Department of Foreign Affairs and Trade
Notes to and Forming Part of the Financial Statements

Note 32: Budgetary Reports and Explanations of Major Variances

The following tables provide a comparison of the original budget as presented in the 2014-15 Portfolio Budget Statements (PBS) and the final financial outcomes in the 2014-15 financial statements, which are prepared in accordance with Australian Accounting Standards. The Budget is not audited and does not reflect additional budget estimates provided in the 2014-15 Portfolio Additional Estimates Statements (PAES) or the revised budget provided as part of the 2015-16 PBS. However, major changes in budget have been explained as part of the variance analysis where relevant. Variances are considered to be ‘major’ where the variance to budget by line item exceeds 10% or the variance to budget exceeds 2% of total expense, revenue, asset or liability category.

Note 32A: Departmental Budgetary Reports  
   
Statement of Comprehensive Income
for the period ended 30 June 2015  
  Actual Budget estimate
    Original1 Variance2
2015 2015 2015
$’000 $’000 $’000
NET COST OF SERVICES
Expenses
    Employee benefits 725,252 666,057   59,195
    Suppliers 636,431 677,506   (41,075)
    Grants 7,929 5,000   2,929
    Depreciation and amortisation 147,490 111,023   36,467
    Write-down and impairment of assets 17,950 –   17,950
    Losses from asset sales – –   –
    Finance costs – unwinding of discount 349 –   349
    Foreign exchange losses – non-speculative – –   –
    Other expenses – 103   (103)
Total expenses 1,535,401 1,459,689 75,712
Own-Source Income
Own-source revenue
    Sale of goods and rendering of services 104,953 108,958   (4,005)
    Other revenue 10,602 8,300   2,302
Total own-source revenue 115,555 117,258 (1,703)
Gains
    Sale of assets 536 –   536
    Reversal of previous impairments 34 –   34
    Foreign exchange gains – non-speculative 6,280 –   6,280
    Other gains – gains on restoration obligations 2,120 550   1,570
Total gains 8,970 550 8,420
Total own-source income 124,525 117,808 6,717
Net cost of services (1,410,876) (1,341,881) (68,995)
    Revenue from Government 1,304,062 1,270,952   33,110
(Deficit) attributable to the Australian Government (106,814) (70,929) (35,885)
 
OTHER COMPREHENSIVE INCOME
Items not subject to subsequent reclassification to net cost of services
    Changes in asset revaluation surplus 473,709 –   473,709
Total other comprehensive income 473,709 – 473,709
Total comprehensive income/(loss) attributable to the Australian Government 366,895 (70,929) 437,824
 
1. The entity’s original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the entity’s 2014-15 Portfolio Budget Statements (PBS)).
2. Between the actual and original budgeted amounts for 2015. Explanations of major variances are provided at later pages.

 

       
Statement of Financial Position
as at 30 June 2015  
   
  Actual Budget estimate
    Original1 Variance2
2015 2015 2015
$’000 $’000 $’000
ASSETS
Financial assets
    Cash and cash equivalents 84,720 61,259 23,461
    Trade and other receivables 755,102 717,513 37,589
Total financial assets 839,822 778,772 61,050
Non-financial assets
    Land and buildings 2,883,632 2,257,663 625,969
    Property, plant and equipment 208,468 206,260 2,208
    Intangibles 89,611 24,875 64,736
    Inventories 39,641 31,124 8,517
    Assets held for sale 671 105 566
    Other non-financial assets 85,210 426,502 (341,292)
Total non-financial assets 3,307,233 2,946,529 360,704
Total assets 4,147,055 3,725,301 421,754
 
LIABILITIES  
Payables  
    Suppliers 121,472 99,621 21,851
    Other payables 62,468 37,285 25,183
Total payables 183,940 136,906 47,034
 
Provisions  
    Employee provisions 212,482 216,203 (3,721)
    Other provisions 22,422 26,701 (4,279)
Total provisions 234,904 242,904 (8,000)
Total liabilities 418,844 379,810 39,034
Net assets 3,728,211 3,345,491 382,720
 
EQUITY  
    Contributed equity 2,153,381 2,304,036 (150,655)
    Reserves 1,241,494 735,531 505,963
    Retained surplus/(Accumulated deficit) 333,336 305,924 27,412
Total equity 3,728,211 3,345,491 382,720
1. The entity’s original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the entity’s 2014-15 Portfolio Budget Statements (PBS)).
2. Between the actual and original budgeted amounts for 2015. Explanations of major variances are provided at later pages.

 

Statement of Changes in Equity  
as at 30 June 2015            
Retained earnings Asset Revaluation Surplus
Actual Budget Estimate Actual Budget Estimate
  Original1 Variance2   Original1 Variance2
2015 2015 2015 2015 2015 2015
$’000 $’000 $’000 $’000 $’000 $’000
Opening balance
Balance carried forward from previous period 440,150 376,853 63,297 767,785 702,549 65,236
Adjusted opening balance 440,150 376,853 63,297 767,785 702,549 65,236
 
Comprehensive income
Other comprehensive income – – – – 32,982 (32,982)
Revaluation adjustment – – – 473,709 – 473,709
(Deficit) for the period (106,814) (70,929) (35,885) – – –
Total comprehensive income (106,814) (70,929) (35,885) 473,709 32,982 440,727
 
Transactions with owners
Distribution to owners
Returns of capital:
    Returns of contributed equity – – – – – –
    Other – – – – – –
Contributions by owners        
Equity injection – Appropriations – – – – – –
Departmental capital budget – – – – – –
Sub-total transactions with owners – – – – – –
Transfers between equity components – – – – – –
Closing balance attributable to the Australian Government 333,336 305,924 27,412 1,241,494 735,531 505,963
 
1. The entity’s original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the entity’s 2014-15 Portfolio Budget Statements (PBS)).
2. Between the actual and original budgeted amounts for 2015. Explanations of major variances are provided at later pages.
 
 
 
Contributed Equity/Capital Total
Actual Budget Estimate Actual Budget Estimate
  Original1 Variance2   Original1 Variance2
2015 2015 2015 2015 2015 2015
$’000 $’000 $’000 $’000 $’000 $’000
Opening balance
Balance carried forward from previous period 2,086,006 2,170,188 (84,182) 3,293,941 3,249,590 44,351
Adjusted opening balance 2,086,006 2,170,188 (84,182) 3,293,941 3,249,590 44,351
 
Comprehensive income
Other comprehensive income – – – – 32,982 (32,982)
Revaluation adjustment – – – 473,709 – 473,709
(Deficit) for the period – – – (106,814) (70,929) (35,885)
Total comprehensive income – – – 366,895 (37,947) 404,842
 
Transactions with owners
Distribution to owners
Returns of capital:
    Other (106,721) – (106,721) (106,721) – (106,721)
Contributions by owners        
Equity injection – Appropriations 121,064 80,816 40,248 121,064 80,816 40,248
Departmental capital budget 53,032 53,032 – 53,032 53,032 –
Sub-total transactions with owners 67,375 133,848 (66,473) 67,375 133,848 (66,473)
Transfers between equity components – – – – – –
Closing balance attributable to the Australian Government 2,153,381 2,304,036 (150,655) 3,728,211 3,345,491 382,720
 
1. The entity’s original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the entity’s 2014-15 Portfolio Budget Statements (PBS)).
2. Between the actual and original budgeted amounts for 2015. Explanations of major variances are provided at later pages.

 

Cash Flow Statement
as at 30 June 2015  
  Actual Budget estimate
    Original1 Variance2
2015 2015 2015
$’000 $’000 $’000
OPERATING ACTIVITIES
Cash received
    Appropriations 1,576,118 1,349,976 226,142
    Sale of goods and rendering of services 86,898 108,958 (22,060)
    Net GST received 37,798 31,375 6,423
    Other operating cash received 9,236 8,300 936
Total cash received 1,710,050 1,498,609 211,441
Cash used
    Employees 722,755 588,637 134,118
    Suppliers 661,345 793,399 (132,054)
    Section 74 receipts transferred to OPA 97,699 – 97,699
    Other 7,731 5,103 2,628
Total cash used 1,489,530 1,387,139 102,391
Net cash from operating activities 220,520 111,470 109,050
   
INVESTING ACTIVITIES
Cash received
    Proceeds from sales of property, plant and equipment 1,661 – 1,661
Total cash received 1,661 – 1,661
Cash used
    Purchase of land and buildings 282,202 375,738 (93,536)
    Purchase of property, plant and equipment 60,621 – 60,621
    Purchase of intangibles 36,032 – 36,032
Total cash used 378,855 375,738 3,117
Net cash (used by) investing activities (377,194) (375,738) (1,456)
   
FINANCING ACTIVITIES
Cash received
    Contributed equity 159,345 133,422 25,923
    Other – 209,323 (209,323)
Total cash received 159,345 342,745 (183,400)
Cash used  
    Returns of contributed equity – – –
    Dividends paid – 79,447 (79,447)
Total cash used – 79,447 (79,447)
Net cash from financing activities 159,345 263,298 (103,953)
     
Net increase in cash held 2,671 (970) 3,641
   
Cash and cash equivalents at the beginning of the reporting period 75,769 60,985 14,784
Effect of exchange rate movements on cash and cash equivalents at the beginning of the reporting period 6,280 – 6,280
Cash and cash equivalents at the end of the reporting period 84,720 60,015 24,705
1. The entity’s original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the entity’s 2014-15 Portfolio Budget Statements (PBS)).
2. Between the actual and original budgeted amounts for 2015. Explanations of major variances are provided at later pages.

 

 

 

Note 32B: Departmental Budgetary Reports Major Variances for 2015
Explanations of major variances Affected line items (and statement)
Following a period of significant organisational change with the merger of AusAID and DFAT, which included integration of two different HR systems, DFAT has reviewed and updated its workforce data. The updates made to DFAT’s workforce data reflect methodology changes that bring DFAT in line with Australian Public Service Commission and Department of Finance methodologies, and removal of some duplicate workforce budget data identified following systems integration.

The 2014-15 budget figures were based on an estimate at the time of the integration of two large organisations and the expected financial impact, including the timing of a large voluntary redundancy program. This resulted in under budgeting for employee expenses and over budgeting of supplier expenses. DFAT has now addressed these accuracy issues for future budget statements.

 Statement of Comprehensive Income
Employee benefits
Suppliers

Cash Flow Statement
Employees, Suppliers and Section 74 receipts transferred to OPA (cash used)
A decision was made to make available additional funding for a range of international organisations. Actual grant contributions demonstrate Australia’s commitment to the rule of law and international efforts to end impunity for serious international crimes, supporting local community level initiatives aimed at strengthening resilience against violent extremism and support for peaceful uses of nuclear applications.

Statement of Comprehensive Income
Grants

Cash Flow Statement
Other (cash used)
Due to limitations in adjusting the depreciation budget numbers these figures were not adjusted following the integration of the two entities to reflect the expected usage of assets. This is also the primary contributor to the higher than budgeted deficit.

Statement of Comprehensive Income
Depreciation and amortisation

Statement of Changes in Equity
Retained Earnings
Write downs and impairment of assets are unpredictable. These are not included in the budget estimates and have no impact on the cash flow statement. Actual write downs and impairments reflect a detailed review of asset balances and included write-offs for software, leasehold improvements and work in progress.

Statement of Comprehensive Income
Write down and impairment of Assets
Actual other revenue is greater than the budget due to a $2.5 million contract penalty payment received related to refunds for the passport redevelopment program.

Statement of Comprehensive Income
Other revenue

Cash Flow Statement
Other operating cash received (cash received)
Foreign exchange movements are unpredictable. Foreign exchange movements are dependent on fluctuations of the Australian dollar against other currencies and will therefore vary to budget due to difficulties in forecasting the movements. Actual gains reflect the impact on foreign bank accounts of a depreciated Australian dollar.

Statement of Comprehensive Income
Foreign exchange gains
Foreign exchange losses
The actual gain on makegood is greater than budget due to reversals of provisions following review and reassessment of lease terms and conditions.

Statement of Comprehensive Income
Other gains – gain on restoration
Actual cash and cash equivalents includes additional cash held at year end by the Overseas Property Office and additional cash transferred from Shanghai. The remainder of the movement is attributable to the depreciation of the Australian dollar.

Statement of Financial Position
Cash and cash equivalents
Explanations of major variances Affected line items (and statement)
Budgeted increase in non-financial assets was allocated against other non-financial assets due to the merger of AusAID and DFAT causing significant upheaval to operations. In total, actual non-financial assets are higher than budgeted due to higher than anticipated increases in the value of land and buildings. The increase in value has arisen from upward movement in the local markets across the majority of regions and the movement in the value of the Australian dollar in particular against the US dollar, Great British Pound and Euro. This was partially offset by fewer asset additions following the integration of the two entities and the need to determine priorities for capital investment and the write-down and impairment of assets.

Statement of Financial Position
Land and Buildings
Intangibles
Other Non-financial assets

Statement of Changes in Equity
Asset Revaluation Surplus
The actual inventory balance is higher than budgeted due to fewer passports being issued in 2014-15 than originally forecast.

Statement of Financial Position
Inventories
Actual supplier payables are greater than the budget due to the budget not being adjusted to reflect the level of supplier payables for the integrated entity. In addition the depreciation of the Australian dollar in 2014-15 has contributed to the variance to the budget.

Statement of Financial Position
Suppliers
The budget for other payables was based on actuals from 2013-14 and included lower levels of rent received in advance by the Overseas Property Office.

Statement of Financial Position
Other Payables
The budget anticipated an increase in make good provisions due to a higher cost per square metre, however the actual costs have remained steady due to a lower than anticipated valuation per square metre and some makegood provisions being reversed or used.

Statement of Financial Position
Other Provisions
The actual closing balance of contributed equity is lower than budget primarily due to the stocktake of prior year retained appropriations. This stocktake had a minimal cash impact which resulted in the variance to budget in the cash used for financing activities on the cash flow statement. The budget for cash used for financing activities was based on a return by the Overseas Property Office to the Government in 2013-14 which did not occur in 2014-15. The variance in relation to cash received for financing activities was primarily due to the actual equity contributions being less than the anticipated budget.

Statement of Changes in Equity
Contributed equity/capital

Cash Flow Statement
Financing Activities (cash used)

 

 

 

 

     
Note 32C: Administered Budgetary Reports    
     
Administered Schedule of Comprehensive Income
as at 30 June 2015          
  Actual   Budget estimate
      Original1   Variance2
2015 2015 2015
$’000 $’000 $’000
NET COST OF SERVICES
Expenses
    Employee benefits 6,505 2,480 4,025
    International development assistance 3,427,544 3,686,467 (258,923)
    Suppliers 11,999 36,852 (24,853)
    Grants and contributions 1,056,808 924,290 132,518
    Depreciation and amortisation 1,322 1,507 (185)
    Finance costs 59,165 14,991 44,174
    Write-down and impairment of assets 9,187 – 9,187
    Net foreign exchange losses 11,022 – 11,022
    Payments to corporate Commonwealth    
    Entities – Tourism Australia 138,865 – 138,865
    Other expenses 84,779 13,279 71,500
Total expenses 4,807,196 4,679,866 127,330
 
Income  
Revenue  
Non-taxation revenue  
    Sale of goods and rendering of services 402,558 439,479 (36,921)
    Interest 13,289 9,641 3,648
    Dividends – Export Finance and Insurance Corporation 18,153 16,000 2,153
    Return of prior year administered expenses 33,099 – 33,099
    Other revenue 38,953 39,456 (503)
Total non-taxation revenue 506,052 504,576 1,476
Total revenue 506,052 504,576 1,476
Gains
    Reversals of previous asset write-downs 391,236 – 391,236
    Net foreign exchange gains – – –
    Other Gains – – –
Total gains 391,236 – 391,236
Total income 897,288 504,576 392,712
Net (cost of)/contribution by services (3,909,908) (4,175,290) 265,382
   
OTHER COMPREHENSIVE INCOME  
    Re-measurements of defined benefit plans (7,108) – (7,108)
    Changes in asset revaluation surplus – – –
    Movement in the carrying amount of investments 14,053 – 14,053
Total other comprehensive income 6,945 – 6,945
Total comprehensive (loss) (3,902,963) (4,175,290) 272,327
           
1. The entity’s original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the entity’s 2014-15 Portfolio Budget Statements (PBS)).
2. Between the actual and original budgeted amounts for 2015. Explanations of major variances are provided at later pages.

 

Administered Schedule of Assets and Liabilities
as at 30 June 2015          
  Actual   Budget estimate
      Original1   Variance2
2015 2015 2015
$’000 $’000 $’000
ASSETS
Financial assets
    Cash and cash equivalents 1,832 24,705 (22,873)
    Trade and other receivables 175,633 152,195 23,438
    Investments 2,392,373 4,358,797 (1,966,424)
Total financial assets 2,569,838 4,535,697 (1,965,859)
Non-financial assets
    Leasehold improvements 1,661 4,282 (2,621)
    Property, plant and equipment 18 1,115 (1,097)
    Intangibles 4,586 6,074 (1,488)
    Prepayments 151 2,381 (2,230)
Total non-financial assets 6,416 13,852 (7,436)
Total assets administered on behalf of Government 2,576,254 4,549,549 (1,973,295)
   
LIABILITIES  
Payables  
    Suppliers 159,020 399 158,621
    Grants 590,449 1,069,060 (478,611)
    Other payables 912,998 1,296,741 (383,743)
Total payables 1,662,467 2,366,200 (703,733)
   
Provisions  
    Employee Provisions 80,749 49,152 31,597
    Other provisions – – –
Total provisions 80,749 49,152 31,597
Total liabilities administered on behalf of Government 1,743,216 2,415,352 (672,136)
Net assets 833,038 2,134,197 (1,301,159)
     
1. The entity’s original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the entity’s 2014-15 Portfolio Budget Statements (PBS)).
2. Between the actual and original budgeted amounts for 2015. Explanations of major variances are provided at later pages.

 

 

 

 

   
Note 32D: Administered Budgetary Reports Major Variances for 2015
Explanations of major variances Affected line items (and schedule)
The difference between actuals and budget is due to the revaluation of outstanding obligations related to the Defined Benefits Pension Schemes for locally engaged staff at overseas posts being higher than expected. Administered Schedule of Comprehensive Income
Employee benefits
Re-measurements of defined benefit plans
Aid program priorities and spending patterns have changed since the budget.   The aid programme fully expensed all available appropriation at 30 June 2015. The underspend in international development assistance is offset against the increase in spend against grants and contributions which can be attributed to government decisions agreed to during the course of the year and the payments to corporate Commonwealth entities – Tourism Australia. Administered Schedule of Comprehensive Income
International development assistance
Grants and contributions
Payments to corporate Commonwealth entities – Tourism Australia
The reduction in actual supplier expenses from the estimates relates to the government decision to terminate the Australia Network contract.   In addition Department of Education and Training drawdowns relating to the New Colombo Plan that were budgeted against supplier expenses were reduced. Administered Schedule of Comprehensive Income
Suppliers
Actual finance costs includes the unwinding of discount on multilateral grants and contribution, and actual write down and impairment of assets includes the related write-down as a result of the revaluation, which is difficult to budget for as it is dependent upon external factors and revaluation advice. Administered Schedule of Comprehensive Income
Finance costs
Write down and Impairment of Assets
Foreign exchange movements are unpredictable. Actual losses relate to the depreciation of the Australian dollar against other currencies over the financial year. Administered Schedule of Comprehensive Income
Net foreign exchange losses
Actual other expenses relate to measurement of multilateral replenishments and Efic fees which were greater than expected. Administered Schedule of Comprehensive Income
Other expenses
The lower than budgeted actual revenue figure reflects that fewer passports were issued in 2014-15 than forecast which was partially offset by the inclusion of a new measure agreed at additional estimates for passport surcharges for passports issued overseas. Administered Schedule of Comprehensive Income
Sale of goods and rendering of services
The budget estimate was based on estimated drawdowns against the residual balance of the Australia-Indonesia Partnership for Reconstruction and Development loans program. The final drawdown request was in excess of the original budget estimate as the program was completed in 2014-15 rather than 2015-16 as planned. This consequently resulted in higher actual interest being recognised and a higher receivable balance in 2014-15. Administered Schedule of Comprehensive Income
InterestAdministered Schedule of Assets and Liabilities
Trade and other receivables
The increase in actual dividends relates to the Government requiring a higher dividend to be paid based on Efic’s commercial account profit, increasing to 75% in 2014-15 from 50% in 2013-14. This increase was not factored into the budget estimate. Administered Schedule of Comprehensive Income
Dividends
   
Explanations of major variances Affected line items (and schedule)
There were higher than expected actual returns of prior year administered expenses which relate to unspent funds from prior year grants, agreements or funding arrangements and return of consular certifications which are included in other revenue. The budget was based on historical trends. Administered Schedule of Comprehensive Income
Return of prior year administered expenses
Other revenue
The actual movement in the carrying amount of investments represents the annual net movement in investment in Efic and Tourism Australia. These are not included in budget estimates. Administered Schedule of Comprehensive Income
Movement in the carrying amount of investments
DFAT moved to maintaining a lower level of cash in bank account during the financial year which is reflected in the lower actual cash and cash equivalents balance in 2014-15. Administered Schedule of Assets and Liabilities
Cash and Cash Equivalents
Included in the budget are amounts appropriated for multilateral agreements which are drawndown as required. These are not recorded as receivables in actual results in accordance with accounting standards. The actual balance also includes the $200 million increase in Efic’s capital base paid by the Commonwealth Government in 2014-15 and a $391 million increase in the valuation of multilateral investments primarily due to the decrease in AUD currency against USD. Administered Schedule of Assets and Liabilities
InvestmentsAdministered Schedule of Comprehensive Income
Reversals of previous asset write-downs
The reduced actual non-financial asset balance compared to budget reflects the lower investment in new assets following the integration of the two entities and the need to determine priorities for capital investment.   This also resulted in lower actual depreciation and amortisation expenses compared to budget. Administered Schedule of Assets and Liabilities
Leasehold Improvements
Property, plant and equipment
IntangiblesAdministered Schedule of Comprehensive Income
Depreciation and amortisation
The budget for prepayments was based on AusAID actuals which included prepayments that were not paid in 2014-15 resulting in the decrease in actuals. Administered Schedule of Assets and Liabilities
Prepayments
This estimate includes the amount payable for the International Development Association/Asian Development Fund grant component, payables for the Global Environment Facility, Multilateral Fund for Implementation of the Montreal Protocol, Heavily Indebted Poor Countries and Multilateral Debt Relief Initiative and the remainder of the aid programme payable.   The budget is based on nominal values with actuals then adjusted based on receipt of professional valuation advice at the end of the financial year. Administered Schedule of Assets and Liabilities
Suppliers
Grants
Other Payables
Actual employee provisions reflects the movement of pensions from other payables and the increase in the funding obligation which was greater than expected due to the depreciation of the Australian dollar. Administered Schedule of Assets and Liabilities
Employee Provisions