Australian Office of Financial Management

Date

Section 1: Agency overview and resources

1.1 Strategic direction statement

The Australian Office of Financial Management (AOFM) is responsible for the management of Australian Government debt and certain financial assets. It issues Treasury Bonds, Treasury Indexed Bonds and Treasury Notes, manages the Government's cash balances and invests from time to time in high quality financial assets including term deposits and investment grade fixed interest investments.

The AOFM aims to meet the Government's financing needs in a cost‑effective manner subject to acceptable risk and to meet the Government's policy objectives of maintaining liquid and efficient Bond and Bond futures markets. Treasury Bonds are the main issuance instrument used by the AOFM. The use of Treasury Indexed Bonds facilitates diversification of the investor base by tapping into additional sources of investor demand. The development of this market has also, at times, been used to facilitate development of the Treasury Bond market.

In managing the Government's cash balances, the AOFM aims to ensure that the Government is able to meet its financial obligations when they fall due, while seeking to minimise the net cost of funding. The issue of Treasury Notes is used to manage cash flow volatility arising from the Government's within‑year financing task, while investment in financial assets helps to defray the cost of this task.

The AOFM manages the Government's holdings of highly rated residential mortgage‑backed securities acquired between 2008‑09 and 2012‑13 in accordance with the Treasurer's directions. No assets have been added to the portfolio since April 2013.

1.2 Agency resource statement

Table 1.1 shows the total resources for AOFM.

Table 1.1: Australian Office of Financial Management resource statement — Budget estimates for 2014‑15 as at Budget May 2014
    Estimate of prior
year amounts
available in 2014‑15
$'000
 + Proposed at
Budget 2014‑15
$'000
 = Total estimate
2014‑15
$'000
Actual available
appropriation
2013‑14
$'000
Ordinary annual services              
Departmental              
Prior year departmental appropriation   25,563 4 -   25,563 -
Departmental appropriation3   -   12,134 1 12,134 11,887
Receipts from other sources (s31)   -   828 2 828 828
Total departmental   25,563   12,962   38,525 12,715
Administered expenses              
Outcome 1   -   10 1 10 10
Total ordinary annual services A 25,563   12,972   38,535 12,725
Other services              
Departmental non-operating              
Equity injections   -   -   - -
Total other services B -   -   - -
Total available annual appropriations (A+B)   25,563   12,972   38,535 12,725
Special appropriations expenses              
Commonwealth Inscribed Stock Act 1911   -   14,707,384   14,707,384 13,452,773
Financial Agreement Act 1994   -   20   20 20
Loans Securities Act 1919   -   720   720 862
Subtotal   -   14,708,124   14,708,124 13,453,655
Special appropriations capital              
Commonwealth Inscribed Stock Act 1911   -   101,393,024   101,393,024 47,786,586
Financial Management and Accountability Act 1997   -   228,698,704   228,698,704 624,873,763
Subtotal   -   330,091,728   330,091,728 672,660,349
Total special appropriations C -   344,799,852   344,799,852 686,114,004
Total appropriations e
xcluding special accounts
  25,563   344,812,824   344,838,387 686,126,729
Special accounts              
Opening balance5   742   -   742 -
Total special account D 742   -   742 -
Total net resourcing for the AOFM (A+B+C+D)   26,305   344,812,824   344,839,129 686,126,729

1. Appropriation Bill (No. 1) 2014‑15.

2. Receipts received under section 31 (s31) of the Financial Management and Accountability Act 1997.

3. Includes $0.7 million in 2014‑15 for the departmental capital budget (also refer to Table 3.2.5).

4. Estimated adjusted balance carried forward from previous year.

5. Estimated opening balance for special accounts. For further detail on special accounts see Table 3.1.2.

1.3 Budget measures

Budget measures relating to the AOFM are summarised below.

Table 1.2: Australian Office of Financial Management 2014‑15 Budget measures
  Program 2013‑14
$'000
2014‑15
$'000
2015‑16
$'000
2016‑17
$'000
2017‑18
$'000
Expense measures            
Efficiency Dividend - temporary increase in the rate1            
Departmental expenses 1.1 - (124) (279) (436) (436)
Efficiency Dividend - a further temporary increase of 0.25 per cent            
Departmental expenses 1.1 - (29) (58) (87) (87)
Public Service efficiencies2            
Departmental expenses 1.1 (3) (16) (35) (49) (49)
Reforms to APS management and efficient procurement of agency software1            
Departmental expenses 1.1 (3) (15) (34) (48) (48)
South Australian Government housing stimulus assistance1            
Administered expenses 1.1 - - - - -
Total expense measures   (6) (184) (406) (620) (620)
Capital measures            
Efficiency Dividend - a further temporary increase of 0.25 per cent            
Departmental capital 1.1 - (2) (4) (6) (6)
Total capital measures   - (2) (4) (6) (6)
Revenue measures            
South Australian Government housing stimulus assistance1            
Administered revenue 1.1 (16,700) (16,000) (15,400) (14,600) (14,600)
Total revenue measures   (16,700) (16,000) (15,400) (14,600) (14,600)

1. This measure was included in the Economic Statement 2013 and has not previously appeared in a portfolio statement.

2. This measure was included in Budget Paper No. 2, Budget Measures 2013‑14 and has not previously appeared in a portfolio statement.

Prepared on a Government Finance Statistics (fiscal) basis.

Section 2: Outcomes and planned performance

2.1 Outcomes and performance information

Government outcomes are the intended results, impacts or consequences on the Australian community arising from policy or regulatory actions by the Government. Australian Government programmes are the primary vehicle by which government agencies achieve the intended results of their outcome statements. Agencies are required to identify the programmes which contribute to government outcomes over the budget and forward years.

The outcome of AOFM's activities is described below, specifying the strategy, programme objective, programme deliverables and programme key performance indicators used to assess and monitor the performance of the AOFM.

Outcome 1: The advancement of macroeconomic growth and stability, and the effective operation of financial markets, through issuing debt, investing in financial assets and managing debt, investments and cash for the Australian Government

Outcome 1 strategy

The AOFM's activities include debt issuance, cash management, investment, portfolio management, compliance monitoring, financial reporting, transaction settlement, debt administration, regular communication with investors, monitoring of market conditions and liaison with market intermediaries.

Debt issuance is directed to meeting the Government's Budget funding needs. Both Treasury Bonds and Treasury Indexed Bonds are issued to meet this objective. The composition and
maturity of debt issuance will remain flexible to achieve an appropriate balance between the following considerations: domestic financial market efficiency, managing investor demand, refinancing risk and the costs of the debt portfolio faced by the Government.

The within‑year cash management task results from differences in the timing of receipts and payments in the Official Public Account. In managing the Government's cash balances, the AOFM will issue Treasury Notes, and make short‑term term deposits with the Reserve Bank of Australia. The AOFM may also from time to time invest in fixed interest investments (as provided for under the Financial Management and Accountability Act 1997) and may raise funds by entering into repurchase agreements using its fixed interest investments as collateral.

The AOFM's financial assets and financial liabilities are managed in accordance with legislative requirements; delegations and directions from the Treasurer; and instructions from the Secretary to the Treasury and the AOFM Chief Executive.

Outcome expense statement

Table 2.1 provides an overview of the total expenses for Outcome 1.

Table 2.1: Budgeted expenses for Outcome 1
Outcome 1: The advancement of macroeconomic growth and stability, and the effective operation of financial markets, through issuing debt, investing in financial assets and managing debt, investments and cash for the Australian Government 2013‑14
Estimated actual expenses
$'000
 2014‑15
Estimated
expenses
$'000
Programme 1.1: Australian Office of Financial Management    
Departmental expenses    
Departmental appropriation 10,807 12,230
Expenses not requiring appropriation in budget year 803 803
Administered expenses    
Ordinary annual services (Appropriation Bill No. 1) 10 10
Expenses not requiring appropriation in budget year 188,571 -
Special appropriations    
Commonwealth Inscribed Stock Act 1911 13,452,771 14,707,384
Financial Agreement Act 1994 20 20
Loans Securities Act 1919 864 722
Total expenses for Outcome 1 13,653,846 14,721,169
     
  2013‑14 2014‑15
Average staffing level (number) 42 43

Contributions to Outcome 1

Programme 1.1: Australian Office of Financial Management
Programme objective

Achievement of the Government's financing task in a cost‑effective manner, subject to acceptable risk and promoting liquidity in the Treasury Bond, Treasury Indexed Bond and Treasury Bond futures markets.

Programme expenses

With the increased level of debt on the AOFM's administered balance sheet, total debt servicing costs arising from the issuance will also rise.

Table 2.2: Programme expenses
  2013‑14
Revised
budget
$'000
2014‑15
Budget
$'000
2015‑16
Forward
year 1
$'000
2016‑17
Forward
year 2
$'000
2017‑18
Forward
year 3
$'000
Annual departmental expenses:          
Departmental items 11,610 13,033 12,902 12,848 12,970
Annual administered expenses:          
Administered items 188,581 10 10 10 10
Special Appropriations:          
Commonwealth Inscribed Stock Act 1911 13,452,771 14,707,384 16,133,697 17,155,943 17,875,948
Financial Agreement Act 1994 20 20 20 20 20
Loans Securities Act 1919 864 722 724 588 -
Total programme expenses 13,653,846 14,721,169 16,147,353 17,169,409 17,888,948
Programme deliverables

The AOFM has the following key deliverables:

  • issue Treasury Bonds, Treasury Indexed Bonds and Treasury Notes; and
  • manage the Official Public Account balance.
Programme key performance indicators

The AOFM has the following key performance indicators:

  • debt issuance;
    • efficiency of issuance (through coverage and pricing ratios); and
    • meeting the planned debt issuance programme;
  • efficient management of the Government's cash balances;
    • maintaining the 91 day moving average of the Government's cash balances within operational limits and within the Ministerial limit throughout the year; and
    • only using the overdraft facility with the Reserve Bank of Australia to cover unexpected events;
  • encourage take up of Commonwealth Government Securities by intermediaries and investors;
    • liaise with the Commonwealth Government Securities investor community to improve investor understanding of the Commonwealth Government Securities market and AOFM understanding of investor issues through face-to-face meetings and conference presentations; and
  • operating within legal and policy limits;
    • compliance with legislative and policy limits.

Section 3: Explanatory tables and budgeted financial statements

Section 3 presents explanatory tables and budgeted financial statements which provide a comprehensive snapshot of agency finances for the budget year 2014‑15. It explains how budget plans are incorporated into the financial statements and provides further details of the reconciliation between appropriations, programme expenses, movements in administered funds and special accounts.

3.1 Explanatory tables

3.1.1 Movement of administered funds between years

The AOFM has not moved any administered funds between years.

3.1.2 Special accounts

Special accounts provide a means to set aside and record amounts used for specified purposes. Special accounts can be created by a Finance Minister's Determination under the Financial
Management and Accountability Act 1997
or under separate enabling legislation. Table 3.1.2 shows the expected additions (receipts) and reductions (payments) for each account used by the AOFM.

Table 3.1.2: Estimates of special account cash flows and balances
  Outcome Opening balance
2014‑15
2013‑14
$'000
Receipts
2014‑15
2013‑14
$'000
Payments
2014‑15
2013‑14
$'000
Adjustments
2014‑15
2013‑14
$'000
Closing balance
2014‑15
2013‑14
$'000
Debt Retirement Reserve Trust 1 742 - - - 742
Account   742 - - - 742
Total special accounts            
2014‑15 Budget estimate   742 - - - 742
Total special accounts            
2013‑14 estimated actual   742 - - - 742

Until 1990, the Australian Government borrowed on behalf of the State and Northern Territory Governments and allocated a portion of its Treasury Bond raisings to those governments to fund the redemption of previous allocations of bonds. Until 1986, the Australian Government also borrowed on behalf of State and Northern Territory Governments to raise new borrowings. In addition, there are outstanding balances of various loans raised by the State Governments.

The annual funding to meet the redemption of debt allocated to the States and the Northern Territory is governed by the Financial Agreement Act 1994, which requires the Australian Government to establish and maintain the Debt Retirement Reserve Trust Account for the States and the Northern Territory. Monies standing to the credit of a State or the Northern Territory are applied by the Australian Government in connection with the repurchase and repayment of the debt of that State or the Northern Territory.

Only perpetual debt with no fixed maturity date remains outstanding under these arrangements for New South Wales and Victoria. Redemption of the perpetual debt is at the discretion of the relevant State.

3.1.3 Australian Government Indigenous expenditure

The AOFM does not have any Australian Government Indigenous expenditure.

3.2 Budgeted financial statements

3.2.1 Differences in agency resourcing and financial statements

Departmental

Sales of goods and services revenue as recorded in the comprehensive income statement (Table 3.2.1) includes resources received free of charge from the Australian National Audit Office for audit services. Departmental agency receipts as recorded in the agency resource statement (Table 1.1) exclude the estimated value of these services received free of charge.

Administered

The AOFM receives administered appropriations for expenses and for capital expenditure arising from managing a portfolio of debt and assets. This is reflected in the agency resource statement (Table 1.1). The administered financial statements identify expenses in the schedule of budgeted income and expenses (Table 3.2.7), and capital expenditures in the capital budget schedule (Table 3.2.10).

3.2.2 Analysis of budgeted financial statements

Departmental

The AOFM forecasts that during the forward estimates period it will need to make renewed capital investment in agency infrastructure. Capital expenditure on the AOFM's specialist debt management systems, both for development and replacement, represents the majority of this expenditure. Significant capital expenditure on specialist debt management systems is forecast to occur in 2013‑14 and 2014‑15.

Administered

The budget and forward estimates reflect expected increases in debt issuance and debt levels to meet the Government's funding needs. With the increased level of debt, total debt servicing costs will also rise.

Assets administered on behalf of the Government include investments in residential mortgage‑backed securities which were made in accordance with the Government's policy to support competition in lending for housing and small business. They also include investments in short term assets held as part of the AOFM's management of the Government's cash balances.

3.2.3 Budgeted financial statements tables

Table 3.2.1: Comprehensive income statement (showing net cost of services)
(for the period ended 30 June)
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
EXPENSES          
Employee benefits 7,275 7,854 8,090 8,332 8,562
Supplier 3,835 4,679 4,312 4,016 3,908
Depreciation and amortisation 500 500 500 500 500
Total expenses 11,610 13,033 12,902 12,848 12,970
LESS:          
OWN-SOURCE INCOME          
Sale of goods and rendering of services 1,131 1,131 1,131 1,131 1,131
Total own-source income 1,131 1,131 1,131 1,131 1,131
Net cost of (contribution by) services 10,479 11,902 11,771 11,717 11,839
Appropriation revenue 11,479 11,402 11,271 11,217 11,339
Surplus (deficit) attributable to the Australian Government 1,000 (500) (500) (500) (500)
Note: Impact of Net Cash Appropriation Arrangements
  2013‑14
$'000
2014‑15
$'000
2015‑16
$'000
2016‑17
$'000
2017‑18
$'000
Total Comprehensive Income (loss) less depreciation/amortisation expenses previously funded through revenue appropriations 1,500 - - - -
plus depreciation/amortisation expenses previously funded through revenue appropriations (500) (500) (500) (500) (500)
Total Comprehensive Income (loss) - as per the Statement of Comprehensive Income 1,000 (500) (500) (500) (500)

Prepared on Australian Accounting Standards basis.

Table 3.2.2: Budgeted departmental balance sheet
(as at 30 June)
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
ASSETS          
Financial assets          
Cash and equivalents 100 100 100 100 100
Trade and other receivables1 25,605 24,410 23,958 24,008 24,063
Total financial assets 25,705 24,510 24,058 24,108 24,163
Non-financial assets          
Infrastructure, plant and equipment 616 648 1,440 1,734 2,038
Intangibles 1,191 2,633 2,567 2,501 2,435
Other 84 84 84 84 84
Total non-financial assets 1,891 3,365 4,091 4,319 4,557
Total assets 27,596 27,875 28,149 28,427 28,720
LIABILITIES          
Provisions          
Employees 2,077 2,124 2,172 2,222 2,277
Other 137 137 137 137 137
Total provisions 2,214 2,261 2,309 2,359 2,414
Payables          
Suppliers 237 237 237 237 237
Total payables 237 237 237 237 237
Total liabilities 2,451 2,498 2,546 2,596 2,651
Net assets 25,145 25,377 25,603 25,831 26,069
EQUITY          
Contributed equity 1,892 2,624 3,350 4,078 4,816
Retained surpluses 23,253 22,753 22,253 21,753 21,253
Total equity 25,145 25,377 25,603 25,831 26,069
Current assets 1,484 242 242 242 242
Non-current assets 26,112 27,633 27,907 28,185 28,478
Current liabilities 860 874 889 904 920
Non-current liabilities 1,591 1,624 1,657 1,692 1,731

1. Includes undrawn appropriations.

Prepared on Australian Accounting Standards basis.

Table 3.2.3: Budgeted departmental statement of cash flows
(for the period ended 30 June)
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
OPERATING ACTIVITIES          
Cash received          
Goods and services 828 828 828 828 828
Appropriations 11,091 12,597 11,723 11,167 11,284
Total cash received 11,919 13,425 12,551 11,995 12,112
Cash used          
Employees 7,229 7,807 8,042 8,282 8,507
Suppliers 3,532 4,376 4,009 3,713 3,605
Total cash used 10,761 12,183 12,051 11,995 12,112
Net cash from or (used by) operating activities 1,158 1,242 500 - -
INVESTING ACTIVITIES          
Cash used          
Purchase of property, plant and equipment and intangibles 1,566 1,974 1,226 728 738
Total cash used 1,566 1,974 1,226 728 738
Net cash from or (used by) investing activities (1,566) (1,974) (1,226) (728) (738)
FINANCING ACTIVITIES          
Cash received          
Contributed equity 408 732 726 728 738
Total cash received 408 732 726 728 738
Net cash from or (used by) financing activities 408 732 726 728 738
Net increase or (decrease) in cash held - - - - -
Cash at the beginning of the reporting period 100 100 100 100 100
Cash at the end of the reporting period 100 100 100 100 100

Prepared on Australian Accounting Standards basis.

Table 3.2.4: Departmental statement of changes in equity — summary of movement
(Budget year 2014‑15)
   Retained surpluses
$'000
Asset revaluation reserve
$'000
 Other reserves
$'000
Contributed equity/capital
$'000
 Total equity
$'000
Opening balance as at 1 July 2014          
Balance carried forward from previous period 23,253 - - 1,892 25,145
Adjusted opening balance 23,253 - - 1,892 25,145
Comprehensive income          
Surplus (deficit) for the period (500) - - - (500)
Total comprehensive income recognised directly in equity (500) - - - (500)
Transactions with owners          
Contributions by owners Appropriation (departmental capital budget) - - - 732 732
Total transactions with owners - - - 732 732
Estimated closing balance as at 30 June 2015 22,753 - - 2,624 25,377

Prepared on Australian Accounting Standards basis.

Table 3.2.5: Departmental capital budget (DCB) statement
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
NEW CAPITAL APPROPRIATIONS          
Capital budget - Bill 1 DCB 408 732 726 728 738
Total new capital appropriations 408 732 726 728 738
Provided for:          
Purchase of non-financial assets 408 732 726 728 738
Total Items 408 732 726 728 738
PURCHASE OF NON-FINANCIAL ASSETS          
Funded by capital appropriation - DCB 1,566 1,974 1,226 72
8
738
Funded by prior year equity injections - - - - -
TOTAL 1,566 1,974 1,226 728 738
RECONCILIATION OF CASH USED TO ACQUIRE ASSETS TO ASSET MOVEMENT TABLE          
Total purchases 1,566 1,974 1,226 728 738
Total cash used to acquire assets 1,566 1,974 1,226 728 738

Prepared on Australian Accounting Standards basis.

Table 3.2.6: Statement of asset movements — departmental
  Buildings
$'000
Other infrastructure, plant & equipment
$'000
Intangibles
$'000
Total
$'000
As at 1 July 2014        
Gross book value - 1,827 4,680 6,507
Accumulated depreciation/amortisation and impairment - 1,211 3,489 4,700
Opening net book balance - 616 1,191 1,807
Capital Asset Additions/Disposals        
By purchase - appropriation ordinary annual services - 232 1,742 1,974
Disposals - gross value - - - -
Total asset additions/disposals - 232 1,742 1,974
Other movements        
Depreciation/amortisation expense - 200 300 500
Disposals - accumulated depreciation/amortisation - - - -
Total other movements - 200 300 500
As at 30 June 2015        
Gross book value - 2,059 6,422 8,481
Accumulated depreciation/amortisation and impairment - 1,411 3,789 5,200
Closing net book balance - 648 2,633 3,281

Prepared on Australian Accounting Standards basis.

Table 3.2.7: Schedule of budgeted income and expenses administered on behalf of government
(for the period ended 30 June)
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
EXPENSES ADMINISTERED ON BEHALF OF GOVERNMENT          
Grants 20 20 20 20 20
Interest costs 13,429,145 14,707,116 16,133,431 17,155,541 17,874,958
Other 24,500 1,000 1,000 1,000 1,000
Total expenses before re-measurements 13,453,665 14,708,136 16,134,451 17,156,561 17,875,978
LESS:          
OWN-SOURCE INCOME          
Non-taxation revenue          
Interest 1,060,751 812,992 673,132 524,316 287,914
Total revenues before re-measurements 1,060,751 812,992 673,132 524,316 287,914
GAIN (LOSSES) BEFORE RE-MEASUREMENTS          
Net loss on repurchase of debt (188,571) - - - -
Net gain on sale of financial assets 9,255 - - - -
Total gains (losses) (179,316) - - - -
Operating result before re-measurements (12,572,230) (13,895,144) (15,461,319) (16,632,245) (17,588,064)
Re-measurements          
Net market valuation gains (losses) 2,414,245 363,957 151,906 26,936 (54,261)
Total re-measurements 2,414,245 363,957 151,906 26,936 (54,261)
Net result (10,157,985) (13,531,187) (15,309,413) (16,605,309) (17,642,325)

Prepared on Australian Accounting Standards basis.

Table 3.2.8: Schedule
of budgeted assets and liabilities administered on behalf of government
(as at 30 June)
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
ASSETS ADMINISTERED ON BEHALF OF GOVERNMENT          
Financial assets          
Cash and cash equivalents 622 622 622 622 622
Receivables 2,106,572 2,033,379 1,958,353 1,881,297 1,801,908
Investments (s39 FMA Act) 33,571,839 29,352,604 23,061,940 28,184,954 21,384,331
Total assets administered on behalf of government 35,679,033 31,386,605 25,020,915 30,066,873 23,186,861
LIABILITIES ADMINISTERED ON BEHALF OF GOVERNMENT          
Interest bearing liabilities          
Commonwealth Government Securities 346,651,502 387,774,241 421,425,506 460,520,337 475,213,491
Other 307 307 307 307 307
Total liabilities administered on behalf of government 346,651,809 387,774,548 421,425,813 460,520,644 475,213,798
Net assets/(liabilities) (310,972,776) (356,387,943) (396,404,898) (430,453,771) (452,026,937)

Prepared on Australian Accounting Standards basis.

Table 3.2.9: Schedule of budgeted administered cash flows
(for the period ended 30 June)
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
OPERATING ACTIVITIES          
Cash received          
Interest 1,031,958 799,060 663,521 502,595 278,458
Total cash received 1,031,958 799,060 663,521 502,595 278,458
Cash used          
Interest and other costs paid 15,073,138 15,653,956 17,199,326 18,376,695 19,275,958
Grants 20 20 20 20 20
Total cash used 15,073,158 15,653,976 17,199,346 18,376,715 19,275,978
Net cash from or (used by) operating activities (14,041,200) (14,854,916) (16,535,825) (17,874,120) (18,997,520)
INVESTING ACTIVITIES          
Cash received          
Repayments of advances 88,674 90,681 92,229 93,947 95,937
Total cash received 88,674 90,681 92,229 93,947 95,937
Net cash from or (used by) investing activities 88,674 90,681 92,229 93,947 95,937
FINANCING ACTIVITIES          
Cash received          
Proceeds from borrowing 112,524,666 143,833,193 169,499,747 183,132,135 226,864,275
Investment redemptions 620,598,237 232,906,749 199,351,189 144,122,952 52,916,863
Total cash received 733,122,903 376,739,942 368,850,936 327,255,087 279,781,138
Cash used          
Repayments of borrowings 47,786,586 101,393,024 134,626,503 142,786,916 210,821,434
Investments made 624,873,763 228,698,704 193,073,294 149,244,433 46,127,279
Total cash used 672,660,349 330,091,728 327,699,797 292,031,349 256,948,713
Net cash from or (used by) financing activities 60,462,554 46,648,214 41,151,139 35,223,738 22,832,425
Net increase or (decrease) in cash
held
46,510,028 31,883,979 24,707,543 17,443,565 3,930,842
Cash at beginning of reporting period 622 622 622 622 622
Cash from Official Public Account for: appropriations 688,586,051 346,426,270 345,579,573 311,032,477 276,836,877
Cash to Official Public Account for: receipts (735,096,079) (378,310,249) (370,287,116) (328,476,042) (280,767,719)
Cash at end of reporting period 622 622 622 622 622

Prepared on Australian Accounting Standards basis.

Table 3.2.10: Schedule of administered capital budget
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
NEW CAPITAL APPROPRIATIONS          
Special appropriations 672,660,349 330,091,728 327,699,797 292,031,349 256,948,713
Total new capital appropriations 672,660,349 330,091,728 327,699,797 292,031,349 256,948,713
Provided for:          
Repayments of borrowings and purchase of investments 672,660,349 330,091,728 327,699,797 292,031,349 256,948,713
Total Items 672,660,349 330,091,728 327,699,797 292,031,349 256,948,713

Prepared on Australian Accounting Standards basis.

3.2.4 Notes to the financial statements

The financial statements contain estimates prepared in accordance with the requirements of the Australian Government's financial budgeting and reporting framework, including Australian Accounting Standards and Statements of Accounting Concepts, as well as specific guidelines issued by the Department of Finance.

The departmental financial statements have been prepared on an accrual basis and are in accordance with the historical cost convention, except for infrastructure, plant and equipment assets and employee entitlements.

With the exception of loans to the States and the Northern Territory, the administered financial statements have been prepared on a fair value basis in accordance with Australian Accounting Standards. Loans to the States and the Northern Territory are measured on an amortised cost basis, after initial recognition at fair value.

Fair value is synonymous with market value and represents the estimated exchange equivalent price using relevant inputs from reference markets and valuation techniques. Fair value is determined on the presumption of normal market conditions and that the reporting entity is not undertaking transactions on adverse terms.

Budgeted departmental and administered financial statements

Under the Australian Government's accrual budgeting framework, transactions that agencies control (agency transactions) are separately budgeted for and reported from transactions agencies do not have control over (administered transactions). This ensures that agencies are only held fully accountable for the transactions over which they have control.

Agency assets, liabilities, revenue and expenses are those which are controlled by the agency. Agency expenses include employee and supplier expenses and other administrative costs, which are incurred by the agency in providing its goods and services to government.

Administered assets, liabilities, revenue and expenses are those which are managed on behalf of the Australian Government according to set government directions. Administered expenses include interest incurred on Commonwealth Government Securities. Administered revenue includes interest earned on housing agreement loans, and interest on investments.

Administered internal transactions

Administered transactions between the AOFM and other agencies within the general government sector (administered internal transactions) are not reported in the schedule of budgeted administered income and expenses or the schedule of budgeted administered assets and liabilities.

However, for the purposes of disclosing all cash flows through the AOFM's administered bank accounts, cash flows in the schedule of budgeted administered cash flows are reported inclusive of administered internal transactions.

Goods and services tax

Supplies provided by the AOFM are predominantly input taxed under A New Tax System (Goods and Services Tax) Act 1999.

Budgeted departmental comprehensive income statement
Appropriations

Under the net cash appropriation framework the AOFM receives an output appropriation to meet budgeted expenses (except depreciation). The output appropriation is recognised in revenue in the year it is appropriated.

The AOFM also receives a capital appropriation for the replacement of infrastructure, plant and equipment and intangibles. The capital appropriation is not recognised in revenue. It is recognised as contributed equity in the departmental balance sheet in the year the appropriation takes effect.

Budgeted departmental balance sheet
Cash and undrawn appropriations

The estimated cash reserves and undrawn appropriations will be maintained to ensure that the AOFM is well placed to:

  • settle employee liabilities as they fall due;
  • fund future asset replacements; and
  • repay liabilities.
Administered schedule of budgeted income and expenses
Non‑taxation revenue — interest
  Estimated actual
2013‑14
$'000
Budget estimate
2014‑15
$'000
Forward estimate
2015‑16
$'000
Forward estimate
2016‑17
$'000
Forward estimate
2017‑18
$'000
Interest revenue          
Interest on housing agreements 127,748 123,582 119,273 114,865 110,336
Interest from investments 933,003 689,410 553,859 409,451 177,578
Total interest revenue 1,060,751 812,992 673,132 524,316 287,914
Net market valuation gains (losses)

Net market valuation gains (losses) represent the estimated unrealised fair value gains or losses on the financial asset and financial liability portfolio. The revaluation effect represents the change in financial exposures due to changes in market conditions and the passage of time.

In a passive 'issue and hold to maturity' strategy, such as that relating to the AOFM's debt issuance and management activities, the revaluation effect will net to zero over the life of a financial instrument.

Administered schedule of budgeted assets and liabilities
Financial assets — investments

The AOFM manages the cash balances in the Official Public Account and invests surplus funds in deposits and fixed interest securities. Investments also include holdings of residential mortgage‑backed securities. Estimates of the fair value of these asset holdings are disclosed as administered investments. The asset holdings of the Future Fund and other government agencies are not included in these estimates.

Interest bearing liabilities — Commonwealth Government Securities

Interest bearing liabilities represent the fair value of Commonwealth Government Securities on issue.

  Estimated
actual
2013‑14
$'000
Budget
estimate
2014‑15
$'000
Forward
estimate
2015‑16
$'000
Forward
estimate
2016‑17
$'000
Forward
estimate
2017‑18
$'000
Commonwealth Government Securities (at fair value)          
Treasury Bonds 309,258,795 345,275,797 372,850,928 407,266,803 417,681,055
Treasury Indexed Bonds 31,377,994 35,984,642 38,564,821 43,251,291 47,530,193
Treasury Notes 5,993,820 6,493,305 9,989,700 9,988,400 9,988,400
Other 20,893 20,497 20,057 13,843 13,843
Total Commonwealth Government Securities (at fair value) 346,651,502 387,774,241 421,425,506 460,520,337 475,213,491