Go to top of page

Services Australia Annual Report 2018–19

11.3 Financial Statements

Independent Auditor's Report

 Statement by the Secretary and Chief Financial Officer;  Statement of Comprehensive Income;  Statement of Financial Position;  Statement of Changes in Equity;  Cash Flow Statement;  Administered Schedule of Comprehensive Income;  Administered Schedule of Assets and Liabilities;  Administered Reconciliation Schedule;  Administered 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 Services Australia in accordance with the relevant ethical requirements for financial statement audits conducted by me. 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. Key audit matters Key audit matters are those matters that, in my professional judgement, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. GPO Box 707 CANBERRA ACT 2601 19 National Circuit BARTON ACT 2601 Phone +61 2 6203 7500 Email grant.hehir at anao.gov.au

 assessed the design and operating effectiveness of IT application controls designed to prevent and detect the inaccurate recording of information in the systems from which data is extracted;  assessed the competence, capability and objectivity of the actuary engaged by Services Australia to assist in making the estimation;  evaluated Services Australia’s review and approval process to assess the reasonableness of actuarial assumptions used in the estimation of receivables;  assessed the reasonableness of the discount rate applied in the estimation against the risk faced by the Commonwealth and market evidence of the time value of money;  assessed the reasonableness of the assumed rate of collection against historical actual repayment of the Child Support Scheme; and  assessed the data used in the estimation process for accuracy and completeness.

 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 Services Australia’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 Services Australia’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 Services Australia 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.

From the matters communicated with the Accountable Authority, I determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. I describe these matters in my auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Australian National Audit Office Grant Hehir Auditor-General for Australia Canberra 27 August 2019

Services Australia Financial Statements for the period ended 30 June 2019

SERVICES AUSTRALIA STATEMENT BY THE SECRETARY AND CHIEF FINANCIAL OFFICER. In our opinion, the attached financial statements for the year ended 30 June 2019 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records per subsection 41(2) of the PGPA Act. In our opinion, at the date of this statement, there are reasonable grounds to believe that Services Australia will be able to pay its debts as and when they fall due. Renée Leon Secretary 26 August 2019 Mark Jenkin Chief Financial Officer 26 August 2019

SERVICES AUSTRALIA STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 June 2019

					Original Budget¹
			2019	2018	2019
	Notes		$'000	$'000	$'000
NET COST OF SERVICES
Expenses
Employee benefits	A1.1		2,814,542	2,838,219	2,580,215
Supplier expenses²	A1.2		2,023,162	1,580,209	2,156,834
Depreciation and amortisation	B2.2		296,662	249,391	268,512
Impairment loss allowance on financial instruments			418	986	129
Write-down and impairment of other assets	B2.2		17,039	17,463	-
Other expenses	A1.3		2,490	4,687	4,030
Total expenses			5,154,313	4,690,955	5,009,720

Own-Source Income	A2
Own-source revenue
Rendering of goods and services			258,297	287,796	241,097
Rental income			14,325	19,870	14,013
Other revenue			336	396	-
Total own-source revenue			272,958	308,062	255,110

Gains
Resources received free of charge	A2.1		2,148	2,907	3,472
Reversal of write-downs and impairment			23	2,843	-
Other gains			2,343	1,642	-
Total gains			4,514	7,392	3,472
Total own-source income			277,472	315,454	258,582

Net cost of services			(4,876,841)	(4,375,501)	(4,751,138)

Revenue from government	A2.2		4,546,335	4,297,066	4,487,626
Deficit			(330,506)	(78,435)	(263,512)

OTHER COMPREHENSIVE INCOME
Items not subject to subsequent reclassification to net cost of services
Changes in asset revaluation reserve⁴	B2.2	B5.1	13,002	20,162	-
Total other comprehensive income			13,002	20,162	-
Total comprehensive deficit³			(317,504)	(58,273)	(263,512)

¹ Budget reported in the 2018-19 Portfolio Budget Statements published in May 2018.

² Operating lease rental expenses comparative adjusted to recognise additional lease incentive received in 2017-18 for $4.0 million.

³ Depreciation and amortisation expenses are not funded through revenue appropriations. Entities receive a separate capital budget provided through equity. Capital budgets are appropriated in the period when cash payment for capital expenditure is required.

⁴ Changes in asset revaluation reserve includes revaluations recognised in note B2.2 ($13.2 million); prior year revaluation reserves adjustments ($1.5 million); offset by make good adjustments in note B5.1 ($1.7 million).

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

SERVICES AUSTRALIA STATEMENT OF FINANCIAL POSITION as at 30 June 2019

					Original Budget¹
			2019	2018	2019
	Notes		$'000	$'000	$'000
ASSETS
Financial assets
Cash	B1		11,800	14,802	20,000
Trade and other receivables	B1.1		1,237,219	1,589,736	1,169,341
Total financial assets			1,249,019	1,604,538	1,189,341

Non-financial assets
Other non-financial assets²	B2.1		254,629	136,127	131,846
Plant and equipment	B2.2	B3	307,909	300,072	235,553
Land and buildings	B2.2	B3	387,265	376,772	351,394
Software	B2.2		471,762	390,830	487,127
Total non-financial assets			1,421,565	1,203,801	1,205,920

Total assets			2,670,584	2,808,339	2,395,261

LIABILITIES
Payables
Employee benefits			28,913	33,844	45,909
Suppliers	B4.1		511,107	618,979	407,735
Other payables	B4.2		6,564	7,764	5,244
Lease incentives²	B4.3		101,128	91,614	41,543
Total payables			647,712	752,201	500,431

Provisions
Other provisions	B5.1		33,987	32,972	30,207
Employee provisions	B5.2		825,731	867,119	856,554
Total provisions			859,718	900,091	886,761

Total liabilities			1,507,430	1,652,292	1,387,192
Net assets			1,163,154	1,156,047	1,008,069

EQUITY
Parent entity interest
Contributed equity			2,639,388	2,317,526	2,610,998
Reserves			199,404	186,402	166,240
Accumulated deficit			(1,675,638)	(1,347,881)	(1,769,169)
Total parent entity interest			1,163,154	1,156,047	1,008,069

Total equity			1,163,154	1,156,047	1,008,069

¹ Budget reported in the 2018-19 Portfolio Budget Statements published in May 2018.

² Operating lease rental expenses comparative adjusted to recognise additional lease incentive received in 2017-18 for $4.0 million and future rent reduction incentives of $0.2 million.

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

SERVICES AUSTRALIA STATEMENT OF CHANGES IN EQUITY for the period ended 30 June 2019

				Original Budget¹
		2019	2018	2019
	Notes	$'000	$'000	$'000
CONTRIBUTED EQUITY
Balance carried forward from previous period		2,317,526	1,950,501	2,317,536
Adjusted opening balance		2,317,526	1,950,501	2,317,536

Distributions to owners
Returns of capital
Repealed appropriation		(9,563)	-	-
Restructuring²		12	-	-
Contributions by owners
Departmental capital budget		183,121	188,996	183,121
Equity injection - appropriations		148,292	178,029	110,341
Total transactions with owners		321,862	367,025	293,462
Total as at 30 June		2,639,388	2,317,526	2,610,998

RESERVES
Balance carried forward from previous period		186,402	166,240	166,240
Changes in asset revaluation reserve		13,002	20,162	-
Total as at 30 June		199,404	186,402	166,240

ACCUMULATED DEFICIT
Balance carried forward from previous period		(1,347,881)	(1,269,446)	(1,505,657)
Adjustment³		2,749	-	-
Adjusted opening balance		(1,345,132)	(1,269,446)	(1,505,657)
Deficit for the period		(330,506)	(78,435)	(263,512)
Total as at 30 June		(1,675,638)	(1,347,881)	(1,769,169)
Total equity as at 30 June		1,163,154	1,156,047	1,008,069

¹ Budget reported in the 2018-19 Portfolio Budget Statements published in May 2018.

² Total assets of $39,135 less total liabilities of $51,228 were relinquished for Early Release of Superannuation function to the Australian Taxation Office in 2018-19 under a restructuring of administrative arrangements.

³ Includes $4.0 million adjustment to lease incentive, $1.4 million adjustment to revaluation reserve and $0.2 million opening balance adjustment relating to the introduction of AASB 9.

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

SERVICES AUSTRALIA CASH FLOW STATEMENT for the period ended 30 June 2019

				Original Budget¹
		2019	2018	2019
	Notes	$'000	$'000	$'000
OPERATING ACTIVITIES
Cash received
Appropriations		5,480,761	4,399,469	5,030,621
Rendering of goods and services		282,403	282,832	268,179
GST received		235,281	166,088	224,582
Other		98,900	64,109	45,718
Total cash received		6,097,345	4,912,498	5,569,100

Cash used
Employees		2,877,895	2,836,540	2,610,031
Suppliers		2,469,586	1,539,173	2,412,762
Other		5,780	5,567	3,000
Borrowing and other financing costs		33	58	-
Competitive neutrality		447	406	454
Section 74 receipts transferred to the official public account		616,717	513,138	538,479
Total cash used		5,970,458	4,894,882	5,564,726
Net cash from operating activities		126,887	17,616	4,374

INVESTING ACTIVITIES
Cash received
Proceeds from sale of plant and equipment		133	109	-
Total cash received		133	109	-

Cash used
Purchase of buildings, plant and equipment		275,164	243,792	180,374
Purchase of software		206,008	139,693	123,088
Total cash used		481,172	383,485	303,462
Net cash used by investing activities		(481,039)	(383,376)	(303,462)

FINANCING ACTIVITIES
Cash received
Contributed equity - departmental capital budget		188,121	183,996	188,121
Contributed equity - capital injection		172,592	185,433	110,967
Total cash received		360,713	369,429	299,088

Cash used
Returns of capital - appropriations		9,563	-	-
Total cash used		9,563	-	-
Net cash from financing activities		351,150	369,429	299,088

Net increase/(decrease) in cash held		(3,002)	3,669	-
Cash at the beginning of the reporting period		14,802	11,133	20,000
Cash at the end of the reporting period	B1	11,800	14,802	20,000

¹ Budget reported in the 2018-19 Portfolio Budget Statements published in May 2018.

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

SERVICES AUSTRALIA ADMINISTERED SCHEDULE OF COMPREHENSIVE INCOME for the period ended 30 June 2019

				Original Budget¹
		2019	2018	2019
	Notes	$'000	$'000	$'000
NET COST OF SERVICES
Expenses	A3
Child support maintenance expenses		1,611,825	1,492,212	1,498,182
Impairment loss allowance on financial instruments	A3.1	69,598	95,993	98,642
Other expenses		271	0	0
Total expenses		1,681,694	1,588,205	1,596,824

Income	A4
Non-taxation revenue
Child support maintenance revenue		1,657,141	1,575,762	1,586,502
Compensation recoveries²		82,432	0	0
Competitive neutrality revenue		13,912	12,935	13,704
Dividends		9,825	11,595	11,441
Fees and fines		8,091	8,814	8,904
Other revenue		779	446	600
Total non-taxation revenue		1,772,180	1,609,552	1,621,151

Gains
Reversal of write-downs and impairment	A4.1	23,951	12,162	10,000
Total gains		23,951	12,162	10,000

Total income		1,796,131	1,621,714	1,631,151
Net contribution by services		114,437	33,509	34,327
Surplus		114,437	33,509	34,327

OTHER COMPREHENSIVE INCOME
Items subject to subsequent reclassification to net cost of services
Gain on investment		6,775	7,508	0
Total comprehensive income		121,212	41,017	34,327

¹ Budget reported in the 2018-19 Portfolio Budget Statements published in May 2018.

² The recovery of compensation for Health care and other services was transferred from the Department of Health on 1 July 2018 and therefore not included in the budget.

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

SERVICES AUSTRALIA ADMINISTERED SCHEDULE OF ASSETS AND LIABILITIES as at 30 June 2019

				Original Budget¹
		2019	2018	2019
	Notes	$'000	$'000	$'000
ASSETS
Financial assets
Cash and cash equivalents	B6.1	120,021	135,175	150,778
Other receivables²	B6.2	21,882	7,657	5,666
Child support receivables²	B6.3	917,156	834,737	914,620
Other investments	B7.1	78,989	72,214	64,706
Total assets administered on behalf of the Australian Government		1,138,048	1,049,783	1,135,770

LIABILITIES
Payables
Child support payments received in advance		23,228	20,702	21,411
Child support and other payables	B8.1	34,119	31,664	28,929
Recovery of compensation payable	B8.2	9,126	82,809	100,438
Total payables		66,473	135,175	150,778

Provisions
Child support maintenance provisions	B9.1	914,766	832,638	912,778
Recovery of compensation provision		48,739	-	-
Total provisions		963,505	832,638	912,778
Total liabilities administered on behalf of the Australian Government		1,029,978	967,813	1,063,556
Net assets		108,070	81,970	72,214

¹ Budget reported in the 2018-19 Portfolio Budget Statements published in May 2018.

² Cost recovery receivables were reclassified from child support receivables to other receivables in 2018-19 to better reflect their nature as court case reimbursements and not child support maintenance receivables. 2017-18 comparatives were adjusted by $1.9 million and $1.4 million of related impairment.

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

SERVICES AUSTRALIA ADMINISTERED RECONCILIATION SCHEDULE for the period ended 30 June 2019

	2019	2018
	$'000	$'000

Opening assets less liabilities as at 1 July	81,970	76,367

Net contribution by services
Income	1,796,131	1,621,714
Expenses to other than corporate Commonwealth entities	(1,681,694)	(1,588,205)
Other comprehensive income
Gain on investment	6,775	7,508
Transfers to/from Australian Government
Appropriation transfers from the official public account
Annual appropriation
Payments to entities other than corporate Commonwealth entities	1,153	1,103
Special accounts (unlimited)
Payments to entities other than corporate Commonwealth entities¹	37,498	37,089
Appropriation transfers to the official public account
Annual appropriations	(69,890)	(73,606)
Special accounts	(63,873)	0
Closing assets less liabilities as at 30 June	108,070	81,970
Income administered and managed on behalf of the Australian Government is administered income. Collections are transferred to the official public account maintained by the Department of Finance. Conversely, cash is drawn from the official public account to make payments under appropriations (including from special accounts). These transfers to and from the official public account are reported in the administered cash flow statement, in this schedule and through the special accounts.

¹ Amounts relate to s77 & s78 of the Child Support (Registration and Collection) Act 1988 credited directly to the Child Support Special account.

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

SERVICES AUSTRALIA ADMINISTERED CASH FLOW STATEMENT for the period ended 30 June 2019

		2019	2018
	Notes	$'000	$'000
OPERATING ACTIVITIES
Cash received
Child support		1,529,098	1,463,520
Health compensation receipts		303,281	295,779
Competitive neutrality		12,241	13,697
Dividends		11,079	12,688
Fees and fines		8,167	8,840
Other		1,352	898
Total cash received		1,865,218	1,795,422

Cash used
Child support		1,524,642	1,461,376
Health compensation payments		259,544	295,775
Other		1,074	827
Total cash used		1,785,260	1,757,978
Net cash from operating activities		79,958	37,444

Cash at the beginning of the reporting period		135,175	133,145
Cash from the official public account
Appropriations		38,651	38,192
Total cash from the official public account		38,651	38,192
Cash to the official public account
Appropriations		(38,052)	(37,954)
Other		(31,838)	(35,652)
Special accounts		(63,873)	0
Total cash to the official public account		(133,763)	(73,606)
Cash at the end of the reporting period	B6.1	120,021	135,175

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

SERVICES AUSTRALIA NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2019

Table of Contents

Overview

A: Financial Performance

B: Financial Position

C: Funding

D: Other Items

Overview

Objectives of Services Australia

The Department of Human Services was renamed Services Australia in the Administrative Arrangement Orders on 29 May 2019. Services Australia is an Australian Government controlled not-for-profit entity. The department delivers social and health related services, through its Centrelink, Medicare and Child Support programmes. Services Australia builds on its foundation of service excellence to improve the delivery of services to the Australian community. Through close collaboration with the community and partner agencies, Services Australia plays an active role in developing new approaches to social and health related policy and service delivery.

The contribution of the department to the Australian Government’s agenda is reflected in its outcome statement which is to:

Support individuals, families and communities to achieve greater self-sufficiency; through the delivery of policy advice and high quality accessible social, health and child support services and other payments; and support providers and businesses through convenient and efficient service delivery.

The department’s activities contributing to this outcome are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, revenue and expenses controlled or incurred by the department in its own right. Administered activities involve the management and oversight by the department, on behalf of the Australian Government, of items controlled or incurred by the Australian Government.

The continued existence of the department is dependent on government policy and on continuing funding by the Parliament for the department's administration and programmes.

Basis of preparation of the financial statements

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

The financial statements have been prepared in accordance with the:

Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR), and
Australian Accounting Standards Reduced Disclosure Requirements and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements are presented in Australian dollars and values are rounded unless disclosure of the full amount is specifically required.

Revenues, expenses, assets and liabilities 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.

Unless otherwise stated, administered revenue, expenses, assets, liabilities and cash flows reported in the administered schedules and related notes are accounted for on the same basis, using the same policies as for departmental items and relate to: child support; fees and fines; dividends; competitive neutrality items; foreign countries transactions; and compensation recoveries.

Taxation

The department is exempt from all forms of taxation except fringe benefits tax and the goods and services tax.

New Australian accounting standards

Adoption of new Australian accounting standard requirements

New and revised accounting standards and interpretations that were issued prior to the signing of the financial statements and were applicable to the current reporting period did not have a material financial impact and are not expected to have significant future financial impact on the department’s financial statements.

Future accounting standard requirements

The department will apply AASB 16 Leases from
2019-20. The standard will require the net present value of payments under most operating leases to be recognised as assets and liabilities. The impact of the accounting standard is expected to increase assets by $2,259.2 million, liabilities by $2,130.3 million and a change in equity of $128.9 million.

The department will also apply AASB 15 Revenue from Contracts with Customers and AASB 1058 Income for Not-for-Profit Entities from 2019-20. These standards are not expected to have a material impact on the transactions and balances recognised in the financial statements.

Commonwealth expenditure

The Australian Government continues to have regard to developments in case law, including the High Court’s most recent decision on Commonwealth expenditure in Williams v Commonwealth [2014] HCA 23, as they contribute to the larger body of law relevant to the development of Commonwealth programmes. In accordance with its general practice, the Australian Government will continue to monitor and assess risk and decide on any appropriate actions to respond to risks of expenditure not being consistent with constitutional or other legal requirements. As at 30 June 2019 the department has assessed that it has no spending activities having a high or medium constitutional risk.

Breach of section 83 of the Constitution

Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law. Payments made which are not supported by an appropriation are not consistent with section 83 of the Constitution.

It is not practical for the department to completely eliminate the potential for non-compliance with section 83. The department has not identified any instances of non-compliance resulting from serious mismanagement. There have been a small number of instances of minor non-compliance. The identified non-compliance represents a small proportion of the total payments made, by volume and value, generally caused by inaccurate customer supplied bank account data and minor administrative errors.

In 2018-19, the department identified 336 payments totalling $29,891 from the Child Support Special Account that were not consistent with section 83 of the Constitution. The department undertook recovery action or offsets of an amount against future payments to the customer. As at 30 June 2019 $14,096 had been recovered or offset.

In 2018-19, the department identified seven payments totalling $61,160 from the Recovery of Compensation for Health Care and Other Services Special Account that were not consistent with section 83 of the Constitution. The department undertook recovery action and as at 30 June 2019 $12,796 had been recovered.

A: Financial Performance

A1: Expenses

A1.1: Employee benefits

	2019	2018
	$'000	$'000
Wages and salaries	1,957,064	1,957,935
Superannuation¹
Defined benefit plans^2,3	224,095	237,366
Defined contribution plans³	174,778	170,590
Leave and other entitlements	397,775	423,974
Separations and redundancies	56,900	45,191
Other employee expenses	3,930	3,163
Total employee benefits	2,814,542	2,838,219

¹ Staff of the department are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or non-government superannuation funds. The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap and other non‑government super funds are defined contribution schemes.

² The department made employer contributions to defined benefit superannuation schemes at rates determined by an actuary to be sufficient to meet the current cost to the Australian Government. The department accounts for the contributions as if they were contributions to defined contribution plans.

³ Includes reclassification of $12.2 million from defined benefit plans to defined contribution plans in 2017-18.

A1.2: Supplier expenses

	2019	2018
	$'000	$'000
Goods and services supplied or rendered
Consultants and contractors	843,509	455,701
IT maintenance	242,797	207,810
Communications	214,672	225,757
Property operating	130,082	125,880
Travel and motor vehicles	53,431	39,626
Customer related	51,530	49,659
Staff related	41,300	36,052
Legal services and compensation	28,970	22,548
Fees and charges	24,230	25,574
Other	15,920	13,171
Total goods and services supplied or rendered¹	1,646,441	1,201,778

Goods supplied	113,252	41,364
Services rendered	1,533,189	1,160,414
Total goods and services supplied or rendered	1,646,441	1,201,778

Other supplier expenses
Operating lease rentals - external parties²	355,848	343,194
Workers compensation premium	20,873	35,237
Total other suppliers	376,721	378,431
Total supplier expenses	2,023,162	1,580,209

¹ Includes $172.0 million (2018: $167.3 million) in related entity transactions.

² Operating lease rental expenses comparative adjusted to recognise additional lease incentives received in 2017-18 for $4.0 million.

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

Lease payments are subject to increases in accordance with upwards movements in the consumer price index, market rates, fixed increase rates or a combination of the aforementioned rates. Lease terms are determined by property use and generally range between one and ten years. Four per cent of office accommodation leases have terms of greater than ten years. Most lease agreements include option terms of three to five years that are exercisable at the Commonwealth's discretion and generally provide for an adjustment of rentals to current market levels upon exercise of an option term.

Lease incentives provided to the department by way of rent free periods, leasehold improvements or cash incentives are recognised as lease incentive liabilities (note B4.3 refers). Lease payments are allocated between a reduction of the lease incentive liabilities and the property rental expense to effect a spreading of the rental expense in accordance with the pattern of benefits derived from the rental properties.

The department makes an immediate allowance for property make-good where required under lease agreements (note B5.1 refers).

A property lease is deemed onerous if it relates to a vacant floor and/or an identifiable and separable portion of a building for which there are no immediate future plans or sub-let arrangements (e.g. a vacant, self-contained floor of a larger building or wing). In these instances a provision for surplus lease space is recognised and subject to annual review (note B5.1 refers).

Commitments payable for minimum lease payments in relation to non-cancellable operating leases

	<1 year	Between 1-5 years	>5 years	Total	<1 year	Between 1-5 years	>5 years	Total
	2019	2019	2019	2019	2018	2018	2018	2018
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Operating leases¹	347,575	947,753	312,940	1,608,268	368,636	967,737	398,164	1,734,537

¹ Contractual obligations comprise property operating, ICT equipment and motor vehicle fleet leases.

A1.3: Other expenses

	2019	2018
	$'000	$'000
Resolution of claims	1,373	3,190
Finance costs	670	650
Competitive neutrality - state tax equivalent¹	447	406
Losses from asset sales	-	441
Total other expenses	2,490	4,687

¹The department provides Centrepay services which are subject to the Australian Government’s competitive neutrality policy. The department is required to make payroll taxation equivalent payments to the Australian Government.

A2: Income

Own source revenue mainly relates to the provision of shared services to other government entities.

Contract revenue from the rendering of goods and services is recognised upon completion of the requirements of the contract and the goods have been transferred or service has been completed.

Gains include incidental transactions and events outside of ordinary operations such as: contributions of assets at no cost or for nominal consideration; gains arising from the disposal of non-current assets; reversals of provisions, previous asset write-downs and impairment; and resources received free of charge where the services would have been purchased if they had not been donated.

Commitments receivable for sub-lease rental income

	<1 year	Between 1-5 years	>5 years	Total	<1 year	Between 1-5 years	>5 years	Total
	2019	2019	2019	2019	2018	2018	2018	2018
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Rental income¹	717	1,909	-	2,626	-	-	-	-

¹ Sub-lease arrangement commenced 1 January 2019 with National Disability Insurance Agency.

A2.1: Resources received free of charge

	2019	2018
	$'000	$'000
Australian Taxation Office	1,160	1,901
Australian National Audit Office	960	980
Seconded staff	28	26
Total resources received free of charge	2,148	2,907

A2.2 Revenue from Government

Amounts appropriated for departmental outputs for the year (adjusted to reflect the department’s funding agreement, formal additions, reductions and restructures) are recognised as revenue from government when the department gains control of the appropriation.

Appropriations receivable are recognised at their nominal amounts (note B1.1 refers).

Amounts appropriated which are designated as equity injections (less any formal reductions) and the departmental capital budget are recognised directly in contributed equity in that year (statement of changes in equity refers).

Income and Expenses Administered on Behalf of Government

A3: Administered - Expenses

Child support maintenance expenses are recognised and measured in line with child support maintenance revenue (note A4 refers).

A3.1: Impairment Loss Allowance on Financial Instruments

	2019	2018
	$'000	$'000
Child support maintenance discharge	65,565	61,376
Child support write-down and impairment of assets	281	34,329
Child support waivers	3,707	136
Child support cost recovery discharge	-	3
Child support cost recovery write-down and impairment	34	91
Child support cost recovery waivers	11	3
Other - fees and fines	-	55
Total impairment loss allowance on financial instruments	69,598	95,993

A4: Administered - Income

Non-taxation revenue

All administered revenue is revenue relating to the course of ordinary activities performed by the department on behalf of the Australian Government.

Child support maintenance revenue

The child support programme acts as the intermediary in the transfer of child support payments, which are collected from the non-custodial parent and then paid to the custodial parent.

Revenue from the assessment and collection of child support is recognised in the administered schedule of comprehensive income at the nominal amounts. The revenue is recognised at the point when a child support assessment, private child support agreement administered by the department or maintenance court order is registered for collection by the child support registrar under the Child Support (Registration and Collection) Act 1988. In accordance with the Act, the revenue is adjusted when a private settlement is agreed by both parents for a particular period of payment.

Compensation recoveries revenue

The Recovery of Compensation for Health Care and Other Services Special Account (the Special Account) is used to manage monies received by the department as part of the compensation recovery programme. The department manages this on behalf of Department of Health, who has administrative responsibility of the Health and Other Services (Compensation) Act 1995 (the HSOC Act). The Special Account itself was established by the Recovery of Compensation for Health Care and Other Services Special Account 2015 – Establishment) Determination 2015/06.

Compensation recovery amounts are recognised as revenue in the administered financial statements when a notice of charge is issued and the recoverable benefits owed to the Commonwealth have been determined.

Competitive neutrality revenue

Australian Hearing provides services on a for-profit basis and is subject to the Australian Government’s competitive neutrality policy. Under competitive neutrality arrangements, Australian Hearing is required to make payroll tax and income tax equivalent payments to the Australian Government. These amounts are recognised in the administered financial statements and have been paid or are payable to the official public account.

Dividend revenue

The Australian Government owns 100 per cent of the issued share capital of Australian Hearing. Dividends from Australian Hearing are recognised in the administered financial statements and have been paid or are payable to the official public account.

Fees and fines

Under section 67 of the Child Support (Registration and Collection) Act 1988, a late payment penalty is applied whenever a non-custodial parent fails to make their child support payment to the custodial parent by the due date and where the outstanding maintenance debt exceeds $1,000.

Late payment penalties are recognised as revenue in the administered financial statements at the time the cash is received. Of the $8.1 million (2018: $8.8 million) of fees and fines revenue in administered income, $8.0 million (2018: $8.5 million) relates to penalty revenue receipts.

Other revenue

Other revenue consists of cost recovery revenue and Centrelink receipts from international sources. Cost recovery revenue is recognised when the court orders a child support customer to pay the department's costs in relation to a court case with the customer.

Gains include incidental transactions and events outside of ordinary operations such as reversals of previous asset impairments.

A4.1: Reversal of write-downs and impairment

	2019	2018
	$'000	$'000
Reversal of impairment - child support	23,929	12,162
Reversal of impairment - other fees and fines	22	-
Total reversal of previous asset impairments	23,951	12,162

B: Financial Position

B1: Financial Assets

Cash is recognised at its nominal amount and includes cash on hand.

B1.1: Trade and other receivables

B1.1: Trade and other receivables

	2019	2018
	$'000	$'000
Trade receivables in connection with
Goods and services	75,836	82,560
Total trade receivables	75,836	82,560

Appropriation receivables
Existing programmes - operating	1,105,461	1,471,390
Departmental capital budget	-	5,000
Equity	6,300	30,600
Funding agreement adjustment - operating	(9,353)	(57,573)
Total appropriations receivables	1,102,408	1,449,417

Other receivables
Goods and service tax	59,052	58,048
Total other receivables	59,052	58,048
Total trade and other receivables (gross)	1,237,296	1,590,025

Less impairment loss allowance
Trade receivables¹	(77)	(289)
Total impairment loss allowance	(77)	(289)
Total trade and other receivables (net)	1,237,219	1,589,736

The department classifies its financial assets at the time of initial recognition depending on the nature and purpose of the asset. All receivables are classified as trade and other receivables and are expected to be recovered within 12 months unless otherwise indicated
Trade receivables are recognised when the department becomes party to an agreement and has the right to receive cash. Trade receivables have 30 day terms (2018: 30 days) and are recognised at the nominal amount due less any impairment allowance. The collectability of debts are reviewed at the end of the reporting period and an impairment allowance is recognised.

¹ On 1 July 2018 AASB 9 Financial Instruments was introduced and the calculation for impairment allowances for all trade receivables owed to the department changed to an expected credit loss model. Introduction of the standard resulted in a $0.2 million reduction in the opening provision that is recognised in equity.

B2: Non-Financial Assets

B2.1: Other non-financial assets

	2019	2018
	$'000	$'000
Prepayments expected to be amortised	201,252	97,121
Lease incentive assets¹	53,377	39,006
Total other non-financial assets	254,629	136,127

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

¹ Lease incentive assets comparative adjusted to recognise additional future rent reductions received in 2017-18 for $0.2 million.

B2.2: Reconciliation of the opening and closing balances of property, plant and equipment and software

	Land and buildings	Plant and equipment	Software	Total
	$’000	$’000	$’000	$’000
Total as at 30 June 2018	376,772	300,072	390,830	1,067,674
Gross book value	402,056	359,347	1,081,699	1,843,102
Accumulated depreciation and amortisation	(25,284)	(59,275)	(690,869)	(775,428)
Total as at 1 July 2018	376,772	300,072	390,830	1,067,674
Additions
Purchases	98,759	98,185	23,297	220,241
Internally developed	-	-	178,294	178,294
Revaluations recognised in other comprehensive income¹	10,392	2,845	-	13,237
Revaluations recognised in net cost of services²	(233)	(128)	-	(361)
Write-down and impairment recognised in net cost of services²	(1,302)	(1,208)	(14,168)	(16,678)
Depreciation and amortisation expenses	(98,263)	(91,905)	(106,494)	(296,662)
Other movements³	1,140	48	3	1,191
Total as at 30 June 2019⁴	387,265	307,909	471,762	1,166,936
Gross book value	412,179	401,895	1,156,664	1,970,738
Accumulated depreciation and amortisation	(24,914)	(93,986)	(684,902)	(803,802)
Total as at 30 June 2019	387,265	307,909	471,762	1,166,936

¹ Recognised in changes to asset revaluation reserve.

² Recognised in write down and impairment of assets.

³ Includes assets recognised for the first time, assets transferred between classes and increase to make-good assets.

⁴ Includes asset under construction amounts for land and buildings of $35.3 million (2018: $67.1 million) and software of $145.5 million (2018: $122.2 million).

The asset thresholds and useful lives for each asset class remain unchanged from 2018.

Departmental assets	2019 Useful life	2019 Threshold
Land	Unlimited	nil
Buildings	50 years	nil
Leasehold improvements	Shorter of unexpired lease term or useful life	$20,000
General plant and equipment	3 to 10 years	$3,000
ICT plant and equipment	3 to 10 years	nil
Purchased software	5 to 10 years	$100,000
Internally developed software	5 to 10 years	$1,000,000

Unless otherwise stated, depreciation and amortisation rates are applied on a straight-line basis and rates are reviewed annually, as are useful lives and residual values. Any necessary adjustments are recognised as appropriate. Where material software assets have not been budgeted to be enhanced, replaced, or retired, a minimum remaining useful life of two years is applied.

All property, plant and equipment is reported at fair value (note B3 refers). Cost is considered an acceptable fair value proxy for assets under construction. An indexation test is applied annually to verify that the carrying amount is acceptable. Revaluations are conducted by an independent valuer. In 2018-19 Jones Lang LaSalle Advisory Services Pty Ltd (JLL) conducted the revaluation of leasehold improvement and make-good relating to leasehold improvements as well as ICT desktop equipment and general plant and equipment (2018: revaluation of all leasehold improvement, make-good relating to leasehold improvements and data centre asset classes).

Software assets are carried at cost less accumulated amortisation and impairment except for software assets under development which are recognised at cost.

All non-financial assets are assessed annually for indicators of impairment and, where appropriate, the asset’s carrying value is adjusted to fair value. In 2018-19, impairment was assessed by management applying professional judgement. This assessment takes into account how assets are being used and is impacted by factors such as legislative changes, program cessations and platform changes. This has resulted in an impairment expense of $16.7 million (2018: $17.5 million).

Capital commitments payable

	<1 year	Between 1-5 years	Total	<1 year	Between 1-5 years	Total
	2019	2019	2019	2018	2018	2018
	$'000	$'000	$'000	$'000	$'000	$'000
Land and buildings	11,021	-	11,021	1,745	-	1,745
Plant and equipment¹	7,233	-	7,233	10,044	-	10,044
Software	-	-	-	249	-	249
Total	18,254	-	18,254	12,038	-	12,038

¹ Contractual obligation primarily for the purchase of Information and Communication Technology hardware.

B3: Fair Value Measurement

The department adopts a risk-based asset valuation approach to measure non-financial assets at fair value in accordance with AASB 13 Fair Value Measurement. Each class of non-financial assets, excluding software, is subject to a formal independent valuation at least once every three years dependent upon an annual risk assessment. In years where a formal valuation is not undertaken non-financial assets are subject to a desktop review.

Fair value is a market-based, rather than entity specific, measurement. The objective in all cases is to estimate the price at which an orderly transaction to sell the asset would take place between market participants under current market conditions at the measurement date. Where possible, assets are valued based upon observable inputs, such as quoted prices in active markets or other market transactions or information. Where this information is not available, valuation techniques rely upon unobservable inputs.

The different levels of the fair value hierarchy are:

Level 1: Quoted prices (unadjusted) in active markets for identical assets.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset, either directly or indirectly.
Level 3: Unobservable inputs for the asset.

A revaluation of non-financial assets was completed in 2019 for leasehold improvements, ICT desktop equipment and general plant and equipment classes (2018: leasehold improvements and data centre asset classes). Results of the revaluation are disclosed at note B2.2.

Level 2 valuations were based on market comparable information. Level 3 valuations were based on depreciated replacement cost and adjusted market comparable information.

The following table provides an analysis of assets that are measured at fair value. The remaining assets disclosed in the statement of financial position do not apply the fair value hierarchy.

Fair value measurements, valuation techniques and inputs used

Fair value measurements as at 30 June				For levels 2 and 3 fair value measurements
	2019	2018	Level	Valuation techniques¹	Inputs used
	$'000	$'000	Level	Valuation techniques¹	Inputs used
Non-financial assets²
Freehold land and buildings	8,777	7,256	2	Market comparables	Adjusted market transactions.
Freehold land and buildings	10,637	6,900	3	Market comparables	Adjusted market transactions.
Leasehold buildings and leasehold improvements	367,851	362,616	3	Depreciated replacement cost	Replacement cost new ($/m²), total useful life, remaining useful life and consumed economic benefit/obsolescence of asset.
Plant and equipment	235,842	188,580	2	Market comparables	Adjusted market transactions.
Plant and equipment	70,061	108,772	3	Depreciated replacement cost	Replacement cost new.
Plant and equipment	2,006	2,720	3	Market comparables	Adjusted market transactions.
Total non-financial assets	695,174	676,844

¹ In 2019, $2.3 million (2018: nil) transferred from level 3 to level 2 due to a change in valuation techniques from depreciated replacement cost to market comparables. In 2019, $0.3 million (2018: $43.9 million) transferred from level 2 to level 3 due to a change in observable inputs.

² A reconciliation of movements in property, plant and equipment is included in note B2.2.

B4: Payables

B4.1: Suppliers

	2019	2018
	$'000	$'000
Trade creditors and accruals	428,756	539,201
Operating lease rentals	82,351	79,778
Total suppliers	511,107	618,979

Supplier and other payables are recognised at the present value of expected future cash flows. Trade creditors and accruals are recognised to the extent that the goods and services have been received (irrespective of having been invoiced). Credit terms for goods and services are expected to be settled within 30 days (2018: 30 days).

B4.2: Other payables

Unearned income	5,716	7,097
Fringe benefits tax	848	667
Total other payables	6,564	7,764

B4.3: Lease incentives

Lease incentives expected to be settled
No more than 12 months	20,038	17,394
More than 12 months	81,090	74,220
Total lease incentives¹	101,128	91,614

¹ Lease incentive liabilities comparative adjusted to recognise additional lease incentives received in 2017-18 for $4.2 million.

B5: Provisions

B5.1: Other provisions

Movements in other provisions
	Property make-good provision¹	Surplus lease space provision	Other	Total
	$’000	$’000	$’000	$’000
As at 1 July 2018	30,237	88	2,647	32,972
Additional provisions made²	3,020	-	815	3,835
Amounts used	(1,249)	-	(81)	(1,330)
Amounts reversed	(643)	(88)	(1,396)	(2,127)
Unwinding of discount or change in discount rate	637	-	-	637
Total as at 30 June 2019	32,002	-	1,985	33,987

¹ There are 417 (2018: 436) agreements for the leasing of premises, which have provisions requiring the department to restore the premises to their original condition at the conclusion of the lease.

² The total additional provision includes property make-good revaluations of existing arrangements. The revaluation conducted by Jones Lang LaSalle Advisory Services Pty Ltd increased the provision and resulted in a $1.7 million decrement to the asset revaluation reserve less a $0.4 million increment recognised in goods and services expense (property operating) and other gains.

B5.2: Employee provisions

	2019	2018
	$'000	$'000
Leave	825,731	855,300
Separations and redundancies	-	11,819
Total employee provisions	825,731	867,119

The department's leave liability includes provisions for annual and long service leave. No provision is made for personal leave, which is non-vesting.

In accordance with AASB 119 Employee Benefits, recreation and long service leave liabilities are measured at the present value of the estimated future cash outflows. The interest rates used in discounting future cash flows relate to market yields on government bonds which have a comparable term to the leave obligations. In 2019, the department engaged the Australian Government Actuary to undertake a triennial actuarial assessment of the leave provisions taking into account the likely tenure of existing staff, patterns of leave claims and payouts, future salary movements, and discount rates.

The department recognises a provision for separations and redundancies where there is a detailed formal plan that has been communicated to the affected staff.

B6: Administered - Financial Assets

B6.1: Cash and cash equivalents

	2019	2018
	$'000	$'000
Cash in special accounts¹	120,021	135,175
Total cash	120,021	135,175

¹ Departure Prohibition Orders (DPO) amounts held as cash on hand or on deposit in prior years are now reported in the Services for Other Entities and Trust Moneys – Services Australia Special Account.

B6.2: Other receivables

	2019	2018
	$'000	$'000
Compensation recoveries²	13,751	-
Dividends	3,959	5,213
Competitive neutrality	3,457	1,786
Other - fees and fines	2,775	2,850
Cost recovery³	1,850	1,882
Debt repayment	172	-
Total other receivables (gross)	25,964	11,731
Less: impairment loss allowance - fees and fines	(2,644)	(2,665)
Less: impairment loss allowance - cost recovery³	(1,438)	(1,409)
Total impairment loss allowance	(4,082)	(4,074)
Total other receivables (net)	21,882	7,657

All significant receivables are expected to be collected within 12 months.

² As at 1 July 2018, compensation recovery revenue, receivables and transfers to the official public account are now reported by the department. As part of the changes, receivables are now recognised in the Administered Schedule of Assets and Liabilities under compensation recoveries.

³ Cost recovery receivables transferred from child support maintenance receivables to other receivables in 2018-19 as it relates to court case reimbursements and not child support maintenance receivables. 2017-18 comparatives were adjusted by $1.9 million and $1.4 million of related impairment.

B6.3: Child support receivables

	2019	2018
	$'000	$'000
Maintenance receivables	1,607,677	1,529,648
Less: impairment loss allowance	(692,911)	(697,011)
Net maintenance receivables	914,766	832,637

Customer miscellaneous receivables	5,883	5,868
Less: impairment allowance	(4,629)	(4,572)
Net customer miscellaneous receivables	1,254	1,296

Client top up receivables	1,932	1,516
Less: impairment allowance	(796)	(712)
Net client top up receivables	1,136	804

Total child support receivables (net)	917,156	834,737

Child support receivables (gross) in connection with
External parties	1,615,492	1,537,032
Total child support receivables (gross)	1,615,492	1,537,032

Child support maintenance receivables and impairment allowance

The child support programme acts as the intermediary in the transfer of child support payments, which are collected from the non-custodial parent and then paid to the custodial parent. The majority of the receivable balance relates to maintenance debt for which the Commonwealth does not have any financial exposure given that the child support programme acts as the intermediary only.

The department actively manages the collection of child support debt on a continual basis and engages the Australian Government Actuary (AGA) annually to perform a review of the impairment allowance for child support maintenance debt.

Since 30 June 2018, changes in collection rates and the discounted mean term have resulted in the impairment allowance for child support maintenance debt changing from 44.83 per cent to 42.84 per cent as at 30 June 2019 as provided as part of the AGA review. This resulted in a movement to the impairment allowance of $32.2 million as at 30 June 2019.

AASB 136 Impairment of Assets requires that payments are discounted at a rate reflecting the estimated timing of the payments. As at 30 June 2019 the AGA’s assessment was that the mean term for child support receivables was approximately 6.75 years and the 6.75 year bond rate was applied (2018: 5.5 year collection and bond rate).

Child support penalty receivables

Child support penalty revenue is recognised in the administered financial statements at the time cash is received not when the debt is raised (note A4 refers). As at 30 June 2019, amounts not recorded in the financial statements included: total outstanding penalty debt $945.0 million (2018: $902.6 million); penalty debts raised during 2018-19, $136.2 million (2018: $131.4 million); and total penalty debts remitted, written off, waived or discharged, $85.8 million (2018: $73.7 million).

B7: Administered - Fair Value Measurement

Administered non-financial assets are measured at fair value in accordance with AASB 13 Fair Value Measurement and consistent with the departmental policy described at note B2 and B3.

The fair value of administered investments is taken to be the Australian Government’s proportional interest in the net assets of the entity. The Australian Government owns 100 per cent of the issued share capital of Australian Hearing, a Corporate Commonwealth Entity. The principal activity of Australian Hearing is to help people manage their hearing impairment in order to improve their quality of life.

B7.1: Fair value measurements, valuation techniques and inputs used

Fair value measurements at 30 June				For level 3 fair value measurements
	2019	2018	Level¹	Valuation techniques²	Inputs used
	$'000	$'000	Level¹	Valuation techniques²	Inputs used
Financial assets
Other investments - Australian Hearing	78,989	72,214	3	Net assets	Net assets of the entity.

¹ No change in valuation technique occurred during the period.

² Refer to note B3, level 3 valuations were based on depreciated replacement cost and adjusted market comparable information.

B8: Administered - Payables

B8.1: Child support and other payables

	2019	2018
	$'000	$'000
Child support maintenance	34,031	31,502
Other	88	162
Total child support and other payables	34,119	31,664

Child support maintenance payables reflect amounts collected and due to be transferred to the custodial parent. All payables are expected to be settled within 12 months and are measured at their nominal amount.

B8.2: Compensation payable

	2019	2018
	$'000	$'000
Recovery of compensation	9,126	82,809
Total compensation payables	9,126	82,809

Recovery of compensation payable reflects amounts collected from insurers and third parties for compensation recovery claims not yet finalised.

B9: Administered - Provisions

The child support maintenance provision reflects child support obligations to the custodial parent that have been assessed but not yet received. The liability is calculated on the basis of the present value of the estimated future cash flows to be made to custodial parents at the reporting date. Estimated future cash flows are calculated with reference to the past experience of the recoverability of gross child support receivables from non-custodial parents. The estimate does not include future cash outflows that may result from child support re-assessments, prior to the reporting date, that are requested by non-custodial or custodial parents after the reporting date.

B9.1: Child support maintenance provisions

Movements in child support maintenance provisions
	$’000	$’000
As at 1 July	832,638	803,758
Additional provisions made¹	1,657,141	1,576,208
Amounts used	(1,530,318)	(1,463,333)
Amounts reversed	(44,695)	(83,995)
Total as at 30 June	914,766	832,638

¹ Additional provisions made to reflect child support obligations to the custodial parent that have been assessed but not yet received.

B10: Financial Instruments

B10.1: Categories of financial instruments

Financial assets class	AASB 139 original classification	AASB 9 new classification	AASB 139 carrying amount at 1 July 2018	AASB 9 carrying amount at 1 July 2018
			2019	2018
			$'000	$'000
Financial assets under AASB 139
Cash				14,802
Trade and other receivables				82,271
Total financial assets under AASB 139				97,073

Financial assets under AASB 9
Financial assets at amortised cost
Cash			11,800
Trade and other receivables			75,759
Total assets at amortised cost			87,559
Total financial assets			87,559	97,073

Financial liabilities
Financial liabilities measured at amortised cost
Suppliers			511,107	618,979
Other payables			6,564	7,764
Total financial liabilities measured at amortised cost			517,671	626,743
Total financial liabilities			517,671	626,743

Classification of financial assets on the date of initial application of AASB 9
			$'000	$'000
Cash	Held-to-maturity	Amortised cost	14,802	14,802
Trade and other receivables	Loans and receivable	Amortised cost	82,271	82,461
Total financial assets			97,073	97,263

Reconciliation of carrying amounts of financial assets on the date of initial application of AASB 9
	AASB 139 carrying amount at 30 June 2018	Reclassification	Re-measurement	AASB 9 carrying amount at 1 July 2018
	$'000	$'000	$'000	$'000
Financial assets at amortised cost
Cash	14,802	-	-	14,802
Trade and other receivables	82,271	-	190	82,461
Total amortised cost	97,073	-	190	97,263

B10.2: Categories of financial instruments

Financial assets class	AASB 139 original classification	AASB 9 new classification	AASB 139 carrying amount at 30 June 2018	AASB 9 carrying amount at 1 July 2018
			2019	2018
			$'000	$'000
Financial assets under AASB 139
Cash and cash equivalents				135,175
Other receivables				5,213
Total financial assets under AASB 139				140,388

Available-for-sale financial assets
Other investments				72,214
Total available-for-sale financial assets				72,214

Financial assets under AASB 9
Financial assets at amortised cost
Cash and cash equivalents			120,021
Other receivables			17,882
Total financial assets at amortised cost			137,903

Financial assets at fair value through other comprehensive income
Other investments			78,989
Total financial assets at fair value through other comprehensive income			78,989
Total financial assets			216,892	212,602

Financial liabilities
Financial liabilities measured at amortised cost
Recovery of compensation payable			9,126	82,809
Total financial liabilities measured at amortised cost			9,126	82,809
Total financial liabilities			9,126	82,809


Classification of financial assets on the date of initial application of AASB 9¹
			$'000	$'000
Cash and cash equivalents	Held-to-maturity	Amortised cost	135,175	135,175
Other receivables	Loans and receivable	Amortised cost	5,213	5,213
Other investments	Available-for-sale	Fair value through other comprehensive income	72,214	72,214
Total financial assets			212,602	212,602

¹ No administered assets were required to be reclassified or re-measured upon the implementation of AASB9

B11: Aggregate Assets and Liabilities

B11.1: Departmental

	2019	2018
	$'000	$'000
Assets expected to be recovered in:
No more than 12 months after the reporting period	1,441,686	1,691,004
More than 12 months after the reporting period	1,228,898	1,117,335
Total assets	2,670,584	2,808,339

Liabilities expected to be settled in:
No more than 12 months after the reporting period	741,927	875,622
More than 12 months after the reporting period	765,503	776,670
Total liabilities	1,507,430	1,652,292

B11.2: Administered

	2019	2018
	$'000	$'000
Assets expected to be recovered in:
No more than 12 months after the reporting period	446,672	489,613
More than 12 months after the reporting period	691,376	560,170
Total assets	1,138,048	1,049,783
Liabilities expected to be settled in:
No more than 12 months after the reporting period	426,571	408,914
More than 12 months after the reporting period	603,407	558,899
Total liabilities	1,029,978	967,813

C: Funding

C1: Appropriations

C1.1: Annual appropriations (recoverable GST exclusive)

	2019	2018
	$'000	$'000
Departmental ordinary annual services
Annual appropriation
Ordinary annual services¹	4,365,433	4,495,742
Departmental capital budget	183,121	188,996
PGPA Act section 74 receipts	375,880	341,857
Total appropriation²	4,924,434	5,026,595
Appropriation applied (current and prior years)
Ordinary annual Services	5,224,566	4,217,437
Department capital budget	188,121	183,996
Total appropriation applied	5,412,687	4,401,433
Variance³	(488,253)	625,162

Departmental other services
Annual appropriation
Equity injection^2,4	151,592	177,850
Total appropriation	151,592	177,850
Appropriation applied (current and prior years)	172,592	185,433
Variance³	(21,000)	(7,583)

Administered ordinary annual services
Annual appropriation
Operating	1,595	1,566
PGPA Act section 74 receipts	1,112	1,068
Total appropriation	2,707	2,634
Appropriation applied (current and prior years)⁵	1,149	1,136
Variance	1,558	1,498

¹In 2018-19 the revenue from government reported in the statement of comprehensive income is $4,546.3 million, $180.9 million more than the operating annual appropriation of $4,365.4 million. The $180.9 million difference reflects:

· $236.6 million reduction through the Appropriation Act (No.1) 2018-19 to reflect adjustments to 2017-18 revenue from government. This reduction is made up of a $57.6 million downward funding model adjustment and a net reduction in funding of $179.0 million.

· $46.3 million withheld through Section 51 of the PGPA Act (footnote 2 refers).

· $9.4 million reduction through the Appropriation Act (No.3) 2019-20 to reflect adjustments to 2018-19 revenue from government for a downward funding model adjustment.

²Includes the amount of $46.3 million of operating appropriation and $3.3 million of equity appropriations withheld under section 51 of the PGPA Act, with a determination date of 25 June 2019.

³Funded from prior year appropriations.

⁴In 2017-18 the equity injections reported in the statement of changes in equity is $178.0 million, $0.2 million more than the equity injections of $177.8 million. The $0.2 million difference relates to a reduction through the Appropriation Act (No.2) 2017‑18 to reflect adjustments to 2016-17 equity injections which could not be reflected in that year's Appropriation Acts.

⁵Applied administered appropriation is represented by $1.2 million drawn from the Appropriation Act (No.1) 2018-19.

Figures in text have been rounded. Discrepancies between totals and sums of components are due to rounding.

C1.2: Unspent annual appropriations (recoverable GST exclusive)

	2019	2018
	$'000	$'000
Authority
Departmental
Appropriation Act (No.1) 2015-16¹	-	9,563
Appropriation Act (No.1) 2016-17²	57,116	57,116
Appropriation Act (No.4) 2016-17³	29,000	29,000
Appropriation Act (No. 1) 2017-18	-	1,645,768
Appropriation Act (No. 1) 2017-18 DCB	-	5,000
Appropriation Act (No. 2) 2017-18	-	30,600
Appropriation Act (No. 3) 2017-18	-	9,228
Appropriation Act (No. 1) 2018-19⁴	1,064,911	-
Appropriation Act (No. 2) 2018-19⁵	9,600	-
Appropriation Act (No. 3) 2018-19	98,035	-
Total appropriation⁶	1,258,662	1,786,275
Administered
Appropriation Act (No.1) 2016-17⁷	-	1,515
Appropriation Act (No.1) 2017-18⁸	1,498	1,498
Appropriation Act (No.1) 2018-19	1,558	-
Total appropriation	3,056	3,013

¹ Appropriation Act (No.1) 2015-16 unspent annual appropriation in 2017-18 includes $9.6 million of funds quarantined for administrative purposes which was repealed in July 2018.

² Appropriation Act (No.1) 2016-17 includes $56.5 million of operating appropriations withheld under section 51 of the PGPA Act, with a determination date of 30 June 2017 and quarantined amount of $0.6 million due to reversal of a 2017-18 measure.

³ Appropriation Act (No.4) 2016-17 includes $29.0 million of capital appropriations withheld under section 51 of the PGPA Act, with a determination date of 30 June 2017.

⁴ Appropriation Act (No.1) 2018-19 includes cash at bank of $11.8 million and $46.3 million of operating appropriations withheld under section 51 of the PGPA Act, with a determination date of 25 June 2019.

⁵ Appropriation Act (No.2) 2018-19 includes $3.3 million of capital appropriations withheld under section 51 of the PGPA Act, with a determination date of 25 June 2019.

⁶ The total unspent departmental annual appropriation as at 30 June 2019 is $1,258.7 million (2018:$1,786.3 million) as compared to the total cash and appropriation receivable balance of $1,114.2 million (2018:$1,464.2 million). The $144.5 million difference reflects:

- $56.5 million of operating appropriation withheld through section 51 of the PGPA Act (footnote 2 refers);

- $29.0 million of capital appropriation withheld under section 51 of the PGPA Act (footnote 3 refers);

- $46.3 million of operating appropriation withheld through section 51 of the PGPA Act (footnote 4 refers); and

- $3.3 million of capital appropriation withheld under section 51 of the PGPA Act (footnote 5 refers).

- $9.4 million reduction to appropriation receivable in 2018-19 for the funding model adjustment.

⁷ Appropriation Act (No.1) 2016-17 unspent annual appropriation in 2017-18 includes $1.5 million of funds withheld under section 51 of the PGPA Act and quarantined for administrative purposes which was repealed in July 2018.

⁸ This amount reflects unspent appropriation from 2017-18 relating to the child support programme.

Figures in text have been rounded. Discrepancies between totals and sums of components are due to rounding.

C1.3: Special appropriations applied (recoverable GST exclusive)

	2019	2018
	$'000	$'000
Authority
Public Governance, Performance and Accountability Act 2013¹	1,141	2,220
Total special appropriations applied	1,141	2,220

¹ Refund appropriation to enable payments to be made for repayment of amounts earlier received under the Centrelink master programme.

C1.4: Disclosure by agent in relation to annual and special appropriations (recoverable GST exclusive)

	2019	2019	2018	2018
	$'000	$'000	$'000	$'000
	Total receipts	Total payments	Total receipts	Total payments
Attorney-General's Department¹	-	-	2,965	2,965
Department of Agriculture²	112,026	112,026	34,460	34,460
Department of Education³	7,822,892	7,822,892	1,375,019	1,375,019
Department of Employment, Skills, Small and Family Business⁴	2,639	2,639	3,353	3,353
Department of Health⁵	59,922,750	59,013,103	57,308,349	56,315,133
Department of Home Affairs⁶	186,801	186,801	132,358	132,358
Department of Infrastructure, Transport, Cities and Regional Development⁷	204,977	204,977	195,281	195,281
Department of Social Services⁸	111,899,225	111,899,225	110,584,183	110,584,183
Department of Veterans’ Affairs⁹	2,300,607	3,210,304	2,311,816	3,305,175
Total	182,451,917	182,451,967	171,947,784	171,947,927

Payments are made from appropriations administered by other agencies. The related revenue, expense, assets, liabilities and cash flows are disclosed in the financial statements of the relevant government agency which is responsible for the outcomes to which the items relate.

¹Attorney-General's Department – Following the machinery of government changes on 20 December 2017, payments for disaster recovery relief and victims of terrorism made on behalf of the entity were transferred to the Department of Home Affairs.

²Department of Agriculture - The department made third party payments on behalf of the entity for farm household allowance.

³Department of Education - The department made third party payments on behalf of the entity for child care subsidies which replaced child care benefit and rebate from July 2018.

⁴Department of Employment, Skills, Small and Family Business - The department made third party payments on behalf of the entity for the PaTH Internship Incentive payments.

⁵Department of Health – The department made third party payments on behalf of the entity for aged care, medical and pharmaceutical benefits.

⁶Department of Home Affairs - Following the machinery of government changes on 20 December 2017, payments for disaster recovery relief and victims of terrorism were transferred from the Attorney-General’s Department to the Department of Home Affairs. The department continues to make third party payments on behalf of the entity for asylum seeker support.

⁷Department of Infrastructure, Transport, Cities and Regional Development - The department made third party payments on behalf of the entity for the Bass Strait passenger vehicle equalisation scheme and Tasmanian freight equalisation scheme.

⁸Department of Social Services - The department made third party payments on behalf of the entity for personal benefits related to a wide section of the community. These include Age Pension, Disability Support Pension, Carer Payment, Family Tax Benefit, Austudy, ABSTUDY, Youth Allowance, Newstart Allowance.

⁹Department of Veterans’ Affairs - The department made third party payments on behalf of the entity for aged care, medical and pharmaceutical benefits.

C2: Special Accounts

The Child Support Special Account is used for the receipt of child support payments and the making of regular and timely payments to the custodial parents. The nature of the special account requires that child support monies received into the account are paid from the account to the relevant recipients. As such net child support receivables reported on the schedule of administered items are offset by equivalent child support provisions.

The Recovery of Compensation for Health Care and Other Services Special Account is used for the recovery of Medicare benefits, residential care and home care subsidies where the recipient receives compensation from a third party as a result of the injury or illness for which they have received benefits. The department is responsible for case management and the recovery of benefits back to the Australian Government. As at 1 July 2018, compensation recovery revenue, receivables and transfers to the official public account are reported by the department (previously reported by the Department of Health). As part of the changes, revenue is now recognised in the Administered Schedule of Comprehensive Income under compensation recoveries. No expense is recognised in relation to Recovery of Compensation, amounts returned to the OPA are recognised in the Administered Reconciliation Schedule.

The Services for Other Entities and Trust Moneys - Services Australia Special Account is a multi-purpose account. It is used for receipts and repayments of Departure Prohibition Orders, an administrative enforcement option that prevents a non-custodial parent with an outstanding child support liability from leaving Australia. The special account is also used for receipts and refunds of foreign countries’ transactions relating to administrative agreements with other countries.

	Child Support Special Account¹		Recovery of Compensation for Health Care and Other Services Special Account²		Services for Other Entities and Trust Moneys Services Special Account³
	2019	2018	2019	2018	2019	2018
	$'000	$'000	$'000	$'000	$'000	$'000
As at 1 July	70,882	71,622	91,090	82,805	-	-
Increases
Child Support (Registration & Collection) Act 1988 section 77⁴	-	37,089	-	-	-	-
Ordinary annual services	1,153	1,103	-	-	-	-
Repayments of ordinary annual services	1,112	1,068	-	-	-	-
Child support receipts	1,509,082	1,433,008	-	-	-	-
Health compensation receipts	-	-	303,283	295,779	-	-
SOETM receipts	-	-	-	-	941	-
Total increases	1,511,347	1,472,268	303,283	295,779	941	-
Available for payments	1,582,229	1,543,890	394,373	378,584	941	-
Decreases
Administered
Payments to custodial parents	(1,544,631)	(1,471,940)	-	-	-	-
Repayments debited from the special account	(1,112)	(1,068)	(63,873)	-	-	-
Payments made to the Department of Health	-	-	-	(62,157)	-	-
Refunds to customers	-	-	(258,388)	(225,337)	-	-
SOETM payments	-	-	-	-	(853)	-
Total decreases	(1,545,743)	(1,473,008)	(322,261)	(287,494)	(853)	-
Total as at 30 June	36,486	70,882	72,112	91,090	88	-
Represented by:
Cash held in the Official Public Account	36,486	70,882	72,112	91,090	88	-
Section 77 crediting clause⁴	37,631	-	-	-	-	-
Total appropriation available	74,117	70,882	72,112	91,090	88	-
Less
Timing differences	(16,858)	(18,678)	(9,438)	(8,281)	-	-
Total cash in special accounts	57,259	52,204	62,674	82,809	88	-

¹ Appropriation: Public Governance, Performance and Accountability Act 2013, section 80. Establishing Instrument: Child Support (Registration and Collection) Act 1988, section 73. Purpose: For the receipt of child support payments and the making of regular and timely payments to custodial parents.

² Appropriation: Public Governance, Performance and Accountability Act 2013, section 78(1). Establishing Instrument: Determination 2015/06 under Public Governance, Performance and Accountability Act 2013. Purpose: To credit monies for the purpose of recovery of compensation following a judgement or settlement under the Recovery of Compensation for Health Care and Other Services Special Account 2015 and;

(a) to pay a person an amount consistent with the Health and Other Services (Compensation) Act 1995;

(b) to pay an amount to a Commonwealth entity that manages a benefit, subsidy or scheme related to the Health and Other Services (Compensation) Act 1995;

(d) to reduce the balance of the special account (and, therefore, the available appropriation for the special account) without making a real or notional payment;

(e) to repay amounts where an Act or other law requires or permits the repayment of an amount received.

³ Services for Other Entities and Trust Moneys - Services Australia Special Account - s78 PGPA Act is a multi-purpose account.

Purpose one: For the receipt and refund of DPO; and

Purpose two: For the receipt and refund of foreign country payments.

⁴ Special Appropriations credited to the special account as budget adjustments which are excluded from note C1.3 Special Appropriations applied, Child Support (Registration and Collection) Act 1988.

C3: Regulatory Charging

	2019	2018
	$'000	$'000
Amounts applied
Departmental
Annual appropriation¹	-	5,079
Total amounts applied	-	5,079

Expenses
Departmental²	-	3,930
Total expenses	-	3,930

¹ The annual appropriation is taken to be representative of the amount applied and is equivalent to revenue received.

² Departmental expenses consist of direct and indirect costs. Indirect costs are apportioned internally to activities and may include administrative, corporate and technical support costs.

The department was responsible for the administration of early release of superannuation benefits on specific compassionate grounds until 30 June 2018. This activity transferred to the Australian Taxation Office on 1 July 2018. Total assets of $39,135 less total liabilities of $51,228 were relinquished for Early Release of Superannuation function to the Australian Taxation Office under a restructuring of administrative arrangements.

D: Other Items

D1: Contingent Assets and Liabilities

Contingent assets and liabilities may arise from uncertainty as to the existence of a liability or asset, or where the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain. Contingent liabilities are disclosed when settlement is greater than remote.

Claims for damages or costs

	2019	2018
	$'000	$'000
Contingent assets
As at 1 July	2,477	2,469
New contingent assets recognised	213	50
Re-measurement	2,964	(9)
Assets realised	-	(33)
Total contingent assets as at 30 June¹	5,654	2,477

Contingent liabilities
As at 1 July	829	1,692
New contingent liabilities recognised	1,239	792
Re-measurement	(26)	(12)
Liabilities realised	(796)	(637)
Obligations expired	60	(1,006)
Total contingent liabilities as at 30 June²	1,306	829
Net contingent assets as at 30 June	4,348	1,648

¹Contingent assets includes insurance and legal claims.

²Contingent liabilities includes compensation claims.

Unquantifiable contingencies

The department had a number of legal claims for which it has denied liability and is defending as well as claims which the department is pursuing. It is not possible to estimate the amount of any eventual payments or compensation in relation to these claims.

There were no quantifiable or unquantifiable administered contingent assets or liabilities in 2019 and 2018.

D2: Budgetary Reporting

Statement of comprehensive income

In 2018-19 the department reported an operating deficit of $330.5 million against a budgeted deficit of
$263.5 million¹. This $67.0 million variance represents 1.4 per cent of the $4,751.1 million budgeted net cost of services reported in the 2018-19 Portfolio Budget Statements published in May 2018.

The department’s total expenses of $5,154.3 million varies by 2.9 per cent to the original budget. The main cause of the variation is an increase in expenditure associated with the delivery of new and existing budget measures relating to decisions of government since the 2018-19 Budget and an increase in employee benefits, reflecting the effect of a change in the bond rate used to estimate the present value of future leave payments and salary increases paid to staff.

The department’s total revenue of $4,823.8 million varies by 1.6 per cent to the original budget. Total revenue was higher than budget reflecting an increase in revenue from government from new budget measures and adjustments to existing measures the result of decisions of government since the 2018‑19 Budget.

Statement of financial position

As at 30 June 2019 the department’s total equity was $1,163.2 million compared to the original budget of $1,008.1 million. The original budget was prepared before the 2017-18 actual figures were known and used an estimated rather than actual final outcome. A more positive operating result than estimated was achieved for 2017-18, and has improved the department’s equity.

Total assets are higher than budget by 11.5 per cent primarily as a result of the original budget being prepared before the 2017-18 actual figures were known which used an estimated rather than actual final outcome. In addition the positive variance relates to an increase in prepayments due to a change in contract terms with some key suppliers and lease incentive assets.

Total liabilities are higher than budget by 8.7 per cent. The major movements were due to higher than budgeted year-end supplier payables and lease incentive liabilities.

During 2018-19, the department received $321.9 million in contributed equity, $28.4 million more than originally budgeted. This increase mainly reflects additional capital funding provided during 2018-19 to support measures approved in the 2018-19 Mid-Year Economic and Fiscal Outlook update process and offset by measures in the 2019-20 Budget update process.

Cash flow statement

The variances between budget and actuals in the cash flow statement are primarily the flow on effect from the events described above. Overall, the department operated within $8.2 million of the budgeted closing cash position.

¹ The Government does not provide operating funding for make-good, depreciation or amortisation expenses. Rather, capital funding is received when assets need to be replaced and is recognised directly in equity.

D3: Administered - Budgetary Reporting

In 2018-19 the department administered $1,681.7 million of expenses on behalf of the government, 5.3 per cent higher than budget and $1,796.1 million of total income, 10.1 per cent higher than budget. Expenses and income have both increased due to increased child support. Income has also been impacted by the recognition of revenue relating to the Health Compensation Recovery Programme this year, not budgeted for.

Approximately 99.9 per cent of the administered expense and 92.3 per cent of administered income relates to child support.

The assets primarily relate to the debts owing from non-custodial parents. Similarly, the liabilities are in respect of the related payables owed to custodial parents.

D4: Key Management Personnel Remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities, directly or indirectly of the department. The department has determined the key management personnel to be the Secretary and Deputy Secretaries¹. Key management personnel remuneration is reported in the table below.

Key management personnel remuneration expense

	2019	2018
	$'000	$'000
Short-term employee benefits
Salary²	3,225	3,824
Non-salary benefits	323	312
Total short-term employee benefits	3,548	4,136

Post-employment benefits
Superannuation	551	796
Total post-employment benefits	551	796

Other long-term employee benefits
Long-service leave	112	107
Total other long-term employee benefits	112	107

Termination benefits	-	398
Total key management personnel remuneration expenses	4,211	5,437
The total number of key management personnel that are included in the above table are 11 (2018: 20). This represents the total number of individuals who have been remunerated during the year, this includes acting arrangements where it is determined the individual meets the definition of a key management personnel. The Portfolio Minister's remuneration and other benefits are excluded as it is set by the Remuneration Tribunal and are not paid by the department.

¹ From 2 January 2018, the Chief Financial Officer and General Manager, Service Strategy were no longer classified as key management personnel due to changed reporting arrangements within the department.

² Annual leave employee benefits are now included as a short-term employee benefit instead of a long-term employee benefit.

The total number of key management personnel that are included in the above table are 11 (2018: 20). This represents the total number of individuals who have been remunerated during the year, this includes acting arrangements where it is determined the individual meets the definition of a key management personnel. The Portfolio Minister's remuneration and other benefits are excluded as it is set by the Remuneration Tribunal and are not paid by the department.

D5: Related Party Disclosures

Related party relationships:

The entity is an Australian Government controlled entity. Related parties to this entity are key management personnel, the Portfolio Minister and Executive, 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.

Significant transactions with related parties can include:

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

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

D6: Events After the Reporting Period

Departmental

There were no subsequent events that had the potential to significantly affect the ongoing structure and financial activities of the department.

Administered

There were no subsequent events that had the potential to significantly affect the financial activities delivered on behalf of the government.

Visit

https://www.transparency.gov.au/annual-reports/services-australia/reporting-year/2018-2019-71