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Annual Report
201516
Commonwealth of Australia 2016
With the exception of the Commonwealth Coat of Arms, all material presented in this document is provided
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Acknowledgements
Coordinators: Vanessa Boyley, Graeme Page and Tim Burchfield
Design and typesetting: Belinda Seaman
Editing and indexing: Wilton Hanford Hanover
Printing: CanPrint Communications
Special thanks go to staff involved in contributing, coordinating and clearing material.
Letter of transmittal
vi
Contents
Letter of transmittal.............................................................................................................. v
About this report................................................................................................................... vi
Part 1: Overview...................................................................................................................... 1
Secretarys review...............................................................................................................................................................2
Portfolio overview................................................................................................................................................................5
Our department.....................................................................................................................................................................7
Part 2: Performance............................................................................................................13
Summary of performance and highlights..........................................................................................................14
Annual performance statements............................................................................................................................29
Part 3: Management and accountability.................................................................... 45
Corporate governance..................................................................................................................................................47
External scrutiny................................................................................................................................................................53
Our people.............................................................................................................................................................................57
Environmental performance......................................................................................................................................62
Financial management...................................................................................................................................................66
Part 4: Financial statements............................................................................................ 73
Appendices.......................................................................................................................... 157
A: Relationship between our purposes and our outcomes..................................................................158
B: Workforce statistics................................................................................................................................................159
C: Work health and safety......................................................................................................................................... 161
D: Advertising and market research...................................................................................................................163
E: Entity resources and expenses by outcomes.........................................................................................164
F: Correction of material errors in the 201415 annual report........................................................... 172
Abbreviations and acronyms........................................................................................ 173
Glossary................................................................................................................................ 174
List of requirements......................................................................................................... 178
Index.......................................................................................................................................183
1
Part 1: Overview
Secretarys review
Portfolio overview
Our department
2
Secretarys review
Welcome to the Department of Finance annual report 201516a report that marks the end
of the first full year of the enhanced Commonwealth performance framework and includes,
for the first time, annual performance statements, providing information on our performance
against our Corporate Plan 201516 and Portfolio Budget Statements 201516.
The departments aspiration to lead the public sector in delivering excellence and value in
the business of government is reflected in our many and varied achievements over the
past 12 months.
These achievements all took place during a year of great change within the department. We
made significant progress on our internal transformation program, which reflects the broader
transformation across the public service. While continuing to deliver value for money for the
people of Australia, we started working in a new operating model. A more flexible and mobile
workforce means we can match our staff with our priorities and streamline the way we work.
We used this model to direct temporary staff and resources into supporting areas with peak
workloads such as priority work in Ministerial and Parliamentary Services during the election
campaign and Budget and Financial Reporting for the 201617 Budget.
Part of this change included moving more than 1,300 staff into a new building and on to a new
technology platform. Being together in one building, rather than five, enables our people to
collaborate more easily. Improved technology and work practices help increase our flexibility.
Our achievements
The department played a central role in supporting the government to deliver its fiscal targets
and policy objectives.
We also successfully delivered the 201617 Budget and the Pre-election Economic and Fiscal
Outlook with our colleagues in the Treasury.
We have fostered improved public sector practice in a diverse range of areas. This work often
involved close partnerships with other entities, and included the enhanced Commonwealth
3
Our people
We would not be able to achieve any of our goals without our people. Our most valuable asset,
and our true strength, are the staff who make these achievements happen. They provide a
range of professional services and strategic advice every day, while reflecting our valuesto
be impartial, committed to service, accountable, respectful and ethical.
The department is a positive and healthy organisation where staff enjoy their work and feel
valued. This was reflected in our 2016 APS employee census results: Finances departmental
culture and employee engagement markers were above 80 per cent.
Our staff are supported by our enterprise agreement, a range of cultural networks, our
Diversity Plan and Reconciliation Action Plan, an online learning management system and our
new performance and capability framework.
Our staff also continued to show how important their community is, raising more than $6,000
for our flagship charity, Communities@Work. I am always impressed by and proud of the
commitment, generosity and community spirit we show in the department.
In 201617, we look forward to our continuing relationship with the Minister for Finance,
Senator the Hon Mathias Cormann, and to working with the Special Minister of State, Senator
the Hon Scott Ryan, in what promises to be a busy and fruitful year.
Jane Halton
Secretary
5
Portfolio overview
This section provides an overview of the Finance portfolio and summarises changes that
occurred in 201516.
Portfolio ministers
The ministers and assistant ministers responsible for the Finance portfolio and its agencies
during 201516 were:
Senator the Hon Mathias Cormann, Minister for Finance (from 18 September 2013) and
Special Minister of State (from 18 February 2016)
the Hon Dr Peter Hendy MP, Assistant Minister for Finance (from 18 February 2016)
the Hon Mal Brough MP, Special Minister of State (21 September 2015 to 18 February 2016)
(stood aside on 29 December 2015)
Senator the Hon Michael Ronaldson, Special Minister of State (until 21 September 2015)
the Hon Michael McCormack MP, Parliamentary Secretary to the Minister for Finance
(until 21 September 2015).
Portfolio structure
The portfolio structure as at 30 June 2016 is shown below.
Department of Finance
Secretary: Jane Halton AO, PSM
www.finance.gov.au
Department
of state As one of the governments central agencies, Finance assists the
government to shape and deliver its agenda by providing high-quality
advice, policies, governance arrangements and professional services.
Our department
This section provides an overview of the department at 30 June 2016 and introduces the
executive team that oversees the work of the departments business areas.
Program
Programs
Public sector
2.1 2.5 Procurement services
governance
Transforming
2.2 government 2.6 Public sector superannuation
Program
Secretary
Jane Halton AO, PSM
Jane Halton was appointed Secretary of the held numerous international appointments
Department of Finance in July 2014. She is with the World Health Organization, the World
responsible for all functions and services Health Assembly and the OECD.
delivered by the department. She was
Jane holds the position of Adjunct Professor
previously Secretary of the Department of
at the University of Sydney and Adjunct
Health (20022014).
Professor at the University of Canberra. She
Jane is co-chair of the OECD Asian Senior holds a Bachelor of Arts (Hons) in Psychology
Budget Officials, a member of the executive from the Australian National University and a
board of the Institute for Health Metrics and Doctorate of Letters (honoris causa) from the
Evaluation at the University of Washington University of New South Wales.
and on the advisory board of the Centre
Jane was awarded a Public Service Medal
for Applied Philosophy and Public Ethics
in 2002, a Centenary Medal in 2003 and an
(an Australian Research Council Special
Order of Australia in 2015.
Research Centre). She is also a Public Policy
Fellow at the Australian National Universitys
Crawford School of Public Policy and has
10
Secretary
Jane Halton AO, PSM
Part 2: Performance
Priorities
Our key priorities for 201516 were:
supporting the government to deliver its fiscal policy objectives through the budget and
financial advice, management and reporting, as required by the Charter of Budget Honesty
Act 1998 and the Public Governance, Performance and Accountability Act 2013 (see
Delivering the 201617 Budget and economic updates on page 15)
supporting the smaller government agenda and ensuring public sector operations are cost-
effective, including rationalising surplus office leases and expanding the reform of back-
office systems and coordinated procurement arrangements for ICT products and services
(see Shared and common services program on page 22 and Revised ICT benchmarking
framework on page 23)
supporting the governments agenda to modernise approaches for the efficient delivery and
management of publicly funded services and assets, including:
delivering key projects such as completing the negotiation on the long-term
arrangements for the Air Warfare Destroyer Program and the strategic review of ASC Pty
Ltds mandate, corporate and capital structure and governance (see Reform of the Air
Warfare Destroyer Program on page 21 and Review of ASCs mandate, corporate and
capital structure and governance on page 22)
undertaking reviews and scoping studies to assess optimal arrangements for
delivery and ownership options for identified assets, such as the Intra-Government
Communications Network and the Australian Rail Track Corporation Ltd (see Intra-
Government Communications Network scoping study and Australian Rail Track
Corporation scoping study on page 22).
In 201516, Finance achieved a longstanding operational objective by co-locating most
Canberra-based staff (previously accommodated across several separate tenancies) into one
building. The new building creates the opportunity for our people to collaborate more easily
across the organisation, and improved technology and work practices will make operations
more agile and better connected and help organise people more flexibly in response to work
priorities (see Finance transformation program on page 46).
15
Activities
As manager of the budget process and rules, assist the government to develop and meet its
fiscal targets, policy objectives and legislative obligations.
Maintain the governments financial reporting framework to enhance public sector
management and accountability.
Highlights
Delivering the 201617 Budget and economic updates
Finances core role is to provide advice and analysis to support the government to develop
and deliver its fiscal and economic policies. Finance works closely with the Treasury to
manage the budget process, communicate the policy decisions and fiscal targets, and ensure
that the budget takes into account government decisions and other material impacts on the
budget, consistent with our obligations under the Charter of Budget Honesty Act.
During the development of the 201617 Budget, Finance:
provided advice on spending and savings proposals, and prepared over 100 briefs for the
Expenditure Review Committee of Cabinet to assist its policy deliberations to achieve the
governments objectives
scrutinised cost estimates for new spending and savings proposals. Finance verified
approximately 740 policy costings for accuracy and overall alignment with the policys intent
and collaborated with portfolio agencies to validate 9,060 estimates adjustments entered in
the Central Budget Management System
coordinated key aspects of the budget process and administered the budget process
operational rules
16
Structural savings
Finance, in collaboration with the Treasury and the Department of the Prime Minister and
Cabinet, developed savings proposals for consideration by the government designed to
support the long-term sustainability of the budget. Finance advised the Expenditure Review
Committee on structural savings proposals to help ensure savings were responsible and
sustainable and could contribute to the ongoing costs of key expense measures.
17
Activities
As steward of the governments public sector governance, performance and accountability
framework and key assets:
contribute to, and foster, leading practice in public sector resource management,
governance and accountability, encompassing:
the public governance, performance and accountability framework and related
oversight frameworks, incorporating procurement, grants, charging and risk
frameworks
the Commonwealth land, public works and property management frameworks
government advertising policies
oversee the governments investment funds, including the Future Fund, and the stability
of the governments unfunded superannuation liabilities
provide performance assessments and strategic advice to support shareholder
oversight of the performance of corporate Commonwealth entities and Commonwealth
companies.
Provide support and advice to the government on Australian electoral matters.
Highlights
Trans-Pacific Partnership negotiations
Finance provided technical support to the Department of Foreign Affairs and Trade in relation
to the government procurement chapter.
Activities
As a public sector leader, stimulate and drive public sector efficiency, excellence and
innovation, and support the government in reforming and improving the governance,
performance and accountability of the public sector and public assets.
Highlights
Effective and efficient management and divestment of non-defence
domestic property
Finance continued to manage the $1.4 billion non-defence domestic property portfolio to
meet its intended purposes and comply with relevant legislation. Assets were managed by
promptly addressing issues and scheduling repairs and upgrades to preserve and improve
asset value. Finance continued to work closely with government entities to fulfil their
requirements for functional and fit-for-purpose office accommodation.
Fifty-two property sales were completed under the governments surplus property
divestment program in 201516. The sales returned approximately $9 million in gross
proceeds to consolidated revenue, and achieved savings in property management costs.
Most of these sales involved properties previously held by the former AlburyWodonga
Development Corporation and rural blocks located along the NSWACT border.
Activities
As steward of the governments key assets (including sovereign wealth funds and government
non-defence real property) and public sector governance, administer:
government superannuation arrangements
government general insurance and risk management services (Comcover)
government non-defence property services
key whole-of-Australian Government ICT services (including communications networks,
online services and ICT apprentice programs)
government purchasing arrangements for common goods and services.
Highlights
Parliamentary injury compensation scheme
The 201516 Budget included funding to establish an injury compensation scheme
for parliamentarians (and the spouse of the Prime Minister), providing coverage from
1 January 2016. The measure is based as far as practicable on the relevant provisions of the
Safety, Rehabilitation and Compensation Act 1988, and is administered by Comcare. The
scheme was implemented through an amending regulation, and the scheme benefits were
determined by the Special Minister of State in a legislative instrument.
Before the schemes establishment, parliamentarians were one of the only professions in
Australia not to be covered for work-related injury.
26
govCMS
govCMS is an open source One tool, which enables sites
web content management and to use information from open
hosting service developed to data portals and picture the
help agencies create modern, data on their websites, was
affordable and responsive co-developed by a federal and
websites and to make it easier to a state agency and has been
collaborate and innovate. govCMS shared across the community.
helps reduce the technology Another, which allows the public
and compliance burden on to participate in both formal and
government agencies while informal policy consultation, has
providing a more cost-effective also been shared.
web content management and
The success of govCMS
hosting option.
shows the value in starting
Before govCMS, many agencies with customer requirements.
were locked into expensive, Agencies were engaged early
proprietary softwareall trying and involved in the design of
to solve the same problems, the service and implementation
battling to achieve compliance was based on the most pressing
and keep up with increasingly customer needs.
sophisticated security and
govCMS shows you dont have to
technical requirements.
mandate the servicejust make
Adoption by agencies in the it compelling.
services first full year of operation
has exceeded all expectations,
reflecting the trust established
in govCMS. The Victorian
Department of Premier and
Cabinet used govCMS to
deliver the state budget on
www.budget.vic.gov.au, and one
of the most visited sites in the
federal government,
www.humanservices.gov.au,
also adopted the service.
Agencies using govCMS are part The work in 201516 culminated
of a thriving community that in govCMS being recognised as
is supported to create a positive example of innovation,
functionality once, and winning the Contributing to a Culture
share with others, of Practice of Innovation category at
the Institute of Public Administration
which eliminates Australias 2016 Public Sector
duplication of cost, Innovation Awards.
time and effort.
29
Introductory statement
I, as the accountable authority of the Department of Finance, present the 201516 annual
performance statements of the Department of Finance, as required under section 39(1)(a) of
the Public Governance, Performance and Accountability Act 2013 (PGPA Act). In my opinion,
these annual performance statements are based on properly maintained records, accurately
reflect the performance of the department, and comply with section 39(2) of the PGPA Act.
Jane Halton
Secretary
October 2016
Results
Performance criterion
Analysis, policy advice and costing information provided to the Finance Minister and the
Expenditure Review Committee of Cabinet as part of budget and financial reporting processes
are relevant, accurate, evidence-based and timely.
Criterion source Corporate Plan 201516, p. 12
Program 1.1, Portfolio Budget Statements 201516, p. 29
Result against performance criterion Achieved
Finance provided advice to the Finance Minister and Expenditure Review Committee of Cabinet
that was relevant to government considerations, accurate, evidence-based, delivered within
agreed timeframes and consistent with government-agreed processes. Finance prepared and
provided over 100 briefs to support the deliberations of the Expenditure Review Committee of
Cabinet.
30
Performance criterion
Advice is objective and based on a thorough understanding of issues from a whole-of-
Australian-Government (WoAG) perspective.
Criterion source Program 1.1, Portfolio Budget Statements 201516, p. 29
Result against performance criterion Achieved
Independent advice, from a WoAG perspective, was provided to the Finance Minister
and Expenditure Review Committee of Cabinet based on information gathered through
consultations with entities and other stakeholders. During the development of the 201617
Budget, Finance verified approximately 740 policy costings for accuracy and overall alignment
with the policys intent and validated 9,060 estimates adjustments entered by agencies into the
Central Budget Management System.
Performance criterion
Accurate budget estimates measured as follows (after allowing for the effects of policy
decisions, movements in economic parameters and changes in accounting treatments):
2.0 per cent difference between first forward year estimated expenses and final outcome
1.5 per cent difference between budget estimated expenses and final outcome
1.0 per cent difference between revised estimated expenses at Mid-Year Economic and Fiscal
Outlook (MYEFO) and Final Budget Outcome (FBO)
0.5 per cent difference between revised estimated expenses at budget and FBO.
Criterion source Program 1.1, Portfolio Budget Statements 201516, p. 29
Result against performance criterion Partially achieved
The difference between first forward year estimated expenses and FBO was 1.9 per cent on
an accrual basis and 2.0 per cent on a cash payments basis.
The difference between budget estimated expenses and FBO was 1.5 per cent on an accrual
basis and 1.9 per cent on a cash payments basis.
The difference between revised estimated expenses at MYEFO and FBO was 0.9 per cent on
an accrual basis and 1.2 per cent on a cash payments basis.
The difference between revised estimated expenses at budget and FBO was 0.6 per cent on
an accrual basis and 0.4 per cent on a cash payments basis.
One element of this criterion was fully achieved and three elements were partially achieved.
Variations between the estimates and final outcome were due to unpredictable delays in the
achievement of project milestones under a range of national partnership agreements and
changes in some program-specific parameters. Program estimates are regularly reviewed
and updated to take account of the best available information to maximise their reliability and
accuracy.
Performance criterion
The budget, related updates and the governments financial statements are accurate
(taking into account, to the fullest extent possible, all government decisions and other
circumstances that may have a material effect) and delivered within required timeframes,
and meet the governments legislative obligations.
31
Performance criterion
The derived underlying cash balance is provided to government within five days of the end of
the financial year.
Criterion source Program 1.1, Portfolio Budget Statements 201516, p. 29
Result against performance criterion Achieved
The 201415 derived underlying cash balance was provided to the government within five days
of the end of the financial year.
Performance criterion
The governments cash requirements are met on a daily basis, ensuring the ongoing operations
of government.
Criterion source Corporate Plan 201516, p. 12
Program 1.1, Portfolio Budget Statements 201516, p. 29
Result against performance criterion Achieved
The governments cash requirements were met on every day of 201516.
Results
Performance criterion
Delivery of significant government initiatives improves, with:
90 per cent of senior responsible officials identifying that gateway reviews have contributed
constructively to their project
90 per cent of gateway review report recommendations actioned or being actioned by entities.
Criterion source Corporate Plan 201516, p. 14
Program 2.1, Portfolio Budget Statements 201516, p. 36
Result against performance criterion Achieved
100 per cent of senior responsible officials identified through feedback forms that gateway
reviews contributed constructively to their project in 201516.
98 per cent of gateway review recommendations have been, or are being, actioned by entities as
reported in feedback forms.
Performance criterion
Timely and relevant advice on grant policy matters.
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 36
Result against performance criterion Achieved
Stakeholder feedback indicates that grants policy advice, tools and guidance was relevant and
timely. Advice was provided on over 120 grant guidelines and all advice was provided within the
advised timeframes.
Performance criterion
Contribute to the achievement of the governments objectives in Papua New Guinea, the Pacific
and East Asia.
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 36
Result against performance criterion Achieved
Stakeholders and whole-of-government partners, including the Department of Foreign Affairs
and Trade, regional development partners and foreign governments endorsed the effectiveness
of Finances technical assistance activities in the Indo-Pacific region.
Performance criterion
Timely and relevant advice on procurement policy matters is provided, with at least 80 per cent
of entity queries to the procurement advice inbox responded to within three days.
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 36
33
Performance criterion
AusTender is available 99 per cent of the time during business hours (ACT local time).
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 36
Result against performance criterion Achieved
AusTender was available 99.97 per cent of the time during business hours in 201516.
Performance criterion
Advice to the Finance Minister [relating to government shareholder oversight] is timely, relevant
and of high quality.
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 37
Result against performance criterion Achieved
The Finance Minister was briefed promptly and comprehensively on shareholder issues related
to government business enterprises as evidenced by the provision of regular and issues-based
briefings during 201516.
Performance criterion
Briefings on corporate plans and progress reports [for government commercial entities] to be
provided to the Finance Minister within four weeks of receipt.
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 37
Result against performance criterion Partially achieved
Eleven briefings on corporate plans or progress reports were provided to the Finance Minister
within the required timeframe. Nineteen briefings were delayed for various reasons.
Performance criterion
Quarterly meetings with government business enterprises.
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 37
Result against performance criterion Achieved
Meetings were held with the government business enterprises on a quarterly or more frequent
basis.
Performance criterion
Advice, analysis and support to the government on public sector superannuation policy and
governance, investment fund policy, and governance matters, is provided in a timely manner, and
is assessed as high quality and robust, supporting the delivery of the governments objectives
and investment mandates.
Criterion source Corporate Plan 201516, p. 14
Program 2.6, Portfolio Budget Statements 201516, p. 49
Program 2.7, Portfolio Budget Statements 201516, p. 51
34
Performance criterion
The Australian Government Office Occupancy Report (to be published in 201516)
demonstrates that Commonwealth entities are working towards best practice in property
management and planning.
Criterion source Corporate Plan 201516, p. 14
Program 2.3, Portfolio Budget Statements 201516, p. 43
Result against performance criterion Achieved
The Australian Government Office Occupancy Report 2015 showed that entities are working to
achieve best practice in property management and planning.
An assessment of the findings of the 2015 report against those of previous reports shows
WoAG reductions in the median fit-out density, total office area and total work points.
These results are also relevant to the Portfolio Budget Statements 201516 performance
criterion WoAG property data is collected, analysed and used as the evidence base to inform
government property management policy and entity property decisions.
Performance criterion
Sustainable property management practices and tools are promulgated to relevant entities
and assisted in using these tools to achieve more efficient, effective and sustainable property
outcomes on a whole-of-life basis.
Criterion source Program 2.3, Portfolio Budget Statements 201516, p. 43
Result against performance criterion Achieved
Ongoing consultations were undertaken with entities that focused on the implementation
of effective and sustainable property outcomes in support of the Commonwealth Property
Management Framework.
In addition, Finance developed a financial model, checklist and templates that entities may
choose to use when preparing a costbenefit analysis and seeking endorsement of a
particular lease.
35
Performance criterion
Costbenefit analysis, an annual WoAG Property Capability Plan, and the two-stage process for
approval of major capital works are systematically applied to better inform government and entity
decisions to own, lease, divest or acquire properties.
Criterion source Program 2.3, Portfolio Budget Statements 201516, p. 43
Result against performance criterion Achieved
Major property expenditure proposed by individual entities was supported by costbenefit
analysis, the two-stage process and other budget processes, including new policy proposals.
Finance assisted entities when requested to undertake reviews of business cases and cost
benefit analyses prior to the entities seeking endorsement of their property lease proposals.
Finance also advised entities on their obligations under the Commonwealth Property
Management Framework. During 201516 Finance provided advice over 200 times on cost
benefit analyses, lease notifications and lease endorsements and decisions to acquire or
dispose of properties, leading to more informed decisions to own, lease, divest or acquire
properties.
The requirement to develop a WoAG Property Capability Plan was discontinued
during 201516.
Performance criterion
Advice and support is provided to the government and Commonwealth entities in relation to
the Lands Acquisition Act 1989, the Public Works Committee Act 1969, relevant sections of the
Native Title Act 1993, the National Land Ordinances and the Commonwealth Property Disposals
Policy.
Criterion source Program 2.3, Portfolio Budget Statements 201516, p. 43
Result against performance criterion Achieved
Finance provided advice and guidance on three acquisitions that were commenced or
completed under the Lands Acquisition Act 1989, to support Commonwealth entities.
Finance prepared 17 public works referrals, totalling approximately $2.69 billion. Finance
prepared 24 expediency motions with a combined cost of approximately $3.41 billion for
approved works.
Under the Commonwealth Property Disposals Policy, Finance provided advice to Commonwealth
entities on over 30 disposal-related matters and assisted with obtaining approval for four
disposal matters.
Performance criterion
Major capital works projects and major land contamination remediation projects are completed
in close consultation with clients and within the time, cost and quality parameters agreed by the
government for the project.
Criterion source Program 2.3, Portfolio Budget Statements 201516, p. 43
36
Performance criterion
Properties within the governments non-defence domestic property portfolio are strategically
managed to meet their intended purposes and legislative requirements.
Criterion source Program 2.3, Portfolio Budget Statements 201516, p. 43
Result against performance criterion Achieved
Properties were managed to meet their intended purposes and in accordance with all legislative
requirements. Properties were subject to an annual maintenance program and routinely
inspected to maintain compliance. Regular consultation with tenant entities made sure that the
properties met their business needs.
Performance criterion
Properties are acquired and divested as appropriate and desired by the government, and residual
issues are managed to protect the governments interests.
Criterion source Program 2.3, Portfolio Budget Statements 201516, p. 43
Result against performance criterion Achieved
Finance continued to progress its surplus non-defence property divestment program, with
65 properties divested since the programs inception in 201415. Properties divested in
201516 included 44 land parcels in AlburyWodonga and seven rural blocks located around
the NSWACT border. Due diligence continued on the remaining properties to inform divestment
strategies and to make sure that post-sale risks are minimised.
Performance criterion
Credits to and payments from the [Australian Government investment] funds are timely and
consistent with legislation.
Criterion source Program 2.7, Portfolio Budget Statements 201516, p. 51
Result against performance criterion Achieved
Finance assisted the government in making crediting determinations for the MRFF on 28 August
and 26 November 2015, consistent with the Medical Research Future Fund Act 2015.
Upon its closure, the uncommitted balance of the HHF, of $1,010,000,000, was transferred to
the MRFF by a crediting determination made on 28 August 2015. A further $2,139,351,000 was
credited to the MRFF on 1 December 2015.
Results
Performance criterion
Contestability reviews and functional and efficiency reviews are completed to support decisions
about Commonwealth entities strategically realigning and reprioritising functions to meet the core
objectives of government.
Criterion source Corporate Plan 201516, p. 16
Program 2.2, Portfolio Budget Statements 201516, p. 39
Result against performance criterion Achieved
Finance coordinated the Efficiency through Contestability Program during 201516, which
included the completion of 10 functional and efficiency reviews of portfolio departments and
agencies, and the commissioning of eight new functional and efficiency reviews for completion in
201617.
Functional and efficiency review outcomes announced to date have delivered administrative and
program savings of about $2.7 billion. Budget Paper No. 4 201617 records the net savings to
government from completed reviews.
These results are also relevant to the Portfolio Budget Statements 201516 performance
criterion Supporting entities to design and implement initiatives to improve the efficient delivery
of government functions.
Performance criterion
Reviews and scoping studies meet the governments targeted outcomes, including for the Air
Warfare Destroyer Program, ASC Pty Ltd and the Australian Rail Track Corporation Ltd.
Criterion source Corporate Plan 201516, p. 16
Program 2.2, Portfolio Budget Statements 201516, p. 39
Result against performance criterion Achieved
The reviews and scoping studies related to the Air Warfare Destroyer Program, ASC Pty Ltd and
Australian Rail Track Corporation Ltd were conducted consistent with their respective terms of
reference. The reviews involved consultation with stakeholders and management of a range of
issues to provide advice to inform government decision-making on matters such as the capital
and corporate structures, mandates and governance arrangements of the government business
enterprises.
These results are also relevant to the Portfolio Budget Statements 201516 performance
criterion Delivering to government agreed scoping studies that report on their respective terms
of reference.
38
Performance criterion
75 per cent of relevant entities access the internet through their shared internet gateway.
Criterion source Program 2.2, Portfolio Budget Statements 201516, p. 39
Result against performance criterion Achieved
77 per cent of relevant entities accessed the internet through their shared internet gateway.
Performance criterion
Usage of the National Telepresence System increases by 10 per cent annually.
Criterion source Program 2.2, Portfolio Budget Statements 201516, p. 40
Result against performance criterion Achieved
Usage of the National Telepresence System increased by 16.8 per cent in 201516 from
201415.
Results
Performance criterion
govCMS is providing useful capability for entities.
Criterion source Program 2.2, Portfolio Budget Statements 201516, p. 40
Result against performance criterion Achieved
govCMS is providing useful capability for entities. At 30 June 2016, govCMS had 68 websites live
on the platform (from 37 entities) and a further 18 were in development. This is 40 per cent higher
than the govCMS feasibility study forecast completed by Deloitte Touche Tohmatsu Limited
before the initiative was implemented.
Performance criterion
The governments non-defence property portfolio is actively managed, with 80 per cent of
actions required to address extreme or high operational risks being programmed, in progress or
completed within a given quarter, facilitating the more efficient and effective administration of the
Finance-managed property portfolio.
Criterion source Corporate Plan 201516, p. 18
39
Performance criterion
WoAG coordinated arrangements meet the governments objectives for the relevant reporting
period.
Criterion source Corporate Plan 201516, p. 18
Program 2.5, Portfolio Budget Statements 201516, p. 46
Result against performance criterion Achieved
WoAG coordinated arrangements met the governments objectives, with:
the establishment of the Whole-of-Government ICT Hardware and Associated Services Panel in
September 2015
the extension of the Microsoft Volume Sourcing Agreement until June 2019
the commencement of the new Air Travel Services Panel on 1 May 2016 with an initial term of
five years
the management of 19 contracts in accordance with appropriate contract
management plans
the conduct of two tender processes within agreed timeframes and budgets.
These results are also relevant to the Portfolio Budget Statements 201516 performance criterion
WoAG arrangements are well managed. In particular, scoping studies and tender processes are
conducted within agreed timeframes and budgets, and contracts are managed in accordance
with appropriate contract management plans.
Performance criterion
ICT capability in participating Commonwealth entities increases, as demonstrated by
70 per cent of students annually accepted for the ICT entry-level programs remaining in
the government after one year, and 50 per cent remaining after two years.
Criterion source Corporate Plan 201516, p. 18
Program 2.2, Portfolio Budget Statements 201516, p. 40
Result against performance criterion Achieved
97 per cent of students annually accepted for the government ICT Apprenticeships Program
remain in the government after one year, and 94 per cent remain after two years.
95 per cent of students annually accepted for the government ICT Cadetships Program remain in
the government after one year, and 93 per cent remain after two years.
100 per cent of students annually accepted for the government ICT Graduate Program
remain in the government after one year. This is a one-year program, so no data is available after
12 months.
40
Performance criterion
Coordinated procurement arrangements are expanded for ICT products and services, establishing
cost-effective WoAG purchasing arrangements for these items.
Criterion source Corporate Plan 201516, p. 18
Result against performance criterion Achieved
All milestones scheduled in 201516 to expand arrangements for ICT coordinated procurement
were completed. Negotiations have commenced with IBM, SAP and Oracle. Agreement on pricing,
terms and conditions will be largely dependent on vendors and this may impact timeframes.
Performance criterion
Government advertising is conducted in accordance with government advertising policies.
Criterion source Program 2.5, Portfolio Budget Statements 201516, p. 46
Result against performance criterion Achieved
All advertising campaigns above the value of $250,000 which launched in 201516, and which
were subject to the Guidelines on Information and Advertising Campaigns by non-corporate
Commonwealth entities (February 2015), were reviewed by the Independent Communications
Committee. The committees compliance advice for all relevant campaigns was published on
Finances website.
Performance criterion
Completion of 50 per cent of all act of grace and waiver of debt requests within 60 days and
100 per cent compliance with timeframes in the Administrative Decisions (Judicial Review)
Act 1977.
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 37
Result against performance criterion Achieved
68 per cent of act of grace and waiver of debt requests were completed within 60 days and
there was 100 per cent compliance with the timeframes of the Administrative Decisions (Judicial
Review) Act for act of grace and waiver of debt requests.
Performance criterion
No adverse findings from the Commonwealth Ombudsman in respect of special claims.
Criterion source Program 2.1, Portfolio Budget Statements 201516, p. 37
Result against performance criterion Achieved
There were no adverse Commonwealth Ombudsman findings in 201516.
Performance criterion
80 per cent of Comcover fund members have achieved their identified level of risk maturity as
measured in the Comcover Benchmarking Program.
Criterion source Program 2.4, Portfolio Budget Statements 201516, p. 45
41
Performance criterion
Members of schemes administered are satisfied with service provision, in particular:
payments are accurate and in accordance with scheme timeframes
superannuation statements are issued in accordance with prescribed timeframes.
Criterion source Program 2.6, Portfolio Budget Statements 201516, p. 49
Result against performance criterion Achieved
Payments for those schemes administered by Finance were accurate and in accordance with
scheme timeframes.
Payments were accurately made to all members of the Judges Pensions Scheme, the Governors-
General Scheme and the Parliamentary Contributory Superannuation Scheme, and payments
under the death and disability arrangements for Federal Circuit Court judges were made within the
prescribed timeframe. There were no payment inquiries or complaints from members during the
reporting period.
99.98 per cent of payment statements were delivered without error and in accordance with
scheme timeframes.
Superannuation statements were issued in accordance with prescribed timeframes.
Annual superannuation statements were accurate and provided to all members of the
Parliamentary Contributory Superannuation Scheme within the prescribed timeframes. There
were no complaints from members during the reporting period.
42
Performance criterion
Services to ministers, office-holders, senators, members and their staff meet agreed service
standards.
93 per cent of client contacts are acknowledged within 24 hours and responded to within
agreed timeframes.
95 per cent of payments (including payroll) are made within agreed timeframes.
100 per cent of office establishment and relocation projects are delivered within their approved
budgets.
100 per cent of monthly management reports are distributed by the 15th of each month.
99 per cent of COMCAR reservations are completed without service failure.
Criterion source Corporate Plan 201516, p. 18
Program 3.1, Portfolio Budget Statements 201516, p. 56
Result against performance criterion Achieved
95 per cent of client contacts were acknowledged within 24 hours and responded to within
agreed timeframes.
95 per cent of payments (including payroll) were made within agreed timeframes.
100 per cent of office establishment and relocation projects were delivered within their approved
budgets.
100 per cent of monthly management reports were distributed by the 15th of each month.
99.67 per cent of COMCAR reservations were completed without service failure.
Performance criterion
The scoping study on the online delivery of parliamentary entitlements is completed to inform
government decision-making.
Criterion source Corporate Plan 201516, p. 18
Result against performance criterion Partially achieved
The scoping study on the online delivery of parliamentary entitlements was superseded by
An Independent Parliamentary Entitlements System: Review released in February 2016. That
review, led by an independent committee, provided options for an independent parliamentary
entitlements system including a principles-based system for the determination, processing
and monitoring of parliamentarians allowable work expenses. In response to the review in
the 201617 Budget under the Scoping Studyintegrated solution for the management
of parliamentary entitlements measure, the government provided $0.5 million in 201516
to undertake a scoping study into the development of an integrated ICT solution for the
management of parliamentary entitlements.
The scoping study to develop options and a possible first-pass business case for an integrated
solution for the management of parliamentary entitlements will commence in July 2016 with a
finalisation date of the end of November 2016.
For example, Finance worked closely with the departments of Social Services, Health,
Human Services, the Treasury, and the Prime Minister and Cabinet and the National
Disability Insurance Agency to cost the bilateral agreements with all states and territories,
other than Western Australia, for the transition to the National Disability Insurance
Scheme (NDIS). Finance worked with these agencies to assess and comprehensively
analyse the costs and complex financial interactions between the Commonwealth and
states and territories, and between the NDIS and mainstream services, such as existing
Commonwealth disability programs and aged care.
governance policy frameworks and modern management practices embodied best practice
public sector leadership and supported efficient, effective, ethical and economical public
sector administration
The introduction of annual reporting requirements for all Commonwealth entities and
companies in the Public Governance, Performance and Accountability Rule 2014 in
201516 put in place the final component of the enhanced Commonwealth performance
framework. With this, the Commonwealth has a complete new resource management
framework that gives coherence to its governance, performance and accountability
arrangements. The new framework encapsulates many of the formal elements required
to build better performance with a more efficient, effective, coherent and joined-up
public sector. It has a strong focus on improving the quality of public information about
the delivery of government programs and services. The framework was developed with
input from the parliament, key external stakeholders and Commonwealth entities and
companies.
reviews and scoping studies informed government decision-making on the reform and
improvement of the delivery of services, assets and businesses
Gateway reviews with entities supported project governance and assurance practices
and increased program and project management capability across government.
Gateway reviews provided support to project leaders with escalation protocols to draw
implementation problems to the attention of public service leaders and ministers.
While the Independent Review of Whole-of-Government Internal Regulation identified
limitations to gateway reviews, including that they are strongly focused on the project
management process, the overwhelming feedback from entities was positive. The
reviews provided useful and practical assurance tools to support institutional checks and
balances in the design and implementation of new projects and programs.
ICT investment and implementation across government was efficient and effective
Finance provides a central assurance role at the whole-of-system level. Finances
collection of whole-of-government ICT benchmarking data is published and individual
comparative reports are provided to entities with guidance on how to use the data to
drive investment efficiency and effectiveness.
There was no material change in Finances organisational capacity specific to any individual
purpose in 201516. However, Finances organisational capacity was enhanced by the
departments internal transformation program. Under this program in 201516 Finance:
moved to a new tenancyco-locating the majority of Finance staff
rolled out new technology
established a People and Projects Office.
This new approach supported progress against the purposes by mobilising staff to support
the delivery of priority activities.
45
Corporate governance
External scrutiny
Our people
Environmental performance
Financial management
46
Corporate governance
The departments corporate functions and staff provide critical support that enables us to
deliver our programs and services. Our corporate areas are focused on providing quality,
timely services and being responsive to the changing policy and operational needs of the
department.
This section discusses our support services and governance structures, which provide a
framework to ensure accountability and the overall effectiveness of the department.
Secretary
Work Health
Audit Executive
and Safety
Committee Board
Committee
Executive Board
The Executive Board advises the Secretary on the priorities, directions and strategic
leadership of the department, monitors performance and maintains accountability. The board
discusses and makes decisions on strategic and operational matters and considers new
policies and projects.
The Secretary is the chair and Deputy Secretaries are standing members. The First Assistant
Secretary of the Corporate Services Division, the Chief Information Officer and the Chief
Financial Officer hold ex officio membership.
Audit Committee
The Audit Committee provides independent advice and assurance to the Secretary on the
appropriateness of the departments accountability and control framework, particularly those
aspects concerning the system of risk oversight and management, the system of internal
controls, performance reporting and financial reporting.
In 201516, the committee comprised four external members, including the chair, and two
departmental members. The committee meets at least five times a year and is attended by
representatives from the Australian National Audit Office, the chair of the Risk Sub-Committee,
the Head of Internal Audit, the Chief Financial Officer and the departments internal audit
service providers as observers.
The Audit Committee has established two sub-committees to support it in performing its
functions:
Financial Statements Audit Sub-Committeemaintains an ongoing review of the process
for preparing the departments annual financial statements.
Performance Framework Sub-Committeeassists with reviewing the departments
systems and procedures for managing its performance, focusing on key concepts
of relevance, reliability, comparability, usefulness, structure and proportionality and
compliance with the performance reporting requirements of the PGPA Act.
Planning Reporting
Annual
performance
Corporate plan
statements/
annual report
External
Portfolio Senate
Budget Estimates
Statements hearings
Individual
Performance
performance
management
agreements
51
Ethical standards
Finance managers work with staff to help ensure that they fully understand their roles and
responsibilities as public servants and continue to do their part in enabling the department to
be an ethical, respectful and barrier-free employer.
Guidelines for ethical decision-making, targeted training, and an ethics hotline, available
through the Australian Public Service Commission, help staff recognise and deal with ethical
issues. Information sessions are provided to individual work areas to cover specific ethical and
conduct matters.
53
External scrutiny
The departments operations are subject to scrutiny from a number of external bodies,
including the Australian National Audit Office, the Commonwealth Ombudsman, the Australian
Information Commissioner, various parliamentary committees and the courts. This section
reports on audits, reviews, inquiries and legal actions relevant to Finance in 201516.
However, due to the timing of the federal election, tabling of the report in parliament was
delayed until 31 August 2016.
Details of the Auditor-Generals reports, including the departments response to any audits it
was directly involved in, can be found on the Australian National Audit Office website
(www.anao.gov.au).
Parliamentary committees
Other committees
Finance attended or provided submissions to the following other committees during 201516.
Finances submissions and the transcripts of committee hearings are available on the
Parliament of Australia website (www.aph.gov.au).
Our people
Finance is leading transformation within the APS, and we are committed to improving the
way we work so we can deliver on government priorities and our ongoing business. Building a
highly capable and committed workforce that is agile, flexible and able to work across complex
policy issues is central to meeting this commitment.
Finance recognises that along with challenging and interesting work, a competitive
remuneration framework, recognition of employees capabilities, a supportive capability
development framework, a culture that embraces diversity, and worklife balance are key
to attracting, developing and retaining talented staff. This section describes our people, the
ways we support diversity in our workforce, and our remuneration, reward, performance
management and capability development frameworks.
Employment performance
At 30 June 2016, Finance had 1,812 staff employed on an ongoing, non-ongoing and casual
basis. Table 1 provides a comparative overview of the departments employment performance
in 201415 and 201516. More information about the departments workforce and salary
ranges is provided in Appendix B.
Workforce diversity
In 201516, the department strengthened its efforts in building awareness of and capability
in cultural and diversity matters. The value of these efforts was confirmed in the 2016 APS
employee census results, which showed an increase in staff identifying as being from a diverse
background and an increase in affirmative response rates for diversity, engagement and
workplace culture.
A key factor in the success of our diversity initiatives is our five cultural and diversity
networksthe Aboriginal and Torres Strait Islander Staff Network; the Diversity Network; the
Finance Womens Network; the Lesbian, Gay, Bisexual, Transgender and Intersex Plus (LGBTI+)
Network; and the Young Leaders Network. These networks are each supported by an SES
sponsor and have the endorsement and backing of all senior leaders, including the Secretary
and the Executive Board Diversity Champion.
The LGBTI+ Network is the newest of the five networks. It was established in August 2015 to
support LGBTI staff and raise awareness of LGBTI issues in the department. At 30 June 2016,
the network had 25 members, including staff who identify as LGBTI and staff who are allies.
One of its early initiatives was helping to change the way personnel records are kept to ensure
confidentiality for employees who have transitioned gender. Individual records now make no
reference to an employees previous gender (e.g. name, salutation, gender) and recognise their
prior service under their new identity. These changes provide transgender employees with
safety and confidence to transfer between agencies.
Other initiatives that supported improved diversity outcomes in 201516 included:
events to raise awareness of equal opportunity and diversity issues, including NAIDOC
Week, International Day of People with Disability, International Womens Day, Harmony Day
and International Day Against Homophobia, Biphobia and Transphobia
collaboration with other government agencies to share best practice information, training
seminars, documents, guidance and approaches on diversity issues
presentations from keynote speakers on mental health and LGBTI matters
cultural and diversity training delivered by the Australian Network on Disability.
The department also continued its memberships in peak diversity bodies such as the
Australian Network on Disability, the Diversity Council Australia and Pride in Diversity.
Recruitmententry-level programs
Finance continued to focus on recruiting talented graduates and school leavers into
customised entry-level programs. The department also participated in several whole-of-
government entry-level programs. Entry-level recruitment figures for 201516 are provided in
Table 2.
Performance pay
Finance does not provide performance pay.
Non-salary benefits
The department provides staff with a number of additional benefits that are not included under
the provisions of the Finance Enterprise Agreement 20152018. These benefits are:
annual influenza immunisation a free, confidential employee assistance
a quit-smoking assistance program program for employees and their
a carers/breastfeeding room immediate families
workstation assessments for new starters a serious illness register
early intervention for case management study assistance to eligible employees
a return-to-work program for non- an opportunity to work from home on a
compensable injuries and illnesses case-by-case basis
mentoring programs contributions to relevant professional
in-house capability development programs
memberships
a gymnasium
library services.
Performance management
All Finance employees participate in the performance management framework, the main
objectives of which are to:
clearly link an individuals work with Finances strategic and operational objectives
provide considered feedback, both informal and formal, to employees on their performance
and achievements at work (formal performance assessments occur in December and June)
identify and support the ongoing learning and development needs of employees
effectively identify and address underperformance.
61
During 201516, the department commenced work on a new performance and capability
framework to support the transformation agenda and encourage regular and meaningful
conversations and feedback. The new framework will be implemented during 201617.
Coaching
Ninety-four staff participated in one-on-one coaching sessions through the Coaching
in Finance Program. The program helps staff to achieve specific development goals and
outcomes that other development opportunities may not meet. Coaching was mainly in the
areas of leadership, career change and development, and career planning.
Study assistance
Finance provided 144 staff with financial assistance and study leave to participate in external
study as part of the departments overall commitment to developing employees skills.
Environmental performance
Departmental activities
This section describes the environmental performance of the department, in accordance with
government policy. Environmental impacts are managed by engineering and administrative
controls. The department uses a range of signage, intranet messages and induction content
to support employees to mitigate environmental impacts.
Table 4 summarises the departments environmental performance in 201516 against the
previous year.
The 201516 readings for office energy use per square metre and potable water consumption
are lower as a result of a temporary increase in square metres occupied. The increase
occurred because the department concurrently occupied both new (One Canberra Avenue)
and old office tenancies while consolidating its accommodation.
Transport
Finance employees are authorised to travel only when there is a demonstrated business need
and when alternative communication tools, such as teleconferencing and videoconferencing,
are an ineffective option. The co-location of the majority of Finance staff at One Canberra
Avenue should also reduce the need for inter-office travel.
The Finance vehicle fleet is made up of departmental pool vehicles and executive vehicles.
A subscription to Greenfleet offsets the associated vehicle emissions.
Cross-government activities
Finance contributes to the environmental outcomes of a number of additional areas in line with
government policy and relevant legislation. These activities include managing the COMCAR
vehicle fleet and providing electorate office accommodation for parliamentarians. These
activities are in addition to those listed in Table 4.
COMCAR
In 201516, COMCAR continued to deliver on its strategy of ensuring an environmentally
responsible fleet of vehicles. As at 30 June 2016, COMCAR had 146 LPG and two petrol-
powered sedans in its fleet of 159 vehicles. The LPG vehicles burn fuel more efficiently,
improving fuel consumption and contributing to reductions in CO2 output of up to 15 per cent
per vehicle. All COMCAR petrol-powered vehicles use E10 fuel, where available.
More than 60 per cent of the COMCAR fleet is regularly washed using harvested rainwater,
which helps to minimise potable water use.
66
Financial management
Financial performance
This section provides an overview of Finances financial performance during 201516 for both
departmental and administered activities.
The departments financial statements are presented in Part 4. The Australian National Audit
Office issued an unqualified audit opinion for these statements on 29 August 2016.
Finances financial performance is summarised in Table 5. The departments entity resource
statement and tables showing expenses by outcome are presented in Appendix E.
Departmental activities
Departmental resourcing includes assets, liabilities, revenues and expenses that Finance
controls directly and uses to produce outcomes on behalf of the government.
For 201516, the department recorded an operating surplus of $113.5 million. This is
$72.8 million more than the revised surplus estimate of $40.7 million published in the Portfolio
Budget Statements 201617. The increase was mainly due to higher valuations of investment
properties and lower insurance claims.
The operating surplus of $113.5 million in 201516 compares to an operating surplus of
$56.4 million in 201415. Finance has budgeted for an operating surplus of $18.1 million in
201617.
Operating expenses were $5.8 million higher than in 201415. This was primarily due to
an increased provision for insurance claims and an increase in expenditure on centralised
procurement.
Write-down and impairment of assets decreased by $43.0 million. This was primarily due
to a reduction in the revaluation decrement for buildings and investment properties from
$55.3 million in 201415 to $13.2 million in 201516.
The increase in own-source revenue of $103.0 million was primarily due to increased
centralised procurement resulting from additional support and licensing arrangements and an
increase in insurance premium revenue from Commonwealth entities.
Revenue from government decreased by $124.1 million, primarily because the 201415 figure
contained a number of one-off budget items such as the sale of Medibank Private Limited, and
funding for remediation of land at Cox Peninsula.
67
Figure 5 outlines the departments departmental financial performance over the past four
years and the budget for 201617.
($m)
800
700
600
500
300
200
100
100
200
201213 201314 201415 201516 201617
Actuals Actuals Actuals Actuals Budget
Administered activities
The financial performance of Finances administered activities for 201516 is summarised in
Table 6. Administered items are assets, liabilities, revenues and expenses that are managed or
overseen by Finance on behalf of the government.
Finance incurred $9.5 billion of expenses on behalf of the government. This was $1.0 billion
less than in 201415 due to a reduction in the distributions to portfolio special accounts
associated with the Australian Government investment funds.
Finance recognised $1.9 billion of income on behalf of the government. This was $6.1 billion
less than in 201415, noting that the 201415 figure contained the proceeds from the sale of
Medibank Private Limited.
Figure 6 outlines the financial performance of the departments administered activities over
the past four years and the budget for 201617.
Income Expense
69
Financial summary
Table 7: Financial summary, 201213 to 201516
Departmental summary of financial 201213 201314 201415 201516
statements $ million $ million $ million $ million
Expenses
Employees 181.74 168.08 161.22 170.36
Suppliers 196.46 222.29 331.70 321.89
Write-down and impairment of assets 1.09 118.92 57.69 14.75
Insurance claims 92.85 108.39 76.46 94.30
Other 35.60 34.89 48.08 36.73
Total expenses 507.74 652.57 675.15 638.03
Own-source income
Rendering of services 111.56 143.02 152.82 230.94
Insurance premiums 82.71 86.26 100.87 125.15
Reinsurance and other recoveries 5.15 6.59 0.00 1.50
Rental income 47.67 48.18 76.48 72.12
Other revenues 13.11 9.66 7.33 10.74
Total own-source revenue 260.20 293.71 337.50 440.45
Gains 41.26 5.97 4.61 43.59
Net cost of services 206.28 352.89 333.04 153.99
Revenue from government 274.45 261.69 395.37 271.32
Income tax equivalent expense 5.54 5.86 5.91 3.84
Net surplus (deficit) 62.63 (97.06) 56.42 113.49
Equitya 1,988.17 2,085.77 2,063.37 2,148.08
Net operating cash flow 13.75 47.89 64.20 69.70
Returns to government 33.82 11.14 111.26 73.92
a In 201415 initially a provision of $18.7 million was raised for the cash return. However, changes in
estimates and assumptions used have resulted in an adjustment to the 201415 figure to reflect the
revised amount of $55.1 million.
70
Asset management
Finance manages the governments non-defence domestic property portfolio of some
170 properties, with a value of approximately $1.6 billion (at 30 June 2016). Finance, with its
private sector partner, manages these assets strategically to ensure that they are efficient and
able to meet the governments needs.
In 201516 new long-term leases were finalised which provide the opportunity to improve the
quality and amenity of the portfolio in line with modern workforce standards. This will result in
improved whole-of-government efficiency through full utilisation of assets.
Performance measures for the management of the domestic property portfolio are included in
the annual performance statements in Part 2 (pages 389).
Grants
Information on grants awarded by Finance during the period 1 July 2015 to 30 June 2016 is
available on our website at www.finance.gov.au/publications/grants.
Procurement
The departments approach to procuring goods and services, including consultancies, is
consistent with, and reflects the principles of, the Commonwealth Procurement Rules. These
rules are applied to activities through the departments accountable authority instructions,
supporting operational guidelines and procurement framework.
71
No contracts of $100,000 or more (inclusive of GST) were let during 201516 that did not
provide for the Auditor-General to have access to the contractors premises.
No contracts in excess of $10,000 (inclusive of GST) or standing offers were exempted by the
Secretary from being published on AusTender on the basis that they would disclose exempt
matters under the Freedom of Information Act 1982.
Information on procurements expected to be undertaken in 201516 is in the departments
annual procurement plan, available from the AusTender website (www.tenders.gov.au).
Consultancies
The department engages consultants when it requires specialist expertise or when
independent research, review or assessment is required. Decisions to engage consultants
during 201516 were made in accordance with the PGPA Act and related regulations, including
the Commonwealth Procurement Rules and relevant internal policies.
During 201516, the department entered into 218 new consultancy contracts involving total
actual expenditure of $12.4 million. In addition, 58 ongoing consultancy contracts were active
during 201516, involving total actual expenditure of $18.5 million.
Annual reports contain information about actual expenditure on contracts for consultancies.
Information on the value of contracts and consultancies is available on the AusTender website
(www.tenders.gov.au).
Financial Statements
Department of Finance
Financial Statements for the period ended 30 June 2016
In our opinion, the attached financial statements for the year ended 30 June 2016 comply with subsection 42(2) of the
Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained
financial records as per subsection 41(2) of the PGPA Act.
In our opinion, at the date of this statement, there are reasonable grounds to believe that the Department of Finance will
be able to pay its debts as and when they fall due.
1
78
Financial Statements
Glossary of terms
AAS Australian Accounting Standards IBNCS Internet based network connection
service
AASB Australian Accounting Standards IBNR Claims incurred but not reported
Board
AMT Adjusted Market Transactions IBNER Claims incurred but not enough reported
ARR Asset Revaluation Reserve Investment Administered investment funds managed
funds by the Future Fund Board of Guardians
ASC ASC Pty Ltd JPS Judges Pensions Scheme
ARCo Australian River Co. Limited LGPH Life Gold Pass Holders
AUD Australian dollar LSL Long Service Leave
BAF Building Australia Fund LTCR Long Term Cost Report 2014
BSSA Business Services Special Account MOP(S) Members of Parliament (Staff) Act 1984
Act
CEB Consumed Economic Benefits MPS Ministerial Parliamentary Services
CCEs Commonwealth Corporate Entities MRFF Medical Research Future Fund
CRF Consolidated Revenue Fund MRFFICs Medical Research Future Fund
Investment Companies
CPCSA Coordinated Procurement Contracting NBFs Nation Building Funds
Special Account
CPI Internet Index NET Net Assets
CSC Commonwealth Superannuation OCI Other comprehensive income
Corporation
CSS Commonwealth Superannuation OPA Official Public Account
Scheme
DAS Department of Administrative PBS Portfolio Budget Statements
Services
DCAF DisabilityCare Australia Fund PGPA Act Public Governance, Performance and
Accountability Act 2013
DPS Department of Parliamentary Services PM&C Department of the Prime Minister and
Cabinet
DTO Digital Transformation Office PCSS Parliamentary Contributory
Superannuation Scheme
EIF Education Investment Fund PSS Public Sector Superannuation Scheme
EUR Euro PSSap Public Sector Superannuation
accumulation plan
FCCJDDS Federal Circuit Court Judges Death RBA Reserve Bank of Australia
and Disability Scheme
FFMA Future Fund Management Agency RCN Replacement Cost of New Assets
FRR PGPA (Financial Reporting) Rule SOETM Services for Other Entities and Trust
2015 Moneys Special Account
FVPL Fair value through profit or loss The Board Future Fund Board of Guardians
GBP British pound USD United States dollar
G-GPS Governor-General Pension Scheme VSA Volume sourcing arrangements
GST Goods and Services Tax WACC Weighted average cost of capital
HHF Health and Hospitals Fund WoAG Whole of Australian Government
2
79
Financial Statements
TABLE OF CONTENTS
C1 : Outcome
Outcome reporting
reporting Financial instruments
D1 : Financial instruments E1 :: Employee
E1 Employee expenses
expenses
C2 :: General
C2 General insurance
insuranceactivities
activities D2 :: Managing
D2 Managing financial
financialrisk
risk E2 :: Employee
E2 Employee provisions
provisions
E3 :
C3 : Investment funds D3 : Non-financial assets E3 : Senior management
Senior management
personnel personnel
remuneration
C3 : Investment funds D3 : Non-financial assets remuneration
C4 : Superannuation D4 : Other provisions
C4 : Superannuation D4 : Other provisions
C5 : Restructuring
C5 : Restructuring
F. Funding 142
66 G. Managing Other Uncertainties 151
75 H. Other Information 154
78
H1 : Investments in joint
F1 : Cash
Cash flow
flow reconciliation
reconciliation Commitments
G1 : Commitments ventures
H1 : Investments in joint ventures
H2 : Other policy and
F2
F2 :: Annual appropriations
Annual appropriations G2
G2 :: Contingencies
Contingencies H2 : Other policy and disclosures
disclosures
F3 : Special
Special appropriations
appropriations Subsequent events
G3 : Subsequent events
F4 :: Special
F4 Special accounts
accounts
3
80
Own-source income
Own-source revenue
Premium revenue C2.1 125,149 100,871 126,990
Reinsurance and other recoveries revenue C2.1 1,504 - -
Centralised procurement revenue H2 B3 176,917 102,541 92,923
Rental income H2 B2 72,119 76,483 84,383
Resources received free of charge H2 2,030 1,585 1,386
Rendering of services 54,019 50,278 45,701
Other interest revenue D1.3 6 - -
Other revenue 8,701 5,737 6,900
Total own-source revenue 440,445 337,495 358,283
Gains
Gains B2 43,591 4,607 3,316
Total gains 43,591 4,607 3,316
Total own-source income 484,036 342,102 361,599
The above statement should be read in conjunction with the accompanying notes 4
81
The above statement should be read in conjunction with the accompanying notes 5
The above statement should be read in conjunction with the accompanying notes 5
82
Actuals
Comprehensive income
Surplus/(deficit) for the period 113,475 56,421 - - - - 113,475 56,421
Other comprehensive income - - 25,133 16,445 - - 25,133 16,445
Total comprehensive income 113,475 56,421 25,133 16,445 - - 138,608 72,866
The above statement should be read in conjunction with the accompanying notes 6
83
Actuals Budget
30 June 30 June 30 June
2016 2015 2016
Note ref $'000 $'000 $'000
OPERATING ACTIVITIES
Cash received
Rendering of services 152,999 206,236 222,735
Revenue from Government 259,944 403,934 257,970
Insurance premiums 125,149 100,924 126,990
Reinsurance and other recoveries 1,302 26,736 -
Interest and dividends 6 - -
Rent received 72,119 76,483 -
Net special account transferred from OPA B5 16,120 - 37,956
Net GST received 3,415 - -
Other 5,332 5,660 6,900
Total cash received 636,386 819,973 652,551
Cash used
Employees 169,842 156,538 175,388
Suppliers B6 326,138 340,934 269,313
Insurance claims B1 70,713 94,121 130,167
Net special account receipts transferred to OPA - 160,871 -
Net GST paid - 3,306 -
Total cash used 566,693 755,770 574,868
INVESTING ACTIVITIES
Cash received
Proceeds from sale of land and buildings 8,257 915 16,719
Proceeds from sale of financial investments 2,393 - -
Proceeds from sale of investment properties - 1,424 -
Total cash received 10,650 2,339 16,719
Cash used
Purchase of plant and equipment 9,423 262 29,441
Purchase of land and buildings B5 84,255 379,823 158,392
Purchase of leasehold improvements B4 1,577 - -
Purchase of intangibles B7 11,901 14,188 32,202
Purchase of investments properties 3,720 13,749 5,396
Total cash used 110,876 408,022 225,431
FINANCING ACTIVITIES
Cash received
Contributed equity B5 95,225 401,026 166,010
Total cash received 95,225 401,026 166,010
Cash used
Return of contributed equity H2 64,845 65,372 34,981
Total cash used 64,845 65,372 34,981
The above statement should be read in conjunction with the accompanying notes 7
84
Actuals Budget
30 June 30 June 30 June
2016 2015 2016
Note ref $'000 $'000 $'000
NET COST OF SERVICES
Expenses
Employee expenses E1 322,425 254,632 225,632
Superannuation expense C4.1 B8 8,715,203 8,640,217 8,186,603
Supplier expenses
Office expenses 38,260 27,396 29,103
Travel expenses 57,317 55,665 57,977
Property operating expenses 42,119 29,129 37,431
COMCAR operating expenses 3,321 3,060 3,093
Other goods and services 32,006 31,293 58,914
Minimum lease payments H2 38,015 36,619 38,777
Investment funds - other expenses C3.1 B9 15,091 11,006 10,950
Distribution to portfolio special accounts C3.1 B9 117,658 1,115,009 204,444
Depreciation and amortisation D3.1 16,198 18,430 20,689
Investment funds - foreign exchange losses C3.1 B9 106,288 286,713 -
Non-financial asset write downs and revaluations D3.1 345 511 106
Impairment of financial assets D1.3 2 5 -
Grants - private sector non profit 2,991 1,694 2,911
Other expenses 2,301 1,585 2,503
Total expenses administered on behalf of
Government 9,509,540 10,512,964 8,879,134
Income
Non- taxation revenue
Interest D1.3 37,254 40,373 15,766
Investment funds - interest on term deposits C3.1 B9 98,946 100,019 365,291
Dividends D1.3 16,100 258,472 17,400
Investment funds - dividends C3.1 6,147 - -
Rendering of services 15,785 3,607 4,688
Superannuation contributions C4.1 B8 1,338,231 1,363,910 1,450,224
Resources received free of charge H2 4,302 4,277 4,198
Other revenue 5,428 21,525 8,136
Total revenue 1,522,193 1,792,183 1,865,703
Gains
Gains from sale of financial assets D1.3 - 5,684,712 -
Gains from sale of non-financial assets 36 15 -
Investment funds - gains on financial investments C3.1 B9 383,368 494,096 40,365
Gain on closure of CCEs D1.3 - 32,609 -
Other gains 970 401 -
Total gains 384,374 6,211,833 40,365
Total income administered on behalf of
Government 1,906,567 8,004,016 1,906,068
The above schedule should be read in conjunction with the accompanying notes 8
85
The above schedule should be read in conjunction with the accompanying notes 9
The above schedule should be read in conjunction with the accompanying notes 9
86
Actuals Budget
Department of Finance 30 June Administered
30 June Primary Schedules
30 June
ADMINISTERED SCHEDULE OF ASSETS AND LIABILITIES
as at 30 June 2016 2016 2015 2016
Note ref $'000 $'000 $'000
Assets Actuals Budget
Financial assets 30 June 30 June 30 June
Cash and cash equivalents D1.1 1,059,534
2016 1,084,959
2015 2016-
Trade receivables D1.1
Note ref 1,390
$'000 1,257
$'000 11,070
$'000
Investment funds - loans and receivables
Assets C3.2 B9 4,259,529 3,774,248 -
State and Territory
Financial assets Government loans D1.1 145,959 151,814 145,960
Accrued
Cash andrevenue
cash equivalents D1.1
D1.1 1,533
1,059,534 1,921
1,084,959 --
Government securities
Trade receivables D1.1
D1.1 1,472
1,390 2,171
1,257 11,070-
Commonwealth
Investment fundscorporate entities
- loans and receivables D1.1
C3.2 B9 400,454
4,259,529 378,108
3,774,248 --
Investment funds - financial
State and Territory Governmentassets at FVPL
loans C3.2
D1.1 B9 12,494,544
145,959 7,626,756
151,814 15,867,945
145,960
Lease incentive
Accrued revenueassets H2
D1.1 21
1,533 359
1,921 --
Other financial
Government assets
securities D1.1 11,304
1,472 54,056
2,171 47,962-
Total financial assets
Commonwealth corporate entities D1.1 18,375,740
400,454 13,075,649
378,108 16,072,937-
Investment funds - financial assets at FVPL C3.2 B9 12,494,544 7,626,756 15,867,945
Non-financial
Lease incentiveassets
assets H2 21 359 -
Leasehold improvements
Other financial assets D3.1 18,460
11,304 23,607
54,056 26,152
47,962
Infrastructure
Total financial assets D3.1 67,374
18,375,740 65,748
13,075,649 64,384
16,072,937
Plant and equipment D3.1 8,255 10,415 -
Intangible assets
Non-financial assets D3.1 1,517 2,032 2,491
Prepayments
Leasehold improvements D3.1 3,556
18,460 3,971
23,607 3,615
26,152
Total non-financial assets
Infrastructure D3.1 99,162
67,374 105,773
65,748 96,642
64,384
Plant and equipment D3.1 8,255 10,415 -
Total Assetsassets
Intangible D3.1 18,474,902
1,517 13,181,422
2,032 16,169,579
2,491
Prepayments 3,556 3,971 3,615
Liabilities
Total non-financial assets 99,162 105,773 96,642
Trade creditors and accruals D1.1 15,585 12,719 11,403
Total Assets funds - financial liabilities
Investment C3.2 B9 18,474,902
21,859 13,181,422
27,286 16,169,579-
Investment funds - derivative liabilities C3.2 B9 26,314 52,283 -
Liabilities
Overnight cash balance payable H2 1,560,747 1,564,472 -
Other
Trade payables
creditors and accruals D1.1 10,498
15,585 16,701
12,719 15,900
11,403
Employee provisions
Investment funds - financial liabilities E2
C3.2 B9 312,502
21,859 248,756
27,286 234,396-
Superannuation
Investment fundsprovisions
- derivative liabilities C4.1
C3.2 B8
B9 189,367,538
26,314 153,878,348
52,283 111,232,398-
Other provisions
Overnight cash balance payable D4
H2 18,173
1,560,747 18,014
1,564,472 15,370-
Total liabilities
Other payables 191,333,216
10,498 155,818,579
16,701 111,509,467
15,900
Employee provisions E2 312,502 248,756 234,396
Net Assets
Superannuation provisions C4.1 B8 (172,858,314)
189,367,538 (142,637,157)
153,878,348 (95,339,888)
111,232,398
Other provisions D4 18,173 18,014 15,370
Total liabilities 191,333,216 155,818,579 111,509,467
The above schedule should be read in conjunction with the accompanying notes 10
The above schedule should be read in conjunction with the accompanying notes 10
87
Actuals
Department of Finance Administered
30 June Primary Schedules
30 June
ADMINISTERED RECONCILIATION SCHEDULE
for the period ended 30 June 2016 2016 2015
Note
ref $'000
Actuals $'000
Opening assets less liabilities (142,637,157)
30 June (124,200,537)
30 June
Net (cost of)/contribution by services (7,602,973)
2016 (2,508,948)
2015
Other comprehensive income/(loss) Note (30,835,288) (10,323,966)
ref $'000 $'000
Reservesassets
Opening transferred to Schedule of Comprehensive Income
less liabilities (142,637,157)- (4,122,667)
(124,200,537)
Transfers
Net (to)/from the Australian
(cost of)/contribution by services Government (7,602,973) (2,508,948)
Appropriation
Other transfers from
comprehensive OPA
income/(loss) (30,835,288) (10,323,966)
Annual appropriations F2.1 296,509 268,887
Administered
Reserves assets to
transferred and liabilities of
Schedule appropriations
Comprehensive Income F2.1 1,149- 482
(4,122,667)
1
Special appropriations
Transfers (to)/from the Australian Government F3.1 6,218,020 9,640,742
Transfers totransfers
Appropriation OPA from OPA (3,394,851) (13,145,346)
Transfers
Annual from OPA
appropriations F2.1 894
296,509 268,887-
Equity distribution
Administered assets and liabilities appropriations F2.1 (1,462,997)
1,149 (4,000)
482
Contributions
Special from government
appropriations
1 to the investment funds F4.2
F3.1 6,598,851
6,218,020 2,486,251
9,640,742
OPA WoAG transfers
Transfers to OPA (3,394,851) (13,145,346)
Transfers from
Transfers from OPAother entities H2 610,652,954
894 591,744,813-
Equity distribution entities
Transfers to other H2 (610,693,425)
(1,462,997) (592,472,868)
(4,000)
Closing assetsfrom
Contributions lessgovernment
liabilities to the investment funds F4.2 (172,858,314)
6,598,851 (142,637,157)
2,486,251
1
TheWoAG
OPA difference in the special appropriations above and the total in Note F3.1 is due to the timing differences in
transfers
superannuation
Transfers frompayments made by Finance on behalf of Emerging Cost Entities.
other entities H2 610,652,954 591,744,813
Transfers to other entities H2 (610,693,425) (592,472,868)
Closing assets less liabilities (172,858,314) (142,637,157)
1
The difference in the special appropriations above and the total in Note F3.1 is due to the timing differences in
superannuation payments made by Finance on behalf of Emerging Cost Entities.
The above schedule should be read in conjunction with the accompanying notes 11
The above schedule should be read in conjunction with the accompanying notes 11
88
The above statement should be read in conjunction with the accompanying notes 12
The above statement should be read in conjunction with the accompanying notes 12
89
The above statement should be read in conjunction with the accompanying notes 13
The above statement should be read in conjunction with the accompanying notes 13
90
Notes to and forming part of the financial statements A. About This Report
x Budget and financial advice, management and reporting - support the government to deliver its fiscal
targets and policy objectives (refer Outcome 1: Program 1.1);
x Governance - foster leading public sector practice (refer Outcome 2: Programs 2.1, 2.3, 2.4 and 2.7);
x Transformation - innovate and improve public sector operations and reform the management and operations of
public assets (refer Outcome 2: Program 2.2); and
x Services - manage efficient, cost effective services to, and for, the government (refer Outcome 2: Program 2.1,
2.3, 2.4, 2.5, 2.6, and Outcome 3: Program 3.1).
For further information, refer to Note C1 which includes the financial results and position for each of Finances outcomes.
Finances activities are classified as either Departmental or Administered. Departmental activities involve the use of
assets, liabilities, incomes and expenses controlled or incurred by Finance in its own right.
Administered items are controlled by the government and managed or overseen by Finance on behalf of the government.
These items are distinguished from Departmental items using shading.
In some areas of this financial report, Departmental and Administered items are included in the same section,
this is for presentation purposes only and these balances should not be compared.
The continued existence of Finance in its present form and with its present programs is dependent on government policy
and on continued funding by Parliament.
Basis of preparation
Finance's financial statements are required by section 42 of the PGPA Act. The financial statements are general purpose
financial statements that have been prepared in accordance with the PGPA (Financial Reporting) Rule 2015 (FRR) and
Australian Accounting Standards (AAS) and Interpretations issued by the Australian Accounting Standards Board
(AASB) that apply for the reporting period.
Basis of accounting
The financial statements have been prepared on an accrual basis and are in accordance with the historical cost
convention, except for certain assets and liabilities at fair value.
All assets have been assessed for impairment at the end of the reporting period, and no impairment indicators exist
unless otherwise stated.
All Departmental Statement of Financial Position and Administered Schedule of Assets and Liabilities items are expected
to be settled or recovered within 12 months unless otherwise stated in the notes.
The following pages set out the notes to the financial statements, which include further information required to
understand the financial statements. This has been assessed against materiality and relevance to the operations,
financial position and performance of Finance. All amounts are presented in Australian dollars (AUD) and are in whole
dollars unless otherwise specified.
14
91
Notes to and forming part of the financial statements A. About This Report
In applying Finance's accounting policies, management has made a number of judgements and applied estimates and
assumptions to future events. Judgements and estimates that are material to the financial statements are found in the
following notes:
With the exception of judgements and estimates applied in the above notes, no allowance is made for the effect of
changing prices on the results or the financial position.
Prior year Departmental contributed equity and return of equity special accounts (liability) were adjusted to reflect a
revised estimate for the 2014-15 Property Special Account cash return. For more information, refer to Note H2.
Minor changes were made to the 2014-15 comparatives in both Departmental and Administered financial statements as
a result of the reclassification of some line items.
Finance has undertaken to produce simplified financial statements for 2015-16, by:
x Adding more information to the primary statements and schedules including budgeted figures for the financial
year;
x Placing greater emphasis on providing information that is material to users, which has resulted in the provision
of information that is more relevant, as well as the removal of disclosures that were not considered useful; and
x Relocating significant accounting policies and assumptions alongside the relevant note where possible. Unless
otherwise noted, these accounting policies and estimates apply to both Departmental and Administered
activities.
x AASB 9 Financial Instruments represents the finalisation of the three phase project to replace AASB 139
Financial Instruments: Recognition and Measurement. It incorporates new principles for the requirements for
recognition, impairment and measurement of financial assets and liabilities and their de-recognition and general
hedge accounting. This is likely to impact on the categorisation, recognition and measurement of financial
instruments particularly those currently held at fair value through profit or loss (FVPL). The new standard is
effective from 1 January 2018. This will result in Finance reviewing classification and disclosure of items
currently included in Note D1 against Finances business model for managing financial assets.
15
92
Notes to and forming part of the financial statements A. About This Report
x AASB 124 Related Party Disclosures removes the current exemption for not-for-profit public sector entities such
as government departments, and enhances implementation guidance with examples specifically tailored to the
Australian environment. Related party transactions will be required to be disclosed to the extent necessary for
users to understand the potential effect of the relationship on the financial statements. The new standard is
effective from 1 July 2016 and will impact disclosure (and collection of information). This does not impact the
recognition or measurement of items in the financial statements, AASB 108.30(b).
x AASB 16 Leases will require lessees to recognise a right-of-use asset and a lease liability for all leases with a
term of more than 12 months, unless the underlying asset is of low value. Lessor accounting under AASB 16
remains substantially unchanged from the predecessor standard AASB 117 Leases. Accordingly, lessors will
continue to classify leases as operating or finance, and account for those two types of leases differently. A
lessor is not required to make any adjustments on transition and shall apply the new standard from the date of
its initial application. The new standard is effective from 1 January 2019. This will result in all properties Finance
occupies as lessee being brought onto the balance sheet. Disclosures relating to the domestic property portfolio
that Finance manages as lessor will require amendment including improved information about risk exposure.
16
93
Notes to and forming part of the financial statements B. Budget Variance Reporting
Major variances are those deemed relevant to an analysis of Finance's performance by management and are not
focussed merely on numerical differences between the actual and budgeted amounts. A note reference is included
against the relevant primary statement/schedule line item which corresponds to the explanations provided below and
elsewhere in the financial statements.
When providing explanations, Finance has identified the financial impact in relation to those key aggregates relevant to
Finance's performance. Users should be aware that there will be consequential impacts on related statements i.e. a
variance in the Statement of Comprehensive Income is likely to have consequential impacts in the Statement of Financial
Position and the Cash Flow Statement.
The Statement of Financial Position budget for 2015-16 was prepared based on 2013-14 financial results, with
adjustments for predicted or known movements at that time.
B1: Insurance Insurance claims expense Insurance claims expense variance to budget is due to lower new
claims incurred in the Property portfolio and favourable claims
Outstanding insurance
experience in the prior year outstanding claims liability.
claims
Outstanding insurance claims liability increase from budget is due to
new claims liabilities exceeding payments, and a favourable
movement in the prior year outstanding claims liability.
B2: Property Land Budget is set with reference to 2013-14 financial results for non-
financial assets such as land, buildings and investment properties.
Buildings
Actual results include impact of asset revaluations conducted at year
Investment properties end, which are difficult to predict for budget purposes, and therefore
no allowance was made in the budget.
Asset Revaluation
Reserves Property revaluation movements for 2015-16 include:
Non-financial asset write x Gains from investment properties valuation increases are
downs and revaluations largely due to land value increases in the Australian Capital
Territory as a result of rezoning.
Gains
x Write downs and revaluations of non-financial assets is a result
Rental income of decreases in building valuations primarily due to law courts
Domestic property portfolio movements resulting from specialised leasing arrangements
expenses that are not comparable to market.
x Asset revaluation reserve (ARR) movement is primarily due to
Other provisions Melbourne and Sydney land valuations which have increased in
line with market demand.
Notes to and forming part of the financial statements B. Budget Variance Reporting
B3: Centralised Centralised procurement Centralised procurement expense and revenue, unearned revenue
procurement expense and revenue and trade receivables variance to budget are largely due to additional
support and licensing arrangements outside the existing
Unearned revenue
arrangements with agencies for Volume Sourcing Arrangements
Trade receivables (VSA) and Internet Based Network Connection Services (IBNCS),
noting that the majority of the expenditure incurred is offset by
Accrued revenue
revenue received.
B4: One Lease incentive liabilities Variance to budget is the result of Finance entering into a 20-year
Canberra lease for One Canberra Avenue office accommodation and a finance
Finance lease liability
Avenue and lease for provision of a new electronic work environment during the
electronic Leasehold improvements year.
working
Lease incentive assets
environment
Plant and equipment
B5: Balances held in special Variance to budget is primarily due to project delays pushing
Departmental accounts expenditure to later years on major Departmental projects, and an
appropriations underspend relating to the Moorebank project, noting these funds are
Other Departmental
receivable no longer required and are pending return to the Official Public
undrawn
Account (OPA).
B6: Trade creditors and Variance from budget is due to timing differences for payments to
Departmental accruals suppliers between financial years.
trade creditors
and accruals
B7: Intangible Intangible assets Variance to budget is primarily due to delays in the Central Budget
assets Management System Redevelopment and other Departmental
projects.
Superannuation expense The Long Term Cost Report (LTCR) discount rate of 6% is used to
calculate the superannuation provisions for budget purposes to
Superannuation provisions reduce the volatility in reported provisions that would occur from year
to year if the long-term government bond rate were used. The long-
18
95
Notes to and forming part of the financial statements B. Budget Variance Reporting
B9: Investment Net surplus comprising: Net surplus variance to budget is due to reducing yields on interest
funds investment funds gains bearing assets consistent with a falling interest rate environment.
on financial investments
and interest on term The net asset balance of the investment funds is higher than
deposits offset by originally budgeted principally due to the delays in the
investment funds other commencement of distributions from the DisabilityCare Australia
expenses and foreign Fund (DCAF), offset by lower contributions to the Medical Research
exchange losses Future Fund (MRFF) than expected.
Distribution to portfolio
special accounts.
19
96
Notes to and forming part of the financial statements C. General Business Disclosures
1.1 Budget and x Production of the governments budget and financial statements; and Departmental ($81.2m) N/A
Financial Management x Seeking to improve the effectiveness and efficiency of the use of
public resources.
Outcome 2: Support an efficient and high-performing public sector through providing leadership to Commonwealth entities in N/A
ongoing improvements to public sector governance, including through systems, frameworks, policy, advice, and service
delivery.
2.1 Public Sector x Leading practice in public sector governance and accountability Administered $46.6m, N/A
Governance encompassing frameworks, policies and oversight. Departmental ($36.4m)
2.2 Transforming x Leading and supporting government decision making on the digital Departmental ($49.4m) N/A
Government economy and use of technology in government operations; and
x Scoping divestment opportunities and managing asset sales and any
residual issues arising from previous asset sales.
2.3 Property and x Providing policy, advice, guidance and support on managing Departmental $29.5m D3
Construction Commonwealth property, land and public works across the
government; and managing capital works projects and the
governments non-Defence property portfolio
2.4 Insurance and x Providing general insurance services and promoting risk Departmental $20.5m C2
Risk Management management across the government.
2.5 Procurement x Developing procurement arrangements for common goods and Departmental $5.8m N/A
Services services to maximise benefits for Commonwealth entities and
providing advice to government in relation to advertising.
2.6 Public Sector x Advising the government on managing the Future Fund, the stability Administered ($7.4b) C4
Superannuation of the governments unfunded superannuation liabilities and its Departmental ($4.9m)
associated Administered expense items and superannuation
arrangements for government employees.
2.7 Australian x Providing advice on investment mandates and governance Administered $249.4m C3
Government arrangements for the governments investment funds.
Investment Funds
Outcome 3: Support for Parliamentarians and others as required by the Australian Government through the delivery of, and N/A
advice on, entitlements and targeted assistance.
3.1 Ministerial and x This program contributes to the outcome through the provision of Administered N/A
Parliamentary advice on, access to and payment of parliamentary and post- ($524.4m)
Services parliamentary entitlements and targeted assistance to entities. Departmental ($37.8m)
20
97
Notes to and forming part of the financial statements C. General Business Disclosures
In the following note disclosures, Departmental and Administered items are included together for presentation
purposes only and these balances should not be compared.
C1.1 Net result by outcome
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Operating expenditure
Outcome 1 Program
1.1 Budget and Financial Management 84,946 81,315 - -
Outcome 2 Programs
2.1 Public Sector Governance 40,172 126,966 710 694
2.2 Transforming Government 62,912 53,003 - -
2.3 Property and Construction 87,949 139,476 - -
2.4 Insurance and Risk Management 106,210 99,128 - -
2.5 Procurement Services 201,780 121,414 - -
2.6 Public Sector Superannuation 4,996 4,875 8,734,544 8,657,302
2.7 Australian Government Investment Funds - - 239,037 1,412,727
Outcome 3 Program
3.1 Ministerial and Parliamentary Services 49,068 48,969 535,249 442,241
Total operating expenditure 638,033 675,146 9,509,540 10,512,964
Operating revenue
Outcome 1 Program
1.1 Budget and Financial Management 3,716 6,709 - -
Outcome 2 Programs
2.1 Public Sector Governance 3,790 9,788 47,296 5,994,696
2.2 Transforming Government 13,549 10,949 - -
2.3 Property and Construction 117,416 79,731 - -
2.4 Insurance and Risk Management 126,675 100,871 - -
2.5 Procurement Services 207,533 121,915 - -
2.6 Public Sector Superannuation 110 32 1,338,645 1,381,260
2.7 Australian Government Investment Funds - - 488,459 594,115
Outcome 3 Program
3.1 Ministerial and Parliamentary Services 11,247 12,107 10,860 10,190
Not attributed - Crown Entity - - 21,307 23,755
Total operating revenue 484,036 342,102 1,906,567 8,004,016
1
Total net cost of services (153,997) (333,044) (7,602,973) (2,508,948)
21
98
Notes to and forming part of the financial statements C. General Business Disclosures
Liabilities
Outcome 1 Program
1.1 Budget and Financial Management 20,497 17,549 - -
Outcome 2 Programs
2.1 Public Sector Governance 6,996 11,780 1,454 3,553
2.2 Transforming Government 10,394 9,149 - -
2.3 Property and Construction 125,177 128,462 - -
2.4 Insurance and Risk Management 355,716 332,025 - -
2.5 Procurement Services 83,565 98,165 - -
2.6 Public Sector Superannuation 1,908 1,897 189,380,835 153,891,062
2.7 Australian Government Investment Funds - - 48,172 79,568
Outcome 3 Program
3.1 Ministerial and Parliamentary Services 6,601 9,793 342,008 279,924
1
Not attributed 86,886 28,313 1,560,747 1,564,472
Total liabilities 697,740 637,133 191,333,216 155,818,579
22
99
Notes to and forming part of the financial statements C. General Business Disclosures
These services are funded from the Comcover Special Account (refer to Note F4).
Premium revenue
Premium revenue includes amounts charged but excludes GST. Premiums are recognised as revenue over the period
insured which is from 1 July to 30 June each year.
Reinsurance and other recovery assets are actuarially assessed as the present value of the expected future receipts,
calculated on the same basis as the outstanding claims liability.
The outstanding claims liability is actuarially assessed and measured at the central estimate of the present value of
expected future payments of claims incurred at the reporting date with an additional risk margin to allow for inherent
uncertainty in the central estimate. The expected future payments include those in relation to unpaid reported claims;
claims incurred but not reported (IBNR); claims incurred but not enough reported (IBNER); and indirect expenses that
are expected to be incurred in settling these claims. Changes in claims estimates are recognised in the surplus/deficit in
the year in which the estimates are changed.
Finance takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. The
claim estimates and judgements are regularly evaluated and updated based on historical experience and other factors.
However, given the uncertainty in the estimation process, it is likely that the final outcome will prove to be different from
the original liability established.
Finances activities are classified into two main categories: Property (Property, Motor Vehicle, and Personal Accident
and Travel) and Liability (Liability and Workers Compensation). Different actuarial methods and assumptions are
applied at a more granular level taking into account the characteristics of the class of business, claim type and the extent
of the development of each past accident period.
The estimation of IBNR and IBNER are generally subject to a greater degree of uncertainty where claims notification and
settlement may not happen for many years after the event giving rise to the claim. For this reason, Liability classes of
business typically display greater variability between the initial estimates and final outcomes.
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Notes to and forming part of the financial statements C. General Business Disclosures
The key actuarial assumptions for the determination of the outstanding claims liabilities are set out in the table below:
Discount rate To allow for the time value of money, projected payments are discounted at a risk free rate derived
from market yields on Commonwealth Government securities at the reporting date.
Inflation rate Claims inflation is incorporated into the resulting projected payments to allow for both expected
levels of economic inflation and superimposed inflation. Economic inflation is based on economic
indicators such as the consumer price index (CPI) and/or increases in average weekly earnings.
Superimposed inflation is past claims inflation in excess of wage inflation. A review of past claims
reveals no evidence of superimposed inflation.
Average The average weighted term to settlement is based on historic payment patterns.
weighted term
to settlement
Expense rate Claims handling expenses are calculated by reference to Finances claims handling remuneration
agreements for direct expenses and internal costs for indirect expenses.
Risk Margin The risk margin is assessed by examining the historical variability of the claims experience,
considering industry studies and benchmarks, and applying actuarial judgement, especially in
respect of uncertainties not reflected in the claims data. This assessment is performed for each
class of business. Diversification benefit is allowed for, with consideration given to industry studies
and benchmarks.
Sensitivity analysis
Finance has conducted a sensitivity analysis to quantify the impact of changes in the key underlying assumptions on the
surplus/deficit. The sensitivity analysis has been performed for each variable independently of all other changes and is
net of reinsurance and other recoveries. The table below describes how a change in each assumption will affect the
surplus/deficit.
The movements are the absolute movement in the assumption (e.g. +1% increase in the expense rate for Property from
1.9% to 2.9%).
24
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Notes to and forming part of the financial statements C. General Business Disclosures
25
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Notes to and forming part of the financial statements C. General Business Disclosures
The $16.6 million decrease in prior years net claims incurred is due to valuation releases arising from favourable claims
experience in the Liability portfolio exceeding adverse claims experience in the Property portfolio.
26
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Notes to and forming part of the financial statements C. General Business Disclosures
27
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Notes to and forming part of the financial statements C. General Business Disclosures
The following table shows the development of the estimated undiscounted outstanding claims relative to the ultimate expected claims for the 10 most recent accident years.
Prior 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Estimate of net ultimate claims costs
At end of accident year 49,813 48,840 45,062 50,778 121,801 61,550 66,779 114,162 102,138 91,686
One year later 60,265 47,451 43,312 48,922 108,067 70,345 63,441 106,114 119,144
Two years later 53,255 45,204 48,191 47,317 100,453 67,843 65,399 96,653
Three years later 52,693 48,962 45,043 70,257 91,789 68,396 62,028
Four years later 53,884 46,215 46,681 65,808 84,123 67,312
Five years later 54,434 47,361 47,758 65,956 82,395
Six years later 52,900 45,257 44,336 51,423
Seven years later 53,443 43,452 44,757
Eight years later 54,816 42,922
Nine years later 55,704
Estimate of net ultimate claims costs 55,704 42,922 44,757 51,423 82,395 67,312 62,028 96,653 119,144 91,686
Cumulative payments (52,798) (42,316) (41,540) (46,358) (76,031) (46,241) (42,655) (36,308) (32,037) (8,997)
Net discounted claims
liability 7,509 2,906 606 3,217 5,065 6,364 21,071 19,373 60,345 87,107 82,689 296,252
Discount to present value (139) (47) (12) (46) (95) (163) (566) (682) (2,434) (3,486) (4,155) (11,825)
Net discounted claims
liability 7,370 2,859 594 3,171 4,970 6,201 20,505 18,691 57,911 83,621 78,534 284,427
Claims handling expense 7,875
Net central estimate 292,302
Net risk margin 53,902
Total net outstanding claims liability 346,204
Reinsurance and other recoveries 6,383
Total gross outstanding claims liability 352,587
The claims development table discloses amounts net of reinsurance and other recoveries to give the most meaningful insight into the impact on profit or loss.
28
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Notes to and forming part of the financial statements C. General Business Disclosures
C3 : Investment funds
Finance provides advice on investment mandates and governance arrangements for the investment funds. This includes
advice on the credit of amounts to and debits for payment from the investment funds. The Future Fund Board of
Guardians (the Board), supported by the Future Fund Management Agency (FFMA), is responsible for the management
and investment of the assets of the investment funds. The investment funds consist of the following:
x Building Australia Fund (BAF) - an investment fund established by the Nation-building Funds Act 2008 to make
payments in relation to the creation or development of transport, communication, eligible national broadband
network, energy and water infrastructure.
x Education Investment Fund (EIF) - an investment fund established by the Nation-building Funds Act 2008 to make
payments in relation to the creation or development of higher education, research, vocational education and training,
and eligible education infrastructure and to make transitional Higher Education Endowment Fund payments.
x Health and Hospitals Fund (HHF) - an investment fund established by the Nation-building Funds Act 2008 to make
payments in relation to the creation or development of health infrastructure. The HHF was closed on
29 October 2015 by the Medical Research Future Fund (Consequential Amendments) Act 2015.
x DisabilityCare Australia Fund (DCAF) - an investment fund established by the DisabilityCare Australia Fund Act
2013 to reimburse the Commonwealth, states and territories for costs incurred in relation to the National Disability
Insurance Scheme Act 2013.
x Medical Research Future Fund (MRFF) - a financial asset fund established under the Medical Research Future
Fund Act 2015 to support medical research and innovation into the future. The MRFF commenced on
22 September 2015.
Key judgements and estimates
In applying Finance's accounting policies, management has made a number of judgements and applied estimates and
assumptions to future events. Judgements and estimates which are material to the financial statements are located
throughout the investment funds disclosure.
The investment mandate for the MRFF was issued by the responsible minister on 8 November 2015. This mandate
states that the Board is to adopt an average return of at least the Reserve Bank of Australia Cash Rate target + 1.5 to
2.0 per cent per annum, net of investment fees, over a rolling 10 year term as the benchmark return on the Fund. In
targeting the benchmark return, the Board must determine an acceptable but not excessive level of risk measured in
terms such as the probability of losses in a particular year.
All investments are designated as financial assets through profit or loss on acquisition. Subsequent to initial recognition,
all investments held at FVPL are measured at fair value with changes in their fair value recognised in the Schedule of
Comprehensive Income each reporting date. Investments are recognised and derecognised on trade date where
purchase or sale of an investment is under a contract whose terms require delivery of the investment within the
timeframe established by the market concerned. Investments are initially measured at fair value, net of transaction costs
that are directly attributable to acquisition or issue of the investment. Investments in collective investment vehicles are
recorded at fair value on the date which consideration is provided to the contractual counterparty under the terms of the
relevant subscription agreement. Any associated due diligence costs in relation to these investments are expensed
when incurred.
The following methods are adopted by the investment funds in determining the fair value of investments:
x Listed securities, exchange traded futures and options and investments in listed managed investment schemes
are recorded at the quoted market prices on relevant stock exchanges.
x Unlisted managed investment schemes and collective investment vehicles are re-measured by the investment
funds based on the estimated fair value of the net assets of each scheme or vehicle at the reporting date.
In determining the fair value of the net assets of unitised unlisted managed investment schemes and collective
investment vehicles, reference is made to the underlying unit price provided by the manager (where available),
capital account statements and the most recent audited financial statements of each scheme or vehicle.
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Notes to and forming part of the financial statements C. General Business Disclosures
Manager valuation reports are reviewed to ensure the underlying valuation principles are materially compliant with
AAS and applicable industry standards including International Private Equity and Venture Capital Valuation
Guidelines as endorsed by the Australian Private Equity and Venture Capital Association Limited.
x Derivative instruments including forward foreign exchange contracts, swaps, futures, forward contracts on
mortgage backed securities and options are recorded at their fair value on the date the contract is entered into
and are subsequently re-measured to their fair values at each reporting date. Further disclosures regarding the
use of derivatives by the investment funds is presented in Note C3.4.
x Asset backed securities, bank bills, negotiable certificates of deposit and corporate debt securities which are
traded in active markets are valued at the quoted market prices. Securities for which no active market is
observable are valued at current market rates using broker sourced market quotations and/or independent pricing
services as at the reporting date.
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Notes to and forming part of the financial statements C. General Business Disclosures
Expenses
Net realised foreign
exchange losses 8,140 30,417 32,365 20,748 14,618 106,288 224,482
Net unrealised foreign
exchange losses - - - - - - 62,231
Suppliers expenses 3,573 3,892 379 3,920 3,327 15,091 11,006
Total expenses 11,713 34,309 32,744 24,668 17,945 121,379 297,719
Net investment funds return 89,869 90,350 9,928 119,878 57,057 367,082 296,396
Distributions to portfolio
special accounts 6,920 55,754 54,984 - - 117,658 1,115,009
Net surplus 82,949 34,596 (45,056) 119,878 57,057 249,424 (818,613)
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Notes to and forming part of the financial statements C. General Business Disclosures
Liabilities
Financial liabilities designated at
FVPL
Derivatives
Currency contracts 3,061 4,434 8,307 4,742 20,544 47,050
Interest rate swap agreements 1,290 2,396 - 1 3,687 5,233
Credit default swaps - - - 2,083 2,083 -
Total financial liabilities
designated at FVPL 4,351 6,830 8,307 6,826 26,314 52,283
Financial liabilities measured at
amortised cost
Trade creditors and accruals 969 1,074 1,606 1,821 5,470 3,136
Unsettled purchases 968 1,070 3,411 10,940 16,389 24,150
Total financial liabilities
measured at amortised cost 1,937 2,144 5,017 12,761 21,859 27,286
Total liabilities 6,288 8,974 13,324 19,587 48,173 79,569
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Notes to and forming part of the financial statements C. General Business Disclosures
The investment funds, directly and via the MRFFICs have committed to provide capital to various collective investment
vehicles. The total of these commitments at balance date is $40.2 million (2015: $nil). The investment funds
commitments, being capital calls, are set out in the various underlying subscription documents. Whilst the actual timing of
the capital calls to be made by the managers of these vehicles is uncertain, as it is dependent on the managers sourcing
suitable investment opportunities, the investment funds have recorded the commitments as being current in accordance
with the underlying legal documents. The investment funds have appropriate liquidity planning in place to ensure a
suitable allocation of resources will be available to cover these future commitments of capital.
The table below provides more detailed information on the commitments and outstanding calls of collective investment
vehicles held directly by the MRFF, DCAF and via MRFFICs at balance date:
Capital Outstanding
Description on Committed as at Commitments Net Capital cost Fair Value as at
underlying 30/06/2016 as at 30/06/2016 at 30/06/2016 30/06/2016
Strategy Local Currency AUD equivalent AUD Equivalent AUD Equivalent
$'000 $'000 $'000
Directly held by MRFF and DCAF
AUD
Debt $100,000,000 - 100,000 99,029
Alternatives AUD $295,000,000 - 295,000 291,658
Total - 390,687
Via MRFFICs
Alternatives USD $50,000,000 - 69,018 65,155
Private equity AUD $6,275,000 1,111 5,164 5,434
Private equity EUR 52,683,895 13,623 65,058 73,653
Private equity USD $139,505,758 25,472 156,015 162,122
Total 40,206 306,364
The investment funds have entered into derivative contracts to manage their exposure to foreign exchange risk, interest
rate risk, equity market risk and credit risk. The investment funds also use derivatives to gain indirect exposure to market
risks. The use of derivative financial instruments by the investment funds is governed by the Nation-building Funds Act
2008, the DisabilityCare Australia Fund Act 2013 and the Medical Research Future Fund Act 2015.
Market risk is the risk of loss arising from movements in the prices of various assets flowing from changes in interest
rates and foreign currency.
The investment funds are exposed to interest rate risk in relation to their investments. The total exposure for each class
of financial asset is set out below.
33
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Notes to and forming part of the financial statements C. General Business Disclosures
2015
Cash and cash equivalents 3,766,352 - - 3,766,352
Interest bearing securities 3,623,458 3,988,796 - 7,612,254
Other financial assets - - 22,398 22,398
Total investment 7,389,810 3,988,796 22,398 11,401,004
Total interest rate swaps (notional amount)
Pay (177,772) (282,996) -
Receive 282,996 177,772 -
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Notes to and forming part of the financial statements C. General Business Disclosures
Sensitivity by year Risk variable Change in risk variable Net cost of services
% $'000
2016 Discount rate +0.3% 9,297
-0.3% (8,262)
2015 Discount rate +0.4% 20,820
-0.4% (18,665)
Financial assets exposed to currency risk USD EURO GBP Other Total
2016 $'000 $'000 $'000 $'000 $'000
Cash and cash equivalents 189,460 59,848 34,739 (9,715) 274,332
Interest bearing securities 2,299,678 840,596 734,972 750,879 4,626,125
Listed equities 880 - - - 880
Collective investment vehicles 227,276 73,653 - - 300,929
Other investments (1,507) 1,133 (221) (981) (1,576)
Receivables 11,197 417 7 (1) 11,620
Payables (490) - (5,448) (10,350) (16,288)
Total physical exposure 2,726,494 975,647 764,049 729,832 5,196,022
Forward exchange contracts
Buy foreign currency 690,496 224,773 5,849 2,995 924,113
Sell foreign currency (3,031,318) (1,194,599) (771,607) (653,436) (5,650,960)
Total derivative exposure (2,340,822) (969,826) (765,758) (650,441) (4,726,847)
Net exposure 385,672 5,821 (1,709) 79,391 469,175
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Notes to and forming part of the financial statements C. General Business Disclosures
Sensitivity by year Risk variable Change in risk variable Net cost of services
% $'000
2016 Exchange rate +10.5% 89,666
-10.5% (89,665)
2015 Exchange rate +10.9% 7,026
-10.9% (7,026)
Fair market
Notional value value
30 June 30 June
2016 2016
$'000 $'000
Buy domestic equity futures contracts 2,070 4
Sell domestic equity futures contracts (4,011) -
Buy international equity futures contracts 249,547 909
Total equity derivative contracts 247,606 913
36
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Notes to and forming part of the financial statements C. General Business Disclosures
Liquidity risk is the risk that the investment funds will not be able to meet their obligations as they fall due. The Nation
Building Funds (NBFs) and DCAF are currently invested in cash and cash like instruments under the current investment
mandate. Accordingly, the risk of these funds not being able to meet their obligations is low. The MRFF must be in a
position to meet the distribution payments required of it up to the amount periodically declared as distributable by the
Board which is managed under the Short-term Liquidity Risk Policy. This includes a short term crash test which is applied
to the portfolio to ensure it is able to meet its immediate cash flow obligations under a plausible but very severe market
dislocation.
Credit risk is the risk of loss that arises from a counterparty failing to meet their contractual commitments in full and on
time, or from losses arising from the change in value of a traded financial instrument as a result of changes in credit risk
on that instrument. The Board sets limits on the credit ratings of debt investments when appointing investment
managers. These limits are reflected in the underlying investment mandates and are monitored by the FFMA with
compliance reported to the Board. The investment fund's maximum exposure to credit risk at reporting date in relation to
each class of recognised financial asset is the carrying amount of those assets as indicated in the investment funds
financial position.
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Notes to and forming part of the financial statements C. General Business Disclosures
38
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Notes to and forming part of the financial statements C. General Business Disclosures
C4 : Superannuation
C4.1 Overview of schemes
Finance administers the following defined benefit superannuation schemes on behalf of the government:
Finance recognises an administered liability for the present value of the Australian Government's expected future
payments arising from the PCSS, JPS, G-GPS and FCCJDDS and the unfunded components of the 1922 Scheme, CSS
and PSS. These liabilities are based on an annual actuarial assessment. The funded components of these schemes are
reported in the financial statements of the respective schemes. Finance also has the responsibility to record the
Australian Government's transactions in relation to the above schemes.
Actuarial gains or losses are recognised in equity in the year in which they occur. Interest on the net defined benefit
liability is recognised in the surplus/(deficit); the return on plan assets excluding the amount included in interest income is
recognised in equity.
Superannuation liabilities are calculated annually as the present value of future benefit obligations less the fair value of
scheme assets. The rate used to discount future benefits is determined by reference to the government bond rate at the
reporting date.
Amounts recognised in the Schedule of Comprehensive Income and Schedule of Assets and Liabilities
Other
CSS PSS PCSS G-GPS JPS FCCJDDS Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
30 June 2016
Revenues 111,649 1,225,581 1,001 - - - 1,338,231
Expenses 2,970,646 5,608,162 48,356 773 86,562 704 8,715,203
OCI (9,730,040) (20,827,810) (181,590) (1,244) (121,172) 606 (30,861,250)
Liabilities 86,124,618 100,612,550 1,242,850 22,168 1,363,326 2,026 189,367,538
30 June 2015
Revenues 157,060 1,205,671 1,179 - - - 1,363,910
Expenses 3,096,967 5,399,808 51,650 893 90,200 699 8,640,217
OCI (5,473,800) (4,848,408) 30,388 269 (7,800) (643) (10,299,994)
Liabilities 76,798,308 74,799,795 1,056,935 21,654 1,199,200 2,456 153,878,348
2016 2015
Superannuation liabilities expected to be settled $'000 $'000
No more than 12 months 6,337,614 6,336,705
More than 12 months 183,029,924 147,541,643
Total superannuation liabilities 189,367,538 153,878,348
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Notes to and forming part of the financial statements C. General Business Disclosures
1922 Scheme Unfunded. There are no longer any members contributing under this Act. Benefits are paid to
members from the Consolidated Revenue Fund (CRF).
CSS and PSS Partially funded. Contributions generally comprise basic member contributions and employer
productivity (up to three per cent) contributions. Unfunded benefits are paid to members from the
CRF.
PCSS Unfunded. Member contributions are a fixed percentage of: parliamentary allowance; salary for
Ministers of State; and allowance by way of salary for office holders, which is paid into the CRF.
Unfunded benefits are paid to members from the CRF.
G-GPS, JPS Unfunded. Members are not required to contribute towards the cost of their benefit during their term
and FCCJDDS of appointment. Unfunded benefits are paid to members from the CRF.
The nature of the benefits provided under the schemes are as follows:
CSS The types of benefits payable are a lifetime indexed pension (indexed in January and July) in line
with changes in the CPI, a lifetime non-indexed pension and a lump sum payment. The main
retirement benefit is the employer-financed indexed pension that is calculated by a set formula
based on a member's age, years of contributory service and final salary.
Where a member has preserved their benefit in the scheme, when the benefit becomes payable
the employer financed index pension is calculated by applying age-based factors to the amount of
two and a half times the member's accumulated basic member contributions and interest.
Members basic contributions, employer productivity contributions and interest can be taken as a
lump sum or an additional non-indexed lifetime pension. This benefit is determined by the value of
contributions and investment returns, and in the case of the non-indexed pension by applying age-
based factors.
PSS The types of benefits payable are a lifetime indexed pension (indexed in January and July in line
with changes in the CPI) and lump sum. On retirement a lump sum benefit is payable which is
calculated based on the members length of contributory membership, their rate of member
contributions and final average salary (average of a members superannuation salary on their last
three birthdays).
Where a member preserves their benefit in the scheme, generally the members lump sum benefit
at that time is crystallised with the funded component of the benefit accumulating with interest and
the unfunded component accumulating with changes in the CPI, until the benefit becomes payable.
Generally members can convert 50 per cent or more of their lump sum to a lifetime indexed
pension. The indexed pension is calculated by applying age-based factors to the amount of lump
sum to be converted to a pension.
PCSS The benefit payable is a lifetime pension or lump sum depending on length of service and
additional offices held.
Where a retiring member has sufficient parliamentary service to meet the pension qualification
period for a lifetime pension (which is payable as set out in the Act), pension benefits are expressed
as a percentage of the superannuation salary applicable for the PCSS and are indexed by
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Notes to and forming part of the financial statements C. General Business Disclosures
A PCSS member who qualifies for a pension can also elect to convert up to half of their benefit to a
lump sum. Lump sum benefits are payable to PCSS members who do not have sufficient
parliamentary service to qualify for a lifetime pension.
G-GPS The benefit payable is a lifetime pension equal to 60% of the salary of the Chief Justice of the High
Court of Australia.
JPS The benefit payable is a lifetime pension equal to 60% of the judicial salary, payable where a judge
has 10 or more years service and is 60 years of age or older.
Provisions are made for part pension (pro-rated based on length of service) where a judge retires
on reaching the maximum retirement age with at least 6 years but less than 10 years service.
FCCJDDS Federal Circuit Court Judges who retire due to permanent disability are provided with a pension
equal to 60% of the salary the Judge would have received if they had not retired, and is payable until
the earlier of the Judge attaining age 70, or his/her death.
In addition, the Judge continues to receive employer superannuation contributions in respect of this
pension until they reach age 65.
Generally, benefits may also be payable to any surviving eligible spouse and children on the death of a member or
pensioner.
Regulatory Framework
The following table details the enabling legislation for each of the individually disclosed defined benefit schemes and
whether the scheme must comply with the requirements of the Superannuation Industry (Supervision) Act 1993, as well
as a number of other Acts.
Governance
The Commonwealth Superannuation Corporation (CSC) was established under the Governance of Australian
Government Superannuation Schemes Act 2011 and is the trustee for the CSS and PSS. CSC is responsible for:
The trustee for the PCSS is established by the enabling Act and comprises five trustees, being two Senators, two
members of the House of Representatives and the Finance Minister. Finance acts as adviser to the Trust. The Secretary
of Finance also has certain powers under the Act in relation to administration of the PCSS.
41
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Notes to and forming part of the financial statements C. General Business Disclosures
The enabling Acts for the other defined benefit superannuation schemes confer certain powers to the Secretary of
Finance in relation to administration of each scheme. Day-to-day administration of the schemes is undertaken by
Finance.
The schemes are exposed to interest rate risk, investment risk, longevity risk and salary risk. The following pages identify
and explain the amounts reported in these financial statements and detail the principal actuarial assumptions
underpinning each of the major schemes, including an analysis of the sensitivity of changes in these assumptions to the
amounts reported in the financial statements.
The fair value of scheme assets for CSS and PSS at 30 June 2016 is $19.6 billion (30 June 2015 was $20.1 billion). The
assets are diversified in the following sectors Australian equity 24%; international equity 27%; property 13%; market
neutral funds 10%; objective based funds 5%; credit 7%; sovereign bonds 5% and cash 9%. This includes $465.9 million
(2015: $230.6 million) of Commonwealth Government Bonds
Membership data as at 30 June 2015 has been rolled forward to 30 June 2016 by making allowance for estimated
investment earnings, contributions, salary increases, benefit payments and benefit accruals, using the actuarial
assumptions from the LTCR where other information is not available. The defined benefit obligation calculated is based
on the rolled forward membership data that was then adjusted to reflect the difference between expected benefit
payments and actual benefit payment to 30 June 2016.
The fair value of scheme assets as at 30 June 2016 (CSS and PSS only) were estimated using the unaudited net
scheme assets available to pay benefits at 31 May 2016 rolled forward to 30 June 2016 with cash flow items provided by
the CSC. An estimate of the actual rate of investment return earned by the scheme during June 2016 was used in
determining the fair value of scheme assets.
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Notes to and forming part of the financial statements C. General Business Disclosures
The impact of a change in the defined benefit obligation reported as at 30 June 2016 under several scenarios is
presented below. The defined benefit obligation has been recalculated by changing the assumptions as outlined below,
whilst retaining all other assumptions.
Impact on defined benefit obligation
0.5% increase 0.5% decrease
Assumption Movement in $'000 Movement in $'000
CSS PSS Other CSS PSS Other
The fair value of scheme assets relates to investments in the Pooled Superannuation Trust (PST). These are disclosed
as level 2 in the fair value hierarchy, where the net market value is derived from observable inputs (other than quoted
prices) such as prices or derived from prices.
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Notes to and forming part of the financial statements C. General Business Disclosures
The fair value of scheme assets relates to investments in the PST. These are disclosed as level 2 in the fair value
hierarchy, where the net market value is derived from observable inputs (other than quoted prices) such as prices or
derived from prices.
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121
Notes to and forming part of the financial statements C. General Business Disclosures
45
122
Notes to and forming part of the financial statements C. General Business Disclosures
C5 : Restructuring
Net assets received from or relinquished to another Australian Government entity under a restructuring of administrative
arrangements are adjusted at their book value directly against contributed equity.
As part of the Administrative Arrangement Orders issued by the Government on 21 September 2015, the Gov 2.0
function (and associated assets and liabilities) were transferred to the Department of the Prime Minister and Cabinet
(PM&C) and the Digital Transformation Office (DTO). Both transfers were effective 24 June 2016. Unspent annual
appropriation balances have been transferred to the relevant gaining agency via a s75 determination under the PGPA
Act.
The Boardlinks program was also transferred to PM&C on 24 June 2016 following agreement by the Prime Minister on
6 January 2016. No assets or liabilities were relinquished as part of this transfer. Ongoing funding has been redirected as
part of the 2015-16 Portfolio Additional Estimates.
Prior year restructures (including associated assets and liabilities) to Finance included functions assumed from the ARCo
and Albury Wodonga Corporation which became effective on 24 April 2015 and 1 January 2015, respectively.
There were no Administered functions assumed or relinquished by Finance during 2015-16 (2014-15: nil).
Liabilities recognised
Payables - - - 19
Provisions - - 15,029 18
Total liabilities recognised - - 15,029 37
FUNCTIONS RELINQUISHED
Assets relinquished
Financial assets 431 24 - -
Non-financial assets 1,003 26 - -
Total assets relinquished 1,434 50 - -
Liabilities relinquished
Payables - - - -
Provisions 431 24 - -
Total liabilities relinquished 431 24 - -
46
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Notes to and forming part of the financial statements D. Operating Financial Resources
D1 : Financial instruments
Policy and measurement
A financial instrument is a contract between entities that gives rise to a financial asset of one entity and a financial liability
or equity instrument of the other entity. Generally, financial instruments are recognised and derecognised on 'trade date'
which is the date that the risks and rewards of ownership are transferred to the 'buyer'. Finance classifies its financial
instruments in the following categories:
x Loans and receivable assets: includes cash and cash equivalents which are readily convertible to cash, trade
receivables, loans and other receivables with fixed or determinable payments that are not quoted in an active
market.
x Held-to-maturity investments: non-derivative financial assets with fixed or determinable payments and fixed
maturities that an entity has a positive intention and ability to hold to maturity.
x Available-for-sale financial assets: non-derivative financial assets that are either designated in this category or
are not classified in any other category.
x Financial assets/liabilities at FVPL: assets and liabilities held for trading, or portions of an identified portfolio of
financial instruments that are managed together and have a recent actual pattern of short term profit taking.
Derivatives are classified as held for trading unless they are designated as hedges.
x Financial liabilities held at amortised cost: includes suppliers and other payables with a fixed or determinable
amount to be paid that are not quoted in an active market.
All financial assets and liabilities are initially recognised at fair value (usually transaction price). For financial instruments
not at FVPL, transaction costs are also added to the initial value.
At fair value, with any Available-for-sale financial assets, Any difference between the cost less
valuation movement taken with the exception of interest and principal repayments and amortisation,
to equity (reserves). foreign exchange movements. and the current fair value less any
previous impairment loss, is transferred
from equity to the surplus/(deficit).
In the following note disclosure, Departmental and Administered items are included together for presentation
purposes only and these balances should not be compared.
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Notes to and forming part of the financial statements D. Operating Financial Resources
Financial Liabilities
Financial liabilities measured at amortised cost
Trade creditors and accruals 53,029 41,211 15,585 12,719
Investment funds - financial liabilities C3.2 - - 21,859 27,286
Total financial liabilities measured at
amortised cost 53,029 41,211 37,444 40,005
Financial liabilities designated at FVPL
Investment funds - derivative liabilities C3.2 - - 26,314 52,283
Finance leases 10,102 - - -
Total financial liabilities designated at FVPL 10,102 - 26,314 52,283
Total financial liabilities 63,131 41,211 63,758 92,288
Financial liabilities expected to be settled
No more than 12 months 55,915 41,211 63,758 92,288
More than 12 months 7,216 - - -
Total financial liabilities 63,131 41,211 63,758 92,288
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Notes to and forming part of the financial statements D. Operating Financial Resources
x CSC is a trustee and administrator of Commonwealth superannuation schemes. The value of CSC has been
measured using the net assets (NET) reported in its audited accounts and internal management accounts. A change
in the net assets would result in an equal change in reported fair value. The merger of CSC and Comsuper on
1 July 2015 has not affected the valuation technique for CSC in 2015-16. Further information about CSC is included
in Note C4.
x ASC Pty Ltd (ASC) provides ongoing capability for the through life support of the Collins class submarine and
shipbuilder for the Air Warfare Destroyers. ASC has been measured using reporting date value of the future cash
flows of the company sourced from the 2016-2021 Corporate Plan. These cash flows have been discounted using
the weighted average cost of capital (WACC). The WACC is calculated based on a number of inputs derived from
either professional judgement or observable historical market data of comparable entities. The impact of WACC
changes is included as part of Market Risk analysis in Note D2.1.
Financial liabilities
Investment funds - derivative liabilities 2 N/A Market approach 26,314 52,283
Total financial liabilities 26,314 52,283
1
Price Index (PI) values based on observable market data relating to prices, industry accepted pricing models and
broker/dealer quotes
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Notes to and forming part of the financial statements D. Operating Financial Resources
Administered
30 June 30 June
Inputs Valuation 2016 2015
Level used technique $'000 $'000
Opening balance of investments in CCEs 378,108 4,532,827
Total gains/(losses) recognised in net cost of services - (4,135,238)
Total gains/(losses) recognised in other comprehensive income 22,346 (19,481)
Closing balance of investments in CCEs 400,454 378,108
There were no transfers into level 3 during the current financial year.
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Notes to and forming part of the financial statements D. Operating Financial Resources
Held-to-maturity investments
Interest revenue earned on Government Securities - - 120 209
Net gain/(losses) on held-to-maturity
investments - - 120 209
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Notes to and forming part of the financial statements D. Operating Financial Resources
Market risk refers to the risk that a change in market parameters will impact on assets held by Finance. Other than
balances held by the investment funds, investments in CCEs and the OPA which are exposed to interest rate risk and
foreign currency risk, Finance holds basic financial instruments that are not exposed to market risks. The following
table discloses market risks in relation to the OPA and investments in CCEs. Disclosures in relation to the investment
funds are included as part of Note C3.3.
Liquidity risk is the risk that an entity will be unable to pay its debts when they fall due. As Finance is appropriation
funded, the risk of Finance not meeting its obligations associated with financial liabilities is highly remote. Internal policies
and procedures are also in place to ensure there are appropriate resources available to meet obligations. Finance's
credit terms for goods and services are payment within 30 days. Disclosures in relation to the investment funds are
included as part of Note C3.3.
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Notes to and forming part of the financial statements D. Operating Financial Resources
Credit risk is the risk that entities owing debts to Finance will not pay those debts as and when they fall due. Finance is
exposed to a moderate level of credit risk in relation to the investment fund's assets; all other financial assets are
considered to be low risk. Trade and other receivables (excluding State and Territory Government loans) have
standard 30 days terms. Additional disclosures for the investment funds credit risk are included in Note C3.3.
Gross exposure to all credit risk and credit quality of financial assets
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
Note ref $'000 $'000 $'000 $'000
Financial assets
Not past due nor impaired
Cash and cash equivalents 3,321 3,474 1,059,534 1,084,959
Trade receivables 68,417 26,309 815 972
Investment funds - loans and receivables C3.2 - - 4,259,529 3,774,248
Investment funds - financial assets at FVPL C3.2 - - 12,494,544 7,626,756
State and territory government loans - - 145,959 151,814
Accrued revenue 20,344 8,893 1,533 1,921
Government securities - - 1,472 2,171
Total not past due nor impaired 92,082 38,676 17,963,386 12,642,841
Past due or impaired
Trade receivables 1,552 2,169 575 285
Total past due or impaired 1,552 2,169 575 285
Total financial assets 93,634 40,845 17,963,961 12,643,126
Ageing of financial instrument assets that were past due or impaired
0 to 30 days 756 439 124 85
31 to 60 days 456 1,540 35 158
61 to 90 days 54 64 22 9
90+ days 286 126 394 33
Total past due but not impaired 1,552 2,169 575 285
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Notes to and forming part of the financial statements D. Operating Financial Resources
D3 : Non-financial assets
Policy and measurement
Non-financial assets (excluding assets held for sale) are not expected to be sold or realised within the next 12 months.
Finance's asset recognition threshold is $5,000; all purchases under this threshold are expensed in the year of
acquisition, other than when they form part of a group of similar items which are significant in total in which case they are
recognised on a group basis.
Finance has a number of asset classes. The recognition and measurement policy for each is included below:
Asset class
Initial Subsequent Revaluation
(includes work in Fair value measured at:
Recognition Recognition Frequency
progress):
Land Assessed annually by Market selling price.
management to
determine whether it is Market selling price or
Buildings
likely that the carrying discounted cash flows.
Fair value less
Leasehold amount is materially Depreciated replacement
subsequent
improvements different from fair value. cost.
At cost. accumulated
If likely, revaluations
depreciation and
are conducted by
Infrastructure, impairment. Market selling price or
independent valuers
plant and and revaluation depreciated replacement
equipment adjustments are made cost.
on a class basis.
At cost, except
Investment where acquired Market selling price or
Fair value. Annually.
property at nominal cost, discounted cash flows.
then fair value.
Intangibles Cost less
(including accumulated
internally amortisation and
At cost. N/A N/A
developed and accumulated
externally acquired impairment
software) losses.
Revaluation adjustments - Property, infrastructure, plant and equipment
The ARR is an equity account held at asset class level. The ARR cannot be negative, therefore when the values of
assets reduce due to revaluation, the amount in excess of the ARR for that class of asset is posted directly to the
surplus/(deficit). Similarly, an increase can only be recognised in the reserve once the previous decreases recognised in
the surplus/(deficit) have been reversed to surplus/(deficit).
Depreciation/amortisation
Depreciable assets are written down to their estimated residual values over their estimated useful lives to Finance using
the straight line method of depreciation. Depreciation rates are based on the following useful lives:
Asset class 2016 & 2015 (no change)
Buildings on freehold land 3 to 100 years This policy is reviewed at each reporting
date. If a change is deemed necessary,
Leasehold improvements Lesser of useful life or lease term
these are made in the current and future
Intangibles 3 to 7 years
reporting periods as appropriate.
Infrastructure, plant and equipment 1 to 45 years
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Notes to and forming part of the financial statements D. Operating Financial Resources
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Notes to and forming part of the financial statements D. Operating Financial Resources
Departmental
Leasehold Invest- Plant and Intang-
improve- ment equip- ible
Land Buildings ments property ment assets Total
$000 $000 $000 $000 $000 $000 $000
As at 1 July 2014
Gross book value 336,333 678,276 7,748 649,096 16,585 112,228 1,800,266
Accumulated depreciation and
impairment - - (2,288) - (4,228) (49,208) (55,724)
Opening balance as at 1 July 2014 336,333 678,276 5,460 649,096 12,357 63,020 1,744,542
Additions
Purchase or internally developed 10,377 351,859 1,138 13,120 262 8,038 384,794
Transfers from agencies 45,553 557 - - 5 - 46,115
Items recognised in equity
Revaluations and impairments 16,445 - - - - - 16,445
Items recognised in the surplus/(deficit)
Revaluations - (11,555) - (43,727) - - (55,282)
Reversal of impairments - - - - - 4,601 4,601
Transfers to assets held for sale (11,734) (310) - - - - (12,044)
Reclassification - 36,681 - (36,681) - - -
Depreciation/amortisation expense - (11,522) (4,011) - (4,338) (6,656) (26,527)
Disposals
Transfers to agencies - other - (321,595) - - - - (321,595)
Write-offs - - - - (25) (1,298) (1,323)
Other disposals (654) (2,256) - (1,530) - - (4,440)
Closing balance as at 30 June
2015 396,320 720,135 2,587 580,278 8,261 67,705 1,775,286
Total as at 30 June 2015 represented by
Gross book value
Fair value (gross) 396,320 425,966 8,886 580,278 16,826 - 1,428,276
Internally developed software - - - - - 47,591 47,591
Purchased software - - - - - 14,895 14,895
Work in progress - at fair value - 294,169 - - - - 294,169
Work in progress - at cost - - - - - 53,627 53,627
Accumulated depreciation,
amortisation and impairment - - (6,299) - (8,565) (48,408) (63,272)
Total as at 30 June 2015 396,320 720,135 2,587 580,278 8,261 67,705 1,775,286
Further information
Domestic property portfolio
Finance is responsible for the management of the Australian Governments domestic non-defence property portfolio and
the construction and delivery of domestic non-defence major capital works projects as directed by the government.
The governments non-defence domestic property portfolio currently has approximately 170 Commonwealth-owned
properties across Australia. These include office buildings, law courts, special purpose facilities, heritage assets, vacant
land and contaminated sites that have been classified as either investment properties, land, buildings, or assets held for
sale.
Other assets
Other assets held by Finance include leasehold improvements, office equipment and information technology assets
required to support the delivery of Finance outcomes.
Finance leases
In 2016, finance leases existed in relation to a new electronic work environment. The leases were non-cancellable and
for a 4 year term. The interest rate implicit in the leases as at 30 June 2016 is 1.99%. The lease assets secured the
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Notes to and forming part of the financial statements D. Operating Financial Resources
lease liabilities. Finance guaranteed the residual values of all assets leased. The future minimum lease commitments
payable is included as part of commitments disclosures, refer Note G1.
Administered
Leasehold
improve- Plant and Intangible
ments Infrastructure equipment assets Total
$000 $000 $000 $000 $000
As at 1 July 2015
Gross book value 50,399 65,748 16,526 3,193 135,866
Accumulated depreciation, amortisation
and impairment (26,792) - (6,111) (1,161) (34,064)
Opening balance as at 1 July 2015 23,607 65,748 10,415 2,032 101,802
Additions
By purchase 4,221 - 2,556 - 6,777
Items recognised in equity
Revaluations - 3,579 - - 3,579
Items recognised in the surplus/(deficit)
Depreciation/amortisation expense (9,276) (1,953) (4,465) (504) (16,198)
Disposals
Write-offs (92) - (242) (11) (345)
Other disposals - - (9) - (9)
Closing balance as at 30 June 2016 18,460 67,374 8,255 1,517 95,606
Total as at 30 June 2016 represented by
Gross Book Value
Fair value (gross) 52,617 67,374 16,231 - 136,222
Internally developed software - - - 3,110 3,110
Purchased software - - - 72 72
Work in progress - at fair value 11 - 1,237 - 1,248
Accumulated depreciation, amortisation
and impairment (34,168) - (9,213) (1,665) (45,046)
Total as at 30 June 2016 18,460 67,374 8,255 1,517 95,606
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Notes to and forming part of the financial statements D. Operating Financial Resources
Administered
Leasehold
improve- Plant and Intangible
ments Infrastructure equipment assets Total
$000 $000 $000 $000 $000
As at 1 July 2014
Gross book value 43,129 59,389 16,011 3,153 121,682
Accumulated depreciation, amortisation
and impairment (16,423) - (2,588) (662) (19,673)
Opening balance as at 1 July 2014 26,706 59,389 13,423 2,491 102,009
Additions
By purchase 8,589 - 2,038 40 10,667
Items recognised in equity
Revaluations and impairments - 8,080 - - 8,080
Items recognised in the surplus/(deficit)
Depreciation/amortisation expense (11,459) (1,721) (4,751) (499) (18,430)
Disposals
Write-offs (229) - (282) - (511)
Other disposals - - (13) - (13)
Closing balance as at 30 June 2015 23,607 65,748 10,415 2,032 101,802
Total as at 30 June 2015 represented by
Gross Book Value
Fair value (gross) 49,916 65,748 16,289 - 131,953
Internally developed software - - - 3,110 3,110
Purchased software - - - 72 72
Work in progress - at fair value 483 - 237 - 720
Work in progress - at cost - - - 11 11
Accumulated depreciation, amortisation
and impairment (26,792) - (6,111) (1,161) (34,064)
Total as at 30 June 2015 23,607 65,748 10,415 2,032 101,802
Further information
Administered non-financial assets include the Intra Government Communication Network (ICON), leasehold
improvements and IT assets for electoral and state offices, and other information technology assets to support
Administered outcomes.
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Notes to and forming part of the financial statements D. Operating Financial Resources
All non-financial assets with the exception of intangibles are measured at fair value. Other than assets held for sale,
these are all recurring fair value measurements.
Valuation of infrastructure
Finance manages a secure fibre network within the ACT known as the ICON. Replacement cost has been established
based on contemporary technology and construction approaches. Significant judgement concerning the nature of the
physical environment has been made to establish the adopted replacement cost. An independent valuation was
undertaken as at 30 June 2016.
Within the property portfolio, there are a small number of properties where the highest and best use differs from the
current use, being:
x 7 vacant blocks which have a highest and best use of 'office buildings';
x 1 vacant block which has a highest and best use of 'rural residential'; and
x 1 property with unusable buildings which has a highest and best use of 'community use'.
While the fair values for these properties has been measured in the financial statements using the highest and best use
for each, they are not being utilised at their highest and best use as Finance is not in the business of development.
The following tables set out (by asset class) the valuation technique, inputs used, and the level of the fair value hierarchy
per AASB 13 Fair Value Measurement.
Finance only holds non-financial assets that fall into the following two categories (or levels) of the fair value hierarchy:
x Level 2: observable inputs (other than quoted prices in active markets) are used to calculate the fair value of the
asset; and
x Level 3: inputs used to calculate the fair value are not observable.
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Notes to and forming part of the financial statements D. Operating Financial Resources
Departmental
Administered
Leasehold Plant and
Technique / inputs used / level improvements Infrastructure equipment Total
$000 $000 $000 $000
Cost Approach / RCN;CEB / 3 18,460 67,374 - 85,834
Market Approach / AMT / 2 - - 6,598 6,598
Cost Approach / AMT;CEB / 3 - - 1,657 1,657
Total assets at fair value 30 June 2016 18,460 67,374 8,255 94,089
Cost Approach / RCN;CEB / 3 23,607 65,748 - 89,355
Market Approach / AMT / 2 - - 8,182 8,182
Cost Approach / AMT;CEB / 3 - - 1,996 1,996
Total assets at fair value 30 June 2015 23,607 65,748 10,178 99,533
Inputs used
Replacement Cost of New Assets (RCN): the amount a market participant would pay to acquire or construct a new
substitute asset of comparable utility.
Consumed Economic Benefits (CEB) obsolescence of assets: physical deterioration, functional or technical
obsolescence and conditions of the economic environment specific to the asset.
Adjusted Market Transactions (AMT): market transactions of comparable assets, adjusted to reflect differences in price
sensitive characteristics.
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Notes to and forming part of the financial statements D. Operating Financial Resources
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Notes to and forming part of the financial statements D. Operating Financial Resources
D4 : Other provisions
Policy and measurement
Finance recognises a provision when it has a legal or constructive obligation to make a payment, it is probable that
payment will be made and the amount to be paid can be reliably measured.
In the following note disclosure, Departmental and Administered items are included together for presentation
purposes only and these balances should not be compared.
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Property
Excess lease space 682 1,948 154 126
Provision for remediation costs 24,092 34,690 4,828 5,178
Other
Act of Grace - - 11,533 11,257
Same Sex Relationships Act - - 1,658 1,453
Total other provisions 24,774 36,638 18,173 18,014
Further information
Remediation
Finance currently has 103 Administered and 4 Departmental agreements for the leasing of premises which have
provisions requiring Finance to restore the premises to their original condition at the conclusion of the lease. The
domestic property portfolio managed by Finance has approximately 170 properties. A small number of these properties
have potential remediation issues identified that are currently the subject of further investigation, a provision has been
raised in relation to remediation of two properties.
Act of grace
The Act of grace mechanism is a discretionary power found in section 65 of the PGPA Act, which allows payments to be
made if it is appropriate and a decision maker considers there are special circumstance. In most cases these relate to
pension payments to spouses of former members of the Commonwealth defined benefit superannuation schemes.
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E. Our People
This section describes the employment and post-employment benefits provided to Finance employees engaged under
the Department of Finance Enterprise Agreement 2015-2018 and Public Service Act 1999.
As part of its Administered operations, Finance facilitates payment of salary and related benefits to staff employed by
current and former Members of Parliament under the Members of Parliament (Staff) Act 1984 (MOP(S) Act) as well as
payment of post-employment benefits for former Parliamentarians and Prime Ministers under relevant legislation.
Superannuation payments made to former Commonwealth employees which are also administered by Finance on behalf
of the Government are not included in the tables below. These are disclosed in Note C4.
In the following note disclosures, Departmental and Administered items are included together for presentation
purposes only and these balances should not be compared.
E1 : Employee expenses
Policy and measurement
Personal leave
Personal leave is expensed in the year that it is taken.
Superannuation expense
Finances staff are members of the CSS, PSS, PSSap, or other non-government superannuation funds. The CSS and
PSS are defined benefit schemes. The PSSap is a defined contribution scheme. Finance makes employer contributions
to employees' defined benefit schemes at rates determined by an actuary to be sufficient to meet the current cost to the
Government. Finance accounts for these amounts as if they were contributions to defined contribution plans.
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Wages and salaries 122,179 120,057 185,062 171,512
Superannuation expense
Defined contribution plans 14,136 9,567 29,784 25,306
Defined benefit plans 10,297 13,812 6,870 10,093
Leave and other entitlements 20,422 15,623 14,805 16,581
Increase in post-employment benefits liability - - 62,878 9,771
Separations and redundancies 2,377 805 5,995 4,402
Other employee expenses 947 1,353 17,031 16,967
Total employee expenses 170,358 161,217 322,425 254,632
E2 : Employee provisions
Policy and measurement
Leave provisions
Leave provisions includes provisions for annual leave and long service leave (LSL).
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Post-employment benefits
Finance has made judgements in relation to the valuation of post-employment benefits such as entitlements of former
Prime Ministers, former Senators and Members and Life Gold Pass Holders (LGPH).
Changes to LGPH entitlements were proposed as part of the Parliamentary Entitlements Legislation Amendment Bill
2014 to enact the Governments announcement in the 2014-15 budget (Parliamentary Service Travel Entitlements
reduced funding). After Parliament was dissolved and an election was called this legislation lapsed permanently and is
subject to being reintroduced. Following the Governments 2014-15 budget measure announcement, there has been
lower LGPH expenditure. The actuarial assessment undertaken in 2015-16 factors in this lower expenditure.
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Leave provisions
Long service leave 36,491 33,866 21,397 18,770
Other leave 25,058 24,456 14,068 15,827
Post-employment benefits - - 277,037 214,159
Total employee provisions 61,549 58,322 312,502 248,756
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The following disclosure has been prepared in accordance with the requirements of the FRR. This relates to personnel
who perform a senior manager role and have the authority and responsibility for planning, directing and controlling the
activities of Finance. As such, it includes all senior executive staff as well as staff who have acted in a senior executive
role for 12 months or more. Staff engaged under the MOP(S) Act do not exercise control over Finances activities and
are therefore excluded.
Departmental
30 June 30 June
2016 2015
$ $
Short-term employee benefits
Salary 14,868,581 13,689,951
Executive vehicle scheme 2,030,391 1,686,942
Other benefits 223,895 330,157
Total short-term employee benefits 17,122,867 15,707,050
Post-employment benefits
Superannuation 3,044,327 2,800,541
Total post-employment benefits 3,044,327 2,800,541
Other long-term benefits
Annual leave 1,384,372 1,395,157
Long service leave 593,650 473,876
Total other long-term benefits 1,978,022 1,869,033
Termination benefits
Separation and redundancies 257,546 526,238
Total termination benefits 257,546 526,238
Total senior management remuneration 22,402,762 20,902,862
The above table includes staff who have been engaged by Finance for part of the year and therefore more than one
individual may have filled a single position over the course of the year.
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F. Funding
Amounts appropriated for Departmental appropriations for the year (adjusted for any formal additions and reductions) are
recognised as revenue from government when Finance gains control of the appropriation. Appropriations receivable is
recognised at the nominal amounts.
Administered appropriations are not recognised as revenue in the Schedule of Comprehensive Income. They are
included in the Administered Reconciliation Schedule once they are recognised which is the date the amounts are drawn
down to Finances bank account for payment against the appropriation for annual and special appropriations or the date
stated in the determination for other Administered amounts.
In the following note disclosure, Departmental and Administered items are included together for presentation
purposes only and these balances should not be compared.
Reconciliation of cash and cash equivalents as per Statement of Financial Position and Administered Schedule
of Assets and Liabilities to Cash Flow Statement
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Cash and cash equivalents as per
Cash Flow Statement 3,321 3,474 1,059,534 1,084,959
Statement of Financial Position 3,321 3,474 1,059,534 1,084,959
Discrepancy - - - -
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Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Movements in assets and liabilities
Assets
(Increase)/decrease in trade and other receivables (42,317) (137,224) (135) (1,527)
(Increase)/decrease in other financial assets (8,205) (4,146) 38,033 (3,661)
(Increase)/decrease in other non-financial assets (2,722) 2,339 (30) (356)
(Increase)/decrease in reinsurance and other
recoveries (202) 26,723 - -
Liabilities
Increase/(decrease) in trade creditors and accruals (31,250) (7,596) 2,903 (2,346)
Increase/(decrease) in unearned revenue (23,952) 40,155 2,335 -
Increase/(decrease) in outstanding insurance claims 23,582 (15,447) - -
Increase/(decrease) in employee provisions 3,227 3,255 63,746 14,360
Increase/(decrease) in finance lease 10,102 - - -
Increase/(decrease) in lease incentive liabilities 40,060 - - -
Increase/(decrease) in superannuation provisions - - 4,627,940 4,917,163
Increase/(decrease) in other provisions (11,864) 18,673 159 (226)
Increase/(decrease) in other payables (1,445) 304 (6,203) 4,487
Net cash from/(used by) operating activities 69,693 64,203 (3,006,707) (3,423,515)
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F2 : Annual appropriations
F2.1 Annual appropriations ('recoverable GST exclusive')
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Ordinary annual services
Annual Appropriation
Ordinary annual services 271,152 312,954 287,148 286,772
Capital budget - 11,050 4,832 4,810
Section 74 receipts of PGPA Act 58,956 56,909 312 392
1
Section 75 transfers of PGPA Act (837) - - -
Total 329,271 380,913 292,292 291,974
2
Appropriation applied (319,077) (378,766) (296,821) (269,054)
Variance 10,194 2,147 (4,529) 22,920
Other services
Annual appropriation
Equity injection 157,310 277,529 - -
Assets and liabilities - - 1,759 1,556
Total 157,310 277,529 1,759 1,556
2
Appropriation applied (59,374) (234,482) (1,149) (712)
3
Variance 97,936 43,047 610 844
1
Amounts of $0.5 million and $0.3 million were transferred to the DTO and the PM&C under a section 75 determination
following the Administrative Arrangements Order of 21 September 2015. For further information, refer to Note C5.
2
Appropriation applied includes cash payments made from current and prior year appropriations.
3
The variance is due primarily to the delay in the multi-year property and construction projects as well as the Moorebank
project.
The following entities spent money from the CRF on behalf of Finance: CSC, Department of Defence and the
Department of Parliamentary Services (DPS). The money spent has been included in the table above.
Departmental and Administered 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.
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Departmental
30 June 30 June
2016 2015
$'000 $'000
Total unspent appropriations 255,095 149,491
Adjustments:
Moorebank reallocation and terminated superannuation reforms measure (405) (405)
Strategic Reviews hand back (802) (802)
Cash at bank - 30 June (1,126) (1,000)
Expected GST refund outstanding at year end (1,718) (4,370)
Recorded against special accounts in ledger (73,112) (15,590)
1. Balance includes quarantines for $0.4 million for Moorebank Unit Relocation and a terminated superannuation reforms
measure.
2. Balance includes a quarantine for $0.8 million for Strategic Reviews hand back.
3. Balance includes cash at bank as at 30 June 2016 of $1.1 million plus expected GST refund of $1.7 million
(2015: cash at bank $1.0 million, GST refund $4.4 million).
4. Balance includes a quarantine for $5.0 million for Moorebank Unit Relocation.
5. Balance includes a quarantine for $0.5 million as a result of a net appropriation decrease at additional estimates.
6. The balances remaining in these appropriations have been withheld under s.51 of the PGPA Act as they are 2014-15
Administered appropriations that are no longer required (the former s.11 process).
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Note: Balances unspent against 2012-13 appropriations will be repealed in 2015-16, 2013-14 will be repealed in 2016-17
and 2014-15 will be repealed in 2017-18.
F3 : Special appropriations
F3.1 Special appropriations ('recoverable GST exclusive')
Appropriation Applied
30 June 30 June
2016 2015
$'000 $'000
Departmental
Medibank Private Sale Act 2006 - (82,416)
Administered
Medibank Private Sale Act 2006 (152) (3,251,710)
Superannuation Act 1922 (90,133) (99,744)
Superannuation Act 1976 (4,210,930) (4,329,795)
Superannuation Act 1990 (1,697,599) (1,732,699)
Governance of Australian Government Superannuation Schemes Act 2011 (634) (112)
Parliamentary Contributory Superannuation Act 1948 (44,038) (40,075)
Parliamentary Superannuation Act 2004 (6,039) (5,774)
Members of Parliament (Life Gold Pass) Act 2002 (788) (2,142)
Parliamentary Entitlements Act 1990 (170,960) (153,951)
Governor-General Act 1974 (1,503) (1,488)
Judges' Pensions Act 1968 (43,602) (42,161)
Federal Circuit Court of Australia Act 1999 (527) (369)
Public Governance, Performance and Accountability Act 2013 (PGPA Act) (894) (393)
Same-Sex Relationships (Equal Treatment in Commonwealth Laws Superannuation)
Act 2008 (59) (58)
Commonwealth of Australia Constitution Act s.66 (Ministers of State Act 1952 s.5) (4,900) (4,787)
Total special appropriations applied (6,272,758) (9,747,674)
Superannuation Act 1976 and Superannuation Act 1990: Payments include amounts that are not an additional cost to the
Australian Government and are funded through a special capital appropriation from a return of superannuation benefit
funded component associated with retirements of scheme members and reimbursements from the emerging cost entities.
Same-Sex Relationships (Equal Treatment in Commonwealth Laws Superannuation) Act 2008 and Federal Circuit
Court of Australia Act 1999: Administered by Finance and the Attorney Generals Department.
Commonwealth of Australia Constitution Act s.66 (Minister of State Act 1952 s.5): For the 2015-16 reporting period this
appropriation was limited to $5 million and the unspent balance of $0.1 million has lapsed.
CSC drew from the special appropriation authorised by the Superannuation Act 1922, the Superannuation Act 1976, the
Superannuation Act 1990, the Governance of Australian Government Superannuation Schemes Act 2011, PGPA Act,
s.77 and the Same-Sex Relationships (Equal Treatment in Commonwealth Laws - Superannuation) Act 2008. The
money spent has been included in the table above.
The Department of the House of Representatives and the Department of the Senate drew from the special appropriation
authorised by the Parliamentary Superannuation Act 2004 and Commonwealth of Australia Constitution Act s66
[Ministers of State Act 1952] salaries. The money spent has been included in the table above.
The Attorney Generals Department, PM&C, DPS, the Department of the House of Representatives and the Department
of the Senate drew from the special appropriation authorised by the Parliamentary Entitlements Act 1990. The money
spent has been included in the table above.
Fair Work Commission drew from the special appropriation authorised by the Judges Pension Act 1968. The money
spent has been included in the table above.
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No investments were made under s.58 of PGPA Act however investments were made for the investment funds (under
the Nation-Building Funds Act 2008 s.32 & s.151), the MRFF (under the Medical Research Future Fund Act 2015 s.37)
and the DCAF (under the DisabilityCare Australia Fund Act 2013 s.27). Refer to note C3 for further information.
F3.2 Disclose by agent in relation to annual and special appropriations ('recoverable GST exclusive')
Appropriations applied
30 June 30 June
2016 2015
Relationship $'000 $'000
Attorney-General's Department
Total receipts 418 414
Solicitors-General pension payments
Total payments (418) (414)
Australian Secret Intelligence Organisation
(ASIO)
Total receipts Commonwealth New Building Project 2,852 12,116
Total payments undertaken on behalf of ASIO (2,852) (12,116)
Department of the Prime Minister and
Cabinet (PM&C)
Total receipts - 10,401
COMCAR services provided for G20
Total payments - (10,401)
Department of the Treasury
Total receipts - 2,130
COMCAR services provided for G20
Total payments - (2,130)
F3.3 Compliance with statutory conditions for payments from the consolidated revenue fund
Section 83 of the Constitution provides that no amount may be paid out of the CRF except under an appropriation made
by law. Finance in its central agency role provided information to all agencies in 2011 regarding the need for specific risk
assessments in relation to section 83. It is impossible to fully remove the potential for section 83 breaches for all
payments. In the vast majority of cases Finance relies on information provided by its clients to pay appropriate
entitlements.
Ministerial and Parliamentary Services (MPS) special appropriation payments under the Parliamentary Entitlements Act
1990 (PE Act):
Finance has identified risks in relation to MPS special appropriation payments under the PE Act. For the current financial
year 39 breaches were identified. These amounted to $27,739 of which $26,554 has been recovered to date.
Legislation to remediate the risk of breaching section 83 of the Constitution was before Parliament when the House of
Representatives and the Senate were dissolved prior to the election. The legislation then lapsed, subject to being
reintroduced by a new Parliament. In the interim, breaches will continue to be reported.
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F4 : Special accounts
A special account is an appropriation mechanism that notionally sets aside an amount within the CRF to be expended for
specific purposes. The type of appropriation provided by a special account is a special appropriation. The appropriation
mechanism remains available until the special account is abolished. The amount of appropriation that may be drawn
from the CRF, via a special account, is limited to the balance of the particular special account.
Finance has been appropriated under the PGPA Act, s78 (Departmental) and s80 (Administered) for expenditure up to
the balance of each of the following special accounts.
Property
Comcover (ceased) Property BSSA CPCSA Total
30 June 30 June 30 June 30 June 30 June 30 June
2015 2015 2015 2015 2015 2015
$'000 $'000 $'000 $'000 $'000 $'000
Opening cash held by special
accounts 1,526 6,048 - - 198 7,772
Opening appropriations receivable 359,147 274,338 - 687 48,180 682,352
Balance brought forward 360,673 280,386 - 687 48,378 690,124
Appropriations credited 9,111 109,570 47,090 - - 165,771
Other receipts 117,691 21,551 402,338 5,501 179,323 726,404
Payments made (106,902) (411,507) (230,433) (394) (116,851) (866,087)
Balance carried forward 380,573 - 218,995 5,794 110,850 716,212
Balance represented by
Cash 1,531 - 309 - 30 1,870
Appropriations receivable 379,042 - 218,686 5,794 110,820 714,342
Special account balance 380,573 - 218,995 5,794 110,850 716,212
Comcover Special Account
Establishing Instrument: Financial Management and Accountability Determination 2009/05 Comcover Special Account
Establishment 2009. Purpose: For receipts and expenditure relating to the promotion of risk management to General
Government Sector entities; to administer the Commonwealths general insurance fund; and to make payments in
respect of any uninsured superannuation liability claims against an insured Commonwealth entity. This account is non-
interest bearing. The special account determination sunsets on 1 April 2019.
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Services for Other Entities and Trust Moneys (SOETM) Special Account Department of Finance
Establishing Instrument: Financial Management and Accountability (Establishment of SOETM Special Account
Finance) Determination 2012/08. Purpose: For the receipt of moneys temporarily held in trust for other persons other
than the Commonwealth and for the payment to a person other than the Commonwealth, on behalf of the Government
that are not PGPA Act agencies, or as permitted by an Act. The account is non-interest bearing. This special account
was established on 26 June 2012 and the determination will sunset on 1 October 2022.
The following Special Account has not been used during the current and comparative years:
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Notes to and forming part of the financial statements G. Managing Other Uncertainties
In the following disclosures, Departmental and Administered items are included together for presentation
purposes only and these balances should not be compared.
G1 : Commitments
Commitments are defined as:
a) Intentions to create liabilities or assets for the receiving entity, as evidenced by undertakings or agreements to
make/obtain future payments to/from other entities; and
b) Are executory contracts that are not recognised under AASB 137 Provisions, Contingent Liabilities and
Contingent Assets (i.e. not onerous); but
c) Do not include future appropriations.
Commitments are disclosed per requirements of AASB 117 Leases, AASB 138 Intangible Assets and AASB 116
Property, Plant and Equipment.
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
BY TYPE
Commitments receivable
1
Domestic property portfolio - rent receivable 954,950 660,371 - -
2
Subleasing - rent receivable 12,587 - - -
Net GST recoverable 46,869 51,978 12,325 13,714
Total commitments receivable 1,014,406 712,349 12,325 13,714
3
Commitments payable
Capital commitments
4
Land and buildings 107,539 158,874 500 -
Intangible assets development 10,350 23,249 - -
Infrastructure, plant & equipment 2,661 - 144 -
Total capital commitments 120,550 182,123 644 -
Other commitments
5
Operating leases 386,288 389,639 135,168 152,191
6
Finance leases 11,433 - - -
Net GST payable 86,814 60,034 - -
Total other commitments 484,535 449,673 135,168 152,191
Total commitments payable 605,085 631,796 135,812 152,191
Net commitments by type 409,321 80,553 (123,487) (138,477)
BY MATURITY
Commitments receivable
Within 1 year 81,338 68,680 3,385 3,038
Between 1 to 5 years 365,459 254,260 6,886 6,884
More than 5 years 567,609 389,409 2,054 3,792
Total commitments receivable 1,014,406 712,349 12,325 13,714
Commitments payable
Capital commitments
Within 1 year 105,387 120,239 644 -
Between 1 to 5 years 15,163 61,884 - -
Total capital commitments 120,550 182,123 644 -
Operating lease commitments
Within 1 year 21,134 12,193 36,820 34,677
Between 1 to 5 years 102,450 81,234 75,749 75,802
More than 5 years 262,704 296,212 22,599 41,712
Total operating lease commitments 386,288 389,639 135,168 152,191
Finance lease commitments
Within 1 year 3,267 - - -
Between 1 to 5 years 8,166 - - -
Total finance lease commitments 11,433 - - -
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Notes to and forming part of the financial statements G. Managing Other Uncertainties
Departmental Administered
30 June 30 June 30 June 30 June
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Other commitments
Within 1 year 6,191 5,149 - -
Between 1 to 5 years 31,334 21,931 - -
More than 5 years 49,289 32,954 - -
Total other commitments 86,814 60,034 - -
Total commitments payable 605,085 631,796 135,812 152,191
Net commitments by maturity 409,321 80,553 (123,487) (138,477)
1
Domestic property portfolio rent receivable includes rent to be received from the Australian Governments non-Defence
Commonwealth owned property portfolio within Australia.
2
Subleasing rent receivable arrangements exist with the Department of Human Services for One Canberra Avenue.
3
Commitments relating to goods and services contracts for current and prior years are not required to be disclosed.
4
Land and buildings mainly represent outstanding contractual commitments for construction projects.
5
Operating leases mainly comprise office accommodation for Finance business operations (Departmental) and
electorate offices for parliamentarians, Commonwealth Parliament Offices and COMCAR depots (Administered).
6
Finance leases represent outstanding contractual commitments relating to IT equipment and software.
G2 : Contingencies
Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position but are reported in
the notes. They may arise from uncertainty as to the existence of a liability or asset, or represent a liability or an asset 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 recognised when settlement is greater than remote.
High Court challenges to changes made to Parliamentary Superannuation and Life Gold Pass.
The High Court challenge, by Cunningham and others was heard on 16 June 2016. This case concerns the
superannuation and Life Gold Pass entitlements of former members of the Australian Parliament. The key legal issue is
whether changes to these entitlements amounted to an acquisition of property for the purposes of s 51(xxxi) of the
Constitution. The Court reserved its decision and the judgment is outstanding. As the outcome of the case is unknown,
the usual litigation contingencies remain and are unquantifiable.
In the normal course of business, Finance has non-insurance claims that are subject to litigation. At the date of this
report, Finance does not consider the outcome of any such litigation is likely to have a material affect on its operations or
financial position.
The Australian Government domestic property portfolio managed by Finance has approximately 170 properties. A small
number of properties currently or previously part of the non-Defence Government property portfolio have potential
remediation issues identified that are currently the subject of further investigation.
Except to the extent a provision for remediation costs has been raised in Note D4, to date the majority of these properties
have not had a provision recognised as neither the conditions for legal or constructive obligation have been met nor is
there a reliable estimate of the obligation available at 30 June 2016.
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Notes to and forming part of the financial statements G. Managing Other Uncertainties
There is a potential liability for costs relating to delays or rectification of some projects.
In the normal course of business, Finance has outstanding insurance claims that are subject to litigation. At the date of
this report, Finance does not consider the outcome of any such claims is likely to have a material affect on its operations
or financial position.
G3 : Subsequent events
There were no subsequent events after the reporting period.
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H. Other Information
This section includes additional financial information which is considered relevant to assist users in understanding the
financial statements.
Investments in joint ventures are not expected to be sold or fully realised within the next 12 months.
Finance's investment in joint ventures is accounted for using the 'Equity Method' which means the investment asset is
carried at cost adjusted for post-acquisition changes in Finance's share of net assets of the joint ventures. Finance has
equity in two joint arrangements, one with the City of Albury (Thurgoona Industrial Estate) and one with the City of
Wodonga (Baranduda Industrial Park). These joint arrangements involve the development and sale of industrial lots in
separate precincts situated within the local government boundaries of Albury and Wodonga.
Equity contributions involve land, estate development costs, rates, maintenance and selling costs. Development works
have been completed and finished lots are currently being marketed.
The terms of each agreement provide that the "rights, duties, obligations, and liabilities of the parties shall be several and
not joint nor joint and several". This means that the arrangements are not partnerships.
Centralised procurement
Finance develops and manages procurement arrangements for common goods and services to maximise market
benefits for Commonwealth entities. The largest arrangements are VSA and IBNCS.
VSA
Finance manages the Volume Sourcing Agreement II and a number of custom support agreements with Microsoft to
provide software licensing and custom support benefits to related Commonwealth entities. The arrangement is funded on
a user pays basis and includes an administration fee.
IBNCS
Finance manages telecommunications services to related Commonwealth entities. This arrangement is funded on a user
pays basis. These services include Network Carriage Services, Virtual Connection Management Services, Internet
Protocol Carriage Services and Major Internet Connection Services.
Other activities
Finance manages other centralised procurement arrangements including WoAG travel, fleet monitoring, campaign
advertising and major office machines. The results of centralised procurement services are shown at Note C1 and the
Coordinated Procurement Contracting Special Account is detailed at Note F4.1.
Operating lease payments are expensed on a straight line basis, which is representative of the pattern of benefits
derived from the leased assets.
Lease incentives liabilities and assets are recognised in the same manner but as a reduction of rental expense and
revenue, respectively, over the lease term. Lease incentive liabilities relate to incentives received by Finance in relation
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to properties it occupies as tenant. Lease incentive assets have been issued to tenants occupying properties which are
part of Finances domestic property portfolio and for other subleasing arrangements.
Finance is exempt from all forms of taxation except Fringe Benefits Tax and GST.
Finance applies the Australian Government's Competitive Neutrality Policy Statement (June 1996) to properties in the
portfolio that are leased and managed in a competitive environment. The taxation equivalent regime is applied as a
competitive neutrality charge (shown as competitive neutrality and income tax expense in the Statement of
Comprehensive Income) and a notional payment is calculated quarterly to cover indirect taxes such as payroll tax,
council rates, stamp duty and land tax and income tax based upon accounting income; as if they have been applied to
these properties. These amounts have been paid or are payable by Finance to the OPA.
Rental income
Rental income includes rent received from tenants occupying buildings that are part of the Australian Governments non-
Defence property portfolio. It also includes revenue received from sub-leasing arrangements with other entities for non-
Commonwealth owned properties.
Resources free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and
the services would be purchased if they had not been donated. Use of the resources is recognised as an expense.
Resources received free of charge are recorded as either revenue or gains depending on their nature. Resources
received free of charge includes Australian National Audit Office audit fees of $0.7 million (2015: $0.7million) for
Finances financial statements and $1.2 million (2015: $0.7 million) for WoAG financial statements.
Unearned revenue
Mainly relates to amounts received in advance for goods and services yet to be rendered by Finance to related
Commonwealth entities for centralised procurement and domestic property and construction activities. Revenues are
recognised in relation to these items when the relevant good or service has been provided.
A provision is raised annually for the estimated balance of surplus funds to be returned to the OPA in the following year
for the Property Special Account. A provision of $65.3 million has been raised for the estimated surplus funds and gross
divestment proceeds for the 2015-16 financial year. The variance to budget for the cash return is due to the estimate
being based on the 2013-14 return.
During 2015-16, Property Special Account surplus funds of $55.1 million and gross divestment proceeds of $2.3 million
were returned to CRF for the 2014-15 financial year. Initially a provision of $18.7 million was raised in 2014-15 for the
cash return, but changes in estimates and assumptions used have resulted in an adjustment to the 2014-15 comparative
to reflect the revised amount of $55.1m, with the corresponding amount taken to distributions to owners (equity). There
was no impact on the Statement of Comprehensive Income.
Collections of revenue to the Government are transferred to the OPA which is administered by Finance. Conversely,
cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of the Government. These
transfers to and from the OPA are adjustments to the administered cash held by Finance on behalf of the Government
and reported as such in the Administered Cash Flow Statement and the Administered Reconciliation Schedule. OPA
balances are disclosed in the Administered Schedule of Assets and Liabilities under cash and cash equivalents and the
overnight cash balance payable. Given the fluctuation in daily balances, no budget is prepared for these items. The OPA
balance is disclosed at Note D1.1.
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Appendices
investment funds
Transformation Program 2.2:
Transforming
government
Services Program 2.1: Public Program 3.1:
sector governance Ministerial and
Program 2.3: Property parliamentary
and construction services
B: Workforce statistics
Table 12: Ongoing and non-ongoing Aboriginal and Torres Strait Islander
staff numbers, at 30 June 2015 and 30 June 2016
Staff numbers
Employment type 2015 2016
Ongoing 20 24
Non-ongoing
Total 20 24
Remuneration
Table 15: Available salary ranges (excluding casuals), at 30 June 2016
APS classification Minimum ($) Maximum ($)
SES 13 160,502 N/Aa
EL 2 (non-SES) 123,831 154,259
APS 6 EL 1 (non-SES) 78,357 130,853
APS 15 (non-SES) 44,361 79,917
a The Secretary, in consultation with Finances Executive Board, determines the salaries of all SES staff.
Note: These figures reflect base salary only and exclude superannuation and other benefits.
Initiatives
Finance employees
In 201516, Finance undertook the following activities to meet its obligations under the
WHS Act:
consulting with staff on WHS issues, particularly in response to changes in accommodation
with the relocation to One Canberra Avenue
providing WHS training and information to all staff, including training focused on dealing with
change in the workplace
conducting hazard inspections and workstation assessments
providing a confidential counselling service through the employee assistance program
promoting a healthy lifestyle by offering access to on-site gymnasium facilities and influenza
vaccinations.
Comcare premium
Finances 201516 workers compensation premium was 1.05 per cent of its payroll (for both
Finance and MOP(S) Act employees). This premium rate is unchanged from the previous year.
Notifiable incidents
Finance employees
Between 1 July 2015 and 30 June 2016, Finance reported three incidents involving Finance
employees to Comcare under section 38 of WHS Act. Two of these reported incidents were
classified as serious injuries under the WHS Act and the third was classified as a dangerous
incident.
Finance-managed workplaces
Under the WHS Act, the department is required to provide statistics of any investigations or
notices given at the workplaces it manages. No investigations were conducted and no notices
were given during 201516.
Departmental non-operating
Equity injections 189,533 59,374 130,159
Total 189,533 59,374 130,159
Administered non-operating
Administered assets and liabilities 17,315 1,149
Total 17,315 1,149
Total other services [2] 206,848 60,523
Special appropriations
Special appropriations limited by
criteria/entitlement
Medibank Private Sale Act 2006 152
Superannuation Act 1922 90,133
Superannuation Act 1976 4,210,930
Superannuation Act 1990 1,697,599
Governance of Australian
Government Superannuation
Schemes Act 2011 634
Parliamentary Contributory
Superannuation Act 1948 44,038
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Notes to Table 18
a A
ppropriation Act (No. 1) 201516 and Appropriation Act (No. 3) 201516. The amount includes prior
year departmental appropriations and section 74 retained revenue receipts.
b Includes an amount of $4.832 million in 201516 for the administered capital budget. For accounting
purposes, this amount has been designated as contributions by owners.
c A
ppropriation Act (No. 2) 201516 and Appropriation Act (No. 4) 201516.
d A ppropriation receipts from Appropriation Act (No. 1) and Appropriation Act (No. 2) included above.
Notes to Table 20
a F
ull-year budget, including any subsequent adjustment made to the 201516 Budget at Additional
Estimates.
b D
epartmental appropriation combines ordinary annual services (Appropriation Act Nos. 1 and 3) and
retained revenue receipts under section 74 of the Public Governance, Performance and Accountability
Act 2013.
c F
igure includes an elimination adjustment for rent charged to Finance and excludes income tax
expense.
d Figure includes an elimination adjustment for insurance charged to Finance.
e R
epresents actual average staffing levels for 201415 and 201516. Figures for both years are
presented under the outcome structure that applied in 201516.
Glossary
Term Meaning
accountable Instructions issued to manage the affairs of an entity to promote the
authority instructions efficient, effective, economical and ethical use of Commonwealth
resources.
act of grace payment A voluntary payment made by the Commonwealth to an individual
or other body in special circumstances when a government entitys
conduct or Commonwealth legislation or policy has resulted in an
unintended, inequitable, anomalous or otherwise unacceptable result.
Act of grace payments must be authorised by the Finance Minister or a
delegate under section 65 of the Public Governance, Performance and
Accountability Act 2013 (PGPA Act). An act of grace payment is used
when the obligation to the applicant is moral, rather than legal.
administered items Items that are usually managed by an entity on behalf of the
government. Entities do not have control over these items, which are
normally related to activities governed by eligibility rules and conditions
established by legislation (for example, grants, subsidies and benefit
payments).
appropriation Public monies the parliament authorises the Australian Government to
withdraw from the Consolidated Revenue Fund for a specified purpose.
AusTender The central web-based facility for the publication of Australian
Government procurement information, including business
opportunities, annual procurement plans and procurement contracts
awarded.
budget Sets out the fiscal and economic outlook for Australia, and includes
expenditure and revenue estimates for the current financial year,
the budget year, and three forward financial years. It identifies the
governments social and political priorities and how they will be
achieved. The budget is usually announced in May each year.
carbon dioxide One tonne of carbon dioxide equivalent would fill the average-sized
equivalent (CO2-e) three-bedroom house.
central agencies The Department of the Prime Minister and Cabinet, the Department of
the Treasury and the Department of Finance.
Central Budget The ICT system used to manage the flow of financial information
Management System between Finance and Commonwealth entities to facilitate cash and
appropriations management, the preparation of budget documentation
and financial reporting.
Charter of Budget Provides a legislative framework for the conduct and reporting of fiscal
Honesty Act 1998 policy, government decisions and Commonwealth financial statements.
It aims to improve discipline, transparency and accountability in the
conduct of fiscal policy.
Comcover The Australian Governments self-managed general insurance fund.
175
Term Meaning
co-mingled recycling A process that allows for mixed recyclables to be disposed of in a
single container. Recyclable materials include glass, plastic, metal and
aluminium cans and containers.
Commonwealth Rules representing the government policy framework under which
Procurement Rules Commonwealth entities undertake their own procurement in line with
both Australias international obligations and good practice. They
enable agencies to design processes that are robust and transparent
and instill confidence in the Australian Governments procurement.
Commonwealth Establishes the principles for the efficient, effective, economical and
Property ethical use of property resources and applies to property leased and
Management owned by non-corporate Commonwealth entities.
Framework
consolidated Statements that present the whole-of-government financial results
financial statements inclusive of all Australian Governmentcontrolled bodies, including
bodies outside the general government sector, such as Australia Post
and the Reserve Bank of Australia.
Consolidated Consists of all revenues and moneys raised or received by the
Revenue Fund executive government of the Commonwealth. The fund is self-
executing in nature, which means that all money received by the
Commonwealth automatically forms part of the fund.
consultancy services Services delivered under a contract for services, distinguished by the
nature of the work performed. A consultant is a person or organisation
providing professional, independent and expert advice or services.
Typically the term is used to describe the application of expert skills to
investigate or diagnose a defined issue or problem; carry out defined
research, reviews or evaluations; or provide independent advice,
information or creative solutions to assist an entity in management
decision-making.
contestability Competition in public sector functions to improve both efficiency and
effectiveness in the delivery of government objectives.
costings or cost An assessment of the financial impact of a proposed policy change.
estimates Commonwealth entities are required to provide costings for any new
policy proposals and seek Cabinet endorsement. Finance must agree
to these costings before they can be incorporated into a submission
for Cabinet.
enterprise agreement An employment agreement made directly between an employer and
employees.
Expenditure Review The ministerial committee responsible for examining all proposals
Committee of against the governments overall fiscal strategy, advising Cabinet on
Cabinet budget spending priorities and initiating reviews of individual ongoing
programs.
fiscal policy The governments approach to taxation and spending, both of which
can affect the economy.
176
Term Meaning
fraud Dishonestly obtaining a benefit, or causing a loss, by deception or
other means. Accountable authorities of Commonwealth entities must
take all reasonable measures to prevent, detect and deal with fraud in
accordance with section 10 of the Public Governance, Performance
and Accountability Rule 2014.
full-time equivalent The average number of effective FTE employees in an entity. Part-time
(FTE) employees are converted to full-time equivalents.
Future Fund A government fund established for accumulating assets to offset future
Australian Government superannuation liabilities.
government business A Commonwealth entity or Commonwealth company that is prescribed
enterprise as a government business enterprise by the rules of the PGPA Act, and
so may operate as a profit-making business.
headcount The actual number of employees employed by the department.
measure A policy or decision of the government that affects revenues, expenses
or capital.
Mid-Year Economic Provides an update of the governments budget estimates by
and Fiscal Outlook examining expenses and revenues in the year to date, as well as
provisions for new decisions that have been taken since the budget to
allow assessment of the governments fiscal performance against the
fiscal strategy statement. The Treasurer is required to publicly release
and table in parliament a mid-year economic and fiscal outlook report
by the end of January each year, or within six months after the budget,
whichever is later.
non-ongoing staff A person engaged as an employee under subsection 22(2)(b) or (c) of
member the Public Service Act 1999.
ongoing staff A person engaged as an ongoing employee under subsection 22(2)(a)
member of the Public Service Act 1999.
outcome The governments objectives in each portfolio area. Outcomes
are desired results, impacts or consequences for the Australian
community influenced by the actions of the Australian Government.
Actual outcomes are the results or impacts actually achieved.
performance Evidence about performance that is collected and used systematically.
information It relates to appropriateness, effectiveness and efficiency and the
extent to which an outcome can be attributed to an intervention.
Portfolio Budget Statements that inform parliamentarians and the public of the
Statements proposed allocation of resources to government outcomes. They
also assist the Senate standing committees with their examination of
the governments budget. Portfolio Budget Statements are tabled in
parliament on budget night and published as budget-related papers.
potable water Water that is suitable for human consumption.
programs Actions taken by the government to deliver stated outcomes.
177
Term Meaning
purposes In the context of the PGPA Act, purposes include the objectives,
functions or role of the entity. Finances purposes are established in the
Corporate Plan 201516.
red tape A colloquial term for unnecessary regulation.
resource Governs how the Commonwealth public sector uses and manages
management public resources. The PGPA Act is the cornerstone of the framework.
framework
risk management The systematic application of management through policies,
procedures and practices to clearly identify, analyse, evaluate, treat
and monitor risks associated with those opportunities. Risk is broadly
defined as the effect of uncertainty on objectives or the impacts of
unforeseen events or undesirable outcomes.
rules In the context of the PGPA Act, legislative instruments made by
the Finance Minister under sections 101 to 105 of the PGPA Act
prescribing matters:
required or permitted by the PGPA Act or
necessary or convenient to be prescribed for carrying out or giving
effect to the PGPA Act.
178
List of requirements
The requirements for non-corporate Commonwealth entities annual reports are prescribed
by Subdivision A of Division 3A of the Public Governance, Performance and Accountability
Rule 2014. The subdivision is made for section 46(3) of the Public Governance, Performance
and Accountability Act 2013. The requirements for content to be included in entities annual
reports were approved on behalf of the parliament by the Joint Committee of Public Accounts
and Audit in May 2016.
The following table shows where the information specified by the requirements can be found
in this report.
Index
A B
Aboriginal and Torres Strait Islander Staff Network, budget (federal). see also Mid-Year Economic and
58 Fiscal Outlook
act of grace requests, 40 201617
administered activities, 68 advice, 15, 34
Administrative Arrangements Order, 5 delivery, 3, 1516, 17
Administrative Decisions (Judicial Review) Act 1977, fiscal and budget strategies, 16
40 performance, 30, 31
advertising structural savings proposals, 16
expenditure, 19, 40 budget estimates, 30
Finance, 163 budget and financial advice, management and
air travel services, 27, 39 reporting (purpose), 7, 43
Air Warfare Destroyer Program, 14, 21, 37 activities, 15
AlburyWodonga Development Corporation, 21, 36 highlights, 1517
An Independent Parliamentary Entitlements System: results, 2931
Review, 42 summary of performance, 15
annual performance statements, 14, 20, 2944 Budget and Financial Reporting, 2, 10, 17
annual report business continuity management, 51
corrections to 201415 report, 172 Business Enabling Services, 10, 51
list of requirements, 17882 business groups, 10, 11
APS employee census, 4, 58 Business Investment Sub-Committee, 48
APS ICT workforce, 26, 39
APS LearnHub, 61 C
APS Statistical Bulletin, 58 capital works, 36
ASC Pty Ltd, 6, 14, 212, 37 cash requirements, government, 31
ASIC Registry, 22 Central Advertising System, 19
aspiration statement, 7, 43 Central Budget Management System, 15, 17, 30
asset management, 70 champions of diversity, 58
asset write-downs, 66 Charter of Budget Honesty Act 1998, 3, 14, 15, 16
Audit Committee, 49, 51 Chief Financial Officer, 48, 49, 77
Auditor-General, 31, 53, 71 Clean Energy Finance Corporation, 19
audits, 49, 51 Clean Energy Innovation Fund, 19
AusTender, 33, 71 Coaching in Finance Program, 61
Australian Accounting Standards, 74 COMCAR
Australian Bureau of Statistics, 24 environmental strategy, 63
Australian Electoral Commission, 6 performance, 42
Australian Government investment funds, 7, 18, 33, Comcare, 25, 161, 162
36, 68 Comcover, 40, 41
Australian Government Office Occupancy Report, 34 Commercial and Government Services, 11
Australian Human Rights Commission, 55 Commonwealth companies, 6, 18, 19
Australian Human Rights Commission Act 1986, 55 Commonwealth Disability Strategy, 58
Australian Information Commissioner, 53 Commonwealth Electoral Act 1918, 19, 163
Australian National Audit Office, 4, 20, 49, 51, 66, 74, Commonwealth Fraud Control Framework, 52
756 Commonwealth Law Courts, Sydney, 3, 26
reports, 53 Commonwealth of Australia v Davis Samuel Pty Ltd
Australian Network on Disability, 58 & Ors, 55
Australian Public Service Commission, 19, 52 Commonwealth Ombudsman, 40, 53
Australian Rail Track Corporation, 14, 22, 37 Commonwealth performance framework, 2, 14, 20,
Australian Renewable Energy Agency, 19 43, 44
Australian River Co. Limited, 5 inquiry into development of, 54
Australian Submarine Corporation. see ASC Pty Ltd Commonwealth Procurement Rules, 70, 71
184
governance (purpose), 7, 43 K
activities, 18
Karen Doane v Peter Slipper v Another, 55
highlights, 1819
KPMG, 51
results, 326
summary of performance, 18
governance structure, 48
L
government business enterprises, 3, 7, 33, 37 Lands Acquisition Act 1989, 35
Governors-General Pension Scheme, 41 learning management system, 61
graduate recruitment, 26, 39 legal actions, 556
grants, 70 legislation, 47. see also individual acts
Guidelines on Information and Advertising Legislation Committee, 54
Campaigns by non-corporate Commonwealth Lesbian, Gay, Bisexual, Transgender and Intersex Plus
entities, 40 (LGBTI+) Network, 58
H M
Head of Internal Audit, 49, 51 machinery of government changes, 19
Health and Hospitals Fund, 34, 36 market research, 163
health and wellbeing. see work health and safety Medibank Private Limited sale, 66
Medical Research Future Fund, 3, 18, 34, 36
I Medical Research Future Fund Act 2015, 18, 34, 36
Members of Parliament (Staff) Act 1984, 55, 161,
ICT
162. see also MOP(S) Act employees
benchmarking framework, 23
Microsoft Volume Sourcing Agreement, 27
Central Budget Management System, 15, 17, 30
Mid-Year Economic and Fiscal Outlook, 6, 30
entry-level programs, 26, 39
Minister for Finance, 4, 5, 10, 19, 70
govCMS, 28, 38
Minister for the Environment, 19
procurement, 40
Ministerial and Parliamentary Services, 2, 161
whole-of-government, 25, 44
MOP(S) Act employees, work health and safety,
ICT Hardware and Associated Services Panel, 39
1612
Independent Communications Committee, 40
motor vehicle fleet. see COMCAR; vehicle fleet
Independent Review of Whole-of-Government
Internal Regulation, 3, 23, 43, 44
Indo-Pacific region, 32
N
Information Publication Scheme, 56 National Disability Insurance Scheme, 44
Inquiry into the Medical Research Future Fund Bill National Disability Strategy 20122020, 58
2015, 54 National Land Ordinances, 35
insurance. see also Comcover National Property Efficiency Program, 3, 24
claims, 4, 66 National Telepresence System, 38
services, 7 Native Title Act 1993, 35
internal audit, 49, 51 non-defence properties
internal regulation review, 3, 23, 43, 44 divestment program, 21, 36
internal transformation program. see transformation environmental performance, 63
program (Finance) portfolio, 21, 25, 36, 38, 63, 70
International Day of People with Disability, 58 Norfolk Island, 19
Intra-Government Communications Network, 14, 22 notifiable incidents, 162
investment funds, 7, 18, 33, 36, 68, 169
O
J occupational health and safety. see work health and
Joint Committee of Public Accounts and Audit, 20, safety
54, 178 Offering Choice in Public Sector Superannuation
Joint Standing Committee on Foreign Affairs, Accumulation Plan, 34
Defence and Trade, 54 One Canberra Avenue, 62, 161
Judges Pensions Scheme, 41 operating model (Finance, new), 2, 46, 49, 61, 161
operating surplus, 4, 66
Operation Tetris, 24
186
T
training and development, 17, 61, 161
transformation program (Finance), 2, 10, 44, 46, 49
transformation (purpose), 7, 43
activities, 21
highlights, 213
results, 378
summary of performance, 21
Trans-Pacific Partnership, 3, 18
Average length of service in Finance
2016
2010 2012 2014
7 years