A : About this report

The Department of Finance (Finance) is an Australian Government controlled not-for-profit entity with its purposes for 2016–17 being:

• budget and financial advice, management and reporting - support the Government to deliver its fiscal targets and policy objectives;
• governance - foster leading public sector practice;
• transformation - innovate and improve public sector operations and reform the management and operations of public assets; and
• services - manage efficient, cost-effective services to, and for, the Government.

Finance works collaboratively with the Department of the Prime Minister and Cabinet (PM&C), the Department of the Treasury and the Australian Public Service Commission (APSC), to achieve these purposes.

Finance is structured to meet three outcomes per the 2016–17 PBS, with some amendments being applied in the 2016–17 PAES to reflect Machinery of Government changes which occurred during the year. Comparatives have been amended for any changes in outcomes and programs.

 

Outcome/Program	How outcomes are achieved	Net contribution / (cost) of services 1
		30 June 2017	30 June 2016
Outcome 1: Support sustainable Australian Government finances through providing high quality policy advice and operational support to the government and Commonwealth entities to maintain effective and efficient use of public resources.
1.1 Budget and Financial Management	Advising the Finance Minister and Expenditure Review Committee (ERC) on fiscal and economic policies and related matters; Supporting the Finance Minister in meeting his financial reporting responsibilities; and Supporting the delivery of the Budget.	Departmental ($84.5m)	Departmental ($81.2m)
Outcome 2: Support an efficient and high-performing public sector through providing leadership to Commonwealth entities in ongoing improvements to public sector governance, including through systems, frameworks, policy, advice, and service delivery.
2.1 Public Sector Governance	Developing and maintaining the public sector resource management framework; Improving the standard of governance, performance and accountability; and Undertaking shareholder oversight of Government Business Enterprises (GBEs) and other commercial entities.	Administered $50.3m Departmental ($33.1m)	Administered $46.6m Departmental ($36.4m)
2.2 Transforming Government	Providing leadership and supporting decision making relating to the digital economy and use of technology in government operations; and Scoping divestment opportunities and managing asset sales and any residual issues arising from previous asset sales.	Departmental ($46.7m)	Departmental ($49.4m)
2.3 Property and Construction	Providing policy advice, guidance and support on managing Commonwealth property, land and public works across the government; and Managing specific major capital works projects and the government’s non-Defence property portfolio within Australia.	Departmental $20.0m	Departmental $29.5m
2.4 Insurance and Risk Management	Providing general insurance services and promoting risk management across the government through the Comcover Special Account.	Departmental ($35.0m)	Departmental $20.5m
2.5 Procurement Services	Establishing WoAG arrangements for common goods and services to maximise market benefits for Commonwealth entities; and Providing advice on advertising.	Departmental $2.9m	Departmental $5.8m
2.6 Service Delivery Office	Providing certain corporate services to client Australian Government entities.	Departmental ($4.7m)	N/A
2.7 Public Sector Superannuation	Advising the government on managing the Future Fund, the stability of the government’s unfunded superannuation liabilities and its associated administered expense items and superannuation arrangements for government employees. This includes the administration and management of superannuation arrangements for Parliamentarians, as well as current and former Governors-General, Federal Judges and Federal Circuit Court Judges.	Administered ($7.7b) Departmental ($6.5m)	Administered ($7.4b) Departmental ($4.9m)
2.8 Australian Government Investment Funds	Providing advice on investment mandates and governance arrangements for the government’s Investment Funds, to maximise the value of the funds to the Government. This includes advice on credit of amounts to the Funds and payments from the Funds.	Administered $431.4m	Administered $249.4m
Outcome 3: Support for Parliamentarians and others as required by the Australian Government through the delivery of, and advice on, entitlements and targeted assistance.
3.1 Ministerial and Parliamentary Services	Providing advice on, access to and payment of parliamentary and post-parliamentary entitlements and targeted assistance to entities.	Administered ($376.4m) Departmental ($35.3m)	Administered ($524.4m) Departmental ($37.8m)

 

¹ Net cost of services includes depreciation and amortisation expense, the write-down and impairment of assets (or the reversal) and gains/losses from the sale of assets. It excludes revenue from government, income tax expense and other items recognised in other comprehensive income.

Finance’s 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.

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. Finance has applied the Reduced Disclosure Requirements issued by the AASB as a minimum and has included additional disclosures for financial instruments, fair value and superannuation as required under subsection 18(3) of the FRR.

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.

How to read this report

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.

Prior Year Adjustments

Prior year Departmental appropriation receivable relating to special accounts (non-capital) has been reclassified to cash and cash equivalents ($643.9 million) as a result of a change in the FRR. The change impacts the Departmental Statement of Financial Position, Cash Flow Statement, Financial Instruments (Note D1.1), Managing Financial Risk – Credit Risk (Note D2.3), Special Account (Note F3.1) and Appropriations (Note F1.2 reconciliation table). Other minor changes were made to the comparatives in both the Departmental and Administered financial statements as a result of the reclassification of some line items.

New Australian Accounting Standards (AAS)

Adoption of AAS requirements

During 2016–17, Finance adopted all applicable AAS that became effective during 2016–17. The application of new standards did not materially impact the operations of Finance.

Future AAS requirements

The AASB has issued a number of new standards, amendments to standards and interpretations that are effective for future reporting periods. These new standards are not expected to have an impact on Finance’s financial statements except for:

• 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) or categorised as available for sale. 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 Finance’s business model for managing financial assets. Currently, Finance (Administered) manages investments funds (financial assets at FVPL) and has investments in Commonwealth corporate entities (available for sale financial assets).

• 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. For all leases where Finance is lessee, a right of use asset and liability will be recognised on the balance sheet. Currently, Finance (Departmental) has leases for vehicles (predominantly pool vehicles) and properties that Finance occupy. Finance (Administered) manages leases for office premises and private plated vehicles on behalf of Parliamentarians and vehicles for Comcar car-with-driver services provided to Parliamentarians. Disclosures relating to the domestic property portfolio that Finance manages as lessor will require amendment including improved information about risk exposure.