Australian Office of Financial Management
Section 1:  Overview, appropriations and budget measures summary
Overview
The Australian Office of Financial Management (AOFM), a ‘prescribed agency’ under the Financial Management and Accountability Act 1997, is responsible for the Commonwealth’s debt management activities.
The objective of the AOFM is to raise, manage and retire Commonwealth debt at the lowest possible long‑term cost, consistent with an acceptable degree of risk exposure.
Appropriations
The total appropriation for the AOFM in the 2002‑03 Budget is $40,401.0 million. Table 1.1 on the following page shows the total appropriations for the AOFM’s outcome.
Price of output appropriation of $6.57 million is based on budgeted expenses (of $6.59 million) after deducting estimated revenues from external sources (of $0.02 million).
The total administered outcome appropriation of $40,394.4 million is based on budgeted expenses of $6,646.0 million and budgeted debt raising and financial investment activity of $33,748.4 million.

Australian Office of Financial Management — appropriations 2002-03
Table 1.1:  Appropriations and other revenue ($‘000)

1.	References C1, E1 and I1 refer to information provided in Table 2.1. Reference K1 refers to information provided in Table 3.1.
2.	Refer to Budgeted Statement of Financial Performance in Table 3.1 for application of agency revenue.
3.	Revenue from other sources includes revenue from other sources (for example, sales of goods and services). Non-appropriated agency revenues and administered revenues are detailed in Appendix 1.
4.	Estimated expenses from administered annual and special appropriations are shown in Appendix 2.
Note:  Percentage figures indicate the percentage contribution of revenue from government (agency appropriations) to the total price of outputs, by outcome.

equity injections and loans
An equity injection carried over from the 2000‑01 financial year of $3.4 million is expected to be utilised in 2002‑03 for the acquisition of a specialist debt management system.

Section 2:  Outcomes and outputs information
Outcomes and output groups
The map below shows the relationship between Government outcomes and the contributing outputs for the Australian Office of Financial Management (AOFM). Financial detail for Outcome 1 by output appears in Table 2.1 while non‑financial information for Outcome 1 appears in Table 2.2.
Map 2:  Outcomes and output groups

Changes to outcomes and outputs
There are no proposed changes to the outcome or outputs since the previous year.
Outcome 1 — Description
To enhance the Commonwealth’s capacity to manage its net debt portfolio, offering the prospect of savings in debt servicing costs and an improvement in the net worth of the Commonwealth over time.
Measures affecting Outcome 1
There are no measures for the AOFM in the 2002‑03 Budget.
Outcome 1 — Resourcing
Table 2.1 shows how the 2002‑03 appropriations translate to total resourcing for Outcome 1, including administered and departmental appropriations, revenue from other sources and the total price of outputs.
Table 2.1:  Total resources for Outcome 1 ($’000)

(1)	C1, E1 and I1 show the links back to Table 1.1.
Outcome 1 — Contribution of outputs
The AOFM has a single output — debt management. The AOFM’s debt management operations include the issue of various borrowing instruments, liquidity management and investment activities, the strategic formulation and undertaking of portfolio management, including through swap transactions, and the administration of the Commonwealth debt portfolio.
Notwithstanding surplus funding positions in recent years, the AOFM has undertaken modest issuance programmes directed at maintaining the liquidity and efficiency of Commonwealth Government securities market and the viability of supporting infrastructure. Integral to the continuing efficient management of its funding risk, the AOFM’s specific objective for its major debt instrument, Treasury Bonds, remains building and maintaining liquidity in key benchmark lines over a yield curve extending to around 12‑13 years.
Debt portfolio management operations are framed by reference to a defined portfolio benchmark that serves as a target for the composition of the Commonwealth debt portfolio. The analytical framework underpinning the benchmark assesses the trade‑off between the long-term expected cost and risk of different portfolio structures, thus allowing informed and consistent decisions about the nature of Commonwealth market exposures.
Debt administration is undertaken by the AOFM in conformity with legislative requirements and in compliance with applicable accounting standards.

Performance information for Outcome 1
Table 2.2:  Performance information for Outcome 1

Evaluations
Performance with regard to producing the debt management output is currently evaluated using benchmark analysis and regular review of the broader risk management framework to ensure that it remains appropriate in the light of Commonwealth operations and market conditions. Results of evaluations will be presented, as appropriate, in the AOFM’s Annual Report.

Section 3:  Budgeted financial statements
Budgeted agency and administered financial statements and related notes for the Australian Office of Financial Management (AOFM) are presented in this section. The financial statements are produced for 2001‑02 (estimated actual results), 2002‑03 (Budget estimate) and three forward years and comprise the following statements. The financial statements should be read in conjunction with the accompanying notes.
Agency Financial Statements
Budgeted agency statement of financial performance
This statement provides a picture of the expected financial results for the AOFM by identifying full accrual expenses and revenues.
Budgeted agency statement of financial position 
This statement shows the financial position of the AOFM. It enables decision-makers to track the management of the agency’s assets and liabilities.
Budgeted agency statement of cash flows 
This statement provides information on the amount and nature of budgeted cash flows, categorised into expected cash flows from operating activities, investing activities and financing activities.
Agency capital budget statement 
This statement shows all proposed capital expenditure on non‑financial assets, whether funded through capital appropriations (equity or borrowings) or from internally sourced funds.
Agency non-financial assets — summary of movement
This statement shows the budgeted movement in the AOFM’s non‑financial assets during the Budget year 2002‑03.

Notes of Administered Activity
Details of transactions administered by the AOFM on behalf of the Commonwealth are to be shown in the following notes to the financial statements.
Note of budgeted administered financial performance
This note identifies the revenues and expenses administered on behalf of the Government.
Note of budgeted administered financial position
This note shows the assets and liabilities administered on behalf of the Government.
Note of budgeted administered cash flows
This note shows cash flows administered on behalf of the Government.

Table 3.1:  Budgeted Agency Statement of Financial Performance
for the period ended 30 June

(1)	K1 — shows the link back to Table 1.1.

Table 3.2:  Budgeted Agency Statement of Financial Position
as at 30 June

Table 3.3:  Budgeted Agency Statement of Cash Flows
for the period ended 30 June

Table 3.4:  Agency Capital Budget Statement

Table 3.5:  Agency Non-financial Assets — Summary of Movement (Budget year 2002-03)

Table 3.7:  Note of Budgeted Financial Performance Administered on behalf of Government for the period ended 30 June

Table 3.8:  Note of Budgeted Financial Position Administered on behalf of Government as at 30 June

Table 3.9:  Note of Budgeted Administered Cash Flows
for the period ended 30 June

Notes to the Financial Statements
Basis of accounting
The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention. No allowance is made for the effect of changing prices on the results or the financial position of the AOFM.
Administered internal transactions
Administered transactions between the AOFM and other agencies within the general government (administered internal transactions) are not reported in the note of budgeted administered financial performance or the note of administered financial position.
Cash flows in the note of budgeted administered cash flows are reported inclusive of administered internal transactions.
Goods and Services Tax (GST)
The AOFM is an input taxed entity under A New Tax System (Goods and Services Tax) Act 1999.
The budgeted financial statements have been prepared in accordance with the Goods and Services Tax (GST) accounting guidelines of the Urgent Issues Group (UIG) of the Australian Accounting Standards Board. The UIG consensus requires that expenses and assets be accounted for net of recoverable GST, revenues be accounted for net of GST payable and that cash flows and accounts payable and receivable be reported gross. Appropriations are thus net of recoverable GST amounts.
Agency and administered financial statements
Under the Commonwealth’s accrual budgeting framework, and consistent with Australian Accounting Standards, 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, revenues 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.
•	
Administered assets, liabilities, revenues and expenses are those which are managed on behalf of the Government according to set government directions. Administered expenses include interest incurred on Commonwealth debt and administered revenues include interest earned on housing agreement loans and interest from swaps.
Appropriations in the accrual budgeting framework
Under the Commonwealth’s accrual budgeting framework, separate annual appropriations are provided to the AOFM for:
•	agency price of outputs appropriations: representing the Government’s purchase of outputs; and
•	administered expense appropriations: for the estimated administered expenses relating to debt management output.
In addition, special appropriations continue under the accrual budgeting framework, and fund the majority of payments from the Official Public Account, including gross debt redemption and financial investment activity.
Agency revenues and expenses
Appropriations
Price of outputs appropriation estimates are not based on market price indicators. The agreed price of outputs appropriation estimates are based on budgeted expenses.
The AOFM has prepared its estimates for the 2002‑03 budget and forward years to achieve a break-even operating result. Consequently the appropriation revenue from Government represents the funding required to meet all expenses after deduction of revenue from other sources.
Interest revenue
As part of the agency banking incentive scheme, the AOFM has estimated that it will earn $20,000 interest on credit balances in its agency account and from term deposit investments.
Employee expenses
The AOFM envisages an increase in the average staffing level during the 2002‑03 Budget year.

Assets and liabilities
The estimated cash reserves will be maintained in order to ensure that the AOFM is well placed to:
•	settle employee liabilities as they fall due;
•	make asset replacements (from depreciation funding); and
•	repay liabilities.
Budgeted financial statements have been prepared on the assumption that unspent monies will not be withdrawn by the Department of Finance and Administration.
Administered notes of budgeted financial statements
Revenues and expenses
Non‑taxation revenue — interest

Interest from other sources includes interest from swaps and investments.
Expenses — grants

Expenses — interest and other financing costs

Assets and Liabilities
Interest bearing liabilities — loans
Loans represent the book value of government securities on issue, net of investments.
Financial assets — receivables

 Appendix 1:  Receipts from independent sources
Receipts from independent sources

Appendix 2:  Estimates of expenses from administered appropriations
Estimates of expenses from administered appropriations