department of the prime minister and cabinet ......department of the prime minister and cabinet...

DEPARTMENT OF THE PRIME MINISTER AND CABINET FINANCIAL STATEMENTS

Part 4: Financial statements

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Department of the Prime Minister and Cabinet Annual Report 2015–16

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DEPARTMENT OF THE PRIME MINISTER AND CABINET STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 June 2016

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

2016 2015 Original budget

Notes $'000 $'000 $'000 NET COST OF SERVICES Expenses

Employee benefits 1.1A 269,825 272,603 252,540 Suppliers 1.1B 132,006 267,414 128,531 Grants 1.1C 450 1,236 962 Depreciation and amortisation 3.2A 21,092 28,225 21,124 Finance costs - unwinding of discount on make good 38 52 18 Write-down and impairment of assets 1.1D 1,823 497 - Losses from asset sales 1.1E 506 31 -

Total expenses 425,740 570,058 403,175 Own-source income Own-source revenue

Sale of goods and rendering of services 1.2A 12,483 13,285 5,964 Resources received free of charge 1.2B 2,687 10,623 -

Total own-source revenue 15,170 23,908 5,964 Gains

Sale of assets - - 1,122 Other gains 1.2C 203 93 -

Total gains 203 93 1,122 Total own-source income 15,373 24,001 7,086 Net cost of services 410,367 546,057 396,089 Revenue from Government - departmental appropriations

384,202 528,523 374,965

Deficit (26,165) (17,534) (21,124) OTHER COMPREHENSIVE INCOME Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation surplus (5,166) 3,822 - Total comprehensive loss (31,331) (13,712) (21,124)


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DEPARTMENT OF THE PRIME MINISTER AND CABINET STATEMENT OF FINANCIAL POSITION as at 30 June 2016



Notes $'000 $'000 $'000 ASSETS Financial assets

Cash and cash equivalents 5,031 12,063 500 Trade and other receivables 3.1A 102,041 118,512 78,914 Accrued revenue - recovery of departmental costs 4,235 5,397 362

Total financial assets 111,307 135,972 79,776 Non-financial assets

Property, plant and equipment 3.2A 90,807 119,415 116,565 Intangibles 3.2A 18,677 13,913 20,799 Prepayments 3.2B 3,226 2,604 3,912

Total non-financial assets 112,710 135,932 141,276 Assets held for sale - land and buildings 9,454 430 - Total assets 233,471 272,334 221,052 LIABILITIES Payables

Suppliers 3.3A 22,812 31,714 27,406 Grants - private sector - 370 - Other payables 3.3B 18,801 26,339 14,838

Total payables 41,613 58,423 42,244 Provisions

Employee provisions 6.1A 76,251 72,758 71,465 Make good provisions 3.4A 1,108 1,190 655

Total provisions 77,359 73,948 72,120 Total liabilities 118,972 132,371 114,364 Net assets 114,499 139,963 106,688 EQUITY

Contributed equity 152,923 147,056 160,271 Accumulated deficit (45,311) (19,146) (61,814) Reserves 6,887 12,053 8,231

Total equity 114,499 139,963 106,688


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DEPARTMENT OF THE PRIME MINISTER AND CABINET STATEMENT OF CHANGES IN EQUITY for the period ended 30 June 2016



$'000 $'000 $'000 CONTRIBUTED EQUITY Opening balance Balance carried forward from previous period 147,056 121,618 153,875 Other - - 43 Adjusted opening balance 147,056 121,618 153,918 Transactions with owners Distributions to owners

Returns of capital: Restructuring1 (970) - (7,984) Other2 (1,500) (2,816) -

Contributions by owners Appropriation (equity injection) 3,096 6,205 3,096 Departmental Capital Budget (DCB) 5,241 22,049 11,241

Total transactions with owners 5,867 25,438 6,353 Closing balance as at 30 June 152,923 147,056 160,271 ACCUMULATED DEFICIT Opening balance Balance carried forward from previous period (19,146) (1,612) (40,666) Other - - 74 Adjusted opening balance (19,146) (1,612) (40,592) Comprehensive income Deficit for the period (26,165) (17,534) (21,124) Total comprehensive income (26,165) (17,534) (21,124) Transactions with owners Distributions to owners

Returns of capital: Other - - (98)

Total transactions with owners - - (98) Closing balance as at 30 June (45,311) (19,146) (61,814)


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DEPARTMENT OF THE PRIME MINISTER AND CABINET STATEMENT OF CHANGES IN EQUITY for the period ended 30 June 2016



$'000 $'000 $'000 ASSET REVALUATION RESERVE Opening balance Balance carried forward from previous period 12,053 8,231 8,231 Adjusted opening balance 12,053 8,231 8,231 Comprehensive income Other comprehensive income (5,166) 3,822 - Total comprehensive income (5,166) 3,822 - Closing balance as at 30 June 6,887 12,053 8,231 TOTAL EQUITY Opening balance Balance carried forward from previous period 139,963 128,237 121,440 Other - - 117 Adjusted opening balance 139,963 128,237 121,557 Comprehensive income Other comprehensive income (5,166) 3,822 - Deficit for the period (26,165) (17,534) (21,124) Total comprehensive income (31,331) (13,712) (21,124) Transactions with owners Distributions to owners

Returns of capital: Restructuring1 (970) - (7,984) Other2 (1,500) (2,816) (98)

Contributions by owners Appropriation (equity injection) 3,096 6,205 3,096 Departmental Capital Budget (DCB) 5,241 22,049 11,241

Total transactions with owners 5,867 25,438 6,255 Closing balance as at 30 June 114,499 139,963 106,688

1 Refer Note 8.2 Restructuring. 2 Return of appropriation under section 51 of PGPA Act of $1.500 million in 2015-16 reflects return of DCB funding transferred to the Digital Transformation Office; $2.000 million in 2014-15 reflects unused funding for voluntary redundancies and $0.816 million for movement of funds to the Digital Transformation Office.

Accounting Policy

Equity injections

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

Restructuring of Administrative Arrangements

Net assets received from or relinquished to another Government entity under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity.

Other Distributions to/from Owners

The Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) requires that distributions to owners be debited to contributed equity unless it is in the nature of a dividend.


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DEPARTMENT OF THE PRIME MINISTER AND CABINET CASH FLOW STATEMENT for the period ended 30 June 2016



Notes $'000 $'000 $'000 OPERATING ACTIVITIES Cash received

Sale of goods and rendering of services 15,156 12,788 6,053 Net GST received 11,940 18,022 1,122 Appropriations 404,470 558,648 417,551

Total cash received 431,566 589,458 424,726 Cash used

Employees 271,498 280,763 280,461 Suppliers 160,575 291,477 139,091 Grants 820 866 1,622 Retained receipts transferred to the Official Public Account 14,894 12,533 6,052

Total cash used 447,787 585,639 427,226 Net cash from/(used by) operating activities 5.4A (16,221) 3,819 (2,500) INVESTING ACTIVITIES Cash received

Proceeds from sales of property, plant and equipment 3,212 409 2,500

Total cash received 3,212 409 2,500 Cash used

Purchase of property, plant and equipment 6,257 3,193 14,337 Purchase of intangibles 8,224 4,252 - Other investing 85 - -

Total cash used 14,566 7,445 14,337 Net cash used by investing activities (11,354) (7,036) (11,837) FINANCING ACTIVITIES Cash received

Contributed equity Equity injections 5,830 2,631 - Departmental capital budget 14,713 11,016 14,337

Total cash received 20,543 13,647 14,337 Net cash from financing activities 20,543 13,647 14,337 Net increase/(decrease) in cash held (7,032) 10,430 - Cash and cash equivalents at the beginning of the reporting period 12,063 1,633 500 Cash and cash equivalents at the end of the reporting period 5,031 12,063 500


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DEPARTMENT OF THE PRIME MINISTER AND CABINET BUDGET COMMENTARY for the period ended 30 June 2016


Departmental Budget Commentary: The below table provides commentary for significant variances between the Department’s original budget estimates, as published in the 2015-16 Portfolio Budget Statements, and the actual expenditure and net asset position for the year.

Explanation of major variances Affected line items (and statement) Bond rate: a decrease in the long term Government bond rate used for valuing employee provisions has caused employee provisions to be higher than budget by 7%.

Employee benefits expense - Statement of Comprehensive Income Employee provisions - Statement of Financial Position

Sub-leasing of office accommodation: arrangements for sub-leasing office accommodation in the regional network were finalised post budget, which is the main reason for Own-source revenue being 154% higher than budget.

Sale of goods and rendering of services - Statement of Comprehensive Income Sale of goods and services - Cash Flow Statement

Additional taskforces: additional taskforces caused supplier expenses to be higher than budget by 3%.

Payments to suppliers - Cash Flow Statement Supplier expense - Statement of Comprehensive Income

Prior year restructuring: a delay in finalising the settlement of appropriation receivable for employee provisions relating to prior year Government restructuring change, caused an underestimate of Trade and other receivables by 29%.

Trade and other receivables - Statement of Financial Position

Asset valuations and reclassifications: the annual stocktake and revaluation of assets, including impairment of property, plant and equipment and reclassification of land and buildings to ‘assets held for sale', has caused the non-financial assets to be lower than budget by 20%.

Non-financial assets - Statement of Financial Position Assets held for sale - Statement of Financial Position Asset revaluation reserve - Other Comprehensive Income Write-down and impairment of assets - Statement of Comprehensive Income


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DEPARTMENT OF THE PRIME MINISTER AND CABINET ADMINISTERED SCHEDULE OF COMPREHENSIVE INCOME for the period ended 30 June 2016


2016 2015 Original Budget

Notes $'000 $'000 $'000 NET COST OF SERVICES Expenses

Employee benefits 2.1A 1,025 874 900 Suppliers 2.1B 97,037 65,403 104,026 Subsidies - Petrol Sniffing Prevention Strategy 499 1,601 2,184 Grants 2.1C 1,231,747 1,218,600 1,237,147 Depreciation and amortisation 4.2A 373 332 124 Finance costs 2.1D 14,304 547 506 Write-down and impairment of assets 2.1E 8,054 11,248 - Losses from asset sales - 821 - Payments associated with Land Councils 2.1F 107,192 88,313 132,762 Payments to Corporate Commonwealth entities and companies 2.1G 120,727 130,058 120,727 Payments to Indigenous Land Corporation 50,712 49,865 - Mining withholding tax 5,525 4,995 -

Total expenses 1,637,195 1,572,657 1,598,376 Income Revenue Non-taxation revenue

Interest - investments 76,117 86,688 71,707 Other revenue 2.2A 24,176 20,070 1,738

Total non-taxation revenue 100,293 106,758 73,445 Total revenue 100,293 106,758 73,445 Gains

Assets received free of charge - 818 - Other gains 2.2B 79 - -

Total gains 79 818 - Total income 100,372 107,576 73,445 Net cost of services 1,536,823 1,465,081 1,524,931 Deficit (1,536,823) (1,465,081) (1,524,931) OTHER COMPREHENSIVE INCOME Items not subject to subsequent reclassification to net cost of services

Changes in asset revaluation reserves 108,106 61,595 - Items subject to subsequent reclassification to net cost of services

Actuarial gains/(losses) - former Governors-General entitlements 6.1C 632 (1,903) -

Total other comprehensive income 108,738 59,692 - Total comprehensive loss (1,428,085) (1,405,389) (1,524,931)


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DEPARTMENT OF THE PRIME MINISTER AND CABINET ADMINISTERED SCHEDULE OF ASSETS AND LIABILITIES as at 30 June 2016


2016 2015 Original Budget

Notes $'000 $'000 $'000 ASSETS Financial assets

Cash and cash equivalents 4.1A 20,094 14,563 16,035 Trade and other receivables 4.1B 63,862 72,636 44,856 Other investments 4.1C 2,549,016 2,480,243 2,554,449 Investments in Corporate Commonwealth entities 4.1D 1,922,338 1,777,729 1,745,587

Total financial assets 4,555,310 4,345,171 4,360,927 Non-financial assets

Property, plant and equipment 4.2A 1,100 1,437 1,910 Prepayments 4.2B 9,690 6,120 7,455

Total non-financial assets 10,790 7,557 9,365 Total assets administered on behalf of Government 4,566,100 4,352,728 4,370,292 LIABILITIES Payables

Suppliers 4.3A 7,086 11,490 624 Grants 4.3B 19,607 18,640 - Other payables 4.3C 14,381 149 25,534

Total payables 41,074 30,279 26,158 Provisions

Employee provisions 6.1B 355 272 330 Non-cash benefits - former Governors-General 6.1C 16,037 17,509 14,629 Other provisions 4.4A 187 227 -

Total provisions 16,579 18,008 14,959 Total liabilities administered on behalf of Government 57,653 48,287 41,117 Net assets 4,508,447 4,304,441 4,329,175


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DEPARTMENT OF THE PRIME MINISTER AND CABINET ADMINISTERED BUDGET COMMENTARY as at 30 June 2016


Administered Budget Commentary: The below table provides commentary for significant variances between the Department’s original budget estimates for administered functions, as published in the 2015-16 Portfolio Budget Statements, and the actual expenditure and net asset position for the year.

Explanation of major variances Affected line items (and statement) Royalty equivalent income: statutory payments to royalty associations were higher than budget due to additional mining royalty equivalent income received by the Aboriginals Benefit Account. 30% of royalty equivalent income received is distributed to relevant royalty associations.

Payments associated with Land Councils combined with Payments to Indigenous Land Corporation – Administered Schedule of Comprehensive Income. Special appropriations - Administered reconciliation table

Revaluation by Corporate Commonwealth entities: revaluations undertaken by the Indigenous Land Corporation have increased its net assets position by 35%, the main reason for investments in Corporate Commonwealth entities being higher than budget.

Investments in Corporate Commonwealth entities - Statement of Financial Position Changes in asset revaluation reserves - Other comprehensive income

Concessional loan discount commitment: during 2015-16 PM&C, on behalf of the Australian Government, entered an agreement to provide a concessional loan to the Indigenous Land Corporation on 1 July 2016. As such, a $13.848 million concessional loan discount commitment was required to be recognised in 2015-16.

Other payables - Administered Schedule of Assets and Liabilities Finance Costs - Administered Schedule of Comprehensive Income


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DEPARTMENT OF THE PRIME MINISTER AND CABINET ADMINISTERED RECONCILIATION SCHEDULE for the period ended 30 June 2016

2016 2015 $'000 $'000

Opening assets less liabilities as at 1 July 4,304,441 4,159,564 Net cost of services Income 100,372 107,576 Expenses

Payments to entities other than Corporate Commonwealth entities and companies (1,465,756) (1,392,734) Payments to Indigenous Land Corporation (50,712) (49,865) Payments to Corporate Commonwealth entities and companies (120,727) (130,058)

Transfers (to)/from the Australian Government

Appropriation transfers from Official Public Account Annual appropriation for administered expenses (non-Corporate Commonwealth entities and companies) 1,349,923 1,290,468 Annual appropriation for payment to Corporate Commonwealth entities and companies 120,727 130,058 Special appropriations (non-Corporate Commonwealth entities and companies) 265,975 216,420 Special account 33,644 18,434

Transfers to Official Public Account (141,103) (124,618) Transfers to Official Public Account Special accounts (33,719) (18,620)

Equity injection to Corporate Commonwealth entities and companies 36,550 38,124 Movement in make good asset 44 22 Restructuring 94 - Administered investments 108,062 61,573 Revaluation of liabilities relating to former Governors-General entitlements 632 (1,903) Closing assets less liabilities as at 30 June 4,508,447 4,304,441

Accounting Policy Administered cash transfers to and from the Official Public Account Revenue collected by PM&C for use by the Government rather than for PM&C is administered revenue. Collections are transferred to the Official Public Account (OPA), maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government. These transfers to and from the OPA are adjustments to the administered cash held by PM&C on behalf of the Government and reported as such in the Administered Cash Flow Statement and in the Administered Reconciliation Schedule.


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DEPARTMENT OF THE PRIME MINISTER AND CABINET ADMINISTERED CASH FLOW STATEMENT for the period ended 30 June 2016

2016 2015 Notes $'000 $'000 OPERATING ACTIVITIES Cash received

Net GST received 115,256 98,080 Other 2,719 9,538

Total cash received 117,975 107,618 Cash used

Employees 996 905 Suppliers 104,915 63,956 Subsidy payments 499 1,601 Grant payments 1,323,017 1,309,520 Payments to Corporate Commonwealth entities and companies 120,727 130,058 Payments associated with Land Councils 107,192 88,313 Payments to Indigenous Land Corporation 50,712 49,865 Other 5,525 4,995

Total cash used 1,713,583 1,649,213 Net cash used by operating activities 5.4B (1,595,608) (1,541,595) INVESTING ACTIVITIES Cash received

Proceeds from realisation of investments 2,567,728 3,982,951 Interest on investments 74,370 87,710

Total cash received 2,642,098 4,070,661 Cash used

Purchase of property, plant and equipment - 1 Payments to Corporate Commonwealth entities and companies 36,550 38,124 Purchase of investments 2,636,500 4,044,383

Total cash used 2,673,050 4,082,508 Net cash used by investing activities (30,952) (11,847) Cash received - restructuring 94 - Net decrease in cash held (1,626,466) (1,553,442) Cash and cash equivalents at the beginning of the reporting period 14,563 17,739 Cash from Official Public Account

Appropriations 1,773,175 1,675,070 Special Accounts 33,644 18,434

Total cash from the Official Public Account 1,806,819 1,693,504 Cash to Official Public Account

Appropriations (141,103) (124,618) Special Accounts (33,719) (18,620)

Total cash to the Official Public Account (174,822) (143,238) Cash and cash equivalents at the end of the reporting period 4.1A 20,094 14,563


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DEPARTMENT OF THE PRIME MINISTER AND CABINET NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2016

Overview

1. Departmental Financial Performance

Expenses 1.1.

Own-Source Revenue and Gains 1.2.

2. Income and Expenses Administered on Behalf of Government

Administered – Expenses 2.1.

Administered – Income 2.2.

3. Departmental Financial Position

Financial Assets 3.1.

Non-Financial Assets 3.2.

Payables 3.3.

Other Provisions 3.4.

4. Assets and Liabilities Administered on Behalf of Government

Administered – Financial Assets 4.1.

Administered – Non-Financial Assets 4.2.

Administered – Payables 4.3.

Administered – Other Provisions 4.4.

5. Funding

Appropriations 5.1.

Special Accounts 5.2.

Net Cash Appropriation Arrangements 5.3.

Cash Flow Reconciliation 5.4.

6. People

Employee Provisions 6.1.

Senior Management Personnel Remuneration 6.2.

7. Managing Uncertainties

Contingent Assets and Liabilities 7.1.

Financial Instruments 7.2.

Administered – Financial Instruments 7.3.

Fair Value Measurement 7.4.

Administered – Fair Value Measurement 7.5.

8. Other Information

Assets Held in Trust 8.1.

Restructuring 8.2.

Reporting of Outcomes 8.3.

94

97

97

99

100

100

102

103

103

105

109

110

111

111

115

117

118

119

119

124

127

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132

132

132

134

138

141

143

143

144

145


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Overview Objectives of the Department The Department of the Prime Minister and Cabinet (PM&C) is a not-for-profit Australian Government controlled Department of State.

The objective of PM&C is to provide policy advice and support to the Prime Minister, the Cabinet, Portfolio Ministers and Parliamentary Secretaries on matters that are on the forefront of public and government administration.

PM&C is structured to meet two outcomes as outlined below:

Outcome 1: Provide high quality policy advice and support to the Prime Minister, the Cabinet, Portfolio Ministers and Parliamentary Secretaries including through the coordination of government activities, policy development and program delivery.

Outcome 2: Improve results for Indigenous Australians including in relation to school attendance, employment and community safety, through delivering services and programs, and through measures that recognise the special place that Indigenous people hold in this Nation.

In 2015-16 PM&C’s activities were identified under the following programs:

Program 1.1: Prime Minister and Cabinet

• Domestic policy

• National security and international policy

• Support services for Government operations

• Official and ceremonial support

• Women’s policy.

Program 2.1: Indigenous

• Commonwealth Aboriginal and Torres Strait Islander policy.

The continued existence of PM&C in its present form and with its present programs is dependent on Government policy and on continuing funding by Parliament for PM&C’s administration and programs.

PM&C’s activities contributing toward these outcomes are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, income and expenses controlled or incurred by PM&C in its own right. Administered activities involve the management or oversight by PM&C, on behalf of the Government, of items controlled or incurred by the Government.

PM&C conducts the following administered activities on behalf of the Government: • Secretariat support to the National Counter-Terrorism Committee

• Parliament House Briefing Room

• Grant payments to the National Australia Day Council Limited

• Compensation and legal expenses

• Operations support for the Prime Minister’s official residences

• Support to former Governors-General

• State occasions and official visits

• Commonwealth Aboriginal and Torres Strait Islander grant programs

• Commonwealth Aboriginal and Torres Strait Islander service delivery

• Women’s grant programs.


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Basis of preparation of the financial statements The financial statements are general purpose financial statements and are required by section 42 of the PGPA Act.

The financial statements have been prepared in accordance with:

• Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) for reporting periods ending on or after 1 July 2015.

• Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period.

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except where certain assets and liabilities are recorded at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements are presented in Australian dollars, and are rounded to the nearest thousand dollars unless otherwise specified.

Except where stated below, administered items are accounted for on the same basis and using the same policies as for departmental items, including the application of Australian Accounting Standards.

Taxation

PM&C is exempt from all forms of taxation except Fringe Benefits Tax (FBT), the Goods and Services Tax (GST) and Mining Withholding Tax (WHT).

New Australian accounting standards Adoption of new Australian Accounting Standard requirements

No accounting standard has been adopted earlier than the application date as stated in the standard.

Other new standards, revised standards, interpretations and amending standards that were issued prior to the sign-off date and are applicable to the current reporting period did not have a material financial impact, and are not expected to have a future material financial impact on PM&C.

Future Australian Accounting Standard requirements

The following new/revised/amending standards and/or interpretations issued by the AASB prior to the sign-off date are expected to have a future material impact on PM&C’s financial statements which are applicable to PM&C for future reporting periods:

Standard/Interpretation Application date Nature of impending changes in accounting policy and likely impact on initial application

AASB 2015-6 Amendments to Australian Accounting Standards – Extending Related Party Disclosures to Not-for-Profit Public Sector Entities [AASB 10, AASB 124 & AASB 1049]

1 July 2016 The amended standard requires not-for-profit public sector entities to provide additional disclosure in relation to related party interactions. PM&C may be required to identify and disclose transactions with key management personnel that occur outside the person’s capacity as an ordinary taxpayer, or that involve a benefit not available to the general public.

AASB 16 Leases 1 July 2019 AASB 16 replaces AASB 117 and other lease-related Interpretations. The new standard requires all leases to be accounted for ‘on balance sheet’ by lessees to better reflect the economics of the transactions. PM&C will be required to assess current lease arrangements and recognise relevant balances as leased assets and liabilities.


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Compliance with statutory conditions for payments from the consolidated revenue fund The Australian Government continues to have regard to developments in case law, including the High Court’s most recent decision on Commonwealth expenditure in Williams v Commonwealth [2014] HCA 23, as they contribute to the larger body of law relevant to the development of Commonwealth programs. In accordance with its general practice, the Government will continue to monitor and assess risk and decide on any appropriate actions to respond to risks of expenditure not being consistent with constitutional or other legal requirements.

During 2015-16 PM&C reviewed its exposure to the risk of not complying with statutory conditions on payments from appropriations, namely section 83 of the Constitution. Administered payments of $566.758 million (35% of total administered payments) and departmental payments of $24.591 million (6% of total departmental payments) were subject to additional statutory conditions.

The review identified the following:

• The Aboriginals Benefit Account (ABA) special account – testing of transactions revealed that two payments made from the ABA under section 64(3) of the Aboriginal Land Rights (Northern Territory) Act 1976 (the ALRA), contravened section 83 of the Constitution totalling $0.296 million. Both were technical contraventions, despite the payments having been made in accordance with the requirements of section 64(3) of the ALRA. Of this amount, $0.003 million has been recovered through the reduction of subsequent payments, and $0.293 million will be offset against future payments. Overpayments from previous years of $0.169 million were recovered during the year.

Payments are required to be made out of the ABA based on royalties received by the Northern Territory and Australian Governments. The contraventions occur when the royalties upon which the payments were based had been estimated at a value greater than the eventual actual. Legislation has been prepared, and is awaiting presentation to Parliament, to reduce the risks of non-compliance associated with these payments to an acceptably low level.

• Long Service Leave (Commonwealth Employees) Act 1976 – testing of payments made under this legislation has revealed no breaches of section 83 of the Constitution in 2015-16.

• Superannuation Act 2005 - testing of payments made under this legislation has revealed 193 breaches of section 83 of the Constitution. These relate to contributions to the Public Sector Superannuation accumulation plan (PSSap) that were calculated using an incorrect basis for superannuation salary. PM&C is investigating mechanisms to improve controls over the selection of the superannuation salary basis. The total value of the potential breaches is $0.069 million.

PM&C will continue to monitor its level of compliance with section 83 of the Constitution across all legislation for which it is administratively responsible. Where possible, amendments to legislation will continue to be progressed.

Events after the reporting period Departmental

There are no known events occurring after the reporting period that could impact on the financial statements.

Administered

PM&C, on behalf of the Australian Government, provided a loan facility of $65.000 million to the Indigenous Land Corporation on 1 July 2016, to assist with restructuring of financing activities. The loan agreement was signed in May 2016 and is provided on terms that are more favourable than the borrower would obtain in the market place and therefore a concessional loan discount has been recognised in 2015-16. The $65.000 million loan receivable will be recognised in 2016-17.


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1. Departmental Financial Performance This section analyses the financial performance of the Department of the Prime Minister and Cabinet for the year ended 30 June 2016.

Expenses 1.1. 2016 2015 $'000 $'000 Note 1.1A: Employee benefits Wages and salaries 188,799 197,825 Superannuation

Defined contribution plans 15,608 17,413 Defined benefit plans 24,964 24,264

Leave and other entitlements 29,379 29,100 Separation and redundancies 7,575 103 Other 3,500 3,898 Total employee benefits 269,825 272,603

Note 1.1B: Suppliers Goods and services supplied or rendered

Consultants, legal, contractors and secondees 29,233 62,066 Equipment, repairs and maintenance 12,908 16,137 General expenses1 10,980 13,138 Venue hire 250 21,772 Office accommodation, facility management and security 3,934 13,779 Information, communication and technology 36,983 93,567 Travel 11,684 12,621

Total goods and services supplied or rendered 105,972 233,080 Goods supplied 16,849 18,944 Services rendered 89,123 214,136 Total goods and services supplied or rendered 105,972 233,080 Other suppliers Operating lease rentals in connection with:

Minimum lease payments 23,585 30,008 Workers compensation expenses 2,449 4,326 Total other supplier expenses 26,034 34,334 Total suppliers 132,006 267,414 Leasing commitments Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within 1 year 24,586 29,141 Between 1 to 5 years 85,555 91,853 More than 5 years 28,083 49,724

Total operating lease commitments 138,224 170,718

Note: Commitments are GST inclusive where relevant. Operating lease commitment - leases for office accommodation Office accommodation lease payments are subject to periodic increases in accordance with the rent review provisions in the lease agreements. 1 Includes $0.029 million audit fees to the ANAO for the financial statements audit of the Aboriginal and Torres Strait Islander Land Account (ATSILA) (2015: $0.029 million), which is not a resource received free of charge.


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Accounting Policy

Leases

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

The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease.

Lease payments are allocated between the principal component and the interest expense.

PM&C currently has 21 (2015: 24) agreements for the leasing of premises which have provisions requiring the premises to be restored to their original condition at the conclusion of the lease. PM&C has recognised a make good provision to reflect the present value of this obligation.

2016 2015 $'000 $'000 Note 1.1C: Grants Public sector

Australian Government entities (related parties) - 80 Private sector

Commercial entities - 390 Non-profit organisations 450 766

Total grants 450 1,236 Note 1.1D: Write-down and impairment of assets Asset write-downs and impairments from:

Impairment of property, plant and equipment and intangibles 1,734 418 Impairment of receivables 89 79

Total write-down and impairment of assets 1,823 497 Note 1.1E: Losses from asset sales Property, plant and equipment

Proceeds from sale 3,212 421 Carrying value of asset sold (3,633) (440) Selling expense (85) (12)

Total losses from asset sales 506 31 Accounting Policy

Gains from disposal of assets are recognised when control of the asset has passed to the buyer.


PAGE 98


Own-Source Revenue and Gains 1.2. 2016 2015 $'000 $'000 Note 1.2A: Sale of goods and rendering of services Sale of goods - 1 Rendering of services 12,483 13,284 Total sale of goods and rendering of services 12,483 13,285

Accounting Policy

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when:

• The amount of revenue, stage of completion and transaction costs incurred can be reliably measured.

• The probable economic benefits associated with the transaction will flow to PM&C.

The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction.

Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

Note 1.2B: Resources received free of charge Seconded staff 2,213 9,633 ANAO audit fee

PM&C - Financial Statements Audit 410 412 Aboriginals Benefit Account - Financial Statements Audit 64 64

Accommodation received free of charge - 514 Total resources received free of charge 2,687 10,623

Accounting Policy

Resources received free of charge are recognised as revenue when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. Resources received free of charge are recorded as either revenue or gains depending on their nature.

Note 1.2C: Other gains Reversal of make good provision 120 93 Reversal of previous asset write-down 45 - Asset first recognised 38 - Total other gains 203 93


PAGE 99


2. Income and Expenses Administered on Behalf of Government This section analyses the activities that the Department of the Prime Minister and Cabinet does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

Administered – Expenses 2.1. 2016 2015 $'000 $'000 Note 2.1A: Employee benefits Wages and salaries 753 676 Superannuation

Defined contribution plans 54 89 Defined benefit plans 85 41

Leave and other entitlements 133 68 Total employee benefits 1,025 874

Note 2.1B: Suppliers Goods and services supplied or rendered

Outsourced providers, contractors and consultants 88,112 50,323 Equipment, repairs and maintenance 692 7,570 General expenses 5,907 4,699 Travel 2,042 1,952 Information, communication and technology 267 830

Total goods and services supplied or rendered 97,020 65,374 Goods supplied 787 786 Services rendered 96,233 64,588 Total goods and services supplied or rendered 97,020 65,374 Other suppliers Operating lease rentals in connection with

Minimum lease payments 7 10 Workers compensation expenses 10 19 Total other supplier expenses 17 29 Total suppliers 97,037 65,403 Leasing commitments Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within 1 year 610 746 Between 1 to 5 years 1,488 946 More than 5 years 1,369 1,761

Total operating lease commitments 3,467 3,453 Note: Commitments are GST inclusive where relevant. Operating leases comprise 17 leases, six for office accommodation for the former Governors-General, one relating to the Indigenous Education (Northern Territory Facilities) program and ten relating to the Children and Schooling program. Lease payments are subject to periodic increase in accordance with the rent review provisions of the lease. Accounting Policy

Leases

PM&C administers six (2015: seven) agreements for the leasing of premises which have provisions requiring the premises to be restored to their original condition at the conclusion of the lease. A make good provision has been raised to reflect the present value of this obligation.


PAGE 100


2016 2015 $'000 $'000 Note 2.1C: Grants Public sector

Australian Government entities 12,450 12,159 Local Governments 51,293 47,465 State and Territory Governments 111,167 45,052

Private sector Non-profit organisations 956,896 937,931 Commercial entities 99,941 175,993

Total grants 1,231,747 1,218,600

Program 2.1 - Jobs, Land and Economy 545,827 567,234 Program 2.2 - Children and Schooling 343,722 285,223 Program 2.3 - Safety and Wellbeing 237,253 233,557 Program 2.4 - Culture and Capability 56,439 57,225 Program 2.5 - Remote Australia Strategy 42,266 68,704 Program 1.1 - Prime Minister and Cabinet 6,240 6,657

Total grants 1,231,747 1,218,600 Accounting Policy PM&C administers a number of grants and subsidy schemes on behalf of the Government. Grant liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed; or (ii) the grant eligibility criteria have been satisfied, but payments due have not been made. Where grant moneys are paid in advance of performance or eligibility, a prepayment is recognised. Settlement is usually made according to the terms and conditions of each grant. This is usually within 30 days of performance or eligibility. All subsidies are in connection with external parties and are expected to be settled in no more than 12 months. The Indigenous grants and subsidies are driven by five programs that constitute the flexible and need-focused Indigenous Advancement Strategy (IAS):

• Jobs, Land and Economy

• Children and Schooling

• Safety and Wellbeing

• Culture and Capability

• Remote Australia Strategy. Note 2.1D: Finance costs Concessional loan discount 13,848 - Unwinding of discount 456 547 Total finance costs 14,304 547

Note 2.1E: Write-down and impairment of assets Impairment of receivables 8,051 11,248 Write-down of non-financial assets 3 - Total write-down and impairment of assets 8,054 11,248

Note 2.1F: Payments associated with Land Councils Payments associated with Land Councils administration 47,617 40,803 Land Councils distributions 59,575 47,510 Total payments associated with Land Councils 107,192 88,313


PAGE 101


2016 2015 $'000 $'000 Note 2.1G: Payments to Corporate Commonwealth entities and companies Aboriginal Hostels Limited 37,582 38,044 Indigenous Business Australia 34,258 34,328 Indigenous Land Corporation 9,389 9,527 Torres Strait Regional Authority 39,498 48,159 Total payments to Corporate Commonwealth entities and companies 120,727 130,058

Accounting Policy Payments to Corporate Commonwealth entities and companies from amounts appropriated for that purpose are classified as administered expenses, equity injections or loans of PM&C. The appropriation to PM&C is disclosed in the Funding section.

Administered – Income 2.2. Note 2.2A: Other revenue Return of grant funding 21,727 18,463 Lease rental income 2,228 1,607 Other 221 - Total other revenue 24,176 20,070

Accounting Policy All administered revenues relate to ordinary activities performed by PM&C on behalf of the Australian Government. As such, administered appropriations are not revenues of the individual entity. PM&C oversees distribution or expenditure of the funds as directed. Interest revenue is recognised using the effective interest method. Note 2.2B: Other gains Reversal of write-down and impairments 38 - Reversal of make good provision 41 - Total other gains 79 -


PAGE 102


3. Departmental Financial Position This section analyses the Department of the Prime Minister and Cabinet’s assets used to generate financial performance and the operating liabilities incurred as a result. Employee related information is disclosed in the People section.

Financial Assets 3.1. 2016 2015 $'000 $'000 Note 3.1A: Trade and other receivables Goods and services receivables

Goods and services 4,442 1,763 Total goods and services receivables 4,442 1,763 Appropriations receivables

Existing programs 94,940 113,325 Total appropriations receivable 94,940 113,325 Other receivables

Statutory receivables 2,771 3,502 Total other receivables 2,771 3,502 Total trade and other receivables (gross) 102,153 118,590 Less impairment allowance

Goods and services (112) (78) Total impairment allowance (112) (78) Total trade and other receivables (net) 102,041 118,512 All receivables are expected to be recovered in no more than 12 months. Trade and other receivables (gross) aged as follows

Not overdue 100,312 117,668 Overdue by

0 to 30 days 236 120 31 to 60 days 785 396 61 to 90 days 256 38 More than 90 days 564 368

Total receivables (gross) 102,153 118,590

The impairment allowance relates to receivables that are more than 90 days old.


PAGE 103


Reconciliation of the impairment allowance Movements in relation to 2016

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services Total $'000 $'000 As at 1 July 2015 78 78

Amounts recovered and reversed (52) (52) Increase/decrease recognised in net cost of services 86 86

Total as at 30 June 2016 112 112 Movements in relation to 2015

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services Total $'000 $'000 Total as at 1 July 2014 - -

Increase/decrease recognised in net cost of services 78 78 Total as at 30 June 2015 78 78


PAGE 104

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PAGE 105

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PAGE 106


Impairment of non-financial assets A net impairment of $0.919 million is recognised in 2016 (2015: $0.382 million) for property plant and equipment. A revaluation was conducted in 2016 by independent qualified valuers. A net impairment of $0.815 million is recognised in 2016 (2015: $0.036 million) for intangibles. No intangibles are expected to be sold or disposed of within the next 12 months. Contractual commitments for the acquisition of property, plant, equipment and intangible assets Contractual commitments for the acquisition of IT equipment and services of $8.354 million are payable within one year. Accounting Policy

Asset recognition threshold

Purchases of property, plant and equipment and intangibles are recognised initially at cost in the Statement of Financial Position, except for purchases costing less than $5,000, which are expensed in the year of acquisition (other than IT assets where they form part of a group of similar items which are significant in total).

The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to ‘make good’ provisions in property leases taken up by PM&C where there exists an obligation to restore the asset to its original condition. These costs are included in the value of PM&C's property, plant and equipment with a corresponding provision for the ‘make good’ recognised.

Revaluations

Fair values for each class of asset are determined as shown below:

Asset class Fair value measurement Land Market selling price

Buildings excluding leasehold improvements

Market selling price and depreciated replacement cost

Leasehold improvements Depreciated replacement cost

Property, plant and equipment Market selling price and depreciated replacement cost

All property, plant and equipment assets with an original cost above $5,000 were formally valued in 2016 by independent qualified valuers.

All leasehold improvement assets with an original cost above $50,000 were formally valued in 2016 by independent qualified valuers.

All demountables were formally valued and assessed for useful lives in 2016 by an independent qualified valuer.

Upon revaluation, any accumulated depreciation is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount.

Intangibles

PM&C’s intangibles comprise internally developed and purchased software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Depreciation/Amortisation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to PM&C using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.

Depreciation rates applying to each class of depreciable asset are based on the following total useful lives for the current and prior reporting periods:

Buildings excluding leasehold improvements 6 to 50 years

Leasehold improvements Lease term

Property, plant and equipment 1 to 50 years

Intangibles 2 to 7 years


PAGE 107


Accounting Policy (continued)

Impairment

All assets were assessed for impairment during 2016.

Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

Derecognition

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

2016 2015 $'000 $'000 Note 3.2B: Prepayments

Prepayments 3,226 2,604 Total prepayments 3,226 2,604 Prepayments expected to be recovered

No more than 12 months 2,772 2,451 More than 12 months 454 153

Total prepayments 3,226 2,604


PAGE 108


Payables 3.3. 2016 2015 $'000 $'000 Note 3.3A: Suppliers Trade creditors and accruals 22,812 31,714 Total suppliers 22,812 31,714

Settlement is usually made within 30 days. Supplier payables are expected to be settled in no more than 12 months. Note 3.3B: Other payables Salaries, wages and superannuation 850 8,653 Separation and redundancies payable 745 520 Unearned income 2,587 81 Lease liability 11,713 12,478 Lease incentive 2,250 3,700 Other 656 907 Total other payables 18,801 26,339 Other payables expected to be settled

No more than 12 months 4,637 11,086 More than 12 months 14,164 15,253

Total other payables 18,801 26,339


PAGE 109


Other Provisions 3.4. 2016 2015 $'000 $'000 Note 3.4A: Other provisions Make good provisions expected to be settled

No more than 12 months 276 396 More than 12 months 832 794

Total make good provisions 1,108 1,190

Make good

provision Total $’000 $’000 As at 1 July 2015 1,190 1,190 Gain on reversal of provision (120) (120) Unwinding of discount or change in discount rate 38 38 Total as at 30 June 2016 1,108 1,108

Significant accounting judgements and estimates

Provision for the restoration of leased premises (make good) is based on future obligations relating to the underlying assets and is supported by independent qualified valuers’ opinions


PAGE 110


4. Assets and Liabilities Administered on Behalf of Government This section analyses assets used to generate financial performance and the operating liabilities incurred as a result which the Department of the Prime Minister and Cabinet does not control, but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

Administered – Financial Assets 4.1. 2016 2015 $'000 $'000 Note 4.1A: Cash and cash equivalents Cash on hand or on deposit 531 428 Aboriginals Benefit Account - Special Account 19,560 14,133 Aboriginal and Torres Strait Islander Land Account - Special Account 3 2 Total cash and cash equivalents 20,094 14,563

Note 4.1B: Trade and other receivables Goods and services receivables

Goods and services receivable 14 72 Total goods and services receivables 14 72 Other receivables

Statutory receivables 11,166 19,587 Interest receivable 32,666 30,920 Grants receivable 14,034 23,278 Special account receivable from the OPA 10,140 9,947 Other 4,448 305

Total other receivables 72,454 84,037 Total trade and other receivables (gross) 72,468 84,109 Less impairment allowance

Other receivables (8,606) (11,473) Total impairment allowance (8,606) (11,473) Total trade and other receivables (net) 63,862 72,636 Trade and other receivables are expected to be received in no more than 12 months. Trade and other receivables (gross) aged as follows

Not overdue 61,572 66,363 Overdue by

0 to 30 days 1,755 1,127 31 to 60 days 337 112 61 to 90 days 185 494 More than 90 days 8,619 16,013

Total trade and other receivables (gross) 72,468 84,109 The impairment allowance relates to receivables that are more than 90 days old. Credit terms are within 30 days (2015: 30 days).


PAGE 111


Reconciliation of the impairment allowance Movements in relation to 2016

Other

receivables Total $'000 $'000 As at 1 July 2015 (11,473) (11,473)

Amounts written-off 5,911 5,911 Amounts recovered and reversed 4,893 4,893 Increase recognised in net cost of services (7,937) (7,937)

Total as at 30 June 2016 (8,606) (8,606) Movements in relation to 2015

Other

receivables Total $'000 $'000 As at 1 July 2014 (8,610) (8,610)

Increase recognised in net cost of services (2,863) (2,863) Total as at 30 June 2015 (11,473) (11,473)

2016 2015 $'000 $'000 Note 4.1C: Other Investments

Bank term deposits 2,549,016 2,480,243 Total other investments 2,549,016 2,480,243 All other investments are expected to be recovered in no more than 12 months.


PAGE 112


2016 2015 $'000 $'000 Note 4.1D: Investments in Corporate Commonwealth entities and companies Equity interest in

Aboriginal Hostels Limited 150,419 146,282 Anindilyakwa Land Council 10,309 8,639 Central Land Council 37,113 35,559 Indigenous Land Corporation 295,301 217,821 Indigenous Business Australia 1,242,448 1,185,459

National Australia Day Council Limited 1,713 1,168 Northern Land Council 9,446 10,105 Outback Stores Pty Ltd 43,082 41,496 Tiwi Land Council 1,351 1,613 Torres Strait Regional Authority 75,568 73,876 Wreck Bay Aboriginal Community Council 55,588 55,711

Total investments in Corporate Commonwealth entities and companies 1,922,338 1,777,729 All investments in Corporate Commonwealth entities and companies are expected to be recovered in more than 12 months.

Investment in Corporate Commonwealth Entities The Australian Government holds a 100% equity interest in the following administered investments:

Aboriginal Hostels Limited

Provides temporary accommodation to Aboriginal and Torres Strait Islander people through a national network of hostels.

Land Councils

The Land Councils include: - Anindilyakwa Land Council - Central Land Council - Northern Land Council - Tiwi Land Council; and - Wreck Bay Aboriginal Community Council

The Land Councils represent the Aboriginal people living in the area of the Land Council in the management of Aboriginal land in the area, and in relation to legislation concerning that land. The Land Councils also consult and protect the interests of traditional owners and take measures to assist in the protection of sacred sites in the area of the Land Council. Wreck Bay Aboriginal Community Council holds title to land and provides services to the Aboriginal community of Jervis Bay.

Indigenous Land Corporation

The Indigenous Land Corporation provides economic, environmental, social and cultural benefits for Aboriginal persons and Torres Strait Islanders by assisting in the acquisition and management of an Indigenous land base.

Indigenous Business Australia

Indigenous Business Australia creates opportunities for Aboriginal and Torres Strait Islander people and communities to build assets and gain wealth.


PAGE 113


Investment in Commonwealth Entities (continued)

National Australia Day Council Limited

Promotes national pride, active citizenship and the observance and celebration of Australia Day; administration of the Australian of the Year awards, which includes awards for the Young Australian of the Year, the Senior Australian of the Year and Australia’s Local Hero; distribution of grants to State and Territory Australia Day Councils, and provision of recommendations and advice to the Australian Government on all matters relating to year-round national pride activities.

Outback Stores Pty Ltd.

Outback Stores Pty Ltd improves access to affordable, healthy food for Indigenous communities, particularly in remote areas, through providing food supply and store management and support services.

Torres Strait Regional Authority

The Torres Strait Regional Authority formulates, implements and monitors the effectiveness of programs for Aboriginal and Torres Strait Islander people living in the Torres Strait and Northern Peninsula Area.

Accounting Policy Administered investments Administered investments in subsidiaries are not consolidated because their consolidation is relevant only at the whole-of-government level. Administered investments other than those held for sale are classified as available for sale and are measured at their fair value as at 30 June 2016. Fair value has been taken to be the Australian Government's proportional interest in the net assets as advised by the entities as at the end of the reporting period.


PAGE 114

DEP

AR

TMEN

T O

F TH

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IME

MIN

ISTE

R A

ND

CA

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TO A

ND

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OF

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for t

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Adm

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Non

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sset

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2. N

ote

4.2A

: Rec

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6

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ldin

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t and

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ipm

ent

Tota

l

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20

15

2016

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15

2016

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s at

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ns a

nd im

pairm

ents

reco

gnis

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oth

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me

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22

44

22

Impa

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ts re

cogn

ised

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e op

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ing

resu

lt -

- (3

) -

(3)

- D

epre

ciat

ion

expe

nse

- -

(373

) (3

32)

(373

) (3

32)

Oth

er m

ovem

ents

-

-

Oth

er m

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ents

-

- (5

) (4

) (5

) (4

) D

ispo

sals

Dis

posa

ls

- (8

18)

- (3

) -

(821

) To

tal a

s at

30

June

-

- 1,

100

1,43

7 1,

100

1,43

7

Tota

l as

at 3

0 Ju

ne re

pres

ente

d by

Fa

ir va

lue

- -

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3 1,

702

1,98

3 1,

702

Wor

k in

pro

gres

s -

- -

463

- 46

3 A

ccum

ulat

ed d

epre

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and

impa

irmen

t -

- (8

83)

(728

) (8

83)

(728

) To

tal a

s at

30

June

-

- 1,

100

1,43

7 1,

100

1,43

7 A

net

impa

irmen

t of $

0.00

3 m

illion

is re

cogn

ised

in 2

016

for p

lant

and

equ

ipm

ent (

2015

:$0)

.


PAGE 115


Accounting Policy

Revaluation

All property, plant and equipment assets were formally valued in 2015 by independent qualified valuers and were assessed for impairment in 2016.

Depreciation

Depreciation rates applying to each class of depreciable asset are based on the following useful lives for the current and prior reporting periods:

Buildings excluding leasehold improvements 38 to 50 years

Leasehold improvements Lease term

Property, plant and equipment 4 to 112 years


PAGE 116


2016 2015 $'000 $'000 Note 4.2B: Prepayments

Prepayments 9,690 6,120 Total prepayments 9,690 6,120 Prepayments expected to be recovered

No more than 12 months 7,097 607 More than 12 months 2,593 5,513

Total prepayments 9,690 6,120

Administered – Payables 4.3.Note 4.3A: Suppliers Trade creditors and accruals 7,086 11,490 Total suppliers 7,086 11,490

Settlement is usually made within 30 days. Supplier payables are expected to be settled in no more than 12 months. Note 4.3B: Grants Public sector

Australian Government entities (related parties) 675 623 Local Governments - 144 State and Territory Governments - 17

Private sector Commercial entities 55 3,325 Non-profit organisations 18,877 14,531

Total grants 19,607 18,640

All grants payables are expected to be settled in no more than 12 months. Note 4.3C: Other payables Concessional loan commitment 13,848 - Payables to Commonwealth entities 399 - Fringe benefits tax 99 44 Salaries, wages and superannuation 5 59 Lease liability 30 46 Total other payables 14,381 149

All other payables are expected to be settled in no more than 12 months.


PAGE 117


Administered – Other Provisions 4.4.Note 4.4A: Other provisions Reconciliation of movements in other provisions

Make good

provision Other

provision Total $’000 $’000 As at 1 July 2015 129 98 227 Amounts reversed (41) - (41) Unwinding of discount or change in discount rate 1 - 1 Total as at 30 June 2016 89 98 187

2016 2015 $'000 $'000 Other provisions expected to be settled


Total other provisions 187 227


PAGE 118

DEP

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TMEN

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App

ropr

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1A: A

nnua

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.


PAGE 119

DEP

AR

TMEN

T O

F TH

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IME

MIN

ISTE

R A

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CA

BIN

ET

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FO

RM

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App

ropr

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GPA

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PAGE 120

DEP

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3 The

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umm

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5 m

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Man

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Dat

a R

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n pr

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t; $2

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on s

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ion

Age

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16 m

illion

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t of f

unds

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he D

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l Tra

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rmat

ion

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ce.

Adm

inis

tere

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n 51

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rant

ines

: $11

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on c

ontri

butio

n to

Indi

geno

us C

omm

unity

lega

l ser

vice

s to

the

Atto

rney

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eral

's D

epar

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t and

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ng

to th

e So

uth

Aus

tralia

n G

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t for

mun

icip

al s

ervi

ces

in re

mot

e In

dige

nous

com

mun

ities

. S

ectio

n 51

qua

rant

ines

hav

e be

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ised

as

a re

duct

ion

in to

tal a

ppro

pria

tion

repo

rted

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yea

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dditi

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re re

cogn

ised

as

reve

nue

from

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ernm

ent w

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gai

ns c

ontro

l of t

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ppro

pria

tion,

exc

ept f

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erta

in a

mou

nts

that

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te to

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iviti

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at a

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cipr

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atur

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ch c

ase

reve

nue

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cogn

ised

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s be

en e

arne

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ppro

pria

tions

rece

ivab

le a

re re

cogn

ised

at t

heir

nom

inal

am

ount

s.


PAGE 121


Note 5.1B: Unspent annual appropriations ('recoverable GST exclusive')

Authority 2016 2015 $'000 $'000

Departmental1,2 Appropriation Act (No.1) 2013-14 5,000 5,000 Appropriation Act (No.6) 2013-14 Non Operating Equity Injection - 4,861 Appropriation Act (No.1) 2014-15 43,446 130,618 Appropriation Act (No.1) 2014-15 - cash held by the department - 12,063 Appropriation Act (No.1) 2014-15 - Capital Budget (DCB) 2,316 13,991 Appropriation Act (No 2) 2014-15 - Non Operating Equity Injection 5,236 5,887 Appropriation Act (No.3) 2014-15 - 1,912 Appropriation Act (No 4) 2014-15 - Non Operating Equity Injection - 318 Appropriation Act (No.1) 2015-16 79,595 - Appropriation Act (No.1) 2015-16 - cash held by the department 5,031 - Appropriation Act (No.1) 2015-16 - Capital Budget (DCB) 8,203 - Appropriation Act (No 2) 2015-16 - Non Operating Equity Injection 3,096 - Total departmental 151,923 174,650 Administered3 Appropriation Act (No.1) Capital Budget (ACB) 2012-13 240 240 Appropriation Act (No.1) 2013-14 10 10 Appropriation Act (No.5) 2013-14 10 24,263 Appropriation Act (No.6) SPP 2013-14 23,837 23,837 Appropriation Act (No.1) 2014-15 26,497 35,700 Appropriation Act (No.1) 2014-15 - cash held by the department - 14,563 Appropriation Act (No.1) Capital Budget (ACB) 2014-15 140 140 Appropriation Act (No.2) SPP 2014-15 1 1 Appropriation Act (No.1) 2015-16 - cash held by the department 20,094 - Appropriation Act (No.1) 2015–16 9,888 - Appropriation Act (No.1) Capital Budget (ACB) 2015-16 252 - Appropriation Act (No.3) 2015–16 19,206 - Appropriation Act (No.2) SPP 2015-16 1,059 - Total administered 101,234 98,754

1 The current year departmental unspent annual appropriation is shown inclusive of quarantines which will reduce Appropriation Act (No.1) 2015-16 by $1.190 million and Appropriation Act (No.1) 2014-15 Capital Budget (DCB) by $1.500 million, but are still available at law. 2 The current and prior year departmental unspent annual appropriation is shown inclusive of quarantines against Appropriation Act (No.1) 2013-14 of $5.000 million, Appropriation Act (No.1) 2014-15 of $41.446 million and $2.000 million from prior year recognised through contributed equity against Appropriation Act (No.1) 2014-15 - Capital Budget (DCB) of $0.816 million. 3 The prior year administered unspent annual appropriation is shown inclusive of Section 51 permanent quarantines against Appropriation Act (No.1) 2014-15 of $26.497 million, Appropriation Act (No.1) Capital Budget (ACB) 2014-15 of $0.140 million and Appropriation Act (No.2) SPP 2014-15 of $0.001 million.


PAGE 122


Note 5.1C: Special appropriations ('recoverable GST exclusive')

Authority

Appropriation applied 2016 2015 $'000 $'000

Aboriginal Land Rights (Northern Territory) Act 1976 208,253 165,268 Public Governance, Performance and Accountability Act 2013 s77 6 - Higher Education Support Act 2003 51,333 51,152 Total 259,592 216,420


PAGE 123

DEP

AR

TMEN

T O

F TH

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L ST

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Spe

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Acc

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PAGE 125


1Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Establishing Instrument: Determination 2008/13 Purpose: This account was created to disburse amounts held on trust or otherwise for the benefit of a person other than the Commonwealth. This account is non-interest bearing and the balance is held in the Official Public Account. 2Appropriation: Public Governance, Performance and Accountability Act 2013; section 80 Establishing Instrument: Corporations (Aboriginal and Torres Strait Islander) Act 2006; section 551-20 Purpose: To administer unclaimed monies received by the Registrar of Aboriginal and Torres Strait Islander Corporations. This account is non-interest bearing and the balance is held in the Official Public Account. 3Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Establishing Instrument: Determination 2003/05 Purpose: To provide a source of finance for the liability for the Superannuation Productivity Benefit entitlements owing to tutors contracted under the Aboriginal Tutorial Assistance Scheme (ATAS). This account is non-interest bearing and the balance is held in the Official Public Account. 4Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Establishing Instrument: Determination 2010/06 Purpose: To support the implementation of the Remote Service Delivery National Partnership Agreement. It will provide the Australian Government with the capacity to address high priority projects in a timely way and support projects identified through the local implementation planning process. This account is non-interest bearing and the balance is held in the Official Public Account. 5Appropriation: Public Governance, Performance and Accountability Act 2013; section 78 Establishing Instrument: Determination 2001/11 (amended by Determination 2006/10) Purpose: developing best practice policies and guidelines in spatial data management in Australia and New Zealand and assisting the growth of a spatial information industry in Australia and New Zealand. This account is non-interest bearing and the balance is held in the Official Public Account. 6Appropriation: Public Governance, Performance and Accountability Act 2013; section 80 Establishing Instrument: Aboriginal Land Rights (Northern Territory) Act 1976; sections 62, 63, 64 and 65 Purpose: For the receipt and disbursement of the equivalent of mining royalty monies derived from mining operations on Aboriginal land in the Northern Territory. This account is interest bearing. 7Appropriation: Public Governance, Performance and Accountability Act 2013; section 80 Establishing Instrument: Section 192W of the Aboriginal and Torres Strait Islander Act 2005 Purpose: To provide a secure stream of income to the Indigenous Land Corporation in perpetuity to provide economic, environmental, social and cultural benefits for Aboriginal people and Torres Strait Islanders by assisting in the acquisition and management of an Indigenous land base. This account is interest bearing. Aboriginal Advancement Account The Aboriginal Advancement Account was established under section 80 of the PGPA Act. The purpose of the account is for furthering the social and economic advancement of Aboriginal people living in Victoria. There were no transactions credited or debited to the special account during 2015 and 2016.


PAGE 126


Net Cash Appropriation Arrangements 5.3. 2016 2015 $'000 $'000 Total comprehensive income/(loss) less depreciation/amortisation expenses previously funded through revenue appropriations1 (10,239) 14,513 Plus: depreciation/amortisation expenses previously funded through revenue appropriation (21,092) (28,225)

Total comprehensive loss - as per the Statement of Comprehensive Income (31,331) (13,712) 1 From 2010-11, the Government introduced net cash appropriation arrangements, where revenue appropriations for depreciation/amortisation expenses ceased. Entities now receive a separate capital budget provided through equity appropriations. Capital budgets are to be appropriated in the period when cash payment for capital expenditure is required.

Cash Flow Reconciliation 5.4.Note 5.4A: Cash flow reconciliation Reconciliation of cash and cash equivalents as per Statement of Financial Position to Cash Flow Statement Cash and cash equivalents as per Cash Flow Statement 5,031 12,063 Statement of Financial Position 5,031 12,063 Discrepancy - - Reconciliation of net cost of services to net cash from/(used by) operating activities

Net cost of services (410,367) (546,057) Revenue from Government 384,202 528,523

Adjustments for non-cash items

Net loss from sale of assets 506 31 Depreciation and amortisation 21,092 28,225 Net write-down of non-financial assets 1,734 418 Assets first recognised (38) - Reclassification of non-financial assets - 565

Movements in assets and liabilities Assets

Increase in net receivables 2,765 17,206 (Increase)/decrease in accrued revenue 1,162 (3,238) (Increase)/decrease in prepayments (596) 3,609

Liabilities Increase/(decrease) in employee provisions 3,485 (3,303) Decrease in supplier payables (12,176) (9,343) Increase/(decrease) in grants payable (370) 370 Decrease in other payables (7,538) (13,075) Decrease in other provisions (82) (112)

Net cash from/(used by) operating activities (16,221) 3,819


PAGE 127


2016 2015 $'000 $'000 Note 5.4B: Administered cash flow reconciliation Reconciliation of cash and cash equivalents as per Administered Schedule of Assets and Liabilities to Administered Cash Flow Statement Cash and cash equivalents as per Administered Cash Flow Statement 20,094 17,739

Administered Schedule of Assets and Liabilities 20,094 17,739 Discrepancy - - Reconciliation of net cost of services to net cash from operating activities Net cost of services (1,536,823) (1,465,081) Adjustments for non-cash items

Depreciation/amortisation 373 332 Losses from asset sales - 821 Net write down of non-financial assets 3 - Assets received free of charge - (818) Interest on investments recognised in investing (76,117) (86,688)

Movements in assets and liabilities Assets

Decrease in net receivables 10,526 8,195 Decrease/(increase) in prepayments (3,570) 3,202

Liabilities Increase/(decrease) in supplier payables (4,404) 2,147 Increase/(decrease) in grants payable 967 (183) Increase/(decrease) in other payable 14,234 (2,387) Increase/(decrease) in employee provisions 83 (53) Decrease in former Governors-General benefits (840) (985) Decrease in other provisions (40) (97)

Net cash used by operating activities (1,595,608) (1,541,595) Accounting Policy

Cash is recognised at its nominal amount. Cash and cash equivalents include:

(a) Cash on hand.

(b) Demand deposits in bank accounts with an original maturity of three months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

(c) Cash in special accounts.


PAGE 128


6. People This section describes a range of employment and post employment benefits provided to our people.

Employee Provisions 6.1. 2016 2015 $'000 $'000 Note 6.1A: Employee provisions Annual leave 25,073 25,680 Long service leave 51,178 47,078 Total employee provisions 76,251 72,758

Employee provisions expected to be settled

No more than 12 months 21,684 21,926 More than 12 months 54,567 50,832

Total employee provisions 76,251 72,758 Accounting policy and significant accounting judgements

Employee benefits

Liabilities for ‘short-term employee benefits’ and termination benefits due within 12 months of the end of the reporting period are measured at their nominal amounts.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of PM&C is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including PM&C’s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination.

The liability for long service leave has been determined by reference to the work of an actuary as at 30 June 2015. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and redundancy

A liability is made for separation and redundancy benefit payments. PM&C recognises a liability for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

PM&C's staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap) or another fund of their choice.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance’s administered schedules and notes.

PM&C makes employer contributions to the employees' superannuation scheme. For Commonwealth defined benefits schemes, these rates are determined by an actuary to be sufficient to meet the current cost to the Government. PM&C accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions for the final fortnight of the year.


PAGE 129


2016 2015 $'000 $'000 Note 6.1B: Administered employee provisions

Annual leave 149 112 Long service leave 206 160 Total employee provisions 355 272 Employee provisions expected to be settled


Total employee provisions 355 272 Accounting Policy

The expense and liabilities for services rendered by staff employed in the Prime Minister’s Official Establishments and in support of former Governors-General are recognised as administered items. Accounting policies are consistent with those applied to departmental items. Note 6.1C: Non-cash benefits - former Governors-General benefits Non-cash benefits - former Governors-General 16,037 17,509 Total non-cash benefits - former Governors-General benefits 16,037 17,509

The amounts recognised in the Administered Schedule of Assets and Liabilities are as follows: Present value of unfunded obligations 16,037 17,509 Net liability in the Administered Schedule of Assets and Liabilities 16,037 17,509 Amounts in the Administered Schedule of Assets and Liabilities: Liabilities 16,037 17,509 Net liability in the Administered Schedule of Assets and Liabilities 16,037 17,509

The amounts recognised in the Administered Schedule of Comprehensive Income are as follows:

Finance costs 455 547 Expense 455 547 Net actuarial (gains)/losses recognised in the Administered Reconciliation Schedule (632) 1,903 Changes in the value of the defined benefit obligations are as follows: Net liability at 1 July 17,509 16,594 Finance costs 455 547 Actuarial losses/(gains) (632) 1,903 Benefits paid (1,295) (1,535) Net liability at 30 June 16,037 17,509 Principal actuarial assumptions at the reporting date (expressed as weighted averages): Discount rate at 30 June 1.90% 2.60% Future salary increases 3.50% 4.00% Inflation rate 2.50% 2.50% Rate of expenditure slow down with age 3.00% 3.00%


PAGE 130


Accounting Policy

Former Governors-General benefits

PM&C has responsibility for the administration of non-cash benefits provided to former Governors-General. These entitlements are regarded as post-employment benefits and represent the provision of office facilities, administrative support and transport. A future liability for these benefits is recognised in the administered accounts.


The provision for non-cash former Governors-General entitlements relate to post-employment benefits such as office facilities, administrative support and transport. The future liability for these benefits is based on the actuarial assessment determined by the Australian Government Actuary.

Senior Management Personnel Remuneration 6.2. 2016 2015 $'000 $'000 Short-term employee benefits

Salary 22,720 23,493 Other1 3,322 2,903

Total short-term employee benefits 26,042 26,396 Post-employment benefits

Superannuation 5,004 5,483 Total post-employment benefits 5,004 5,483 Other long-term employee benefits

Annual leave 2,011 1,999 Long-service leave 642 640

Total other long-term benefits 2,653 2,639 Termination benefits

Termination benefits 667 1,264 Total termination benefits 667 1,264 Total senior executive remuneration expenses 34,366 35,783

The total number of senior management personnel included in the above table is 160 (2015: 183). Included in that number is 85 staff who worked for the full-year and 75 staff who worked a part-year (2015: 93 and 90). Senior management on acting arrangements are included where the length of the arrangement is longer than 6 months. 1 The comparative has been restated to align with current year methodology. .


PAGE 131


7. Managing Uncertainties This section analyses how the Department of the Prime Minister and Cabinet manages financial risks within its operating environment.

Contingent Assets and Liabilities 7.1.Note 7.1A: Contingent assets and liabilities Unquantifiable contingent liabilities - claims for damages and costs Proceedings have commenced against the Australian Government by former residents of the Retta Dixon Home in the Northern Territory. The outcome of that litigation cannot be predicted (2015: Nil). Accounting Policy

Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position but are reported in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset, or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when the probability of settlement is greater than remote.

Note 7.1B: Administered contingent assets and liabilities Quantifiable contingent liabilities - claims for damages and costs The Australian Government has appealed a decision by the Federal Court requiring the payment of a grant to the Machado Joseph Disease (MJD) Foundation in the amount of $10.000 million. An outcome is expected to be known early in 2016-17, however it is not possible to determine the financial effect of the outcome on other grants at this time. (2015: Nil).

Financial Instruments 7.2. 2016 2015 $'000 $'000 Note 7.2A: Categories of financial instruments Financial assets Loans and receivables

Cash and cash equivalents 5,031 12,063 Goods and services receivables (net) 4,330 1,685 Accrued revenue 4,235 5,397

Total loans and receivables 13,596 19,145 Total financial assets 13,596 19,145 Financial liabilities Financial liabilities measured at amortised cost

Trade creditors and accruals 22,812 31,714 Grants - 370

Total financial liabilities measured at amortised cost 22,812 32,084 Total financial liabilities 22,812 32,084

Note 7.2B: Net gains or losses on financial assets Loans and receivables

Impairment 89 78 Net losses on loans and receivables 89 78 Net loss on financial assets 89 78

Note 7.2C: Fair value of financial instruments The fair value of financial instruments approximates their carrying amounts.


PAGE 132


Note 7.2D: Credit risk PM&C is exposed to minimal credit risk as loans and receivables are comprised of cash, goods and services receivable and accrued revenue. The maximum exposure to credit risk is the risk that arises from potential default of a debtor. This amount is equal to the total amount of these outstanding receivables, 2016: $4.442 million (2015: $1.763 million). PM&C has assessed the risk of the default on payment and has allocated $0.112 million to an impairment allowance account (2015: $0.078 million). PM&C holds no collateral to mitigate against credit risk. Note 3.1A provides aging of gross receivables past due and an analysis of impaired receivables.

Note 7.2E: Liquidity risk PM&C’s financial liabilities are suppliers and grants payable. The exposure to liquidity risk is based on the notion that the Department will encounter difficulty in meeting its obligations associated with financial liabilities. This is highly unlikely due to appropriation funding and mechanisms available to the Department (e.g. Advance to the Finance Minister) and internal policies and procedures put in place to ensure there are appropriate resources to meet its financial obligations. The maturities for non-derivative financial liabilities of PM&C are within one year in both the current and prior years.

Note 7.2F: Market risk PM&C holds basic financial instruments that do not expose the Department to interest risk, currency risk or other price risk.

Accounting Policy

Impairment of financial assets

Financial assets are assessed for impairment at the end of each reporting period.

Financial liabilities

Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

Financial liabilities are recognised and derecognised upon ‘trade date’.


The relevant government bond rate has been used to discount non-current liabilities.


PAGE 133


Administered – Financial Instruments 7.3. 2016 2015 $'000 $'000 Note 7.3A: Categories of financial instruments Financial assets Held-to-maturity investments Bank term deposits 2,549,016 2,480,243 Total held-to-maturity investments 2,549,016 2,480,243 Loans and receivables Cash and cash equivalents 20,094 14,563 Goods and services receivable 14 72 Interest receivable 32,666 30,920 Grants receivable (net) 5,428 11,805 Total loans and receivables 58,202 57,360 Available for sale financial assets

Aboriginal Hostels Limited 150,419 146,282 Anindilyakwa Land Council 10,309 8,639 Central Land Council 37,113 35,559 Indigenous Land Corporation 295,301 217,821 Indigenous Business Australia 1,242,448 1,185,459

National Australia Day Council Limited 1,713 1,168 Northern Land Council 9,446 10,105 Outback Stores Pty Ltd 43,082 41,496 Tiwi Land Council 1,351 1,613 Torres Strait Regional Authority 75,568 73,876 Wreck Bay Aboriginal Community Council 55,588 55,711

Total available for sale financial assets 1,922,338 1,777,729 Total financial assets 4,529,556 4,315,332 Financial liabilities Financial liabilities measured at amortised cost

Trade creditors and accruals 7,086 11,490 Grants 19,607 18,640 Other payables 14,247 -

Total financial liabilities measured at amortised cost 40,940 30,130 Total financial liabilities 40,940 30,130


PAGE 134


2016 2015 $'000 $'000 Note 7.3B: Net gains or losses on financial instruments Financial assets Held-to-maturity investments Interest revenue 75,815 86,325 Net gains on held-to-maturity investments 75,815 86,325 Loans and receivables Interest revenue 302 363

Reversal of impairment 38 - Impairment (8,051) (11,248) Net losses on loans and receivables (7,711) (10,885) Net gain on financial assets 68,104 75,440 Financial liabilities Financial liabilities measured at amortised cost

Concessional loan discount (13,848) - Net loss on financial liabilities measured at amortised cost (13,848) - Net loss on financial liabilities (13,848) -

Note 7.3C: Fair value of financial instruments The fair value of administered financial instruments approximates their carrying value.

Note 7.3D: Credit risk The administered activities of PM&C are not exposed to a high level of credit risk as the majority of financial assets are cash and cash equivalents, and trade receivables. The maximum amount of credit risk is the risk that arises from potential default of a debtor. This amount is equal to the amount of these outstanding trade receivables, 2016: $0.014 million (2015: $0.072 million). PM&C has assessed the risk of the default on payment of receivables and has allocated amounts to an impairment allowance in relation to grant receivables, 2016: $8.606 million (2015: $11.473 million). PM&C holds no collateral to mitigate against administered credit risk. PM&C has no significant exposures to any concentrations of credit risk.


PAGE 135


Credit quality of financial instruments not past due or individually determined as impaired

Not past due nor

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impaired

Past due or

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or impaired 2016 2015 2016 2015 $'000 $'000 $'000 $'000 Bank term deposits 2,549,016 2,480,243 - - Cash and cash equivalents 20,094 14,563 - - Goods and services receivable 14 72 - - Interest receivable 32,666 30,920 - - Grants receivable 3,138 5,532 10,896 17,746 Equity interest in:

Aboriginal Hostels Limited 150,419 146,282 - - Anindilyakwa Land Council 10,309 8,639 - - Central Land Council 37,113 35,559 - - Indigenous Land Corporation 295,301 217,821 - - Indigenous Business Australia 1,242,448 1,185,459 - - National Australia Day Council Limited 1,713 1,168 - - Northern Land Council 9,446 10,105 - - Outback Stores Pty Ltd 43,082 41,496 - - Tiwi Land Council 1,351 1,613 - - Torres Strait Regional Authority 75,568 73,876 - - Wreck Bay Aboriginal Community Council 55,588 55,711 - -

Total 4,527,266 4,309,059 10,896 17,746 Note 4.1B provides aging of gross receivables past due and an analysis of impaired receivables. Aging of financial assets that were past due but not impaired in 2016 0 to 30 31 to 60 61 to 90 90+ days days days days Total $'000 $'000 $'000 $'000 $'000 Grants receivable 1,755 337 185 13 2,290 Total 1,755 337 185 13 2,290 Aging of financial assets that were past due but not impaired in 2015 0 to 30 31 to 60 61 to 90 90+ days days days days Total $'000 $'000 $'000 $'000 $'000 Grants receivable 1,127 112 494 4,540 6,273 Total 1,127 112 494 4,540 6,273


PAGE 136


Note 7.3E: Liquidity risk PM&C’s administered financial liabilities are supplier and grant payables and a concesional loan comittment. The exposure to liquidity risk is based on the notion that PM&C will encounter difficulty in meeting its obligations associated with administered financial liabilities. This is highly unlikely due to appropriation funding and mechanisms available to PM&C (e.g. Advance to the Finance Minister) and internal policies and procedures put in place to ensure there are appropriate resources to meet its financial obligations. The ATSILA has sufficient capital base available to meet its obligations when they fall due. The ABA investment policy ensures sufficient cash is available to meet payments as they fall due. All non-derivative financial liabilities are expected to mature within one year.

Note 7.3F: Market risk PM&C holds basic financial instruments, available for sale and held-to-maturity investments that do not expose the entity to certain market risks. PM&C is not exposed to currency risk, other price risk or interest rate risk.

Accounting Policy

Financial assets

PM&C classifies its financial assets in the following categories:

• Held-to-maturity investments

• Available for sale financial assets

• Loans and receivables.

All financial assets are expected to be recovered within 12 months except where indicated.

Interest is recognised by applying the effective interest rate.

Loans and receivables

Where loans and receivables are not subject to concessional treatment, they are carried at amortised cost using the effective interest method. Gains and losses due to impairment, derecognition and amortisation are recognised through the Administered Schedule of Comprehensive Income.


PAGE 137

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r lia

bilit

y, e

ither

dire

ctly

(i.e

. as

pric

es) o

r ind

irect

ly (i

.e. d

eriv

ed fr

om p

rices

). Le

vel 3

: In

puts

for t

he a

sset

or l

iabi

lity

that

are

not

bas

ed o

n ob

serv

able

mar

ket d

ata

(uno

bser

vabl

e in

puts

).

Not

e 7.

4A: F

air v

alue

mea

sure

men

ts, v

alua

tion

tech

niqu

es a

nd in

puts

use

d Fa

ir va

lue

mea

sure

men

ts a

t the

end

of t

he

repo

rtin

g pe

riod

For L

evel

s 2

and

3 fa

ir va

lue

mea

sure

men

ts

2016

20

15

Cat

egor

y (L

evel

1, 2

or

31 ) Va

luat

ion

Tech

niqu

e(s)

and

Inpu

ts U

sed

$'00

0 $'

000

12,6

29

19,6

34

2 Ad

just

ed m

arke

t tra

nsac

tions

(pric

e pe

r squ

are

met

re)

Non

-fina

ncia

l ass

ets2

La

nd

Bui

ldin

gs

29,7

20

36,1

58

2 Ad

just

ed m

arke

t tra

nsac

tions

Bu

ildin

gs

10,9

28

15,8

63

3 R

epla

cem

ent C

ost

Leas

ehol

d im

prov

emen

ts

26,9

11

28,8

50

3 R

epla

cem

ent C

ost

Prop

erty

, pla

nt a

nd e

quip

men

t 10

,619

18

,910

3

Con

sum

ed e

cono

mic

ben

efit/

Obs

oles

cenc

e of

ass

et

Tota

l non

-fina

ncia

l ass

ets

90,8

07

119,

415

3,51

0 15

0 2

Adju

sted

mar

ket t

rans

actio

ns

Ass

ets

held

for s

ale3

La

nd

Bui

ldin

gs

5,94

4 28

0 2

Adju

sted

mar

ket t

rans

actio

ns

Tota

l ass

ets

held

for s

ale

9,45

4 43

0


PAGE 138

DEPARTMENT OF THE PRIME MINISTER AND CABINET NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the period ended 30 June 2016 1 Recurring and non-recurring Level 3 fair value measurements - valuation process PM&C procured valuation services from valuation experts and relied on the valuations made by these experts in 2016. The experts provided written assurance that the models developed to value assets are in compliance with accounting standards. PM&C tests the procedures of the valuation model as an internal management review at least once every 12 months. PM&C has a rolling revaluation plan in place which ensures all assets are formally revalued at least once every three to five years. If a particular asset class experiences significant and volatile changes in fair value (i.e. where indicators suggest that the value of the class has changed materially since the previous reporting period), that class is subject to specific valuation in the reporting period, where practicable, regardless of the timing of the last specific valuation.

The valuation technique for portable building assets has changed during the year from the replacement cost method to the adjusted market transaction method. This change is due to the downturn in the mining industry increasing the number of portable building assets currently available for sale and therefore providing a better basis to measure fair value.

Assets that do not transact with enough frequency or transparency to develop objective opinions of value from observable market evidence have been measured utilising the cost (Depreciated Replacement Cost or DRC) approach. Professional judgement has been applied in calculating the consumed economic benefit/asset obsolescence relevant to the asset under consideration.

3 Assets held for sale PM&C is currently marketing 20 residential properties (staff housing) that are no longer essential to operational requirements. The assets are measured at the lesser of their carrying amount and fair value less cost to sell and are valued at a non-recurring basis. All other assets are valued on a recurring basis.

2 Fair value measurement - highest and best use PM&C's assets are held for operational purposes and not held for the purposes of deriving a profit. The current use of all controlled assets is considered their highest and best use.


The fair value of land and buildings and property, plant and equipment has been taken to be the market value of similar properties as determined by an independent qualified valuer. Where an active market does not exist these assets are valued at their replacement cost as determined by an independent qualified valuer.


PAGE 139

DEP

AR

TMEN

T O

F TH

E PR

IME

MIN

ISTE

R A

ND

CA

BIN

ET

NO

TES

TO A

ND

FO

RM

ING

PA

RT

OF

THE

FIN

AN

CIA

L ST

ATE

MEN

TS

for t

he p

erio

d en

ded

30 J

une

2016

Not

e 7.

4B: R

econ

cilia

tion

for r

ecur

ring

Leve

l 3 fa

ir va

lue

mea

sure

men

ts

R

ecur

ring

Leve

l 3 fa

ir va

lue

mea

sure

men

ts -

reco

ncili

atio

n fo

r ass

ets

N

on-fi

nanc

ial a

sset

s

La

nd

Bui

ldin

gs

Leas

ehol

d im

prov

emen

ts

Prop

erty

, pla

nt a

nd

equi

pmen

t To

tal

20

16

2015

20

16

2015

20

16

2015

20

16

2015

20

16

2015

$'00

0 $'

000

$'00

0 $'

000

$'00

0 $'

000

$'00

0 $'

000

$'00

0 $'

000

As

at 1

Jul

y -

4,74

0 15

,863

22

,871

28

,850

31

,846

18

,910

15

,370

63

,623

74

,827

To

tal l

osse

s re

cogn

ised

in n

et c

ost o

f ser

vice

s1 -

- (1

05)

(11,

478)

(4

,924

) (6

,171

) (5

,880

) (6

,721

) (1

0,90

9)

(24,

370)

To

tal g

ains

/(los

ses)

reco

gnis

ed in

oth

er

com

preh

ensi

ve in

com

e2 -

- -

3,48

9 (1

,659

) 3,

112

(463

) 1,

104

(2,1

22)

7,70

5 P

urch

ases

-

- 6,

076

353

1,98

5 63

79

8 6,

395

8,85

9 6,

811

Rec

lass

ifica

tions

-

- (3

54)

- 2,

659

- (1

,968

) -

337

- Tr

ansf

ers

into

leve

l3 -

- -

4,70

2 -

- -

2,76

2 -

7,46

4 Tr

ansf

ers

out o

f lev

el3

- (4

,740

) (1

0,55

2)

(4,0

74)

- -

- -

(10,

552)

(8

,814

) A

dditi

ons

thro

ugh

rest

ruct

ure

- -

- -

- -

(778

) -

(778

) -

Tota

l as

at 3

0 Ju

ne

- -

10,9

28

15,8

63

26,9

11

28,8

50

10,6

19

18,9

10

48,4

58

63,6

23

1 T

hese

loss

es a

re p

rese

nted

in th

e S

tate

men

t of C

ompr

ehen

sive

Inco

me

unde

r 'D

epre

ciat

ion

and

amor

tisat

ion'

, 'Lo

sses

from

ass

et s

ales

' and

'Writ

e-do

wn

and

impa

irmen

t of

asse

ts'

2 The

se g

ains

/(los

ses)

are

pre

sent

ed in

Oth

er C

ompr

ehen

sive

Inco

me

unde

r 'C

hang

es in

ass

et re

valu

atio

n su

rplu

s'.

3 PM

&C

und

erto

ok a

n as

set v

alua

tion

proc

ess

as a

t 30

June

201

6, re

sulti

ng in

mov

emen

ts o

f a n

umbe

r of l

and

and

build

ing

asse

ts b

etw

een

leve

l 2 a

nd le

vel 3

.


PAGE 140

DEP

AR

TMEN

T O

F TH

E PR

IME

MIN

ISTE

R A

ND

CA

BIN

ET

NO

TES

TO A

ND

FO

RM

ING

PA

RT

OF

THE

FIN

AN

CIA

L ST

ATE

MEN

TS

for t

he p

erio

d en

ded

30 J

une

2016

Adm

inis

tere

d –

Fair

Valu

e M

easu

rem

ent

7.5.

Not

e 7.

5A: F

air v

alue

mea

sure

men

ts, v

alua

tion

tech

niqu

e an

d in

puts

use

d

Fa

ir va

lue

mea

sure

men

ts a

t the

end

of t

he re

port

ing

perio

d

20

16

2015

C

ateg

ory

(Lev

el

1, 2

or 3

) Va

luat

ion

Tech

niqu

e(s)

and

Inpu

ts U

sed1

$'

000

$'00

0 Fi

nanc

ial a

sset

s

In

vest

men

ts in

Cor

pora

te C

omm

onw

ealth

ent

ities

an

d co

mpa

nies

1,

922,

338

1,77

7,72

9 3

Cos

t app

roac

h - A

ustra

lian

Gov

ernm

ent's

pro

porti

onal

inte

rest

in th

e ne

t ass

ets

of

the

entit

ies

at b

alan

ce d

ate.

Non

-fina

ncia

l ass

ets

Prop

erty

, pla

nt a

nd e

quip

men

t 1,

100

1,43

7 3

Cos

t app

roac

h - C

onsu

med

eco

nom

ic b

enef

it/O

bsol

esce

nce

of a

sset

1

The

met

hods

and

val

uatio

n te

chni

ques

use

d fo

r the

pur

pose

of m

easu

ring

fair

valu

e of

ass

ets

and

liabi

litie

s ar

e un

chan

ged

from

the

prev

ious

repo

rting

per

iod.

R

ecur

ring

and

non-

recu

rrin

g Le

vel 3

fair

valu

e m

easu

rem

ents

- va

luat

ion

proc

ess

Inve

stm

ents

in C

orpo

rate

Com

mon

wea

lth e

ntiti

es a

nd c

ompa

nies

Fa

ir va

lue

is a

sses

sed

as th

e A

ustra

lian

Gov

ernm

ent's

pro

porti

onal

inte

rest

in th

e ne

t ass

ets

of th

e en

titie

s at

bal

ance

dat

e.

Pro

perty

, pla

nt a

nd e

quip

men

t Th

e fa

ir va

lue

of p

rope

rty, p

lant

and

equ

ipm

ent a

sset

s ha

ve b

een

take

n to

be

the

depr

ecia

ted

repl

acem

ent c

ost a

s as

sess

ed b

y an

inde

pend

ent q

ualif

ied

valu

er. R

epla

cem

ent c

ost i

s m

easu

red

by re

fere

nce

to th

e lo

wes

t cos

t of r

epla

cing

the

asse

t or r

epai

ring

the

asse

t.

Rec

urrin

g Le

vel 3

fair

valu

e m

easu

rem

ents

- se

nsiti

vity

of i

nput

s P

rope

rty, p

lant

and

equ

ipm

ent

The

sign

ifica

nt u

nobs

erva

ble

inpu

ts u

sed

in th

e fa

ir va

lue

mea

sure

men

t of t

he e

ntity

's le

aseh

old

impr

ovem

ents

ass

et c

lass

es re

late

to th

e co

nsum

ed e

cono

mic

ben

efit/

asse

t ob

sole

scen

ce. A

sig

nific

ant i

ncre

ase/

(dec

reas

e) in

this

inpu

t wou

ld re

sult

in a

sig

nific

antly

low

er/(h

ighe

r) fa

ir va

lue

mea

sure

men

t. Fa

ir va

lue

mea

sure

men

t - h

ighe

st a

nd b

est u

se

PM

&C

's a

sset

s ar

e he

ld fo

r ope

ratio

nal p

urpo

ses

and

not h

eld

for t

he p

urpo

ses

of d

eriv

ing

a pr

ofit.

The

cur

rent

use

of a

ll co

ntro

lled

asse

ts is

con

side

red

thei

r hig

hest

and

bes

t use

.


PAGE 141

DEP

AR

TMEN

T O

F TH

E PR

IME

MIN

ISTE

R A

ND

CA

BIN

ET

NO

TES

TO A

ND

FO

RM

ING

PA

RT

OF

THE

FIN

AN

CIA

L ST

ATE

MEN

TS

for t

he p

erio

d en

ded

30 J

une

2016

Not

e 7.

5B: R

econ

cilia

tion

for r

ecur

ring

Leve

l 3 fa

ir va

lue

mea

sure

men

ts

R

ecur

ring

Leve

l 3 fa

ir va

lue

mea

sure

men

ts -

reco

ncili

atio

n fo

r ass

ets

Fi

nanc

ial a

sset

s N

on-fi

nanc

ial a

sset

s

A

dmin

iste

red

inve

stm

ents

Pr

oper

ty, p

lant

and

equ

ipm

ent

20

16

2015

20

16

2015

$'00

0 $'

000

$'00

0 $'

000

As

at 1

Jul

y 1,

777,

729

1,67

8,03

2 1,

437

1,75

3 To

tal l

osse

s re

cogn

ised

in n

et c

ost o

f ser

vice

s1 -

- (3

37)

(1,1

57)

Tota

l gai

ns re

cogn

ised

in A

dmin

iste

red

othe

r com

preh

ensi

ve in

com

e2 14

4,60

9 99

,697

-

22

Pur

chas

es

- -

- 1

Ass

ets

rece

ived

free

of c

harg

e -

- -

818

Tota

l as

at 3

0 Ju

ne

1,92

2,33

8 1,

777,

729

1,

100

1,43

7

1 The

se lo

sses

are

pre

sent

ed in

the

Adm

inis

tere

d S

ched

ule

of C

ompr

ehen

sive

Inco

me

unde

r 'D

epre

ciat

ion'

and

'Los

ses

from

ass

et s

ales

'. 2 T

hese

gai

ns a

re p

rese

nted

in th

e A

dmin

iste

red

Rec

onci

liatio

n S

ched

ule

unde

r ‘A

dmin

iste

red

Inve

stm

ents

’ and

‘Equ

ity in

ject

ion

to C

orpo

rate

Com

mon

wea

lth e

ntiti

es a

nd

com

pani

es’.


PAGE 142


8. Other Information Assets Held in Trust 8.1.

2016 2015 $'000 $'000 Monetary assets - Cash at bank As at 1 July 122 11

Receipts 1 154 Payments (123) (43)

Total as at 30 June - 122 Total monetary assets held in trust - 122

Financial assets held in trust are disclosed in Note 5.2 Special accounts in the account titled Services for Other Entities and Trust Moneys Special Account.


PAGE 143


Restructuring 8.2.

Whole of Government

Service Delivery

Policy (Public Data Policy)

Gov 2.0 and Boardlinks

Cities and the Built

Environment

Administered Australian New

Zealand Land Information

Special Account

DoCA1 DoF2 DoE3 DoCA4

$'000 $'000 $'000 $'000 FUNCTION ASSUMED Assets recognised

Cash - - - 94 Appropriation receivable 594 24 100 - Other non-financial assets - 26 - -

Total assets recognised 594 50 100 94 Liabilities recognised

Employee provisions 594 24 108 - Total liabilities recognised 594 24 108 - Net assets assumed - 26 (8) 94 Income

Recognised by the receiving entity - - 451 - Recognised by the losing entity - - 477 -

Total income assumed - - 928 - Expenses

Recognised by the receiving entity 2,444 410 937 20 Recognised by the losing entity 731 226 1,950 -

Total expenses 3,175 636 2,887 20

2016 Digital

Transformation Office DTO5

$'000 FUNCTION RELINQUISHED Assets relinquished

Property, plant and equipment 988 Total assets relinquished 988 Net assets relinquished 988

1 Whole of Government Service Delivery Policy (Public Data Policy) was assumed from the Department of Communications and Art (DoCA) during 2016 following a restructuring of administrative arrangements, effective 21 September 2015. 2 Gov 2.0 and Boardlinks was assumed from the Department of Finance (DoF) during 2016 following a restructuring of administrative arrangements, effective 21 September 2015. 3 Cities and the Built Environment was assumed from the Department of Environment (DoE) during 2016 following a restructuring of administrative arrangements, effective 18 February 2016. 4

Property, plant and equipment assets were relinquished to the Digital Transformation Office (DTO) during 2015-16, following the Government decision to establish the DTO as an Executive Agency on 29 April 2015.

5

The Administered Australian New Zealand Land Information Special Account was assumed from DoCA during 2016 following a restructuring of administrative arrangements, effective 21 September 2015.


PAGE 144

DEP

AR

TMEN

T O

F TH

E PR

IME

MIN

ISTE

R A

ND

CA

BIN

ET

NO

TES

TO A

ND

FO

RM

ING

PA

RT

OF

THE

FIN

AN

CIA

L ST

ATE

MEN

TS

for t

he p

erio

d en

ded

30 J

une

2016

Rep

ortin

g of

Out

com

es

8.3.

PM

&C

attr

ibut

es c

orpo

rate

sha

red

item

s ba

sed

upon

ave

rage

sta

ffing

leve

ls to

refle

ct fu

ll co

st o

f del

iver

y. T

he b

asis

of a

ttrib

utio

n in

the

tabl

e be

low

is c

onsi

sten

t with

the

basi

s us

ed fo

r th

e B

udge

t.

O

utco

me

1 O

utco

me

2 Pa

ymen

ts to

Cor

pora

te

Com

mon

wea

lth e

ntiti

es

Tota

l

2016

20

15

2016

20

15

2016

20

15

2016

20

15

$'

000

$'00

0 $'

000

$'00

0 $'

000

$'00

0 $'

000

$'00

0 Ex

pens

es

Em

ploy

ee b

enef

its

(67,

450)

(9

4,59

3)

(202

,375

) (1

78,0

10)

(269

,825

) (2

72,6

03)

Sup

plie

rs

(31,

929)

(1

68,7

75)

(100

,077

) (9

8,63

9)

(132

,006

) (2

67,4

14)

Gra

nts

- non

-pro

fit o

rgan

isat

ions

(3

50)

(1,0

47)

(100

) (1

89)

(450

) (1

,236

) D

epre

ciat

ion

and

amor

tisat

ion

(3,1

64)

(9,7

83)

(17,

928)

(1

8,44

2)

(21,

092)

(2

8,22

5)

Fina

nce

cost

s (5

) (9

) (3

3)

(43)

(3

8)

(52)

W

rite-

dow

n an

d Im

pairm

ent o

f ass

ets

(455

) (1

89)

(1,3

68)

(308

)

(1

,823

) (4

97)

Loss

es fr

om a

sset

sal

es

- -

(506

) (3

1)

(506

) (3

1)

Tota

l exp

ense

s (1

03,3

53)

(274

,396

) (3

22,3

87)

(295

,662

) -

- (4

25,7

40)

(570

,058

) O

wn-

sour

ce in

com

e

S

ale

of g

oods

and

rend

erin

g of

ser

vice

s

1,45

5 4,

491

11,0

28

8,79

4

12

,483

13

,285

R

esou

rces

rece

ived

free

of c

harg

e 2,

250

9,72

2 43

7 90

1

2,

687

10,6

23

Gai

n on

reve

rsal

of m

ake

good

48

93

15

5 -

203

93

Rev

enue

from

Gov

ernm

ent

117,

776

239,

665

266,

426

288,

858

384,

202

528,

523

Tota

l ow

n-so

urce

inco

me

121,

529

253,

971

278,

046

298,

553

- -

399,

575

552,

524


PAGE 145

DEP

AR

TMEN

T O

F TH

E PR

IME

MIN

ISTE

R A

ND

CA

BIN

ET

NO

TES

TO A

ND

FO

RM

ING

PA

RT

OF

THE

FIN

AN

CIA

L ST

ATE

MEN

TS

for t

he p

erio

d en

ded

30 J

une

2016

Out

com

e 1

Out

com

e 2

Paym

ents

to C

orpo

rate

C

omm

onw

ealth

ent

ities

To

tal

2016

20

15

2016

20

15

2016

20

15

2016

20

15

$'00

0 $'

000

$'00

0 $'

000

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PAGE 146

DEP

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PAGE 147

DEP

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PAGE 148

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