

• the variance between budget and actual is greater than 10% and
  • the variance between budget and actual is greater than 1% of the relevant category (expenses, revenue, assets, liabilities, receipts or payments), or
  • an item below this threshold but considered important for the reader’s understanding.

Major budget variances for 2020

The Gallery was temporarily closed for two extended periods during the financial year. From 23 April 2019 to 14 September 2019 to undertake rectification works and from 24 March 2020 to 6 June 2020 at the direction of Government to deal with the covid-19 pandemic. The continued implementation of Government restrictions to deal with the pandemic is impacting visitation numbers and the ability to generate own-source income.

The closures and restrictions resulted in reduced sales of goods and rendering of services revenue and resources received free of charge in the way of sponsorship in kind. This reduction was partially offset by higher than budgeted other revenue in the form of grants received and reduced supplier expenses due to the postponement of exhibitions and operational savings during the closures.

The Foundation received higher than budgeted cash donations and lower than budgeted donated works of art resulting in higher contributions and lower gains. Whilst increased cash donations have resulted in a higher investments balance, interest is lower than budget due to the fall in cash interest rate.

Employee expenses are higher due to unbudgeted redundancies and Employee provisions are higher than budget due to employee transfers and a fall in the bond rate that is used to adjust employee provisions to present value.