Financial statements

The AEC’s expenses were higher than anticipated due to the conduct of six by-elections and additional depreciation for election related finance lease assets. These additional expenses have resulted in the AEC incurring a higher than expected operating loss.

The AEC’s ongoing annual funding model does not support the delivery of by-elections due to their unpredictable nature. As a result it is normal business for the AEC to seek departmental funding supplementation each time a by-election is delivered. The AEC has secured departmental funding supplementation of $11.7m through its 2019–20 appropriations to cover the costs of the six by-elections.

Depreciation and amortisation costs are higher than expected as additional assets were purchased under finance lease to deliver the 2019 federal election.

Revenue from government is slightly higher than anticipated as additional funding was provided to deliver improvements to the nominations process.

Total assets are significantly higher than expected due mainly to a higher than anticipated balance in appropriations receivable and other receivables. This is partially offset by lower cash and non-financial assets. Appropriations receivable are significantly higher than anticipated due to the timing of the federal election and payment of associated invoices. Other receivables, represented by GST receivable, is higher than expected as the majority of the AEC’s expenditure has been incurred in May and June 2019 for the federal election and GST refunds have not yet been received. Cash is lower than expected as additional funds have been used to purchase assets, while non-financial assets are lower than expected due to the roll over of capital projects that were put on hold during the federal election.

Total liabilities are significantly higher than expected due to a significantly higher balance in suppliers payable. This is due to the timing of the federal election and receipt/payment of associated invoices.

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.

The AEC incurred a higher than anticipated equity position as it is still carrying additional Departmental Capital Budget received in previous years for capital projects that were put on hold during the federal election.

Total cash received and used during the financial year was lower than anticipated as a result of the timing of the federal election and the associated receipt/payment of invoices. This is supported by the higher than expected Suppliers Payable balance on the Statement of Financial Position. This cash will be drawn-down from appropriations and used early in the 2019–20 financial year to pay suppliers.

Cash used to purchase property, plant and equipment and cash received from Departmental Capital Budget are both higher than expected as the purchase of additional assets required using previous years departmental capital funding held in reserves.

Administered expenses are higher than expected as a result of increased enrolment and voter turnout.

Administered revenue is lower than anticipated due to the timing of the federal election. Electoral fines for non-voters will occur during the 2019–20 financial year.

Administered liabilities are higher than expected due to the timing of the federal election as well as changes to the Political Party funding claims process. The new process allows Political Parties to claim funding over of a period of six months post an electoral event.

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.

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, balances that are held in trust are disclosed as a footnote to the special account notes, not included in AEC’s financial position, and not included in any statements or notes required by AASB 7 Financial Instruments: Disclosures or AASB 9 Financial Instruments.

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

Amounts appropriated for departmental appropriations for the year (adjusted for any formal additions and reductions) are recognised as Revenue from Government when the AEC gains control of the appropriation, except for certain amounts that relate to activities that are reciprocal in nature, in which case revenue is recognised only when it has been earned. Appropriations receivable are recognised at their nominal amounts.

Revenue from the sale of goods is recognised when:

1. the risks and rewards of ownership have been transferred to the buyer; and
2. the AEC retains no managerial involvement or effective control over the goods.

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.

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. The entity has a services for other entities and trust monies special account. This account was established under section 78 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) Determination 2012/04 dated 30 May 2012. For the year ended 30 June 2019 the account has a balance of $4,273k.
3. The closing balance of special account services for other Entities and Trust Monies (SOETM) includes amounts held in trust: $4,273k in 2019, and $1,328k in 2018. See 5.6A Assets Held in Trust for more information

With the implementation of AASB 9 Financial Instruments in 2019, the AEC classifies its financial assets in the following categories:

The classification depends on both the entity’s business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the entity becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

Comparatives have not been restated on initial application.

Financial assets included in this category need to meet two criteria:

Amortised cost is determined using the effective interest method.

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Financial assets are assessed for impairment at the end of each reporting period based on Expected Credit Losses, using the general approach which measures the loss allowance based on an amount equal to lifetime expected credit losses where risk has significantly increased, or an amount equal to 12-month expected credit losses if risk has not increased.

The simplified approach for trade, contract and lease receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses.

A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

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’.

Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liablility.

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

Financial assets have been assessed for impairment at the end of the reporting period based on Expected Credit Losses. No credit loss has been identified.

Refer to Note 1.1.

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

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.

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.

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.

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:

All assets were assessed for impairment at 30 June 2019. 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.

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

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 2019.

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.

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 $144,133 (2018: $56,407).

Refer to Note 3.2.

Refer to Note 4.1A.

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.

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.

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 2019. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

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.

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

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.