DEPARTMENT OF FINANCE AND DEREGULATION FINANCIAL STATEMENTS

DEPARTMENT OF FINANCE AND DEREGULATION FINANCIAL STATEMENTS for the period ended 30 June 2012 Department of Finance and Deregulation STATEMENT BY THE SECRETARY AND CHIEF FINANCIAL OFFICER In our opinion, the attached financial statements for the year ended 30 June 2012 are based on properly maintained financial records and give a true and fair view of the matters required by the Finance Minister’s Orders made under the Financial Management and Accountability Act 1997, as amended. ……................................. …………................................ David Tune Secretary Department of Finance and Deregulation Michael Burton Chief Financial Officer Department of Finance and Deregulation August 2012 August 2012 Department of Finance and Deregulation STATEMENT OF COMPREHENSIVE INCOME for the period ended 30 June 2012 30 June 2012 $'000 30 June 2011 $'000 3A 3B 3C 3D 3E 3F 3G 3H 184,354 202,327 18,969 57 62,998 831 37,272 15,241 522,049 169,989 188,136 19,133 2,331 392 1,359 190,887 15,387 587,614 Own-source revenue Rendering of services Insurance premiums Reinsurance and other recoveries Rental income Interest Other Total own-source revenue 4A 4B 4C 4D 4E 4F 113,269 99,698 2,216 88,806 6,051 10,894 85,545 86,411 58,414 84,211 3,979 10,041 320,934 328,601 Gains Other gains Total gains 4G 16,872 16,872 3,005 3,005 Total own-source income 337,806 331,606 Net cost of (contribution by) services 184,243 256,008 4H 235,495 51,252 239,800 (16,208) 5 9,028 42,224 13,463 (29,671) 42,224 (29,671) (58,524) (58,524) (7,442) (7,442) (16,300) (37,113) Notes EXPENSES Employee benefits Suppliers Depreciation and amortisation Finance costs Write-down and impairment of assets Losses from asset sales Insurance claims Other Total expenses LESS: OWN-SOURCE INCOME Revenue from Government Surplus (Deficit) before income tax on continuing operations Income tax expense Surplus (Deficit) after income tax on continuing operations Surplus (Deficit) after income tax OTHER COMPREHENSIVE INCOME Changes in asset revaluation reserves Total other comprehensive income after income tax 6 Total comprehensive income (loss) The above statement should be read in conjunction with the accompanying notes. Department of Finance and Deregulation BALANCE SHEET as at 30 June 2012 Notes 30 June 2012 $'000 30 June 2011 $'000 8A 8B 8C 4,989 785,660 9,414 1,631 809,048 8,772 800,063 819,451 815,243 11,186 582,857 63,272 3,584 371,126 6,486 920,961 29,769 2,466 1,476,142 1,330,808 2,276,205 2,150,259 21,650 59,454 42,296 11,440 19,231 78,054 49,642 4,165 134,840 151,092 58,380 257,059 6,784 322,223 47,477 298,616 6,419 352,512 457,063 503,604 Net assets 1,819,142 1,646,655 EQUITY Contributed equity Asset revaluation reserves Retained surplus Total equity 1,482,290 119,790 217,062 1,293,503 176,616 176,536 1,819,142 1,646,655 ASSETS Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Total financial assets Non-financial assets Land and buildings Property, plant and equipment Investment properties Intangibles Other non-financial assets Total non-financial assets 9A, 9C 9B, 9C 9D 9E, 9F 9G Total assets LIABILITIES Payables Suppliers Unearned revenue Return of equity Other Total payables Provisions Employee Outstanding insurance claims Other Total provisions 10A 10B 10C 10D 11A 11B, 15 11C Total liabilities The above statement should be read in conjunction with the accompanying notes. Department of Finance and Deregulation STATEMENT OF CHANGES IN EQUITY for the period ended 30 June 2012 Opening balance Balance carried forward from previous period Adjustment for changes in accounting policies Adjusted opening balance Comprehensive income Other comprehensive income Surplus (Deficit) for the period Total comprehensive income Transactions with owners Distributions to owners Returns of capital: Returns of contributed equity Contributions by owners Departmental capital budget Equity injection - appropriations Restructuring (refer to Note 12) Sub-total transactions with owners Transfers between equity components Closing balance as at 30 June 2012 Retained earnings 2012 2011 $'000 $'000 Asset revaluation reserves 2012 2011 $'000 $'000 176,536 - 206,207 - 176,616 - 184,058 - 1,293,503 - 1,128,622 - 1,646,655 - 1,518,887 - 176,536 206,207 176,616 184,058 1,293,503 1,128,622 1,646,655 1,518,887 42,224 (58,524) (7,442) - - (58,524) 42,224 42,224 (29,671) (29,671) (58,524) (7,442) - - (16,300) (7,442) (29,671) (37,113) - - - - (33,175) (53,198) (33,175) (53,198) - - - - 16,631 208,000 (2,669) 188,787 14,913 161,796 41,370 164,881 16,631 208,000 (2,669) 188,787 14,913 161,796 41,370 164,881 (1,698) 217,062 176,536 1,698 119,790 176,616 1,482,290 1,293,503 1,819,142 1,646,655 The above statement should be read in conjunction with the accompanying notes. Contributed equity/capital 2012 2011 $'000 $'000 Total equity 2012 2011 $'000 $'000 Department of Finance and Deregulation STATEMENT OF CASH FLOWS for the period ended 30 June 2012 30 June 2012 $'000 30 June 2011 $'000 OPERATING ACTIVITIES Cash received Rendering of services Appropriations Insurance premiums Reinsurance and other recoveries Net cash transferred from the OPA Net GST received Other Total cash received 201,524 226,635 99,698 10,060 6,287 544,204 154,266 233,427 86,411 1,135 118,913 7,178 11,518 612,848 Cash used Employees Suppliers Insurance claims Net cash transferred to OPA Net GST paid Total cash used 173,041 219,380 71,058 28,879 5,418 497,776 163,023 241,791 136,033 540,847 46,428 72,001 204 204 59 2 61 77,945 7,310 40,618 126,569 15,553 2,231 10,807 140,128 252,442 (252,238) 168,719 (168,658) 249,689 249,689 153,593 153,593 40,521 58,626 40,521 209,168 58,626 94,967 3,358 (1,690) 1,631 4,989 3,321 1,631 Notes Net cash from (used by) operating activities 13 INVESTING ACTIVITIES Cash received Proceeds from sales of property, plant and equipment Repayments of loans Total cash received Cash used Purchase of land and buildings Purchase of property, plant and equipment Purchase of intangibles Purchase of investment properties Total cash used Net cash from (used by) investing activities FINANCING ACTIVITIES Cash received Contributed equity Total cash received Cash used Capital repayments Total cash used Net cash from (used by) financing activities Net increase (decrease) in cash held Cash and cash equivalents at the beginning of the reporting period Cash and cash equivalents at the end of the reporting period 8A The above statement should be read in conjunction with the accompanying notes. Department of Finance and Deregulation SCHEDULE OF COMMITMENTS as at 30 June 2012 30 June 2012 $'000 30 June 2011 $'000 229,809 27,772 257,581 539,488 30,999 570,487 173,772 161,290 173,772 161,290 12,848 13,573 129,177 20,881 162,906 177,969 49,044 240,586 Total commitments payable Net commitments receivable (payable) by type 336,678 (79,097) 401,876 168,611 BY MATURITY Commitments receivable One year or less From one to five years Over five years Total commitments receivable 51,154 110,461 95,966 257,581 115,617 230,735 224,135 570,487 Commitments payable Capital commitments One year or less From one to five years Total capital commitments 120,490 53,282 173,772 158,740 2,550 161,290 6,040 6,808 12,848 8,386 5,187 13,573 BY TYPE Commitments receivable Property leases1 Net GST recoverable on commitments Total commitments receivable Commitments payable Capital commitments Land and buildings2 Total capital commitments Operating leases and other commitments Operating leases3 Other commitments: Goods and services contracts Net GST Payable Total operating leases and other commitments Operating leases commitments One year or less From one to five years Total operating lease commitments Other commitments One year or less From one to five years Over five years Total other commitments Total commitments payable 95,115 46,222 8,721 164,606 42,031 20,376 150,058 336,678 227,013 401,876 Net commitments receivable (payable) by maturity (79,097) 168,611 Commitments are GST inclusive where relevant. The above statement should be read in conjunction with the accompanying notes. Department of Finance and Deregulation SCHEDULE OF COMMITMENTS as at 30 June 2012 1 Property lease commitments receivable includes rent to be received from the Australian Government’s non-Defence Commonwealth owned property portfolio within Australia and any sub-lease revenue from other properties. 2 Land and buildings represent outstanding contractual commitments for construction projects. 3 Operating leases comprise: Nature of leases Leases for office accommodation General description of leasing arrangement Leases are for office accommodation for the Department’s business operations. Lease terms and conditions are dependent on market conditions in each location. Leases for motor vehicles - Leases are for Commonwealth cars and motor vehicles for the Department’s employees. No contingent rentals exist. There are no purchase options available to the Department. Leases for computer equipment - Computer equipment for the Department is supplied through an outsourcing arrangement. Computer equipment is either purchased or leased from suppliers. For leased equipment, various schedules exist commencing from March 2005 and expiring in May 2015. The above statement should be read in conjunction with the accompanying notes. Department of Finance and Deregulation SCHEDULE OF CONTINGENCIES as at 30 June 2012 30 June 2012 $'000 30 June 2011 $'000 Contingent assets Claims for damages or costs Total contingent assets 57 57 57 57 Net contingent assets (liabilities) 57 57 Contingencies are GST inclusive where relevant. Details of the above contingent asset are disclosed in Note 14 Contingent assets and liabilities, along with information on significant remote contingencies and contingencies that cannot be quantified. The above statement should be read in conjunction with the accompanying notes. Department of Finance and Deregulation ADMINISTERED SCHEDULE OF COMPREHENSIVE INCOME for the period ended 30 June 2012 Notes 30 June 2012 30 June 2011 $'000 $'000 EXPENSES Employee benefits Superannuation 20A 20B 244,387 6,449,642 202,098 6,349,500 Suppliers Grants 20C 20D 191,816 649 198,077 666 Depreciation and amortisation Write-down and impairment of assets 20E 20F 19,786 3 25,054 13 Finance costs Other expenses 20G 20H 82 4,617,073 133 2,423,493 Losses on financial investments Losses from asset sales 20I 20J 555,995 278 1,500,411 3,165 Unrealised foreign exchange losses Total expenses administered on behalf of Government 20K 2,561 12,082,272 10,702,610 Rendering of services Interest 21A 21B 4,137 115,715 4,746 114,404 Dividends Superannuation contributions 21C 21D 103,660 1,330,498 455,787 1,344,325 Other revenue Total non-taxation revenue 21E 7,968 1,561,978 10,550 1,929,812 Realised foreign exchange gains Gains on financial investments 21F 21G 258,666 1,090,647 1,785,656 721,112 Other gains Total gains 21H 4,094 1,353,407 52,657 2,559,425 Total own-source income administered on behalf of Government 2,915,385 4,489,237 Net cost of (contribution by) services 9,166,887 6,213,373 (9,166,887) (6,213,373) LESS: OWN-SOURCE INCOME Own-source revenue Non-taxation revenue Gains Surplus (Deficit) after income tax OTHER COMPREHENSIVE INCOME (516,291) (298,383) (51,737,891) (52,254,182) 496,476 198,093 (61,421,069) (6,015,280) Changes in administered reserves Movement in carrying amount of superannuation Total other comprehensive income Total comprehensive income (loss) 22A The above schedule should be read in conjunction with the accompanying notes. Department of Finance and Deregulation ADMINISTERED SCHEDULE OF ASSETS AND LIABILITIES as at 30 June 2012 Notes 30 June 2012 30 June 2011 $'000 $'000 ASSETS Financial assets Cash and cash equivalents 23A 744,278 1,084,235 Trade and other receivables Investments 23B 23C 218,630 17,483,610 212,845 21,917,877 Other financial assets Total financial assets 23D 41,486 18,488,004 62,056 23,277,013 Non-financial assets Land and buildings Property, plant and equipment 24A, 24C 24B, 24C 19,205 60,169 23,833 56,439 Intangibles Other non-financial assets Total non-financial assets 24D, 24E 24F 1,310 2,507 132 2,791 83,191 83,195 18,571,195 23,360,208 137,986 1,697,643 78,477 1,838,312 1,835,629 1,916,789 Total assets administered on behalf of Government LIABILITIES Payables Suppliers Other payables Total payables 25A 25B Provisions Employee provisions 26A 199,347 168,028 Superannuation provisions Other provisions Total provisions 26B 26C 149,416,553 20,497 94,885,610 16,749 149,636,397 95,070,387 151,472,026 96,987,176 (132,900,831) (73,626,968) Total liabilities administered on behalf of Government Net administered assets / (liabilities) The above schedule should be read in conjunction with the accompanying notes. Department of Finance and Deregulation ADMINISTERED RECONCILIATION SCHEDULE for the period ended 30 June 2012 30 June 2012 $'000 30 June 2011 $'000 Opening administered assets less administered liabilities as at 1 July (73,626,968) (69,313,938) Adjusted opening administered assets less liabilities (73,626,968) (69,313,938) Surplus (deficit) items: Plus: Administered income Less: Administered expenses (non CAC) 2,915,385 (12,082,272) 4,489,237 (10,702,610) 4,236 (51,737,891) (520,527) 3,155 496,476 (301,538) 240,330 5,623 5,167,721 (2,570,623) (461,815) 553,150,559 (553,384,589) 230,689 1,330,625 3,818,638 (3,195,720) (1,230,433) 537,118,955 (536,370,504) (132,900,831) (73,626,968) Other comprehensive income: Assets and make good valuation Movement in carrying amount of superannuation Administered revaluations taken to/from reserves Administered transfers to/from Australian Government: Appropriation transfers from Official Public Account: Annual appropriations Administered assets and liabilities appropriations Special appropriations Transfers to Official Public Account Equity distribution Transfers from other entities (Whole-of-Government) Transfers to other entities (Whole-of-Government) Closing administered assets less administered liabilities as at 30 June The above schedule should be read in conjunction with the accompanying notes. Department of Finance and Deregulation ADMINISTERED CASH FLOWS STATEMENT for the period ended 30 June 2012 30 June 2012 30 June 2011 $'000 $'000 Rendering of services Superannuation contributions - employers 3,963 1,341,078 2,397 1,344,325 Superannuation funds contribution Net gains from sale of financial instruments held at fair value 1,354,716 50,823 1,324,999 145,609 Net realised exchange gains Interest 258,666 108,404 1,418,562 109,309 Dividends Other Total cash received 114,660 8,395 462,584 63,207 3,240,705 4,870,992 Notes OPERATING ACTIVITIES Cash received Cash used 212,216 202,403 Suppliers Grants - Nation-building Funds (NBF) distribution 187,622 4,324,072 201,359 2,420,672 Grants - other Superannuation 1,349 5,011,306 3,487 4,987,451 Settlements Total cash used 286,800 10,023,365 7,815,372 (6,782,660) (2,944,380) 87 31,309,861 317 40,971,799 10,428 5,400 11,328 6,606 31,325,776 6,955 40,997,005 4,308 10,552 3,347 4,639 1,335 26,872,318 176 38,971,010 26,888,513 4,437,263 38,979,172 2,017,833 Employees Net cash from (used by) operating activities 27 INVESTING ACTIVITIES Cash received Proceeds from sales of property, plant and equipment Proceeds from sale of investments Repayments of advances and loans Matured Government securities Proceeds from liquidation of administered investments Total cash received Cash used Purchase of property, plant and equipment Purchase of land and buildings Purchase of intangibles Purchase of investments Total cash used Net cash from (used by) investing activities The above schedule should be read in conjunction with the accompanying notes. Department of Finance and Deregulation ADMINISTERED CASH FLOWS STATEMENT for the period ended 30 June 2012 30 June 2012 30 June 2011 $'000 $'000 1,354,716 1,330,625 1,354,716 1,330,625 NBF equity distribution Total cash used 461,815 1,230,433 461,815 1,230,433 Net cash from (used by) financing activities 892,901 100,192 (1,452,496) (826,355) 1,084,235 (1,520,796) 553,008,793 (553,384,589) 538,948,283 (536,370,504) (375,796) 2,577,779 FINANCING ACTIVITIES Cash received Appropriations - contributed equity Total cash received Cash used Net increase (decrease) in cash held Cash and cash equivalents at the beginning of the reporting period Official Public Account (Whole-of-Government) Transfers from other entities Transfers to other entities Net cash received (transferred) from other entities Finance administered Cash from Official Public Account - for appropriations Cash to Official Public Account - for appropriations Net cash received from Official Public Account Cash and cash equivalents at the end of the reporting period 23A The above schedule should be read in conjunction with the accompanying notes. 4,058,958 4,049,327 (2,570,623) 1,488,335 (3,195,720) 853,607 744,278 1,084,235 Department of Finance and Deregulation SCHEDULE OF ADMINISTERED COMMITMENTS as at 30 June 2012 30 June 2012 $'000 30 June 2011 $'000 15,024 7,223 15,024 7,223 - 1,319 - 1,319 159,969 6,663 66,837 13,231 166,632 166,632 80,068 81,387 (151,608) (74,164) 3,373 3,226 7,027 4,624 3,827 170 15,024 7,223 - 1,319 - 1,319 32,932 26,620 76,173 50,864 38,348 1,869 159,969 66,837 Goods and services contracts One year or less From one to five years 5,545 1,118 8,845 4,386 Over five years Total goods and services contracts 6,663 13,231 166,632 81,387 (151,608) (74,164) BY TYPE Commitments receivable GST recoverable on commitments Total commitments receivable Commitments payable Capital commitments Property, plant and equipment Total capital commitments Other commitments Operating leases1 Goods and services contracts Total other commitments Total commitments payable Net commitments by type BY MATURITY Commitments receivable One year or less From one to five years Over five years Total commitments receivable Commitments payable Capital commitments One year or less Total capital commitments Operating lease commitments One year or less From one to five years Over five years Total operating lease commitments Total commitments payable Net commitments by maturity Commitments are GST inclusive where relevant. The above schedule should be read in conjunction with the accompanying notes. Department of Finance and Deregulation SCHEDULE OF ADMINISTERED COMMITMENTS (CONTINUED) as at 30 June 2012 1Operating leases comprise: Nature of leases General description of leasing arrangement Leases for office accommodation - Leases for motor vehicles - Leases for computer equipment - - Leases are for office accommodation for electorate offices for Senators and Members of Parliament. Lease terms and conditions are dependent on market conditions in each location. Leases of motor vehicles are for Senators, Members of Parliament and some of their staff. No contingent rentals exist. There are no purchase options available to the Department. Computer equipment for electorate offices is supplied through an outsourcing arrangement. The above schedule should be read in conjunction with the accompanying notes. Department of Finance and Deregulation SCHEDULE OF ADMINISTERED CONTINGENCIES as at 30 June 2012 Administered contingent liabilities Indemnities Other Total administered contingent liabilities Net administered contingent assets (liabilities) 30 June 2012 $'000 30 June 2011 $'000 - 565,208 10,973 10,973 565,208 (10,973) (565,208) Administered contingencies are GST inclusive where relevant. Details of each class of contingent liabilities and contingent assets in the above table are disclosed in Note 28, along with information on significant remote contingencies that cannot be quantified. Statement of activities administered on behalf of Government The major administered activities of the Department are directed towards achieving the three outcomes described in Note 1 to the financial statements. The major financial activities include investments, entitlements and services provided to Members of Parliament and Senators, grants and superannuation benefits payable, fees and interest and loans. Details of planned activities for the year can be found in the Agency Portfolio Budget and Portfolio Additional Estimates Statements for 2012-13 that have been tabled in the Parliament. The above schedule should be read in conjunction with the accompanying notes. Notes to and forming part of the financial statements Note 1 Significant accounting policies ......................................................................................................... 18 Note 2 Events after balance sheet date ...................................................................................................... 33 Note 3 Expenses ......................................................................................................................................... 34 Note 4 Income ............................................................................................................................................. 37 Note 5 Income tax expense ......................................................................................................................... 39 Note 6 Other comprehensive income .......................................................................................................... 39 Note 7 Business activities ........................................................................................................................... 40 Note 8 Financial assets ............................................................................................................................... 41 Note 9 Non-financial assets ........................................................................................................................ 43 Note 10 Payables .......................................................................................................................................... 50 Note 11 Provisions ........................................................................................................................................ 51 Note 12 Restructuring ................................................................................................................................... 52 Note 13 Cash flow reconciliation ................................................................................................................... 54 Note 14 Contingent assets and liabilities ...................................................................................................... 55 Note 15 General insurance activities............................................................................................................. 57 Note 16 Senior executive remuneration ........................................................................................................ 65 Note 17 Remuneration of auditors ................................................................................................................ 70 Note 18 Financial instruments ....................................................................................................................... 71 Note 19 Financial assets reconciliation ......................................................................................................... 75 Note 20 Administered expenses ................................................................................................................... 76 Note 21 Administered income ....................................................................................................................... 79 Note 22 Administered other comprehensive income .................................................................................... 81 Note 23 Administered financial assets .......................................................................................................... 82 Note 24 Administered non-financial assets ................................................................................................... 86 Note 25 Administered payables .................................................................................................................... 91 Note 26 Administered provisions ................................................................................................................... 92 Note 27 Administered cash flow reconciliation .............................................................................................. 94 Note 28 Administered contingent assets and liabilities ................................................................................. 95 Note 29 Administered financial instruments .................................................................................................. 96 Note 30 Administered financial assets reconciliation .................................................................................. 109 Note 31 Superannuation ............................................................................................................................. 110 Note 32 Appropriations ................................................................................................................................ 134 Note 33 Special accounts and FMA Act Section 39 .................................................................................... 146 Note 34 Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund ....... 151 Note 35 Compensation and debt relief ........................................................................................................ 155 Note 36 Reporting of outcomes................................................................................................................... 156 Note 37 Competitive neutrality and cost recovery....................................................................................... 161 Note 38 Net cash appropriation arrangements ........................................................................................... 161 Notes to and forming part of the financial statements Note 1 Significant accounting policies 1.1 Objectives of the Department of Finance and Deregulation The Department of Finance and Deregulation (the Department) is an Australian Government controlled not-forprofit entity. The objectives of the Department are detailed in the body of its Annual Report. The Department is structured to meet the following three outcomes: Outcome 1: Informed decisions on Government finances and continuous improvement in regulation making through: budgetary management and advice; transparent financial reporting; a robust financial framework; and best practice regulatory processes. Outcome 2: Improved Government administration and operations through systems, policy and advice on: procurement; Commonwealth property management and construction; Government enterprises; risk management; and application of information and communications technology. Outcome 3: Support for Parliamentarians and others with entitlements and organisations as approved by Government through the delivery of entitlements and targeted assistance. The Department's activities contributing towards these outcomes are classified as either departmental or administered. Departmental activities involve the use of assets, liabilities, revenues and expenses controlled or incurred by the Department in its own right. Administered activities involve the management or oversight by the Department, on behalf of the Government, of items controlled or incurred by the Government. Following a review of agency outcomes in 2012, the Department has revised the wording for its outcomes 1 and 2. The Department will report its activities against the revised outcomes in 2012-13. Outcome 1: Informed decisions on Government finances and regulatory practices through: policy advice; implementing frameworks; and providing financial advice, guidance and assurance. Outcome 2: Effective Government advice, administration and operations through: oversight of Government Business Enterprises; Commonwealth property management and construction; risk management; and providing ICT services. Outcome 3: Support for Parliamentarians and others with entitlements and organisations as approved by Government through the delivery of entitlements and targeted assistance. The continued existence of the Department in its present form and with its present programs is dependent on Government policy and on continuing appropriations by the Parliament for the Department's administration and programs. 1.2 Basis of preparation of the financial statements The financial statements are general purpose financial statements and are required by section 49 of the Financial Management and Accountability Act 1997. The financial statements and notes have been prepared in accordance with:  Finance Minister's Orders (FMOs) for reporting periods ending on or after 1 July 2011; and  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 are in accordance with the historical cost convention, except for certain assets and liabilities 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 values are rounded to the nearest thousand dollars unless otherwise specified. Unless an alternative treatment is specifically required by an accounting standard or the FMOs, assets and liabilities are recognised in the Balance Sheet when and only when it is probable that future economic benefits will flow to the Department or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under agreements equally proportionately unperformed are not recognised unless required by an accounting standard. Liabilities and assets that are unrecognised are reported in the Schedule of Commitments and the Schedule of Contingencies (other than unquantifiable contingencies, which are reported at Note 14). Notes to and forming part of the financial statements Unless an alternative treatment is specifically required by an accounting standard, income and expenses are recognised in the Statement of Comprehensive Income when and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured. 1.3 Significant accounting judgement and estimates In the process of applying the accounting policies listed in this note, the Department has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:  The fair value of land and buildings and investment properties has been taken to be the market value of similar properties or discounted cash flows as determined by an independent valuer. Further information can be found in Note 1.18.  The Department recognises a departmental liability for outstanding Comcover insurance claims. These liabilities are based on an actuarial assessment as at 30 June 2012. Further details on the valuation methodology are provided at Note 1.22.  Leave provisions also involve actuarial assumptions based on the likely tenure of existing staff, patterns of leave claims and payouts, future salary movements and future discount rates. See Note 1.8 for further information.  The Department recognises administered liabilities for the Australian Government’s unfunded civilian superannuation schemes. These liabilities are based on an actuarial assessment as at 30 June 2012. Further details on the valuation methodology are provided at Note 1.25.  The Department has made judgements in relation to the valuation of administered investments and other financial investments. Further information on administered investments is located at Note 1.24.  The Department has made judgements in relation to the valuation of post employment benefits such as entitlements of former Prime Ministers, former Senators and Members and Life Gold Pass holders. The valuation is based on an actuarial assessment which is conducted on a 3 yearly cycle or in the event of a significant demographic change. No other accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to carrying amounts of assets and liabilities within the next accounting period. 1.4 New Australian Accounting Standards Adoption of new Australian Accounting Standard requirements No new accounting standard has been adopted earlier than the application date as stated in the standard. The following new standards issued by the Australian Accounting Standards Board (AASB) prior to the signing of the statements by the Secretary and Chief Financial Officer are applicable to the current reporting period and did not have a financial impact on the entity: AASB 7 Financial Instruments: Disclosures AASB 1054 Australian Additional Disclosures Other new accounting standards, revised standards or amending standards that were issued prior to the signing of the statement by the Secretary and Chief Financial Officers and are applicable to the current reporting period did not have a financial impact and are not expected to have a future financial impact on the entity. Future Australian Accounting Standard requirements The following new standards issued by the AASB prior to the signing of the statements by the Secretary and Chief Financial Officer will be applicable to future reporting periods but won’t have a financial impact on the entity: AASB 9 Financial Instruments AASB 13 Fair Value Measurement AASB 119 Employee Benefits AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 AASB 2012-1 Amendments to Australian Accounting Standards - Fair Value Measurement - Reduced Disclosure Requirements AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities Notes to and forming part of the financial statements AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities Other new accounting standards, revised standards or amending standards that were issued prior to the signing of the statement by the Secretary and Chief Financial Officer and are applicable to future reporting periods are not expected to have a future financial impact on the entity. 1.5 Transactions with the Government as owner Equity injections Amounts appropriated that are designated as 'equity injections' for a year (less any formal reductions) and Departmental Capital Budgets (DCB) are recognised directly in contributed equity in that year. Restructuring of administrative arrangements Net assets received from or relinquished to another Australian Government agency or authority under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity. Other distributions to owners The FMOs require that distributions to owners be debited to contributed equity unless in the nature of a dividend. Proceeds from the sale of property are recognised as a return on equity. On an annual basis, the Property Special Account is reviewed to ensure that an adequate cash balance is maintained and excess funds are returned to the Official Public Account (OPA). In the 2011-12 financial year, by agreement, the Department returned $33.2 million to the OPA (2010-11: $53.2 million). This represents sale proceeds, returns of excess funds and returns of unused appropriations. 1.6 Revenue All revenues referred to in the notes to the financial statements are revenues relating to the core operating activities of the Department. Revenues from general insurance activities and superannuation schemes are addressed in Notes 1.22 and 1.25, respectively. Details of revenue amounts are given in Note 4 (Departmental) and Note 21 (Administered). Revenues from Government Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the Department gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is only recognised when it is earned. Appropriations receivable are recognised at their nominal amounts. Resources received free of charge 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. Rent Rental revenue from the non-Defence domestic property portfolio is recognised systematically over the period of the lease. Other types of revenue 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 and the probable economic benefits from the transactions will flow to the Department. Notes to and forming part of the financial statements 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 transactions. 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. 1.7 Gains Resources received free of charge Resources received free of charge are recognised as gains, 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 or a decrease of the liability. Resources received free of charge are recognised as either revenue or gains depending on their nature. Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government agency as a consequence of a restructuring of administrative arrangements (refer to Note 1.5). Sale of assets Gains from disposal of assets are recognised when control of the asset has passed to the buyer. 1.8 Employee benefits This policy applies to departmental, administered COMCAR, and other administered employee benefits. Other administered employee benefits relate to the entitlements owed to Senators, Members of Parliament and their staff, the administration of which is managed by the Ministerial and Parliamentary Services Division within the Department. Administered employee liabilities relating to superannuation schemes are addressed at Note 1.25. Wages and salaries Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled. Liabilities for 'short-term employee benefits' (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of the end of the reporting period are measured at their nominal amounts. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability. Other long term employee benefit liabilities are measured as the net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly. Leave The liability for employee benefits includes provision for annual leave and long service leave. No provision is made for personal leave as all personal leave is non-vesting and the average personal leave taken in future years by employees of the Department is estimated to be less than the annual entitlement to the 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 the Department'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 2012. The estimate of the present value of the liability takes into account expected attrition rates and pay increases through promotion and inflation as at 30 June 2012. Separation and redundancy Provision is made for separation and redundancy benefit payments. The Department recognises a provision 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. Notes to and forming part of the financial statements Superannuation Employees of the Department are members of either the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), the PSS Accumulation Plan (PSSap) or other superannuation funds held outside the Commonwealth. The CSS and PSS are defined benefit schemes for the Commonwealth. The PSSap is a defined contribution scheme. The liability for the defined benefits is recognised in the administered financial statements and notes (refer Note 1.25) and are settled by the Australian Government in due course or as they become payable. The Department makes employer contributions to the employees’ superannuation scheme at rates determined by an actuary to be sufficient to meet the current costs to the Government. The Department accounts for the contributions as if they were contributions to defined contribution plans. The superannuation liability recognised at 30 June represents outstanding contributions for the final fortnight of the year. 1.9 Leases A distinction is made between finance leases and operating leases. Finance leases Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased assets. Where an asset is acquired by means of a finance lease, the asset is capitalised at either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a corresponding liability is recognised at the same time and for the same amount. The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease unless the asset has been classified as an investment property. Lease payments are allocated between the principal component and interest expense. The Department has no finance leases in the current or comparative year. Operating leases An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all the risks and rewards incidental to ownership. Operating lease payments are expensed on a straight-line basis, which is representative of the pattern of benefits derived from the use of leased assets. Lease incentives Lease incentives received in the form of 'free' leasehold improvements and rent holidays are also recognised as liabilities, and are reduced by allocating the lease payments between rental expense and reduction of the liability when rental payments occur. 1.10 Borrowing costs All borrowing costs are expensed as incurred. 1.11 Foreign currency Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. 1.12 Cash Cash and cash equivalents include cash on hand, cash held with outsiders and demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash is recognised at its nominal amount. Cash or cash equivalent balances that are held for the longer term for investment purposes are classified as investments. Notes to and forming part of the financial statements 1.13 Financial assets The Department classifies its financial assets in the following categories:     financial assets at fair value through the Statement of Comprehensive Income; held-to-maturity investments; available-for-sale financial assets; and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised when control over future economic benefits is established and the amount of the benefit can be reliably measured. Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or the asset is transferred to another entity. In the case of a transfer to another entity, the risks and rewards of ownership are also transferred. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis except for financial assets that are recognised at fair value through profit and loss. Financial assets at fair value through profit and loss Financial assets are classified as financial assets at fair value through profit and loss where the financial assets:    have been acquired principally for the purpose of selling in the near future; are parts of an identified portfolio of financial instruments that the Department manages together and have a recent actual pattern of short-term profit taking; or are derivatives that are not designated and effective as a hedging instrument. Assets in this category are classified as current assets. Financial assets at fair value through profit and loss are stated at fair value, with any resultant gain or loss recognised in profit and loss. The net gain or loss recognised in profit and loss incorporates any interest earned on the financial asset. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the asset within 12 months after the reporting period. Available-for-sale financial assets are recorded at fair value. Gains and losses arising from changes in fair value are recognised directly in reserves (equity) with the exception of impairment losses. Interest is calculated using the effective interest method and foreign exchange gains and losses on monetary assets are recognised directly in profit and loss. Where the asset is disposed of or is determined to be impaired, part (or all) of the cumulative gain or loss previously recognised in the reserve is included in profit and loss for the period. Where a reliable fair value cannot be established for unlisted investments in equity instruments, these instruments are valued at cost. The Department has no such instruments. Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Department has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. Notes to and forming part of the financial statements Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The fair value of short-term receivables is the transaction cost or the face value because there is no interest rate applicable and subsequent measurement is not required as the effect of discounting is not material. Impairment of financial assets Financial assets are assessed for impairment at the end of each reporting period.  Financial assets held at amortised cost - if there is objective evidence that an impairment loss has been incurred for loans and receivables or held-to-maturity investments held at amortised cost, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the asset's original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income.  Available-for-sale financial assets - if there is objective evidence that an impairment loss on an available-for-sale financial asset has been incurred, the amount of the difference between its cost, less principal repayments and amortisation, and its current fair value, less any impairment loss previously recognised in expenses, is transferred from equity to the Statement of Comprehensive Income.  Financial assets held at cost - if there is objective evidence that an impairment loss has been incurred the amount of the impairment loss is the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate for similar assets. 1.14 Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit and loss or other financial liabilities (at amortised cost). Financial liabilities are recognised and derecognised upon ‘trade date’. Financial liabilities at fair value through profit and loss Financial liabilities at fair value through profit and loss are initially measured at fair value. Subsequent fair value adjustments are recognised in the profit and loss. The net gain or loss recognised in the profit and loss incorporates any interest paid on the financial liability. Other financial liabilities (at amortised cost) Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent goods or services have been received (and irrespective of having been invoiced). 1.15 Contingent liabilities and contingent assets Contingent liabilities and contingent assets are not recognised in the Balance Sheet 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 a liability or an asset in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain, and contingent liabilities are recognised when settlement is greater than remote. 1.16 Financial guarantee contracts Financial guarantee contracts are accounted for in accordance with AASB 139 Financial Instruments: Recognition and Measurement. They are not treated as a contingent liability, as they are regarded as financial instruments outside the scope of AASB 137 Provisions, Contingent Liabilities and Contingent Assets. Notes to and forming part of the financial statements 1.17 Acquisition of assets Assets are recorded at cost on acquisition, except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate. Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amounts at which they were recognised in the transfer or agency's accounts immediately prior to the restructuring. 1.18 Property, plant and equipment Asset recognition threshold Purchases of property, plant and equipment are recognised initially at cost in the Balance Sheet, except for purchases costing less than $5,000. These are expensed in the year of acquisition, other than 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 the 'make good' provision for properties leased by the Department where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Department's leasehold improvements with a corresponding provision for the ‘make good’ costs. Revaluations Fair values for each class of asset are determined as shown below: Asset class Land Buildings (excluding leasehold improvements) Investment properties Leasehold improvements Plant and equipment Fair value measured at: Market selling price Market selling price or discounted cash flows Market selling price or discounted cash flows Depreciated replacement cost Market selling price or depreciated replacement cost Following initial recognition at cost, property, plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets fair values’ as at reporting date. The regularity of independent valuations depends upon the volatility of movements in market values for the relevant assets. Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the Statement of Comprehensive Income or has been classified as an investment property. Revaluation decrements for a class of assets are recognised directly through the Statement of Comprehensive Income except to the extent that they reverse a previous revaluation increment for that class or the asset. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount. Depreciation Depreciable property, plant and equipment assets are written down to their estimated residual values over their estimated useful lives to the Department using, in all cases, the straight-line method of depreciation. Depreciation commences from the time the assets are first held ready for use. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease. The useful life for decommissioning, restoration and make-good is estimated from the date the liability arises to the date the obligation is expected to be met. The useful life of each asset is the estimated period of time over which it is expected to be able to be used or the benefits represented by it are expected to be derived by the Department. Notes to and forming part of the financial statements Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current and future reporting periods as appropriate. Residual values are re-estimated for a change in prices only when assets are revalued. Depreciation rates applying to each class of depreciable asset are based on the following useful lives: 2012 Buildings on freehold land 3 to 100 years 2011 3 to 100 years Leasehold improvements Lesser of useful life or lease term Lesser of useful life or lease term Plant and equipment 2 to 45 years 2 to 45 years The aggregate amount of depreciation and amortisation allocated for each class of asset during the reporting period is disclosed in Note 3C (Departmental) and Note 20E (Administered). Gain or loss on disposal The gain or loss on disposal of land, buildings, property, and plant and equipment is determined as the difference between the carrying amount of the asset at the time of disposal and the proceeds from disposal, less selling costs. Buildings under construction Buildings under construction are classified as construction work in progress under land and buildings. They are measured at cost, and are not depreciated. Impairment of non-current assets All non financial assets were assessed for impairment at 30 June 2012. 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. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset's ability to generate future cash flows, and the asset would be replaced if the Department were deprived of the asset, its value in use is taken to be its depreciated replacement cost. 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. 1.19 Investment property A number of the Department's non-Defence properties within Australia are classified as investment properties. These properties are held at fair value, with any changes in the fair value recorded through the Statement of Comprehensive Income. Investment properties are not depreciated and are valued annually. 1.20 Intangible assets The Department's intangible assets comprise internally developed and externally acquired software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses. Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the Department’s software are 3 to 7 years (2010-11: 3 to 7 years). All software assets were assessed for indication of impairment as at 30 June 2012. 1.21 Unearned income Deposits and prepayments for services yet to be rendered are recognised as a liability at the time of receipt. Revenues are recognised in relation to these items at the time the service is provided. Notes to and forming part of the financial statements 1.22 General insurance activities Comcover is the Commonwealth's self managed fund for insurable risks. Comcover operates under the section 20 Special Account provision of the Financial Management and Accountability Act 1997. The Department and other Australian Government agencies in the General Government Sector have insured with the fund for risks other than workers’ compensation which is dealt with through continuing arrangements with Comcare. Comcover’s agreements with insured agencies meet the substance of the definition of General Insurance Contracts under AASB 1023 General Insurance Contracts and the Department has fully complied with AASB 1023 in relation to all transactions, valuations of assets and liabilities and disclosures. Accounting policies in relation to these items are as follows: Premiums Premiums are amounts charged to fund members. The earned portion of premiums received and receivable is recognised as revenue. Premiums are treated as earned from the date of attachment of risk. The pattern of recognition over the policy or indemnity period is based on time, which is considered to closely approximate the pattern of risks underwritten. Unearned premiums are determined using the pro-rata method. Outwards reinsurance The Department no longer undertakes significant reinsurance. To the extent it does, premiums ceded to reinsurers are recognised as an expense in accordance with the pattern of reinsurance service received. Reinsurance recoveries are recognised as revenue for claims incurred. Recovery receivables are measured as the present value of the expected future receipts, calculated on the same basis as the liability for outstanding claims. Claims The liability for outstanding claims covers the expected future payments in relation to claims reported but not yet paid, claims incurred but not yet reported (“IBNR”), claims incurred but not enough reported (“IBNER”) and anticipated direct and indirect costs of settling these claims. The liability for outstanding claims is subject to an annual actuarial review. The general approach to the actuarial estimation of outstanding claims is to analyse all available experience. Based on this review, the expected future payments are determined and discounted to present value using the risk free rate. The provision for the outstanding claims liability also contains a risk margin to reflect the inherent uncertainty in the central estimate. The Department’s policy is to adopt a risk margin to increase the probability that the net liability is adequately provided to a 75 per cent confidence level. General insurance disclosure and actuarial assumptions are included in Note 15. 1.23 Taxation / competitive neutrality The Department is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST). Income tax equivalent amounts are recognised as noted below under Competitive Neutrality. GST policy Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable from the Australian Taxation Office. Receivables, payables, commitments and contingencies are reported inclusive of GST. Competitive neutrality The Department applies the principles of the Australian Government's Competitive Neutrality Policy Statement to its significant business operations, namely the non-Defence domestic property operations and Comcover. The taxation equivalent regime is applied as a competitive neutrality charge calculated annually based upon accounting income (adjusted for significant non-taxable items) for the Department's non-Defence domestic property operations and Comcover. The tax equivalent amounts shown in Note 3H and Note 5 are returned to the Official Public Account. The Department recognises these transactions according to their nature. Regulatory, debt, rates and other equivalents are recognised as part of other expenses and income tax equivalents are reported separately as income tax expense in the Statement of Comprehensive Income. Notes to and forming part of the financial statements 1.24 Reporting of Administered activities Administered assets, liabilities, revenue, expenses and cash flows are disclosed in the administered financial statements and related notes. Except where otherwise stated below, administered items are accounted for on the same basis using the same policies as for departmental items, including the application of Australian Accounting Standards. Administered items are controlled by the Government and managed or overseen by the Department on behalf of the Government. Administered items include:        investments for former superannuation schemes and controlled entities; civilian superannuation schemes for Australian Government employees; Nation-building Funds; entitlements and services provided to current and former Members of Parliament; grants and benefits payable; fees, fines and interest; and loans. Funding flows to and from the Official Public Account with entities within the General Government Sector (GGS) are recognised in the Administered Cash Flow Statement and the Administered Reconciliation Schedule. The purpose of separating administered and departmental items is to provide for the separate scrutiny of the items and enable assessment of the Department's administrative efficiency in providing goods and services. Administered items are distinguished from agency items in the financial statements by shading. Administered cash transfers to and from the Official Public Account Revenue collected by the Department for use by the Government rather than by the Department is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of the Government. These transfers to and from the OPA are adjustments to the administered cash held by the Department on behalf of the Government and reported as such in the Administered Cash Flow Statement and the Administered Reconciliation Schedule. Revenue All administered revenues are revenues relating to ordinary activities performed by the Department on behalf of the Australian Government. Interest revenue is recognised on a time proportional basis taking into account the interest rates applicable to the financial assets. Dividend revenue represents dividends received from entities, which mainly relate to administered investments of the Department. Dividends are recognised when the right to receive the payment is established. Grants The Department administers a number of grant schemes on behalf of the Government. Grant liabilities are recognised to the extent that:   the services required to be performed by the grantee have been performed; or the grant eligibility criteria have been satisfied, but payments due have not been made. A commitment is recorded when the Government enters into an agreement to make these grants but services have not been performed or criteria satisfied. Where grant moneys are paid in advance of performance or eligibility, a prepayment is recognised. Payments made for non-reciprocal grants, where those grants are not subject to future criteria, are fully expensed in the year of payment. Notes to and forming part of the financial statements Administered investments Administered investments in controlled entities are not consolidated because their consolidation is relevant only at the Whole-of-Government level. Administered investments other than those held for sale are measured at their fair value as at 30 June 2012. Fair value has been taken to be the present value of future cash flows or the net assets of the entities. Additional details relating to administered investments can be found at Note 23C. Loans and receivables Concessional loans made to states and territories have been measured at amortised cost using the effective interest method as at the earliest practicable date to determine the retrospective effect of applying AASB 139 Financial Instruments: Recognition and Measurement. A 10 year long term bond rate at the earliest practicable date for each loan has been applied to calculate discounts on the concessional loans (refer Note 29H Concessional loans). 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 in the Administered Schedule of Comprehensive Income. Financial assets at fair value through profit and loss Financial assets are classified as financial assets at fair value through profit and loss (FVPL) where the financial assets:    have been acquired principally for the purpose of selling in the near future; are parts of an identified portfolio of financial instruments that the Department manages together and have a recent actual pattern of short-term profit taking; or are derivatives that are not designated and effective as a hedging instrument. Assets in this category are classified as current assets. Financial assets at FVPL are stated at fair value, with any resultant gain or loss recognised in profit and loss. The net gain or loss recognised in the profit and loss incorporates any interest earned on the financial assets. Interest earned on financial assets at FVPL is disclosed in Note 21G Gains on financial investments and are not included again in Note 21B Interest. Guarantees The amounts guaranteed by the Australian Government have been disclosed in the Schedule of Administered Contingencies and in Note 28. At the time of completion of the financial statements, all guarantees were remote and there was no reason to believe that they would be called upon. Indemnities The maximum amounts payable under the indemnities given is disclosed in the Schedule of Administered Contingencies and in Note 28. At the time of completion of the financial statements, there was no reason to believe that the indemnities would be called upon and no recognition of a liability was therefore required. 1.25 Superannuation schemes The Department recognises an administered liability for the present value of the Australian Government's expected future payments arising from the Parliamentary Contributory Superannuation Scheme, Judges' Pensions Scheme, Governor-General Pension Scheme, death and invalidity benefits for Federal Magistrates and the unfunded components of the Commonwealth Superannuation Scheme (CSS) and the Public Sector Superannuation scheme (PSS). The funded components of these schemes are reported in the financial statements of the respective schemes. The Department also has the responsibility to record the Australian Government's transactions in relation to the CSS and PSS schemes. Accounting policies in relation to these items are as follows: Notes to and forming part of the financial statements Employer contributions Employer contributions received from Australian Government entities are recorded as administered revenues. Benefits paid and employee contributions Gross benefits paid less employee contributions and employer productivity contributions (offsets) received are recognised as a net reduction in the liability. Increases in the accrued benefits liability Increases in the accrued benefits liability, pursuant to regular estimates of the liability taking account of actuarial reviews, are recognised as an expense and classified as employee superannuation expense, except for actuarial gains or losses which are recognised in equity. In accordance with AASB 119 Employee Benefits, the liability is assessed annually by applying the projected unit credit method in assessing the balance of the liability. The rate used to discount long term employee benefits and post employment benefits is determined by reference to the Government bond rate at the reporting date on high quality corporate bonds except where there is not a deep market in these bonds, in which case the market yield on national Government bonds is used. In the case of discounting the superannuation liability, the market yield on Government bonds has been used. Additional superannuation information can be found at Note 31. 1.26 Nation-building Funds Investments Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned. Investments are initially measured at fair value, net of transaction costs that are directly attributable to the acquisition or issue of the investment. All investments are designated as financial assets through profit and loss on purchase with any resultant gain or loss recognised in the profit and loss. The net gain or loss recognised in profit and loss incorporates any interest earned on the financial asset. The following methods are adopted by the Nation-building Funds in determining the fair value of investments:   Mortgage backed securities, bank bills, negotiable certificates of deposit, corporate debt securities and other fixed income securities that are traded in active markets are valued at the quoted bid price; and Derivative instruments including forward foreign exchange contracts, interest rate swap agreements and credit default swaps are recorded at their fair value on the date the contract is entered into and are subsequently re-measured to their fair values at each reporting date. Revenue Interest revenue is recognised using the effective interest method as set out in AASB 139 Financial Instruments: Recognition and Measurement except for financial assets that are recognised at fair value through profit and loss. 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 balance date. Allowances are made when collectability of the debt is no longer probable. Trade creditors Trade creditors and accruals are recognised at their nominal amounts, being the amounts at which the liabilities will be settled. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of the Fund having been invoiced). Notes to and forming part of the financial statements Foreign currency (i) Functional and presentation currency Items included in the financial statements of the Nation-building Funds are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The financial statements are presented in Australian dollars, which is the Nation-building Fund’s functional and presentation currency. (ii) Transactions and balances All foreign currency transactions during the period are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency items at reporting date are translated at the exchange rate existing at reporting date. Exchange differences are recognised in the profit and loss in the period in which they arise. Derivative financial instruments The Nation-building funds have entered into forward foreign exchange contracts to manage exposure to foreign exchange risk. The Nation-building funds also use interest rate futures and swaps to manage their exposure to interest rate risk; and credit default swaps to manage their exposure to credit risk and/or gain indirect exposure to credit risk. The use of derivative financial instruments by the Nation-building funds is governed by the Nation-building Funds Act 2008. The Nation-building funds have not designated any derivatives as cash flow or fair value hedges. The Nation Building Funds have entered into To-Be-Announced (TBA) trades that are delivery obligations on underlying collateral (i.e. mortgage pools) with pool numbers and precise amounts unknown at the trade dates and are therefore accounted for as derivatives. The Nation Building Funds have not designated any derivatives as cash flow or fair value hedges. All derivatives are accounted for at fair value through profit and loss. 1.27 Environmental liabilities The Department recognises a provision for restoration and remediation when there is a present obligation as a result of a past event, or it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 1.28 Comparative figures Unless otherwise stated, comparative figures are provided and, where necessary, have been adjusted in accordance with the Finance Minister's Orders. 1.29 Rounding Amounts have been rounded to the nearest $1,000 unless stated otherwise. 1.30 Prior year adjustments The comparative year financial statements have been changed as follows: Balance Sheet: In 2010-11, lease incentives ($0.016 million) were disclosed as ‘other interest bearing liabilities’. This has been reclassified as ‘other payables’. In 2010-11, outstanding insurance claims ($298.6 million) were disclosed as ‘outstanding insurance claims payable’. This has been reclassified as ‘outstanding insurance claims provisions’. Notes to and forming part of the financial statements Administered Cash Flow Statement: In 2010-11, net gains from sale of financial instruments held at fair value ($145.6 million) and net realised exchange gains ($1,418.6 million) were disclosed as investing activities (‘proceeds from sale of investments’). These have been disclosed as separate operating activities items as they are day-to-day operations in nature. Lease incentives: In 2010-11, lease incentives ($1.3 million) were disclosed as ‘other interest bearing liabilities’. This has been reclassified as ‘other payables’ (Note 25B). Cash and cash equivalents: In 2010-11, the balance of the Official Overnight Public Account ($1,829 million) was excluded from the Official Public Account balances and netted off in the Administered reconciliation schedule. It has been included in the Administered schedule of assets and liabilities. This has been reported in the associated notes (23A, 25B, 29A and 36C). To-Be-Announced (TBA) trades: In previous years TBA trades were classified as 'regular way' transactions and accounted for as purchases and sales of securities. During the year the accounting policy for TBA trades has been revised on the basis of their use and general market practice. Accordingly, TBA trades are now classified as derivatives instead of regular sales and purchases of investments. This required a reclassification of the 2011 comparatives as detailed below: As reported in 2011 $'000 Financial assets Trade and other receivables Unsettled sales Investments Interest Bearing Securities Financial liabilities Suppliers Derivative financial liabilities Unsettled investments purchases Adjustments $'000 Restated 2011 $'000 39,021 (14,366) 24,655 16,291,271 (311,440) 15,979,831 25,063 365,036 851 (326,657) 25,914 38,379 Note 23B Note 23C Note 25A Notes to and forming part of the financial statements Note 2 Events after balance sheet date Departmental There were no post balance date events that need to be disclosed in the financial statements. Administered There were no post balance date events that need to be disclosed in the financial statements. Notes to and forming part of the financial statements 30 June 2012 $'000 Note 3 30 June 2011 $'000 Expenses Note 3A Employee benefits Wages and salaries Superannuation: Defined contribution plans Defined benefit plans Leave and other entitlements Separation and redundancies Other employee expenses Total employee benefits 132,562 125,730 8,785 16,842 24,500 509 1,156 7,731 15,040 19,840 341 1,307 184,354 169,989 Note 3B Supplier expenses Goods and services Outsourcing costs Insurance expenses Consultants and contractors Other goods and services Property company expenses Total goods and services 84,069 27,141 33,961 37,167 14,657 66,247 30,071 40,405 34,687 12,867 196,995 184,277 Goods and services are made up of: Provision of goods – external parties Rendering of services – related entities Rendering of services - external parties Total goods and services 1,343 1,385 194,267 196,995 2,304 1,385 180,588 184,277 4,617 715 5,332 3,269 590 3,859 202,327 188,136 Other supplier expenses Operating lease rentals – external parties: Minimum lease payments Workers compensation expenses Total other supplier expenses Total supplier expenses Notes to and forming part of the financial statements Note 3C Depreciation and amortisation Depreciation: Buildings Leasehold improvements Property, plant and equipment Total depreciation Amortisation: Intangibles Total amortisation Total depreciation and amortisation Note 3D Finance costs Notional interest1 Total finance costs 30 June 2012 $'000 30 June 2011 $'000 6,697 2,767 2,464 4,523 2,730 2,352 11,928 9,605 7,041 7,041 9,528 9,528 18,969 19,133 57 57 2,331 2,331 1 In 2010-11 notional interest expense was recognised in relation to financial assets (reinsurance recoveries) expected to be received in future years. Note 3E Write-down and impairment of assets Financial assets: Impairment on financial assets Non-financial assets: Impairment on intangible assets Revaluation decrement - land and buildings2 Write-down of investment properties Total write-down and impairment of assets 18,048 9 36,485 8,465 62,998 383 392 2 As a result of a Government decision, the Commonwealth Law Courts have been reclassified from investment properties to land and buildings. This has contributed to a total revaluation decrement of $95.0 million of which $36.5 million is a write-down expense. A further $58.5 million is recorded against the asset revaluation reserve. Note 3F Losses from asset sales Investments: Carrying value of assets sold Selling expense Land and buildings: Proceeds from sale Property, plant and equipment: Carrying value of assets sold Intangibles: Carrying value of assets sold Total losses from asset sales 815 420 970 (204) (59) 146 27 74 1 831 1,359 Notes to and forming part of the financial statements Note 3G Insurance claims Current claims incurred Changes in outstanding claims liability Net recovery adjustment Effect of change in discount rate Claims management costs Total insurance claims Note 3H Other expenses Reinsurance equivalent payment Competitive neutrality: Competitive neutrality - regulatory1 Competitive neutrality - rates and other taxes1 Total other expenses 1 The 30 June 2012 $'000 30 June 2011 $'000 76,056 (54,192) 7,771 5,607 2,030 139,425 48,236 433 2,793 37,272 190,887 5,000 5,000 104 126 10,137 15,241 10,261 15,387 Comcover and Property Special Accounts apply the Australian Government's Competitive Neutrality Policy. This includes levies payable by general insurers to the Australian Prudential Regulation Authority and indirect taxes, such as payroll tax, council rates, stamp duty and land tax, as if they had applied to the Comcover and Property Special Accounts. These amounts have been paid or are payable by the Department to the Official Public Account. Notes to and forming part of the financial statements Note 4 30 June 2012 $'000 30 June 2011 $'000 77,172 12,398 22,438 1,261 50,848 14,147 19,008 1,542 113,269 85,545 Income OWN-SOURCE REVENUE Note 4A Rendering of services Rendering of services - related entities Centralised procurement and contracting Property services Recovery of costs from other entities Other services Total rendering of services Note 4B Insurance premiums Comcover Special Account - insurance premiums Total insurance premiums 99,698 99,698 86,411 86,411 Note 4C Reinsurance and other recoveries Current claims incurred Net recovery adjustment Changes in outstanding claims liability Effect of change in discount rate Total reinsurance and other recoveries 2,214 7,771 (8,110) 341 733 57,552 129 2,216 58,414 Note 4D Rental income Operating lease - investment properties: Related entities External parties Operating lease - other properties: Related entities 45,879 190 60,412 307 42,737 88,806 23,492 84,211 - 4 6,051 6,051 3,975 3,979 Total rental income Note 4E Interest Loans Notional interest1 Total interest 1 Reversal of notional interest expense reported in prior years as a result of passage of time. Note 4F Other revenue Commission Fleet monitoring Total other revenue 9,734 1,160 8,326 1,715 10,894 10,041 Notes to and forming part of the financial statements 30 June 2012 $'000 30 June 2011 $'000 Note 4G Other gains Change in fair value of investment properties Assets first found Resources received free of charge Other 11,050 4,414 1,385 23 1,593 1,385 27 Total other gains 16,872 3,005 Note 4H Revenue from Government Appropriations: Departmental appropriations 235,495 239,800 Total revenue from Government 235,495 239,800 GAINS REVENUE FROM GOVERNMENT Notes to and forming part of the financial statements 30 June 2012 $'000 Note 5 30 June 2011 $'000 Income tax expense Income tax expense Competitive neutrality - Commonwealth tax equivalent expense Total income tax expense 1 9,028 13,463 9,028 13,463 Comcover and Property Special Accounts apply the Australian Government’s Competitive Neutrality Policy. Income tax payable includes income tax payable under the Income Tax Assessment Act 1997 as if the Act had applied to the Comcover and Property Special Accounts. These amounts have been paid or are payable by the Department to the Official Public Account. 1 The Note 6 Other comprehensive income Changes in asset revaluation reserves Non-financial assets revaluation reserve adjustment: Land Buildings Total changes in asset revaluation reserves 2 2 (15,281) (43,243) (22,232) 14,790 (58,524) (7,442) As a result of a Government decision, the Commonwealth Law Courts have been reclassified from investment properties to land and buildings. This has contributed to a total revaluation decrement of $95.0 million of which $58.5 million is recorded against the asset revaluation reserve. A further $36.5 million is recorded as write-down expense. Notes to and forming part of the financial statements Note 7 Business activities Property management The Department delivers services and provides advice related to the Australian Government's non-Defence property portfolio, including construction and project delivery services. This portfolio includes commercial office buildings, law courts, laboratories and heritage properties within Australia. The portfolio is managed with an aim of optimising return on investment, whilst recognising public interest considerations, the requirement for tenant satisfaction and the need to maintain the condition of the property portfolio. Revenue from appropriations Revenue from ordinary activities Unrealised investment property revaluation increment/(decrement) Land and buildings revaluation increment/(decrement) Expenses from ordinary activities before income tax Net surplus (deficit) from ordinary activities before income tax Income tax equivalent Net surplus (deficit) from ordinary activities after income tax Financial assets Non-financial assets Payables Provisions Equity 30 June 2012 $'000 335 112,070 11,050 (36,485) (63,147) 23,823 (9,028) 14,795 30 June 2011 $'000 284 106,126 1,593 (52,499) 55,504 (13,463) 42,041 239,234 1,389,929 (63,849) (8,565) 250,468 1,283,653 (66,409) (7,748) 1,556,749 1,459,964 Comcover The Department provides General Government Sector agencies insurance and risk management services through the Comcover self-managed insurance fund. Comcover is responsible for promoting best practice risk management in agencies so as to improve policy formulation and delivery of Government programs and services. Revenue from appropriations Revenue from ordinary activities Expenses from ordinary activities Net surplus (deficit) from ordinary activities Net surplus (deficit) from ordinary activities Financial assets Payables Provisions Equity 15,022 109,701 (94,245) 11,912 150,183 (233,806) 30,478 30,478 (71,711) (71,711) 388,626 (2,898) (258,003) 399,459 (2,948) (299,264) 127,725 97,247 Notes to and forming part of the financial statements 30 June 2012 $'000 Note 8 30 June 2011 $'000 Financial assets Note 8A Cash and cash equivalents Cash at bank Cash on hand Cash held in Comcover Special Account Cash held in Property Special Account Cash held in Coordinated Procurement Contracting Special Account 3,828 11 233 55 862 519 11 279 49 773 Total cash and cash equivalents 4,989 1,631 49,204 2,800 65,529 315 52,004 65,844 226,782 256,398 41,222 901 70,433 242,529 239,768 32,939 928 66,891 595,736 583,055 18,618 131,065 6,281 34,233 125,053 863 155,964 803,704 160,149 809,048 Less impairment allowance account: Goods and services Other receivables Total impairment allowance account (59) (17,985) (18,044) - Total trade and other receivables (net) 785,660 809,048 Receivables are expected to be recovered in: No more than 12 months More than 12 months 70,820 714,840 85,273 723,775 Total trade and other receivables (net) 785,660 809,048 Note 8B Trade and other receivables Goods and services: Goods and services - related entities Goods and services - external parties Total receivables for goods and services Appropriations receivable: Property Special Account Comcover Special Account Coordinated Procurement Contracting Special Account Business Services Special Account Other departmental undrawn Total appropriations receivable Other receivables: Reinsurance and other recoveries Reinsurance debtor 1 GST receivable from the Australian Taxation Office Total other receivables Total trade and other receivables (gross) Amounts recoverable from the Department’s reinsurers arising from claim settlements following the Commonwealth’s suspension of Pan Pharmaceuticals Ltd’s manufacturing license. The Department’s reinsurers have denied liability. The Department’s legal advice is that the reinsurance claims are valid and recoverable. 1 Credit terms for goods and services were within 30 days (2010-11: 30 days). Notes to and forming part of the financial statements 30 June 2012 $'000 30 June 2011 $'000 793,883 756,514 7,233 893 79 1,616 49,588 1,160 40 1,746 803,704 809,048 (17,985) (59) (18,044) - Other receivables $'000 Goods and services $'000 Total $'000 17,985 17,985 63 (4) 59 18,048 (4) 18,044 Other receivables $'000 Goods and services $'000 Total $'000 Opening balance Amounts recovered and reversed - 2,500 (2,500) Closing balance - - Note 8B Trade and other receivables (continued) Receivables (gross) are aged as follows: Not overdue Overdue by: 0 to 30 days 31 to 60 days 61 to 90 days More than 90 days Total receivables (gross) The impairment allowance account is aged as follows: Not overdue More than 90 days Total impairment allowance account Reconciliation of the impairment allowance account: Movements in relation to 2012 Opening balance Increase/ decrease recognised in net surplus Amounts recovered and reversed Closing balance Movements in relation to 2011 Note 8C Other financial assets Accrued revenue - goods and services Lease incentives Total other financial assets Total other financial assets expected to be recovered in: No more than 12 months More than 12 months Total other financial assets 2,500 (2,500) - 4,590 4,824 9,414 5,117 3,655 8,772 4,993 4,421 9,414 5,477 3,295 8,772 Notes to and forming part of the financial statements 30 June 2012 $'000 Note 9 30 June 2011 $'000 Non-financial assets Note 9A Land and buildings Land: Land at fair value Total land 323,630 157,194 323,630 157,194 50,460 432,954 - 13,101 192,380 - 483,414 205,481 12,014 (5,498) 1,683 8,199 11,142 (2,730) 39 8,451 815,243 371,126 Note 9B Property, plant and equipment Work in progress - at cost Fair value Accumulated depreciation 7,409 8,309 (4,532) 1,092 7,698 (2,304) Total property, plant and equipment 11,186 6,486 Buildings on freehold land: Work in progress Fair value Accumulated depreciation Total buildings on freehold land Leasehold improvements: Fair value Accumulated depreciation Work in progress - at cost Total leasehold improvements Total land and buildings All assets have been valued on the fair value basis in accordance with the revaluation policy set out in Note 1.18. The formal revaluations were conducted by Savills. No land and buildings or property, plant and equipment are under finance lease. No indicators of impairment were found for land and buildings or property, plant and equipment. There is no accumulated impairment from previous years. No land and buildings or property, plant and equipment are expected to be disposed of within the next 12 months. Revaluation of non-financial assets A revaluation decrement for land of $15.3 million (2010-11: decrement of $22.2 million) and a decrement for buildings on freehold land of $43.2 million (2010-11: increment of $14.8 million) were credited to the asset revaluation reserve by asset class and included in the equity section of the balance sheet. A revaluation decrement for buildings on freehold land of $36.5 million was recognised in the operating result (2010-11: no adjustment). No revaluation adjustment was made for leasehold improvements (2010-11: no adjustment) and for property, plant and equipment (2010-11: no adjustment) during the year. Notes to and forming part of the financial statements Note 9C Reconciliation of the opening and closing balances of property, plant and equipment (2011-12) As at 1 July 2011 Gross book value Accumulated depreciation and impairment Net book value 1 July 2011 Additions: By purchase Assets first found Transfer from investment properties - net value1 Revaluations and impairments recognised in other comprehensive income Revaluations and impairments recognised in the operating results Restructuring - gross value Depreciation/amortisation expense Disposals: Other disposals - cash considerations Net book value 30 June 2012 Net book value as of 30 June 2012 represented by: Gross book value Accumulated depreciation and impairment Closing net book value at 30 June 2012 1 Total land and buildings $’000 Plant & equipment $’000 Total $’000 Land $’000 Buildings $’000 Leasehold improvements $’000 157,194 - 205,481 - 11,181 (2,730) 373,856 (2,730) 8,790 (2,304) 382,646 (5,034) 157,194 205,481 8,451 371,126 6,486 377,612 35,403 4,414 141,900 (15,281) - 39,555 2,515 (2,767) 77,473 4,414 468,900 (58,524) (36,485) (2,197) (9,464) 7,310 84,783 4,414 468,900 (58,524) (36,485) (2,197) (11,928) 327,000 (43,243) (36,485) (2,197) (6,697) (2,464) - - - - (146) (146) 323,630 483,414 8,199 815,243 11,186 826,429 323,630 - 483,414 - 13,697 (5,498) 820,741 (5,498) 15,718 (4,532) 836,459 (10,030) 323,630 483,414 8,199 815,243 11,186 826,429 As a result of a Government decision, the Commonwealth Law Courts have been reclassified from investment properties to land and buildings. Notes to and forming part of the financial statements Note 9C Reconciliation of the opening and closing balances of property, plant and equipment (2010-11) As at 1 July 2010 Gross book value Accumulated depreciation and impairment Net book value 1 July 2010 Land $’000 Buildings $’000 Leasehold improvements $’000 Total land and buildings $’000 Plant & equipment $’000 Total $’000 144,926 144,926 174,488 174,488 9,484 9,484 328,898 328,898 6,634 6,634 335,532 335,532 Additions: By purchase Revaluations and impairments recognised in other comprehensive income Restructuring Depreciation/amortisation expense Disposals: Other disposals - cash considerations Net book value 30 June 2011 - 13,856 1,697 15,553 2,231 17,784 (22,232) 34,500 - 14,790 6,870 (4,523) (2,730) (7,442) 41,370 (7,253) (2,352) (7,442) 41,370 (9,605) - - - - (27) (27) 157,194 205,481 8,451 371,126 6,486 377,612 Net book value as of 30 June 2011 represented by: Gross book value Accumulated depreciation and impairment Closing net book value at 30 June 2011 157,194 - 205,481 - 11,181 (2,730) 373,856 (2,730) 8,790 (2,304) 382,646 (5,034) 157,194 205,481 8,451 371,126 6,486 377,612 Notes to and forming part of the financial statements 30 June 2012 $'000 30 June 2011 $'000 Note 9D Investment properties Land and buildings Land at fair value Buildings at fair value 94,907 487,950 236,597 684,364 Total investment properties1 582,857 920,961 Reconciliation of the opening and closing balances of investment properties As at 1 July 2011 Additions: By assets under construction Transfer to land and building1 Disposals Movements recognised in operating results: Impairments Revaluation increment/(decrement) Net book value at 30 June 2012 920,961 779,660 128,211 (468,900) - 140,128 (420) (8,465) 11,050 582,857 1,593 920,961 1 As a result of a Government decision, the Commonwealth Law Courts have been reclassified from investment properties to land and buildings. Rental income from investment properties was $46.1 million in 2011-12 (2010-11: $84.2 million). Operating expenses in relation to these properties were $27.5 million in 2011-12 (2010-11: $19.8 million). All formal revaluations are independent and are conducted in accordance with the revaluation policy stated in Note 1.18. In 2011-12, the formal revaluations were conducted by Savills. The net revaluation increment of $11.1 million (2010-11: increment of $1.6 million) was recorded through the Statement of Comprehensive Income. Impairment losses of $8.5 million (2010-11: $nil) were recorded through the Statement of Comprehensive Income. Note 9E Intangibles Computer software: Internally developed – in progress Internally developed – in use Purchased Accumulated amortisation Accumulated impairment losses Total computer software Total intangibles 44,578 41,447 23,958 (43,921) (2,790) 63,272 8,142 41,904 23,922 (41,409) (2,790) 29,769 63,272 29,769 No indicators of impairment were found for intangible assets. Impairment loss of $nil (2010-11: $0.4 million) was recorded through the Statement of Comprehensive Income. No intangibles are expected to be sold or disposed of within the next 12 months. Notes to and forming part of the financial statements Note 9F Reconciliation of the opening and closing balances of Intangibles (2011-12) As at 1 July 2011 Gross book value Accumulated amortisation and impairment Net book value 1 July 2011 Additions: By purchase Internally developed Reclassifications Amortisation Net impairment Disposals: Other disposals Net book value 30 June 2012 Net book value as of 30 June 2012 represented by: Gross book value Accumulated amortisation and impairment Closing net book value at 30 June 2012 Computer software internally developed $’000 Computer software purchased $’000 Other intangibles internally developed $’000 Total $’000 50,046 (28,768) 21,278 23,921 (15,430) 8,491 - 73,967 (44,198) 29,769 3,454 36,436 (295) (4,349) - 728 295 (2,692) - - (68) 56,456 (6) 6,816 - 4,182 36,436 (7,041) (74) 63,272 86,025 (29,569) 56,456 23,958 (17,142) 6,816 - 109,983 (46,711) 63,272 Notes to and forming part of the financial statements Note 9F Reconciliation of the opening and closing balances of intangibles (2010-11) As at 1 July 2010 Gross book value Accumulated amortisation Accumulated impairment Net book value 1 July 2010 Additions: By purchase Internally developed Reclassifications Amortisation Net impairment Disposals: Other disposals Net book value 30 June 2011 Net book value as of 30 June 2011 represented by: Gross book value Accumulated amortisation and impairment Closing net book value at 30 June 2011 Computer software internally developed $’000 Computer software purchased $’000 Other intangibles internally developed $’000 Total $’000 50,541 (25,834) (2,407) 12,975 (6,528) - 1,053 (926) - 64,569 (33,288) (2,407) 22,300 6,447 127 28,874 3,230 961 (5,213) - 7,572 (829) (4,315) (383) 5 (132) - 7,577 3,230 (9,528) (383) 21,278 (1) 8,491 - (1) 29,769 50,046 (28,768) 21,278 23,921 (15,430) 8,491 - 73,967 (44,198) 29,769 Notes to and forming part of the financial statements 30 June 2012 $'000 30 June 2011 $'000 Note 9G Other non-financial assets Prepayments 3,584 2,466 Total other non-financial assets 3,584 2,466 Total other non-financial assets are expected to be recovered in: No more than 12 months More than 12 months 3,366 218 2,176 290 Total other non-financial assets 3,584 2,466 No indicators of impairment were found for other non-financial assets. Notes to and forming part of the financial statements 30 June 2012 $'000 Note 10 30 June 2011 $'000 Payables Note 10A Suppliers Trade creditors and accruals 21,650 19,231 Total supplier payables 21,650 19,231 Supplier payables expected to be settled within 12 months: Related entities External parties 943 20,707 3,998 15,233 Total supplier payables 21,650 19,231 55,106 4,348 59,454 76,387 1,667 78,054 58,972 482 77,571 483 59,454 78,054 Note 10C Return of equity Property special account - cash returns Total return of equity 42,296 42,296 49,642 49,642 Return of equity is expected to be settled in: No more than 12 months Total return of equity 42,296 42,296 49,642 49,642 3,581 210 4,934 260 230 2,225 2,843 585 16 721 Total other payables 11,440 4,165 Total other payables are expected to be settled in: No more than 12 months 11,440 4,165 Total other payables 11,440 4,165 Settlement is usually made within 30 days. Note 10B Unearned revenue Related entities External entities Total unearned revenue Unearned revenue is expected to be settled in: No more than 12 months More than 12 months Total unearned revenue Note 10D Other payables Salaries and wages Competitive neutrality tax payable Client advances Separations and redundancies Lease incentives Other payables Notes to and forming part of the financial statements 30 June 2012 $'000 30 June 2011 $'000 Note 11A Employee provisions Leave Other 58,380 - 47,449 28 Total employee provisions 58,380 47,477 Employee provisions are expected to be settled in: No more than 12 months More than 12 months 49,567 8,813 37,447 10,030 Total employee provisions 58,380 47,477 Note 11B Outstanding insurance claims provisions Outstanding claims - general insurance business Gross expected future claims payable Discount to present value Total outstanding insurance claims provisions 264,482 (7,423) 257,059 311,299 (12,683) 298,616 Total outstanding insurance claims provisions are expected to be settled in: No more than 12 months More than 12 months Total outstanding insurance claims provisions 162,164 94,895 257,059 172,774 125,842 298,616 Note 11C Other provisions Provision for remediation costs: Make good costs1 Property remediation costs 1,174 5,610 922 5,497 Total other provisions 6,784 6,419 Other provisions are expected to be settled in: No more than 12 months More than 12 months 3,489 3,295 5,497 922 Total other provisions 6,784 6,419 Make good costs $’000 Property remediation costs $’000 Total $’000 922 202 50 5,497 113 - 6,419 315 50 1,174 5,610 6,784 Note 11 Provisions Reconciliation of other provisions: Carrying amount 1 July 2011 Additional provisions made Unwinding of discount or change in discount rate Closing balance 30 June 2012 1 The Department currently has five agreements for the leasing of premises that have provisions requiring the Department restore the premises to their original condition at the conclusion of the lease. The Department has made a provision to reflect the present value of this obligation. Notes to and forming part of the financial statements Note 12 Restructuring Note 12A Departmental restructuring 2012 Villawood Immigration Detention Facility Project cost Department of Immigration and Citizenship1 $'000 Function Entity 2012 Electorate Office Information Technology Department of Parliamentary Services2 2011 Management of the Lodge and Kirribilli House $'000 Department of the Prime Minister and Cabinet3 $'000 - - 41,370 41,370 - - - - - 41,370 Income Recognised by the receiving entity Total income - - 284 284 Expenses Recognised by the receiving entity Recognised by the losing entity Total expenses - - 267 23 290 2,197 472 - - 2,197 472 - 2,197 472 - FUNCTIONS ASSUMED Assets recognised Non-financial assets Total assets recognised Total liabilities recognised Net assets/(liabilities) assumed 4 FUNCTIONS RELIQUISHED Assets relinquished Financial assets Non-financial assets Total assets relinquished Net assets/(liabilities) relinquished5 Notes: 1. Project Management for the redevelopment of the Villawood Immigration Detention Facility was given to Finance as part of the 2009-10 Budget. This project has been substantially completed and transferred back to DIAC for ongoing management. 2. The Electorate Office Information Technology was relinquished to the Department of Parliamentary Services on 1 September 2011 following a Government decision made on 22 August 2011. 3. Management of the Lodge and Kirribilli House was assumed from PM&C on 1 December 2010 due to an Administrative Arrangements Order issued on 14 October 2010. 4. The net asset/(liabilities) assumed from all entities were $nil (2010-11: $41.4m) . 5. The net asset/(liabilities) relinquished to all entities were $2.7 million (2010-11: $nil). 6. In respect of functions assumed and relinquished, the net book values of assets and liabilities were transferred to the entity for no consideration. Notes to and forming part of the financial statements Note 12B Administered restructuring The Department transferred $0.2 million Administered Annual Appropriation Act 1 2011-12 funding to the Department of Parliamentary Services in relation to the transfer of the Electorate Office Information Technology function. This transfer has been reported as administered equity distribution in the Administered reconciliation schedule. Some departmental assets were also transferred and have been reported in Note 12A above. Notes to and forming part of the financial statements 30 June 2012 $'000 Note 13 30 June 2011 $'000 Cash flow reconciliation Reconciliation of cash and cash equivalents as per Balance Sheet to Cash Flow Statement Cash and cash equivalents as per: Cash flow statement Balance sheet Difference 4,989 4,989 1,631 1,631 - - (184,243) 235,495 (9,028) (256,008) 239,800 (13,463) Adjustments for non-cash items Net losses from sale of assets Revaluation increment - investment properties Assets first found Revaluation decrement Depreciation and amortisation Revaluation decrement - land and buildings Non-financial assets write-down 831 (11,050) (4,414) 18,969 36,485 8,465 389 (1,593) 19,133 Changes in assets / liabilities (Increase) / decrease in net receivables (Increase) / decrease in other financial assets (Increase) / decrease in other non-financial assets Increase / (decrease) in employee provisions Increase / (decrease) in other provisions Increase / (decrease) in outstanding insurance claims Increase / (decrease) in other payables - unearned revenue Increase / (decrease) in other payables - other Increase / (decrease) in trade creditor payables (1,670) (642) (1,118) 10,903 365 (41,557) (18,600) 7,275 (38) 31,764 (5,545) 261 6,048 57 54,854 11,941 (7,201) (8,819) 46,428 72,001 Reconciliation of net cost of services to net cash from operating activities: Net cost of services Add revenue from Government Less income tax expense Net cash from (used by) operating activities 383 Notes to and forming part of the financial statements Note 14 Contingent assets and liabilities Claims for damages or costs 2012 2011 $'000 $'000 Total 2012 $'000 2011 $'000 Contingent assets Balance from previous period New Total contingent assets 57 57 57 57 57 57 57 57 Contingent liabilities Balance from previous period Re-measurement Total contingent liabilities - 143 (143) - - 143 (143) - 57 57 57 57 Net contingent assets (liabilities) Quantifiable contingent assets Sharjade v Darwinia - Breach of Heads of Agreement between parties The contingent asset is estimated to be $0.06 million. The Sharjade claim was decided in the Commonwealth’s favour in the NSW Court, Supreme Court and the appeal dismissed in the High Court. The Department is now seeking to recover costs supported by a bank guarantee. Unquantifiable contingent liabilities General remediation costs The Australian Government domestic property portfolio managed by the Department has approximately 105 properties. A small number of these have had potential remediation issues identified that are currently the subject of further investigation. Except to the extent a provision for remediation costs has been raised in Note 11C, to date the majority of these properties have not had a provision recognised as neither the conditions for legal or constructive obligation have been met nor is there a reliable estimate of the obligation available at 30 June 2012. Comcover - insurance claims - General The Department provides general insurance services to Australian Government entities through use of the Comcover Special Account. In the normal course of business, the Department is exposed to contingent liabilities arising from claims that are subject to litigation. At the date of this report, the outcome of any such claims are not likely to have a material effect on the net assets of the Department. Provisions are made for obligations that are probable and quantifiable. Comcover - insurance claims - Superannuation On 20 April 2007, the High Court of Australia found against the Commonwealth on a claim for negligent misstatement relating to superannuation benefits for a former employee of the Department of the Interior. There is a potential for more claims to arise from other former temporary employees who upon their retirement can demonstrate negligent misstatement over their eligibility to join an Australian Government superannuation scheme. The Department has assumed responsibility for the claims under its insurance arrangements with the relevant agencies or their predecessors. Current construction projects There is a potential liability for costs relating to delays or rectification of some projects. Davis Samuel case The Department is subject to a counter claim in relation to legal action before the ACT Supreme Court. The counter claim is subject to sufficient uncertainty that it is not possible to quantify the amount, if any, of the liability. The Department is defending this case. The hearing concluded in September 2008 and judgement is yet to be handed down. Notes to and forming part of the financial statements Unquantifiable contingent assets Davis Samuel case The Department is engaged in legal action seeking recovery of funds misappropriated during 1997-98. The hearing before the ACT Supreme Court concluded in September 2008 and judgement is yet to be handed down. Significant remote contingencies The Department does not have any significant remote contingencies. Notes to and forming part of the financial statements Note 15 General insurance activities Accounting estimates and judgements (a) The ultimate liability arising from claims made under the insurance contracts The outstanding claims liability is the estimated cost of claims incurred but not settled at the balance sheet date. This provision consists of estimates of both the expected ultimate cost of claims notified to the Department as well as the expected ultimate cost of claims incurred but not reported (IBNR) to the Department. The estimated cost of claims includes indirect expenses that are expected to be incurred in settling those claims. Long tail classes of business such as Liability and Professional Indemnity, where claims settlement may not happen for many years after the event giving rise to the claim, typically display greater variability between initial estimates and final settlement due to delays in notifications becoming claims, uncertainty in respect of court awards and future claims inflation. The outstanding claims liability is determined based on three building blocks being:  a central estimate of the future cash flows  discounting for the effect of the time value of money; and  a risk margin for uncertainty. (i) Future cash flows In calculating the estimated cost of unpaid claims, the Department uses a variety of estimation techniques, generally based upon statistical analyses of historical experience, which assumes that the development pattern of the current claims will be reasonably consistent with experience. Allowance is made, however, for changes or uncertainties that may create distortions in the underlying statistics or that might cause the cost of unsettled claims to increase or decrease when compared with the cost of previously settled claims. Such changes include:      Changes in the economic environment; Changes in the mix of business; Medical and technological development; Changes in benefit structures or policy coverage; and Changes in claims management practice. Different actuarial valuation models are used for different claims types and lines of business. The selection of the appropriate actuarial model takes into account the characteristics of a claim type and class of business and the extent of the development of each past accident period. Future cash flows are calculated gross of all recoveries. A separate estimate is made of the amounts that will be recoverable from third parties and from reinsurers, based upon the gross provisions. These decreasing adjustments are estimated as a percentage of the gross outstanding claims liability, based on the historical claims experience. The decreasing adjustments vary by class of business. An allowance for future claims handling expense allowance is also added to the future cash flows. (ii) Discounting Projected future claims payments, both gross and net of reinsurance and other recoveries, and associated claims handling costs are discounted to a present value using risk free discount rates. (iii) Risk Margin The central estimate of the future cash flows is an estimate that is intended to contain no deliberate or conscious over or under estimation and is commonly described as providing the mean of the distribution of future cash flows. It is considered appropriate to add a risk margin to the central estimate in order for the outstanding claims liability to have an increased probability of sufficiency. Uncertainties surrounding the outstanding claims liability estimation process include those relating to the data, actuarial models and assumptions, the statistical uncertainty associated with a general insurance claims runoff process, and risks external to the Department. Uncertainty from these sources is examined for each class of business and expressed as a volatility measure relative to the net central estimate. Considerations of the Department’s risk appetite are also made on the determination of risk margin. The risk margin is assessed by examining the historical variability of the claims experience, considering industry studies and benchmarks and applying actuarial judgement, especially in respect of uncertainties not reflected in the claims data. This assessment is performed for each class of business. Diversification benefit is allowed, with consideration given to industry studies and benchmarks. Notes to and forming part of the financial statements Note 15 General insurance activities (continued) (b) Actuarial methods The risks covered by the Department can be classified into the following groups:  Short Tail classes o Property o Commercial motor vehicle o Miscellaneous (including accidents and other classes)  Long Tail classes o Public liability (including Directors and Officers and medical malpractice) o Professional indemnity o Aviation and marine liability Both public liability and professional indemnity risks are on a ‘claims made’ basis, whereas all other risks are on a ‘claims incurred’ basis. Short Tail classes These portfolios contain claims that are typically reported and settled within one year of being incurred. At least two actuarial methods are used to estimate the outstanding claims with the final estimate based on actuarial advice. Separate analyses are carried out for small and large claims. The methods adopted are standard actuarial methods that are based on claim numbers, average claim size, incurred claims development pattern or based on initial loss ratios. Projected payments are discounted to allow for the time value of money. Long Tail classes These portfolios contain claims that are typically reported and settled more than one year after being incurred. A range of actuarial methods are used with at least two different methods being applied to most portfolios. Separate analyses were carried out for the incurred costs of claims capped at a defined limit and any incurred costs above the cap. The estimates of outstanding claims are derived from methods that are based on claim numbers and average claims sizes or based on initial expected loss ratios. The above capped component is highly variable due to the sparse claims experience. It is less suited to estimation by statistical analysis and hence any assessment of its contribution to the outstanding claims liability carries a greater judgemental component. Claims inflation is incorporated into the resulting projected payments for each portfolio, to allow for both general economic inflation as well as any superimposed inflation detected in the modelling of payments experience. Superimposed inflation arises from non-economic factors such as developments of legal precedent. Some methods applied do not make specific allowance for inflation as it is included implicitly in other assumptions. Projected payments are discounted to allow for the time value of money. (c) Key actuarial assumptions The key actuarial assumptions for the determination of the outstanding claims liabilities are set out in the table below. Assumption Classes Claims handling expense Discount rate All classes All classes Public liability and professional indemnity aviation and marine liability Property, motor vehicle and miscellaneous Property, public liability and professional indemnity Public liability (above cap) Professional indemnity (above cap) Professional indemnity Property (large claims) Public liability Claims inflation Projected ultimate cost of very large claims/events Bornhuetter-Ferguson loss ratio Average claim size (capped component) 2012 2011 3.2% 2.1% to 4.5% 3.1% 4.4% to 5.9% 4.3% to 4.5% 4.3% to 5.0% 3.0% 3.0% $89,309,489 $184,712,496 30% to 55% 75% to 85% 15% to 40% 90% to 92% 30% to 55% 75% 35% 92% $10,089 $13,840 Notes to and forming part of the financial statements Figures are in current values, i.e. assumptions as at 30 June 2012 are in 30 June 2012 values, whilst those as at 30 June 2011 are in 30 June 2011 values. The projected ultimate costs of very large claims/events refer to claims/events that have significant open reserves as at the reporting date. (d) Process used to determine actuarial assumptions Claims handling expense Claims handling expenses are calculated by reference to past experience of claims handling costs as a percentage of payments. Discount rate Projected payments are discounted at a risk free rate to allow for the time value of money. Discount rates are derived from market yields on Commonwealth Government securities at the reporting date. Claims inflation Claims inflation is incorporated into the resulting projected payments to allow for both expected levels of economic inflation and superimposed inflation. Economic inflation is based on economic indicators such as the consumer price index and/or increases in average weekly earnings. Results of the investigations of past claims inflation in excess of wage inflation, referred to as superimposed inflation, indicated no evidence of superimposed inflation. Average weighted term to settlement The average weighted term to settlement is calculated by class of business and is based on historic payment patterns. Average claim size (capped component of public liability class) The average claim size assumptions for the capped component of claims costs have been based on the results of an investigation of Comcover claims experience. Bornhuetter-Ferguson loss ratios The Bornhuetter-Ferguson loss ratios have been based on investigations of Comcover’s claims experience, with consideration also given to differences in premium levels between different years. Very large claims There have been numerous claims reported over which there is a degree of uncertainty. The assumed size of these claims for the valuation (on an inflated and discounted central estimate basis) is a key assumption. Notes to and forming part of the financial statements Note 15 (e) General insurance activities (continued) Sensitivity analysis The Department has conducted a sensitivity analysis to quantify the impact of changes in the key underlying assumptions on the Statement of Comprehensive Income. The sensitivity analyses have been performed for each variable independently of all other changes and are net of reinsurance and other recoveries. The table below describes how a change in each assumption will affect the Statement of Comprehensive Income. Assumption Claims handling expense Discount rate Claims inflation Outstanding claims cost of very large claims/events Bornhuetter-Ferguson loss ratios (above cap) Average claim size (capped component) Bornhuetter-Ferguson loss ratios (capped) Bornhuetter-Ferguson loss ratios (large claims) Classes All Classes All Classes All Classes All Classes Public liability and professional indemnity Public liability and professional indemnity All Classes All Classes Public liability Public liability Professional indemnity Professional indemnity Public liability Public liability Professional indemnity Professional indemnity Property Property Movement +1% -1% +1% -1% +1% -1% +10% -10% +10% -10% +10% -10% +10% -10% +10% -10% +10% -10% 30 June 2012 $'000 (2,521) 2,521 2,457 (2,525) (1,589) 1,563 (6,872) 6,872 (3,577) 3,577 (1,571) 1,571 (721) 721 (111) 111 (810) 810 30 June 2011 $'000 (2,914) 2,214 2,663 (2,749) (1,614) 1,587 (4,148) 4,148 (3,137) 3,137 (675) 675 (904) 904 (76) 76 (687) 687 Notes to and forming part of the financial statements Note 15 (f) General insurance activities (continued) Impact of changes to key assumptions The movement in assumptions for claims handling expenses, discount rate and claims inflation are the absolute movement in the assumption (e.g. +1% increases the claims handling expenses from 3.0% to 4.0%) while the movement for other assumptions is a pro-rata change to the assumption. The most significant change to the net outstanding claims liability is the overall favourable runoff of the March 2011 quarter catastrophe events which includes Queensland Floods, Cyclone Yasi and Cyclone Carlos. (g) Net claims incurred table 2011-12 Direct business expenses Gross claims incurred and related expenses - undiscounted Reinsurance and other recoveries - undiscounted Net claims incurred - undiscounted Discount and discount movement - gross claims incurred Discount and discount movement - reinsurance and other recoveries Net discount movement Net claims incurred Other underwriting expenses Other underwriting expenses Claims background Claims paid 2011-12 policy year Claims paid prior policy years Claims not settled Estimated claims incurred but not reported 2010-11 Current year $'000 Prior year $'000 Total $'000 Current year $'000 Prior year $'000 Total $'000 78,646 (2,222) 76,424 (56,206) 9,417 (46,789) 22,440 7,195 29,635 144,557 (740) 143,817 40,806 (56,203) (15,397) 185,363 (56,943) 128,420 (2,590) 8 7,621 (1,648) 5,031 (1,640) (4,870) 7 7,601 (1,477) 2,731 (1,470) (2,582) 73,842 5,973 (40,816) 3,391 33,026 (4,863) 138,954 6,124 (9,273) 1,261 129,681 28,431 - 28,431 30,966 - 30,966 $'000 8,181 60,847 118,029 139,030 Notes to and forming part of the financial statements Note 15 (h) General insurance activities (continued) Outstanding claims liability Gross central estimate Risk margin Gross outstanding claims liability Risk margin adopted Probability of adequacy of the risk margin Gross outstanding claims liability - current Gross outstanding claims liability - non-current Total gross outstanding claims liability Reinsurance and other recoveries - current Reinsurance and other recoveries - non current Total reinsurance and other recoveries receivable Net outstanding claims liability 2012 $'000 2011 $'000 215,321 41,738 257,059 249,120 49,496 298,616 19.4% 75% 19.9% 75% 162,164 94,895 257,059 172,774 125,842 298,616 12,494 6,124 18,985 15,248 18,618 34,233 238,441 264,383 The following average inflation rates and discount rates were used in measuring the outstanding claims liability. Claims expected to be paid: Not later than one year Later than one year Inflation rate Discount rate 3.0% to 4.25% 2.8% Inflation rate Discount rate 3.0% to 4.5% 2.1% to 3.7% Reconciliation of changes in net discounted liability Balance as at 1 July 2011 Current year claims incurred Change in previous year's outstanding claims liability Current year claims paid Previous year claims paid Effect of change in discount rate Balance as at 30 June 2012 Gross $'000 298,616 76,056 (54,192) (8,181) (60,847) 5,607 257,059 Reinsurance and other recoveries $'000 (34,233) (2,214) 8,110 354 9,706 (341) (18,618) Net $'000 264,383 73,842 (46,082) (7,827) (51,141) 5,266 238,441 Notes to and forming part of the financial statements Note 15 (i) General insurance activities (continued) Claims development table Prior 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 75,473 Estimate of gross ultimate claims costs At end of accident year 122,334 69,428 44,375 58,575 69,131 60,543 55,992 61,744 140,720 One year later 93,139 50,990 27,556 74,992 72,995 56,296 50,162 55,743 120,360 Two years later 74,359 38,378 32,291 73,810 64,753 52,022 53,726 52,540 Three years later 66,172 25,527 31,994 64,399 59,706 55,135 48,509 Four years later 57,472 25,163 45,030 64,386 60,625 51,773 Five years later 72,715 34,096 38,133 61,741 61,793 Six years later 150,573 40,157 38,756 53,449 Seven years later 162,858 39,889 26,349 Eight years later 211,977 39,524 Nine years later 208,871 Current estimate of ultimate claims cost 208,871 39,524 26,349 53,449 61,793 51,773 48,509 52,540 120,360 75,473 Cumulative payments to date 205,359 31,565 25,692 50,388 47,148 32,790 33,392 25,440 36,459 8,181 3,512 7,959 657 3,061 14,645 18,983 15,117 27,100 83,901 67,292 Gross outstanding claims liability undiscounted Claim handling expense Discounting impact 15,321 257,548 260 46 19 24 80 378 507 359 599 1,406 3,256 6,934 (148) (19) (225) (14) (66) (228) (436) (457) (869) (2,289) (2,672) (7,423) 15,433 3,539 7,753 667 3,075 14,795 19,054 15,019 26,830 83,018 67,876 257,059 Total gross outstanding claims liability - discounted Notes to and forming part of the financial statements Prior 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 73,251 Estimate of net ultimate claims costs At end of accident year 108,591 61,120 39,738 56,126 64,329 58,590 54,512 61,063 139,980 One year later 84,412 43,458 25,205 72,476 68,745 55,193 49,437 55,036 119,463 Two years later 65,839 31,490 22,071 68,035 58,046 50,998 53,002 51,670 Three years later 59,884 23,555 22,291 62,476 55,802 53,913 47,664 Four years later 50,769 23,225 19,325 61,263 56,381 49,633 Five years later 66,044 31,825 19,748 58,654 56,869 Six years later 77,983 30,858 20,271 49,954 Seven years later 80,977 30,532 18,384 Eight years later 87,510 30,102 Nine years later 85,671 Current estimate of ultimate claims cost 85,671 30,102 18,384 49,954 56,869 49,633 47,664 51,670 119,463 73,251 Cumulative payments to date 82,206 29,541 17,727 47,206 44,610 30,842 32,550 24,570 35,655 7,827 Net outstanding claims liability - 8,553 3,465 561 657 2,748 12,259 18,791 15,114 27,100 83,808 65,424 238,480 Claim handling expense 260 46 19 24 80 378 507 359 599 1,406 3,256 6,934 Discounting impact (20) (17) (11) (14) (59) (143) (431) (457) (869) (2,288) (2,664) (6,973) 8,793 3,494 569 667 2,769 12,494 18,867 15,016 26,830 82,926 66,016 238,441 undiscounted Total net outstanding claims liability discounted The weighted average expected term to settlement from the reporting date of the outstanding claims is estimated to be 1.08 years (2011: 1.15 years) Notes to and forming part of the financial statements Note 16 Senior executive remuneration Note 16A Senior executive remuneration expenses for the reporting period Short-term employee benefits: Salary (including annual leave taken) Annual leave accrued Executive vehicle scheme Other benefits Total short-term employee benefits Post-employment benefits: Superannuation Total post-employment benefits Other long-term benefits: Long-service leave Total other long-term benefits Termination benefits Total employment benefits 30 June 2012 $ 30 June 2011 $ 17,665,517 1,623,821 1,906,522 602,855 21,798,715 16,709,732 1,455,328 1,658,694 709,753 20,533,507 3,321,544 2,983,771 3,321,544 2,983,771 778,642 743,236 778,642 743,236 115,811 203,195 26,014,712 24,463,709 Notes: 1. Note 16A is prepared on an accrual basis (so the performance bonus expenses disclosed above differ from the cash 'Bonus paid' in Note 16B). 2. Note 16A excludes acting arrangements and part-year service where total remuneration expensed for a senior executive was less than $150,000. Notes to and forming part of the financial statements Note 16B Average annual reportable remuneration paid to substantive senior executives during the reporting period Average annual reportable remuneration1 Total remuneration (including part-time arrangements): less than $150,000 $150,000 to $179,999 $180,000 to $209,999 $210,000 to $239,999 $240,000 to $269,999 $270,000 to $299,999 $300,000 to $329,999 $330,000 to $359,999 $360,000 to $389,999 $390,000 to $419,999 $540,000 to $569,999 Total Senior Executives No. Reportable salary2 $ 22 9 27 31 10 6 5 1 4 1 1 117 68,959 132,115 162,836 182,078 205,003 221,164 256,973 289,047 317,732 303,586 416,824 2011-12 Contributed superannuation3 $ 11,283 30,952 32,024 41,471 46,417 63,253 51,434 64,208 55,245 87,257 135,535 Reportable allowances4 $ Bonus paid5 $ Total $ 213 - - 80,242 163,067 194,860 223,762 251,420 284,417 308,407 353,255 372,977 390,843 552,359 Notes to and forming part of the financial statements Note 16B Average annual reportable remuneration paid to substantive senior executives during the reporting period (continued) 2010-11 Average annual reportable remuneration1 Total remuneration (including part-time arrangements): less than $150,000 $150,000 to $179,999 $180,000 to $209,999 $210,000 to $239,999 $240,000 to $269,999 $270,000 to $299,999 $300,000 to $329,999 $330,000 to $359,999 $360,000 to $389,999 $480,000 to $509,999 Total Senior Executives No. Reportable salary2 $ Contributed superannuation3 $ Reportable allowances4 $ Bonus paid5 $ Total $ 16 7 34 26 10 8 3 4 1 1 110 78,049 146,114 164,364 181,651 198,598 228,104 271,558 295,235 318,119 364,510 15,055 20,868 29,668 43,960 56,469 49,288 37,482 58,490 40,973 125,162 123 1,149 526 3,197 3,197 - - 93,104 166,982 194,032 225,734 256,216 277,918 312,237 353,725 362,289 489,672 Notes: 1. This table reports substantive senior executives who received remuneration during the reporting period. Each row is an averaged figure based on headcount for individuals in the band. 2. 'Reportable salary' includes the following: a) gross payments (less any bonuses paid, which are separated out and disclosed in the 'bonus paid' column); b) reportable fringe benefits (at the net amount prior to 'grossing up' to account for tax benefits); and c) exempt foreign employment income. 3. The 'contributed superannuation' amount is the average actual superannuation contributions paid to senior executives in that reportable remuneration band during the reporting period, including any salary sacrificed amounts, as per the individuals' payslips. 4. 'Reportable allowances' are the average actual allowances paid as per the 'total allowances' line on individuals' payment summaries. 5. 'Bonus paid' represents average actual bonuses paid during the reporting period in that reportable remuneration band. The 'bonus paid' within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the entity during the financial year. 6. Various salary sacrifice arrangements were available to other highly paid staff including super, motor vehicle and expense payment fringe benefits. Salary sacrifice benefits are reported in the 'reportable salary' column, excluding salary sacrificed superannuation, which is reported in the 'contributed superannuation' column. Notes to and forming part of the financial statements Note 16C Other highly paid staff Average annual reportable remuneration1 Total remuneration (including part-time arrangements): $150,000 to $179,999 $180,000 to $209,999 $210,000 to $239,999 $240,000 to $269,999 $270,000 to $299,999 Total Staff No. 113 9 4 5 1 132 Reportable salary2 $ 131,924 153,165 189,444 215,518 251,448 2011-12 Contributed superannuation3 $ 28,882 38,187 28,351 36,666 24,642 Reportable allowances4 $ Bonus paid5 $ Total $ 184 1,174 3,435 - 38 - 161,028 192,526 221,230 252,184 276,090 Notes to and forming part of the financial statements Note 16C Other highly paid staff (continued) 2010-11 Average annual reportable remuneration1 Total remuneration (including part-time arrangements): $150,000 to $179,999 $180,000 to $209,999 $210,000 to $239,999 $210,000 to $239,999 Total Staff No. Reportable salary2 $ Contributed superannuation3 $ Reportable allowances4 $ Bonus paid5 $ Total $ 129,729 153,922 198,595 232,902 27,625 37,168 22,911 20,208 117 908 4,248 - - 157,471 191,998 225,754 253,110 82 7 7 4 100 Notes: 1. This table reports staff: a) who were employed by the entity during the reporting period; b) whose reportable remuneration was $150,000 or more for the financial period; and c) were not required to be disclosed in Tables A, B or director disclosures. Each row is an averaged figure based on headcount for individuals in the band. A number of the staff captured in this table acted as SES (2011-12: 46, 2010-11: 28) or were deployed overseas and received foreign employment income (2011-12: 10, 2010-11: 14). 2. 'Reportable salary' includes the following: a) gross payments (less any bonuses paid, which are separated out and disclosed in the 'bonus paid' column); b) reportable fringe benefits (at the net amount prior to 'grossing up' to account for tax benefits); and c) exempt foreign employment income. 3. The 'contributed superannuation' amount is the average actual superannuation contributions paid to senior executives in that reportable remuneration band during the reporting period, including any salary sacrificed amounts, as per the individuals' payslips. 4. 'Reportable allowances' are the average actual allowances paid as per the 'total allowances' line on individuals' payment summaries. 5. 'Bonus paid' represents average actual bonuses paid during the reporting period in that reportable remuneration band. The 'bonus paid' within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the entity during the financial year. 6. Various salary sacrifice arrangements were available to other highly paid staff including super, motor vehicle and expense payment fringe benefits. Salary sacrifice benefits are reported in the 'reportable salary' column, excluding salary sacrificed superannuation, which is reported in the 'contributed superannuation' column. Notes to and forming part of the financial statements Note 17 Remuneration of auditors 30 June 2012 $'000 30 June 2011 $'000 668 710 7 668 710 7 1,385 1,385 Financial statement audit services were provided free of charge to the Department by the Australian National Audit Office (ANAO). Fair value of the services provided Finance's financial statements audit services Whole-of-Government financial statements audit services Advance to the Finance Minister Total of fair value of services provided No other services were provided by the auditors of the financial statements. Notes to and forming part of the financial statements Note 18 Financial instruments 30 June 2012 $'000 30 June 2011 $'000 4,978 52,004 9,414 1,620 65,827 8,772 66,396 76,219 Carrying amount of financial assets 66,396 76,219 Financial liabilities At amortised cost: Suppliers Other payables Total 21,650 7,048 28,698 19,231 709 19,940 Carrying amount of financial liabilities 28,698 19,940 Note 18A Categories of financial instruments Financial assets Loans and receivables: Cash and cash equivalents Trade and other receivables Other financial assets Total Note 18B Net income and expense from financial assets Loans and receivables Impairment Net gain/(loss) from loans and receivables (63) (63) (9) (9) Net gain/(loss) from financial assets (63) (9) The net expense from financial assets not at fair value from profit and loss for 2011-12 is $0.063 million (2010-11: $0.009 million). Note 18C Net income and expense from financial liabilities There was no net income or expense from financial liabilities not at fair value through profit and loss for the current and comparative years. Note 18D Fair value of financial instruments The carrying values of the Department's financial assets and liabilities are a reasonable approximation of their fair values. Loans and receivables designated at fair value through profit and loss There are no changes in the fair value of loans and receivables designated at fair value through profit and loss that arise due to credit risk for the current and comparative years. Fair value measurements recognised by fair value hierarchy The Department’s financial assets and liabilities have not been measured at fair value. The carrying values of the Department's financial assets and liabilities are a reasonable approximation of their fair values. Notes to and forming part of the financial statements Note 18E Financial liabilities designated at fair value through profit and loss The Department has no financial liabilities designated at fair value through profit and loss. Note 18F Financial assets reclassified No financial assets were reclassified in the current and prior years. Notes to and forming part of the financial statements Note 18G Credit risk The Department is exposed to minimal credit risk. The maximum exposure to credit risk is to the risk that arises from the potential default of a debtor. This amount is equal to the total amount of financial assets (2012: $61.4 million and 2011: $74.6 million). The Department’s maximum exposure to credit risk at reporting date in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the balance sheet. Credit terms for trade and other receivables are generally net 30 days. Loans are made under contract with varying terms to maturity and fixed interest rates. The credit risk is assessed as minimal. The Department holds no collateral to mitigate against credit risk. The following table illustrates the entity's gross exposure to credit risk, excluding any collateral or credit enhancements. 2012 2011 $'000 $'000 Financial assets 52,004 Trade and other receivables 65,827 9,414 Other financial assets 8,772 Total 61,418 74,599 Financial liabilities Suppliers Other payables Total (21,650) (7,048) (28,698) (19,231) (709) (19,940) Credit quality of financial instruments not past due or individually determined as impaired Not past due nor impaired 2012 $'000 Not past due nor impaired 2011 $'000 Past due or impaired 2012 $'000 Past due or impaired 2011 $'000 4,978 42,183 9,414 1,620 13,293 8,772 9,821 - 52,534 - 56,575 23,685 9,821 52,534 Ageing of financial assets that were past due but not impaired for 2012 0 to 30 31 to 60 61 to 90 days days days $'000 $'000 $'000 7,233 893 79 Trade and other receivables 90+ days $'000 1,616 Total $'000 9,821 Total Cash and cash equivalents Trade and other receivables Other financial assets 7,233 893 79 1,616 9,821 Ageing of financial assets that were past due but not impaired for 2011 0 to 30 31 to 60 days days $'000 $'000 Trade and other receivables 49,588 1,160 Total 49,588 1,160 61 to 90 days $'000 40 90+ days $'000 1,746 Total $'000 52,534 40 1,746 52,534 There are no financial assets that have been assessed as impaired. Notes to and forming part of the financial statements Note 18H Liquidity risk The Department's financial liabilities are trade creditors, other payables, and other interest bearing liabilities. 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, 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 Department is appropriation funded from the Australian Government. The Department manages its funds to ensure it has adequate funds to meet payments as they fall due. In addition, the Department has policies in place to ensure payments are made when due and has no experience of default. The following tables illustrate the maturities for financial liabilities. Maturities for non-derivative financial liabilities 2012 On demand $'000 Within 1 year $'000 1 to 2 years $'000 2 to 5 years $'000 >5 years $'000 Total $'000 9,152 6,027 12,498 1,012 3 3 3 21,650 7,048 15,179 13,510 3 3 3 28,698 Maturities for non-derivative financial liabilities 2011 On Within 1 demand year $'000 $'000 Suppliers 5,802 13,429 Other payables 125 572 Total 5,927 14,001 1 to 2 years $'000 4 4 2 to 5 years $'000 8 8 >5 years $'000 - Total $'000 19,231 709 19,940 Suppliers Other payables Total The Department has no derivative financial liabilities in either the current or prior year. Note 18I Market risk The Department holds basic financial instruments that are not exposed to significant market risks. The Department is not exposed to currency risk or other price risk. The only interest bearing items on the balance sheet are loans, leases and other interest bearing liabilities. Loans and leases bear interest at a fixed rate and will not fluctuate due to changes in the market interest rate. Note 18J Assets pledged/or held as collateral The Department has not pledged any assets as collateral, nor does it hold any assets as collateral. Note 18K Concessional loans The Department has no concessional loans. Notes to and forming part of the financial statements Note 19 Financial assets reconciliation Financial assets Total financial assets as per balance sheet Less: non-financial instrument components Petty cash Appropriations receivable Reinsurance and recovery receivable Impairment allowance GST receivable from the Australian Taxation Office Reinsurance debtor receivable Comcare recoveries Total non-financial instrument components Total financial assets per financial instruments note 30 June 2012 $'000 30 June 2011 $'000 800,063 819,451 (11) (595,736) (18,618) 18,044 (6,281) (131,065) - (11) (583,055) (34,233) (863) (125,053) (17) (733,667) 66,396 (743,232) 76,219 Notes 8A 8B 8B 8B 8B 8B Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 Note 20A Employee benefits Wages and salaries Superannuation: 153,202 141,253 Defined contribution plans Defined benefit plans 17,835 10,759 17,311 8,228 Leave and other entitlements Separations and redundancies 17,068 3,149 13,315 6,563 8,658 7,552 8,436 6,972 26,164 20 244,387 202,098 3,367,013 2,956,107 3,342,221 2,884,371 Parliamentary Contributory Superannuation Scheme (PCSS) Governor-General Pension Scheme 52,307 940 51,582 924 Judges' Pensions Scheme Federal Magistrates Death and Invalidity Scheme 72,600 675 69,200 1,202 6,449,642 6,349,500 Printing and stationery 22,774 31,330 Fees and charges Travel expenses 31,629 56,909 35,257 49,236 Property operating expenses COMCAR operating expenses 10,327 2,912 11,700 3,756 Communication and other office expenses Outsourcing costs 14,080 14,483 15,145 13,747 6,826 7,735 159,940 167,906 24,824 2,094 33,354 1,859 Rending of services - external parties 133,022 132,693 Total goods and services 159,940 167,906 30,796 28,794 1,080 31,876 1,377 30,171 191,816 198,077 Note 20 Administered expenses Fringe benefits tax Other employee expenses Increase in post employment benefits liability Total employee benefits Note 20B Superannuation Commonwealth Superannuation Scheme (CSS) Public Sector Superannuation Scheme (PSS) Total superannuation Note 20C Suppliers Goods and services Other goods and services Total goods and services Goods and services are made up of: Provision of goods – external parties Rendering of services – related entities Other supplier expenses Operating lease rentals – external parties: Minimum lease payments Workers compensation expenses Total other supplier expenses Total supplier expenses Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 649 666 649 666 14,907 4,759 18,300 6,553 19,666 24,853 120 201 Note 20D Grants Private sector: Non-profit organisations Total grants Note 20E Depreciation and amortisation Depreciation: Buildings Property, plant and equipment Total depreciation Amortisation: Intangibles Total amortisation 120 201 19,786 25,054 Note 20F Write-down and Impairment of assets Asset write-downs and impairments from: Impairment on receivables 3 13 Total write-down and impairment of assets 3 13 Note 20G Finance costs Notional interest 82 133 Total finance costs 82 133 Total depreciation and amortisation Note 20H Other expenses Act of Grace payments 700 707 3,509 1,992 2,114 - Payments to Nation-building Funds Portfolio Special Accounts Settlements 4,324,072 286,800 2,420,672 - Total other expenses 4,617,073 2,423,493 - 924,908 555,995 555,995 575,503 1,500,411 Movement in Act of Grace provision Payment to Commonwealth Superannuation Corporation Note 20I Losses on financial investments Net unrealised changes in fair value of financial investments Realised losses on disposal of fair value investments Total other losses1 1 This is offset by $258.7 million (2010-11: $1,785.7 million) gains reported in Note 21F Foreign exchange gains. Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 - (4,087) 7,015 273 214 (50) (40) Carrying value of assets sold Intangibles: 18 63 Carrying value of assets sold 37 - Total losses from asset sales 278 3,165 2,561 - 2,561 - Note 20J Losses from asset sales Financial assets - administered investments: Proceeds from sale Carrying value of assets sold Land and buildings: Carrying value of assets sold Property, plant and equipment: Proceeds from sale Note 20K Unrealised foreign exchange losses Non-speculative Nation building fund Total unrealised foreign exchange losses Notes to and forming part of the financial statements Note 21 30 June 30 June 2012 $'000 2011 $'000 4,136 4,533 Administered income OWN-SOURCE REVENUE Non-taxation revenue Note 21A Rendering of services Rendering of services - related entities Recovery of costs from other entities Rendering of services - external parties 1 213 4,137 4,746 Note 21B Interest Government securities Housing agreements 922 17,320 1,431 17,732 Nation-building Funds investments Deposits 62,881 33,937 58,823 35,620 655 798 115,715 114,404 103,660 455,787 103,660 455,787 Other services Total rendering of services State and Territory Governments Total interest Note 21C Dividends Australian Government entities Total dividends 1 1 Finance expects to receive a special dividend from Medibank Private Ltd totalling $300m in the next financial year, subject to maintenance of their capital adequacy target following the special dividend payment. Note 21D Superannuation contributions Commonwealth Superannuation Scheme 231,262 254,815 1,097,473 1,763 1,087,631 1,879 1,330,498 1,344,325 Note 21E Other revenue Recovery of superannuation overpayments Other 4,508 3,460 7,229 3,321 Total other revenue 7,968 10,550 Public Sector Superannuation Scheme Parliamentary Contributory Superannuation Scheme Total superannuation contributions Notes to and forming part of the financial statements 30 June 30 June 2012 2011 $'000 $'000 258,666 1,785,656 258,666 1,785,656 GAINS Note 21F Realised foreign exchange gains Non-speculative gains: Nation building fund Total realised foreign exchange gains1 1 This is offset by $556.0 million (2010-11: $1,500.4 million) losses reported in Note 20I other losses. Note 21G Gains on financial investments Realised gains on fair value investments: Interest - bank bills and negotiable certificate of deposits 180,152 215,856 Interest - mortgage backed securities Interest - corporate debt securities 82,729 220,240 80,087 293,516 Interest - Government debt securities Interest - asset backed securities 99,349 12,977 114,623 14,827 11,371 606,818 2,203 721,112 Interest - other Total realised gains on fair value of investments Net unrealised gains in fair value of investments Total gains on financial investments Note 21H Other gains Resources received free of charge Reversal of prior year items Total other gains 483,829 - 1,090,647 721,112 3,844 3,783 250 48,874 4,094 52,657 Notes to and forming part of the financial statements 30 June 2012 30 June 2011 $'000 $'000 4,236 3,155 Gains/losses on available for sale financial assets Movement in carrying amount of superannuation 1 (520,527) (51,737,891) (301,538) 496,476 Total administered other comprehensive income (52,254,182) 198,093 Note 22 Administered other comprehensive income Note 22A Administered other comprehensive income Changes in administered reserves: Assets and make good valuation 1 Superannuation provision has significantly increased in 2011-12 largely as a result of a decrease in the market yield on Government bonds used to discount these balances (30 June 2012: 3.1%, 30 June 2011: 5.3%). Further details are shown in Note 26B Superannuation provision. Notes to and forming part of the financial statements Note 23 30 June 30 June 2012 $'000 2011 $'000 Administered financial assets Note 23A Cash and cash equivalents Official Public Account balances: Official Public Account1 13,553,290 9,903,383 Official Overnight Account2 Official Term Deposit Contra Account3 1,687,562 (14,500,000) 1,829,328 (10,650,000) Total Official Public Account balances Cash on hand 740,852 1 1,082,711 1 Department of Finance and Deregulation's bank accounts Total cash and cash equivalents 3,425 1,523 744,278 1,084,235 1 Official Public Account receives all administered receipts and makes appropriation payments to Commonwealth agencies. 2 Official Overnight Account is used for funds swept from all Commonwealth administered payments bank accounts and all departmental payments and receipts bank accounts. These funds are used for overnight investments and are returned to agencies’ transactional bankers the next morning (note 25B). 3 Official Term Deposit Contra Account is a contra account drawn on by the Office of Financial Management (AOFM) to make term deposits. The balance in this account is always negative. AOFM is responsible for managing investments on behalf of the Government, including term deposits. Note 23B Trade and other receivables Goods and services: 13,096 2,890 841 2,207 15,986 3,048 167,710 167,710 172,638 172,638 1,342 11,000 1,519 33,608 34,950 24,655 37,174 Less: allowance for impairment 218,646 (16) 212,860 (15) Total receivables (net) 218,630 212,845 55,934 162,696 45,145 167,700 218,630 212,845 Goods and services - related entities Goods and services - external parties Total receivables for goods and services Loans:1 State and Territory Governments Total loans Other receivables: Dividends receivable GST receivable from Australian Taxation Office Unsettled investment sales Total other receivables Total trade and other receivables (gross) Receivables are expected to be recovered in: No more than 12 months More than 12 months Total trade and other receivables (net) 1 No security is held for State and Territory loans. In 2011-12, principal of $10.4 million (2010-11: $11.3 million) was repaid. The average effective interest rate is 4.69% (2011-12: 4.89%). Repayments are based on a reducing balance method. Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 218,149 212,453 145 139 111 17 5 108 224 218,646 155 212,860 - - 16 16 15 15 30 June 2012 30 June 2011 $'000 15 $'000 5 (2) (3) 3 16 13 15 Note 23B Trade and other receivables Receivables are aged as follows: Not overdue Overdue by: 0 to 30 days 31 to 60 days 61 to 90 days More than 90 days Total receivables (gross) The impairment allowance account is aged as follows: Not overdue Overdue by: More than 90 days Total impairment allowance account Credit terms for goods and services were within 30 days (2010-11: 30 days) Reconciliation of the impairment allowance account: Goods and services Opening balance Amounts written off Amounts recovered and reversed Increase/decrease recognised in net surplus Closing balance Notes to and forming part of the financial statements 30 June 2012 30 June 2011 $'000 $'000 10,106 15,506 10,106 15,506 3,787,700 4,310,281 115,323 3,903,023 113,269 4,423,550 Bank bills Negotiable certificate of deposit 3,335,525 173,397 3,526,761 Corporate debt securities Mortgage backed securities 3,691,135 2,158,023 6,488,174 2,821,215 Government debt securities Asset backed securities 1,900,806 385,251 2,276,629 604,259 11,470,740 89,396 15,979,831 148,414 1,302 159,748 - 1,370 151,086 20,678 180,426 Note 23C Investments Securities Government securities1 Total securities Commonwealth companies:2 Government Business Enterprises (GBEs) Non-GBEs Total Commonwealth companies Nation-building Funds (NBF) investments at fair value:3 Interest bearing securities: Other income fixed securities Total interest bearing securities Derivatives: Currency contracts Forward contracts on mortgage backed securities Interest swap agreements Total derivatives Cash and cash equivalents held by NBF Total NBF investments at fair value 1,948,655 1,318,564 13,570,481 17,478,821 Total investments 17,483,610 21,917,877 13,579,687 3,903,923 17,576,941 4,340,936 17,483,610 21,917,877 Investments are expected to be recovered in: No more than 12 months More than 12 months Total investments 1 These consist of assets of former superannuation schemes administered by the Australian Government. 2 All of the investments in Commonwealth companies are 100% owned by the Commonwealth. The names of each of the Commonwealth companies held, and their principal activities, are as follows:  Commonwealth Superannuation Corporation (CSC) – Trustee of Commonwealth superannuation schemes.  ASC Pty Ltd – provision of ongoing capability for the through life support of the COLLINS class submarine and shipbuilder for the Air Warfare Destroyers.  Australian River Co Ltd – charter and sub-charter of vessels.  Medibank Private Ltd – provision of health insurance services (footnote continues on next page). Notes to and forming part of the financial statements Note 23C Investments (continued)  Albury-Wodonga Corporation – operates as a majority property-owner and land developer in the AlburyWodonga region. It continues to dispose of its property assets in an orderly manner to provide a financial return to Government in preparation for its winding up. GBEs are Commonwealth companies with independent legal existence and whose principal function is to engage in commercial activities in the private sector. GBEs include Medibank Private Limited and ASC Pty Ltd and were valued by management based on the present value of future cash flows. Non-GBEs include all other Commonwealth companies. Albury-Wodonga Corporation has been valued by management using the present value of cash flows. Australian River Co Ltd has been valued using net assets as reported on 31 May 2011. CSC has been valued using net assets forecast by management as at 30 June 2012. 3 The Nation-building Funds Act 2008 (the Act), established three financial asset funds to provide financing sources to meet the Government’s commitment to Australia’s future by investment in critical areas of property such as transport, communications, energy, water, education research and health. The Building Australia Fund (BAF), Education Investment Fund (EIF) and Health and Hospitals Fund (HHF) are financial asset funds consisting of cash and investments. 30 June 30 June 2012 $'000 2011 $'000 35,472 5,556 58,262 3,745 Note 23D Other financial assets Accrued revenue: Accrued employer superannuation contributions Interest 458 49 41,486 62,056 No more than 12 months More than 12 months 41,486 - 62,056 - Total other financial assets 41,486 62,056 Other Total other financial assets Total other financial assets is expected to be recovered in: Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 49,910 40,205 675 (31,380) 1,792 (18,164) 19,205 23,833 Fair value Work in progress 67,624 801 60,374 1,148 Accumulated depreciation (8,256) (5,083) 60,169 56,439 Note 24 Administered non-financial assets Note 24A Buildings Leasehold improvements: Fair value Work in progress Accumulated depreciation Total land and buildings Note 24B Property, plant and equipment Property, plant and equipment: Total property, plant and equipment All assets have been valued on the fair value basis in accordance with the revaluation policy set out in Note 1.18. All independent revaluations were conducted by the Australian Valuation Office (AVO) as at 30 June 2010. Management have updated the value of a significant asset as at 30 June 2011 and 30 June 2012 using the valuation methodology provided by AVO as at 30 June 2010. No indicators of impairment were found for land and buildings or property, plant and equipment. No land and buildings or property, plant and equipment are expected to be disposed of within the next 12 months. Revaluation of non-financial assets A revaluation increment for leasehold improvements of $nil (2010-11: increment of $2.6 million), and an increment for property, plant and equipment of $4.2 million (2010-11: increment of $0.4 million) were credited to the asset revaluation reserve by asset class and included in the administered reconciliation schedule. No revaluation adjustments were recognised in the operating result (2010-11: no adjustments). Notes to and forming part of the financial statements Note 24C Reconciliation of the opening and closing balances of property, plant and equipment (2011-12) Property, plant & Buildings equipment $’000 $’000 Total $’000 As at 1 July 2011 Gross book value Accumulated depreciation and impairment Net book value 1 July 2011 Additions: By purchase Revaluations and impairments recognised in other comprehensive income Depreciation expense Disposals: Other disposals Net book value 30 June 2012 Net book value as of 30 June 2012 represented by: Gross book value Accumulated depreciation and impairment Closing net book value at 30 June 2012 41,997 61,522 103,519 (18,164) 23,833 (5,083) 56,439 (23,247) 80,272 10,552 4,271 14,823 (14,907) 4,236 (4,759) 4,236 (19,666) (273) (18) (291) 19,205 60,169 79,374 50,585 (31,380) 68,425 (8,256) 119,010 (39,636) 19,205 60,169 79,374 Note 24C Reconciliation of the opening and closing balances of property, plant and equipment (2010-11) Buildings Property, plant & equipment Total $’000 $’000 $’000 As at 1 July 2010 Gross book value 35,055 60,845 95,900 Accumulated depreciation and impairment Net book value 1 July 2010 (1,303) 33,752 60,845 (1,303) 94,597 Additions: By purchase 5,980 1,770 7,750 Revaluations and impairments recognised in other comprehensive income 2,614 395 3,009 (18,300) 46 (6,553) 46 (24,853) Reclassification Depreciation expense Disposals: Write-offs (213) (89) (302) Other disposals Net book value 30 June 2011 23,833 25 56,439 25 80,272 Net book value as of 30 June 2011 represented by: Gross book value 41,997 61,522 103,519 (18,164) 23,833 (5,083) 56,439 (23,247) 80,272 Accumulated depreciation and impairment Closing net book value at 30 June 2011 Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 Purchased Accumulated amortisation Total computer software 2,069 (759) 1,157 (1,025) 1,310 132 Total intangibles 1,310 132 Note 24D Intangibles Computer software: No indicators of impairment were found for intangible assets. Impairment losses of $nil (2010-11: $nil million) were recorded through the Statement of Comprehensive Income. No intangibles are expected to be sold or disposed of within the next 12 months. Notes to and forming part of the financial statements Note 24E Reconciliation of the opening and closing balances of intangibles (2011-12) Computer software purchased Other intangibles purchased Total $’000 $’000 $’000 1,157 (1,025) - 1,157 (1,025) 132 - 132 1,335 (120) - 1,335 (120) (37) - (37) 1,310 - 1,310 2,069 (759) - 2,069 (759) 1,310 - 1,310 Computer software purchased $’000 Other intangibles purchased $’000 Total $’000 950 77 1,027 (792) 158 (32) 45 (824) 203 As at 1 July 2011 Gross book value Accumulated amortisation and impairment Net book value 1 July 2011 Additions: By purchase or internally developed Amortisation Disposals: Other disposals Net book value 30 June 2012 Net book value as of 30 June 2012 represented by: Gross book value Accumulated amortisation and impairment Closing net book value at 30 June 2012 Note 24E Reconciliation of the opening and closing balances of intangibles (2010-11) As at 1 July 2010 Gross book value Accumulated amortisation and impairment Net book value 1 July 2010 Additions: By purchase or internally developed Reclassification Amortisation Net book value 30 June 2011 Net book value as of 30 June 2011 represented by: Gross book value Accumulated amortisation and impairment Closing net book value at 30 June 2011 175 1 176 (201) (46) - (46) (201) 132 - 132 1,157 (1,025) - 1,157 (1,025) 132 - 132 Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 2,507 2,791 2,507 2,791 2,333 174 2,444 347 2,507 2,791 Note 24F Other non-financial assets Prepayments Total other non-financial assets Total other non-financial assets are expected to be recovered in: No more than 12 months More than 12 months Total other non-financial assets Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 Trade creditors and accruals Unsettled investments purchases 16,805 95,388 14,184 38,379 Derivative financial liabilities 25,793 25,914 137,986 78,477 4,670 133,316 1,018 68,287 137,986 69,305 - 9,172 Note 25 Administered payables Note 25A Suppliers Total suppliers Supplier payables expected to be settled within 12 months: Related entities External parties Total Supplier payables expected to be settled in greater than 12 months: External parties Total Total supplier payables - 9,172 137,986 78,477 4,476 3,624 3,196 1,687,562 3,960 1,829,328 1,344 1,065 1,339 61 1,697,643 1,838,312 1,696,843 1,837,435 Settlement is usually made within 30 days. Note 25B Other payables Salaries and wages GST annotation loan Overnight cash balance payable 1 Lease incentives Other Total other payables Total other payables are expected to be settled in: No more than 12 months More than 12 months Total other payables 1 800 877 1,697,643 1,838,312 Official Overnight Account is used for funds swept from all Commonwealth administered payments bank accounts and all departmental payments and receipts bank accounts. These funds are used for overnight investments and are payable to agencies’ transactional bankers the next morning. Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 Note 26A Employee provisions Leave Life Gold Pass Holders' entitlements 35,586 51,313 30,432 45,502 Severance travel entitlements Former Prime Ministers' entitlements 1,985 110,463 4,960 87,134 Total employee provisions 199,347 168,028 Note 26 Administered provisions Employee provisions are expected to be settled in: 15,713 25,337 183,634 142,691 199,347 168,028 Note 26B Superannuation provisions Parliamentary Contributory Superannuation Scheme Commonwealth Superannuation Scheme 1,282,408 79,001,329 836,468 60,039,140 Public Sector Superannuation Scheme Governor-General Pension Scheme 67,836,193 22,271 33,135,943 18,358 1,272,500 1,852 853,900 1,801 149,416,553 94,885,610 3,903,967 145,512,586 3,808,193 91,077,417 149,416,553 94,885,610 No more than 12 months More than 12 months Total employee provisions Judges' Pensions Scheme Federal Magistrates Death and Invalidity Scheme Total superannuation provisions Total superannuation are expected to be settled in: No more than 12 months More than 12 months Total superannuation provisions The opening balance for all superannuation schemes unfunded liabilities have been based on actuarial valuations as at 30 June 2011. The actuarial valuation at 30 June 2012 reflects adjustments for benefit accruals for additional years of service by current contributors, a nominal interest charge and payments to eligible recipients throughout the year. The main reason for the change in valuations is the impact of a change in the discount rate used for valuing the unfunded superannuation liability from 5.3% at 30 June 2011 to 3.1% at 30 June 2012. The use of a spot rate is required by Australian Accounting Standards, AASB 119 Employee Benefits. A financial asset fund, the Future Fund, was established by the Government for the purpose of accumulating assets to help meet this expected future Australian Government superannuation obligation. The balance of the Future Fund is reported in the financial statements of the Future Fund Management Agency. Additional superannuation information can be found at Note 31. Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 Note 26C Other provisions Act of Grace 14,932 12,590 Same Sex Relationships Act Make good 1,594 3,971 1,091 3,068 20,497 16,749 Total other provisions Other provisions are expected to be settled in: No more than 12 months More than 12 months Total other provisions 812 2,749 19,685 14,000 20,497 16,749 Reconciliation of movements in other provisions Carrying amount 1 July 2011 Additional provisions made Amounts used Amounts reversed Unwinding of discount or change in discount rate Closing balance 30 June 2012 Same Sex Relationships Act $’000 Act of Grace $’000 Make good $’000 Total $’000 1,091 56 12,590 644 3,068 1,091 16,749 1,791 (55) - (1,310) - (379) (1,365) (379) 502 1,594 3,008 14,932 191 3,971 3,701 20,497 In 2012, 124 agreements for leasing of premises that have provisions to restore the premises to their original condition at the conclusion of the lease were signed. A provision to reflect the present value of these obligations was made. Notes to and forming part of the financial statements Note 27 30 June 30 June 2012 2011 $'000 $'000 Administered cash flow reconciliation Reconciliation of cash and cash equivalents as per Schedule of Administered Assets and Liabilities to Schedule of Administered Cash Flows Cash and cash equivalents as per: Schedule of administered cash flows 744,278 1,084,235 Schedule of administered assets and liabilities Difference 744,278 - 1,084,235 - 9,166,887 6,213,373 Reconciliation of net cost of services to net cash from operating activities: Net cost of services Adjustments for non-cash items 19,786 25,054 (483,829) - 449,802 2,561 278 3,124 (Increase) / decrease in net receivables (Increase) / decrease in other financial assets (7,260) 20,570 (116) (698) (Increase) / decrease in other non financial assets Increase / (decrease) in employee provisions 284 31,319 1,127 (947) 2,621 1,097 (6,042) 1,222 2,793,052 3,748 2,795,060 1,407 (6,782,660) (2,944,380) Depreciation / amortisation Unrealised loss/(gains) on fair value investments Unrealised foreign exchange gain Unrealised foreign exchange losses Losses from assets sale Changes in assets / liabilities Increase / (decrease) in supplier payables Increase / (decrease) in other payable Increase / (decrease) in superannuation provisions Increase / (decrease) in other provisions Net cash from (used by) operating activities Notes to and forming part of the financial statements Note 28 Administered contingent assets and liabilities Indemnities 2012 2011 $'000 $'000 Contingent liabilities Balance from previous period New Obligation discharged Re-measurement: estimated interest Total contingent liabilities Net contingent assets (liabilities) Other 2012 2011 Total 2012 2011 $'000 $'000 $'000 $'000 565,208 - 531,885 - 10,973 - 565,208 10,973 531,885 - (565,208) - - - (565,208) - - 33,323 - 33,323 565,208 10,973 - - - 10,973 565,208 - (565,208) (10,973) - (10,973) (565,208) Quantifiable administered contingencies Sale of Sydney Airport Corporation Limited (SACL) An indemnity has been provided to Southern Cross Airports Corporation as purchaser of the Sydney Airports Corporation Limited (SACL) in the event of a liability arising under Chapter 3 of the Duties Act 1997 (New South Wales) by reason of the sale of shares in SACL constituting a relevant acquisition in a land rich private corporation. The NSW Office of State Revenue (NSWOSR) issued a notice of assessment on 17 November 2006, which subsequently gave rise to legal proceedings. The matter was settled on 25 June 2012 when the Commonwealth paid an agreed amount to NSWOSR and the remainder of the assessment was extinguished. Severance Pay Benefit The staff employed under the Members Of Parliament Staff (MOP(S)) Act 1984 are eligible for severance pay benefits in accordance with Enterprise Agreement 2012-15 clause 71.2 (persons whose employment is terminated under Part III or IV of the MOP(S) Act other than through resignation). The severance pay liability estimate will be triggered for relevant MOP(S) Act employees when an employing Member dies or ceases to hold office. When an employee is terminated as a result of the employing Member ceasing to hold office (i.e. under subsections 16(1), 16(2) or 23(1) of the MOP(S) Act), the base severance pay benefit payable under clause 71 will be increased by 30%. The actuarial valuation model of June 2012 estimated an accrued severance pay liability of $10.9m as of 30 June 2012. Unquantifiable administered contingencies The Department does not have any unquantifiable administered contingent assets or liabilities. Significant remote administered contingencies The Department does not have any significant remote contingencies. Notes to and forming part of the financial statements Note 29 Administered financial instruments 30 June 2012 30 June 2011 $'000 $'000 10,106 10,106 15,506 15,506 744,277 1,084,236 15,986 33,608 3,048 24,654 1,948,655 6,014 1,318,564 3,794 167,710 2,916,250 172,638 2,606,934 3,787,700 4,310,281 115,323 3,903,023 113,269 4,423,550 Note 29A Categories of financial instruments Financial assets Held-to-maturity: Government securities Total Loans and receivables: Cash and cash equivalents Trade receivables Unsettled sales Nation-building Funds (NBF) investments - cash and cash equivalents1 Accrued revenue Loans to state and territory governments Total Available for sale: General Government Enterprises (GBEs) Non-GBEs Total Fair value through profit and loss (designated): 151,086 180,426 NBF - interest bearing securities Total 11,470,740 11,621,826 15,979,831 16,160,257 Carrying amount of financial assets 18,451,205 23,206,247 16,805 95,388 14,173 38,379 4,617 116,810 5,310 57,862 25,793 25,914 25,793 25,914 142,603 83,776 NBF - derivatives Financial liabilities At amortised cost: Suppliers Unsettled investment purchases Other payables Total Fair value through profit and loss (designated): Total derivative financial liabilities Total Carrying amount of financial liabilities 1 The NBF had cash with a futures broker to cover exchange traded futures positions as required under clearing house rules. As at 30 June 2012, the NBF had $23.5 million (2011: $32.4 million) in futures margins to cover open positions. This cash remains a financial asset of the NBF, however any alternate use of this cash is restricted. NBF has entered into various derivative contracts which require NBF to post or receive collateral with counterparties under certain circumstances based on minimum transfer limits. NBF provide cash as collateral when legally required and the counterparties also post collateral when legally required. Any cash provided as collateral remains a financial asset of the NBF, however any alternate use of this cash is restricted as it is held by the counterparty. Any cash received by the Fund from counterparties is not included in the net assets of the NBF. As at 30 June 2012 the NBF has received $35.8 million in cash (2011:$38.9 million). Notes to and forming part of the financial statements 30 June 30 June 2012 $'000 2011 $'000 922 922 1,431 1,431 Interest revenue Interest - deposits 17,975 33,937 18,530 35,620 Impairment Net gain/(loss) from loans and receivables (3) 51,909 (13) 54,137 103,660 (520,527) 455,787 (301,538) (416,867) 154,249 Net realised exchange gains Net unrealised exchange losses 258,666 (2,561) 1,785,656 - Realised gains on fair value investments Net unrealised changes in fair value of investments 606,818 483,829 721,112 (924,908) (555,995) 62,881 (575,503) 58,823 853,638 853,638 1,065,180 1,065,180 489,602 1,274,997 Note 29B Net income and expense from financial assets Held-to-maturity Interest revenue Net gain/(loss) held-to-maturity Loans and receivables Available for sale Dividend revenue Gain/(loss) recognised in equity Net gain/(loss) from available for sale Fair value through profit and loss Designated as fair value through profit and loss: Realised gains/ (losses) on disposal of fair value of investments Interest revenue - NBF investments Total designated as fair value through profit and loss Net gain/(loss) at fair value through profit and loss Net gain/(loss) from financial assets The net income/(expense) from financial assets not at fair value from profit and loss is ($364.0) million (2010-11: $209.8 million). Note 29C Net income and expense from financial liabilities There was no income and expense from financial liabilities in the current or prior year. Notes to and forming part of the financial statements Note 29D Fair value of financial instruments The carrying value of the Department's administered financial assets and liabilities are a reasonable approximation of their fair values. Loans and receivables designated at fair value through profit and loss There are no changes in the fair value of loans and receivables designated as fair value through profit and loss that arise due to credit risk. All changes in fair value are attributable to changes in market conditions. Fair value changes due to credit risk There are no changes in the fair value of loans and receivables designated as fair value through profit and loss that arise due to credit risk. All changes in fair value are attributable to changes in market conditions. Fair value measurements categorised by fair value hierarchy The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Fair value measurements categorised by fair value hierarchy Level 1 Level 2 Level 3 Total 2012 $'000 2012 $'000 2012 $'000 2012 $'000 - - 3,787,700 115,323 3,787,700 115,323 - 11,470,740 - 11,470,740 Derivatives Total financial assets at fair value - 151,086 11,621,826 3,903,023 151,086 15,524,849 Financial liabilities at fair value: Derivatives Total financial liabilities at fair value - 25,793 - 25,793 - 25,793 - 25,793 Level 1 2011 Level 2 2011 Level 3 2011 Total 2011 $'000 $'000 $'000 $'000 - - - - 4,310,281 113,269 4,310,281 113,269 - 15,979,831 - 15,979,831 180,426 16,160,257 4,423,550 180,426 20,583,807 25,914 25,914 - 25,914 25,914 Financial assets at fair value: Commonwealth companies: Government business enterprises (GBEs) Non GBEs NBF investments: Interest bearing securities Financial assets at fair value Commonwealth companies: GBEs Non GBEs NBF investments: Interest bearing securities Derivatives Total financial assets at fair value Financial liabilities at fair value: Derivatives Total financial liabilities at fair value - - Notes to and forming part of the financial statements Note 29D Fair value of financial instruments (continued) Reconciliation of level 3 fair value hierarchy for financial assets GBEs Non-GBEs Investments in other entities 2012 $'000 2012 $'000 2012 $'000 2012 $'000 Financial assets at fair value Opening balance Liquidation 4,310,280 - 113,270 - - 4,423,550 - Gains (losses) recognised in equity1 Closing balance (522,581) 3,787,699 2,054 115,324 - (520,527) 3,903,023 Total Total GBEs Non-GBEs Investments in other entities 2011 $'000 2011 $'000 2011 $'000 2011 $'000 Financial assets at fair value Opening balance Liquidation 4,583,399 - 148,645 (6,955) 61 (61) 4,732,105 (7,016) Gains (losses) recognised in equity1 Closing balance (273,119) 4,310,280 (28,420) 113,270 - (301,539) 4,423,550 1 These gains and losses are disclosed in the administered reconciliation schedule under "administered revaluations taken to/from reserves". Notes to and forming part of the financial statements Note 29E Credit risk The administered activities of the Department are exposed to a moderate level of credit risk in its financial investments portfolio and a low risk in other financial assets such as trade receivables, advances and loans to state, territory and local governments and shares in government controlled and funded entities. The Department has assessed the risk of default on payment and has not identified any amounts to be allocated to a doubtful debts account. The following table illustrates the Department’s gross exposure to credit risk, excluding any collateral held or credit enhancement. Gross exposure to credit risk Financial assets Trade and other receivables Administered investments NBF investments Government securities Accrued revenue Total 2012 2011 $'000 $'000 217,304 200,340 3,903,023 11,621,826 4,423,550 16,160,257 10,106 6,014 15,506 3,794 15,758,273 20,803,447 As at 30 June 2012, the Nation-building Funds (NBF) had an exposure of greater than 10% of its net assets to interest bearing securities issued by domestic banks. Exposures to individual counterparties greater than 5% of the net assets of the Funds are separately identified for Building Australia Fund (BAF), Education Investment Fund (EIF) and Health and Hospital Fund (HHF) in the table below. Credit risk exposures of debt instruments held by NBF BAF 2012 EIF 2012 HHF 2012 Total NBF 2012 $'000 $'000 $'000 $'000 641,023 395,400 368,202 1,404,625 777,602 402,061 544,955 217,606 472,137 212,127 1,794,694 831,794 342,074 574,631 177,100 540,192 176,759 332,120 695,933 1,446,943 2,737,391 1,875,253 1,561,345 6,173,989 BAF 2011 EIF 2011 HHF 2011 Total NBF 2011 $'000 $'000 $'000 $'000 Interest Bearing Securities issued by: Commonwealth Bank of Australia 780,301 405,297 404,421 1,590,019 Westpac Banking Corporation The Commonwealth of Australia 767,703 459,428 452,566 304,677 369,114 250,394 1,589,383 1,014,499 501,379 430,706 201,391 184,881 267,195 214,112 969,965 829,699 2,939,517 1,548,812 1,505,236 5,993,565 Credit rating Interest Bearing Securities issued by: Commonwealth Bank of Australia Westpac Banking Corporation National Australia Bank Limited Australia and New Zealand Banking Group The Northern Trust Company Total Credit rating National Australia Bank Limited Australia and New Zealand Banking Group Total Notes to and forming part of the financial statements Note 29E Credit risk (continued) Credit exposure by credit rating The following table provides information regarding the credit risk exposures of the debt instruments held by the NBF according to the credit ratings of the underlying debt instruments. Credit risk exposures of debt instruments held by NBF Credit rating Long term rated securities AAA BAF EIF HHF Total NBF 2012 $'000 2012 $'000 2012 $'000 2012 $'000 1,692,866 1,243,553 964,321 3,900,740 AA+ AA 96,696 925,279 67,416 801,807 54,368 496,265 218,480 2,223,351 AAA+ 721,901 303,577 607,079 231,208 460,411 166,940 1,789,391 701,725 A A- 156,225 173,065 125,279 135,434 87,028 94,265 368,532 402,764 5,083 4,701 4,314 4,064 2,823 2,629 12,220 11,394 5,720 35,978 9,207 18,573 3,178 19,494 18,105 74,045 A-1+ 1,511,133 809,543 814,265 3,134,941 A-1 Other: 29,876 4,965 10,929 45,770 183,847 79,517 213,848 66,146 120,241 44,831 517,936 190,494 5,925,464 4,342,436 3,341,988 13,609,888 BAF 2011 EIF 2011 HHF 2011 Total NBF 2011 $'000 $'000 $'000 $'000 AAA AA+ 2,722,062 96,459 1,755,402 60,066 1,474,866 50,213 5,952,330 206,738 AA AA- 1,492,915 502,701 997,456 330,592 786,079 279,124 3,276,450 1,112,417 A+ A 587,192 365,935 376,923 234,206 320,736 202,108 1,284,851 802,249 AAa2 255,864 8,782 163,919 5,397 140,538 4,527 560,321 18,706 Aa3 A2 6,146 4,176 4,097 2,516 3,414 2,155 13,657 8,847 18,073 11,126 9,323 38,522 1,791,100 120,256 799,409 29,697 889,611 45,615 3,480,120 195,568 151,950 94,864 100,889 347,703 100,891 8,224,502 54,437 4,920,107 53,641 4,362,839 208,969 17,507,448 Aa2 Aa3 A2 A3 Short term rated securities: US Government Guaranteed Other non debt financial instruments Total debt securities held by the NBF Credit rating Long term rated securities A3 Short term rated securities: A-1+ A-1 Other: US Government Guaranteed Other non debt financial instruments Total debt securities held by the NBF Notes to and forming part of the financial statements Note 29E Credit risk (continued) Credit quality of financial instruments not past due or individually determined as impaired Not past due nor impaired 2012 $'000 Not past due nor impaired 2011 $'000 Past due or impaired 2012 $'000 Past due or impaired 2011 $'000 216,807 199,933 497 407 3,903,023 11,621,826 4,423,550 16,160,257 - - 10,106 6,014 15,506 3,794 - - 15,757,776 20,803,040 497 407 Ageing of financial assets that were past due but not impaired for 2012 0 to 30 31 to 60 61 to 90 days days days $'000 $'000 $'000 90+ days $'000 Total $'000 224 224 497 497 Financial assets Trade and other receivables Administered investments NBF investments Government securities Accrued revenue Total Trade and other receivables Total 145 145 111 111 Ageing of financial assets that were past due but not impaired for 2011 0 to 30 31 to 60 Trade and other receivables Total 17 17 61 to 90 90+ days $'000 days $'000 days $'000 days $'000 Total $'000 139 139 5 5 108 108 155 155 407 407 Notes to and forming part of the financial statements Note 29F Liquidity risk The Department's administered financial liabilities are trade creditors and other payables. The exposure to liquidity risk is based on the notion that the Department will encounter difficulty in meeting its obligations associated with administered 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 Department's administered activities are appropriated from the Australian Government and the Department manages its budgeted administered funds to ensure it has adequate funds to meet payments as they fall due. In addition, the Department has policies in place to ensure timely payments are made when due and has no past experience of default. The Department has $25.8 million (2010-11: $25.1 million) derivative financial liabilities, of which $25.8 million (2010-11: $15.9 million) are recoverable within 12 months. The following table illustrates the maturities for financial liabilities. Maturities for non-derivative financial liabilities 2012 On Within 1 1 to 2 2 to 5 >5 demand $'000 year $'000 years $'000 years $'000 years $'000 Total $'000 7,943 3,197 104,250 620 439 355 6 112,193 4,617 11,140 104,870 439 355 6 116,810 Maturities for non-derivative financial liabilities 2011 On Within 1 Suppliers Other payables Total 1 to 2 2 to 5 >5 demand $'000 year $'000 years $'000 years $'000 years $'000 Total $'000 8,883 3,971 43,669 462 372 505 - 52,552 5,310 12,854 44,131 372 505 - 57,862 Maturities for derivative financial liabilities 2012 On Within 1 Suppliers Other payables Total 1 to 2 2 to 5 >5 demand $'000 year $'000 years $'000 years $'000 years $'000 Total $'000 BAF EIF - 12,182 7,870 - - - 12,182 7,870 HHF Total - 5,741 25,793 - - - 5,741 25,793 On demand Within 1 year 1 to 2 years 2 to 5 years >5 years Total $'000 - $'000 7,715 $'000 - $'000 682 $'000 3,769 $'000 12,166 - 4,785 4,242 - 394 468 2,246 1,613 7,425 6,323 - 16,742 - 1,544 7,628 25,914 Maturities for derivative financial liabilities 2011 BAF EIF HHF Total Notes to and forming part of the financial statements Note 29G Market risk Other than balances held by the Nation-building Funds, administered investments and Consolidated Revenue Fund (CRF) balances, the Department holds basic financial instruments that are not exposed to certain market risks. In regards to the Nation-building Funds, administered investments and the CRF, the Department is exposed to interest rate risk and foreign currency risk. The following table is a sensitivity analysis of the risk the Department is exposed to. Sensitivity analysis of the risk that the Department is exposed to for 2012 Effect on Profit Equity and loss $'000 $'000 Risk variable Change in risk variable % Deposit rate +1.40% 22,862 - Deposit rate Discount rate -1.40% +1.40% (10,659) - (446,300) Discount rate Discount rate -1.40% +1.40% - 618,400 (2,945) Discount rate Discount rate -1.40% +1.40% 41,868 3,102 - Discount rate Discount rate -1.40% +1.40% (38,578) 33,276 - Discount rate Discount rate -1.40% +1.40% (25,153) 22,216 - Discount rate -1.40% (20,655) - BAF Exchange rate Exchange rate +15% -15% 2,649 (2,649) - EIF Exchange rate Exchange rate +15% -15% 3,472 (3,472) - HHF Exchange rate Exchange rate +15% -15% 1,855 (1,855) - Interest rate risk1 Overnight cash deposits with the RBA Government Business Enterprises (GBEs) Non GBEs Building Australia Fund (BAF) Education Investment Fund (EIF) Health and Hospital Fund (HHF) Currency risk2 Notes to and forming part of the financial statements Note 29G Market risk (continued) Sensitivity analysis of the risk that the Department is exposed to for 2011 Risk variable Change in risk variable Effect on Profit and Equity loss % $'000 $'000 Deposit rate Deposit rate +1.75% -1.75% 7,210 (4,692) - Government Business Enterprises (GBEs) Discount rate Discount rate +1.75% -1.75% - (697,894) 1,037,424 Non GBEs Discount rate Discount rate +1.75% -1.75% - (3,334) 3,540 Building Australia Fund (BAF) Discount rate Discount rate +1.75% -1.75% 68,542 (79,985) - Education Investment Fund (EIF) Discount rate Discount rate +1.75% -1.75% 41,549 (49,468) - Health and Hospital Fund (HHF) Discount rate Discount rate +1.75% -1.75% 36,060 (41,435) - Exchange rate +15.00% 1,527 - Exchange rate Exchange rate -15.00% +15.00% (1,527) 853 - Exchange rate Exchange rate -15.00% +15.00% (853) 659 - Exchange rate -15.00% (659) - Interest rate risk 1 Overnight cash deposits with the RBA Currency risk2 BAF EIF HHF 1 Interest rate risk The Department is exposed to interest rate risk in relation to overnight cash deposits with the Reserve Bank of Australia (RBA), the NBF investments and administered investments. The impact of a change in interest rates is disclosed in the above table. The Department has also issued a number of fixed interest loans that are not subject to any degree of interest rate risk. 2 Currency risk The NBF undertakes certain transactions denominated in foreign currencies and hence is exposed to the effects of exchange rate fluctuations. Exchange rate exposures are managed utilising forward foreign exchange contracts. The above sensitivity analysis table demonstrates the impact on the operating result of a movement in the value of the Australian dollar relative to the basket of actual net exposures as at year end, with all other variables held constant. Notes to and forming part of the financial statements Note 29G Market risk (continued) The NBF’s exposure in Australian equivalents to foreign currency risk at the reporting date was as follows for 2012: Building Australia Fund (BAF) Total physical exposure Total derivative exposure Total net exposure Education Investment Fund (EIF) Total physical exposure Total derivative exposure Total net exposure Health and Hospital Fund (HHF) Total physical exposure Total derivative exposure Total net exposure Total NBF exposure USD $'000 EURO $'000 GBP $'000 Other $'000 Total $'000 960,087 (937,803) 583,911 (587,706) 271,320 (271,822) 4 187 1,815,322 (1,797,144) 22,284 (3,795) (502) 191 18,178 900,872 (880,625) 462,896 (464,831) 226,981 (227,265) 4 125 1,590,753 (1,572,596) 20,247 (1,935) (284) 129 18,157 594,784 (580,410) 322,214 (324,042) 151,116 (151,390) 1 112 1,068,115 (1,055,730) 14,374 56,905 (1,828) (7,558) (274) (1,060) 113 433 12,385 48,720 The NBF’s exposure in Australian equivalents to foreign currency risk at the reporting date was as follows for 2011: Building Australia Fund (BAF) Total physical exposure Total derivative exposure Total net exposure Education Investment Fund (EIF) Total physical exposure Total derivative exposure Total net exposure Health and Hospital Fund (HHF) Total physical exposure Total derivative exposure Total net exposure Total NBF exposure USD EURO GBP Other Total $'000 $'000 $'000 $'000 $'000 1,717,524 (1,705,970) 1,235,019 (1,240,473) 298,132 (297,226) 1,459 (435) 3,252,134 (3,244,104) 11,554 (5,454) 906 1,024 8,030 1,187,211 (1,177,962) 754,897 (760,419) 185,772 (185,193) 941 (905) 2,128,821 (2,124,479) 9,249 (5,522) 579 36 4,342 958,631 650,682 156,994 831 1,767,138 (950,630) 8,001 (655,397) (4,715) (156,798) 196 (606) 225 (1,763,431) 3,707 28,804 (15,691) 1,681 1,285 16,079 Notes to and forming part of the financial statements Note 29G Market risk (continued) Investments under the NBF are exposed to risk of loss arising from movement in the prices of various assets flowing through interest rate changes. The total exposure for each class of NBF financial investments is set out below: Exposure of NBF financial investments by class Financial assets Floating interest rate 2012 Fixed interest rate 2012 Noninterest bearing 2012 Total 2012 $'000 $'000 $'000 $'000 Building Australia Fund (BAF) Cash and cash equivalents Interest bearing securities 811,466 1,873,648 3,160,833 - 811,466 5,034,481 Other financial assets Total BAF 2,685,114 3,160,833 79,517 79,517 79,517 5,925,464 Education Investment Fund (EIF) Cash and cash equivalents Interest bearing securities 710,223 1,444,355 2,121,712 - 710,223 3,566,067 Other financial assets Total EIF 2,154,578 2,121,712 66,146 66,146 66,146 4,342,436 426,966 - - 426,966 1,118,874 - 1,751,317 - 44,831 2,870,191 44,831 1,545,840 6,385,532 1,751,317 7,033,862 44,831 190,494 3,341,988 13,609,888 Floating interest rate Fixed interest rate Noninterest bearing Total 2011 $'000 2011 $'000 2011 $'000 2011 $'000 583,161 - - 583,161 Interest bearing securities Other financial assets Total BAF Education Investment Fund (EIF) Cash and cash equivalents 3,238,315 - 4,302,136 - 100,890 7,540,451 100,890 3,821,476 4,302,136 100,890 8,224,502 434,054 - - 434,054 Interest bearing securities Other financial assets Total EIF Health and Hospital Fund (HHF) Cash and cash equivalents Interest bearing securities 2,037,354 - 2,394,260 - 54,437 4,431,614 54,437 2,471,408 2,394,260 54,437 4,920,105 301,349 1,750,655 2,257,195 - 301,349 4,007,850 Other financial assets Total HHF 2,052,004 2,257,195 53,641 53,641 53,641 4,362,840 Total NBF 8,344,888 8,953,591 208,968 17,507,447 Health and Hospital Fund (HHF) Cash and cash equivalents Interest bearing securities Other financial assets Total HHF Total NBF Financial assets Building Australia Fund (BAF) Cash and cash equivalents - - - - Notes to and forming part of the financial statements Note 29G Market risk (continued) Interest rate futures contracts The NBF had open positions in exchange traded interest rate futures contracts as at 30 June 2012. The Nation-building Funds Act 2008 governs the use of financial derivatives. Exchange traded interest rate futures are used by the NBF investment managers to manage the exposure to interest rates and to ensure it remains within approved limits. The notional value of the open contracts and their fair value are set out below. Notional value 2012 2011 Building Australia Fund (BAF) Education Investment Fund (EIF) Health and Hospital Fund (HHF) Total $'000 (1,208,139) (843,331) (702,102) (2,753,572) $'000 (2,749,810) (1,859,111) (1,568,522) (6,177,443) Fair market value 2012 2011 $'000 18,406 12,230 11,442 42,078 $'000 (45,924) (26,420) (23,129) (95,473) Note 29H Concessional loans The following table provides information on the carrying value of concessional loans the Department holds with States and Territories. 2012 2011 $'000 $'000 170,122 63,368 177,715 67,565 106,754 110,150 46,131 14,966 47,385 15,806 31,165 31,579 25,957 8,227 26,725 8,720 17,730 18,005 2,043 732 2,082 770 1,311 1,312 4,950 1,437 5,172 1,548 3,513 160,473 3,624 164,670 Australian Capital Territory housing loans Nominal value Less: Unexpired discount Carrying value Returned service personnel - New South Wales Nominal value Less: Unexpired discount Carrying value Returned service personnel - Queensland Nominal value Less: Unexpired discount Carrying value Returned service personnel - South Australia Nominal value Less: Unexpired discount Carrying value Returned service personnel - Western Australia Nominal value Less: Unexpired discount Carrying value Total concessional loans Notes to and forming part of the financial statements Note 30 Administered financial assets reconciliation Financial assets 30 June 2012 30 June 2011 $'000 $'000 18,488,004 23,277,013 16 15 (35,472) (58,261) (1) (11,000) (1) (1,342) (36,799) (1,519) (70,766) 18,451,205 23,206,247 Notes Total financial assets as per schedule of administered assets and liabilities Add / (less): Non-financial instrument components Allowance for impairment Accrued employer contributions and additional lump sum revenue Dividends receivable Petty cash GST receivable from Australian Taxation Office Total non-financial instrument components Total financial assets as per financial instruments note 29A Notes to and forming part of the financial statements Note 31 Superannuation Note 31A Commonwealth Superannuation Scheme (CSS) Accounting policy Actuarial gains and losses are recognised immediately in administered equity in the year in which they occur. Scheme information Members generally receive an unfunded indexed pension benefit on retirement, disablement, redundancy or death (to an eligible spouse/children) with an option in most cases to receive the funded component as a once off lump sum or convert to additional non-indexed pension. The CSS scheme is closed to new members. Reconciliation of the present value of the defined benefit obligation Financial year ended 30 June 30 June 2012 $'000 2011 $'000 64,271,126 64,446,182 270,182 302,285 30,749 3,378,020 32,226 3,330,711 84,742 18,528,873 90,130 (261,660) 22,292,566 3,493,692 Benefits paid: Total benefits paid from CRF (including ACT/NT/ANU)1 Benefits paid from CRF for ACT/NT/ANU Benefits paid from CSS Fund (excluding ACT/NT/ANU) Net benefits paid (3,995,553) 346,421 2,401 (3,646,731) (4,004,725) 338,455 2,356 (3,663,914) Taxes, premiums and expenses paid Present value of defined benefit obligations at end of the year (4,613) 82,912,348 (4,834) 64,271,126 Present value of defined benefit obligations at beginning of the year Amounts recognised in income, expenses or equity: Current service cost Productivity contributions Interest cost Contributions by scheme participants Actuarial losses/(gains) Net amounts recognised in income, expenses or equity 1 Total benefits paid from the Consolidated Revenue Fund (CRF) include both the unfunded and funded components and are inclusive of payments made to employees of the ACT Government (ACT), the NT Government (NT) and the Australian National University (ANU). These are excluded from the calculations of the present value of defined benefit obligations. Notes to and forming part of the financial statements Note 31A Commonwealth Superannuation Scheme (CSS) (continued) Reconciliation of the fair value of scheme assets Financial year ended Fair value of scheme assets at beginning of the year Changes in fair value of plan assets: Expected return on scheme assets Actuarial gains/(losses) Contributions by scheme participants Contributions by employer - productivity contribution Net changes in fair value of plan assets Appropriation from CRF: Total employer contributions - appropriation from CRF (incl. ACT/NT/ANU) Total emerging cost contributions from ACT/NT/ANU Benefits paid from CRF for ACT/NT/ANU Funded benefits paid from CSS Fund to CRF for ACT/NT/ANU Net appropriation from CRF Benefits paid: Total benefits paid from CRF (including ACT/NT/ANU)1 Benefits paid from CRF for ACT/NT/ANU Benefits paid from CSS Fund (excluding ACT/NT/ANU) Net benefits paid Taxes, premiums and expenses paid Fair value of scheme assets at end of the year 30 June 2012 $'000 30 June 2011 $'000 4,231,986 4,380,424 281,189 (172,151) 290,775 13,779 84,742 30,749 90,130 32,226 224,529 426,910 3,220,908 177,894 (346,421) 53,467 3,105,848 3,215,599 161,214 (338,455) 55,042 3,093,400 (3,995,553) 346,421 2,401 (4,004,725) 338,455 2,356 (3,646,731) (4,613) (3,663,914) (4,834) 3,911,019 4,231,986 Total benefits paid from the Consolidated Revenue Fund (CRF) include both the unfunded and funded components and are inclusive of payments made to employees of the ACT Government (ACT), the NT Government (NT) and the Australian National University (ANU). These are excluded from the calculations of the present value of defined benefit obligations. 1 Reconciliation of the net superannuation liabilities administered on behalf of Government As at 30 June 2012 $'000 82,912,348 Defined benefit obligation 30 June 2011 $'000 64,271,126 (3,911,019) 79,001,329 (4,231,986) 60,039,140 30 June 2012 $'000 30 June 2011 $'000 Current service cost Interest cost 270,182 3,378,020 302,285 3,330,711 Less: expected return on assets Net superannuation expense (Refer Note 20B) (281,189) 3,367,013 (290,775) 3,342,221 Less: fair value of scheme assets Net superannuation liability (Refer Note 26B) Total expense recognised in the schedule of administered comprehensive income Financial year ended Notes to and forming part of the financial statements Note 31A Commonwealth Superannuation Scheme (CSS) (continued) Amounts recognised directly in administered equity Financial year ended 30 June 2012 $'000 30 June 2011 $'000 (18,701,024) 275,439 30 June 30 June 2012 $'000 2011 $'000 (27,293,314) (8,592,290) 30 June 2012 % 23.1% 30 June 2011 % 26.5% Market neutral funds Long / short funds 10.2% - 10.2% 1.9% International equity Objective based funds 28.6% 5.6% 28.7% 3.6% Credit Property 8.0% 14.7% 6.3% 12.8% 3.8% 6.0% 4.8% 5.2% Actuarial gains/(losses) Cumulative amount of actuarial gains and losses recognised in administered equity Financial year ended Cumulative amount of actuarial gains/(losses) Scheme Assets The fair value of scheme assets is represented by: Financial year ended Australian equity Cash Bonds Fair value of scheme assets The fair value of scheme assets does not include amounts relating to: any of the Department’s (and the Australian Government’s) own financial instruments; and any property occupied by, or other assets used by the Department (or the Australian Government). except: property holdings, including interest in various unit trusts, may include leases to the Department (or the Australian Government); and Government bonds, amounting to $30.19 million (CSC Investments Trust) as at 30 June 2012 ($9.14 million as at 30 June 2011). Expected rate of return on scheme assets The expected return on assets assumption is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each asset class. The returns used for each asset class are net of investment tax and investment fees. Notes to and forming part of the financial statements Note 31A Commonwealth Superannuation Scheme (CSS) (continued) Actual return on scheme assets Financial year ended Actual return on scheme assets Actual return on scheme assets as a percentage Principal actuarial assumptions at balance sheet date Financial year ended Discount rate (active members) Discount rate (pensioners) Expected rate of return on plan assets (active members) Expected salary increase rate (plus promotional increases) Expected pension increase rate 30 June 30 June 2012 $'000 2011 $'000 109,038 2.7% 304,554 7.5% 30 June 2012 % 3.1% pa 3.1% pa 7.0% pa 4.0% pa 2.5% pa 30 June 2011 % 5.3% pa 5.3% pa 7.0% pa 4.0% pa 2.5% pa Other material assumptions Assumptions have been made regarding rates of retirement, death (for active, preserved and pension members), mortality improvements, invalidity, resignation, retrenchment, retention and take up rates of pensions in the scheme. Assumptions have also been made for the ages of spouses and rates of member contributions. Unless stated otherwise in this report, all assumptions are the same as those used for the Long Term Cost Report as at 30 June 2011. Certain estimates and approximations were required to determine the year end assets and liabilities in the Statement of Administered Items in the timeframe required. The fair value of scheme assets as at 30 June 2012 was estimated using the audited fair value of scheme assets at 30 June 2011 with cash flow items provided by the trustee, Commonwealth Superannuation Corporation, other than benefits paid during the year, which were based on information provided by the Department. An estimate of the actual rate of investment return earned by the scheme during the year to 30 June 2012 was used in determining the fair value of scheme assets. In relation to the defined benefit obligation, member data as at 30 June 2011 was projected forward allowing for decrements in accordance with the 2011 Long Term Cost Report. The data was then adjusted for the difference between actual benefit payments and those based on the assumed decrements. Salaries at 30 June 2012 were estimated using an assumption derived from the Australian Public Service Remuneration Survey. Members’ account balances were increased to be consistent with the estimated level of Earning Rates prevailing at 30 June 2012. Notes to and forming part of the financial statements Note 31A Commonwealth Superannuation Scheme (CSS) (continued) Historical information Financial year ended 30 June 2012 $'000 30 June 2011 $'000 30 June 2010 $'000 30 June 2009 $'000 30 June 2008 $'000 Present value of defined benefit obligation 82,912,348 64,271,126 64,446,182 59,837,471 55,663,789 Less: fair value of scheme assets Total deficit in scheme (3,911,019) 79,001,329 (4,231,986) 60,039,140 (4,380,424) 60,065,758 (4,259,430) 55,578,041 (5,555,721) 50,108,068 Experience adjustments (gain)/loss - scheme assets 172,151 (13,779) (221,343) 1,048,332 478,388 Experience adjustments (gain)/loss - scheme liabilities (450,845) 442,361 1,541,732 (2,863,710) 1,971 30 June 2013 $'000 29,220 30 June 2012 $'000 29,541 Expected contributions Financial year ended Expected employer contributions2 2 This represents the employer productivity contributions, which are paid into the CSS fund. Funding arrangements for employer contributions (a) Deficit The following is a summary of the most recent financial position of the Commonwealth Superannuation Scheme determined in accordance with AAS 25 Financial Reporting by Superannuation Plans. Financial year ended 30 June 30 June 2012 2008 $'000 $'000 59,900,000 59,200,000 Accrued benefits - unfunded liability as at 30 June 20113 3 This valuation is sourced from the long-term cost report as at 30 June 2011 when a complete valuation was undertaken. This valuation is for the entire scheme, which includes a component relating to the ACT and NT Governments and the ANU. (b) Contribution recommendations The Scheme is largely unfunded. While employers pay productivity contributions of between 2% and 3% into the CSS Fund, the remaining employer contributions are not funded in advance. (c) Funding method Where a benefit becomes payable that cannot be fully met from the moneys held in the CSS fund, all moneys in the CSS fund in respect of the members are paid into the Consolidated Revenue Fund and the Commonwealth then assumes responsibility for the payment of the benefit. (d) Economic assumptions The long-term economic assumptions adopted for the last actuarial review of the scheme as at 30 June 2011 were: Expected rate of return on assets (discount rate) Expected salary increase rate Expected CPI increase 6.0% pa 4.0% pa (nominal) + a promotional salary increase scale 2.5% pa Notes to and forming part of the financial statements Nature of asset/liability The Department has recognised a liability in the Schedule of Administered Items in respect of its defined benefit superannuation arrangements administered on behalf of the Government. The Commonwealth Superannuation Scheme does not impose a legal liability on the Department to cover any deficit that exists in the scheme. This liability instead rests with the Australian Government. The Government has established the Future Fund for the purpose of accumulating assets to help meet this liability. The Future Fund is also intended to cover other superannuation unfunded liabilities including in relation to military schemes, parliamentarians, federal judges and Governors-General. Notes to and forming part of the financial statements Note 31B Public Sector Superannuation Scheme (PSS) Accounting policy Actuarial gains and losses are recognised immediately in administered equity in the year in which they occur. Scheme information Members have the choice of receiving lump sum or pension benefits on retirement, death, disablement and resignation. Members may also preserve their benefit. The PSS scheme is closed to new members. Reconciliation of the present value of the defined benefit obligation Financial year ended 30 June 2012 $'000 30 June 2011 $'000 44,719,652 41,543,533 1,430,915 210,600 1,493,929 209,739 2,344,926 556,581 2,137,986 545,357 31,663,235 36,206,257 (322,588) 4,064,423 Total benefits paid from CRF (including ACT/ANU)1 Benefits paid from CRF for ACT/ANU (1,017,737) 69,933 (910,426) 62,644 Benefits paid from PSS Fund (excluding ACT/ANU) Net benefits paid (3,711) (951,515) (9,061) (856,843) (31,590) 79,942,804 (31,461) 44,719,652 Present value of defined benefit obligations at beginning of the year Amounts recognised in income, expenses or equity: Current service cost Productivity contributions Interest cost Contributions by scheme participants Actuarial (gains)/losses Net amounts recognised in income, expenses or equity Benefits paid Taxes, premiums and expenses paid Present value of defined benefit obligations at end of the year 1 Total benefits paid from the Consolidated Revenue Fund (CRF) include both the unfunded and funded components and are inclusive of payments made to employees of the ACT Government (ACT) and the Australian National University (ANU). These are excluded from the calculations of the present value of defined benefit obligations. Notes to and forming part of the financial statements Note 31B Public Sector Superannuation Scheme (PSS) (continued) Reconciliation of the fair value of scheme assets Financial year ended Fair value of scheme assets at beginning of the year Changes in fair value of plan assets: Expected return on scheme assets 30 June 2012 $'000 2011 $'000 11,583,709 10,551,432 819,734 747,544 (550,394) 556,581 29,209 545,357 210,600 1,036,521 209,739 1,531,849 437,665 66,461 374,553 42,903 (69,933) 35,292 (62,644) 33,920 469,485 388,732 Benefits paid Total benefits paid from CRF (including ACT/ANU)1 Benefits paid from CRF for ACT/ANU (1,017,737) 69,933 (910,426) 62,644 Benefits paid from PSS Fund (excluding ACT/ANU) Net benefits paid (3,711) (951,515) (9,061) (856,843) (31,590) 12,106,610 (31,461) 11,583,709 Actuarial gains/(losses) Contributions by scheme participants Contributions by employer - productivity contribution Net changes in fair value of plan assets Appropriation from CRF: Total employer contributions - appropriation from CRF (incl. ACT/ANU) Total emerging cost contributions from ACT/ANU Benefits paid from CRF for ACT/ANU Funded benefits paid from PSS Fund to CRF for ACT/ANU Net appropriation from CRF Taxes, premiums and expenses paid Fair value of scheme assets as at end of the year 1 30 June Total benefits paid from the Consolidated Revenue Fund (CRF) include both the unfunded and funded components and are inclusive of payments made to employees of the ACT Government (ACT) and the Australian National University (ANU). These are excluded from the calculations of the present value of defined benefit obligations. Notes to and forming part of the financial statements Note 31B Public Sector Superannuation Scheme (PSS) (continued) Reconciliation of the net superannuation liability administered on behalf of Government. As at 30 June 30 June 2012 $'000 79,942,803 2011 $'000 44,719,652 (12,106,610) 67,836,193 (11,583,709) 33,135,943 30 June 2012 $'000 1,430,915 30 June 2011 $'000 1,493,929 2,344,926 (819,734) 2,137,986 (747,544) 2,956,107 2,884,371 30 June 30 June 2012 $'000 2011 $'000 (32,213,629) 351,797 Defined benefit obligation Less: fair value of scheme assets Net superannuation liability (Refer Note 26B) Total expense recognised in the schedule of administered comprehensive income Financial year ended Current service cost Interest cost Less: expected return on assets Net superannuation expense (Refer Note 20B) Amounts recognised directly in administered equity Financial year ended Actuarial gains/(losses) Cumulative amount of actuarial gains and losses recognised in administered equity Financial year ended 30 June 2012 $'000 30 June 2011 $'000 (41,651,069) (9,437,441) 30 June 30 June 2012 % 2011 % Australian equity Market neutral funds 23.1% 10.2% 26.5% 10.2% Long / short funds International equity 28.6% 1.9% 28.7% 5.6% 8.0% 3.6% 6.3% 14.7% 3.8% 12.8% 4.8% 6.0% 5.2% Cumulative amount of actuarial gains/(losses) Scheme Assets The fair value of scheme assets is represented by: Financial year ended Objective based funds Credit Property Cash Bonds Notes to and forming part of the financial statements Note 31B Public Sector Superannuation Scheme (PSS) (continued) Fair value of scheme assets The fair value of scheme assets does not include amounts relating to: any of the Department’s (and the Australian Government’s) own financial instruments; and any property occupied by, or other assets used by the Department (or the Australian Government). except: Property holdings, including interest in various unit trusts, may include leases to the Department (or the Australian Government); and Government bonds, amounting to $106.74 million (CSC Investments Trust) as at 30 June 2012 ($26.11 million as at 30 June 2011). Expected rate of return on scheme assets The expected return on assets assumption is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each asset class. The returns used for each asset class are net of investment tax and investment fees. Actual return on scheme assets Financial year ended 30 June 30 June Actual return on scheme assets 2012 $'000 269,340 2011 $'000 776,753 2.5% 7.4% 30 June 2012 % 3.1% pa 3.1% pa 7.0% pa 4.0% pa 2.5% pa 30 June 2011 % 5.3% pa 5.3% pa 7.0% pa 4.0% pa 2.5% pa Actual return on scheme assets as a percentage Principal actuarial assumptions at balance sheet date Financial year ended Discount rate (active members) Discount rate (pensioners) Expected rate of return on plan assets (active members) Expected salary increase rate (plus promotional increases) Expected pension increase rate Other material assumptions Assumptions have been made regarding rates of retirement, death (for active, preserved and pension members), mortality improvements, invalidity, resignation, retrenchment, retention and take up rates of pensions in the scheme. Assumptions have also been made for the ages of spouses and rates of member contributions. Unless stated otherwise in this report, all assumptions are the same as those used for the Long Term Cost Report as at 30 June 2011. Certain estimates and approximations were required to determine the year end assets and liabilities in the Statement of Administered Items in the timeframe required. The fair value of scheme assets as at 30 June 2012 was estimated using the audited fair value of scheme assets at 30 June 2011 with cash flow items provided by the trustee, Commonwealth Superannuation Corporation, other than benefits paid during the year which were based on information provided by the Department. An estimate of the actual rate of investment return earned by the scheme during the year to 30 June 2012 was used in determining the fair value of scheme assets. Notes to and forming part of the financial statements Note 31B Public Sector Superannuation Scheme (PSS) (continued) In relation to the defined benefit obligation, member data as at 30 June 2011 was projected forward allowing for decrements in accordance with the 2011 Long Term Cost Report. The data was then adjusted for the difference between actual benefit payments and those based on the assumed decrements. Salaries at 30 June 2012 were estimated using an assumption derived from the Australian Public Service Remuneration Survey. Members’ account balances were increased to be consistent with the estimated level of Earning Rates prevailing at 30 June 2012. Historical information Financial year ended 30 June 2012 $'000 30 June 2011 $'000 30 June 2010 $'000 30 June 2009 $'000 30 June 2008 $'000 79,942,803 44,719,652 41,543,533 34,153,268 25,702,650 (12,106,610) (11,583,709) (10,551,432) (9,307,754) (10,514,985) 67,836,193 33,135,943 30,992,101 24,845,514 15,187,665 550,394 (29,209) (226,380) 2,273,405 1,017,448 1,824,948 446,882 1,457,523 (251,498) (75,420) 30 June 2013 $'000 30 June 2012 $'000 209,717 Expected employer contributions2 This represents the employer productivity contributions, which are paid into the PSS fund. 203,931 Present value of defined benefit obligation Less: fair value of scheme assets Total deficit in scheme Experience adjustments (gain)/loss - scheme assets Experience adjustments (gain)/loss - scheme liabilities Expected contributions Financial year ended 2 Funding arrangements for employer contributions a) Deficit The following is a summary of the most recent financial position of the Public Sector Superannuation Scheme determined in accordance with AAS 25 Financial Reporting by Superannuation Plans. Financial year ended 30 June 30 June 2012 2008 $'000 $'000 33,100,000 Accrued benefits - unfunded liability as at 30 June 20113 20,900,000 3 This valuation is sourced from the long-term cost report as at 30 June 2011 when a complete valuation was undertaken. This valuation is for the entire scheme, which includes a component relating to the ACT and the ANU. (b) Contribution recommendations The Scheme is largely unfunded. While employers pay productivity contributions of between 2% and 3% into the PSS fund, the remaining employer contributions are not funded in advance. (c) Funding method Where a benefit becomes payable that cannot be fully met from the moneys held in the PSS fund, all moneys in the PSS fund in respect of the members are paid into the Consolidated Revenue Fund and the Commonwealth then assumes responsibility for the payment of the benefit. Notes to and forming part of the financial statements Note 31B Public Sector Superannuation Scheme (PSS) (continued) (d) Economic assumptions The long-term economic assumptions adopted for the last actuarial review of the scheme as at 30 June 2011 were: Expected rate of return on assets (discount rate) Expected salary increase rate Expected CPI increase 6.0% pa 4.0% pa + a promotional salary increase scale 2.5% pa Nature of asset/liability The Department has recognised a liability in the Schedule of Administered Items in respect of its defined benefit superannuation arrangements administered on behalf of the Government. The Public Sector Superannuation Scheme does not impose a legal liability on the Department to cover any deficit that exists in the scheme. This liability instead rests with the Australian Government. The Government has established the Future Fund for the purpose of accumulating assets to help meet this liability. The Future Fund is also intended to cover other superannuation unfunded liabilities including in relation to military schemes, parliamentarians, federal judges and Governors-General. Notes to and forming part of the financial statements Note 31C Parliamentary Contributory Superannuation Scheme (PCSS) Accounting policy Actuarial gains and losses are recognised immediately in administered equity in the year in which they occur. Scheme information Members of the PCSS who leave Federal Parliament are entitled to either a lump sum or pension benefit depending on the length of their parliamentary service. For certain members, payment of their pension entitlement is deferred until age 55. Changes were made to the scheme legislation in 2011-12 to break the link between parliamentary salaries paid to sitting members of Parliament and to the calculation of contributions and benefits paid under the scheme legislation. Members contribute to the cost of benefits through contributions paid to the Consolidated Revenue Fund. The scheme is closed to new and returning members. Reconciliation of the present value of the defined benefit obligation Financial year ended Present value of defined benefit obligations at beginning of the year Amounts recognised in income, expenses or equity: Current service cost1 Interest cost Actuarial (gains)/losses Net amounts recognised in income, expenses or equity Net benefits paid Present value of defined benefit obligations at end of the year 30 June 30 June 2012 $'000 2011 $'000 836,468 802,604 8,897 10,758 43,410 428,462 40,824 17,347 480,769 (34,829) 68,929 (35,065) 1,282,408 836,468 Includes the cost of benefits accruing as a result of contributions deducted from members’ salaries that are paid into the Consolidated Revenue Fund. 1 Reconciliation of the fair value of scheme assets Financial year ended 30 June 2012 $'000 30 June 2011 $'000 Fair value of scheme assets at beginning of the year Net employer contributions2 Net benefits paid Fair value of scheme assets as at end of the year 2Employer 34,829 35,065 (34,829) - (35,065) - contributions comprise appropriations from the Consolidated Revenue Fund to pay benefits. Reconciliation of the net superannuation liability administered on behalf of Government As at Defined benefit obligation Net superannuation liability (Refer Note 26B) 30 June 30 June 2012 $'000 2011 $'000 1,282,408 1,282,408 836,468 836,468 Notes to and forming part of the financial statements Note 31C Parliamentary Contributory Superannuation Scheme (PCSS) (continued) Total expense recognised in the schedule of administered comprehensive income Financial year ended Current service cost3 Interest cost Net superannuation expense (Refer Note 20B) 30 June 2012 $'000 30 June 2011 $'000 8,897 43,410 10,758 40,824 52,307 51,582 Includes the cost of benefits accruing as a result of contributions deducted from members’ salaries that are paid into the Consolidated Revenue Fund. 3 Amounts recognised directly in equity Financial year ended Actuarial gains/(losses) Cumulative amount of actuarial gains and losses Financial year ended Cumulative amount of actuarial gains/(losses) 30 June 30 June 2012 $'000 (428,462) 2011 $'000 (17,347) 30 June 2012 $'000 (487,595) 30 June 2011 $'000 (59,134) Scheme assets The Scheme is an unfunded arrangement with no assets, and therefore the expected return on assets assumption is not relevant. Principal actuarial assumptions at the balance sheet date Financial year ended 30 June 30 June Discount rate (active members) 2012 % 3.1% pa 2011 % 5.3% pa Discount rate (pensioners) Expected salary increase rate 3.1% pa 4.0% pa 5.3% pa 4.0% pa Expected pension increase rate Other material assumptions 4.0% pa 4.0% pa Assumptions have been made regarding rates of death (for active members and pensioners), mortality improvements, invalidity, retirement/defeat at future elections, commutation of pensions and pensioner marital status. Unless stated otherwise in this report, all assumptions are the same as those used for the 30 June 2011 Long Term Cost Report. Certain estimates and approximations were required to determine the year end liabilities in the Statement of Administered Items in the timeframe required. In relation to the defined benefit obligation, member data as at 1 July 2011 was projected forward to 30 June 2012 allowing for the actual increase in relevant salaries which occurred during the year, including the increase that is effective from 1 July 2012, and expected changes in membership as a result of the federal election (based on the assumptions used for the actuarial investigation of the Scheme as at 30 June 2011). Pensioner data as at 1 July 2011 was projected forward to 30 June 2012 allowing for mortality in accordance with the 2011 actuarial investigation and the actual increase in the backbench salary which occurred during the year, including the increase which is effective from 1 July 2012. Notes to and forming part of the financial statements Note 31C Parliamentary Contributory Superannuation Scheme (PCSS) (continued) Historical information Financial year ended Present value of defined benefit obligation Total deficit in scheme 30 June 2012 $'000 30 June 2011 $'000 30 June 2010 $'000 30 June 2009 $'000 30 June 2008 $'000 1,282,408 1,282,408 836,468 836,468 802,604 802,604 737,714 737,714 668,297 668,297 43,484 29,420 (3,682) (57,533) (31,553) 30 June 2013 $'000 30 June 2012 $'000 Experience adjustments (gain)/loss scheme liabilities Expected contributions Financial year ended 36,133 Expected employer contributions4 35,649 4 Employer contributions comprise appropriations from the Consolidated Revenue Fund to pay benefits. Funding arrangements for employer contributions (a) Deficit The following is a summary of the most recent financial position of the Commonwealth Superannuation Scheme determined in accordance with AAS 25 Financial Reporting by Superannuation Plans. Financial year ended 30 June 30 June 2012 2008 $'000 $'000 778,900 Accrued benefits - unfunded liability as at 30 June 20115 701,600 5 This valuation is sourced from the Long Term Cost report as at 30 June 2011 when a complete valuation was undertaken. (b) Contribution recommendations The Scheme is unfunded. The defined benefits are not funded in advance. (c) Funding method Where a benefit in the Scheme becomes payable, the Australian Government assumes responsibility for the payment from the Consolidated Revenue Fund. (d) Economic assumptions The long-term economic assumptions adopted for the last actuarial review of the scheme as at 30 June 2011 were: Expected rate of return on assets (discount rate) Expected salary increase rate 6.0% pa 4.0% pa Nature of asset/liability The Department has recognised a liability in the Schedule of Administered Items in respect of its defined benefit superannuation arrangements administered on behalf of the Government. The Parliamentary Contributory Superannuation Scheme does not impose a legal liability on the Department to cover any deficit that exists in the scheme. This liability instead rests with the Australian Government. The Government has established the Future Fund for the purpose of accumulating assets to help meet this liability. The Future Fund is also intended to cover other superannuation unfunded liabilities including in relation to military schemes, Commonwealth Public Servants, parliamentarians and federal judges. Notes to and forming part of the financial statements Note 31D Governor-General Pension Scheme Accounting policy Actuarial gains and losses are recognised immediately in administered equity in the year in which they occur. Scheme information The Governor General Pension Scheme is an unfunded defined benefits scheme. It provides a pension benefit on retirement of 60% of the salary payable to the Chief Justice of the High Court of Australia less any other Government pensions or retiring allowances. The scheme is unfunded and members do not contribute towards the cost of benefits. Reconciliation of the present value of the defined benefit obligation Financial year ended Present value of defined benefit obligations at beginning of the year Amounts recognised in income, expenses or equity: 30 June 2012 $'000 18,358 30 June 2011 $'000 18,385 940 924 4,207 5,147 276 1,200 (1,234) 22,271 (1,227) 18,358 30 June 2012 $'000 30 June 2011 $'000 1,234 1,227 (1,234) - (1,227) - Interest cost Actuarial (gains)/losses Net amounts recognised in income, expenses or equity Net benefits paid Present value of defined benefit obligations at end of the year Reconciliation of the fair value of scheme assets Financial year ended Fair value of scheme assets at beginning of the year Net employer contributions1 Net benefits paid Fair value of scheme assets at end of the year 1 Employer contributions comprise appropriations from the Consolidated Revenue Fund to pay benefits. Reconciliation of the net superannuation liability administered on behalf of Government As at Defined benefit obligation Net superannuation liability (Refer Note 26B) Total expense recognised in the schedule of administered comprehensive income Financial year ended 30 June 2012 $'000 22,271 30 June 2011 $'000 18,358 22,271 18,358 30 June 30 June 2012 $'000 - 2011 $'000 - 940 940 924 924 Current service cost2 Interest cost Net superannuation expense (Refer Note 20B) 2 The service cost represents the cost of accruing benefits for the serving Governor-General. Notes to and forming part of the financial statements Note 31D Governor-General Pension Scheme Amounts recognised directly in administered equity Finance year ended Actuarial gains/(losses) Cumulative amount of actuarial gains and losses Financial year ended Cumulative amount of actuarial gains/(losses) 30 June 2012 $'000 (4,207) 30 June 2011 $'000 (276) 30 June 2012 $'000 (7,119) 30 June 2011 $'000 (2,912) Scheme assets The Scheme is an unfunded arrangement with no assets and therefore the expected return on assets assumption is not relevant. Principal actuarial assumptions at the balance sheet date Financial year ended Discount rate 30 June 2012 % 3.1% pa 30 June 2011 % 5.3% pa Expected salary increase rate Expected pension increase rate 4.0% pa 4.0% pa 4.0% pa 4.0% pa Other material assumptions The demographic assumptions used as at 30 June 2012 liability are those used for the last actuarial review of the scheme as at 30 June 2011. Historical information Financial year ended Present value of defined benefit obligation Total deficit in scheme Experience adjustments (gain)/loss - scheme liabilities Expected contributions Financial year ended 30 June 2012 $'000 22,271 30 June 2011 $'000 18,358 30 June 2010 $'000 18,385 30 June 2009 $'000 16,014 30 June 2008 $'000 12,118 22,271 18,358 18,385 16,014 12,118 4,207 276 2,636 1,417 150 30 June 30 June 2013 $'000 2012 $'000 1,200 Expected employer contributions3 3 Employer contributions comprise appropriations from the Consolidated Revenue Fund to pay benefits. 1,300 Notes to and forming part of the financial statements Note 31D Governor-General Pension Scheme (continued) Funding arrangements for employer contributions (a) Deficit The following is a summary of the most recent financial position of the Governor-General Pensions Scheme calculated in accordance with AAS 25 Financial Reporting by Superannuation Plans. Financial year ended 30 June 30 June 2012 $'000 17,300 Accrued benefits - unfunded liability as at 30 June 20114 2008 $'000 - 4 This valuation is sourced from the Long Term Cost report as at 30 June 2011 when a complete valuation was undertaken. (b) Contribution recommendations The Scheme is unfunded. The defined benefits are not funded in advance. (c) Funding method Where a benefit in the Scheme becomes payable, the Australian Government assumes responsibility for the payment from the Consolidated Revenue Fund. (d) Economic assumptions The long-term economic assumptions adopted for the last actuarial review of the scheme as at 30 June 2011 were: Expected rate of return on assets (discount rate) Expected salary increase rate Expected pension increase 6.0% pa 4.0% pa 4.0% pa Nature of asset/liability The Department has recognised a liability in the Schedule of Administered Items in respect of its defined benefit superannuation arrangements administered on behalf of the Government. The Governor-General Pension does not impose a legal liability on the Department to cover any deficit that exists in the scheme. This liability instead rests with the Australian Government. The Government has established the Future Fund for the purpose of accumulating assets to help meet this liability. The Future Fund is also intended to cover other superannuation unfunded liabilities including in relation to military schemes, Commonwealth Public servants, parliamentarians and federal judges. Notes to and forming part of the financial statements Note 31E Judges' Pensions Scheme Accounting policy Actuarial gains and losses are recognised immediately in administered equity in the year in which they occur. Scheme information The Judges' Pensions Scheme is a defined benefit scheme. It provides a lifetime pension benefit of 60% of the appropriate current judicial salary for eligible retired judges. The scheme is unfunded and members do not contribute towards the cost of benefits. Reconciliation of the present value of the defined benefit obligation Financial year ended 30 June 2012 $'000 30 June 2011 $'000 Present value of defined benefit obligations at beginning of the year Amounts recognised in income, expenses or equity: Current service cost Interest cost 853,900 814,200 28,000 44,600 27,100 42,100 Adjustment for prior year liability Actuarial (gains)/losses Net amounts recognised in income, expenses or equity (5,200) 390,500 6,300 457,900 (39,300) 75,500 (35,800) 1,272,500 853,900 30 June 30 June 2012 $'000 2011 $'000 39,300 (39,300) 35,800 (35,800) - - Net benefits paid Present value of defined benefit obligations at end of the year Reconciliation of the fair value of scheme assets Financial year ended Fair value of scheme assets at beginning of the year Net employer contributions1 Net benefits paid Fair value of scheme assets at end of the year 1Employer contributions comprise appropriations from the Consolidated Revenue Fund to pay benefits. Reconciliation of the net superannuation liability administered on behalf of Government As at Defined benefit obligation Net superannuation liability (Refer Note 26B) 30 June 2012 $'000 30 June 2011 $'000 1,272,500 1,272,500 853,900 853,900 Notes to and forming part of the financial statements Note 31E Judges' Pensions Scheme (continued) Total expense recognised in the schedule of administered comprehensive income Financial year ended Current service cost2 Interest cost Net superannuation expense (Refer Note 20B) 2The 30 June 2012 $'000 28,000 30 June 2011 $'000 27,100 44,600 72,600 42,100 69,200 service cost represents the total cost of accruing benefits, as no contributions are made by the Judges. Amounts recognised directly in equity As at Actuarial gains/(losses) Cumulative amount of actuarial gains and losses recognised in administered equity Financial year ended Cumulative amount of actuarial gains/(losses) 30 June 30 June 2012 $'000 2011 $'000 (390,500) (6,300) 30 June 2012 $'000 30 June 2011 $'000 (451,100) (60,600) Scheme assets The scheme is an unfunded arrangement with no assets, and therefore the expected return on assets assumption is not relevant. Principal actuarial assumptions at the balance sheet date Financial year ended 30 June 30 June Discount rate 2012 % 3.1% pa 2011 % 5.3% pa Expected salary increase rate Expected pension increase rate 4.0% pa 4.0% pa 4.0% pa 4.0% pa Other material assumptions The demographic assumptions used as at 30 June 2011 are those used for the preparation of the Long Term Cost Report for the Judges' Pensions Scheme as at 30 June 2011. Benefits payable (including payments of surcharge debt) under the Judges' Pensions Act 1968 and the Superannuation (Productivity Benefit) Act 1988 are paid from Consolidated Revenue on an emerging (or pay as you go) basis. Thus, contributions made equal benefits paid for the Judges' Pensions Scheme. Notes to and forming part of the financial statements Note 31E Judges' Pensions Scheme (continued) Historical information Financial year ended Present value of defined benefit obligation Total deficit in scheme Experience adjustments (gain)/loss - scheme liabilities 30 June 2012 $'000 30 June 2011 $'000 30 June 2010 $'000 30 June 2009 $'000 30 June 2008 $'000 1,272,500 1,272,500 853,900 853,900 814,200 814,200 680,500 680,500 572,057 572,057 390,500 6,300 54,500 84,400 (7,200) 30 June 2013 $'000 41,000 30 June 2012 $'000 38,000 Expected contributions Financial year ended Expected employer contributions3 3Employer contributions comprise appropriations from the Consolidated Revenue Fund to pay benefits. Funding arrangements for employer contributions (a) Deficit The following is a summary of the most recent financial position of the Judges' Pensions Scheme calculated in accordance with AAS 25 Financial Reporting by Superannuation Plans. Financial year ended 30 June 30 June 2012 2008 $'000 $'000 782,000 Accrued benefits - unfunded liability as at 30 June 20114 615,200 4 This valuation is sourced from the Long Term Cost Report as at 30 June 2011 when a complete valuation was undertaken. (b) Contribution recommendations The Scheme is unfunded. The defined benefits are not funded in advance. (c) Funding method Where a benefit in the Scheme becomes payable, the Australian Government assumes responsibility for the payment from the Consolidated Revenue Fund. (d) Economic assumptions The long-term economic assumptions adopted for the last actuarial review of the scheme as at 30 June 2011 were: Expected rate of return on assets (discount rate) Expected salary increase rate 6.0% pa 4.0% pa Nature of asset/liability The Department has recognised a liability in the Schedule of Administered Items in respect of its defined benefit superannuation arrangements administered on behalf of the Government. The Judges’ Pensions does not impose a legal liability on the Department to cover any deficit that exists in the scheme. This liability instead rests with the Australian Government. The Government has established the Future Fund for the purpose of accumulating assets to help meet this liability. The Future Fund is also intended to cover other superannuation unfunded liabilities including in relation to military schemes, Commonwealth Public Servants, parliamentarians and Governors-General. Notes to and forming part of the financial statements Note 31F Federal Magistrates Death and Invalidity Scheme Accounting policy Actuarial gains and losses are recognised immediately in administered equity in the year in which they occur. Scheme information In addition to an employer funded superannuation contribution, Federal Magistrates have access to a statutory death and disability scheme. The disability benefit provides a retired disabled Federal Magistrate with a pension of 60% of the salary the Federal Magistrate would have received if they had not been retired, and is payable until the earlier of the Federal Magistrate attaining age 70 or his/her death. In addition, the Magistrate continues to receive employer superannuation contributions in respect of this pension until they reach age 65. A death benefit is also provided where a Federal Magistrate or disabled Federal Magistrate dies before attaining age 65. The benefit is the amount of the superannuation contributions that would have been made if the Magistrate had not died or retired in the period until he or she would have reached age 65. The benefits are unfunded and members do not contribute towards the cost of benefits. Reconciliation of the present value of the defined benefit obligation Financial year ended Present value of defined benefit obligations at beginning of the year Amounts recognised in income, expenses or equity: Current service cost Interest cost Actuarial (gains)/losses Net amounts recognised in income, expenses or equity Net benefits paid Present value of defined benefit obligations at end of the year Reconciliation of the fair value of scheme assets Financial year ended Fair value of scheme assets at beginning of the year Net employer contributions1 Net benefits paid Fair value of scheme assets at end of the year 1Employer 30 June 30 June 2012 $'000 1,801 2011 $'000 1,991 582 1,076 93 69 126 (1,176) 744 (693) 26 (216) 1,852 1,801 30 June 30 June 2012 $'000 2011 $'000 693 (693) 216 (216) - - contributions comprise appropriations from the Consolidated Revenue Fund to pay benefits. Notes to and forming part of the financial statements Note 31F Federal Magistrates Death and Invalidity Scheme (continued) Reconciliation of the net superannuation liability administered on behalf of Government As at Defined benefit obligation Net superannuation liability (Refer Note 26B) Total expense recognised in the schedule of administered comprehensive income Financial year ended Current service cost2 Interest cost Net superannuation expense (Refer Note 20B) 30 June 30 June 2012 $'000 2011 $'000 1,852 1,852 1,801 1,801 30 June 2012 $'000 30 June 2011 $'000 582 93 1,076 126 675 1,202 2The service cost represents the total cost of accruing benefits, as no contributions are made by the Federal Magistrates. Amounts recognised directly in equity As at Actuarial gains/(losses) Cumulative amount of actuarial gains and losses Financial year ended Cumulative amount of actuarial gains/(losses) 30 June 30 June 2012 $'000 (69) 2011 $'000 1,176 30 June 2012 $'000 1,191 30 June 2011 $'000 1,280 Scheme assets The scheme is an unfunded arrangement with no assets. Expected rate of return on scheme assets The expected return on assets assumption is not relevant as the scheme is an unfunded arrangement with no assets. Principal actuarial assumptions at the balance sheet date Financial year ended 30 June 30 June 2012 % 2011 % Discount rate Expected salary increase rate 3.1% pa 4.0% pa 5.3% pa 4.0% pa Expected pension increase rate 4.0% pa 4.0% pa Notes to and forming part of the financial statements Note 31F Federal Magistrates Death and Invalidity Scheme (continued) Other material assumptions The demographic assumptions used as at 30 June 2012 liabilities are those used for the Long Term Cost Report for the Federal Magistrates Death and Invalidity Scheme as at 30 June 2011. Benefits payable are paid from Consolidated Revenue on an emerging (or pay as you go) basis. Thus contributions made equal benefits paid. Historical information Financial year ended Present value of defined benefit obligation Total deficit in scheme Experience adjustments (gain)/loss - scheme liabilities 30 June 2012 $'000 1,852 30 June 2011 $'000 1,801 30 June 2010 $'000 1,991 30 June 2009 $'000 - 1,852 1,801 1,991 - 69 (1,176) (104) - 30 June 2013 $'000 237 30 June 2012 $'000 223 Expected contributions Financial year ended Expected employer contributions3 3 Employer contributions represent the appropriation for expected benefit payments. Funding arrangements for employer contributions (a) Deficit The following is a summary of the most recent financial position of the Judges' Pensions Scheme calculated in accordance with AAS 25 Financial Reporting by Superannuation Plans. Financial year ended 30 June 30 June 2012 $'000 2008 $'000 1,786 Accrued benefits - unfunded liability as at 30 June 20114 valuation is sourced from the Long Term Cost Report as at 30 June 2011 when a complete valuation was undertaken. 4 This (b) Contribution recommendations The Scheme is unfunded. The defined benefits are not funded in advance. (c) Funding method Where a benefit in the Scheme becomes payable, the Australian Government assumes responsibility for the payment from the Consolidated Revenue Fund. (d) Economic assumptions The long-term economic assumptions adopted for the last actuarial review of the scheme as at 30 June 2011 were: Expected rate of return on assets (discount rate) 6.0% pa Expected salary increase rate 4.0% pa Expected pension increase 4.0% pa Nature of asset/liability The Department has recognised a liability in the Schedule of Administered Items in respect of its defined benefit superannuation arrangements administered on behalf of the Government. The Federal Magistrates death and disability arrangements do not impose a legal liability on the Department to cover any deficit that exists. This liability instead rests with the Australian Government. Notes to and forming part of the financial statements Note 32 Appropriations Note 32A Annual appropriations ('recoverable GST exclusive') 2011-2012 Appropriations Appropriation Act DEPARTMENTAL Ordinary annual services Other services Equity Total departmental ADMINISTERED Ordinary annual services Outcome 13 Outcome 2 Outcome 3 Other services Administered assets and liabilities Total administered 1 Appropriations FMA Act Annual Appropriation $'000 Appropriations reduced1 $'000 Section 30 $'000 Section 31 $'000 Section 32 $'000 Total appropriation $'000 Appropriation applied2 $'000 Variance $'000 252,126 (735) 10 25,204 (472) 276,133 (272,991) 3,142 208,000 - - - - 208,000 (228,075) (20,075) 460,126 (735) 10 25,204 (472) 484,133 (501,066) (16,933) 14,689 681 237,190 (1,575) (32) (5,791) 2,606 - (236) 13,114 649 233,769 (14,321) (649) (229,518) (1,207) 4,251 1,789 254,349 (7,398) 2,606 - (236) 1,789 249,321 (2,303) (246,791) (514) 2,530 reduced under Appropriation Acts (Nos. 1, 3 & 5) 2011-12: sections 10, 11, and 12 and under Appropriation Acts (Nos. 2, 4 & 6) 2011-12: sections 12,13, and 14. Departmental appropriations do not lapse at financial year-end. However, the responsible Minister may decide that part or all of a departmental appropriation is not required and request the Finance Minister to reduce that appropriation. The reduction in the appropriation is effected by the Finance Minister's determination and is disallowable by Parliament. On 26 June 2012, the Finance Minister issued a determination to reduce departmental appropriations. The amount of the reduction under Appropriation Act (No.1) 2011-12 was $0.74 million. As with departmental appropriations, the responsible Minister may decide that part or all of an administered appropriation is not required and request that the Finance Minister reduce that appropriation. For administered appropriations reduced under section 11 of Appropriation Acts (Nos. 1, 3 & 5) 2011-12 and section 12 of Appropriation Acts (Nos. 2, 4 & 6) 2011-12, the appropriation is taken to be reduced to the required amount specified in Table F of this note once the annual report is tabled in Parliament. All administered appropriations may be adjusted by a Finance Minister’s determination, which is disallowable by Parliament. 2 ‘Appropriation applied’ includes cash payments made from current and prior year appropriations compared to ‘Annual Appropriation’ which includes only current year appropriations. 3 Comsuper spent money from the Consolidated Revenue Fund (CRF) on behalf of the Department. The money spent has been included in the table above. Notes to and forming part of the financial statements Note 32A Annual appropriations ('recoverable GST exclusive') (continued) 2010-2011 Appropriations FMA Act Appropriation Act DEPARTMENTAL Ordinary annual services Other services Equity Total departmental ADMINISTERED Ordinary annual services Outcome 13 Outcome 2 Outcome 3 Other services Administered assets and liabilities Total administered 1 Appropriations Annual Appropriation $'000 Appropriations reduced1 $'000 Section 30 $'000 Section 31 $'000 Section 32 $'000 Total appropriation $'000 Appropriation applied2 $'000 Variance $'000 254,122 (16) 39 15,542 591 270,278 (256,255) 14,023 161,796 415,918 (16) 39 15,542 591 161,796 432,074 (158,694) (414,949) 3,102 17,125 15,135 666 225,092 (1,946) (6,405) 3,501 923 - - 16,690 666 219,610 (13,240) (666) (217,987) 3,450 1,623 2,054 - - - - 2,054 (4,566) (2,512) 242,947 (8,351) 4,424 - - 239,020 (236,459) 2,561 reduced under Appropriation Acts (Nos. 1 & 3) 2010-11: sections 10, 11, and 12 and under Appropriation Acts (Nos. 2 & 4) 2010-11: sections 12, 13, 14 and 17. Departmental appropriations do not lapse at financial year-end. However, the responsible Minister may decide that part or all of a departmental appropriation is not required and request the Finance Minister to reduce that appropriation. The reduction in the appropriation is effected by the Finance Minister's determination and is disallowable by Parliament. On 30 June 2011, the Finance Minister issued a determination to reduce departmental appropriations. The amount of the reduction under Appropriation Act (No.1) 2010-11 was $0.02 million. As with departmental appropriations, the responsible Minister may decide that part or all of an administered appropriation is not required and request that the Finance Minister reduce that appropriation. For administered appropriations reduced under section 11 of Appropriation Acts (Nos. 1 & 3) 2010-11 and section 12 of Appropriation Acts (Nos. 2 & 4) 2010-11, the appropriation was taken to be reduced to the required amount specified in Table F of this note once the annual report was tabled in Parliament. All administered appropriations may be adjusted by a Finance Minister’s determination, which is disallowable by Parliament. 2 ‘Appropriation applied’ includes cash payments made from current and prior year appropriations compared to ‘Annual Appropriation’ which includes only current year appropriations. 3 Comsuper spent money from the Consolidated Revenue Fund (CRF) on behalf of the Department. The money spent has been included in the table above. Notes to and forming part of the financial statements Note 32B Departmental and administered capital budgets ('recoverable GST exclusive') Capital Budget Appropriations applied in 2011-12 (current and prior years) 2011-12 Capital Budget Appropriations Appropriation Act FMA Act Section 32 $'000 Total Capital Budget Appropriations $'000 Payments for nonfinancial assets3 $'000 Payments for other purposes $'000 Total payments $'000 Variance $'000 - - 16,631 21,614 - 21,614 (4,983) - - 3,320 3,320 - 3,320 - Annual Capital Budget $'000 Appropriations reduced2 $'000 16,631 3,320 DEPARTMENTAL Ordinary annual services Capital Budget1 ADMINISTERED Ordinary annual services Capital Budget1 1 Departmental and Administered Capital Budgets are appropriated through Appropriation Acts (No. 1, 3, 5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts. For more information on ordinary annual services appropriations, please see Table A: Annual Appropriations. 2 Appropriations reduced under Appropriations Acts (No 1, 3, 5) 2011-12: sections 10, 11, 12 and 15, under Appropriation Acts (No.2, 4, 6) 2011-12: sections 12,13, 14 and 17 or via a determination by the Finance Minister. 3 Payments made on non-financial assets include purchases of assets, expenditure on assets which has been capitalised, costs incurred to make good an asset to its original condition, and the capital repayment component of finance leases. Notes to and forming part of the financial statements Note 32B Departmental and administered capital budgets ('recoverable GST exclusive') (continued) Capital Budget Appropriations applied in 2010-11 (current and prior years) 2010-11 Capital Budget Appropriations Appropriation Act FMA Act Payments for nonfinancial assets3 $'000 Payments for other purposes $'000 Total payments $'000 Variance $'000 Annual Capital Budget $'000 Appropriations reduced2 $'000 Section 32 $'000 Total Capital Budget Appropriations $'000 14,913 - - 14,913 8,224 - 8,224 6,689 5,450 4,389 - 1,061 1,061 - 1,061 - DEPARTMENTAL Ordinary annual services Capital Budget1 ADMINISTERED Ordinary annual services Capital Budget1 1 Departmental and Administered Capital Budgets are appropriated through Appropriation Acts (No. 1, 3, 5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts. For more information on ordinary annual services appropriations, please see Table A: Annual Appropriations. 2 Appropriations reduced under Appropriations Acts (No 1, 3, 5) 2010-11: sections 10, 11, 12 and 15, under Appropriation Acts (No.2,4,6) 2010-11: sections 12,13, 14 and 17, or via a determination by the Finance Minister. 3 Payments made on non-financial assets include purchases of assets, expenditure on assets which has been capitalised, costs incurred to make good an asset to its original condition, and the capital repayment component of finance leases. Notes to and forming part of the financial statements Note 32C Unspent annual appropriations ('recoverable GST exclusive') 2012 2011 $'000 $'000 69,721 46,954 27,038 15,841 3,522 613 2,150 56,545 1,706 100 75,632 46,954 27,843 18,368 n/a 13,967 2,150 1,000 55,811 n/a 6,689 n/a n/a 224,190 248,414 Appropriation Act (No. 2) 2004 - 2005 407 448 Appropriation Act (No. 2) 2005 - 2006 Appropriation Act (No. 2) 2006 - 2007 - 34 173 Appropriation Act (No. 2) 2007 - 2008 Appropriation Act (No. 2) 2008 - 2009 - 1 106 Appropriation Act (No. 2) 2009 - 2010 Appropriation Act (No. 2) 2010 - 2011 32 781 431 100 Appropriation Act (No. 2) 2011 - 2012 Appropriation Act (No. 4) 2008 - 2009 1,314 1,769 n/a 3,524 Appropriation Act (No. 1) 2009 - 2010 Appropriation Act (No. 1) 2010 - 2011 - 219 14,660 Appropriation Act (No. 1) 2011 - 2012 Appropriation Act (No. 3) 2010 - 2011 27,093 - n/a 3,877 Appropriation Act (No. 3) 2011 - 2012 Total unspent administered annual appropriations 656 32,052 n/a 23,573 Authority DEPARTMENTAL Appropriation Act (No. 2) 2007 - 2008 Appropriation Act (No. 2) 2008 - 2009 Appropriation Act (No. 2) 2009 - 2010 Appropriation Act (No. 2) 2010 - 2011 Appropriation Act (No. 2) 2011 - 2012 Appropriation Act (No. 4) 2006 - 2007 Appropriation Act (No. 4) 2007 - 2008 Appropriation Act (No. 4) 2009 - 2010 Appropriation Act (No. 1) 2010 - 2011 Appropriation Act (No. 1) 2011 - 2012 Appropriation Act (No. 1) 2010 - 2011 – Capital Appropriation Act (No. 1) 2011 - 2012 – Capital Appropriation Act (No. 3) 2011 - 2012 Total unspent departmental annual appropriations ADMINISTERED Notes to and forming part of the financial statements Note 32D Special Appropriations ('Recoverable GST exclusive') Authority Type Purpose Superannuation Act 1922 s.7(4), s.119T(2)(b), s.119ZC(5), s.134(1) Administered Unlimited amount Superannuation Act 1976 s.54L(2), s.54ZA, s.110TG(2), s.112(2), s.112(5), s.112(9), s.124(1)(b), s.124(1)(c)(i), s.128(7A), s.140(3), s.145(5), s.145(9)(b), s.160A(2), s.166(4), s.180(4), s.241(2) Administered Unlimited amount Superannuation Act 1990 s.18, s.33E(2), s.37(1), s.37(3), s.37A(2), s.38(2) Administered Unlimited amount An Act to provide superannuation benefits for persons employed by the Commonwealth and by certain Commonwealth authorities and to make provision for the families of those persons. An Act to make provision for and in relation to an occupational superannuation scheme, known as the Commonwealth Superannuation Scheme, for people employed by the Commonwealth and for certain other people. An Act to make provision for and in relation to an occupational superannuation scheme for persons employed by the Commonwealth, and for certain other persons. Superannuation Act 2005 s.29(4). Appropriation provision removed from 1 July 2011. Administered Unlimited amount Governance of Australian Government Superannuation Schemes Act 2011 s.34(1)(b), s.34(2)(b), s.35(3)(a), s.35(4) Administered Parliamentary Contributory Superannuation Act 1948 s.15C(11), s.22DH(4), s.26D, s.27 Administered Appropriation applied 2012 2011 $'000 $'000 (129,135) (143,680) (3,862,002) (3,857,924) (1,016,486) (910,022) An Act about the Public Sector Superannuation Accumulation Plan (PSSAP) and for related purposes. - (37) Unlimited amount An Act to provide for the administration of certain Australian Government superannuation schemes by a single body and for related purposes. (366) - Unlimited amount An Act to make provision for contributory superannuation for persons who have served as Members of the Parliament. (34,820) (33,840) Notes to and forming part of the financial statements Note 32D Special Appropriations ('Recoverable GST exclusive') Appropriation applied 2012 2011 $'000 $'000 (3,506) (2,709) Authority Type Purpose Parliamentary Superannuation Act 2004 s.18 Administered Unlimited amount An Act to provide for the making of superannuation contributions in respect of Members of Parliament and for related purposes. Members of Parliament (Life Gold Pass) Act 2002 s.31 Administered Parliamentary Entitlements Act 1990 s.11 Administered Governor-General Act 1974 s.5 Administered Unlimited amount An Act to set out the entitlements of holders of a life gold pass. (2,695) (1,600) Unlimited amount An Act relating to the provision of benefits to Members of each House of the Parliament. (140,914) (147,306) Unlimited amount (1,234) (1,229) Judges' Pensions Act 1968 s.12A(5), 14(b) Administered Federal Magistrates Act 1999 s. 9G Administered Financial Management and Accountability Act 1997 s.28 Administered Same-Sex Relationships (Equal Treatment in Commonwealth Laws – Superannuation) Act 2008, s.4(7) Administered Unlimited amount An Act to make provision in relation to the salary of the Governor-General, and the payment of allowances to persons, and to the spouses of persons, who have held the office of Governor-General, to establish the office of Official Secretary to the GovernorGeneral, to provide for the employment of staff of the Governor-General and for related purposes. An Act to make provision for pensions for Judges and their families. An Act relating to Federal Magistrates, and for other purposes. (39,341) (35,641) (693) (210) (289,934) (5,160) (55) (158) Unlimited amount Refund Unlimited amount Repayments required or permitted by law (where no other appropriation for repayment exists). An Act to address discrimination against samesex couples and their children in Commonwealth laws and for other purposes. Notes to and forming part of the financial statements Note 32D Special Appropriations ('Recoverable GST exclusive') Appropriation applied 2012 2011 $'000 $'000 (3,935) (3,340) Authority Type Purpose Commonwealth of Australia Constitution Act s.66 (Ministers of State Act 1952 s.5) limited to $5,000,000 annually balance lapsed Administered Airports (Transitional) Act 1996, s.39, s.44, s.70, s.78 and s.86(1) Administered Australian Industry Development Corporation Act 1970, s.34 and s.34ZX(2) Administered CFM Sale Act 1996, s.56(2) Administered Limited amount An Act to determine the number of the Ministers of State and to make provision for their salaries and allowances. Unlimited amount An Act relating to the leasing of airports, and for related purposes. - - Unlimited amount An Act to establish an Australian Industry Development Corporation. - - Unlimited amount An Act relating to the sale of Commonwealth Funds Management Limited, and for related purposes. - - Commonwealth Funds Management Limited Act 1990, s.8(2). Appropriation provision removed from 18 December 2010. Administered Unlimited amount - - CSL Sale Act 1993, s.29(2) and s.50(2) Administered Lands Acquisitions Act 1989, s.124(5) Administered Unlimited amount An Act relating to the constitution of the Superannuation Fund Investment Trust as a public company providing investment services on a commercial basis to the public and private sector, and for related purposes. An Act relating to the sale of CSL Limited, and for related purposes. - - An Act relating to the acquisition of land by the Commonwealth and certain authorities and dealings with land so acquired, and for other purposes. - - Unlimited amount Notes to and forming part of the financial statements Note 32D Special Appropriations ('Recoverable GST exclusive') Appropriation applied 2012 2011 $'000 $'000 - Authority Type Purpose Parliamentary Retiring Allowances (Increases) Act 1967, s.5(c) Administered Parliamentary Retiring Allowances (Increases) Act 1971, s.10(2) Administered Public Accounts and Audit Committee Act 1951, s.22(3) Administered Public Works Committee Act 1969, threshold limit of $15,000,000 and allowances limited to $30,000 Administered Superannuation (Pension Increases) Act 1961, s.6(2) and s.6(4) Administered Superannuation (Pension Increases) Act 1967, s.6(2) and s.6(4). Appropriation provision removed from 16 September 2011. Administered Superannuation (Pension Increases) Act 1971, s.11(2) and s.11(4). Appropriation provision removed from 16 September 2011. Administered Telstra Corporation Act 1991, s.8AS(3) and s.8AL(1) Administered Transferred Officers' Allowances Act 1948, s.8 Administered Unlimited amount An Act to provide for increases in certain parliamentary retiring allowances. Unlimited amount An Act to provide for increases in certain parliamentary retiring allowances. - - Unlimited amount An Act to provide for a joint Parliamentary Committee of Public Accounts and Audit. An Act relating to the Parliamentary Standing Committee on Public Works. - - - - Unlimited amount An Act to provide for increases in certain superannuation pensions. - - Unlimited amount An Act to provide for increases in certain superannuation pensions. - - Unlimited amount An Act to provide for increases in certain superannuation pensions. - - Unlimited amount An Act relating to Telstra Corporation Limited, and for other purposes. An Act to provide for the payment of allowances to certain transferred officers. - - - - Western Australia (South-West Region Water Supplies) Agreement Act 1965, s.4, limited to $12,000,000 Administered Limited amount An Act relating to an Agreement between the Commonwealth and the State of Western Australia in relation to water supplies in the southwest region of that state. - - Limited amount Unlimited amount Notes to and forming part of the financial statements Note 32D Special Appropriations ('Recoverable GST exclusive') Authority Type Purpose Aboriginal and Torres Strait Islander Act 2005, Part 4B Administered Unlimited amount Aerospace Technologies of Australia Limited Sale Act 1994 Administered Unlimited amount An Act to establish a Torres Strait Regional Authority, an indigenous land corporation and a corporation to be known as Indigenous Business Australia, and for related purposes. An Act relating to the sale of AeroSpace Technologies of Australia Limited, and for related purposes. AIDC Sale Act 1997 Administered Unlimited amount Albury-Wodonga Development Act 1973 Administered Unlimited amount Total An Act to amend the Australian Industry Development Corporation Act 1970, and for other purposes An Act relating to the Development of the AlburyWodonga Area. Appropriation applied 2012 2011 $'000 $'000 - - - - - - - (5,525,116) (5,142,856) Comsuper drew from the special appropriation authorised by the Superannuation Act 1922 s.7(4), s.119T(2)(b), s.119ZC(5), s.134(1), the Superannuation Act 1976 s.54L(2), s.54ZA, s.110TG(2), s.112(2), s.112(5), s.112(9), s.124(1)(b), s.124(1)(c)(i), s.128(7A), s.140(3), s.145(5), s.145(9)(b), s.160A(2), s.166(4), s.180(4), s.241(2), the Superannuation Act 1990 s.18, s.33E(2), s.37(1), s.37(3), s.37A(2), s.38(2), Superannuation Act 2005 s.19, the Governance of Australian Government Superannuation Schemes Act 2011 s. 34 and the Same-Sex Relationships (Equal Treatment in Commonwealth Laws – Superannuation) Act 2008 s.4. Additionally, ComSuper drew down from the Financial Management and Accountability Act 1997 s.28. The money spent has been included in the table above. The Department of the House of Representatives, the Department of the Senate and the Department of Parliamentary Services drew from the special appropriation authorised by the Parliamentary Superannuation Act 2004 s.18. The money spent has been included in the table above. The Department of the Attorney-General, Department of Defence, House of Representatives and House of the Senate drew from the special appropriation authorised by the Parliamentary Entitlements Act 1990 s.11. The money spent has been included in the table above. Fair Work Australia drew from the special appropriation authorised by the Judges Pension Act 1968 s.12A(5), 14(b). The money spent has been included in the table above. Notes to and forming part of the financial statements Note 32E Disclosure by agent in relation to annual and special appropriations ('recoverable GST exclusive') 2012 Total receipts Total payments 2011 Total receipts Total payments AttorneyGeneral's Department $'000 Australian Secret Intelligence Organisation $'000 Department of Prime Minister and Cabinet $'000 393 (393) 108,441 (108,441) 3,382 (3,382) Royal Australian Mint $'000 Australian Secret Intelligence Organisation $'000 Department of Prime Minister and Cabinet $'000 - 28,782 (28,782) - Notes to and forming part of the financial statements Note 32F Reduction in Administered Items ('Recoverable GST exclusive') As per Appropriation Act (Act 1 s.11; Act 2 s.12) Amount required - by Appropriation Act 2011-12 Total Amount required - as represented by: Total amount Total amount reduction required appropriated in effective in 2011-12 2012-13 1,575,188.69 Act (No.1) Act (No.3) Spent Retention Outcome 1 13,113,811.31 - 12,163,811.31 950,000.00 13,113,811.31 14,689,000.00 Outcome 2 648,704.00 - 648,704.00 - 648,704.00 681,000.00 32,296.00 Outcome 3 227,186,525.31 656,000.00 208,442,226.31 19,400,299.00 227,842,525.31 233,633,684.46 5,791,159.15 Ordinary Annual Services Administered capital budget Other services 3,320,000.00 - 3,320,000.00 - 3,320,000.00 3,320,000.00 - 244,269,040.62 656,000.00 224,574,741.62 20,350,299.00 244,925,040.62 252,323,684.46 7,398,643.84 Note: 1. Numbers in this section of the table must be disclosed to the cent. 2. Administered items for 2011-12 will be reduced to these amounts when the financial statements are tabled in Parliament as part of the Department’s 2011-12 annual report. This reduction is effective in 2012-13, but the amounts are reflected in the 2011-12 financial statements in column ‘Appropriations reduced’ as they are adjustments to the 2011-12 appropriations. As per Appropriation Act (Act 1 s.11; Act 2 s.12) Amount required - by Amount required - as represented Appropriation Act 2010-11 by: Total amount Total amount Total reduction required appropriated in effective in 2011-12 2011-12 1,945,567.52 Act (No.1) Act (No.3) Spent Retention Outcome 1 13,189,432.48 - 12,408,030.36 781,402.12 13,189,432.48 15,135,000.00 Outcome 2 665,569.99 - 665,569.99 - 665,569.99 666,000.00 430.01 Outcome 3 208,645,000.00 8,980,974.49 199,870,604.95 17,755,369.54 217,625,974.49 219,642,000.00 2,016,025.51 Ordinary Annual Services Administered capital budget Other services 1,061,012.15 - 1,061,012.15 - 1,061,012.15 5,450,000.00 4,388,987.85 223,561,014.62 8,980,974.49 214,005,217.45 18,536,771.66 232,541,989.11 240,893,000.00 8,351,010.89 Note: 1. Numbers in this section of the table must be disclosed to the cent. 2. Administered items for 2010-11 were reduced to these amounts when the financial statements were tabled in Parliament as part of the Department’s 2010-11 annual report. This reduction is effective in 2011-12, but the amounts are reflected in the 2010-11 financial statements in column ‘Appropriations reduced’ as they are adjustments to the 2010-11 appropriations. Notes to and forming part of the financial statements Note 33 Special accounts and FMA Act Section 39 Note 33A Special accounts (recoverable GST exclusive) Departmental Special Accounts Comcover 1 Balance brought forward from previous period Increases: Appropriation credited to the special account Other receipts Rendering of services Insurance premiums Reinsurance and other recoveries Proceeds from sale of property, plant and equipment Other Total increases Available for payments Decreases: Payments made Employees Suppliers Insurance claims paid Purchase of property, plant and equipment Capital repayments Competitive neutrality Total decreases Total balance carried forward to the next period Represented by: Cash and bank Appropriation receivable Total cash Property 2 Business Services 3 Coordinated Procurement Contracting 4 Total Departmental 2012 $'000 240,047 2011 $'000 315,037 2012 $'000 242,579 2011 $'000 257,635 2012 $'000 928 2011 $'000 904 2012 $'000 33,712 2011 $'000 45,268 2012 $'000 517,266 2011 $'000 618,844 15,022 11,912 175,500 160,860 - - 4,953 4,972 195,475 177,744 101,472 10,060 126,554 366,601 29 87,713 1,037 100,691 415,728 98,546 204 2,175 276,425 519,004 108,234 59 308 269,461 527,096 5 - 24 - 5 933 24 928 78,493 9,734 93,180 126,892 37,502 8,359 50,833 96,101 177,044 101,472 10,060 204 11,909 496,164 1,013,430 145,789 87,713 1,037 59 8,667 421,009 1,039,853 (2,173) (31,635) (71,058) (5,104) (109,970) 256,631 (2,210) (33,591) (134,754) (5,126) (175,681) 240,047 (7,740) (25,698) (199,989) (39,785) (18,955) (292,167) 226,837 (7,122) (44,646) (154,950) (57,560) (20,239) (284,517) 242,579 (32) (32) 901 928 (9,355) (75,453) (84,808) 42,084 (7,414) (54,967) (8) (62,389) 33,712 (19,268) (132,818) (71,058) (199,989) (39,785) (24,059) (486,977) 526,453 (16,746) (133,204) (134,754) (154,958) (57,560) (25,365) (522,587) 517,266 233 256,398 256,631 279 239,768 240,047 55 226,782 226,837 50 242,529 242,579 901 901 928 928 862 41,222 42,084 773 32,939 33,712 1,150 525,303 526,453 1,102 516,164 517,266 Notes to and forming part of the financial statements Note 33B Special accounts (recoverable GST exclusive) (continued) Administered Special Accounts Services for Other Building Australia Fund 6 Other Trust Moneys 5 Education Investment Health and Hospital Entities Fund 7 Fund 8 and Trust Moneys 9 Total Administered 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 258 456 32 - 26 - 25 - - - 341 456 - - 60,747 59,211 50,824 145,609 Balance brought forward from previous period Increases: Other receipts Interest - - 25,488 25,843 19,694 16,046 15,565 17,322 19,214 76,566 20,552 39,887 11,058 29,156 - - Net gains from sale of financial instruments held at fair value 127,750 644,385 69,425 416,960 61,491 357,217 258,666 1,418,562 - - - - - - - 257 - 257 41,974,332 Net realised exchange gains Transfer from other special accounts Investments realised Other Total increases Available for payments - - 15,128,511 22,326,708 8,885,761 11,026,518 7,879,494 8,621,106 - - 31,893,766 17 629 - 2,515 - - - 45,800 - - 17 48,944 17 629 15,300,963 23,076,017 8,995,432 11,499,411 7,967,608 9,070,601 257 - 32,264,277 43,646,658 275 1,085 15,300,995 23,076,017 8,995,458 11,499,411 7,967,633 9,070,601 257 - 32,264,618 43,647,114 Decreases: Payments made (18) (827) (9,028) (10,850) (6,148) (6,923) (5,149) (5,931) - - (20,343) (24,531) (257) - - - - - - - - - (257) - Purchase of investments - - (12,591,696) (21,008,925) (8,142,790) (10,585,951) (6,721,631) (8,376,580) - - (27,456,117) (39,971,456) Grants and equity distribution - - (2,700,271) (2,056,210) (846,520) (906,511) (1,240,853) (688,065) - - (4,787,644) (3,650,786) (275) (827) (15,300,995) (23,075,985) (8,995,458) (11,499,385) (7,967,633) (9,070,576) - - (32,264,361) (43,646,773) - 258 - 32 - 26 - 25 257 - 257 341 Appropriation receivable - 258 - 32 - 26 - 25 257 - 257 341 Total cash - 258 - 32 - 26 - 25 257 - 257 341 Suppliers Transfer to other special accounts Total decreases Total balance carried to the next period Represented by: Notes to and forming part of the financial statements Note 33 1 Special accounts (continued) Comcover Special Account Legal Authority: Financial Management and Accountability Act 1997, s20. Purpose: For receipts and expenditure relating to the administration of Comcover including direct and indirect costs for staff and the Advisory Council, and for expenditure in relation to Comcover's operations in meeting liabilities that arise from its function as the Commonwealth's insurable risks claims manager. This account is non-interest bearing. 2 Property Special Account Legal Authority: Financial Management and Accountability Act 1997, s20. Purpose: Facilitates the management of the Commonwealth's non-Defence domestic property portfolio. This account is non-interest bearing. 3 Business Services Special Account Legal Authority: Financial Management and Accountability Act 1997, s20. Purpose: For expenditure relating to sentencing and disposing of records associated with the former Department of Administration Services (DAS), and managing and settling any personal injury and other legal claims arising from activities associated with the former DAS. This account is non-interest bearing. 4 Coordinated Procurement Contracting Special Account Legal Authority: Financial Management and Accountability Act 1997, s20. Purpose: For expenditure relating to the Whole of Government contract for providing fleet management and leasing services, the centralised Government advertising activities, and other co-coordinated procurement contracts for the benefit of Government entities. The account is noninterest bearing. 5 Other Trust Moneys Special Account Legal Authority: Financial Management and Accountability Act 1997, s20. Purpose: For the receipt of moneys temporarily held in trust for other persons. The account is non-interest bearing. This account was abolished on 26 June 2012 as it was no longer required. 6 Building Australia Fund Special Account Legal Authority: Financial Management and Accountability Act 1997, s21. Purpose: For making payments in relation to transport infrastructure, communications infrastructure (including the National Broadband Network), energy infrastructure and water infrastructure. The balance of the special account is invested by the Future Fund Board of Guardians. The Future Fund Board of Guardians invests amounts standing to the credit of the special account, although the special account itself is non-interest bearing. 7 Education Investment Fund Special Account Legal Authority: Financial Management and Accountability Act 1997, s21. Purpose: For making payments in relation to higher education infrastructure, research infrastructure, vocational education and training infrastructure, and any other eligible education infrastructure. The balance of the special account is invested by the Future Fund Board of Guardians. The Future Fund Board of Guardians invests amounts standing to the credit of the special account, although the special account itself is non-interest bearing. 8 Health and Hospital Fund Special Account Legal Authority: Financial Management and Accountability Act 1997, s21. Purpose: For making payments in relation to health infrastructure. The balance of the special account is invested by the Future Fund Board of Guardians. The Future Fund Board of Guardians invests amounts standing to the credit of the special account, although the special account itself is non-interest bearing. 9 Services for Other Entities and Trust Moneys Special Account – Department of Finance and Deregulation Legal Authority: Financial Management and Accountability Act 1997, s20. Purpose: For the receipt of moneys temporarily held in trust for other persons other than the Commonwealth and for the payment to a person other than the Commonwealth, on behalf of the Government that are not FMA Act agencies, or as permitted by an Act. The account is Notes to and forming part of the financial statements Note 33 Special accounts (continued) non-interest bearing. This account was established on 26 June 2012 for the purpose of combining the Other Trust Moneys and the Services for Other Governments and Non-agency Bodies special accounts. The following Special Account has not been used during the current and comparative years: (a) Lands Acquisition Account (Lands Acquisition Act 1989) [Special Public Money] Legal Authority: Financial Management and Accountability Act 1997, s20. Purpose: For the holding of amounts of compensation due to be paid to a person in respect of compulsory acquisition of interests in land where the amount of compensation payable to the person has been determined but where the person has not, because of some default or delay on the part of the person, received payment for the compensation within a 3 month period after the date of the determination. To date there have not been any transactions through this account. Notes to and forming part of the financial statements Note 33C Investments made under section 39 of the FMA Act (recoverable GST exclusive) Movements in Nation-building Funds investments established under the Nation-building Funds Act 2008 Opening balance Investments made Interest earned Foreign currency realised Amounts paid to other portfolio special accounts Investments realised Amounts transferred to operations1 Closing fund balance 1 The Building Australia Fund Education Investment Fund Health and Hospital Fund Total Administered 2012 $'000 2011 $'000 2012 $'000 2011 $'000 2012 $'000 2011 $'000 2012 $'000 2011 $'000 8,417,985 14,590,375 9,738,202 20,940,621 5,057,298 8,578,111 5,503,558 10,579,864 4,477,418 7,585,382 4,726,442 8,312,232 17,952,701 30,753,868 19,968,202 39,832,717 320,999 127,750 367,732 644,385 197,159 69,425 212,914 416,960 177,316 61,491 187,751 357,217 695,474 258,666 768,397 1,418,562 (2,700,271) (14,852,212) (2,054,018) (21,208,059) (846,520) (8,728,848) (906,533) (10,742,335) (1,240,853) (7,728,801) (642,239) (8,457,826) (4,787,644) (31,309,861) (3,602,790) (40,408,220) (9,130) 5,895,496 (10,878) 8,417,985 (6,213) 4,320,412 (7,130) 5,057,298 (5,198) 3,326,755 (6,159) 4,477,418 (20,541) 13,542,663 (24,167) 17,952,701 operations of the Nation-building Funds are funded from revenues generated by the funds. Notes to and forming part of the financial statements Note 34 Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund Section 83 of the Constitution provides that no amount may be paid out of the Consolidated Revenue Fund except under an appropriation made by law. The Department of Finance and Deregulation (DoFD) in its central agency role provided information to all agencies in 2011 regarding the need for specific risk assessments in relation to section 83. The possibility of this being an issue for Finance itself was reported in the notes to the 2010-11 financial statements and Finance undertook to investigate the issue during 2011-12. These requirements arose because of the outcome of the June 2011 financial statements audit, which highlighted the existence of risk for all agencies that they may be in noncompliance with section 83, where payments are made from special appropriations that do not accord with conditions in the relevant legislation. It is impossible to fully remove the potential for section 83 breaches for all payments. In the vast majority of cases Finance relies on information provided by its clients to pay appropriate entitlements. The information provided by customers is not always accurate resulting in potential breaches of section 83. During 2011-12, Finance developed a plan to review exposure to risks of not complying with statutory conditions on payments from appropriations. The plan involved:  identifying each special appropriation and special account;  determining the risk of non-compliance by assessing the difficulty of administering the statutory conditions and assessing the extent to which existing payment systems and processes satisfy those conditions;  determining procedures to confirm risk assessments in medium risk cases and to quantify the extent of noncompliance, if any, in higher risk situations; and  considering legislative or procedural changes to reduce the risk of non-compliance in the future to an acceptably low level. Finance identified 24 appropriations involving statutory conditions for payment, comprising:  11 Superannuation special appropriations;  3 Ministerial and Parliamentary Services special appropriations;  4 Departmental special accounts;  5 Administered special accounts; and  1 other special appropriation. As at 30 June 2012, risk assessments had been completed in respect of all appropriations with statutory conditions for cash payments. The current status of the reviews, identified breaches and remedial action is set out in the following table: Notes to and forming part of the financial statements Note 34 Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund (continued) Appropriations identified as subject to conditions Expenditure in 2011-12 $'000 Review complete? (Yes/No) 1 Breaches identified to date 2 Were any breaches identified? Special appropriation – Superannuation payments Superannuation Act 1922 Superannuation Act 1976 Superannuation Act 1990 Superannuation Act 2005 Same-Sex Relationships (Equal Treatment in Commonwealth Laws Superannuation) Act 2008 Governance of Australian Government Superannuation Schemes Act 2011 Parliamentary Contribution Superannuation Act 1948 Parliamentary Superannuation Act 2004 Governor General Act 1974 Judges Pensions Act 1968 Federal Magistrates Act 1999 s9G Departmental special accounts Comcover Special Account Property Special Account Business Services Special Account Coordinated Procurement Contracting Special Account Remedial action taken or proposed3 Number Total Amounts recovered Amounts waived Amounts yet to be recovered $000 $000 $000 $000 129,135 3,862,002 1,016,486 - Yes Yes Yes Yes No Yes Yes No N/A 2,405 95 N/A N/A 4,420 1,142 N/A N/A 3,796 1,050 N/A N/A N/A N/A 624 92 N/A LM LM LM N/A 55 Yes No N/A N/A N/A N/A N/A N/A 366 Yes No N/A N/A N/A N/A N/A N/A 34,820 Yes Yes 16 21 16 - 5 LM 3,506 1,234 39,341 693 Advanced Yes Yes Yes No No Yes No N/A N/A 5 N/A N/A N/A 42 N/A N/A N/A 6 N/A N/A N/A N/A N/A N/A 36 N/A LM LM LP LM 109,970 292,167 32 Yes Yes Yes No No No N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 84,808 Yes No N/A N/A N/A N/A N/A N/A Notes to and forming part of the financial statements Note 34: Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund (continued) Appropriations identified as subject to conditions Expenditure in 2011-12 $'000 Review complete? (Yes/No) 1 Breaches identified to date 2 Were any breaches identified? Special appropriation Ministerial and Parliamentary payments Parliamentary Entitlements Act 1990 Members of Parliament (Life Gold Pass) Act 2002 Commonwealth of Australia Act 1901 s.66 (limit set under Ministers of State 1952 s.5) Administered special accounts Building Australia Fund Special Account Education Investment Fund Special Account Health and Hospital Fund Other Trust Monies Special Account Services for other entities and trust monies special account Other Appropriations Financial Management and Accountability Act 1997 s28 Remedial action taken or proposed3 Number Total Amounts recovered Amounts waived $000 $000 $000 Amounts yet to be recovered $000 140,914 Advanced No N/A N/A N/A N/A N/A LP 2,695 Advanced No N/A N/A N/A N/A N/A LP 3,935 Advanced No N/A N/A N/A N/A N/A LP 15,300,995 Yes No N/A N/A N/A N/A N/A N/A 8,995,458 7,967,633 Yes Yes No No N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 275 Yes No N/A N/A N/A N/A N/A N/A - Yes No N/A N/A N/A N/A N/A N/A 289,934 Yes No N/A N/A N/A N/A N/A N/A Notes to and forming part of the financial statements Note 34 Compliance with Statutory Conditions for Payments from the Consolidated Revenue Fund (continued) 1 Review Finance has undertaken an assessment of the inherent level of risk of a breach. Legislation marked as “Completed” has undergone internal assessment by the business area. Items marked “Advanced” indicate where the business areas have finalised their risk assessment but identified a need to seek further legal advice before the process can be finalised. 2 Breaches The work conducted to date has identified that a number of breaches exist. Amounts reported have been derived by analysing data on recovery of overpayments and other identified risk areas for 2011-12. There exists business processes to ensure that identified overpayments are recovered. The numbers and amounts represent the overpayments made during 2011-12 under relevant schemes. 3 Remedial action taken or proposed (L= legislative change; S= systems change; P= planned change; M= change made) Legislative changes made (LM) in relation to the above mentioned (*) Acts were included in the recently enacted Financial Framework Legislative Amendment (FFLA) Act No.1, FFLA Act No.2 and FFLA Act No.3. In particular, following are some key legislatives changes made:  FFLA Act No. 2 provides a mechanism, called a ‘recoverable payment’, to address administrative issues common to Finance, that provides authority for the inadvertent overpayment of some benefits, and for their recovery in line with the duty to pursue recovery of a debt under section 47 of the Financial Management and Accountability Act 1997 (FMA Act); and  A second mechanism to authorise Finance to make ‘recoverable death payments’ until Finance is notified of a benefit recipient’s death. Notes to and forming part of the financial statements Note 35 Compensation and debt relief Departmental 2012 $ 2011 $ No ‘Act of Grace’ payments were expended during the reporting period (2011: no expenses). - - No waivers of amounts owing to the Australian Government were made pursuant to subsection 34(1) of the Financial Management and Accountability Act 1997 (2011: no waivers). - - No payments were provided under the Compensation for Detriment caused by Defective Administration (CDDA) Scheme during the reporting period (2011: no payments). - - No ex-gratia payments were provided for during the reporting period (2011: no payments). - - No payments were provided in special circumstances relating to APS employment pursuant to section 73 of the Public Service Act 1999 (PS Act) during the reporting period (2011: no payments) - - 2012 $ 2011 $ 1,310,034 1,360,932 2,642 1,443 No payments were provided under the Compensation for Detriment caused by Defective Administration (CDDA) Scheme during the reporting period (2011: no payments). - - No ex-gratia payments were provided for during the reporting period (2011: no payments). - - No payments were provided in special circumstances relating to APS employment pursuant to section 73 of the Public Service Act 1999 during the reporting period (2011: no payments). - - Administered 64 ‘Act of Grace’ payments were expensed during the reporting period (2011: 66 expenses). 64 of the above payments amounting to $1,310,034 were paid on a periodic basis (2011: 66 payments amounting to $1,360,932). These are expected to continue in future years. The estimated amount outstanding in relation to payments being made on a periodic basis as at 30 June 2012 was $14,932,000 ($12,590,000 at 30 June 2011). 3 waivers of amounts owing to the Australian Government were made pursuant to subsection 34(1) of the Financial Management and Accountability Act 1997. (2011: 2 waivers). Notes to and forming part of the financial statements Note 36 Reporting of outcomes Note 36A Net cost of outcome delivery Outcome 1 2012 2011 $'000 $'000 Departmental Expenses Own-source income Net cost/(contribution) of outcome delivery Administered Expenses Own-source income Net cost/(contribution) of outcome delivery Outcome 2 2012 2011 $'000 $'000 Outcome 3 2012 2011 $'000 $'000 Not attributed 2012 2011 $'000 $'000 Total 2012 $'000 2011 $'000 134,259 10,052 126,526 8,634 350,255 316,004 430,433 312,742 46,563 11,750 44,118 10,230 - - 531,077 337,806 601,077 331,606 124,207 117,892 34,251 117,691 34,813 33,888 - - 193,271 269,471 11,374,365 2,766,559 10,311,998 3,985,437 287,450 103,678 3,594 455,801 420,457 11,211 387,018 12,379 33,937 35,620 12,082,272 2,915,385 10,702,610 4,489,237 8,607,806 183,772 409,246 9,166,887 6,326,561 (452,207) 374,639 (33,937) (35,620) The Department uses an activity based costing system to determine the attribution of its shared items. The basis of attribution in the above table is consistent with the basis used for the 2011-12 Budget. Outcomes 1, 2 and 3 are described in Note 1.1. Net costs shown include intra-Government costs that are eliminated in calculating the actual budget outcome. 6,213,373 Notes to and forming part of the financial statements Note 36B Major Classes of departmental expense income assets and liabilities by outcome Outcome 1 2012 2011 $'000 $'000 Outcome 2 2012 2011 $'000 $'000 Outcome 3 2012 2011 $'000 $'000 Not attributed 2012 2011 $'000 $'000 Total 2012 $'000 2011 $'000 Departmental expenses Employee benefits Suppliers expense Depreciation and amortisation Finance costs Write-down and impairment of assets Net losses from disposal of assets Insurance claims Other Total expenses 92,551 35,261 6,254 28 35 130 134,259 85,275 37,108 3,908 34 193 8 126,526 60,838 153,629 10,627 17 62,947 656 37,272 24,269 350,255 55,602 136,879 14,457 2,288 124 1,346 190,887 28,850 430,433 30,965 13,437 2,088 12 16 45 46,563 29,112 14,149 768 9 75 5 44,118 - - 184,354 202,327 18,969 57 62,998 831 37,272 24,269 531,077 169,989 188,136 19,133 2,331 392 1,359 190,887 28,850 601,077 Departmental income Revenue from Government Rendering of services Rental income Insurance premiums Reinsurance and other recoveries Other revenue Other gains Interest Total income 122,616 9,283 733 36 132,668 121,905 7,530 1,104 130,539 71,538 92,307 88,806 99,698 2,216 10,894 16,070 6,013 387,542 84,771 67,939 84,211 86,411 58,414 10,041 1,751 3,975 397,513 41,341 11,679 69 2 53,091 33,124 10,076 150 4 43,354 - - 235,495 113,269 88,806 99,698 2,216 10,894 16,872 6,051 573,301 239,800 85,545 84,211 86,411 58,414 10,041 3,005 3,979 571,406 Notes to and forming part of the financial statements Note 36B Major Classes of departmental expense income assets and liabilities by outcome (continued) Outcome 1 2012 2011 $'000 $'000 Outcome 2 2012 $'000 2011 $'000 Outcome 3 2012 2011 $'000 $'000 Not attributed 2012 2011 $'000 $'000 Total 2012 $'000 2011 $'000 Departmental assets Cash and cash equivalents Trade and other receivables Accrued revenue Land and buildings Infrastructure, plant and equipment Investment property Intangibles Other non-financial assets Total assets 352 11,016 1,433 2,998 33,679 1,022 50,500 3,873 1,083 1,349 8,380 51 14,736 940 740,149 7,284 807,044 1,471 582,857 9,257 398 2,149,400 665 775,210 7,257 362,714 990 920,961 7,524 676 2,075,997 5 31,304 653 1,682 328 7,075 31 41,078 14,036 424 1,542 65 1,549 17,616 3,692 3,191 44 6,517 6,389 13,261 2,133 35,227 966 15,929 8 6,870 4,082 12,316 1,739 41,910 4,989 785,660 9,414 815,243 11,186 582,857 63,272 3,584 2,276,205 1,631 809,048 8,772 371,126 6,486 920,961 29,769 2,466 2,150,259 Departmental liabilities Suppliers Return of equity Unearned revenue Outstanding insurance claims Other payables Employee provisions Other provisions Total liabilities 1,233 1,016 1,442 21,328 (106) 24,913 3,729 480 823 19,048 24,080 17,548 42,296 57,909 257,059 7,378 13,899 5,716 401,805 15,260 49,642 77,328 298,616 757 12,802 5,497 459,902 1,563 529 319 5,805 45 8,261 28 246 30 5,257 42 5,603 1,306 2,301 17,348 1,129 22,084 214 2,555 10,370 880 14,019 21,650 42,296 59,454 257,059 11,440 58,380 6,784 457,063 19,231 49,642 78,054 298,616 4,165 47,477 6,419 503,604 Notes to and forming part of the financial statements Note 36C Major classes of administered expenses, income, assets, and liabilities by outcomes Outcome 1 2012 2011 Outcome 2 2012 2011 Outcome 3 2012 2011 Total 2012 2011 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 3,506 2,709 649 - 666 - 240,881 199,389 - - 649 244,387 666 202,098 6,449,642 32,389 6,349,500 35,885 - - 159,427 162,192 - - 6,449,642 191,816 6,349,500 198,077 Depreciation and amortisation Write-down and impairment of assets - - - - 19,786 3 25,054 13 - - 19,786 3 25,054 13 Finance costs Net loss from sale of assets - - - 2,928 82 278 133 237 - - 82 278 133 3,165 4,330,273 2,561 2,423,493 - 286,800 - - - - - - 4,617,073 2,561 2,423,493 - 555,994 11,374,365 1,500,411 10,311,998 1 287,450 3,594 420,457 387,018 - - 555,995 12,082,272 1,500,411 10,702,610 6 - - - 4,131 4,746 - - 4,137 4,746 81,778 - 78,781 - 103,660 3 455,787 - - 33,937 - 35,620 - 115,715 103,660 114,404 455,787 Superannuation Contributions Other revenue 1,330,498 4,964 1,344,325 7,243 18 11 2,986 3,296 - - 1,330,498 7,968 1,344,325 10,550 Foreign exchange gains Gains on financial investments 258,666 1,090,647 1,785,656 721,112 - - - - - - 258,666 1,090,647 1,785,656 721,112 Other gains Total income 2,766,559 48,320 3,985,437 103,678 455,801 4,094 11,211 4,337 12,379 33,937 35,620 4,094 2,915,385 52,657 4,489,237 Administered expenses Grants Employees Superannuation Suppliers Other Foreign exchange losses Losses on financial investments Total expenses Administered income Rendering of services Interest Dividends Not attributed* 2012 2011 Notes to and forming part of the financial statements Note 36C Major classes of administered expenses, income, assets, and liabilities by outcomes (continued) Outcome 1 2012 2011 Outcome 2 2012 2011 $'000 $'000 $'000 $'000 (3,446) 189,532 164,474 - 13,580,587 41,028 17,494,327 62,007 Buildings Infrastructure, plant and equipment - Intangibles Other Total assets Outcome 3 2012 2011 Not attributed* 2012 2011 Total 2012 2011 $'000 $'000 $'000 $'000 $'000 $'000 11,001 6,874 2,994 1,524 1,109 740,850 26,104 1,082,711 36,261 744,278 218,630 1,084,235 212,845 3,903,023 - 4,423,550 - 458 49 - - 17,483,610 41,486 21,917,877 62,056 - - - 19,205 60,169 23,833 56,439 - - 19,205 60,169 23,833 56,439 - - - - 1,310 2,507 132 2,791 - - 1,310 2,507 132 2,791 13,807,701 17,720,808 3,903,023 4,434,551 93,517 85,877 766,954 1,118,972 18,571,195 23,360,208 126,538 (4,229) 70,596 - 59 63 11,448 14,251 7,881 8,921 1,687,562 1,829,328 137,986 1,697,643 78,477 1,838,312 Employee provisions Superannuation 149,416,553 94,885,610 - - 199,347 - 168,028 - - - 199,347 149,416,553 168,028 94,885,610 Other provisions Total liabilities 16,526 149,555,388 13,681 94,969,887 59 63 3,971 229,017 3,068 187,898 1,687,562 1,829,328 20,497 151,472,026 16,749 96,987,176 Administered assets Cash and cash equivalents Trade and other receivables Investments Accrued revenue Administered liabilities Suppliers Other payables Notes to and forming part of the financial statements Note 37 Competitive neutrality and cost recovery Note 37A Competitive neutrality - expenses and dividend declared Competitive neutrality - regulatory Competitive neutrality - rates and other taxes Commonwealth tax equivalent expense1 Total expenses and dividend declared 30 June 2012 $'000 30 June 2011 $'000 104 10,137 9,028 126 10,261 13,463 19,269 23,850 1 The amount of Commonwealth tax equivalent on the taxable profit for the period was $9.7 million (2011: $13.0 million). There were no adjustments for timing differences in accordance with AASB 112 Income Taxes. Differences are attributable to a subsequent revision of prior years forecast and actual results. Note 37B Receipts subject to cost recovery policy The Department received no departmental receipts subject to the cost recovery policy for the period (2011: nil). Note 37C Competitive neutrality - administered expenses and dividend declared The Department made no administered competitive neutrality payments during the period (2011: nil). Note 37D Administered receipts subject to cost recovery policy The Department received no administered receipts subject to the cost recovery policy for the period (2011: nil). Note 38 Net cash appropriation arrangements Total comprehensive income (loss) less depreciation/amortisation expenses previously funded through revenue appropriations 1 Add: depreciation/amortisation expenses previously funded through revenue appropriation2 Total comprehensive income (loss) - as per Statement of Comprehensive Income 1 30 June 2012 $'000 30 June 2011 $'000 (28,567) (51,715) 12,267 14,602 (16,300) (37,113) 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. 2 Excludes depreciation and amortisation for Special Accounts, which are appropriated through their own determination.

DEPARTMENT OF FINANCE AND DEREGULATION FINANCIAL STATEMENTS

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