Australian Office of Financial Management
Annual Report 2004-05
© Commonwealth of Australia 2005
ISBN 0 642 74311 8
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10 October 2005
Treasurer
Parliament House
CANBERRA ACT 2600
Dear Treasurer
I have pleasure in presenting the Annual Report of the Australia Office of Financial Management for the year ending 30 June 2005 for presentation to the Parliament.
The Report has been prepared in accordance with guidelines approved on behalf of the Parliament by the Joint Committee of Public Accounts and Audit. These guidelines provide that a copy of the Annual Report is to be laid before each House of the Parliament on or before 31 October.
Yours sincerely
SIGNED
Neil Hyden
Chief Executive Officer
AOFM OBJECTIVE
The AOFM aims to manage the Commonwealth net debt portfolio at least cost over the medium-term, subject to the government’s policies and risk preferences.
Contents
Review by the Chief Executive Officer
Treasury bond issuance
Securities lending facility
Cash management
Management of the net debt portfolio
Performance of the portfolio
Foreign currency exposure
Credit management
Operational risk
International Financial Reporting Standards
International activities
Staff
AOFM role, functions, outcome and output structure
Structure of the portfolio
Funding
Organisational structure
Appropriations and other funding
Part 2: Operations and performance
Introduction
Treasury bond issuance
Cash management
Minimising debt servicing costs subject to acceptable risk
Foreign currency exposure
Operational risk
Agency financial performance
Review: Introduction of fair value accounting
Harmonisation objective
IAS 39 / AASB 139 Financial Instruments: Recognition and Measurement
AOFM’s existing accounting policies
Fair value accounting
Comprehensive income presentation
Part 3: Management and accountability
Corporate governance
External scrutiny
Management of human resources
Commonwealth disability strategy
Purchasing
Competitive tendering and contracting
Assets management
Consultants
Advertising and market research
Discretionary grants
Ecologically sustainable development and environmental performance
Freedom of information
Glossary
Acronyms
Index of compliance with requirements
Contact details
Index
AOFM Annual Report 2003-04 correction
In the AOFM’s Annual Report for 2003-04 the Review item on Foreign Currency Debt included an estimate that foreign currency swaps, and the forward exchange contracts used in unwinding them, generate a total economic benefit to the Commonwealth of $783.7 million over the lifetime of the foreign currency swaps between 1988 and 2004. An error was subsequently identified in the calculation of this estimate. The corrected estimate is $771.8 million.
List of tables
Part 1: AOFM overview
Table 1: General government sector funding requirement and funding sources
Table 2: AOFM gross appropriations and other funding
Part 2: Operations and performance
Table 1: Treasury bond tender results
Table 2: Spreads from mid-market on interest rate swaps (basis points)
Table 3: Commonwealth debt portfolio cost of funds analysis
Table 4: Relative performance analysis: Long-Term Debt Portfolio vs Benchmark
Table 5: Derivative counterparties by credit rating as at 30 June 2004 and
30 June 2005
Review: Introduction of fair value accounting
Table 1: Illustrative comprehensive income presentation of AOFM’s 2004-05 administered revenues and expenses under fair value accounting
Part 3: Management and accountability
Table 1: Operative and paid inoperative staff by classification and gender as at 30 June 2004 and 2005
Table 2: AOFM Australian Workplace Agreement salary ranges
Table 3: Consultancy services let during 2004-05, of $10,000 or more
List of figures
Part 1: AOFM overview
Figure 1: Portfolio structure
Figure 2: AOFM organisational structure
List of charts
Part 2: Operations and performance
Chart 1: Treasury bond issuance for 2004-05 and Treasury bonds outstanding as at 30 June 2005
Chart 2: Australian 3- and 10-year bond yields 2004-05
Chart 3: Commonwealth yield curves 2004-05
Chart 4: Australian/US 10-year bond interest rate differential 2004-05
Chart 5: Australian Government financial asset holdings at the Reserve Bank of Australia 2004-05
Chart 6: Modified duration — nominal component of Australian dollar Long-Term Debt Portfolio: 1 July 2004-30 June 2005
Chart 7: Short-dated exposure — nominal component of Australian dollar Long-Term Debt Portfolio: 1 July 2004-30 June 2005
Chart 8: Change in debt service cost between 2003-04 and 2004-05
Chart 9: Bond interest expense by year of issue
Chart 10: Bond interest expense by maturity date
Review: Introduction of fair value accounting
Chart 1: Balance sheet under historic cost accounting
Chart 2: Debt service cost under historic cost accounting
Chart 3: Balance sheet under fair value accounting
Chart 4: Debt service cost under fair value accounting
Chart 5: Comparison of debt service cost
Return to Contents
Next - Part 1: AOFM Overview
Previous - Review by the Chief Executive
Officer