Department of the Environment and Energy

Annual Report 2016–17

Overview of financial performance

The Department delivers major Government initiatives to promote the conservation and sustainable use of Australia’s natural resources and to maintain a secure and reliable, affordable and sustainable energy supply to support our economy and serve the Australian community as the energy market transforms. We do this across four purposes: environment and heritage, Antarctica, climate change, and energy(see Part 2, ‘Annual performance statements’, page 21).

During 2016–17, the Department demonstrated sound financial management and achieved a break-even departmental appropriation budget. Total departmental and administered expenditure managed was $1.18 billion, compared with $1.15 billion in 2015–16. TheDepartment continued to successfully implement key government programs, notablyGreen Army,Reef 2050 Long-Term Sustainability Plan, Reef Trust and the National Landcare Program, including 20Million Trees. The Department ran significant operations, including in remote locations such as Commonwealth national parks and the Antarctic. Therewere nine special accounts managed through legislation and cost recovery schemes.

Departmental finances

Figure 1.1 outlines the Department’s financial performance over the past four years and the budget for 2017–18.

Figure 1.1: Departmental financial performance, 2013–14 to 2017–18 ($ million)

The financial performance of departmental activities for 2016–17 is summarised in Table 1.1.

Table 1.1: Departmental financial performance, 2015–16 and 2016–17

Indicator / 30 June 2017
($’000) / 30 June 2016
($’000) / Variance
($’000)
Operating expenses / 514,104 / 526,971 / (12,867)
Own-source revenue / 48,025 / 42,830 / 5,195
Gains / 10,512 / 2,350 / 8,162
Net cost of services / (455,567) / (481,791) / 26,224
Revenue from government / 410,360 / 398,902 / 11,458
Operating (deficit)/surplus / (45,207) / (82,889) / 37,682
Changes in asset revaluation surplus / 26,960 / (37,739) / 64,699
Total comprehensive income/(loss) / (18,247) / (120,628) / 102,381

The Department’s net cost of services was $455.57million, with own-source revenue of $48.03million and operating expenses of $514.10million. Revenue from Government was $410.36million, resulting in an operating deficit of $45.21million. The total comprehensive loss (deficit net asset revaluation) was $18.25million. This is an approved operating loss and includes non-cash expenses such as depreciation, amortisation and provision for restoration obligations in the Australian Antarctic regions.

The reduction in operating expenses in 2016–17 is primarily attributable to non-cash movements in the Antarctic make-good liability and a decrease in the Department’s depreciation expense. These movements are partially offset by an increase in employee expenses as a result of the transfer of staff to the Department associated with the Administrative Arrangements Orders made on 19 July and 1 September 2016.

The increase in own-source revenue of $5.20million was largely due to contributions for the Council of Australian Governments Energy Council from states and territories.

The increase in gains by $8.16million in 2016–17 was primarily due to the movement in bond rates applied to the make-good provision for the restoration of the Antarctic solid waste disposal sites.

The $11.46million increase in revenue from the Government primarily reflected the net result of the Administrative Arrangements Orders made on 19 July and 1 September 2016, the transfer in of the energy functions to the Department from the Department of Industry, Innovation and Science.

Changes in asset revaluation surplus largely relate to changes in the relevant Australian Government bond rates used to calculate make-good and base restitution obligations for the Antarcticbases.

The Department’s financial position for 2015–16 and 2016–17 is summarised in Table 1.2.

Table 1.2: Departmental financial position, 2015–16 and 2016–17

30 June 2017
($’000) / 30 June 2016
($’000) / Variance
($’000)
Total assets / 688,481 / 544,142 / 144,339
Total liabilities / 623,785 / 644,823 / (21,038)
Total equity / 64,696 / (100,681) / 165,377

In 2016–17, the Department managed a total asset base of $688.48million, an increase of $144.34million over 2015–16, mainly due to commencing construction of the new science and resupply icebreaker ship. A further increase in trade and other receivables was associated with funds receivable for milestone payments for the new icebreaker.

Total liabilities managed by the Department decreased by $21.04million in 2016–17. This was mainly due to the Department’s make-good provisions decreasing to reflect the time value of future cash flows. This decrease was partially offset by higher employee provisions resulting from the impact of implementation of the Enterprise Agreement 2016–2019, which came into effect on 30November2016.

Administered finances

Figure 1.2 outlines the Department’s financial performance in relation to administered activities over the past four years and the administered budget for 2016–17.

Figure 1.2: Administered activities, 2013–14 to 2017–18 ($ million)

The financial performance of the Department’s administered activities for 2016–17 is summarised in Table 1.3.

Table 1.3: Administered financial performance, 2015–16 and 2016–17

Indicator / 30 June 2017
($’000) / 30 June 2016
($’000) / Variance
($’000)
Expenses administered on behalf of Government / 663,412 / 618,906 / 44,506
Income administered on behalf of Government / 290,840 / 521,300 / (230,460)
Net cost of services / (372,572) / (97,606) / (274,966)

The Department’s total administered expenditure during 2016–17 was $663.41million. An overall increase in administered expenses of $44.51million compared with 2015–16 was mainly driven by an increase in payments to corporate Commonwealth entities, specifically the Australian Renewable Energy Agency (ARENA). This increase is a result of ARENA’s large-scale solar competitive round of grants in 2016–17. This increase was partially offset by decreases in supplier expenses, mainly associated with the Green Army program following the Government’s decision to terminate the program in 2017–18. There were also net decreases in grant expenses, and reduced impairment expenses for water entitlement assets.

In 2016–17, the Department’s administered income from activities on behalf of the Government totalled $290.84million. This amount was $230.46million lower than in 2015–16, primarily due to lower impairment reversals of $271.56million recorded against water entitlement assets in 2016–17. This amount was offset by $29.58million in dividends received from Snowy Hydro Ltd following the company’s transfer to the Department during 2016–17.

The Department’s administered assets and liabilities for 2015–16 and 2016–17 are summarised at Table 1.4.

Table 1.4: Administered assets and liabilities, 2015–16 and 2016–17

30 June 2017
($’000) / 30 June 2016 ($’000) / Variance
($’000)
Total assets / 13,361,682 / 10,304,260 / 3,057,422
Total liabilities / 7606 / 13,389 / (5783)
Net assets / 13,354,076 / 10,290,871 / 3,063,205

As at 30 June 2017, the Department administered assets valued at $13.36billion consisting predominately of water entitlements, the Government’s interest in the net assets of the Director of National Parks, the Sydney Harbour Federation Trust, ARENA, the Clean Energy Finance Corporation and Snowy Hydro Ltd, and cash held in special accounts. The increase of $3.06 billion in 2016–17 was mainly due to the Commonwealth's increased investment in the Clean Energy Finance Corporation and the Department's recognition of the Commonwealth's 13 per cent shareholding in Snowy Hydro Ltd, following machinery-of-government transfer in 2016–17 and subsequent revaluation.

The total assets held as at 30 June 2016 have changed from $4.83billion to $10.30billion due to the changes in the Public Governance, Performance and Accountability (Financial Reporting) Rule2015 during 2016–17. The Department is now required to disclose special account balances held in the Official Public Account as cash equivalents in the Administered Schedule of Assets and Liabilities, Administered Cash Flow Statement, and Administered Reconciliation Schedule.

As at 30 June 2017, the Department had administered liabilities of $7.61million consisting predominately of end of year supplier and grant payables. The decrease in total liabilities is the result of the decrease in Green Army program payables following the Government’s decision to terminate the Green Army program in 2017–18.

The Entity Resource Statement provides additional information about the various funding sources that the Department may draw upon during the year (see Appendix2). For a summary of total expenses by outcomes, see Appendix3.