Annual Report 2017–18

Tabled: 20 September 2018

7 Our financial management

7.1 Current year financial review

Our primary fiscal objective is to minimise our costs to Parliament and our public sector fee-paying clients, while maintaining the effectiveness and quality of our services and their delivery.

Our financial performance and position are, as a rule, predictable year on year, as the nature of our business and its scale does not change substantially. Following the prior year's organisational transformation, this year's results reflect the embedding of our changed practices.

Figure 7A
Financial summary 2017–18 and previous four years

Item

2017–18
($'000)

2016–17
($'000)

2015–16
($'000)

2014–15
($'000)

2013–14
($'000)

Movement
from 2016–17
to 2017–18
($'000)

Change
from 2016–17
to 2017–18
(percentage)

Total revenue

45 276

43 763

41 384

39 698

38 954

1 513

3

Total expenses

43 263

46 907

41 301

39 161

38 994

(3 644)

-8

Surplus/(deficit)

2 013

(3 144)

83

537

(40)

5 157

-164

Financial assets

19 955

25 619

16 962

15 019

13 965

(5 664)

-22

Non-financial assets

5 968

6 463

1 386

1 803

2 326

(495)

-8

Total assets

25 923

32 082

18 348

16 822

16 291

(6 159)

-19

Total liabilities

18 360

26 532

9 654

8 211

8 217

(8 172)

-31

Net assets

7 563

5 550

8 694

8 611

8 074

2 013

36

Surplus/deficit

We aim to break even over the medium term, understanding that in some years we need to invest in new technology and update our audit methodologies. This will lead to deficits in those years, which we fund from our working capital reserves. In other years, we will make small surpluses, which will replenish our reserves.

This year we made a surplus to partly offset last year's deficit, indicating that we are operating in a fiscally responsible and sustainable manner.

Figure 7B
Surplus/deficit as percentage of total revenue

2017–18

2016–17

2015–16

2014–15

2013–14

Five-year
average

4.4%

-7.2%

0.2%

1.4%

-0.1%

-0.3%

This year's surplus was due largely to the realisation of cost-savings across all expense categories.

Net assets

We remain in a strong financial position, with an improvement in our financial position driven by the operating surplus. Significantly, our working capital is sufficient to fund our operations over the forward estimates period.

Figure 7C
Net assets as a percentage of total assets

2017–18

2016–17

2015–16

2014–15

2013–14

Five-year
average

29.2%

17.3%

47.4%

51.2%

49.6%

35.2%

The future

We budget for a small surplus in 2018–19, as we continue to implement our organisational transformation activities.

7.2 Financial performance

Operating statement

Our net financial result for the year was a surplus of $2 013 000, compared with a deficit of $3 144 000 in 2016–17.

Figure 7D
Revenues and expenses

Item

2017–18
($'000)

2016–17
($'000)

2015–16
($'000)

2014–15
($'000)

2013–14
($'000)

Movement
from 2016–17
to 2017–18
($'000)

Change
from 2016–17
to 2017–18
(percentage)

General appropriation

16 589

16 184

15 789

15 404

15 179

405

3

Special appropriation

569

590

576

541

495

(21)

-4

Section 29

27 942

26 586

24 732

23 536

23 191

1 356

5

Other

176

403

287

217

89

(227)

-56

Total revenue

45 276

43 763

41 384

39 698

38 954

1 513

3

Total expenses

43 263

46 907

41 301

39 161

38 994

(3 644)

-8

Surplus/(deficit)

2 013

(3 144)

83

537

(40)

5 157

-164

Revenue

We are funded through Parliamentary appropriations and Financial Management Act 1994 section 29 revenue.

Our total revenue has been rising steadily over the past several years. It increased 3 per cent in 2017–18 through a combination of increased section 29 revenue from audit engagement fees, and the indexation of our general appropriation in line with inflation.

Other revenue declined because of fewer staff secondments to other agencies and so lower recovery of associated costs, as well as no longer being reimbursed for performing the ACAG Financial Reporting and Accounting Council secretariat role, which has rotated to another member.

Expenses

We spend most of our budget on employees, contract audit services including audit service providers, and miscellaneous expenses, such as accommodation, supplies and services.

Figure 7E
Expenses from ordinary activities

Item

2017–18
($'000)

2016–17
($'000)

2015–16
($'000)

2014–15
($'000)

2013–14
($'000)

Movement
from 2016–17
to 2017–18
($'000)

Change
from 2016–17
to 2017–18
(percentage)

Depreciation

839

583

657

765

753

256

44

Employee expenses

23 801

27 809

23 715

23 238

21 714

(4 008)

-14

Contract audit services

12 547

12 154

11 893

10 446

11 652

393

3

Rental expenses—accommodation

1 864

1 530

1 520

1 514

1 509

334

22

Other expenses

4 212

4 831

3 516

3 198

3 366

( 619)

-13

Total expenses

43 263

46 907

41 301

39 161

38 994

(3 644)

-8

Our employee expenses decreased by 14 per cent, or $4 million, mainly because of one-off employment termination payments and provisions from the organisational restructure program in the prior year, and a lower overall headcount, bringing costs in line with prior years.

Our depreciation expense has increased in the current year due to a full year's depreciation being charged on leasehold improvements for the new office premises.

Our audit service provider contractor expenditure of $11.80 million is broadly in line with last year's ($11.29 million). We continue to use contracted subject‑matter experts in our performance audit area ($743 000 compared to $866 000 in 2016–17) to make sure we have the skills and knowledge needed to evaluate complex programs and services.

Our rental expenditure comprises base rental costs, common tenancy maintenance costs and other outgoings. Our relocation in late May 2017 saw our base rent increase by 37 per cent, offset by the smaller office area now occupied, which is reflected in the 22 per cent increase in the current year.

The 13 per cent decrease in remaining expenses reflects the organisation's transformation activities and focus on economic efficiencies.

7.3 Financial position

Balance sheet

Our financial position at 30 June 2018 remained adequate, with total assets of $25.9 million, total liabilities of $18.3 million and net assets of $7.6 million.

Figure 7F
Assets and liabilities movement

Item

2017–18
($'000)

2016–17
($'000)

2015–16
($'000)

2014–15
($'000)

2013–14
($'000)

Movement
from 2016–17
to 2017–18
($'000)

Change
from 2016–17
to 2017–18
(percentage)

Financial assets

19 955

25 619

16 962

15 019

13 965

(5 664)

-22

Non-financial assets

5 968

6 463

1 386

1 803

2 326

( 495)

-8

Total assets

25 923

32 082

18 348

16 822

16 291

(6 159)

-19

Total liabilities

18 360

26 532

9 654

8 211

8 217

(8 172)

-31

Net assets

7 563

5 550

8 694

8 611

8 074

2 013

36

Assets

Our total financial assets decreased by $5.7 million, largely due to partial repayment of a public account advance of $8.5 million from the prior year. The total amount recognised as owing from the Victorian Government comprises previously applied Parliamentary appropriations not yet drawn down. The balance represents accumulated surpluses, payables, movements in provisions and accumulated depreciation net of asset acquisitions. The amounts represent funding for all commitments incurred through the appropriations and are drawn from the Consolidated Fund as the commitments fall due.

Non-financial assets have decreased by $0.5 million due to depreciation of assets being only partially offset by new asset acquisitions.

Liabilities

Our liabilities decreased by $8.2 million (31 per cent), primarily due to the partial repayment of the public account advance of $8.5 million, and significantly lower accruals for redundancy payments.

7.4 Cash flows

Cash flow statement

We keep a base cash balance of $900 in petty cash. All other bank balances are transferred overnight to the state government as part of our government banking arrangement.

Figure 7G
Cash flow statement

Item

2017–18
($'000)

2016–17
($'000)

Change
($'000)

Change
(percentage)

Net cash flows from / (used in) operating activities

488

4 118

(3 631)

-88

Net cash flows from / (used in) investing activities

(346)

(4 122)

3 776

-92

Net cash flows from / (used in) financing activities

(142)

4

( 146)

-3 400

Net increase / (decrease) in cash held

Cash at the beginning of the financial year

1

1

Cash at the end of the financial year

1

1

Our net surplus for the year under an accrual basis is $2.01 million. The net cash inflow from operating activities was lower, at $488 000. This is mainly because the decline in payables of $7.0 million was more than the decline in receivables of $5.7 million. The main driver of the decline in payables was the partial repayment of the public account advance.

7.5 Other financial matters

Financial report

Under Standing Direction 4.2 of the Financial Management Act 1994, the financial statements of government departments must be presented fairly and in accordance with the requirements in the model financial report. This annual report complies with this requirement.

Consultancies

In 2017–18, we engaged one consultancy that had total fees payable greater than $10 000, as outlined in Figure 7H. We also engaged one consultancy where the total fees payable were less than $10 000, with a total expenditure of $3 000 (excluding GST).

Figure 7H
Consultancies—payments in excess of $10,000

Consultant

Purpose of consultancy

Start date

End date

Total approved
project fee
(excluding GST)
($'000)

Expenditure
2017–18 (excluding GST)
($'000)

Future
expenditure
(excluding GST)
($'000)

Peter Collins and Associates Pty Ltd

Strategy development

20 July 2017

30 September 2017

11

11

0

Performance audit contractors

In 2017–18, we paid $0.74 million ($0.87 million in 2016–17) to 12 contractors for services related to performance audits.

Figure 7I
Payments to performance audit contractors

Performance audit contractor

2017–18
($'000)

2016–17
($'000)

ACER

27

Aginic

272

Aski

235

Australian Survey Research Group Pty Ltd

45

Chappell Dean Pty Ltd

12

Civic Ways Pty Ltd

23

Dench McLean Carlson Pty Ltd

82

Eassure

31

Ernst & Young

70

Finity Consulting Pty Ltd

180

Glossop Town Planning Pty Ltd

28

Guidera Consulting Group Pty Ltd

81

Keaney Planning

23

KordaMentha

137

Lion Partnership

40

Orima Research Pty Ltd

22

Ovum Pty Ltd

22

Paul Edney

27

PEECE Pty Ltd

44

P G Rorke

59

Project Planning & Development

28

Tract Consultants

23

Victorian Government Solicitor(a)

20

Other—service providers (6 in 2016–17)

23

55

Total

743

866

(a) The Victorian Government Solicitor's Office was engaged to provide legal advice on audits.

Financial audit service providers

In 2017–18, we paid $11.8 million ($11.3 million in 2016–17) to 23 audit firms that provided services related to our financial statement audits.

Figure 7J
Payments to financial audit service providers

Financial audit service provider

2017–18
($'000)

2016–17
($'000)

Accounting and Auditing Solutions

67

63

Crowe Horwath

834

671

Crowe Horwath Albury

485

418

Crowe Horwath Vic

636

576

Crowe Horwath West Vic

88

177

Davidsons Assurance Services Pty Ltd

44

48

DFK Kidsons

268

81

DMG Audit and Advisory

241

199

Ernst & Young

801

826

Grant Thornton Audit Pty Ltd

54

HLB Mann Judd (VIC Partnership)

2 601

2 536

Johnsons MME

383

315

KPMG

543

422

LD Assurance

135

138

McLaren Hunt(a)

405

384

McLean Delmo Bentleys Pty Ltd

517

681

MGR Accountants Pty Ltd

20

12

Moore Stephens Audit (Vic)

39

PPT Professional Pty Ltd

62

26

RSD Audit(b)

1 036

1 184

RSM Australia Pty Ltd

2 567

2 420

Other—3 service providers (5 in 2016–17)

32

57

Total

11 804

11 288

(a) Previously known as Coffey Hunt Audit
(b) Previously known as Richmond Sinnott & Delahunty

Information and communications technology expenditure

In 2017–18, we had ICT expenditure of $1 794 000.

Figure 7K
ICT expenditure

Expenditure type

Expenditure
($’000)

Business as usual (BAU) ICT expenditure

1 113

Non-BAU ICT expenditure

682

Operational expenditure

343

Capital expenditure

339

ICT expenditure refers to our costs in providing business-enabling ICT services. It comprises BAU ICT expenditure and non-BAU ICT expenditure. Non-BAU ICT expenditure relates to extending or enhancing our current ICT capabilities. BAU ICT expenditure is all remaining ICT expenditure which primarily relates to ongoing activities to operate and maintain the current ICT capability.

Whole-of-government financial statements

Figure 7L is a comprehensive operating statement for the Parliament portfolio that provides a comparison between our actual financial statements and the forecast financial information published in the Statement of Finances 2017–18: Budget Paper No.5 (BP5). The financial data has been prepared on a consolidated basis and includes all general government sector entities within the portfolio. Financial transactions and balances are classified into either controlled or administered categories, as agreed with the Treasurer in the context of the published statements in BP5. The following statements are not subject to audit and are not prepared on the same basis as VAGO's financial statements as they include the consolidated financial information of the Parliament entity.

Figure 7L
Comprehensive operating statement for Parliament

 

2017–18

Budget

Actual

Variance(b)

Parliament
($'000)

VAGO
($'000)

Controlled
Parliament(a)
($'000)

VAGO
($'000)

VAGO
($'000)

Income from transactions

Output appropriations

130 531

42 601

173 132

44 531

1 930

Special appropriations

48 635

558

49 193

569

11

Sale of goods and services

26 098

0

26 098

143

143

Grants

14

0

14

0

0

Fair value of services received free of charge or for nominal consideration

0

38

38

33

(5)

Total income from transactions

205 278

43 197

248 475

45 276

2 079

 

Expenses from transactions

Employee benefits

108 684

25 836

134 520

23 801

2 035

Depreciation and amortisation

14 549

355

14 904

839

(484)

Interest expense

86

2

88

14

(12)

Capital asset charge

6 490

126

6 616

359

(233)

Payments into consolidated fund

26 021

0

26 021

0

0

Other operating expenses

49 371

16 854

66 225

18 137

(1 283)

Total expenses from transactions

205 201

43 173

248 374

43 150

23

Net result from transactions (net operating balance)

77

24

101

2 126

2 102

(a) Budget figures are as published in Statement of Finances 2017–18: Budget Paper No.5, page 132 (shown in $millions).
(b) For income items, the variance is positive if actual exceeds budget. For expense items, the variance is positive if budget exceeds actual.

7.6 Financial statements

Declaration in the financial statements

Independent Auditor's Report

Comprehensive Operating Statement

Balance Sheet

Cash Flow Statement

Statement of Changes in Equity

Notes to financial statements

  1. About this report
  2. Funding delivery of our services
  3. The cost of delivering our services
  4. Controlled and administered items
  5. Key assets available to support output delivery
  6. Other assets and liabilities
  7. How we financed operations
  8. Risks and valuation judgements
  9. Other disclosures

Declaration in the Financial Statements

The attached financial statements for the Victorian Auditor-General's Office (VAGO) have been prepared in accordance with Direction 5.2 of the Standing Directions of the Minister for Finance under the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards including Interpretations, and other mandatory professional reporting requirements.

We further state that, in our opinion, the information set out in the Comprehensive Operating Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and accompanying notes, presents fairly the financial transactions during the year ended 30 June 2018 and financial position of VAGO at 30 June 2018.

At the time of signing, we are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate.

We authorise the attached financial statements for issue on 21 August 2018.

Signature of the Auditor-General.png

Andrew Greaves
Auditor-General
Victorian Auditor-General's Office

Melbourne
21 August 2018

Narelle Whinfield's Signature


Narelle Whinfield
Finance Director
Victorian Auditor-General's Office

Melbourne
21 August 2018

Independent Auditor's Report

Independent Auditor's Report to the Victorian Auditor-General's Office, page 1.

 

Independent Auditor's Report to the Victorian Auditor-General's Office, page 2.

Comprehensive Operating Statement

for the financial year ended 30 June 2018

 

Note

2017–18
$'000

2016–17
$'000

Income from transactions

Output appropriations

2.1

44,531

42,770

Special appropriations

 

569

590

Sale of services and other income

2.2.1

176

403

Total income from transactions

 

45,276

43,763

 

Expenses from transactions

Employee expenses

3.1.1

23,801

27,809

Contracted audit services provided by professional firms

 

12,547

12,154

Operating lease payments - accommodation

 

1,864

1,530

Depreciation

5.1.2

839

583

Interest expense

 

14

10

Consultants and contractors

 

982

1,482

Other operating expenses

3.4

3,103

3,611

Total expenses from transactions

 

43,150

47,179

 

Net result from transactions (net operating balance)

 

2,126

(3,416)

 

Other economic flows included in net result

Net gain / (loss) on non-financial assets

7.2.1

(29)

(2)

Other gains / (losses) from other economic flows

 

(84)

274

Total other economic flows included in net result

 

(113)

272

 

Net result

 

2,013

(3,144)

 

Comprehensive result gain / (loss)

 

2,013

(3,144)

The accompanying notes form part of these financial statements.

Balance Sheet

as at 30 June 2018

 

Note

2017–18
$'000

2016–17
$'000

Assets

Financial assets

Cash

7.2

1

1

Receivables

6.1

19,954

25,618

Total financial assets

 

19,955

25,619

 

Non-financial assets

Property, plant and equipment and intangible assets

5.1.2

5,403

5,926

Other non-financial assets

6.2

565

537

Total non-financial assets

 

5,968

6,463

 

Total assets

 

25,923

32,082

 

Liabilities

Payables

6.3

12,546

19,560

Borrowings

7.1

155

297

Employee related provisions

3.1.2

4,880

6,200

Other provisions

6.4

779

475

Total liabilities

 

18,360

26,532

 

Net assets

 

7,563

5,550

 

Equity

Accumulated surplus

 

7,268

5,255

Contributed capital

 

295

295

Net worth

 

7,563

5,550

The accompanying notes form part of these financial statements.

Cash Flow Statement

for the financial year ended 30 June 2018

 

Note

2017–18
$'000

2016–17
$'000

Cash flows from operating activities

Receipts

Appropriation receipts from Government

 

57,457

50,991

Receipts from other entities

 

143

370

Total receipts

 

57,600

51,361

 

Payments

Payments to suppliers and employees

 

(55,877)

(46,660)

Goods and Services Tax paid to the ATO (i)

 

(873)

(451)

Capital asset charge payments

 

(359)

(123)

Interest and other costs of finance paid

 

(3)

(9)

Total payments

 

(57,112)

(47,243)

Net cash flows from / (used in) operating activities

7.2.1

488

4,118

 

Cash flows from investing activities

Purchases of non-financial assets

 

(494)

(4,214)

Sales of non-financial assets

 

148

92

Net cash flows from / (used in) investing activities

 

(346)

(4,122)

 

Cash flows from financing activities

Proceeds from finance leases

 

73

161

Repayment of finance leases

 

(215)

(157)

Net cash flows from / (used in) financing activities

 

(142)

4

 

Net increase / (decrease) in cash held

 

Cash at the beginning of the financial year

 

1

1

Cash at the end of the financial year

7.2

1

1

The accompanying notes form part of these financial statements.

(i) Goods and Services Tax paid to the ATO is presented on a net basis.

Statement of Changes in Equity

for the financial year ended 30 June 2018

 

Accumulated
surplus
$'000

Contributed
capital
$'000

TOTAL

$'000

Balance at 1 July 2016

8,399

295

8,694

Net result for the year

(3,144)

(3,144)

Balance at 30 June 2017

5,255

295

5,550

Net result for the year

2,013

2,013

Balance at 30 June 2018

7,268

295

7,563

The accompanying notes form part of these financial statements.

Notes to financial statements

1. ABOUT THIS REPORT

The Victorian Auditor-General's Office (VAGO) and the Auditor-General's mandate are established pursuant to:

  • the Constitution Act 1975, which establishes the role of the Auditor-General and gives the Auditor-General complete discretion in the performance and exercise of his functions and powers
  • the Audit Act 1994, which establishes the Auditor-General's mandate, provides the legal basis for his powers, and identifies his responsibilities.

VAGO is an administrative agency acting on behalf of the Crown. Our address is: Level 31, 35 Collins Street, Melbourne, VIC, 3000.

A description of the nature of VAGO's operations and its principal activities and objectives is included in the report of operations, which does not form part of these financial statements.

Basis of preparation

These financial statements cover VAGO as an individual reporting entity and include all of its controlled activities.

These financial statements are prepared in Australian dollars and use the historical cost convention unless a different measurement basis is specifically disclosed in the note associated with the item. They apply an accrual basis of accounting whereby assets, liabilities, equity, income and expenses are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

Consistent with the requirements of AASB 1004 Contributions, contributions by owners (that is, contributed capital and its repayment) are treated as equity transactions and, therefore, do not form part of the income and expenses of VAGO. Additions to net assets which have been designated as contributions by owners are recognised as contributed capital. Other transfers that are in the nature of contributions to or distributions by owners have also been designated as contributions by owners.

Judgements, estimates and assumptions are made about financial information being presented. Significant judgements are in the notes where amounts affected by those judgements are disclosed. Estimates and associated assumptions are based on professional judgements derived from historical experience and various other factors believed reasonable under the circumstances. Actual results may differ from these estimates.

Revisions to accounting estimates are recognised in the period in which the estimate is revised.

All amounts in the financial statements have been rounded to the nearest $1 000, unless otherwise stated.

Compliance information

These general purpose financial statements have been prepared in accordance with the Financial Management Act 1994 (FMA) and applicable Australian Accounting Standards (AAS) which include Interpretations, issued by the Australian Accounting Standards Board (AASB). In particular, they are presented in a manner consistent with the requirements of AASB 1049 Whole of Government and General Government Sector Financial Reporting (AASB 1049).

Where appropriate, AAS paragraphs applicable to not-for-profit entities have been applied. Accounting policies selected and applied in these financial statements ensure that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events are reported.

2. FUNDING DELIVERY OF OUR SERVICES

2.1 Summary of compliance with annual Parliamentary and special appropriations

The following table discloses the details of the various annual Parliamentary appropriations received by VAGO for the year.

'Provision for outputs' are disclosed as 'controlled' activities of VAGO. Administered transactions are those that are undertaken on behalf of the State of Victoria over which VAGO has no control or discretion.

 

Appropriations Act

Financial Management Act 1994(i)

     
 

Annual appropriation

Section 29

Total Parliamentary authority

Appropriations applied

Variance(ii)

2017–18

$'000

$'000

$'000

$'000

$'000

Controlled

Provision for outputs

16,589

26,012

42,601

44,531

(1,930)

Total 2017–18

16,589

26,012

42,601

44,531

(1,930)

2016–17

Controlled

Provision for outputs

16,184

25,585

41,769

42,770

(1,001)

Total 2016–17

16,184

25,585

41,769

42,770

(1,001)

(i) VAGO has received a public account advance under section 37 FMA of $8.54 million. This does not require a warrant, but allows VAGO to replenish the State Administration Unit receivable, as disclosed under 'Amounts owing from Victorian Government' in Note 6.1. The advance is disclosed under 'Amounts payable to government and agencies' in Note 6.3.

(ii) The variance from estimate in 2016–17 and 2017–18 was due to the variability in financial audit fees charged and retained as per the section 29 agreement.

The following table discloses the details of compliance with special appropriations:

       

Appropriations applied

Authority

 

Purpose

 

2017–18
$'000

2016–17
$'000

The Constitution Act 1975, section 94A(6)

 

Costs associated with the Auditor-General

 

569

590

Appropriations

Once annual Parliamentary appropriations are applied by the Treasurer, they become controlled by VAGO and are recognised as income when applied to the purposes defined under the Appropriation Act 2016.

Output appropriations: Income from the outputs VAGO provides to Parliament is recognised when the outputs have been delivered and the Minister for Finance and the Treasurer have certified delivery of the outputs in accordance with specified performance criteria as outlined in the 2017–18 budget papers.

Special appropriations: Under section 94A(6) of the Constitution Act 1975, revenue related to costs associated with the Auditor-General's delivery of assurance services, such as remuneration and on-costs, is recognised when the amount appropriated for that purpose is due and payable to VAGO.

Annotated income agreements

VAGO charges and collects financial audit fees from audit clients. VAGO is permitted to have financial audit fees annotated to annual appropriation per section 29 of the FMA. Receipts are transferred into the Consolidated Fund and shown as an administered item in Note 4.2. At the point of income recognition, section 29 provides for an equivalent amount to be added to the annual appropriation, which is then available to fund the costs of financial audit services.

The following is a listing of the FMA section 29 annotated income agreements approved by the Treasurer:

 

2017–18
$'000

2016–17
$'000

Fee for services

Audit fees

26,012

25,585

Total annotated income agreements

26,012

25,585

2.2 Other income from transactions

2.2.1 Services and other income

 

2017–18
$'000

2016–17
$'000

Sale of services(i)

143

370

Fair value of services received free of charge or for nominal consideration(ii)

33

33

Total sale of services and other income

176

403

(i) Arises from the recovery of costs of secretariat services for the Australasian Council of Auditors-General (ACAG), and the recovery of salaries of staff seconded to other government departments and agencies. The prior year included revenue from the recovery of costs of the Financial Reporting and Auditing Committee.
Income from the sale of services includes the recovery of costs for staff secondments to other Victorian government departments and agencies and other State Auditor-General Offices and is recognised by reference to the stage of completion of the services being performed.
The income is recognised when the amount of the income, stage of completion and transaction costs incurred can be reliably measured, and it is probable that the economic benefits associated with the transaction will flow to VAGO.

Under this method, income is recognised by reference to labour hours supplied or to labour hours supplied as a percentage of total services to be performed in each annual reporting period.

(ii) Represents funding of remuneration of the external auditor paid by the Public Accounts and Estimates Committee. See Note 9.4 for further details.

3. THE COST OF DELIVERING OUR SERVICES

This section provides an account of the expenses incurred by VAGO in delivering services and outputs.

3.1 Employee benefits

3.1.1 Employee benefits included in the Comprehensive Operating Statement

 

2017–18
$'000

2016–17
$'000

Salaries and wages, annual leave and long service leave

21,786

23,638

Defined contribution superannuation expense

1,884

1,860

Defined benefit superannuation expense

69

109

Termination benefits

62

2,202

Total employee expenses

23,801

27,809

Employee expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, termination payments, WorkCover premiums, defined benefits superannuation plans and defined contribution superannuation plans.

Employment on-costs such as payroll tax, workers compensation and superannuation are not employee benefits. They are disclosed separately as a component of the provision for employee benefits when the employment to which they relate has occurred.

The amount recognised in relation to superannuation is employer contributions for members of both defined benefit and defined contribution superannuation plans that are paid or payable during the reporting period. VAGO does not recognise any defined benefit liabilities because it has no legal or constructive obligation to pay future benefits relating to its employees. The Department of Treasury and Finance discloses in its annual financial statements the net defined benefit cost related to the members of this plan as an administered liability (on behalf of the State as the sponsoring employer).

Termination benefits are payable when employment is terminated before normal retirement date, or when an employee accepts an offer of benefits in exchange for the termination of employment. Termination benefits are recognised when VAGO is either demonstrably committed to terminating the employees' employment according to a formal plan which has no possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy.

3.1.2 Employee benefits provisions in the Balance Sheet

A provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave (LSL) for services rendered to the reporting date and recorded as an expense during the period the services are delivered.

 

2017–18
$'000

2016–17
$'000

Current provisions

Annual leave

Unconditional and expected to settle within 12 months

1,156

1,168

Unconditional and expected to settle after 12 months

340

424

 

1,496

1,592

Long service leave

Unconditional and expected to settle within 12 months

305

313

Unconditional and expected to settle after 12 months

1,904

2,013

 

2,209

2,326

Provision for on-costs

Unconditional and expected to settle within 12 months

224

227

Unconditional and expected to settle after 12 months

347

377

 

571

604

Performance incentive entitlements

Unconditional and expected to settle within 12 months

82

376

Termination payments

Conditional and expected to settle within 12 months

86

811

Total current provisions for employee benefits

4,444

5,709

 

Non-current provisions

Employee benefits

377

425

On-costs

59

66

Total non-current provisions for employee benefits

436

491

 

Total provisions for employee benefits

4,880

6,200

Reconciliation of movement in on-cost provision

 

2017–18
$'000

Opening balance

670

Additional provisions recognised

71

Additions due to transfer in

56

Reductions arising from payments

(105)

Reductions due to transfer out

(73)

Unwind of discount and effect of changes in the discount rate

11

Closing balance

630

 

Current

571

Non-current

59

Total provisions for on-costs

630

Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries (including non-monetary benefits, annual leave and on-costs) are recognised as part of the employee benefit provision as current liabilities, as VAGO does not have an unconditional right to defer settlement of these liabilities. They are recognised at remuneration rates which are current at the reporting date and measured at undiscounted amounts as it is expected the wages and salaries liabilities will be wholly settled within 12 months of reporting date.

No provision has been made for sick leave as it is non-vesting and not considered probable that the average sick leave taken in the future will be greater than the benefits accrued in the future. As sick leave is non-vesting, an expense is recognised in the Comprehensive Operating Statement as it is taken.

Long service leave

Unconditional LSL is disclosed as a current liability even where VAGO does not expect to settle the liability within 12 months because it does not have an unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months.

The components of the current LSL liability are measured at undiscounted value where VAGO expects to wholly settle within 12 months or present value where VAGO does not expect to wholly settle within 12 months.

Any gain or loss following revaluation of the present value of non-current LSL liability is recognised as a transaction, except to the extent that a gain or loss arises due to changes in bond interest rates which is then recognised as an 'other economic flow', in the net result.

Conditional LSL is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. This non-current LSL is measured at present value.

Performance incentive entitlements

The performance incentive entitlements liability represents an estimate of the performance incentive entitlements payable to non-executive staff for the performance review period ending on the balance sheet date and payable within the next financial year. These are subject to the remuneration committee's assessment of employee Performance Development Plans. In 2016–17, the liability included an estimate of such payments to executive staff, but these have now been discontinued.

3.1.3 Superannuation contributions

Superannuation contributions paid or payable for the reporting period are included as part of employee benefits in the Comprehensive Operating Statement of VAGO.

 

Paid contribution for the year

Contribution outstanding at year end

 

2017–18
$'000

2016–17
$'000

2017–18
$'000

2016–17
$'000

Defined benefit plans(i)

State Superannuation Fund—revised and new

69

107

2

Defined contribution plans

VicSuper

1,216

1,165

19

Other employee nominated plans

648

666

10

Total

1,933

1,938

31

(i) The bases for determining the level of contributions are determined by the various actuaries of the defined benefit superannuation plans.

As noted in 3.1.1 VAGO does not recognise any defined benefit liabilities.

3.2 Contracted audit services provided by professional firms

VAGO contracts certain audit services to external professional firms. Amounts incurred under such contracts are recognised as an expense in the reporting period in which they are incurred. At the end of the reporting period, an estimate is made of the value of audit services provided to VAGO which have not yet been invoiced. The value of this uninvoiced work is recognised as an accrual in the Balance Sheet, and as an expense in the Comprehensive Operating Statement.

3.3 Operating lease payments

Operating lease payments are recognised on a straight-line basis over the lease term. They relate to the lease of VAGO's premises.

3.4 Other operating expenses
 

2017–18
$'000

2016–17
$'000

Training

572

621

Recruitment

245

306

Information technology

826

799

Outsourced internal audit fees

81

255

Motor vehicles

148

256

Travel

266

246

Other office expenses

965

1,128

Total other operating expenses

3,103

3,611

Other operating expenses generally represent the day-to-day running costs incurred in normal operations. They are recognised as an expense in the reporting period in which they are incurred.

4. CONTROLLED AND ADMINISTERED ITEMS

Judgement is required in allocating income and expenditure to specific outputs. The following judgements were made in making the allocations:

  • Output appropriation revenue is allocated directly to the output funded by the appropriation.
  • Other revenue is allocated on the basis of management estimates of the relative benefits accruing to each output.
  • Expenses are allocated on the basis of management estimates of the planned direct hours worked by employees against each output.

There were no amounts unallocated.

The distinction between controlled and administered items is based on VAGO's ability to deploy the resources in question for its own benefit (controlled items) or on behalf of the state (administered). VAGO remains accountable for transactions involving administered items but does not recognise them in its financial statements, except by way of note disclosure.

4.1 Departmental outputs – Descriptions

4.1.1 Output descriptions

For a description of the VAGO's outputs, please refer to pages 21 to 25 in the Report of Operations.

Departmental Outputs – Controlled income and expenses for the year ended 30 June 2018

 

Parliamentary reports

Financial statement audit
and assurance reports

Total

 

2017–18
$'000

2016–17
$'000

2017–18
$'000

2016–17
$'000

2017–18
$'000

2016–17
$'000

Income from transactions

Parliamentary output appropriations

16,589

16,184

27,942

26,586

44,531

42,770

Parliamentary special appropriations

244

295

325

295

569

590

Sale of services

59

203

84

167

143

370

Fair value of services received free of charge or for nominal consideration

14

14

19

19

33

33

Total income from transactions

16,906

16,696

28,370

27,067

45,276

43,763

 

Expenses from transactions

Employee expenses

11,585

13,056

12,216

14,753

23,801

27,809

Contracted audit services provided by professional firms

743

866

11,804

11,288

12,547

12,154

Depreciation

396

234

443

349

839

583

Interest expense

7

7

7

3

14

10

Capital asset charge

169

53

190

70

359

123

Other operating expenses

2,654

2,938

2,936

3,562

5,590

6,500

Total expenses from transactions

15,554

17,154

27,596

30,025

43,150

47,179

 

Net result from transactions (net operating balance)

1,352

(458)

774

(2,958)

2,126

(3,416)

 

Other economic flows included in net result

Net gain / (loss) on non-financial assets

(14)

(1)

(15)

(1)

(29)

(2)

Other gains / (losses) from other economic flows

(41)

131

(43)

143

(84)

274

Total other economic flows included in net result

(55)

130

(58)

142

(113)

272

 

Net result

1,297

(328)

716

(2,816)

2,013

(3,144)

 

Comprehensive result gain / (loss)

1,297

(328)

716

(2,816)

2,013

(3,144)

Controlled assets and liabilities as at 30 June 2018

 

Parliamentary reports

Financial statement audit
and assurance reports

Total

 

2017–18
$'000

2016–17
$'000

2017–18
$'000

2016–17
$'000

2017–18
$'000

2016–17
$'000

Assets

Financial assets

7,199

9,298

12,756

16,321

19,955

25,619

Non-financial assets

2,153

2,345

3,815

4,118

5,968

6,463

Total assets

9,352

11,643

16,571

20,439

25,923

32,082

 

Liabilities

Total liabilities

6,624

9,629

11,736

16,903

18,360

26,532

Net assets

2,728

2,014

4,835

3,536

7,563

5,550

4.2 Administered Items

Administered income includes recovery of audit costs incurred from performing financial statement audits. VAGO does not control the income and assets arising from audit fees and collects these amounts on behalf of the state. Accordingly, the income and related assets are disclosed as Administered Items. As VAGO has an annotated income agreement for financial audit fees, the output appropriation—used to fund the costs of financial audit services (see Note 2.1)—is increased by an equivalent amount.

Administered expenses include payments made on behalf of the state and payments into the Consolidated Fund. Administered assets include government income earned but yet to be collected. Administered liabilities include government expenses incurred but yet to be paid.

Except as otherwise disclosed, administered resources are accounted for on an accrual basis using the same accounting policies adopted for recognition of the controlled items in the financial statements. Both controlled and administered items of VAGO are consolidated into the financial statements of the state.

VAGO's administered (non-controlled) items for the financial year ended 30 June 2018

 

2017–18
$'000

2016–17
$'000

Administered income from transactions

Reimbursement of audit costs charged

27,942

26,479

Miscellaneous income

3

Total administered income from transactions

27,942

26,482

 

Administered expenses from transactions

Doubtful debts expense

(122)

Payments into the Consolidated Fund

27,942

26,608

Total administered expenses from transactions

27,942

26,486

 

Total administered net result from transactions (net operating balance)

(4)

 

Administered other economic flows included in administered net result

Net gain / (loss) on non-financial assets

4

Total administered other economic flows

4

 

Administered net result

 

Total administered comprehensive result

 

Administered financial assets

Receivables(i)

4,635

3,666

Total administered financial assets

4,635

3,666

 

Administered non-financial assets

Work in progress(ii)

2,133

1,880

Total administered non-financial assets

2,133

1,880

 

Total administered assets

6,768

5,546

 

Administered liabilities

Amounts owing to the state

6,768

5,546

Total administered liabilities

6,768

5,546

 

Total administered net assets

(i) Receivables comprise debtors falling due as follows:

 

Current

4,141

3,023

Overdue between 30 to 60 days

181

285

Overdue beyond 61 to 90 days

231

358

Overdue beyond 90 days

82

 

4,635

3,666

Receivables comprise financial statement audit debtors and are deemed wholly collectable.

(ii) Prior year work in progress included a provision of $1,280,000, deemed to be not a reasonable cost of the audit. This was due to an overestimation of the hourly rates of staff which are built into the internal pricing mechanism.

5. KEY ASSETS AVAILABLE TO SUPPORT OUTPUT DELIVERY

VAGO controls assets that are utilised to fulfil its objectives and conduct its activities. They represent the resources that have been entrusted to VAGO to deliver those outputs.

The initial cost for non-financial physical assets under a finance lease is measured at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease.

Purchased intangible assets are initially recognised at cost. Purchased internally generated intangible assets relating to development of electronic audit toolsets used in financial and performance audit areas are initially recognised at cost when they meet the recognition criteria in AASB 138 Intangible Assets.

Internally generated intangible assets are recognised on the basis of demonstrating:

(a) the technical feasibility of completing the intangible asset so that it will be available for use

(b) an intention to complete the intangible asset and use it

(c) the ability to use the intangible asset

(d) the intangible asset will generate probable future economic benefits

(e) the availability of adequate technical, financial and other resources to complete the development and to use the intangible asset

(f) the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Subsequent to initial recognition, intangible assets with finite useful lives are carried at cost less accumulated depreciation and accumulated impairment losses. Depreciation begins when the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Items of property, plant and equipment (PPE) are measured initially at cost. Where an asset is acquired for no or nominal cost, the cost is its fair value at the date of acquisition.

Subsequently they are measured at fair value less accumulated depreciation and impairment. Fair value is normally determined by reference to the asset's depreciated replacement cost, and is summarised below by asset category.

Fair value measurement

Where the assets included in this section are carried at fair value, additional information is disclosed in Note 5.2 in connection with how those fair values were determined.

Purpose groups

Under FRD 103G, PPE are classified primarily by the 'purpose' for which the assets' are used, according to one of six purpose groups based upon government purpose classifications. All assets in a purpose group are further sub-categorised according to the asset's 'nature', with each sub-category being classified as a separate class of asset for financial reporting purposes.

All VAGO PPE is classified as the purpose group 'public administration'.

5.1 Total property, plant and equipment and intangible assets

Classification by nature

 

Gross carrying amount

Accumulated depreciation

Net carrying amount

 

2017–18
$'000

2016–17
$'000

2017–18
$'000

2016–17
$'000

2017–18
$'000

2016–17
$'000

Leasehold improvements

6,011

5,951

(1,373)

(854)

4,638

5,097

Furniture and fittings

113

113

(107)

(106)

6

7

Computer software

286

267

(273)

(267)

13

Computer hardware

2,155

1,852

(1,748)

(1,582)

407

270

Office equipment

303

283

(187)

(147)

116

136

Mobile phones

42

42

(42)

(41)

1

Motor vehicles—leased

193

361

(38)

(66)

155

295

Intangible assets

1,824

1,807

(1,756)

(1,687)

68

120

Total property, plant and equipment and intangible assets

10,927

10,676

(5,524)

(4,750)

5,403

5,926

5.1.1 Depreciation and impairment

Useful lives

All plant and equipment and other non-financial physical assets that have finite useful lives, are depreciated. Intangible assets with finite useful lives are depreciated as an 'expense from transactions' on a straight-line basis over their useful lives.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, and adjustments made where appropriate.

Depreciation is calculated on a straight-line basis, at rates that allocate the asset's value, less any estimated residual value, over its estimated useful life. Leasehold improvements are depreciated over the shorter of the lease term and their useful lives. Estimated useful lives for the different asset classes for current and prior years are included in the table below.

Asset

Useful life
(years)

Leasehold improvements

2–10

Furniture and fittings

10

Computer software

3

Computer hardware

4

Office equipment

5

Mobile phones

2

Motor vehicles—leased

3

Intangible assets

3

The depreciation charge for the period is included in Note 5.1.2.

In the event of the loss or destruction of an asset, the future economic benefits arising from the use of the asset will be replaced (unless a specific decision to the contrary has been made).

Impairment

Non-financial assets, including items of property, plant and equipment and intangibles, are tested for impairment whenever there is an indication that the asset may be impaired. The assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Where an asset's carrying value exceeds its recoverable amount, the difference is written off as an 'other economic flow'.

The recoverable amount for most assets is measured at the higher of current replacement cost and fair value less costs to sell.

Intangible assets with finite useful lives are tested for impairment whenever an indication of impairment is identified.

No assets were impaired in the current reporting period.

5.1.2 Reconciliation of movements in carrying amounts of property, plant and equipment and intangible assets, carried at fair value

 

Lease improvements
$'000

Furniture and fittings
$'000

Computer software
$'000

Computer hardware
$'000

Office equipment
$'000

Mobile phones
$'000

Motor vehicles—leased
$'000

Intangible assets
$'000

Total
$'000

Balance at 1 July 2016

277

4

1

203

35

290

94

904

Additions

5,139

5

209

115

1

161

70

5,700

Disposals

(95)

(95)

Depreciation

(319)

(2)

(1)

(142)

(14)

(61)

(41)

(583)

Balance at 30 June 2017

5,097

7

270

136

1

295

120

5,926

Additions

61

19

303

21

73

16

493

Disposals

(177)

(177)

Depreciation

(520)

(1)

(6)

(166)

(41)

(1)

(36)

(68)

(839)

Balance at 30 June 2018

4,638

6

13

407

116

155

68

5,403

5.2 Fair value determination

Significant judgement: Fair value measurements of assets and liabilities

Fair value determination requires judgement and the use of assumptions. This section discloses the most significant assumptions used in determining fair values. Changes to assumptions could have a material impact on the results and financial position of VAGO.

This section sets out information on how fair value for financial reporting purposes is determined. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The following assets and liabilities are carried at fair value:

  • financial assets and liabilities at fair value,
  • plant and equipment, and
  • other assets and liabilities carried at amortised cost.

Fair value hierarchy

In determining fair values a number of inputs are used. VAGO uses only Level 3 unobservable inputs. Significant unobservable inputs have remained unchanged since June 2017

For those assets and liabilities for which fair values are determined, the following disclosures are provided:

  • a reconciliation of the movements in fair values from the beginning of the year to the end; and
  • details of significant unobservable inputs used in the fair value determination.

5.2.1 Fair value determination of financial assets and liabilities

The carrying amounts of financial assets and financial liabilities recognised at the balance date, consisting of cash, receivables, payables and borrowings, represent fair value.

5.2.2 Fair value determination: Non-financial physical assets

All non-financial physical assets are classified as Level 3 significant unobservable inputs in the fair value hierarchy. There have been no transfers between levels during the period.

Reconciliation of Level 3 fair value movements

 

Property, plant and equipment

 

2017–18
$'000

2016–17
$'000

Balance at 1 July 2017

5,806

810

Additions

477

5,630

Disposals

(177)

(95)

Depreciation

(771)

(539)

Balance at 30 June 2018

5,335

5,806

Description of significant unobservable inputs to Level 3 valuations

2017–18 and 2016–17

Valuation technique

Significant unobservable inputs

Leasehold improvements

Depreciated replacement cost

Depreciated replacement cost per unit

Useful life of leasehold improvements

Other property, plant and equipment

Depreciated replacement cost

Depreciated replacement cost per unit

Useful life of other property, plant and equipment

6. OTHER ASSETS AND LIABILITIES

This section sets out assets and liabilities arising from operations.

6.1 Receivables
 

2017–18
$'000

2016–17
$'000

Contractual

Lease incentive(i)

4,747

Other receivables

1

39

Statutory

Amounts owing from Victorian Government(ii)

19,953

20,735

FBT owing from ATO

42

GST input tax credit recoverable

55

Total receivables

19,954

25,618

Represented by

Current receivables

13,332

21,394

Non-current receivables

6,622

4,224

Total receivables

19,954

25,618

(i) Lease incentive is due from the lessor of the VAGO premises.

(ii) The total amount recognised as owing from the Victorian Government was $19,953,000 (2016–17: $20,735,000) of which $13,331,000 (2015–16: $16,511,000) is likely to be drawn down in the next financial year and is reported accordingly as a current receivable. The amount recognised as owing from the Victorian Government comprises previously applied Parliamentary appropriations not yet drawn down. The balance is represented by accumulated surpluses, payables, movements in provisions and accumulated depreciation and amortisation net of asset acquisition.

Contractual receivables are classified as financial instruments and categorised as 'receivables'. They are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement they are measured at amortised cost using the effective interest method, less any impairment.

Statutory receivables do not arise from contracts and are recognised and measured similarly to contractual receivables (except for impairment), but are not classified as financial instruments. Amounts recognised from the Victorian Government represent funding for all commitments incurred and are drawn from the Consolidated Fund as the commitments fall due.

Ageing analysis of contractual financial assets(i)

 

Carrying amount

Not past due
and not impaired

Past due but not impaired

Less than 1 month

1–3months

3 months –1 year

1–5 years

 

$'000

$'000

$'000

$'000

$'000

$'000

2017–18

Lease incentive

Other receivables

1

1

Total

1

1

 

2016–17

Lease incentive

4,747

3,569

1,178

0

0

0

Other receivables

39

39

Total

4,786

3,608

1,178

(i) The carrying amounts disclosed here exclude statutory amounts (e.g. Amounts owing from Victorian Government and GST input tax credit recoverable).

There are no material contractual financial assets that are individually determined to be impaired. Currently VAGO does not hold any collateral as security nor credit enhancements relating to any of its financial assets.

There are no contractual financial assets that have had their terms renegotiated so as to prevent them from being past due or impaired, and they are stated at the carrying amounts as indicated.

6.2 Other non-financial assets
 

2017–18
$'000

2016–17
$'000

Current other non-financial assets

Prepaid software and hardware maintenance contracts

284

191

Prepaid rental expense— accommodation

176

168

Other prepayments

71

101

Accrued income—recovery of expenses

10

73

Total current other non-financial assets

541

533

 

Non-current other non-financial assets

Prepaid software and hardware maintenance contracts

24

4

Total non-current other non-financial assets

24

4

Total other non-financial assets

565

537

Other non-financial assets include prepayments and accrued income. Prepayments represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period. Accrued income represents amounts not received at the balance sheet date in exchange for the provision of services in the reporting period.

6.3 Payables
 

2017–18
$'000

2016–17
$'000

Contractual

Supplies and services(i)

2,962

3,840

Amounts payable to government and agencies(ii)

4,750

8,552

Lease incentive(iii)

4,167

4,636

Other payables(iv)

441

2,458

Statutory

FBT payable

17

GST payable

123

Payroll tax payable

86

74

Total payables

12,546

19,560

Represented by

Current payables

8,846

10,721

Non-current payables

3,700

8,839

Total payables

12,546

19,560

(i) Supplies and services is principally comprised of payables due to audit service providers.
(ii) Amounts payable to government and agencies is principally comprised of a public account advance under section 37 FMA of $4.67 million. See Note 2.1 for further information.
(iii) Lease incentive payable relates to funding provided by the lessor of the new VAGO premises. This is amortised over the term of the lease.
(iv) Other payables in 2017–18 were general salary accruals. In the prior year, they principally comprised an accrual for termination payments for employees.

Payables consist of:

  • contractual payables, classified as financial instruments, measured at amortised cost. Accounts payable represent liabilities for goods and services provided prior to the end of the financial year that are unpaid; and

  • statutory payables, are recognised and measured similarly to contractual payables, but not classified as financial instruments and not included in the category of financial liabilities at amortised cost, because they do not arise from contracts.

Payables for supplies and services have an average credit period of 30 days.

The terms and conditions of amounts payable to the government and agencies vary according to the particular agreements and as they are not legislative payables, they are not classified as financial instruments.

For the maturity analysis of contractual payables, see Note 8.1.2.

6.4 Non-employee related provisions
 

2017–18
$'000

2016–17
$'000

Non-current provisions

Lease contracts

316

24

Make-good provision

463

451

Total non-current provisions

779

475

 

Total non-employee related provisions

779

475

These provisions are recognised when VAGO has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation.

Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows, using a discount rate that reflects the time value of money and risks specific to the provision.

The provision for lease contracts reflects a requirement to provide for known future increases in operating lease rentals for the lease of VAGO's premises.

The make-good provision reflects a requirement in the terms of the lease of VAGO's premises to restore the property at the end of the lease term.

Reconciliation of movements in non-employee related provisions

 

Lease contracts
$'000

Make-good
$'000

Total
$'000

Opening balance at 1 July 2017

24

451

475

Additional provisions recognised

292

12

304

Provisions released

Closing balance at 30 June 2018

316

463

779

7. HOW WE FINANCED OPERATIONS

This section provides information on the sources of finance utilised by VAGO during its operations and other information related to financing activities of VAGO.

This section includes disclosures of balances that are financial instruments (such as borrowings and cash balances). Note 8.1 provides additional, specific financial instrument disclosures.

7.1 Finance lease liabilities (VAGO as lessee)
 

Minimum future lease payments(iii)

Present value of minimum future lease payments

2017–18
$'000

2016–17
$'000

2017–18
$'000

2016–17
$'000

Finance lease liabilities payable(i)(ii)

Not longer than one year

45

90

45

89

Longer than 1 year and not longer than 5 years

118

222

110

208

Minimum future lease payments

163

312

155

297

Less future finance charges

(8)

(15)

Present value of minimum lease payments

155

297

155

297

 

Included in the financial statements as:

Current borrowings

   

41

82

Non-current borrowings

   

114

215

Total

   

155

297

(i) Secured by the motor vehicle assets leased. Finance leases are effectively secured as the rights to the leased assets revert to the lessor in the event of default.
(ii) None of the borrowings related to PPPs.
(iii) Minimum future lease payments include the aggregate of all base payments and any guaranteed residual.

At the commencement of the lease term, finance leases are initially recognised as assets and liabilities at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payment, each determined at the inception of the lease. The leased asset is accounted for as a non-financial physical asset and depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Minimum finance lease payments are apportioned between the reduction of the outstanding lease liability and the periodic finance expense which is calculated using the interest rate implicit in the lease and charged directly to the Comprehensive Operating Statement.

Leasing arrangements: Finance leases relate to motor vehicles with lease terms of up to 3 years. VAGO does not have the option to purchase the vehicles at the conclusion of the lease agreements.

For the maturity analysis of borrowings, see Note 8.1.2.

7.2 Cash flow information and balances

Cash comprises cash on hand.

 

2017–18
$'000

2016–17
$'000

Total cash disclosed in the balance sheet

1

1

Balance as per cash flow statement

1

1

Due to the State's investment policy and funding arrangements, VAGO does not hold a cash reserve in its bank accounts. Cash received from generation of income is paid into the State's bank account ('public account'). Similarly, VAGO's expenditure is made via the public account. The public account remits to VAGO the cash required upon presentation of cheques by VAGO's suppliers or creditors.

7.2.1 Reconciliation of net result for the period to cash flow from operating activities

 

2017–18
$'000

2016–17
$'000

Net result for the period

2,013

(3,144)

Non-cash movements

(Gain) / loss on disposal of non-current assets

29

2

Depreciation of non-current assets

839

583

Movements in assets and liabilities

(Increase) / decrease in receivables

5,665

(8,657)

(Increase) / decrease in prepayments

(28)

(55)

Increase / (decrease) in payables

(7,014)

15,945

Increase / (decrease) in provisions

(1,016)

(556)

Net cash flows from / (used in) operating activities

488

4,118

7.3 Commitments for expenditure

Commitments for future expenditure include operating and capital commitments arising from contracts. These commitments are recorded below at their nominal value and inclusive of GST. These future expenditures cease to be disclosed as commitments once the related liabilities are recognised in the balance sheet.

7.3.1 Lease commitments

 

2017–18
$'000

2016–17
$'000

Operating lease commitments payable(i)

Less than 1 year

2,354

2,223

Longer than 1 year but not longer than 5 years

10,657

9,722

5 years or more

12,731

13,989

Total operating lease commitments payable

25,742

25,934

 

Contract audit service commitments payable

Less than 1 year

6,853

4,668

Longer than 1 year but not longer than 5 years

2,533

3,567

5 years or more

-

Total contract audit service commitments payable

9,386

8,235

 

Total commitments (inclusive of GST)

35,128

34,169

Less GST recoverable from the Australian Taxation Office

(3,193)

(3,106)

Total commitments (exclusive of GST)

31,935

31,063

(i) Operating lease commitments relate to office accommodation with a lease term of 10 years

7.4 Contingent assets and contingent liabilities

At the reporting date, VAGO was not aware of any contingent assets or contingent liabilities.

8. RISKS AND VALUATION JUDGEMENTS

VAGO is exposed to risk from its activities and outside factors. In addition, it is often necessary to make judgements and estimates associated with recognition and measurement of items in the financial statements. This section sets out financial instrument specific information, including exposures to financial risks.

8.1 Financial instruments specific disclosures

Financial instruments arise out of contractual agreements that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Due to the nature of VAGO's activities, certain financial assets and financial liabilities arise under statute rather than a contract (for example taxes). Such assets and liabilities do not meet the definition of financial instruments in AASB 132 Financial Instruments: Presentation.

Categories of financial instruments

Receivables and cash are financial instrument assets with fixed and determinable payments that are not quoted on an active market. These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement, receivables are measured at amortised cost using the effective interest method (and for assets, less any impairment). VAGO recognises the following assets in this category:

  • cash
  • receivables (excluding statutory receivables).

Financial liabilities at amortised cost are initially recognised on the date they originated. They are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial instruments are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the interest-bearing liability using the effective interest rate method. VAGO recognises the following liabilities in this category:

  • payables (excluding statutory payables)
  • finance lease liabilities.

Impairment of financial assets: At the end of each reporting period, VAGO assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. All financial instrument assets, except those measured at fair value through profit or loss, are subject to annual review for impairment.

The allowance is the difference between the financial asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. In assessing impairment of statutory (non‑contractual) financial assets, which are not financial instruments, professional judgement is applied in assessing materiality using estimates, averages and other computational methods in accordance with AASB 136 Impairment of Assets.

Derecognition of financial liabilities: A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

8.1.1 Financial instruments: Categorisation

 

2017–18
$'000

2016–17
$'000

Contractual financial assets—receivables and cash

Cash

1

1

Receivables(i)

Lease incentive and other receivables

1

4,786

Total contractual financial assets

2

4,787

 

Contractual financial liabilities at amortised cost

Payables(i)

Supplies and services

2,962

3,840

Amounts payable to government and agencies

4,750

8,552

Lease incentive

4,167

4,636

Other payables

441

2,458

Borrowings

Finance lease liabilities

155

297

Total contractual financial liabilities

12,475

19,783

(i) The total amounts disclosed here exclude statutory amounts (e.g. amounts owing from Victorian Government and GST input tax credit recoverable and taxes payable). Statutory financial assets will be used to cover payment of contractual financial liabilities.

8.1.2 Financial risk management objectives and policies

This section sets out financial instrument specific information, (including exposures to financial risks) as well as those items that are contingent in nature or require a higher level of judgement to be applied, which for VAGO related mainly to fair value determination.

VAGO's financial risk management program seeks to manage these risks and the associated volatility of its financial performance.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, with respect to each class of financial asset, financial liability and equity instruments are disclosed in Note 5.2 to the financial statements.

The main purpose in holding financial instruments is to prudently manage VAGO's business.

VAGO's main financial risks include credit risk, liquidity risk and interest rate risk. These financial risks are managed in accordance with the financial risk management policy.

VAGO uses different methods to measure and manage the different risks to which it is exposed. Primary responsibility for the identification and management of financial risks rests with the Accountable Officer.

The following table discloses the contractual maturity analysis for VAGO's contractual financial liabilities:

Maturity analysis of contractual financial liabilities(i)

 

Carrying amount

Nominal amount

Maturity dates

Less than 1 month

1–3months

3 months–1 year

1–5 years

5+ years

$'000

$'000

$'000

$'000

$'000

$'000

$'000

2017–18

Payables(ii)

Supplies and services

2,962

2,962

2,966

(6)

2

Amounts payable to government and agencies

4,750

4,750

80

4,670

Lease incentive

4,167

4,167

39

78

351

1,869

1,830

Other payables

441

441

441

Borrowings

Finance lease liabilities

155

163

3

6

36

118

 

12,475

12,483

3,529

78

5,059

1,987

1,830

2016–17

Payables(ii)

Supplies and services

3,840

3,840

3,840

Amounts payable to government and agencies

8,552

8,552

12

3,870

4,670

Lease incentive

4,636

4,636

39

78

351

1,869

2,299

Other payables

2,458

2,458

2,458

Borrowings

Finance lease liabilities

297

312

33

10

47

222

 

19,783

19,798

6,382

88

4,268

6,761

2,299

(i) Maturity analysis is presented using the contractual undiscounted cash flows.
(ii) The carrying amounts disclosed exclude statutory amounts (e.g. GST payables).

The carrying amounts of financial assets and financial liabilities that are exposed to interest rates and VAGO's sensitivity to interest rate risk are set out in the table below.

Interest rate exposure of financial instruments

 

Weighted average interest rate

Carrying amount

Fixed interest rate

Variable interest rate

Non-interest bearing

Per cent

$'000

$'000

$'000

$'000

2017–18

Financial assets

Cash

 

1

1

Receivables(i)

Lease incentive and other receivables

 

1

1

Total financial assets

 

2

2

 

Financial liabilities

Payables(i)

Supplies and services

 

2,962

2,962

Amounts payable to government and agencies

 

4,750

4,750

Lease incentive

 

4,167

4,167

Other payables

 

441

441

Borrowings

Finance lease liabilities

3.52

155

155

Total financial liabilities

 

12,475

155

12,320

 

2016–17

Financial assets

Cash

 

1

1

Receivables(i)

Lease incentive and other receivables

 

4,786

4,786

Total financial assets

 

4,787

4,787

 

Financial liabilities

Payables(i)

Supplies and services

 

3,840

3,840

Amounts payable to government and agencies

 

8,552

8,552

Lease incentive

 

4,636

4,636

Other payables

 

2,458

2,458

Borrowings

Finance lease liabilities

3.48

297

297

Total financial liabilities

 

19,783

297

19,486

(i) The carrying amounts disclosed here exclude statutory amounts (e.g. amounts owing from Victorian Government, GST input tax credit recoverable, and GST payables).

9. OTHER DISCLOSURES

This section includes additional material disclosures required by accounting standards, for the understanding of this financial report.

9.1 Responsible persons

Given the independent relationship of the Auditor-General with the Parliament, no Government Minister has any direct responsibility for the operations of VAGO. The following disclosures are made relating to the Accountable Officer in accordance with the Directions of the Minister for Finance under the Financial Management Act 1994:

Andrew Greaves, Auditor-General held the Accountable Officer Position in relation to VAGO for the full year.

Remuneration

Remuneration received or receivable by the substantive and acting Accountable Officers in connection with the responsibilities of the position during the reporting period was in the following ranges:

 

2017–18
No.

2016–17
No.

$520,000–$529,999 (substantive)

1

$390,000–$399,999 (substantive)

1

$110,000–$119,999 (acting)

1

$20,000–$29,999 (acting)

1

9.2 Remuneration of executives

The number of executive officers, other than the substantive and acting Accountable Officers, and their total remuneration during the reporting period are shown in the table below. Total annualised employee equivalent provides a measure of full-time equivalent executive officers over the reporting period.

Remuneration comprises employee benefits in all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered, and is disclosed in the following categories.

Short-term employee benefits include amounts such as wages, salaries, annual leave or sick leave that are usually paid or payable on a regular basis, as well as non-monetary benefits such as allowances and free or subsidised goods or services.

Post-employment benefits include pensions and other retirement benefits paid or payable on a discrete basis when employment has ceased.

Other long-term benefits includes long service leave.

Termination benefits include termination of employment payments, such as severance packages.

Several factors affected total remuneration payable to executives in the comparative year 2016–17. A number of executive officers retired, resigned or were retrenched in the prior year. This had a significant impact on remuneration figures for the termination benefits category.

The remuneration amounts disclosed below are measured on the same basis as required by AASB 119 Employee Benefits.

Remuneration of executive officers (including Key Management Personnel disclosed in Note 9.3)

 

Total remuneration

 

2017–18
$'000

2016–17
$'000

Short-term employee benefits

4,116

4,192

Post-employment benefits

421

450

Other long-term benefits

97

543

Termination benefits

(43)

1,161

Total remuneration

4,591

6,346

Total number of executives(i)

32

31

Total annualised employee equivalents(ii)

22.4

24.8

(i) The total number of executive officers includes persons who meet the definition of Key Management Personnel (KMP) of the entity under AASB 124 Related Party Disclosures and are also reported within the related parties note disclosure (Note 9.3).

(ii) Annualised employee equivalent is based on the time fraction worked over the reporting period.

9.3 Related parties

VAGO is a wholly owned and controlled entity of the State of Victoria. Related parties of VAGO include:

  • all key management personnel and their close family members and personal business interests (controlled entities, joint ventures and entities they have significant influence over),
  • all cabinet ministers and their close family members, and
  • all departments and public sector entities that are controlled and consolidated into the whole of state consolidated financial statements.

All related party transactions have been entered into on an arm's length basis.

Significant transactions with government-related entities

VAGO received funding and made payments to the Consolidated Fund of $45.1 million (2016–17: $43.4 million)

and $27.9 million (2016–17: $26.6 million) respectively.

During the year, VAGO had the following government-related entity transactions:

Nature of transaction

Amount
$'000

Revenue from financial statement audits

Department of Treasury and Finance

1,358

Other government related parties(i)

26,585

Total significant transactions with government-related entities

27,943

(i) Transactions with other related parties are collectively, but not individually significant.

Key management personnel of VAGO include the Accountable Officer and members of the Senior Management Group (SMG), which includes:

  • David Barry, Deputy Auditor-General
  • Craig Burke, Assistant Auditor-General, Financial Audit (ceased 7 July 2017)
  • Renee Cassidy, Assistant Auditor-General, Performance Audit (appointed 3 July 2017)
  • Susan Fraser, Assistant Auditor-General, Technical Audit Services
  • Peter Frost, Chief Executive Officer / Deputy Auditor-General (ceased 7 July 2017)
  • Nancy Stefanovski, Executive Director, Audit Support Group (ceased 11 August 2017)
  • Bill Gilhooly, Assistant Auditor-General, Financial Audit (appointed 3 July 2017)
  • Chris Sheard, Executive Director, Audit Support Group (ceased 7 July 2017)
  • Steven Vlahos, Assistant Auditor-General, Performance Audit (ceased 7 July 2017).

Compensation of KMPs

 

VAGO(i)

2017–18
$'000

2016–17
$'000

Short-term employee benefits

1,673

1,965

Post-employment benefits

155

216

Other long-term benefits

89

479

Termination benefits(ii)

43

1,148

Total(iii)

1,960

3,808

(i) No entities were consolidated pursuant to section 53(1)(b) of the FMA into VAGO's financial statements.

(ii) Termination benefits for 2017–18 exclude accrued termination benefits for four KMPs (including one who ceased in June 2017) whose termination payments were made in July 2017. These payments are included in the termination benefits figure for 2016–17.

(iii) Note that KMPs are also reported in the disclosure of responsible persons (Note 9.1) and remuneration of executives (Note 9.2).

Transactions and balances with key management personnel and other related parties

There were no related party transactions that involved key management personnel, their close family members and their personal business interests in the current reporting period.

9.4 Remuneration of auditors
 

2017–18
$'000

2016–17
$'000

Nexia Melbourne Audit Pty Ltd

Audit of the financial statements

33

33

The auditor of VAGO is appointed by Parliament and paid by the Public Accounts and Estimates Committee in accordance with the Audit Act 1994. Mr Geoff Parker from Nexia Melbourne Audit Pty Ltd was appointed to this position in 2016. No other services were provided.

As the remuneration of the auditor is paid by the Public Accounts and Estimates Committee, the amount disclosed above is included in 'fair value of services received free of charge or for nominal consideration' in Note 2.2.1.

9.5 Subsequent events

VAGO had no events that occurred between the end of the reporting period and the date when the financial statements are authorised for issue that would require adjustment to, or disclosure in our financial statements.

9.6 Other accounting policies

Contributions by owners

Consistent with the requirements of AASB 1004 Contributions, contributions by owners (that is, contributed capital and its repayment) are treated as equity transactions and, therefore, do not form part of the income and expenses of VAGO.

9.7 Australian Accounting Standards issued that are not yet effective

The table below outlines the accounting pronouncements that have been issued but not effective for 2017–18, which may result in potential impacts on VAGO reporting for future reporting periods.

Topic

Key requirements

Effective date

Likely impact on initial application

AASB 9 Financial Instruments

The key changes introduced by AASB 9 include simplified requirements for the classification and measurement of financial assets, a new hedging accounting model and a revised impairment loss model to recognise impairment losses earlier, as opposed to the current approach that recognises impairment only when incurred.

1 January 2018

No material impact expected.

AASB 2014-1 Amendments to Australian Accounting Standards [Part E Financial Instruments]

Amends various AASs to reflect the AASB's decision to defer the mandatory application date of AASB 9 to annual reporting periods beginning on or after 1 January 2018, and to amend Reduced Disclosure requirements.

1 January 2018

No material impact expected.

AASB 2014–7 Amendments to Australian Accounting Standards arising from AASB 9

Amends various AASs to incorporate the consequential amendments arising from the issuance of AASB 9.

1 January 2018

No material impact expected.

AASB 15 Revenue from Contracts with Customers

The core principle of AASB 15 requires an entity to recognise revenue when the entity satisfies a performance obligation by transferring a promised good or service to a customer. Note that amending standard AASB 2015‑8 Amendments to Australian Accounting Standards – Effective Date of AASB 15 has deferred the effective date of AASB 15 to annual reporting periods beginning on or after 1 January 2018, instead of 1 January 2017.

1 January 2018

VAGO has yet to undertake a detailed assessment of the impact of this pronouncement.

AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15

Amends the measurement of trade receivables and the recognition of dividends as follows:

Trade receivables, that do not have a significant financing component, are to be measured at their transaction price, at initial recognition.

Dividends are recognised in the profit and loss only when:

  • the entity's right to receive payment of the dividend is established;
  • it is probable that the economic benefits associated with the dividend will flow to the entity; and
  • the amount can be measured reliably.

1 January 2018, except amendments to AASB 9 (Dec 2009) and AASB 9 (Dec 2010) apply 1 January 2018.

No material impact expected.

AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of AASB 15

This standard defers the mandatory effective date of AASB 15 from 1 January 2017 to 1 January 2018.

1 January 2018

No material impact expected.

AASB 2016-3 Amendments to Australian Accounting Standards – Clarifications to AASB 15

This Standard amends AASB 15 to clarify requirements for identifying performance obligations, principal versus agent considerations and the timing of recognising revenue from granting a licence.

The amendments require:

  • a promise to transfer to a customer a good or service that is 'distinct' to be recognised as a separate performance obligation;
  • for items purchased online, the entity is a principal if it obtains control of the good or service prior to transferring to the customer; and
  • for licences identified as being distinct from other goods or services in a contract, entities need to determine whether the licence transfers to the customer over time (right to use) or at a point in time (right to access).

1 January 2018

VAGO has yet to undertake a detailed assessment of the impact of this pronouncement.

AASB 2016-7 Amendments to Australian Accounting Standards – Deferral of AASB 15 for Not‑for‑Profit Entities

This standard defers the mandatory effective date of AASB 15 for not-for-profit entities from 1 January 2018 to 1 January 2019.

1 January 2019

VAGO has yet to undertake a detailed assessment of the impact of this pronouncement.

AASB 2016-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not‑for‑Profit Entities

This Standard amends AASB 9 and AASB 15 to include requirements and implementation guidance to assist not-for-profit entities in applying the respective standards to particular transactions and events.

The amendments:

  • require non-contractual receivable arising from statutory requirements (i.e. taxes, rates and fines) to be initially measured and recognised in accordance with AASB 9 as if those receivables are financial instruments; and
  • clarifies circumstances when a contract with a customer is within the scope of AASB 15.

1 January 2019

VAGO has yet to undertake a detailed assessment of the impact of this pronouncement.

AASB 16 Leases

The key changes introduced by AASB 16 include the recognition of most operating leases (which are currently not recognised) on balance sheet which has an impact on net debt.

1 January 2019

The implementation of this pronouncement is likely to materially increase assets and liabilities on the Balance Sheet. It is not expected to have a significant impact on the Comprehensive Operating Statement.

AASB 1058 Income of Not-for-Profit Entities

This standard will replace AASB 1004 Contributions and establishes principles for transactions that are not within the scope of AASB 15, where the consideration to acquire an asset is significantly less than fair value to enable not-for-profit entities to further their objectives. The restructure of administrative arrangement will remain under AASB 1004.

1 January 2019

No material impact expected.

9.8 Glossary of technical terms

The following is a summary of the major technical terms used in this report.

Actuarial gains or losses on superannuation defined benefit plans are changes in the present value of the superannuation defined benefit liability resulting from:

(a) experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and

(b) the effects of changes in actuarial assumptions.

Administered item generally refers to VAGO lacking the capacity to benefit from that item in the pursuit of its objectives and to deny or regulate the access of others to that benefit.

Borrowings refers to interest-bearing liabilities raised from finance leases.

Commitments include those operating, capital and other outsourcing commitments arising from non-cancellable contractual or statutory sources.

Comprehensive result is the amount included in the operating statement representing total change in net worth other than transactions with owners as owners.

Controlled item generally refers to the capacity of VAGO to benefit from that item in the pursuit of its objectives and to deny or regulate the access of others to that benefit.

Depreciation is an expense that arises from the consumption through wear or time of a produced physical or intangible asset. This expense is classified as a 'transaction' and so reduces the 'net result from transactions'.

Effective interest method is the method used to calculate the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset or, where appropriate, a shorter period.

Employee benefits expenses include all costs related to employment including wages and salaries, fringe benefits tax, leave entitlements, termination payments, WorkCover premiums, defined benefits superannuation plans, and defined contribution superannuation plans.

Financial asset is any asset that is:

(a) cash;

(b) a contractual right:

  • to receive cash or another financial asset from another entity; or
  • to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.

Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability of another entity.

Financial liability is any liability that is:

A contractual obligation:

(i) To deliver cash or another financial asset to another entity; or

(ii) To exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity.

Financial statements comprises:

(a) a Balance Sheet as at the end of the period;

(b) a Comprehensive Operating Statement for the period;

(c) a Statement of Changes in Equity for the period;

(d) a Cash Flow Statement for the period;

(e) notes comprising a summary of significant accounting policies and other explanatory information;

(f) comparative information in respect of the preceding period as specified in paragraph 38 of AASB 101 Presentation of Financial Statements; and

(g) a statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements in accordance with paragraphs 41 of AASB 101.

General government sector comprises all government departments, offices and other bodies engaged in providing services free of charge or at prices significantly below their cost of production. General government services include those which are mainly non-market in nature, those that are largely for collective consumption by the community and those which involve the transfer or redistribution of income. These services are financed mainly through taxes, or other compulsory levies and user charges.

Interest expense represents costs incurred in connection with borrowings. It includes interest components of finance lease repayments, and amortisation of discounts or premiums in relation to borrowings.

Leases are rights to use an asset for an agreed period of time in exchange for payment. Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and rewards incidental to ownership. Leases of infrastructure, property, plant and equipment are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership from the lessor to the lessee. All other leases are classified as operating leases.

Net operating balance or net result from transactions is a key fiscal aggregate and is revenue from transactions minus expenses from transactions. It is a summary measure of the ongoing sustainability of operations. It excludes gains and losses resulting from changes in price levels and other changes in the volume of assets. It is the component of the change in net worth that is due to transactions and can be attributed directly to government policies.

Net result is a measure of financial performance of the operations for the period. It is the net result of items of income, gains and expenses (including losses) recognised for the period, excluding those that are classified as 'other non-owner movements in equity'.

Net worth is calculated as assets less liabilities, which is an economic measure of wealth.

Non-financial assets are all assets that are not financial assets. It includes plant and equipment, intangible assets, and prepayments and accrued income.

Other economic flows included in net result are changes in the volume or value of an asset or liability that do not result from transactions. In simple terms, other economic flows are changes arising from market remeasurements. They include gains and losses from disposals, and impairments of non-current physical and intangible assets; and gains and losses arising from the revaluation of the long service leave liability.

Payables includes short and long-term trade debt and accounts payable, taxes and interest payable.

Produced assets include plant and equipment and certain intangible assets. Intangible produced assets include computer software.

Receivables include amounts owing from government through appropriation receivable, short and long-term trade credit and accounts receivable, and taxes receivable.

Supplies and services generally represent cost of goods sold and the day-to-day running costs, including maintenance costs, incurred in the normal operations of VAGO.

Transactions are those economic flows that are considered to arise as a result of policy decisions, usually an interaction between two entities by mutual agreement. They also include flows in an entity such as depreciation, where the owner is simultaneously acting as the owner of the depreciating asset and as the consumer of the service provided by the asset. Taxation is regarded as mutually agreed interactions between the government and taxpayers. Transactions can be in kind (e.g. assets provided/given free of charge or for nominal consideration) or where the final consideration is cash. In simple terms, transactions arise from the policy decisions of the government.

 

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