Overview of Commonwealth financial reporting

The Commonwealth financial reporting outputs include:

Finance supports these financial reporting outputs by:

  • supporting the Finance Minister to meet the financial reporting requirements in the PGPA Act, Charter of Budget Honesty Act external link and the Appropriation Acts
  • maintaining and enhancing a single, whole-of-government, accounting and reporting framework for Commonwealth entities
  • maintaining CBMS
  • maintaining and improving monitoring and reporting of the Commonwealth's cash balances.

The sections below describe the following areas in further detail:

Monthly and annual reporting processes

Monthly reporting and annual reporting are integral to the Commonwealth's accrual budgeting and reporting framework and complements the Budget process by providing outcomes against Budget estimates.

The monthly financial statements, FBO and CFS are required by legislation and serve a number of purposes.

Monthly financial reporting

The monthly financial statements show how actual expenditure is tracking against the monthly profile and full year estimate. The statements: 

  • are required by the PGPA Act (section 47) to be published by the Minister for Finance in a form consistent with the Budget estimates, as soon as practicable after the end of each month
  • show how actual expenditure is tracking against the monthly profile and full year estimate
  • enable the delivery of actual results against the Budget and provide an opportunity to utilise the benefits associated with accrual budgeting and reporting by:
    • delivering reports on accrual measures such as operating result and financial position as well as the use of cash
    • being an integral component in forming the annual Consolidated Financial Statements and
    • providing an important budget tracking mechanism for the government
  • meet the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS), to which the Commonwealth has subscribed, which requires central governments to publish financial statements on a monthly basis; within one month of the period close; and on a basis consistent with that reported in the annual Budget. Under accrual accounting, the IMF has granted some flexibility in the release of June and July monthly statements to allow for the release of the FBO by the end of September
  • are used by the Australian Bureau of Statistics (ABS) for inclusion in the Australian National Accounts.

Annual financial reporting

Final Budget Outcome (FBO)

The FBO provides the outcome for the latest financial year with an emphasis on a GFS presentation of the general government sector. The FBO:

  • is required by the Charter of Budget Honesty Act 1998 external link (section 18) by 30 September each year
  • incorporates audit cleared accrual based revenue and expenses, balance sheet and cash flow information (obtained from the annual compilation process for the consolidated financial statements)
  • provides the outcome for the latest financial year
  • includes the release of the June monthly financial data as that month cannot be released until publication of the financial outcome for the year (July and August monthly financial statements are released following the release of the FBO).

Consolidated Financial Statements (CFS)

The CFS:

  • are required by the PGPA Act (section 48)
  • must be audited by the Auditor-General
  • use the same audit cleared financial data as the FBO (sometimes updated for some entities due to a later release) but provides an accounting presentation. 

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Consistency and use of accounts

Entities should report financial information for monthly and annual financial reporting, consistent with their audited financial statements. Limiting the use of 'other' accounts will reduce the need for follow up questions from Finance.

Consistent use of accounts enables:

  • current data to be compared to previous data for analytical purposes
  • consistency in published data
  • the derivation of the consolidated cash flow statement which compares operating statement data to relevant movements in balance sheet aggregates
  • monthly data to be used by the ABS in the compilation of the Australian National Accounts.

In addition, reporting at the lowest level of detail in the chart of accounts allows Finance to satisfy ABS data collection requirements, avoiding the need for the ABS to undertake an additional Public Finance survey of Commonwealth entities.

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Government Finance Statistics (GFS) 

The GFS reporting framework is an accrual financial measurement and reporting system designed to support economic analysis of the public sector. The GFS focuses on the size of the public sector; its contribution to aggregate demand, investment, and saving and provides for cross-country comparison.

The GFS principles are issued by the IMF. The Heads of Treasury, through the Uniform Presentation Agreement (UPF), and the Australian Bureau of Statistics (ABS), through the Australian GFS manual, oversee Australia’s application of GFS. The UPF is an agreement between the Commonwealth and state and territory governments for reporting of financial activities on a GFS basis. The ABS publishes an Australian GFS manual providing guidance on the application of GFS by Australian governments.

Although the initial 1986 GFS standard was cash-based, GFS moved to accrual-based reporting with the publication of the IMF’s 2001 manual. The IMF introduced the current accrual-based manual in 2014external link. The ABS has also published Australian versions of this framework in 2005 and 2015external link.  The Australian Accounting Standards Board’s AASB1049 Whole of Government and General Government Sector Financial Reportingexternal link  harmonises the ABS GFS Manual and Generally Accepted Accounting Principles. The UPF applies this framework to present Australian Government financial reports.

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Functional reporting

Reporting by function is an internationally recognised means of reporting government activities for comparison purposes. It provides a useful means of understanding government outlays as it allows for the reporting of expenses according to their purpose.

The functional classification used by the Australian government is based on the ABS eleven major functions published in the ABS 2015 GFS manual. It comprises the following fourteen major functional categories disaggregated into sub-functional categories:

  • general public services
  • defence
  • public order and safety
  • education
  • health
  • social security and welfare
  • housing and community amenities
  • recreation and culture
  • fuel and energy
  • agriculture, forestry and fishing
  • mining, manufacturing and construction
  • transport and communication
  • other economic affairs
  • other purposes.

This classification scheme differs slightly to the ABS which recognises eleven major functions. The ABS has amalgamated the following five economic major functions into a single economic affairs major function:

  • Agriculture, forestry and fishing;
  • Fuel and energy;
  • Mining, manufacturing and construction;
  • Communication; and
  • Other economic affairs.

In addition, Transport and Environmental Protection are presented as separate major categories and Social Security and Welfare is renamed Social Protection.

Expenses by function are published in the Australian Government’s Budget Papers and the Final Budget Outcome, as well as the Australian Government’s monthly financial statements.  See description of functions and sub-functions for a description of each function a list of what is included and excluded in each sub-function.

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Publication standards for reporting

Variance information/explanations

Consolidated analysis commentary in the monthly financial statements is based on a comparison of the current months (YTD) figures to a profile of the most recent published budget estimate.

Finance's analysis on monthly financial statements not only verifies the reasonableness of the information provided, it also facilitates the compilation of variance information / explanations on which the analysis commentary is based.

In order to streamline the reporting, analysis and publication process, entities are asked to provide Finance each month with information about significant variations (i.e. variations between the current months (YTD) and the profile which are greater than $50 million at the account level or $20 million at the program level). In addition, entities are required to notify Finance of any issues affecting entity's monthly financial statements at the time that financial information is submitted to CBMS.

Some examples of explanations can include:

  • variations to expenses in income statement:
    • grants expenses below profile due to the timing of payments. This is mainly attributed to:
      • grants to states where payments are made quarterly
      • grants to states where payments do not commence until projects are approved and/or agreements are signed and
      • grants to non-profit institutions, where payments do not commence until applications are received and approved.
    • depreciation and amortisation is below profile due to capital items have not yet been purchased, therefore depreciation has not been expensed.
    • suppliers expenses are below profile due to:
      • irregular payments associated with programs and
      • delays in establishing new programs.
  • variations to balance sheet – administered or departmental:
    • other non-financial assets – the variance in other non-financial assets to the 30 June closing balance is due to the expensing of prepayments
    • suppliers – variance to the 30 June closing balance is due to unanticipated delay in some payments at the end of the month.
    • other provisions and payables – variance to the 30 June closing balance is due to the inclusion of an accrual for grants due but not yet paid.

Note: variances in administered expenses need to include the impact on function.

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Major fiscal aggregates

Based on the GFS framework, the major fiscal aggregates presented in Commonwealth financial reports include:

  • net operating balance – is an accrual measure that shows whether the Government has to borrow from financial markets to cover its operating activities.
  • fiscal balance – is an accrual measure that shows whether the Government has to borrow from financial markets to cover its operating activities and net investments in non-financial assets used in the provision of goods and services.
  • underlying cash balance – is a cash measure that shows whether the Government has to borrow from financial markets to cover its operating activities and net investments in non-financial assets used in the provision of goods and services.
  • headline cash balance – is a cash measure that shows whether the Government has to borrow from financial markets to cover its operating activities; net investments in non-financial assets used in the provision of goods and services; and net investment in financial assets for policy purposes.
  • net debt – a common measure of the strength of the Government’s financial position comprising  liquid financial assets and interest bearing liabilities.
  • net worth – is equal to assets minus liabilities and is a measure of the strength of the Government’s financial position. It is a broader measure than net debt.
  • net financial worth – is equal to financial assets minus liabilities and is a measure of the strength of the Government’s financial position but avoids valuation issues with non‑financial assets in the net worth measure.

See Finance Advice Paper - General Principles for Recognition of Expenditure in Budget Aggregates [PDF icon 545 KB] for the principles used in the presentation of government expenditure in the Australian Government Budget Financial Statements and the Consolidated Financial Statements. Further information on equity investments and concessional loans are provided in the following documents:

Net operating balance (NOB)

NOB is an accrual measure that shows whether the Government has to borrow from financial markets to cover operating activities. If this measure is in surplus then government revenue (mainly taxation) is sufficient to fund operating expenses, which is a measure of the sustainability of the existing level of government goods and services. GFS revenue and expenses excludes changes in assets and liabilities that the Government can’t control, such as:

  • net write-downs of assets;
  • assets recognised for the first time;
  • actuarial revaluations;
  • net foreign exchange gains;
  • net swap interest received; and
  • market valuation adjustment for issued securities

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Fiscal balance

The fiscal balance is an accrual measure that shows whether the Government has to borrow from financial markets to cover operating activities and net investments in non-financial assets used in the provision of goods and services. If this measure is in deficit, then government is drawing on resources of other sectors in the economy to finance its provision of goods and services. This is sustainable if NOB is in balance/surplus as the government is only seeking the financing of investments in productive non-financial assets.

Fiscal balance is calculated as NOB less net investment in non-financial assets. The capital adjustment is net purchases less sales of fixed assets such as equipment and intangible assets such as spectrum. It also removes depreciation included in NOB to avoid any double counting.

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Underlying cash balance

The underlying cash balance is a cash measure that shows whether the Government has to borrow from financial markets to cover its operating activities and net investments in non-financial assets used in the provision of goods and services. If this measure is in deficit, then government is drawing on resources of other sectors in the economy to finance its provision of goods and services.

The underlying cash balance is calculated as net AAS cash receipts from operations (excluding net Future Fund earnings until 2019-20), plus financing adjustments (to remove cash flows more appropriately viewed as financing in GFS), plus capital adjustments (net investment in non-financial assets). Financing adjustments include:

  • net interest on swap transactions; and
  • certain AOFM PDI transactions.

Headline Cash Balance

The headline cash balance is a cash measure that shows whether the Government has to borrow from financial markets to cover its operating activities; net investments in non-financial assets used in the provision of goods and services; and net investment in financial assets for policy purposes. If this measure is in deficit, then government is drawing on resources of other sectors in the economy to finance its provision of goods and services and public policy investments.

The government can provide equity and loan funding for public policy reasons rather than for cash management. This includes net equity and loan payments to government economic corporations (such as NBN) and other economic sectors. This funding results in higher government borrowing and is therefore included in the headline cash balance. The Future Fund and AOFM invest for cash management purposes and their investments are not included in the headline cash balance.

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Contact for information on this page: Financial Reporting and Accounting Policy Contacts

Last updated: 12 February 2019