Consolidated financial statements
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The consolidated financial statements (CFS) present whole-of-government financial results, inclusive of all Australian Government–controlled entities. Also presented are the financial statements of the general government sector (GGS) and disaggregated information on each of the sectors of government.
Consolidated financial statements — overview
The Australian Government comprises departments of state, parliamentary departments, other non-corporate Commonwealth entities, corporate Commonwealth entities and companies in which the Australian Government holds a controlling interest.
Entities are grouped into portfoliosthat are aligned to a minister’s area of responsibility as established through Administrative Arrangements Orders. Within each portfolio, there are three types of entities accountable to the Parliament — Commonwealth entities (non-corporate or corporate ) and Commonwealth companies. These entities are classified into the three sectors of government, being the:
- General Government Sector (GGS) — all government and non-profit controlled entities that provide public services that are mainly non-market in nature, mainly for the collective consumption of the community, involving the transfer or redistribution of income and financed mainly through taxes and other compulsory levies;
- Public Financial Corporations Sector (PFCS) — government-controlled corporations and quasi-corporations mainly engaged in financial intermediation or provision of auxiliary financial services; and
- Public Non-Financial Corporations Sector (PNFCS) — government-controlled corporations and quasi-corporations mainly engaged in the production of market goods and/or non-financial services.
The consolidated financial statements (CFS) of the Australian Government are required under section 48 of the Public Governance, Performance and Accountability Act 2013. The CFS are prepared in accordance with Australian Accounting Standard AASB 1049 Whole-of-Government and General Government Sector Financial Reporting. The CFS presents whole-of-government financial results inclusive of all Australian Government–controlled entities. Also presented are the financial statements of the GGS and disaggregated information on each of the sectors of government.
The Finance Minister is required to prepare and deliver the CFS to the Auditor-General by 30 November each year. The Department of Finance has operational responsibility for the preparation of CFS for the Finance Minister.
To assist in the preparation of the CFS, the Department of Finance classifies entities as material or non-material, based on their contribution to the GGS. Material entities are those entities that in aggregate comprise 99 per cent of revenues, expenses, assets and liabilities of the total GGS. All departments of state are considered material in nature.
Budgeted expenditure for entities within the GGS is anticipated to total $500.882019–20.billion for
Figure 1 shows the level of budgeted expenditure by portfolio for 2019–20. The size of each ‘bubble’ represents the level of expenditure relative to the total GGS. The placement of each bubble is dependent on the number of entities within the portfolio and the average staffing level of the respective portfolio.
Source: ANAO analysis of 2019–20 Portfolio Budget Statements Budget related papers pre–machinery-of-government changes announced on 29 May 2019.
The financial statements audit planning process examines each entity’s environment and governance arrangements, its system of internal control, and prior-year financial and performance audit findings. These planning processes are undertaken on a whole-of-organisation basis with the aim to identify key risks that may significantly impact on the integrity of the financial statements.
When planning the audits of entities’ 2018–19 financial statements, the ANAO identified 191 financial statements risks for those 63 Commonwealth entities classified as material. Of these risks, 78 were considered higher risks and 113 were moderate risks.
Figure 2 presents the total number of financial statements risks identified for the 2018–19 financial statements of material entities within each portfolio.
Source: ANAO analysis of 2018–19 financial statements audit strategy documents.
Government accountability and transparency is supported by the preparation and audit of the Australian Government’s consolidated financial statements. The CFS and the associated financial analysis provide information to assist users in assessing the annual financial performance and position of the Australian Government.
The key risks for the 2018–19 CFS that the ANAO has highlighted for specific audit coverage, including those that the ANAO considered Key Audit Matters (KAM) by the ANAO, are the:
- recognition of taxation revenue, given the estimation and allocation processes associated with the reporting of taxation revenue and the volume of transactions subject to estimation that involve the application of significant judgement and specialist knowledge (KAM – Completeness and accuracy of taxation revenue);
- unfunded superannuation liabilities, due to the complexity of calculations and the nature of the economic and demographic assumptions involved (KAM – Valuation of unfunded superannuation liability);
- fair value measurement of collective investments, due to the inherent subjectivity and significant judgements and estimates required where market data is not available to determine the fair value of these investments (KAM – Valuation of financial assets);
- fair value measurement of specialist military equipment and infrastructure, due to the inherent subjectivity and need for significant judgements in the valuation, including for items of a specialised nature (KAM – Valuation of non-financial assets); and
- valuation of loans and receivables, due to the inherent uncertainty and complexity in estimating future credit losses on amounts receivable and the sensitivity of these balances to changes in assumptions (KAM – Valuation of loans and receivables).