Analysis of budgeted financial statements

An analysis of the primary causes of movements in the financial statements from those published in the 2004-05 PBS is provided below.

Departmental

Statement of Financial Performance

The department is budgeting to break even in 2004-05. Total revenue and expenses are estimated to be $1,228.3m, an increase of $817.0m from the 2004-05 PBS estimates.
The increase is primarily due to:

· an increase of $3.8m as a result of new measures;

· an increase of $2.6m for the creation of the Federal Safety Commission;

· a decrease of $2.0m for the transfer of funding to the Department
of Human Services;

· a decrease of $0.2m associated with the transfer of funding
for Indigenous Community Volunteers to administered funds;

· an estimated increase of $774.0m expected to be transferred from FaCS, in line with the AAO changes of 26 October 2004, and 16 December 2004. Negotiations of the actual amount to be transferred were not finalised at publication of the 2004-05 PAES;

· an increase of $28.4m associated with the transfer of staff and functions from the Aboriginal and Torres Straight Islander Services in July 2004; and

· an increase of $10.4m in revenue from independent sources.

Statement of Financial Position

The budgeted net asset position for 2004-05 of $54.6m represents a decrease of
$1.0m from the 2004-05 PBS estimates. The decrease is primarily due to the adjustment of the asset and liability balances to reflect the actual 2003-04 results.

The structure of the department’s balance sheet is typical of an organisation where the key attributes are its employees, computer software (included in intangibles), computer hardware (included in infrastructure, plant and equipment) and leasehold fit-outs. The IT platform is an intrinsic component of the successful operations of the Job Network.

Administered

Revenues and Expenses

It is estimated that department will receive non-appropriation revenue on behalf of the Government of $112.5m, an increase of $13.1m from the 2004-05 PBS estimates.
The change is due to an increase in the estimated revenue received from the Coal Mining Industry Levy.

Administered expenses are estimated to be $16,743.1m, an increase of $15,328.8m from the 2004-05 PBS estimates. The change is primarily due to:

• an increase of $6.2m as a result of new measures;
   
• an increase of $365.1m associated with revised estimates for the Job Network;
   
• an increase of $13.1m for the Coal Mining Industry Levy;
   
• an increase of $386.1m associated with the transfer of administered programmes from ATSIS in October 2004; and
   
• an increase of $14,558.2m associated with the transfer of administered programmes from FaCS in October and December 2004.

Assets and Liabilities

Administered assets as at 30 June 2005 are estimated to be $388.2m, an increase
of $346.0m from the 2004-05 PBS estimates. The change is primarily due to:

• an increase of $25.7m for the Job Network equity injection;
   
• an increase of $27.2m associated with the transfer of administered assets from ATSIS in October 2004;
   
• an increase of $303.2m associated with the transfer of administered assets from FaCS in October and December 2004; and
   
• a reduction of $10.0m associated with the adjustment of asset balances
  to reflect the actual 2003-04 results.

Administered liabilities as at 30 June 2005 are estimated to be $424.3m, an increase of $355.7m from the 2004-05 PBS estimates. The change is primarily due to:

• an increase of $331.5m associated with the transfer of administered liabilities from FaCS in October and December 2004; and
• an increase of $24.2m associated with the adjustment of liability balances to reflect the actual 2003-04 results.

FINANCIAL STATEMENTS

Departmental Financial Statements

Budgeted departmental statement of financial performance

This statement provides a picture of the expected financial results for DEWR by identifying full accrual expenses and revenues, which shows whether DEWR is operating at a sustainable level (see Table 3.1).

Budgeted departmental statement of financial position

This statement shows the expected financial position of DEWR. It helps decision-makers to track the management of DEWR’s assets and liabilities (see Table 3.2).

Budgeted departmental statement of cash flows

Budgeted cash flows, as reflected in the statement of cash flows, provides important information on the extent and nature of cash flows by categorising them into expected cash flows from operating activities, investing activities and financing activities
(see Table 3.3).

Departmental capital budget statement

Shows all planned capital expenditure (on non-financial assets), whether funded either through capital appropriations or additional equity or borrowings, or from funds from internal sources (see Table 3.4).

Departmental non financial assets — summary of movement

Shows budgeted acquisitions and disposals of non-financial assets during the budget year (see Table 3.5).

Schedule of administered activity

Schedule of budgeted revenues and expenses administered on behalf of government

This schedule shows the expected sources of revenue administered by the department on behalf of government, and anticipated expenses relating to programmes administered by the department on behalf of government (see Table 3.6).

Schedule of budgeted assets and liabilities administered on behalf of government

This schedule shows the expected balances of those assets and liabilities administered by the department on behalf of government (see Table 3.7).

Schedule of budgeted administered cash flows

This schedule reflects the sources of expected cash the received by the department on behalf of government, as well as anticipated cash to be used by the department on behalf of government (see Table 3.8).

Schedule of administered capital budget

This schedule shows all planned capital expenditure by the department on behalf of the government (see Table 3.9).

NOTES TO THE FINANCIAL STATEMENTS

1. Accounting Policy

The budgeted financial statements have been prepared in accordance with the requirements of the Finance Minister’s Orders issued by the Minister for Finance and Administration.

The statements have been prepared:

• on an accrual accounting basis;
• in compliance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Boards and the Consensus Views of the Urgent Issues Group; and
• having regard to Statements of Accounting Concepts.

2. Departmental and Administered Items

Under the Australian Government’s accrual budgeting framework, and consistent with Australian Accounting Standards, transactions that agencies control (departmental transactions) are separately budgeted for and reported on from transactions agencies do not have control over (administered transactions). This ensures that agencies are only held fully accountable for the transactions over which they have control.

Departmental items are those assets, liabilities, revenues and expenses that are controlled by the agency. Departmental expenses include employee and supplier expenses and other administrative costs, which are incurred by the agency in providing its goods and services.

Administered items are revenues, expenses, assets and liabilities that are managed by an agency or authority on behalf of the government according to set government directions. Administered expenses include subsidies, grants and personal benefit payments and administered revenues include taxes, fees and fines.

3. Appropriations in the accrual budgeting framework

Under the Australian Government’s accrual budgeting framework, separate annual appropriations are provided for:

• Departmental price of outputs appropriations representing the government’s purchase of outputs from agencies;
• Departmental capital appropriations for investments by the government in the form of additional equity or loans in agencies;
• Administered expense appropriations for the estimated administered expenses relating to an existing Outcome, a new Outcome or a Specific Purpose Payment to the states; and
• Administered capital appropriations for increases in administered equity through funding non-expense administered payments.

Across the Australian Government as a whole, special appropriations fund the majority of payments from the Consolidated Revenue Fund (especially those that are entitlement driven or involve transfers to state governments).

4. Departmental Revenue from Government

Revenue from government represents the purchase of outputs from the department by the government. The changes reflected in the ordinary annual appropriations are as a result of those new measures and variations that are explained in Section 1: Overview, variations and measures.

5. Departmental Revenue from Other Sources

Revenue from the sale of goods and services is recognised upon the delivery of the goods or services to the customers.

6. Departmental Expenses - Employees

This item represents payments made and net increases or decreases in entitlements owed to employees for their services provided in the financial year.

7. Departmental Expenses - Suppliers

This item represents payments to suppliers for goods and services. It includes contracted payments made to Centrelink for services received.

8. Departmental Expenses - Depreciation and Amortisation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the department using, in all cases, the straight-line method of depreciation.

Computing equipment assets are depreciated over their useful lives between three and seven years. Office machines are depreciated over five years (20 per cent). Leasehold improvements are amortised on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease. Buildings are depreciated over forty years (2.5 per cent). Land is not depreciated.

Forward estimates of depreciation expense are made using forecasts of net capital acquisition requirements over the forward years.

9. Departmental Assets - Financial Assets - Receivables

Receivables represent amounts owing to the department for goods and services that it has provided to external parties and cash reserves held in the Official Public Account which are recorded as receivable.

10. Departmental Assets - Non-Financial Assets

These items represent future economic benefits that the department will consume in producing outputs. Apart from revalued assets, the reported value represents the purchase price paid less depreciation incurred to date in using that asset.

Land and Buildings, and Infrastructure, Plant and Equipment are initially brought to account at cost, except for purchases costing less than $2,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

Computer software, disclosed in the Departmental Statement of Financial Position as Intangibles, is expensed in the year of acquisition except for purchases or internally developed software costing more than $200,000 which are capitalised at cost.

The department annually reassesses and adjusts the values of Land and Buildings (leasehold improvements), Infrastructure, Plant and Equipment.

11. Departmental Liabilities - Provisions - Employees

Provision has been made for the department's liability for employee entitlements arising from services rendered by employees to balance date. This liability encompasses unpaid wages and salaries, annual and long service leave. No provision is made for sick leave.

The liability for leave expected to be settled within 12 months has been measured at the nominal amount.

Other employee entitlements payable later than one year have been estimated at the present value of the expected future cash outflows in relation to those entitlements. Attrition rates and pay rises through promotion and wage/salary agreements have been taken into account.

12. Departmental Liabilities - Payables - Suppliers

This item partly comprises surplus leased office space relating to the former Commonwealth Employment Service (CES). These leases no longer provide an economic benefit to the Commonwealth and accordingly their total liability has been recognised in full. The liability is being progressively reduced through payments to lessors over the remaining periods of the leases.

13. Administered Revenue – Taxation Revenue

Black Coal Mining Industry Levy: Since 1993, employers have been required to pay a levy of 5 per cent of payroll into a central fund managed by the Coal Mining Industry (Long Service Leave) Corporation.

14. Administered Expenses – Grants

These are primarily payments under the Community Development and Employment Projects and Business Development and Assistance Programme .

15. Administered Expenses – Subsidies

These are primarily payments under the Indigenous Employment Programme, Payment to Voluntary Work Agencies and Coal Mining Industry (Long Service Leave Funding) Act 1992.

16. Administered Expenses – Personal Benefits

These comprise Job Network expenses (New Enterprise Incentive Scheme), General Employee Entitlements and Redundancy Scheme payments, Parenting Payment Single, Parenting Payment Partnered, Newstart Allowance, Disability Support Pension, Pensioner Education Supplement, Partner Allowance Pension, Partner Allowance Benefit, Widow Allowance, Youth Allowance, Sickness Allowance, Mobility Allowance, Mature Age Allowance and Special Employee Entitlements Scheme for Ansett Group Employees.

17. Administered Expenses – Suppliers

These comprise payments to suppliers for Job Network and other labour market programmes, Special Employee Entitlements Scheme for Ansett Group Employees, Work for the Dole, Rehabilitation Services, Green Corps Employment Assistance and other services, Payment to Voluntary Work Agencies, Personal Support Programme (PSP), Job Placement, Employment and Training Programme (JPET) and to the International Labour Organisation.

18. Administered Assets – Financial Assets - Receivables

These primarily comprise receivables relating to personal benefit overpayments, the balance of the Employee Entitlements Support Scheme special account, the Coal Mining (Long Service Leave Funding) Act 1992, and GST receivable.

19. Administered Liabilities – Payables - Suppliers

These primarily comprise payables relating to Job Network and other labour market programmes.

20. Administered Liabilities – Payables – Grants and Subsidies

These primarily comprise payables relating to Coal Mining Industry, Community Development and Employment Projects and Business Development and Assistance Programme.

21. Administered Liabilities – Payables – Personal Benefits

These primarily comprise payables relating to Disability Support Pension , Mature Age Allowance , Mobility Allowance , Newstart Allowance, Parenting Payment (Partnered), Parenting Payment (Single), Partner Allowance (Benefit), Partner Allowance (Pension), Pensioner Education Supplement , Sickness Allowance , Widow Allowance , and Youth Allowance.