Section 17J of the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) applies where functions of an entity (the old entity) have been transferred to another entity (the new entity).
These arrangements apply under subsection 17J(1) of the PGPA Rule, whether or not the old entity has ceased to exist. Under subsection 17J(3) of the PGPA Rule, the Finance Minister may nominate the accountable authority of an entity to report in relation to the transferred functions.
For the purpose of sections 17J of the PGPA Rule, the ‘reporting entity’ is defined as:
- the entity nominated by the Finance Minister under subsection 17J(3), or
- the new entity—if no entity is nominated.
Presentation within the annual report
Unlike the statements and reports prepared in accordance with sections 17A–17G of the PGPA Rule, the preparation and presentation of documents under section 17J of the PGPA Rule varies according to the type of document and the situation.
The information relating to the transferred functions to be included in the annual report of the reporting entity is required under subsection 17J(6) of the PGPA Rule.
The accountable authority of the reporting entity would be expected to report in relation to the transferred functions for the full reporting period (including that part of the reporting period prior to the transfer of functions).
This means that the accountable authority of the reporting entity should prepare one consolidated annual report which includes performance and other information relating to the transferred functions for the entire reporting period.
Where functions have been transferred, the relevant information for the functions transferred from an old entity must be incorporated into the reporting entity’s annual report, rather than being presented in a separate annual report.
Section 37 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) requires the accountable authority of entities to cause records to be kept in a manner that properly records and explains the entity’s performance in achieving its purposes. To enable the reporting entity to prepare the annual report, it is expected that the old entity would provide the reporting entity with records relating to the performance of the transferred functions.
The reporting entity has discretion in how to incorporate the information relating to the transferred functions into its consolidated annual report. As a minimum, the accountable authority of the reporting entity would be expected to include notes or explanations in the annual report to explain that the reporting entity has gained the relevant functions during the reporting period and, therefore, is reporting on them.
The Finance Minister, under section 17K of the PGPA Rule, is provided the authority to determine that a transfer of functions is taken not to have occurred, for the purposes of reporting under sections 17A–17J of the PGPA Rule.
Annual performance statements
Information relating to the transferred functions to be included in the annual performance statements of the reporting entity is required under subsection 17J(4) of the PGPA Rule.
The accountable authority of the reporting entity should prepare one consolidated set of annual performance statements, which include the performance and other information relating to the transferred functions, for the entire reporting period.
Where functions have been transferred, performance and other information for the functions transferred from an old entity must be incorporated into the reporting entity’s annual performance statements, rather than in a separate annual performance statement.
The reporting entity has discretion in how to incorporate performance and other information of the transferred functions into its consolidated annual performance statements. As a minimum, the accountable authority of the reporting entity would be expected to include notes or explanations in the annual performance statements that explain that the reporting entity has gained the relevant functions during the reporting period and, therefore, is reporting on them.
For examples of notes and explanations to annual performance statements, see Examples 8A and 8B below.
The approach adopted will depend on a number of factors including:
- the nature and significance of the functions transferred
- the timing of the transfer of functions.
Where the old entity has performed the functions for the majority of the reporting period, it is expected that the reporting entity would report on the extent to which the performance measures and targets relating to the transferred functions had been achieved by the old entity, in accordance with the Commonwealth Performance Framework.
However, where functions are transferred early in the reporting period, it may not be practical to report on the performance of the old entity in relation to the transferred functions. In these circumstances, the annual performance statements of the new entity should explain how its performance relating to these functions has been measured, including any changes that have been made to the performance measures and targets following the transfer.
Where the transfer has occurred very late in the reporting period, for example, the Finance Minister may make a determination under section 17K of the PGPA Rule.
Example 8A: Statement for combined annual performance statements
As a result of MoG changes during the 2017-18 reporting period, functions were transferred to the Department of Home Affairs (HA), from the Department of Immigration and Border Protection, the Attorney-General’s Department, the Department of Infrastructure and Regional Development, the Department of Social Services and the Department of Prime Minister and Cabinet.
At the introduction to the 2017-18 annual performance statements for HA, the following note explained the inclusion of results for the transferred functions against the performance criteria that had been published in the 2017-18 corporate plans, portfolio budget statements, portfolio additional estimates statements for the old entities.
Performance Reporting
Part 2 of this report includes the Department’s results against performance criteria outlined in the Department of Immigration and Border Protection Corporate Plan 2017–18, Department of Immigration and Border Protection Portfolio Budget Statements (PBS) 2017–18 and the Department of Immigration and Border Protection Portfolio Additional Estimates Statements 2017–18. The link between the outcome structure of the Department of Immigration and Border Protection (DIBP) PBS and purposes in the DIBP Corporate Plan are shown below. The DIBP performance measures for 2017–18 are updated from those reported in 2016–17. Where comparative data from 2016–17 is available for the new measures, it has been included.
The second half of Part 2 includes reporting of performance measures for functions that moved into the Department from the Attorney-General’s Department (AGD) and the Department of Infrastructure and Regional Development, and which were contained in the previous agencies’ 2017–18 corporate plans. The list of these performance measures is outlined on page 75.
Note: Functions transferred into the Department from the Department of Social Services and the Department of the Prime Minister and Cabinet did not come with accompanying performance measures for 2017–18.
Example 8B: Statement for combined annual performance statements
HA also distinguished the performance information for the transferred functions by including the following statement in the annual performance statement. This provided additional context before presenting the results and analysis for the transferred performance measures.
Additional performance measures
The Department of Immigration and Border Protection Corporate Plan 2017–18 was published on 31 August 2017, ahead of the formal establishment of the Department of Home Affairs on 20 December 2017. Performance measures belonging to the functions subject to machinery-of-government (MoG) changes and transferred into the new Department of Home Affairs appeared in the corporate plans of their originating agency.
The Department is required to report against the performance measures of the incoming MoG functions in accordance with section 16F of the PGPA Rule, which mandates that where a function or office is transferred between entities, the gaining entity will take responsibility for the mandatory reporting requirements.
The Attorney-General’s Department Performance Measures transferred to the Department as part of the MoG changes relied on a survey of stakeholders. The Department maintained this approach for consistency and completed the survey for the relevant 2017–18 performance measures.
A range of stakeholders across the private, and public sectors and other government agencies were contacted for the survey, although all responses were anonymous. In total, the survey resulted in 228 responses, with valid response rates across questions for three categories: national security, law enforcement and emergency management. This approach will not be used in 2018–19 when we will apply a different methodology to assess performance.
Table 9 provides information on the additional performance measures from the Department of Infrastructure and Regional Development and the Attorney-General’s Department. An analysis of each performance measure that transferred is included on pages 80 to 93.
Annual financial statements
Different requirements apply when an old entity:
- ceases to exist, or all the functions of an old entity have been transferred to one or more entities
- has not ceased to exist and only some its functions have been transferred.
If the old entity ceases to exist, under subsection 17J(5), a reporting entity is required to prepare its annual financial statements, covering the function/s transferred from the old entity, as if the old entity has been part of the new entity for the entire reporting period.
If subsection 17J(5) does not apply, the ordinary requirements in relation to the preparation of annual financial statements apply, subject to sections 17B, 17C and 17F.
The detailed requirements are specified below.
Old entity has ceased to exist, or all functions have been transferred.
Where an entity ceases to exist (the old entity) or all its functions have been transferred to one or more other entities, the accountable authority of the reporting entity(s) is required to produce a single set of annual financial statements, incorporating the functions transferred from the old entity, for the full reporting period.
This requires the accountable authority of the reporting entity to take responsibility for reporting on the functions transferred for the period prior to the transfer date.
In preparing the annual financial statements, the accountable authority of the reporting entity is to disclose the carrying amount of assets, liabilities, expenses and/or income that are reliably attributable to the transferred function(s) from the old entity, over the entire reporting period, that is, prior to and post the transfer date.
As a minimum, the accountable authority of the reporting entity would be expected to include notes or explanations in their annual financial statements, explaining the reporting entity gained the relevant functions during the reporting period and is therefore reporting on them.
It would be expected that the reporting entity(s) would include the following additional disclosures in their annual financial statements:
- meaningful comparatives for the old entity and the reporting entity’s prior year annual financial statements
- a budgetary reporting note with the comparative original budget from the old entity(s) and the reporting entity
- a restructure note that includes the amount of total expenses and revenue attributable to the transferred functions from the old entity(s) up to the date of transfer
- an appropriation note at the entity level on an aggregated basis, which should include sufficient notes and footnotes to identify the amounts attributable to the old entity.
If the above listed disclosures are impractical, the reporting entity should disclose the fact, together with an explanation as to why this is the case.
Finance recommends entities discuss the disclosure requirements for transferred functions with the Australian National Audit Office as part of the planning process for the preparation of their annual financial statements.
Example 9: Financial statements - old entity ceased, all functions transferred
In the example below, as a part of MoG changes, Entity B ceased to exist effective 1 February 2020 and all its functions transferred to Entity A. For the purposes of section 17J of the PGPA Rule, Entity A is the reporting entity.
In column 1, for the reporting period, Entity A would present, the aggregated total of expenses and income, including for:
- Entity B operating results that are reliably attributable to the transferred functions prior to the transfer date (that is the period 1 July 2019 until 31 January 2020)
- Entity A operating results during the financial year (which would include the income/ expenses attributable to functions transferred from 1 February 2020).
Columns 2 and 3 separately disclose the prior year’s comparative figures for Entity A and Entity B. This would normally reflect the actuals from Entity A and Entity B prior year financial statements in their entirety, not just for the transferred functions.
Statement of Comprehensive Income1 For the period ended 30 June 2020 | 1 | 2 | 3 | |
Notes | 2020 $'000 | Entity A 2019 $'000 | Entity B2 2019 $'000 | |
| NET COST OF SERVICES | ||||
| Expenses | ||||
Employee Benefits | 1.1A | - | - | - |
Suppliers | 1.1B | - | - | - |
| Grants | 1.1C | - | - | - |
Depreciation and amortisation | 3.2A | - | - | - |
Finance Costs | 1.1D | - | - | - |
Impairment Loss on Financial Instruments | 1.1E | - | - | - |
Write-Down and Impairment of Other Assets | 1.1F | - | - | - |
Foreign Exchange Losses | 1.1G | - | - | - |
Losses from asset sales | - | - | - | |
| Other Expenses | 1.1H | - | - | - |
| Total expenses | - | - | - | |
| Own-Source Income | ||||
| Own-source revenue | ||||
| Sale of Goods and Rendering of Services | 1.2A | - | - | - |
| Fees and Fines | 1.2B | - | - | - |
| Interest | 1.2C | - | - | - |
| Dividends | 1.2D | - | - | - |
| Rental Income | 1.2E | - | - | - |
| Other Revenue | 1.2F | - | - | - |
| Total own-source revenue | - | - | - | |
1. Incorporates Entity B for the period 1 July 2019 until 31 January 2020.
2. Comparative figures for Entity B are included due to functions transferred to Entity A effective 1 February 2020.
Old entity has not ceased to exist with some functions transferred
Where the old entity continues to exist and only some functions have been transferred (that is the old entity has retained some functions), the accountable authority of the:
- old entity should report on the:
- transferred functions up until the date of the transfer
- non-transferred functions (those functions that remained with the old entity) for the full reporting period
- reporting entity is required to report on the functions transferred from the old entity from the date of transfer until the end of the reporting period.
Also see Key management personnel reporting following MoG changes.
