Acknowledgments

A message from the Minister for Finance

I am pleased to endorse the 2010 annual edition of the Model Report for Victorian Government Departments (the Model).

This publication is the State’s primary compliance resource under Standing Direction 4.2 (Reporting Requirements in terms of Part 7 of the Financial Management Act 1994) to guide departments in producing their annual reports.

In keeping with previous editions, this version contains further enhancements based on user feedback, recommendations from various parliamentary reviews, and the Government’s ongoing commitment to ensure transparent and responsible management of the State’s finances. The objective of the Model is to prescribe a consistent approach to the preparation and presentation of the financial statements and disclosures in the report of operations. It also provides advice on the latest accounting requirements. This consistent approach is also expected to assist the preparation of and information collected for, the State’s consolidated Annual Financial Report.

While all Victorian Government departments are required to comply with the Model, many of our public bodies operating as stand-alone business enterprises also use this Model as the authoritative guide to assist in preparing their annual reports. I strongly encourage all Victorian public sector entities to follow this Model where relevant and appropriate for their users, to ensure that Victoria maintains the existing high standard of reporting on the use of all public resources.

Key areas of change in this edition include:

a complete revision of the trial balance numbers representing the transactions and activities underlying the financial statements (and notes);

an overview of additional requirements regarding the design and print of annual reports;

more fully populated numerical disclosure in the illustrative examples; and

general improvements and updates due to minor changes in Financial Reporting Directions and Australian Acounting Standards, including interpretations.

Consistent with previous editions of the Model, a fictitious department (the Department of Technology) is used to illustrate departmental financial and non-financial disclosures that I and my predecessors have directed to encourage accountability and good governance. These are illustrated by incorporating disclosures that are representative of the types of transactions and activities that are common to departments. Further, to assist preparers in applying professional judgement so that disclosures are appropriate for each individual department, convenient referencing to authoritative source material has been provided.

I commend the effort and proactive approach displayed by all who have contributed to the revision of this manual which has become an integral part of Victorian public sector financial reporting.

TIM HOLDING MPMinister for Finance, WorkCover and the Transport Accident Commission

Acknowledgments

The Department of Treasury and Finance wishes to acknowledge the suggestions and comments provided by users and in particular officers from the Department of Education and Early Childhood Development, Department of Primary Industry, and Victoria Police for the preparation of the 2010 edition of this publication.

The Budget and Financial Management Division within the Department of Treasury and Finance would also like to express its gratitude to the Victorian Auditor-General’s Office for its significant contribution to and support of the Model.

Table of Contents

Introduction..................................................................................................................1

Legislative background...................................................................................................................... 1

Financial accountability and reporting................................................................................................1

Reporting structure of the State of Victoria........................................................................................3

Basis of each financial publication.....................................................................................................4

Public Finance and Accountability Bill 2009.......................................................................................5

The Model Report – purpose and scope............................................................................................5

How to use the Model Report.............................................................................................................6

Structure of the Model Report and disclosure requirements..............................................................7

Source references.............................................................................................................................. 8

Department of Technology – Model report of operations............................................9

Department of Technology – Model financial statements..........................................69

Notes to the financial statements.....................................................................................................98

Appendix 1: Extracts of whole of government financial statements and analysis of disclosures..............................................................................................................273

Appendix 1(a): Extract of estimated financial statements from 2009-10 Statement of Finances: Budget Paper No. 4........................................................................................................................ 273

Appendix 1(b): Extract of financial statements from the 2009-10 Quarterly Report No. 1..............278

Appendix 1(c): Extract of financial statements from the 2008-09 Mid-Year Financial Report.........282

Appendix 1(d): Analysis of disclosures made in Victorian financial publications............................286

ii

Model Reportfor Victorian Government Departments iii

Introduction

The Victorian Government provides a number of publications to inform Parliament, and the wider community about its financial plans, outcome and position. Many relate to individual agencies while others, on a consolidated basis, cover a sector or the whole of Victorian Government. Public sector agencies fund, deliver and regulate a wide range of services on behalf of the Government, mainly related to education, health, public safety, transport and communication. Most of these services are funded through taxes, levies, fees from the sale of goods and services, and grants from the Commonwealth Government. Through their day-to-day operations, all public sector bodies are involved in the financial management of and accountability for the State’s finances.

Legislative backgroundThe Constitution Act (1975) sets down that only Parliament can give approval to the executive government to spend public funds. The Government in turn is committed to sound financial management of the State’s public services and infrastructure assets. All Victorian public sector bodies operate under a prudent financial management framework comprising elements from the Constitution Act 1975, the Appropriation Acts (annual and special), the Financial Management Act 1994 (FMA), the Borrowing and Investment Powers Act 1987, the Administrative Arrangements Act 2004 and the Audit Act 1994. All of these Acts may contain sections that affect the requirements of the budget and financial reporting obligations to Parliament. In particular the FMA governs the use of public money, and the accountability processes and subordinate legislation with which the Government, departments and other public sector bodies are obliged to comply.

Financial accountability and reporting

Key financial publications for the State of Victoria

The Department of Treasury and Finance (DTF) is responsible for the coordination, preparation and publication of the State’s main planning and financial accountability documents required under the FMA. This includes the following budgetary and financial reports, which are summarised in Diagram 1, 2009-10 annual financial publication cycle:

State budget papers (BPs) in conjunction with the Appropriation Bills;

Budget Update;

Annual Financial Report (AFR);

interim financial reports, including quarterly and the mid-year reports (QFR and MYFR); and

Pre-Election Budget Update (PEBU) – only in election years.

Each of these publications provides a consolidated set of financial statements and accompanying notes based on data submitted by departments and other public sector agencies. In addition to the consolidated financial statements, each department and agency prepares its own entity annual report.

DTF also provides the State’s consolidated financial data to the Australian Bureau of Statistics (ABS) for inclusion in the national accounts and other statistical reports. The analysis and application of this data has significant consequences for the State. For example, the ABS publishes interstate comparisons of this financial data, 5 which is relied upon by national authorities such as the Commonwealth Grants Commission when allocating the GST pool and other Commonwealth grant funding across the states and territories.

Therefore, high quality financial data is required, not only to fairly reflect the Government’s financial performance and management of the State’s resources, but also to fairly represent the level of activity in the State that impacts on the quantum of funding received by Victoria from the Commonwealth Government.

5 Catalogue Number 5512.0, Government Finance Statistics, Australia 2007-08, Australian Bureau of Statistics.

Model Reportfor Victorian Government Departments 1

Introduction

Resource materials

In support of the State’s financial management legislative framework and provision of high quality financial data, DTF issues budgetary, regulatory and other financial reporting materials to enable consistency in the way public sector bodies record and submit their financial data to DTF. Some of the main guidance materials include:

Standing Directions of the Minister for Finance, including approximately 40 Financial Reporting Directions (FRDs)6;

budget and financial management guidances (BFMGs)7; and

this Model for Victorian Government departments which is revised and issued annually2.

Diagram 1: 2009-10 annual financial publication cycle

Footnote: (i) The darker the shading the more intensive the work effort.(ii) PEBU is only published in an election year. Refer to Diagram 3.

6 Located on the DTF website at http://www.dtf.vic.gov.au/CA25713E0002EF43/pages/bfm-financial-reporting-policy

7 Accessible to Victorian Government reporting entities only.

Model Report2 for Victorian Government Departments

Reporting structure of the State of VictoriaThe Victorian public sector includes over 1 800 agencies established by legislation for specified purposes, including departments, statutory authorities, state-owned corporations, school councils, boards, trusts, and advisory and management committees. Most of these agencies are established as ‘not-for-profit’ organisations, with a small group of 17 entities – mainly from the finance and metropolitan water portfolios – operating as ‘for profit’ organisations.

The reporting structure for the State is based on the System of National Accounts, which classifies public sector bodies into either the general government sector (GGS), public non-financial corporations (PNFCs) or public financial corporations (PFCs) sectors. Diagram 2, Reporting structure of the State of Victoria, provides an overview of this reporting structure.

Diagram 2: Reporting structure of the State of Victoria

Source: Department of Treasury and Finance (DTF)

The Victorian GGS is the largest sector and forms the basis of the estimates published in the Budget Paper. As shown in Diagram 2, the GGS comprises government departments and other bodies engaged in providing public services free of charge or at prices significantly below the cost of production for example, schools and hospitals. They generally receive more than 50 per cent of their funding from budget appropriations.

Organisations in other sectors of government – that is the PNFCs and PFCs – operate as stand - alone business enterprises which aim to recover most of their costs involved in delivering their goods or services. Such entities include water and port authorities (PNFCs) and the Transport Accident Commission and Treasury Corporation Victoria (PFCs). Both the PNFC and PFC sectors are treated as equity investments of the GGS.

The non-financial public sector (NFPS) represents a consolidation of the GGS and PNFCs, after eliminating any transactions and debtor/creditor relationships between the sub sectors to avoid double counting. Similarly, the whole of state (WOS) is the consolidation (after relevant eliminations) of the NFPS with the PFCs. A fuller explanation of the characteristics of each of these sectors can be found in the 2009-10 Budget Paper No. 4 and the 2008-09 Annual Financial Report.

Under the FMA, the Budget Papers mainly relate to the GGS whereas the mid-year and annual financial reports include both the WOS and GGS as required by the accounting standards. A comprehensive list of public sector agencies, identified by sector, that submit financial data for consolidation into the State’s key financial publications can be found in the accompanying notes of the 2008-09 Annual Financial Report. Diagram 3, Publication coverage and project timelines provides further details regarding the reporting sector/entity basis of the key financial publications issued by DTF.

The System of National Accounts 1993 was released under the auspices of the Commission of the European Communities, International Monetary Fund, Organisation for Economic Cooperation and Development, United Nations and World Bank.


State of Victoria

Non-financial public sector

General government Public non-financial corporations

Public financial corporations

Departments Statutory authorities and other agencies controlled by government

Introduction

Basis of each financial publicationFinancial statements (including accompanying notes), are prepared in accordance with Australian Accounting Standards, including interpretations (AASs) and relevant FRDs. In addition, the budget papers and annual financial report need to comply with the Uniform Presentation Framework (UPF) approved by the Australian Loan Council. The UPF is based on the Government Financial Statistics Framework (GFS) designed to provide statistics related to all Australian public sector entities.

Since 1 July 2008, AASB 1049 Whole of government and general government sector financial reporting has been adopted and applied to government sector budget estimates and outcome reports. This standard incorporates the major elements of the GFS framework into an accounting standard. It has resulted in an operating statement presentation largely consistent with that used by Victoria at the consolidated level for some years. The UPF was also updated based on AASB 1049 to provide consistency in the presentation formats of the financial statements with the AAS formats. In Victoria, AASB 1049 was first implemented for the GGS budget estimates for 2008-09, and is applicable for the WOS and GGS outcome reports in 2008-09. For your further information, extracts from the complete set of 2008-09 financial statements from the budget estimates, the first QFR and the MYFR can be found in Appendix 1 of the Model, Extracts of whole of government financial statements and analysis of disclosures.

In addition to financial statements and notes, most annual reports also include a narrative (management discussion and analysis) section usually in the report of operations. Best practice is to include in these narrative reports non-technical analysis and explanation of significant aspects of the financial statement, to assist users in the interpretation of the financial statement.

Diagram 3: Publication coverage and project timelines

Project timelines

2009 2010 Sector/Entities

Jul

Aug

Sep Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

WoS

GG

S

Dep

ts

UP

F

PN

FC

s

GG

E

ES

TIM

AT

ES ERC (Preliminary to budget)

Budget Papers Nos. 1–4 (BP) (a) (c)

Budget Information Paper No. 1 (BIP 1) (b) (a)

Budget Update (b)

Quarterly Financial Report (QFR1) (b)

AC

TU

AL

S

Mid–Year Financial Report (MYFR) (b)

Quarterly Financial Report No. 2 (QFR 2) (b)

Quarterly Financial Report No. 3 (QFR 3) (b)

Annual Financial Report (AFR) (b) (d)

Quarterly Financial Report No. 4 (QFR 4) (b) (d)

2008-09 publication 2009-10 publication 2010-11 publication

The next Pre–Election Budget Update (PEBU) for the GGS and PNFC sector is due October/November 2010, and is issued within 10 days of the writ.

Notes:(a) The 2010-11 Budget is expected to be tabled 4 May 2010.(b) Tabled on or before 15th of the month. (c) Includes limited analysis of the whole of state.(d) Tabled on or before 16th of the month

GGS: General government sector WoS: Whole of state Depts: Departments UPF: Uniform Presentation Formats (incl Non-Financial Public Sector)PNFCs: Public non-financial corporation entities GGE: General government entitiesERC: Economic Review Committee


Introduction

Public Finance and Accountability Bill 2009The Public Finance and Accountability Bill 2009 (the Bill) will establish a framework in Victoria for public finance, accountability and resource management, and will replace the FMA.

Implementation of various elements of the Bill will be staggered. For example, changes to whole of government and public body reporting requirements will be implemented from 1 July 2010, with earlier reporting timelines required for September 2011 (for financial year reporters such as hospitals and water authorities) or March 2011 (for calendar year reporters such as TAFEs).

The Bill will establish four public body categories. This will be supported by the introduction of a differential framework which will outline specific requirements for financial and non-financial planning and reporting for each public body category. Below is a summary of the reporting requirements to be applied by each of the four public body categories:

Requirement Departments and Category 15

Category 2 Category 3 Category 4

Annual reportingFinancial statements with full note disclosures

Financial statements with full note disclosures

Financial statements with reduced note disclosures

Basic set of accounts (template)

Auditing Subject to audit Subject to audit Subject to audit Subject to audit

Tabling Tabled in Parliament Tabled in Parliament Tabled in ParliamentProvided to portfolio Minister and made available upon request

The Bill was introduced into Parliament on 8 December 2009, and will be considered by Parliament early in 2010.

Further information on the Bill can be found at www.dtf.vic.gov.au, while the Bill can be found on the Victorian legislation and parliamentary documents website (www.dms.dpc.vic.gov.au).

The Model Report – purpose and scopeIn addition to the financial publications produced by DTF, the FMA also requires audited annual reports of government departments and public bodies to be tabled in Parliament, on or before the first sitting day in November of the following financial year. To enhance the consistency and quality of departmental reporting, DTF produces this Model to guide departments in applying the latest reporting pronouncements that are applicable under legislation and AAS.

All Victorian Government departments are required, under Standing Direction 4.2 Reporting Requirements in terms of Part 7 of the FMA, to comply with the Model when preparing and tabling their annual reports in Parliament. For the purposes of the Model, the applicable reporting entities are:

the Departments of Education and Early Childhood Development, Health, Human Services, Transport, Innovation Industry and Regional Development, Justice, Premier and Cabinet, Primary Industries, Sustainability and Environment, Treasury and Finance, and Planning and Community Development; and

the Parliament of Victoria and Victoria Police.

In addition to the above requirements and to the extent applicable, Ministerial Directions require a department’s financial statements be prepared in accordance with:

AASs and other professional requirements;

Financial Reporting Directions; and

business rules in budget and financial management guidances (BFMGs).

5 The distinction between Category 1 and 2 requirements is mainly in the areas of governance and planning.


http://www.dms.dpc.vic.gov.au/

http://www.dtf.vic.gov.au/

Introduction

Due to the adoption of AASB 1049 for GGS entities, DTF has implemented new financial statement formats for departments that align with the new government sector formats in the 2008-09 edition of the Model, and in this edition of the Model. All other GGS entities such as Roads Corporation and the Environmental Protection Authority, as well as other public sector entities such as PNFCs and PFCs are encouraged to adopt these new financial statement formats in their 2009-10 annual reports.

How to use the Model ReportSince its introduction in 2001, the Model has prescribed a consistent approach to the preparation of both the financial and non-financial reporting requirements of departmental annual reports. It includes:

guidance and commentaries highlighting the minimum disclosure requirements;

convenient references and interpretations of relevant authoritative pronouncements; and

illustrative disclosures related to common departmental activities.

The Model addresses the requirements of the complete set of financial statements and accompanying notes for the financial statements (refer to the Model financial statements section), and in a separate section the non -financial performance disclosures required by the FMA and FRDs for a report of operations (refer to the model report of operations section).

Entities should note that the text information presented in the Model is based on a fictitious department and therefore should be used as a guide. However, departments are required to present their financial statements and notes in the same manner and format as shown in the Model financial statements.

While the Model focuses on authoritative requirements for departmental reporting, other Victorian public sector bodies are encouraged to use this key annual reporting resource, where applicable, to enable greater consistency in the presentation formats of the complete set of financial statements across all public bodies in the State.

Further, Appendix 1(d) of the Model, Analysis of disclosures made in Victorian financial publications, provides a handy cross reference guide between the types of disclosures found in the Model’s financial statements and notes, with those produced in the most recent financial publications for the State. This guide will enable the preparers of government sector level financial statements to readily identify applicable legislative and accounting reporting requirements, and to view their related illustrative examples in the Model. In this way, the Model can be used as a foundation guide for developing sector level financial statements. This is in keeping with the overall intent of the Model, that as a guide, the Model should not be used as a substitute for referring to the legislation and standards themselves.


Introduction

Structure of the Model Report and disclosure requirementsThe Model is based on a fictitious Department of Technology (DoT) to highlight and illustrate disclosure requirements. It is divided into the following four sections:

the Introduction;

the Model report of operations;

the Model financial statements; and

Appendix 1 – Extracts of whole of government financial statements and analysis of disclosures.

The Model has been developed to illustrate as widely as possible the disclosure requirements for Victorian government departments. Given the broad spectrum of services provided by departments, the Model cannot be expected to cover all possible types of disclosure requirements for a department. As such, all departments are expected to use the Model report of operations as a basis for preparing their year in review.

With regard to the Model financial statements, departments should be aware that the text information presented in the Model financial statements is based on a fictitious department and therefore should be used as a guide in preparing financial statements and appendices (including additional disclosures where necessary). However, departments are required to present their financial statements and notes in the same manner and format as shown in the Model financial statements.

As indicated in the Minister’s message, preparers and auditors will need to use their professional judgement to ensure that disclosures in annual reports are appropriate for each department. The Model’s sample disclosures and convenient referencing to authoritative source material will guide users in making these judgements.

The Model has been prepared in accordance with the FMA, and has been updated incorporating the latest applicable requirements of AAS and FRDs that were available at 1 March 2010 for the reporting period ending 30 June 2010. Any additional requirements pronounced post publication will be issued by DTF in the form of Supplementary Information closer to year end.

The Model assumes that Accounting Standards issued by the AASB which are not yet effective have not been adopted early. This policy is outlined in the Model financial statements under Note 1(W) – AASs issued that are not yet effective.

The fictitious circumstances of our example department have been chosen only for the purposes of illustrating the minimum financial reporting and disclosure requirements for the report of operations and financial statements based on the most common activities and transactions for Victorian Government departments.

The Model does not illustrate all disclosure requirements that may be applicable to non-departmental entities within the Government. In particular, it does not illustrate income tax equivalent entries applicable to entities in the National Tax Equivalent Regime (NTER).


Introduction

Source referencesReferences to the relevant requirements are provided in the left hand column of each page of this Model. If further clarity is required as to the appropriate treatment, examination of the source of the disclosure requirement is recommended.

The current Model also uses ‘New’ or ‘Revised’ in the source reference column next to relevant sections to indicate where changes have occurred since the previous edition of the Model. Abbreviations used in the Model are as follows:

Reference TitleAASB Accounting Standards issued by the Australian Accounting Standards Board

AAS Australian Accounting Standards

DOT Department of Technology (fictitious department)

FRD Financial Reporting Direction

SD Standing Direction

IFRIC International Financial Reporting Interpretations Committee

IFRS International Financial Reporting Standards

MOG Machinery of government

Financial Reporting Direction on the design and printing of annual reportsA financial reporting direction (FRD 30) on the design, layout and printing of annual reports has recently been released by the Minister for Finance. This FRD includes specification requirements for the design of annual reports, use of colour and images, standard sizing and paper stocks and other publishing requirements.

The purpose of this FRD is to reduce the costs of annual reports for public sector entities, reduce the environmental impact of producing annual reports—both in terms of the type of stock used and elements of the process to make them recyclable—and to ensure a more consistent approach in the way public sector annual reports are presented.

This FRD on the design and printing of annual reports can be found on the DTF website www.dtf.vic.gov.au under Financial Reporting Directions.


http://www.dtf.vic.gov.au/

Acknowledgments

Documents

Transcript of Acknowledgments