Budget Variances Commentary

Statement of comprehensive income

The AEC’s expenditure, both employee and supplier expenses, were higher than anticipated due to the conduct of three by-elections, preparation for the next federal election, the payment of a number of redundancies and also expenditure on electoral integrity reforms. The AEC’s own-source revenue was higher than anticipated as there was increased activity on industrial and commercial elections, particularly in relation to protected action ballots. Revenue from Government was also higher than anticipated as additional funding was secured in order to deliver electoral integrity reforms.

Budget Variances Commentary

Statement of financial position

Total payables and cash are significantly lower than expected as suppliers were paid in the financial year and cash was not required to be on hand for payment immediately following end of financial year. The lower cash balance offsets a large proportion of the higher appropriation receivable balance, with the further increase in appropriation receivable resulting from the receipt of additional funding during the year for electoral integrity reforms that was not full spent.

Non-financial assets are lower than budgeted mainly due to a decrease in inventory as it was expected that in preparation for the next federal election the AEC would have purchased additional inventory during the financial year. Employee provisions were lower than expected due to the payment of a number of redundancies as a result of the organisational design review.

ACCOUNTING POLICY

Contributions by owners

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

BUDGET VARIANCES COMMENTARY

Statement of changes in equity

The AEC incurred a higher than anticipated equity position as additional Departmental Capital Budget was received during the year and the financial result was higher than expected with a surplus of $6.276 million achieved against an expected deficit of $8.206 million. This occurred as additional funding was received during the year and was not fully spent.

BUDGET VARIANCES COMMENTARY

Cash flow statement

The AEC’s operating cash received was higher than anticipated as there was increased activity on industrial and commercial elections, particularly in relation to protected action ballots and also, additional funding was secured from Government in order to deliver electoral integrity reforms. Operating cash used was higher than budgeted as a result of the three by-elections, preparation for the next federal election, the payment of a number of redundancies and also expenditure on electoral integrity reforms. Investing and financing cash used and received was lower than anticipated as capital works were not completed during the financial year and work rolled forward into 2018–19.

BUDGET VARIANCES COMMENTARY

Schedule of comprehensive income

The AEC’s administered expenditure and revenue was higher than anticipated due to the three by-elections conducted during the financial year.

ACCOUNTING POLICY

Administered cash transfers to and from the Official Public Account

Revenue collected by the AEC for use by the Government rather than the AEC is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government. These transfers to and from the OPA are adjustments to the administered cash held by the entity on behalf of the Government and reported as such in the schedule of administered cash flows and in the administered reconciliation schedule.

REPORTING OF ADMINISTERED ACTIVITIES

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the administered schedules and related notes.

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

In accordance with the FRR Special Account cash balances held in AEC bank accounts and in the Official Public Account are included in the Administered assets, liabilities, reconciliation schedule and cash flows.

ADMINISTERED

There are no events after the reporting date that will materially affect the financial statements.

Accounting Policy

Revenue from Government

Revenue collected by the AEC for use by the Government rather than the AEC is administered revenue. Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance. Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government. These transfers to and from the OPA are adjustments to the administered cash held by the entity on behalf of the Government and reported as such in the schedule of administered cash flows and in the administered reconciliation schedule.

ACCOUNTING POLICY

Revenue from the sale of goods is recognised when:

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

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

Accounting Policy

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.

1.3 Special accounts

^{1. Appropriation: Public Governance, Performance and Accountability Act 2013 section 80. Establishing Instrument: Financial Management and Accountability Act 1997 section 20. Purpose: for the expenditure of monies temporarily held in trust or otherwise for the benefit of a person other than the Commonwealth. For example, candidate deposits.}

^{2. These amounts are included in the Administered Schedule of Asset and Liabilities, Administered Reconciliation Schedule and Administered Cash Flow Statement.}

Accounting Policy

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.

Accounting Policy

Financial assets

The AEC classifies its financial assets in the following categories:

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 and derecognised upon trade date.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments and that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment.

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

Effective interest method

Income is recognised on an effective interest rate basis except for financial assets that are recognised at fair value through profit or loss.

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.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.

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

Accounting Policy

Refer to Note 1.1.

Accounting Policy

Statutory receivables are amounts owed to the AEC from the Australian Taxation Office in relation to the refund of GST collected.

ACCOUNTING POLICY

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 transferor’s accounts immediately prior to the restructuring.

Asset Recognition Threshold

Purchases of plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than $2,000, which 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 ‘makegood’ provisions in property leases taken up by the AEC where there exists an obligation to restore the property to its original condition. These costs are included in the value of the AEC’s leasehold improvements with a corresponding provision for ‘make good’ recognised.

Revaluations

Following initial recognition at cost, 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 did not differ materially from the assets’ fair values as at the reporting date. The regularity of independent valuations depended 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 reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class. 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 plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the AEC, in all cases, the straight-line method of depreciation.

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

Depreciation rates applying to each class of depreciable asset are based on the following useful lives:

Impairment

All assets were assessed for impairment at 30 June 2018. 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 of disposal 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 AEC were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Derecognition

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

Intangibles

The AEC’s intangibles comprise internally developed software, purchased software and intellectual property for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets are amortised on a straight-line basis over its anticipated useful life.The useful lives of the AEC’s software are 1 to 10 years (2017: 1 to 10 years) and the useful lives of the AEC’s intellectual property are 0 to 4 years (2017: 0 to 4 years).

All intangible assets were assessed for indications of impairment as at 30 June 2018.

Accounting Policy

Inventories held for distribution are valued at cost, adjusted for any loss of service potential.

Costs incurred in bringing each item of inventory to its present location and condition are assigned as follows:

1. raw materials and stores – purchase cost on a first-in-first-out basis
2. finished goods and work-in-progress – cost of direct materials and labour plus attributable costs that can be allocated on a reasonable basis

Inventories acquired at no cost or nominal consideration are initially measured at current replacement cost at the date of acquisition.

Accounting Policy

Parental leave payments scheme

Amounts received under the Parental Leave Payments Scheme by the AEC not yet paid to employees were presented as cash and a liability (payable). The total amount received under this scheme was $56,407 (2017: $81,862).

Employee benefits

Refer to Note 3.2.

Leases

Refer to Note 4.1A.

Accounting Policy

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

Accounting Policy

Liabilities for short-term employee benefits and termination benefits expected within twelve months of the end of reporting period are measured at their nominal amounts.

Other long-term employee benefits are measured as 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. 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 entity’s 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 shorthand method as at 30 June 2018. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Superannuation

The AEC’s staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS), or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

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

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

The AEC makes employer contributions to the employees’ defined benefit superannuation scheme at rates determined by an actuary to be sufficient to meet the current cost to the Government. The AEC accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

Accounting Policy

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

Accounting Policy

All administered revenues are revenues relating to ordinary activities performed by the AEC on behalf of the Australian Government. As such, administered appropriations are not revenues of the individual entity that oversees distribution or expenditure of the funds as directed.

Fines are charged for non-voters of federal elections, by-elections and referendums. Administered fee revenue is recognised when received.

Each nomination for the Senate and the House of Representatives must be accompanied by a deposit.