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Part 4.2: Financial statements

ANAO Independent Auditor's Report Text reproduced below

ANAO Independent Auditor's Report Signed by Rebecca Riley Executive Director Delegate of the Auditor-General Canberra 23 September 2020 Text reproduced below

INDEPENDENT AUDITOR’S REPORT (text reproduced from preceding images)

INDEPENDENT AUDITOR’S REPORT
To the Attorney-General


Opinion
In my opinion, the financial statements of the Office of the Inspector-General of Intelligence and Security (‘the Entity’) for the year ended 30 June 2020:


(a) comply with Australian Accounting Standards – Reduced Disclosure Requirements and the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015; and


(b) 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 statements as at 30 June 2020 and for the year then ended:

  • Statement by the Inspector-General of Intelligence and Security;
  • Statement of Comprehensive Income;
  • Statement of Financial Position;
  • Statement of Changes in Equity;
  • Cash Flow Statement;
  • Notes to the forming part of the financial statements.

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 (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.


Accountable Authority’s responsibility for the financial statements
As the Accountable Authority of the Entity, the Inspector-General of Intelligence and Security 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 Inspector-General of Intelligence and Security is also responsible for such internal control as the Inspector-General of Intelligence and Security 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 Inspector-General of Intelligence and Security 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 Inspector-General of Intelligence and Security 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

Rebecca Reilly
Executive Director
Delegate of the Auditor-General
Canberra
23 September 2020

STATEMENT BY THE INSPECTOR-GENERAL OF INTELLIGENCE AND SECURITY

In my 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 my opinion, at the date of this statement, there are reasonable grounds to believe that the Office of the Inspector-General of Intelligence and Security will be able to pay its debts as and when they fall due.

Jake Blight

Acting Inspector-General of

Intelligence and Security

23 September 2020

OFFICE OF THE INSPECTOR-GENERAL OF INTELLIGENCE AND SECURITY

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 June 2020

2020

2019

Original Budget

Notes

$

$

$

NET COST OF SERVICES

Expenses

Employee benefits

2A

5 006 248

4 444 133

9 348 000

Suppliers

2B

1 631 263

1 819 509

3 035 000

Depreciation

5

922 988

297 990

2 326 000

Finance costs

188

-

--

Total expenses

7 560 687

6 561 632

14 709 000

Own-Source Income

Own-source revenue

Revenue from contracts with customers

3A

31 266

19 155

-

Other revenue

3B

39 508

53 315

27 000

Total own-source income

70 774

72 470

27 000

Net cost of services

7 489 913

6 489 162

14 682 000

Revenue from Government

12 356 000

9 642 000

12 356 000

Surplus /(deficit)

on continuing operations

4 866 087

3 152 838

(2 326 000)

OTHER COMPREHENSIVE INCOME

Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation surplus

-

-

-

Total comprehensive income/(loss)

4 866 087

3 152 838

(2 326 000)

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

OFFICE OF THE INSPECTOR-GENERAL OF INTELLIGENCE AND SECURITY

STATEMENT OF FINANCIAL POSITION

as at 30 June 2020

2020

2019

Original budget

Notes

$

$

$

ASSETS

Financial Assets

Cash and cash equivalents

221 012

306 265

200 000

Trade and other receivables

4

25 872 197

18 130 839

8 788 000

Total financial assets

26 093 209

18 437 104

8 988 000

Non-Financial Assets1

Property, plant and equipment

5

5 054 636

5 646 110

10 347 000

Other non-financial assets

6

16 305

92 089

-

Total non-financial assets

5 070 941

5 738 199

10 347 000

Total Assets

31 164 150

24 175 303

19 335 000

LIABILITIES

Payables

Suppliers

7A

273 695

783 065

100 000

Other payables

7B

105 991

41 158

61 000

Total payables

379 686

824 223

161 000

Interest Bearing Liabilities

Leases

8

15 832

-

Total interest bearing liabilities

15 832

-

Provisions

Employee provisions

9

1 598 377

1 529 912

2 058 000

Total provisions

1 598 377

1 529 912

2 058 000

Total Liabilities

1 993 895

2 354 135

2 219 000

Net Assets

29 170 255

21 821 168

17 116 000

EQUITY

Contributed equity

14 854 167

12 371 167

14 868 000

Reserves

21 623

21 623

22 000

Retained surplus

14 294 465

9 428 378

2 226 000

Total Equity

29 170 255

21 821 168

17 116 000

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

1. Right-of-use assets are included in Property, plant and equipment.

OFFICE OF THE INSPECTOR-GENERAL OF INTELLIGENCE AND SECURITY

STATEMENT OF CHANGES IN EQUITY

for the period 30 June 2020

2020

2019

Original budget

$

$

$

CONTRIBUTED EQUITY

Opening balance as at 1 July

12 371 167

12 109 283

12 385 000

Transactions with Owners

Contributions by Owners

Return of Equity

-

(13 116)

Departmental Capital Budget

2 483 000

275 000

2 483 000

Total Transactions with Owners

2 483 000

261 884

2 483 000

Closing balance as at 30 June

14 854 167

12 371 167

14 868 000

RETAINED EARNINGS

Opening balance as at 1 July

Balance carried forward from previous period

9 428 378

6 275 540

4 552 000

Adjusted opening balance

9 428 378

6 275 540

4 552 000

Comprehensive Income

Surplus/deficit for the period

4 866 087

3 152 838

(2 326 000)

Total comprehensive income

4 866 087

3 152 838

(2 326 000)

Closing balance as at 30 June

14 294 465

9 428 378

2 226 000

ASSET REVALUATION RESERVE

Opening balance as at 1 July

Balance carried forward from previous period

21 623

21 623

22 000

Comprehensive Income

Other Comprehensive Income

-

-

-

Total comprehensive income

-

-

-

Closing balance as at 30 June

21 623

21 623

22 000

TOTAL EQUITY

Opening balance

Balance carried forward from previous period

21 821 168

18 406 446

16 959 000

Adjustment for change in accounting policies

-

-

-

Adjusted opening balance

21 821 168

18 406 446

16 959 000

Comprehensive Income

Surplus/deficit for the period

4 866 087

3 152 838

(2 326 000)

Other comprehensive income

-

-

-

Total comprehensive income

4 866 087

3 152 838

(2 326 000)

Transactions with Owners

Contributions by Owners

Return of Equity

-

(13 116)

-

Departmental Capital Budget

2 483 000

275 000

2 483 000

Total Transactions with Owners

2 483 000

261 884

2 483 000

Closing balance as at 30 June

29 170 255

21 821 168

17 116 000

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

Equity Injections

Amounts appropriated which are designated as ‘equity injections’ for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly to contributed equity in that year.

OFFICE OF THE INSPECTOR-GENERAL OF INTELLIGENCE AND SECURITY

CASH FLOW STATEMENT

for the year ended 30 June 2020

2020

2019

Original Budget

Notes

$

$

$

OPERATING ACTIVITIES

Cash received

Appropriations

6 925 682

5 759 654

11 856 000

Net GST received

127 621

585 149

-

Other cash received

367 273

575 026

27 000

Total cash received

7 420 576

6 919 829

11 883 000

Cash used

Employees

(4 665 766)

(4 130 812)

(8 848 000)

Suppliers

(2 536 690)

(2 172 315)

(3 035 000)

Interest payments on lease liabilities

(188)

-

-

Section 74 receipts transferred to OPA

(350 418)

(510 224)

-

Total cash used

7 553 062

(6 813 351)

(11 883 000)

Net cash from/(used by) operating activities

(132 486)

106 477

-

INVESTING ACTIVITIES

Cash used

Purchase of property, plant and equipment

(309 125)

(5 838 030)

(2 481 000)

Total cash used

(309 125)

(5 838 030)

(2 481 000)

Net cash from/(used by) investing activities

(309 125)

(5 838 030)

(2 481 000)

FINANCING ACTIVITIES

Cash received

Contributed equity

363 104

5 838 030

2 481 000

Total cash received

363 104

5 838 030

2 481 000

Cash used

Principal payments of lease liabilities

(6 746)

-

-

Total cash used

(6 746)

-

-

Net cash from financing activities

356 358

5 838 030

2 481 000

Net increase/(decrease) in cash held

(85 253)

106 477

-

Cash and cash equivalents at the beginning of the reporting period

306 265

199 788

200 000

Cash and cash equivalents at the end of the reporting period

221 012

306 265

200 000

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

Major Budget Variances for 2020

The following table provides high level commentary of major variances between budgeted information for the OIGIS published in the 2019-20 Portfolio Budget Statements (PBS) and the 2019-20 final outcome as presented in accordance with Australian Accounting Standards for the OIGIS.

The Budget is not audited. Major variances are those deemed relevant to an analysis of OIGIS’ performance and are not focused merely on numerical differences between the budget and actual amounts. Explanations of major variances are as follows:

Explanation of major variances

Affected line items (and statements)

Employee Benefits – $4,341,752 below budget. The variance reflects delays in on boarding activities, partly associated with the lengthy security clearance process.

Impacted:

Statement of Comprehensive Income:

Employee expense

Employee Provisions - $459,623 below budget. The variance reflects the actual versus budgeted staffing numbers.

Statement of Financial Position:

Appropriations receivable

Employee provisions

Other payables

Retained surplus

Cashflow Statement

Cash used - operating

activities

Suppliers expenses – $1,403,737 below budget. The most significant variances related to security clearance fees and recruitment related consultancy fees. Both expenditure items were lower due to recruitment delays. Other variances include underspends in expenses driven by the number and scope of inquiry work, including legal and travel expenses. The COVID-19 pandemic also impacted on expense items including staff training and overseas travel.

Impacted:

Statement of Comprehensive Income

Supplier expenses

Suppliers payable - $173,695 above budget. The variance represents in part a timing difference with property related outgoings included as accrued expenses. The variance is also partly due to staff leave liability transfers for departed staff which were not included in the budget.

Statement of Financial Position:

Appropriation receivable

Suppliers payables

Employee provisions

Retained surplus

Cashflow Statement:

Cash used - operating

activities

Property, Plant and Equipment – capital expenditure was approximately $5,292,364 below budget due to lower than expected capital works. Part of the variance is the subject of an approved Movement of Funds request.

Impacted:

Statement of Comprehensive Income:

Depreciation

Statement of Financial Position:

Property, plant and equipment

Appropriations receivable

Cashflow Statement:

Cash used - investing activities

1.1 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.

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 and values are rounded to the nearest dollar.

1.2 Significant Accounting Judgments and Estimates

In the process of applying the accounting policies listed in this note, OIGIS has made judgments in relation to leave provisions that have a significant impact on the amounts recorded in the financial statements. Leave provisions involve assumptions on the likely tenure of existing staff, future salary movements and future discount rates.

The uncertainty associated with the existing COVID-19 pandemic may impact on the reliability of these judgements. The potential impact is currently unquantifiable.

1.3 New Australian Accounting Standards

The following new standards were applicable for the first time in the current reporting period:

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

OIGIS 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 OIGIS 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), OIGIS applies the general AASB 15 principles to determine the appropriate revenue recognition. If these criteria are not met, OIGIS shall consider whether AASB 1058 applies.

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

In terms of AASB 1058, OIGIS is required to recognise volunteer services at fair value if those services would have been purchased if not provided voluntarily, and the fair value of those services can be measured reliably.

Impact on transition

There was no material impact upon transition.

Application of AASB 16 Leases

OIGIS 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.

As a lessee, OIGIS 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, OIGIS recognises right-of-use assets and lease liabilities for all of its current leases.

On adoption of AASB 16, OIGIS recognised a right-of-use asset and lease liability in relation to the lease of one motor vehicle, which had previously been classified as an operating lease.

The lease liabilities were measured at the present value of the remaining lease payments, discounted using OIGIS’s incremental borrowing rate as at 1 July 2019.

The right-of-use asset was measured as the carrying value that would have resulted from AASB 16 being applied from the commencement date of the lease.

Impact on transition

On transition to AASB 16, OIGIS recognised a right-of-use asset and lease liability recognising the difference to retained earnings. The impact on transition is summarised below:

1 July 2019

$

Right-of-use asset – property, plant and equipment

22 390

Lease liabilities

22 390

The following table reconciles the minimum lease commitments disclosed in OIGIS’s 30 June 2019 annual financial statements to the amount of lease liabilities recognised on 1 July 2019:

1 July 2019

$

Minimum operating lease commitment at 30 June 2019

20 698

Plus: adjustments to lease commitments and inclusion of applicable GST

2 070

Less: short-term leases not recognised under AASB 16

-

Less: low value leases not recognised under AASB 16

-

Plus: effect of extension options reasonable certain to be exercised

-

Undiscounted lease payments

22 768

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

(378)

Lease liabilities recognised at 1 July 2019

22 390

1.4 Taxation

OIGIS is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and 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.

1.5 Revenue from Government

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when OIGIS gains control of the appropriation. Appropriations receivable are recognised at their nominal amounts.

1.6 Events after the Reporting Period

There was no subsequent event that had the potential to significantly affect the ongoing structure and financial activities of OIGIS.

Note 2 – Expenses

2020

$

2019

$

Note 2A – Employee Benefits

Wages and salaries

3 873 085

3 354 324

Superannuation:

Defined benefit plans

275 486

239 787

Defined contribution plans

409 763

329 297

Leave and other entitlements

447 914

520 725

Total employee benefits

5 006 248

4 444 133

Accounting Policy

Accounting policies for employee related expenses are contained in Note 9.

2020

$

2019

$

Note 2B – Suppliers

Goods and services supplied or rendered

Consultants

123 952

467 878

ICT support

395 186

143 002

Legal expenses

48 996

4 165

Printing publications

17 468

13 352

Resources received free of charge

39 508

39 545

Stationery

7 777

32 183

Training

50 086

20 041

Travel

83 945

102 620

Security Vetting Expenses

95 011

76 587

HR Support Services

77 300

88 045

Minor Assets

9 350

58 323

Scribe Services

16 011

24 522

Occupancy Expenses

573 679

587 801

Accommodation - Placements

24 073

50 377

Other

54 912

90 452

Total goods and services supplied or rendered

1 617 254

1 798 893

Other suppliers

Motor Vehicle Lease – minimum lease payments1

-

8 555

Variable lease payments

-

-

Workers compensation premiums

14 009

12 061

Total other supplier

14 009

20 616

Total supplier

1 631 263

1 819 509

1 The above lease disclosures should be read in conjunction with accompanying notes 1.3.

Note 3 – Own-Source Revenue

2020

$

2019

$

Note 3A – Revenue from Contracts with Customers

Rendering of services – provision of staff car parking facilities

31 266

19 155

Total revenue from contract with customers

31 266

19 155

2020

$

2019

$

Note 3B – Other Revenue

Other

-

13 770

Resources Received Free of Charge:

Australian National Audit Office

35 000

35 000

Australian Signals Directorate

4 508

4 545

Total other own-source revenue

39 508

53 315

Accounting Policy

Rendering of Services

OIGIS provides staff with access to onsite car parking facilities. Agreements are in place for the recovery of anticipated associated Fringe Benefits Tax (FBT) expenses on a fortnightly basis via payroll deductions. With performance obligations having been met during fortnightly pay cycles the revenue is recognised when received. The transaction price is based on a fixed amount per fortnight and is reviewed at the commencement of each FBT reporting period.

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.

The main resources received free of charge in 2019-20 are the provision of audit services (from the ANAO) and the installation and maintenance of the OIGIS owned internal secure computer network (from Australian Signals Directorate).

Note 4 – Financial Assets

2020

$

2019

$

Trade and other receivables

Appropriations receivable

25 840 404

17 939 771

GST receivable from the Australian Taxation Office

15 436

67 739

Other receivables

16 357

123 329

Total trade and other receivables (net)

25 872 197

18 130 839

All receivables are expected to be recovered in less than 12 months.

Accounting Policy

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any allowance for impairment. Collectability of debts is reviewed as at end of reporting period.

All financial assets are assessed for impairment at the end of each reporting period based on expected credit losses. Impairment of trade receivables is assessed on lifetime credit losses. The amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The loss is recognised in the Statement of Comprehensive Income.

Note 5 – Non-Financial Assets

Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment

Item

Property, plant & equipment

$

Leasehold

Improvements

$

Intangibles

$

Total

$

As at 1 July 2019

Work in progress

530 000

-

754 739

1 284 739

Gross book value

1 280 416

3 392 088

-

4 672 504

Accumulated depreciation and impairment

(104 362)

(206 771)

-

(311 133)

Total as at 1 July 2019

1 706 054

3 185 317

754 739

5 646 110

Additions

by purchase

right-of-use assets

Disposals

46 485

22 390

-

15 260

-

-

247 380

-

-

309 125

22 390

-

Depreciation expense

Depreciation on right-of-use assets

(235 197)

(6 634)

(681 158)

-

-

-

(916 355)

(6 634)

Total as at 30 June 2020

1 533 098

2 519 419

1 002 119

5 054 636

Total as at 30 June 2020 represented by:

Work in progress

557 955

-

1 002 119

1 560 074

Gross book value

1 321 335

3 407 348

-

4 728 683

Accumulated depreciation and impairment

(346 193)

(887 929)

-

(1 234 122)

Total as at 30 June 2020

1 533 098

2 519 419

1 002 119

5 054 636

Carrying amount of right-of-use assets

15 756

-

-

15 756

Accounting Policy

Acquisition of Assets

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.

Leased right-of-use 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.

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).

Fair Value Measurement

The fair values of property plant and equipment are determined using either the market selling price or depreciated replacement cost. The valuation of property plant and equipment at 30 June 2020 included $4,035,307 Level 2 assets (including office equipment and furniture, software and leasehold improvements) and $1,455 Level 3 assets (including office furniture).

The unobservable inputs (Level 3 fair value hierarchy) used to determine the fair value, include historical actual cost information and costing guides to estimate the current replacement cost. Useful life profiles have been applied to the replacement cost to reflect the expended life of the asset.

Revaluations

Following initial recognition at cost, property plant and equipment (excluding right-of-use assets) 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 do 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 reverses 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 reverse a previous revaluation increment for that class.

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

All revaluations are independent and are conducted in accordance with the stated revaluation policy. An Asset Materiality Review was undertaken by Jones Lang LaSalle Public Sector Valuations Pty Ltd (JLL) as at 30 June 2020. The outcome of the Materiality Review was an assessment by JLL that the carrying amounts of all property, plant and equipment assets (including assets under construction) were not materially different to the fair value of the assets as reported at 30 June 2020.

All assets were examined for indicators of impairment during the stocktake completed on 30 June 2020. The right-of-use asset included in Property, plant and equipment was also assessed for impairment at the reporting date. No indicators of impairment have been identified.

Depreciation

Depreciable property plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to OIGIS 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 of depreciable assets are based on useful lives of:

Property – Plant & Equipment 1 – 11 years (2019: 1 – 11 years)

Leasehold Improvements 5 years (2019: 5 years)

The depreciation rates for right-of-use assets are based on the commencement date to the earlier of the end of the useful life of the right-of-use 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.

Intangibles

Intangibles comprise internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses. Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of OIGIS’s software are 3 years. All software assets were assessed for indicators of impairment as a 30 June 2020.

Note 6 – Other Non-Financial Assets

2020

$

2019

$

Prepayments

16 305

92 089

Total other non-financial assets

16 305

92 089

Note 7 – Payables

2020

$

2019

$

7A - Suppliers

Trade creditors and accruals

273 695

783 065

Total suppliers

273 695

783 065

Supplier payables expected to be settled in no more than 12 months.

Accounting Policy

OIGIS’ financial liabilities comprise trade and other payables and are recognised at amortised costs. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

2020

$

2019

$

7B - Other Payables

Salaries and wages

78 797

31 210

Superannuation

10 492

4 874

Other

16 702

5 074

Total other payables

105 991

41 158

Other Payables are expected to be settled in no more than 12 months.

Accounting Policy

Superannuation

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

Note 8 – Interest Bearing Liabilities

2020

$

2019

$

Leases

Lease liability – motor vehicle

15 832

-

Total leases

15 832

-

Total cash outflow for leases for the year ended 30 June 2020 was $7,173.84 (GST inclusive)

Accounting Policy

OIGIS has one motor vehicle lease. The lease liability represents the present value of the remaining lease payments, discounted using OIGIS’s incremental borrowing rate as at 1 July 2019. OIGIS’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and condition. The weighted-average rate applied was 0.97% which is considered to be the equivalent of the bond yield rate.

Note 9 – Employee Provisions

2020

$

2019

$

Employee Provisions

Leave

1 598 377

1 529 912

Total employee provisions

1 598 377

1 529 912

Accounting Policy

Liabilities for ‘short-term employee benefits’ and termination benefits expected within twelve 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 personal leave as all personal leave is non-vesting and the average personal leave taken in future years by employees of OIGIS is estimated to be less than the annual entitlement for personal 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 OIGIS’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 using the Short Hand Method per the Financial Reporting Rules. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Superannuation

Staff of OIGIS are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) and other industry super funds held outside the Australian Government.

The CSS and PSS are defined benefit schemes for the Australian Government. 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.

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

The PSSap is a defined contribution scheme.

Note 10 – Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of OIGIS, directly or indirectly. OIGIS has determined the key management personnel to be the Chief Executive, Deputy Chief Executive and Assistant Chief Executives. Key management personnel remuneration is reported in the table below:

2020

$

2019

$

Short-term employee benefits:

Salary

1 047 977

901 374

Other Benefits & Allowances

125 729

110 734

Total short-term employee benefits

1 173 706

1 012 108

Post-employment benefits:

Superannuation

164 114

125 197

Total post-employment benefits

164 114

125 197

Other long-term employee benefits:

Long Service Leave

20 662

15 805

Total other long-term employee benefits

20 662

15 805

Total senior executive remuneration expenses

1 358 482

1 153 110

Accounting Policy

This note is prepared on an accrual basis. The total number of key management personnel that are included in the above table are 4 individuals (2019: 4 individuals). The 2019 figure includes one of the officers for part of the year.

Note 11 – Related Party Disclosures

Related Party Relationships

OIGIS is an Australian Government controlled entity. Related parties to OIGIS are:

  • Key Management Personnel, their close family members and entities controlled or jointly controlled by either;
  • the members of the Executive – key management personnel for the whole of government financial statements; and
  • other Australian Government entities.

Transactions with Related Parties

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

Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the entity, it has been determined that there are no related party transactions to be separately disclosed.

Note 12 - Contingent Assets and Liabilities

Contingent liabilities and contingent assets are not recognised in the statement of financial position but are reported in the relevant 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.

OIGIS has no contingencies to report at 30 June 2020 (2019: Nil).

Note 13 – Financial Instruments

2020

$

2019

$

Categories of Financial Instruments

Financial Assets at amortised costs

Cash and cash equivalents

221 012

306 265

Trade and other receivables

16 357

123 329

Total financial assets at amortised cost

237 369

429 594

Total financial assets

237 369

429 594

Financial Liabilities measured at amortised cost

Suppliers

273 695

783 065

Total financial liabilities measured at amortised cost

273 695

783 065

Total financial liabilities

273 695

783 065

The net fair values of the financial assets and liabilities are at their carrying amounts. OIGIS derived no interest income from financial assets in either the current and prior year.

Financial Assets

OIGIS classifies its financial assets as measured at amortised cost using the effective interest method. Financial assets are recognised and derecognised upon trade date.

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

Credit terms are net 30 days (2019: 30 days).

Financial Liabilities

Financial liabilities are classified as other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.

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).

Settlement is usually made net 30 days.

Note 14 – Appropriations

Note 14A – Annual Appropriations (‘Recoverable GST exclusive’)

2020

2019

$

$

Ordinary Annual Services

Annual Appropriation

12 356 000

9 642 000

PGPA Act – Section 74 Receipts

350 418

510 223

Annual Departmental Capital Budget1

2 483 000

275 000

Total appropriation

15 189 418

10 427 223

Appropriation applied (current and prior years)

7 381 940

11 491 154

Variance2

7 807 478

(1 063 931)

1 Departmental Capital Budgets are appropriated through Appropriation Acts (No 1,3,5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.

2 Variance between Total Appropriation and Appropriation Applied is due in part to section 74 receipts, underspends related largely to recruitment delays associated with security clearance requirements, the impact of the COVID-19 pandemic on planned activities and delayed capital expenditure.

Note 14B: Unspent Annual Appropriations (‘Recoverable GST exclusive)

2020

2019

$

$

Departmental

Appropriation Act (No 3) 2017-18

-

2 772 309

Appropriation Act (No 3) 2017-18 – DCB1

5 408 865

5 771 969

Appropriation Act (No 1) 2018-19

4 967 120

9 120 492

Appropriation Act (No 1) 2018-19 – DCB

275 000

275 000

Appropriation Act (No 1) 2019-20

7 372 865

-

Supply Act (No 1) 2019-20

5 333 553

-

Appropriation Act (No 1) 2019-20 – DCB

1 448 000

-

Supply Act (No 1) 2019-20 - DCB

1 035 000

-

Cash

221 012

306 265

Total Departmental

26 061 415

18 246 035

1 $3.5 million subject to Administrative Quarantine as at 30 June 2020.

Note 15 – Aggregate Assets and Liabilities

2020

$

2019

$

Assets expected to be recovered in:

No more than 12 months

26 106 330

18 523 695

More than 12 months

5 057 820

5 651 608

Total assets

31 164 150

24 175 303

Liabilities expected to be recovered in:

No more than 12 months

766 798

1 370 142

More than 12 months

1 227 097

983 993

Total liabilities

1 993 895

2 354 135