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Commonwealth of Australia - The Treasury

Annual Report 2014/15

Notes 11 – 20

Note 11: Restructuring

  2015 2014
  Small Business Programs Industry1 Small Business Function Industry2
  $’000 $’000
Note 11A: Departmental restructuring    
FUNCTIONS ASSUMED    
Assets recognised    
Property, plant and equipment 7
Total assets recognised 7
Liabilities recognised    
Employer payables 1,626
Total liabilities recognised 1,626
Net assets/(liabilities) assumed (1,619)
Income    
Recognised by the losing entity 2
Total Income 2
Expenses    
Recognised by the receiving entity 347 2,839
Recognised by the losing entity 547 3,442
Total Expenses 894 6,281
  2015 2014
  Small Business Programs Industry1 Small Business Function Industry2
  $’000 $’000
Note 11B: Administered restructuring    
FUNCTIONS ASSUMED    
Assets recognised    
Trade debtors and accruals 1
Total assets recognised 1
Liabilities recognised    
Trade Creditors and accruals   54
Total liabilities recognised 54
Net assets/(liabilities) assumed 1 (54)
Expenses    
Recognised by the receiving entity 6,869 215
Recognised by the losing entity 564 275
Total expenses 7,433 490

1. The Treasury assumed responsibility for the small business programs from the Department of Industry during 2015 as a result of the restructuring of administrative arrangements on 23 December 2014. No functions were relinquished as part of this arrangement.

2. The small business policy function was gained from the Department of Industry during 2014 as a result of restructuring of administrative arrangements on 18 September 2013. Appropriations receivable of $1.595 million was transferred from Industry to the Treasury as an equity injection during the 2014-15 Budget (refer to the Statement of Changes in Equity). No functions were relinquished as part of this arrangement.

Note 12: Cash Flow Reconciliation

  2015
$’000
2014
$’000
Reconciliation of cash and cash equivalents as per Statement of Financial Position to Cash Flow Statement    
Cash and cash equivalents as per:    
Cash flow statement 5,152 655
Statement of financial position 5,152 655
Discrepancy
Reconciliation of net cost of services to net cash from    
operating activities:    
Net cost of services (177,804) (177,493)
Add revenue from Government 172,767 168,471
  (5,037) (9,022)
Adjustments for non-cash items    
Depreciation/amortisation 9,667 9,297
Finance costs 25 445
Net write down of non-financial assets 277 144
Other gains (14)
Movements in assets and liabilities    
Assets    
(Increase)/decrease in net receivables 1,312 550
(Increase)/decrease in other non-financial assets (752) 51
Liabilities    
Increase/(decrease) in provisions 923 (1,353)
Increase/(decrease) in other payables (531) 3,792
Increase/(decrease) in supplier payables (1,107) (120)
Net cash from/(used by) operating activities 4,754 3,784

Note 13: Contingent Assets and Liabilities

Quantifiable Contingencies

There were no quantifiable contingent assets or liabilities in 2015 (2014: $0).

Remote Contingencies

The Treasury’s lease on its current premises contains a make good clause which has been estimated by an independent valuer at $3.0 million. In 2014-15, the Treasury has recognised a provision for make good of $1.0 million, being recognition of partial hand back of lease space in 2015. The Treasury is committed to remaining in the Treasury building. The likelihood of the remaining make good provision being required has been deemed as remote.

As at 30 June 2015, the Treasury has a number of contracts which may give rise to contingent liabilities based on certain events occurring. The Treasury has assessed the likelihood of such events occurring as being remote and unquantifiable.

Note 14: Senior Management Personnel Remuneration

  2015
$
2014
$
Short-term employee benefits    
Salary 17,868,378 19,107,668
Allowances 1,646,977 1,373,546
Total short-term employee benefits 19,515,355 20,481,214
Post-employment benefits    
Superannuation 3,133,362 3,252,312
Total post-employment benefits 3,133,362 3,252,312
Other long-term employee benefits    
Annual leave accrued 1,663,365 1,829,294
Long-service leave 1,309,640 612,514
Total other long-term employee benefits 2,973,005 2,441,808
Termination benefits    
Termination benefits 664,482 1,454,363
Total termination benefits 664,482 1,454,363
Total senior executive remuneration expenses 26,286,204 27,629,697

Note 14 is prepared on an accruals basis. No performance bonuses were paid in 2015 (2014: Nil).

The total number of senior management personnel that are included in the above table are 99 (2014: 103).

Includes secondees received free of charge of $515,807 (2014: $529,436). Revenue is reflected in note 5D.

The comparative figures have been revised and do not match what was published in the 2013-14 financial statements as a result of new disclosure requirements.

Long-service leave benefits have increased due to the leave revaluation as at 30 June 2015. The long-term government bond rate as at the reporting date was used to value the leave provision.

Allowances include payments made to employees on overseas posts.

Note 15: Financial Instrument

Note 15A: Fair value of financial instruments

The net fair values of the Treasury’s financial assets and financial liabilities are approximated by their carrying amounts.

Note 15B: Credit risk

The Treasury is exposed to minimal credit risk as financial assets only include cash and trade receivables. The maximum exposure to credit risk is the risk that arises from potential default of a debtor. This amount is equal to the total amount of trade receivables (2015: $1,742,425 and 2014: $2,141,727). The Treasury has assessed the risk of default on payment as being minimal.

Other government agencies and staff members make up the majority of the Treasury’s debtors. To aid the Treasury to manage its credit risk there are internal policies and procedures that guide employees on debt recovery techniques that are to be applied.

The Treasury holds no collateral to mitigate against credit risk.

Credit quality of financial instruments not past due or individually determined as impaired
  Not past due nor impaired Not past due nor impaired Past due or impaired Past due or impaired
  2015
$’000
2014
$’000
2015
$’000
2014
$’000
Loans and receivables        
Cash and cash equivalents 5,152 655
Trade receivables 675 1,085 1,070 1,057
Total 5,827 1,740 1,070 1,057
Ageing of financial assets that were past due but not impaired for 2015
  0 to 30 days 31 to 60 days 61 to 90 days 90+ days Total
  $’000 $’000 $’000 $’000 $’000
Loans and receivables          
Trade receivables 890 111 11 58 1,070
Total 890 111 11 58 1,070
Ageing of financial assets that were past due but not impaired for 2014
  0 to 30 days 31 to 60 days 61 to 90 days 90+ days Total
  $’000 $’000 $’000 $’000 $’000
Loans and receivables          
Trade receivables 681 97 157 122 1,057
Total 681 97 157 122 1,057

Note 15C: Liquidity risk

The Treasury’s financial liabilities are payables. The exposure to liquidity risk is based on the notion that the Treasury will encounter difficulty in meeting its obligations associated with financial liabilities. This is highly unlikely due to the appropriation funding mechanisms available to the Treasury and internal policies and procedures put in place to ensure there are appropriate resources to meet its financial obligations.

The Treasury is appropriated funding from the Australian Government. The Treasury manages its budgeted funds to ensure it has adequate funds to meet payments as they fall due. In addition, the Treasury has policies in place to ensure timely payments are made when due and has no past experience of default.

All non-derivative financial liabilities are expected to mature within 1 year (2014: 1 year).

Note 15D: Market risk

The Treasury holds only basic financial instruments that do not expose the Treasury to certain market risks, such as ‘Currency risk’ and ‘Other price risk’.

Interest rate risk

The Treasury does not hold financial instruments that expose the Treasury to interest rate risk.

Note 16: Financial Assets Reconciliation

  Notes 2015
$’000
2014
$’000
Financial Assets      
Total financial assets as per Statement of Financial Position   65,293 63,703
Less: non-financial instrument components      
Appropriation receivables 7A 57,564 60,240
GST receivable from the ATO 7A 832 666
Total non-financial instrument components   58,396 60,906
Total financial assets as per financial instruments note 15B 6,897 2,797

Note 17: Administered Expenses

  2015
$’000
2014
$’000
Note 17A: Grants    
Public sector:    
State and Territory Governments 82,704,840 82,590,099
Payment of COAG receipts from Government agencies 993,379 1,798,099
Grants to international financial institutions1 37,972
Reserve Bank of Australia 8,800,000
Clean Energy Finance Corporation 8,000
Private sector:    
Grants to private sector 10,628 4,000
Total grants 83,746,819 93,200,198
     
Note 17B: Net foreign exchange losses    
IMF SDR allocation 55,723
IMF Maintenance of Value 455,936
IMF quota revaluation (58,492)
IFIs revaluation (21,318)
IMF new arrangement to borrow loans revaluation (10,335)
Other (737)
Total net foreign exchange losses2 420,777

1. Grant made to the IMF, Poverty Reduction and Growth Trust.

2. Refer to Note 18F for current year figures.

Note 18: Administered Income

  2015
$’000
2014
$’000
Revenue    
Non-Taxation Revenue    
     
Note 18A: Interest    
Gross IMF remuneration 689 1,263
Less: Burden sharing (41) (36)
Net IMF remuneration 648 1,227
Interest on loan to IMF under New Arrangements to Borrow 575 880
Interest on loans to States and Territories 1,943 1,196
Total interest 3,166 3,303
     
Note 18B: Dividends    
Reserve Bank of Australia 1,884,000 1,235,000
Australian Reinsurance Pool Corporation 57,500 75,000
Total dividends 1,941,500 1,310,000
     
Note 18C: Sale of goods and rendering of services    
GST administration fees — external entities 680,318 709,510
Guarantee Scheme for Large Deposits and Wholesale Funding Fee 22,218 243,497
Guarantee of State and Territory Borrowing 23,763 37,058
Total sale of goods and rendering of services 726,299 990,065
     
Note 18D: COAG revenue from Government    
Building Australia Fund revenue 184,680 1,198,990
Health and Hospital Fund revenue 659,480 492,034
Education and Innovation Fund revenue
Interstate road transport revenue 73,615 75,074
Social and Community Services Sector Special Account 75,604 32,001
Total COAG receipts from government agencies 993,379 1,798,099
     
Note 18E: Other revenue    
HIH Group liquidation proceeds 92,273 26,257
IMF receipt of gold sales distribution 37,972
Recoveries 1
Australian Reinsurance Pool Corporation Fee 55,000
Other revenue 6,916 19,407
Total other revenue 154,189 83,637
Gains    
     
Note 18F: Net Foreign exchange gains    
IMF SDR allocation (579,042)
IMF Maintenance of Value (212,328)
IMF quota revaluation 607,819
IFIs revaluation 129,423
IMF new arrangement to borrow loans revaluation 101,437
Other (10,680)
Total foreign exchange gains1 36,629

1. Refer to Note 17B for the comparative year figures.

Note 19: Administered Fair Value Measurements

The following tables provide an analysis of assets and liabilities that are measured at fair value.

The different levels of the fair value hierarchy are defined below.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

Note 19A: Fair Value Measurements, Valuation Techniques and Inputs Used
Recurring fair value measurements at the end of the reporting period by hierarchy for assets and liabilities in 2015

  Fair value measurements at the end of the reporting period using   For Levels 2 and 3 fair value
  2015
$’000
2014
$’000
Category
(Level 1, 2 or 3)
  Valuation technique(s)1 Inputs
Financial assets:            
Investment in Australian Government Entities: 25,638,809 20,115,052 3   Net assets Net assets of the entity
Australian Reinsurance Pool Corporation 537,700 573,034        
Clean Energy Finance Corporation 1,232,109 1,232,018        
Reserve Bank of Australia 23,869,000 18,310,000        
Investment in International Financial Institutions: 6,926,891 6,162,354 3   Value of shares held Foreign exchange
IMF quota 5,913,393 5,305,574        
Asian Development Bank 561,246 482,066        
European Bank for Reconstruction and Development 91,174 90,646        
International Bank for Reconstruction and Development 291,378 227,242        
International Finance Corporation 61,626 50,243        
Multilateral Investment Guarantee Agency 8,074 6,583        
Total financial assets 32,565,700 26,277,406        
Total fair value measurements 32,565,700 26,277,406        

1. No change in valuation techniques occurred during the period.

2. Significant observable inputs only.

Fair value measurements

The highest and best use of Treasury’s investments in Australian Government entities does not differ because the fair value is based on the net asset position of the entity.

The highest and best use of Treasury’s Investments in International Financial Institutions does not differ because the fair value is based on the value of shares held in the relevant institution.

Note 19B: Level 1 and Level 2 transfers for recurring fair value measurements

No assets were transferred between Level 1 and Level 2.

Note 19C: Reconciliation for recurring Level 3 fair value measurements
Recurring Level 3 fair value measurements — reconciliation for assets

  Financial assets
  Investments Total
  2015
$’000
2014
$’000
2015
$’000
2014
$’000
Opening balance 26,277,406 16,456,446 26,277,406 16,456,446
Total gains/(losses) recognised in other comprehensive income 5,574,357 9,663,872 5,574,357 9,663,872
Total gains/(losses) recognised in net cost of services        
IMF Quota foreign exchange gain 607,819 58,492 607,819 58,492
International Financial Institutions foreign exchange gain 129,423 21,318 129,423 21,318
Repayment of CEFC capital (50,600) (50,600)
Share Purchases        
Increase in investments in the International Financial Institutions 27,295 77,278 27,295 77,278
Closing balance 32,565,700 26,277,406 32,565,700 26,277,406

Note 20: Administered Financial Assets

  2015
$’000
2014
$’000
Note 20A: Receivables & loans    
Advances and loans:    
Loans to States and Territories 44,233 42,290
IMF new arrangements to borrow loan 766,588 985,033
Total advances and loans 810,821 1,027,323
Other receivables:    
Guarantee Scheme for Large Deposits and Wholesale Funding contractual fee receivable1 23,018
Guarantee Scheme for Large Deposits and Wholesale Funding fee receivable 13 7,712
Guarantee of State and Territory Borrowing contractual fee receivable1 77,019 113,217
Guarantee of State and Territory Borrowing fee receivable 1,765 2,365
Net GST receivable from the ATO 761 9
IMF related moneys owing 55 217
Dividends receivable 2,501,245 1,235,000
Other receivables 15,229 15,631
Total other receivables 2,596,087 1,397,169
Total trade and other receivables (gross) 3,406,908 2,424,492
Receivables are expected to be recovered in:    
No more than 12 months 1,597,006 692,859
More than 12 months 1,809,902 1,731,633
Total receivables (gross) 3,406,908 2,424,492
Receivables are aged as follows:    
Not overdue 3,406,908 2,424,492
Total receivables (gross) 3,406,908 2,424,492

1. Refer Note 1.33 for details on accounting treatment and Note 21C for corresponding liability.

  2015
$’000
2014
$’000
Note 20B: Investments1    
International financial institutions    
Asian Development Bank 561,246 482,066
European Bank for Reconstruction and Development 91,174 90,646
International Bank for Reconstruction and Development 291,378 227,242
International Finance Corporation 61,626 50,243
Multilateral Investment Guarantee Agency 8,074 6,583
Total international financial institutions 1,013,498 856,780
Australian Government entities    
Reserve Bank of Australia 23,869,000 18,310,000
Australian Reinsurance Pool Corporation 537,700 573,034
Clean Energy Finance Corporation 1,232,109 1,232,018
Total Australian Government entities 25,638,809 20,115,052
Other Investments    
IMF quota 5,913,393 5,305,574
Total other investments 5,913,393 5,305,574
Total Investments 32,565,700 26,277,406
Investments are expected to be recovered in no more than 12 months.

1. Details of administered investments listed above are disclosed at Note 26 Administered Investments.